Aurora’s Hydrogen Market Report (HyMaR) offers a comprehensive overview of the current hydrogen landscape and market dynamics, providing valuable insights for industry stakeholders and investors. Covering critical aspects such as market outlook, policy summaries, market sizing, driver analyses, cost evaluation, and price forecasts up to 2060, the report serves as an essential resource for navigating the evolving hydrogen market.
Currently, over 90% of Europe’s hydrogen is produced via fossil fuels, contributing to carbon dioxide emissions and climate change. However, there is growing recognition of hydrogen’s potential to play a pivotal role in decarbonising existing energy use and facilitating new applications.
In recent years, the adoption of hydrogen produced via electrolysers has gained momentum, with many countries setting ambitious targets to integrate electrolysers into their energy mix. Notably, the European Union initially aimed for 40 GW of electrolyser capacity by 2030, which was later revised to accommodate the production of 10 million tonnes of domestically produced renewable hydrogen. This shift necessitates approximately 140 GW of electrolyser capacity in Europe by 2030, alongside plans to import an additional 10 million tonnes of hydrogen. Individual nations, including Germany and the UK, have also committed to significant electrolyser deployment targets, reflecting a collective effort to embrace hydrogen technology.
Our global electrolyser database meticulously tracks projects worldwide, providing clients with invaluable insights into project specifics such as location, partners, timeline, power sources, and electrolyser types. While over 1.2 TW of electrolyser capacity have been announced globally, a significant portion remains in the early stages of development, emphasising the need for sustained investment and support.
Despite the enthusiasm surrounding hydrogen, cost remains a significant barrier to widespread adoption. Currently, electrolytic hydrogen is several times more expensive than traditional methods. This cost disparity varies by country and offtaker profile (variable vs. baseload). In general, variable hydrogen supply is cheaper than the baseload one until large-scale infrastructure such as underground storage, pipelines, etc., develops. However, until then, only a few countries can use grid power to produce baseload hydrogen. The others have to rely on expensive above-ground hydrogen tanks for storage and to buffer the intermittency. There are many caveats here; let’s unpack more:
- Electrolysers can purchase power at the spot market if the share of renewable power exceeds 90% in their bidding zone. According to our forecast, Norway, Sweden, Denmark, Italy, and Portugal can fulfil this criterion by 2030.
- Great Britain does not have to fulfil the 90% renewable criteria, as the low-carbon hydrogen standard only focuses on carbon emissions. If grid power is only used as a top-up, it is possible to produce low-carbon hydrogen even today.
- If variable supply was possible, hydrogen costs vary between 4.5–8.0 €/kg across Europe; the cheapest countries are Sweden, Norway, and Spain. However, if baseload supply is needed, costs in Spain almost triple due to the need for an above-ground storage tank.
Business models and offtaker requirements further shape the hydrogen landscape, with tailored approaches necessary to address regional nuances. In essence, business models and offtaker requirements play a significant role in each country. What works in the Nordics might not always work well in Iberia. Because of that, business models should be designed carefully, keeping in mind the fundamentals of the power market, technologies, offtaker demand, and the availability of hydrogen infrastructure.
Looking at the regions that could produce the cheapest renewable/low-carbon hydrogen, it is still more expensive than the traditional grey hydrogen (produced via steam methane reforming). While operational support mechanisms, such as fixed premiums and contracts for difference, aim to bridge the cost gap, ongoing policy developments and regulatory frameworks remain pivotal in driving market growth. Denmark, Great Britain, as well as the European Union launched their first auctions successfully in 2023. While Denmark and Great Britain announced their results, the EU’s pilot auction results will be available soon (in May). Deep dive into the current and planned auctions as well as relevant policy and regulatory frameworks offered in our Hydrogen Market Report.
In conclusion, the report serves as a roadmap for navigating Europe’s transition to a hydrogen-based economy. By addressing key challenges and opportunities, it empowers stakeholders to navigate the complex terrain of hydrogen adoption, driving sustainable energy transformation across the continent.
