The world will need 50GW of renewable capacity dedicated to green hydrogen production by 2027 — a 100-fold increase — but if politicians address bottlenecks and put in place financial incentives, that figure could be 80% higher, according to a new report from the International Energy Agency (IEA).

Hydrogen: hype, hope and the hard truths around its role in the energy transition
Will hydrogen be the skeleton key to unlock a carbon-neutral world? Subscribe to the weekly Hydrogen Insight newsletter and get the evidence-based market insight you need for this rapidly evolving global market

Policy uncertainties makes the agency take “a conservative approach” in its central, or “main case”, forecast of 50GW in its new study, Renewables 2022: Analysis and Forecasts to 2027 — and the agency lists several policy actions that could increase the renewables demand for green H2 to 90GW within five years (see below).

In this “accelerated case”, almost 4% of the total global growth in renewables capacity between 2022 and 2027 would be required for green hydrogen production, compared to just over 2% in the main case scenario.

But in the hydrogen-exporting nations of Chile and Australia, and the MENA region (Middle East and North Africa), that figure would hit 19%, 17.5% and 13%, respectively (in the main case scenario).

The IEA report explains that global renewables capacity is expected to experience rapid growth of 2.4 terawatts during the five-year period — more than double the existing global capacity.

China will lead the world in terms of green hydrogen additions between today and 2027, adding more than 18GW of projects, driven mainly by provincial and local government policies, such as Inner Mongolia’s target to produce 500,000 tonnes per year, as well as the central government’s plans to decarbonise industry and transport and boost electrolyser manufacturing.

Europe is expected to deploy 7GW of dedicated renewable energy for green hydrogen production on the back of EU decarbonisation goals, financial incentives and energy security measures to displace Russian gas.

Spain will be the leading renewable H2 producer, accounting for half of Europe's growth, followed by Germany, Sweden, Denmark and the Netherlands, the report explains.

But much will depend on the EU’s definitions of renewable hydrogen and rules on how the use of green electricity for H2 production will be monitored — as well as proposed industrial hydrogen and fuel mandates.

In Asia Pacific, Latin America and the MENA region, demand for renewable energy for green hydrogen will be 19GW by 2027, driven by ammonia produced for export. Australia, Chile, Oman and Saudi Arabia will take the lead, but European regulatory uncertainty is affecting the forecasts, the IEA admits.

And in the US, 4GW of renewable power is expected for green H2 manufacturing, fuelled by the generous tax credits in the recent Inflation Reduction Act.

“Securing off-takers to bring projects to financial close and obtaining regulatory clarity over definitions of low-emissions hydrogen could be the most important factors to unlock development of the project pipeline,” the report explains.

“For example, policy actions to support demand creation for low-emission hydrogen, particularly in the industry and transport sectors (eg, through mandates, public procurement and auctions) could increase the number of willing buyers; and financial incentives to help reduce production costs could improve the competitiveness of renewable hydrogen with other fuels and raise the likelihood of securing off-takers.

“Investors would be able to move forward with planned projects once they have regulatory clarity over what qualifies as renewable hydrogen and how electricity is accounted for.”

Today, the vast majority of the 90 million tonnes of hydrogen produced every year — mainly for use in oil refining, fertilisers and other chemicals — are produced from unabated natural gas or coal, emitting roughly as much CO2 annually as the UK and Indonesia combined.

Replacing this all with green hydrogen would require an estimated 2.7 terawatts of renewable energy — more than today’s global installed capacity.