With multiple auctions announced in 2023, this year will highlight the early winners in this emerging economy. In late 2023, a few winners were announced for grants and auctions held around the world. The US’ Hydrogen Hub funding program declared seven, while Denmark and the UK’s green hydrogen auctions announced their own. Oman’s Hydrom initiative has also wrapped up its first land auction with five winning projects. Some crucial auctions in 2024 that will attract attention include the first European Hydrogen Bank auction, and Japan’s contract for difference (CfD) auctions. With only a few winners, this will provide some initial tests of commitments for companies but also offer plenty of learning opportunities. One of the most important aspects about upcoming auctions is the revelation about the pricing of clean hydrogen. Upcoming auctions will mostly benchmark projects on the pricing and level of production credits developers would like to receive to make clean hydrogen a viable decarbonization solution. Despite mainly being geared toward the domestic markets, these auctions happening worldwide will also help reveal how much clean hydrogen cost will vary with different setups and geographical locations. Hence, global attention will surely be fixed on all auction results, regardless of markets. Any uncertainty around offtakes of clean hydrogen should also be revealed.

Much of the early days of the clean hydrogen sector have been about announcing projects and debating the cleanliness of the hydrogen produced. As the industry matures and moves closer to final investment decisions (FID), it is expected that challenges related to technological implementations will become increasingly prominent and transparent. These will range from the performance of electrolyzers coupling with intermittent renewables at scale to the ensuring the efficiency of downstream industrial processes like ammonia production, methanol production or oil refining when green hydrogen is partly or fully used as feedstock, replacing the stable and established grey hydrogen production. The year will also see the successes and failures of many new technologies developed by a few start-ups in the hydrogen space when they are being applied at scale. Other technological implementations that will be tested will be from the perspective of hydrogen applications such as trucks or marine engine.

Furthermore, another technological challenge that will be of high interest, but perhaps not as well discussed, is how to measure, certify and track the emissions intensity of the clean hydrogen produced. Multiple countries have announced emissions standards for defining clean hydrogen in 2023. While most of these hydrogen emission standards will consider life-cycle emissions (such as upstream emissions of natural gas or power), there might be additional requirements. For instance, electrolytic or green hydrogen can face further requirements such as correlations of hydrogen production with the generation of its feedstock power geographically and temporally, as well as whether such feedstock power is newly installed or not (which is described as additionality) – all with the aim to avoid cannibalism of the decarbonization of power mix itself. Too strict and it could destroy the nascent industry but not strict enough and hydrogen impact on climate goals could be minimal.

With the winners of auctions to be determined, technological challenges, and strict regulations, the hydrogen sector will see fewer project announcements in 2024 compared to previous years. Most of the effort in 2024 will be focused on realizing clean hydrogen projects, which marks the start of the learning-by-doing phase for the clean hydrogen economy. Any announcements of new projects will be more conservative and of lower risks. This will continue the trend that was seen in 2023, where only 17.6 million tonnes of hydrogen were announced, following the 30 million tonnes announced in 2022.  

Authors: 

Minh Khoi Le 

Vice President, Head of Global Hydrogen Solution & Research
minh.khoi.le@rystadenergy.com

(The data and forecasts contained in this column are Rystad Energy’s and the opinions are of the authors.)