L R AS Published on Sunday 11 February 2024 - n° 475 - Categories:hydrogen

Hydrogen world makes slow progress in Q4 2023

There has certainly been progress in production capacity, but many projects remain speculative, with delays and cancellations likely.

Huge construction projects continue to dominate

Half of the announced capacity comes from just 49 projects. Many of these projects are likely to face significant obstacles to timely development, such as political uncertainty, cost inflation and slow emergence of opportunities. Developer confidence is low. At the same time, many projects struggle to reach the final investment decision.

Development costs for hydrogen projects have risen significantly over the course of 2023, and on top of this developers have struggled to secure funding.

The Cavendish project in the UK has been cancelled due to regulatory and financial challenges. In the United States, Nutrien has suspended work on its Geismar project, which was due to produce 1.2 Mtpa of blue ammonia, for at least two years. The delay is due to rising investment costs and uncertainty over the emergence of buyers. China has cancelled five hydrogen project developments, including a $2.9 billion project originally planned to produce 0.1 Mtpa of electrolytic hydrogen.

Export-oriented projects account for 44% of the announced capacity, but achieving their 2030 target will depend on increased demand in import markets.

In the 4th quarter, green hydrogen (from electrolysis) accounted for a growing share.

In the United States

In the United States, the long-awaited 45V Treasury guidelines have been published, defining three pillars of hydrogen production. These 45V guidelines, according to the article, will lead to delays and cancellations of some US projects. This will create challenges for value chain players, who must now change their approaches to deploying hydrogen projects. The resulting delays and cancellations will have an impact on electrolyser manufacturers in North America, and as costs remain higher for longer, US developers may turn to low-cost Chinese electrolysers.

With cost being the biggest hurdle facing the global low-carbon hydrogen market, financial support mechanisms such as CfD programmes and tax incentives are becoming a fundamental part of policy preparation.

Announcements of manufacturing capacity slowed considerably in the fourth quarter, following rapid growth in the previous four quarters.

China is emerging as an increasingly powerful force in global electrolyser manufacturing and is likely to increase its manufacturing capacity faster than Europe and North America - potentially capturing a significant share of the market. However, doubts have been raised about their performance and reliability.


Wood Mackenzie of 6 February 2024

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