Is green hydrogen growth accelerating?

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Green hydrogen is experiencing unprecedented momentum with global electrolyzer capacity growing 257% year-over-year to reach 5 GW by end-2024.

China dominates deployment with 70% of new capacity additions, while Europe shows the fastest growth rates despite implementation challenges that see only 4% of announced projects reaching final investment decisions. The sector faces a critical cost competitiveness gap with green hydrogen costing $3.74-$11.70/kg versus gray hydrogen at $1.11-$2.35/kg, but targeted policy support and industrial decarbonization mandates are beginning to bridge this divide in specific applications.

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What was the global installed capacity of green hydrogen production at the end of 2024 and how does that compare with 2023?

Global electrolyzer capacity reached 5 GW by the end of 2024, marking a dramatic 257% increase from the 1.4 GW installed at the end of 2023.

China emerged as the dominant force, accounting for approximately 70% of all new capacity additions in 2024. The country added about 68% of new global green hydrogen production capacity during the year, demonstrating its aggressive push into the sector. By May 2024, total operational electrolyzer capacity globally had reached 1.75 GW, with China contributing 1.15 GW of this operational total.

This growth represents the most significant year-over-year expansion in green hydrogen infrastructure to date. The acceleration stems from a combination of policy support, industrial demand, and China's manufacturing scale advantages. However, it's important to distinguish between installed capacity and operational capacity—while 5 GW was installed by year-end, only about 1.75 GW was actually operational by mid-2024.

The growth trajectory indicates that green hydrogen is transitioning from an experimental technology to industrial-scale deployment, though significant challenges remain in translating announced projects into operational facilities.

How much new green hydrogen capacity has come online so far in 2025 and how does this pace compare with 2024?

The 2025 deployment pace is accelerating significantly compared to 2024, with Europe projected to see 200% annual growth and China's electrolyzer orders already surpassing the entire 2024 total.

Europe leads the growth rate with over 60 projects currently under construction and nearly 200 GW of capacity announced for development. This represents a substantial acceleration from 2024 levels, driven by maturing policy frameworks and improved financing mechanisms. The European market is benefiting from the €45 billion REPowerEU+ package and streamlined regulatory processes.

China continues its dominance with electrolyzer orders in 2025 that have already exceeded the entire 2024 total, indicating sustained momentum in the world's largest market. Global investment in clean hydrogen production is expected to grow by 70% in 2025 to almost $8 billion, compared to previous year levels.

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The acceleration is particularly notable in project development phases, with more projects moving from announcement to construction phase. However, the industry continues to face challenges in translating this activity into operational capacity, as evidenced by historical implementation rates.

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What is the projected global installed capacity for green hydrogen by the end of 2026, and what assumptions are behind these projections?

Global electrolyzer capacity could reach almost 17 GW by 2026, based on planned project pipelines across almost 30 countries.

These projections assume continued policy support from major economies, particularly the EU's hydrogen strategy and US Inflation Reduction Act incentives providing up to $3/kg production tax credits. Successful project execution of current pipeline projects is a critical assumption, though historical data suggests significant implementation challenges ahead.

The forecasts require adequate renewable energy supply to power the expanded electrolyzer capacity, which depends on continued rapid deployment of wind and solar infrastructure. Resolution of supply chain bottlenecks, particularly for critical materials like platinum-group metals used in PEM electrolyzers, is another key assumption.

However, these projections face considerable uncertainty given that only about 7% of global capacity announcements finished on schedule in 2023. This massive gap between announcements and delivery represents the sector's biggest challenge. The projections also assume stable regulatory environments and continued access to financing, both of which could face headwinds from economic volatility or policy changes.

How do analysts forecast the market size for green hydrogen over the next 5 years and next 10 years, in terms of volume and value?

The green hydrogen market is projected to experience explosive growth with market value reaching $60.56 billion by 2030 from $8.78 billion in 2025, representing a 38.5% compound annual growth rate.

Which countries or regions are showing the fastest growth in green hydrogen production capacity right now?

China leads in absolute capacity deployment while Europe demonstrates the fastest growth rates, with distinct regional strategies emerging across the global hydrogen landscape.

China dominates with 49% of global green hydrogen capacity under construction for 2023/2024 and 68% of new global capacity additions in 2024. The country is expected to exceed national targets, with 2.5 GW of electrolyzer capacity by end of 2024. China's advantage stems from integrated manufacturing capabilities, government support, and lower cost structures.

Europe shows the fastest growth rate at 54.17% CAGR through 2030, with 200% annual growth projected for 2025. The region benefits from a strong policy framework including €5 billion in direct public funding and the comprehensive REPowerEU+ package. Over 60 projects are currently under construction with nearly 200 GW of capacity announced.

Asia-Pacific region holds the largest market share at 48% in 2025, led by China, India, and Japan with major national hydrogen strategies. North America focuses primarily on blue hydrogen but shows strong growth in electrolyzer investments supported by $3/kg production tax credits. The region expects over 1.5 million tons per annum of blue hydrogen capacity reaching FID in 2025.

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What are the main drivers behind the current growth of green hydrogen and how significant is each?

Policy support and subsidies represent the most significant driver, followed by industrial decarbonization demand, technology improvements, and grid balancing needs.

• Policy Support and Subsidies (Most Significant): Over 40 governments have adopted comprehensive hydrogen strategies. The EU Hydrogen Strategy includes a €45 billion REPowerEU+ package, while the US Inflation Reduction Act provides up to $3/kg production tax credits. These policies create artificial demand and close cost gaps with conventional hydrogen.
• Industrial Demand for Decarbonization: The steel industry seeks green hydrogen as a replacement for coal in steel production. The chemical sector drives demand through ammonia and methanol production requirements. The refining sector faces mandatory emission reductions encouraging hydrogen adoption for cleaner fuel production.
• Technology Improvements: Although electrolyzer costs have risen recently due to supply chain disruptions, the long-term trajectory remains downward. Renewable energy cost declines make green hydrogen more competitive over time. Efficiency improvements in alkaline and PEM electrolyzer technologies reduce operational costs.
• Grid Balancing and Energy Storage: Hydrogen serves as a long-duration storage solution for renewable energy integration. Grid stability requirements drive demand for managing intermittency of solar and wind power, particularly in markets with high renewable penetration.

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What are the biggest hurdles to large-scale deployment of green hydrogen today and how material are they quantitatively?

Cost competitiveness represents the most material barrier, with green hydrogen costing 150-300% more than gray hydrogen, followed by infrastructure limitations and extremely low project implementation rates.

Cost competitiveness creates the most significant hurdle with current green hydrogen costs ranging from $3.74-$11.70/kg compared to gray hydrogen at $1.11-$2.35/kg. This cost gap of $1.60-$3.20/kg represents a 150-300% premium that makes green hydrogen uneconomical for most applications without subsidies.

Infrastructure limitations severely constrain deployment, with Europe having only 1,600km of hydrogen pipelines versus the 11,600km needed by 2030. Limited large-scale storage facilities and high transportation costs can undermine project economics, particularly for projects located far from demand centers.

Project implementation rates reveal a massive execution gap, with only 4% of global hydrogen projects reaching final investment decisions in 2024. Historical data shows only 7% of announced capacity finished on schedule in 2023, indicating systemic challenges in project development and financing.

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Renewable energy supply constraints create bottlenecks through transmission limitations and grid integration challenges. The inability to evacuate renewable energy from remote locations and balance intermittent renewable supply with steady hydrogen production requirements limits scalable deployment.

How have electrolyzer costs evolved from 2020 to 2024, what trends are seen in 2025 so far, and what are credible forecasts for 2026 and beyond?

Electrolyzer costs experienced significant volatility rather than the expected steady decline, with costs initially dropping from 2020-2022 before rising substantially in 2023-2024 due to supply chain disruptions.

The period from 2020-2022 saw initial cost declines due to manufacturing scale-up and early economies of scale. However, 2023-2024 witnessed substantial cost increases driven by supply chain disruptions, material cost inflation, and component shortages. The current market shows manufacturing oversupply with 25 GW/year capacity but only 2.5 GW actual output in 2023.

2025 trends indicate market stabilization with the electrolyzer market value expected to grow from $1.24 billion in 2025 to $10.89 billion by 2035. Manufacturing capacity is expected to reach over 40 GW/year in 2024, suggesting potential oversupply that could drive costs down.

Forecasts for 2026 and beyond focus on technology differentiation, with PEM electrolyzers expected to dominate with 68.34% market share by 2035 due to superior efficiency and flexibility. Cost reduction drivers include manufacturing scale-up, technological improvements, and supply chain optimization. China is expected to maintain cost leadership through integrated manufacturing capabilities and lower labor costs.

How is renewable electricity supply availability affecting green hydrogen growth and what quantitative evidence shows the scale of this impact?

Renewable electricity supply availability represents a critical bottleneck, with transmission constraints and grid integration challenges limiting the scale of economically viable green hydrogen deployment.

Transmission bottlenecks severely limit the ability to evacuate renewable energy from remote locations where wind and solar resources are abundant. Many announced green hydrogen projects depend on co-located renewable generation, but grid connection delays have pushed back project timelines by 12-24 months in multiple markets.

Grid integration challenges arise from balancing intermittent renewable supply with steady hydrogen production requirements. Electrolyzer capacity factors drop significantly when relying on intermittent renewables without storage, reducing project economics. Studies show that electrolyzer utilization rates fall to 20-40% when directly connected to wind or solar without grid backup.

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The quantitative impact shows that renewable energy costs represent 60-80% of green hydrogen production costs, making electricity price and availability the dominant factor in project viability. Projects requiring grid electricity at industrial rates above $50/MWh struggle to achieve cost competitiveness without substantial subsidies.

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How much of the announced green hydrogen projects globally have actually reached final investment decision and construction start?

Only 4% of announced global hydrogen projects reached final investment decisions in 2024, revealing a massive gap between announcements and actual implementation.

Global FID statistics show that 3.4 million tons per annum of production capacity has reached FID, doubling from 2023 levels but still representing a tiny fraction of announced capacity. Most successful projects reaching FID are concentrated in China, which has more favorable financing conditions and government support structures.

Construction data indicates that 26 GW of electrolysis capacity has passed FID globally, but historical implementation rates suggest significant execution challenges ahead. Only 7% of announced capacity finished on schedule in 2023, highlighting systemic issues in project development, financing, and execution.

The implementation gap stems from multiple factors including difficulty securing long-term offtake agreements, challenges accessing competitive financing, and regulatory approval delays. Projects that have reached FID typically feature strong government backing, secured offtake agreements, and co-located renewable energy sources.

What is the current cost per kilogram of green hydrogen in the main markets and how does that compare to gray hydrogen today?

Green hydrogen currently costs $3.74-$11.70/kg across main markets, compared to gray hydrogen at $1.11-$2.35/kg, representing a significant 150-300% premium that limits commercial viability.

What are key examples of major industrial offtake agreements or demand commitments signed recently, and what volumes and timelines are they targeting?

Recent major offtake agreements demonstrate growing industrial confidence, with multi-year contracts spanning 15-20 years and volumes reaching tens of thousands of tons annually.

The RWE-TotalEnergies agreement signed in March 2025 represents one of the largest commitments, covering 30,000 metric tons annually for 15 years from 2030-2044. This agreement supports the Leuna refinery decarbonization project and demonstrates long-term industrial demand for green hydrogen in refining applications.

Scatec's Egypt project secured a 20-year offtake agreement in July 2024 for 13,000 tonnes of renewable hydrogen and 74,000 tonnes of renewable ammonia annually. Fertiglobe serves as the buyer through the H2Global auction mechanism, highlighting the role of government-backed purchasing programs in creating demand certainty.

Lhyfe signed a multi-year agreement with H2 MOBILITY in 2024 covering over 1,200 tons over five years for hydrogen refueling stations in Germany. This agreement demonstrates demand in the transportation sector, though volumes remain relatively small compared to industrial applications.

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These agreements typically feature take-or-pay structures with pricing mechanisms tied to renewable electricity costs, providing revenue certainty for project developers while sharing cost risks with buyers. The 15-20 year contract durations align with electrolyzer asset life cycles and financing requirements.

Conclusion

Sources

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