The International Energy Agency (IEA) has downgraded its predicted renewable power capacity for hydrogen production over the next five years to 45 gigawatts, down 35% from its prediction in 2022.

Of all the announced projects that seek to use renewables to produce hydrogen by 2030, the agency forecasts only 7% of the proposed capacity will come online by the end of this decade. China, Saudi Arabia, and the US will lead the growth, accounting for over 75% of renewable capacity for hydrogen production by 2028, IEA says in its Renewables 2023: Analysis and forecast to 2028 report.

“While almost all regions are still expected to increase the amount of renewable energy capacity dedicated to hydrogen production by 2028, the pace of growth is now less optimistic than in Renewables 2022,” the report states. 

IEA has downgraded its forecasts for all regions, except China. The country should account for 70% of the additions between 2023 and 2024, Kallanish notes. 

“The main reason is the slow pace of bringing planned projects to final investment decisions due to a lack of offtakers and the impact of higher prices on production costs,” the agency says. “The development of an international hydrogen market is a key uncertainty affecting the forecast, particularly for markets that have limited domestic demand for hydrogen.”

A lack of clarity on low-emission hydrogen definitions, delays in electrolyser shipments, and permitting and grid connection challenges, are also constraining hydrogen production.

In China, renewable energy capacity addition for hydrogen production is predicted to reach 24 GW by 2028. Early electrolyser deployment in the country is expected to come primarily from state-owned companies developing projects to meet provincial and national hydrogen production targets, accounting for an estimated 2 GW of renewable electricity capacity growth in 2023 and 4 GW in 2024. 

While the annual growth is expected to reach 6 GW by 2028, the report warns China is “constrained by the risk of uncertainty over hydrogen demand.” Nonetheless, the Asian country giant will remain the “single largest market” through the period.

Meanwhile, the IEA also notes that half of global annual hydrogen-driven renewables installation growth will come from outside of China by 2028. Saudi Arabia, Australia, Oman and the UAE, which aim to become major renewable hydrogen exporters, could account for one-fifth of the hydrogen-led renewable capacity deployment.

“To fully convince investors, ambitious project announcements will have to be followed by consistent policies supporting demand,” the body notes. More effort will also be needed to ensure adequate infrastructure for hydrogen storage and transport, to clarify regulatory uncertainty, and to boost investment in R&D to improve technologies, IEA concludes.