Tech Insights

Despite Growing Global Interest, Barriers to Low-Carbon Hydrogen Deployment Remain 

July 21, 2023 by Shannon Cuthrell

The still-nascent low-carbon hydrogen market is hindered by uncertainty around demand, emissions intensity, varying definitions of clean hydrogen, and a lack of streamlined standards to oversee interoperability across countries and sectors. 

A recent commentary report from the International Energy Agency (IEA) identifies several barriers to global low-carbon hydrogen deployment. Though countries worldwide are making progress in researching, developing, or deploying new hydrogen technologies, the market remains clouded by uncertainty around demand projections, emissions intensity, insufficient transport and delivery infrastructure, and no standardized regulations or certifications. 


This high-pressure alkaline system from Norway-based HydrogenPro is the largest electrolyzer of its kind on the market

This high-pressure alkaline system from Norway-based HydrogenPro is the largest electrolyzer of its kind on the market. Image used courtesy of HydrogenPro


More than two dozen governments have established hydrogen strategies to incentivize development. However, the lack of a unified terminology for hydrogen’s emissions intensity has limited investment and trade in the still-nascent field. The case for hydrogen as a clean energy pathway is centered around “green” or “low-carbon hydrogen,” made through renewable energy and electrolysis. However, many other categories get mixed up in that terminology. Blue hydrogen is produced with natural gas and carbon capture, utilization, and storage (CCUS). Grey hydrogen is produced with fossil fuels and doesn’t involve capturing greenhouse gasses, while pink hydrogen is based on electrolysis and nuclear sources. 

The IEA points out that there’s no consensus on these definitions, all of which entail different levels of greenhouse gas (GHG) emissions. In the case of blue hydrogen, the organization found that the emissions per kilogram of hydrogen produced vary widely depending on the capture rate and technology used. 

Several low-carbon hydrogen production routes are already in place, though most come at a high cost as the market remains in the early stages of commercialization. Infrastructure aside, the lack of clarity around emissions requirements across countries and sectors creates additional uncertainty for investors and consumers. 


Emissions Questions and Varying Policies 

Since 2018, 25 countries have formed national hydrogen strategies, and 24 are preparing to do the same. This milestone was announced at last year’s Hydrogen Energy Ministerial Meeting, in which 30 countries and regions shared progress on deploying 540,000 fuel cell systems and over 1,100 hydrogen refueling stations. The participants aim to develop 10 million fuel cell systems and 10,000 hydrogen refueling stations over the next decade. The meeting added a goal to produce at least 90 million tonnes (Mt) of renewable and low-carbon hydrogen by 2030. 

However, the IEA’s latest commentary says the global market is not on track to reach this target, and faster and more robust policies would be required to facilitate interoperability and a common methodology to calculate hydrogen emissions intensity. 


Hydrogen emissions intensity across production routes

Hydrogen emissions intensity across production routes. Image used courtesy of the IEA

G7 countries see low-carbon hydrogen as a tool to support their shared goal to limit the rise in temperatures to 1.5 degrees Celsius (34.7 degrees Fahrenheit) and decarbonize the power sector by 2035 while avoiding nitrous oxide as a GHG and nitrogen oxides as regional air pollutants. Earlier this year, the G7 Meeting on Climate, Energy, and Environment saw participants reaffirming their commitment to reducing the cost gap between renewable/low-carbon hydrogen and its derivatives and fossil fuels, including efforts to scale up research and development (R&D) and infrastructure. 

Individual countries have different approaches and timelines for achieving these goals. For example, the United States is focused on cutting the cost of clean hydrogen by 80% to $1 per kilogram (kg) in a decade, compared to $5 per kg today. The Bipartisan Infrastructure Law (passed in 2021) set aside $8 billion in funding to build regional clean hydrogen hubs nationwide. Millions more will go towards hydrogen refueling infrastructure, R&D, and other initiatives. The Inflation Reduction Act also provides a $3 per kg green hydrogen production tax credit over ten years, among other incentives. 

Meanwhile, the European Union aims to produce 10 million tonnes and import another 10 million tonnes of green hydrogen by 2030. In 2022, the European Commission approved up to $5.7 billion to support 35 hydrogen projects, including large-scale electrolyzers, transport infrastructure, and technologies to integrate hydrogen into industrial processes. 

Despite public funding commitments, the industry faces the practical challenge of complying with proposed standards that vary widely across countries. Policy uncertainty remains a significant barrier to investment. The IEA noted that although over 1,200 low-carbon hydrogen production projects have been announced, only 5% have secured firm investment decisions. 

This is partially due to underlying questions about the scale of demand the sector will likely see in the coming decades. Global demand grew from 94 Mt in 2021 to 95 Mt last year, mainly driven by traditional usage in the refining and industrial sectors. Today’s landscape is primarily based on fossil fuels, as there’s little production of low-carbon hydrogen in key target markets like long-distance transport and heavy industry applications. According to the IEA, hydrogen demand in the transport sector increased by 60% from 2020 to 2021 amid the growing adoption of hydrogen fuel cell electric vehicles. Still, the sector only accounts for 0.03% of total hydrogen demand. 

Based on government policy commitments, the IEA projects that hydrogen demand could reach 115 Mt by the decade's end. However, new uses would comprise less than 2 Mt. This is far short of the 130 Mt needed to meet governments’ existing climate pledges. Reaching net-zero emissions by 2050 would also require nearly 200 Mt by 2030. 


Global hydrogen demand in 2021

Global hydrogen demand in 2021. Image used courtesy of the IEA (page 18)


Standardization Efforts Are Underway

At this year’s G7 Ministers’ Meeting on Climate, Energy, and Environment in Japan, participants committed to developing relevant regulations, safety codes, and standards to accelerate hydrogen deployment to reduce emissions. They stressed the importance of international standards and certification, including a GHG calculation methodology for hydrogen production and a mechanism recognizing carbon intensity-based tradability and transparency.

The IEA and its partners are working on designing such standards. The International Partnership for Hydrogen and Fuel Cells in the Economy created a methodology to calculate the GHG intensity of various hydrogen production routes. This will be the blueprint for the first international standard to measure the GHG emissions of hydrogen supply. The project is headed by the International Organization for Standardization, which plans to finalize the standard in 2024. 

Some countries are working on independent national regulations to oversee hydrogen commercialization in consumer and industrial products. For instance, the U.S. Department of Energy has partnered with code officials and industry stakeholders to draft new standards for domestic and international production, storage, distribution, and hydrogen manufacturing.