The nascent hydrogen market could skew more towards blue rather than green hydrogen in the next few years, with Donald Trump’s win in the US presidential election changing the calculus around the potential trajectory of US public policy.
The assessment comes from Murray Douglas, Vice-President and Head of Hydrogen Research at the analyst group and professional consultancy Wood Mackenzie, speaking at the firm’s two-day Hydrogen Conference 2024 in London shortly after Trump’s win was confirmed.
“A Republican presidency puts parts of the Democrat-introduced Inflation Reduction Act at risk. At this stage we cannot rule out a full repeal. There are also some risks that attach to the incoming administration introducing trade tariffs on goods entering the US,” said Douglas.
But the broad momentum is still there in the global hydrogen market, in Wood Mackenzie’s assessment. Announced capacity in the hydrogen market has surpassed 140Mtpa now, spread across 1,700 projects, though with momentum slowing. This headline capacity figure is skewed by a few massive green hydrogen projects, and some of these still look vulnerable in today’s market.
“The slowdown in hydrogen in 2024 is to be expected in many respects,” said Douglas. “Yes, it has been a tough year for the low carbon hydrogen market, with some cancellations and likely more to come, and allied to project timescales that sometimes look too ambitious. But this kind of portfolio streamlining to be expected, as developers focus on the better opportunities after moving on the broad opportunity. But cost remains a real challenge. What is the cost base in the market?”
Douglas said some weakness in policy support and a lack of regulatory clarity was putting a brake on what is still an immature market, with a lack of binding offtake agreements the upshot.
“But we shouldn’t be too downbeat. The list of real projects that are moving forwards is growing. At Wood Mackenzie, we are tracking 5.5 million tonnes per annum of green hydrogen capacity, which represents over 6% of carbon-intensive hydrogen supply.”
And how is the offtake market in hydrogen developing?
“It is moving now, but there are not enough binding offtake agreements. North America is strongly weighted to blue rather than green hydrogen when we look at lower carbon intensity hydrogen in the round. So the challenge from here in many respects is for developers to secure binding offtake agreements into order to unlock further final investment decisions on projects.”
This challenge, however, put the whole question of contracting in the spotlight, said Douglas, and especially all the contracting challenges in today’s market: locking down costs, often inadequate regulatory clarity, project scheduling risk, managing offtaker risks, and more.
A growing market for seaborne ammonia is one element in the hydrogen mix that could help to strengthen the demand side in hydrogen and improve the risk equation in the near term. Wood Mackenzie estimated that demand could reach 50 million tonnes per annum by 2030, though with risks on the downside of that estimate.
“Delays in the US, for example, from policy changes could have an impact,” said Douglas. The projection is that about a fifth of that quoted ammonia volume could be blue by 2030, with the rest still being carbon-intensive.
