Global investment in clean hydrogen technologies is set to surge by 70% in 2025 to almost $8 billion despite a wave of high-profile project cancellations, as governments maintain policy support and developers push ahead with projects that have reached final investment decision, the International Energy Agency said June 5.
Hydrogen investment rose by 60% in 2024, despite significant headwinds and delays, and developing all projects that have reached FID would require a further major boost in spending, the IEA said in its World Energy Investment 2025 report.
“Successfully developing all hydrogen projects that have received FID would require investment to rise by a further 70% in 2025 to almost $8 billion,” it said.
This would increase capacity to around 7.5 million mt/year by 2035, representing a near 15-fold increase on current levels.
The hydrogen sector experienced a significant consolidation in 2024, with electrolyzer investment jumping 90% to $2.5 billion even as several major projects were cancelled or delayed.
“Some hydrogen projects have been cancelled or delayed in the past 12 months, but there remains a pipeline of approved projects that requires around $8 billion of investment in 2025, almost double the level seen in 2024,” the IEA said.
The investment in low-emissions hydrogen is part of a broader 30% increase in spending on liquid biofuels, biogases and low-carbon hydrogen to a record high of almost $25 billion.
Sector headwinds
Major setbacks included Air Products’ exit from a 13,000 mt/year electrolyzer project and the pause on development of a 600,000 mt/year complex in Louisiana until offtake agreements can be secured, despite the project reaching FID in 2023.
Orsted’s cancellation of its 50,000 mt/year FlagshipONE e-methanol project in Sweden that was in construction, two years after reaching FID, also highlighted the challenges facing the sector.
However, construction activity is accelerating on approved projects, and electrolyzer investment is set to rise by 150% in 2025, according to the IEA.
This growth reflects both the scaling up of manufacturing capacity and the construction phase of projects that secured financing in previous years.
“An increasing number of electrolyzer projects are under construction, including a project in Kakinada, India, that reached FID in mid-2024 and is set to produce 1 million mt/year of low-emissions ammonia by 2026, largely for export to Europe,” the IEA said.
Around one-third of investment in carbon capture, utilization and storage (CCUS)-based hydrogen is concentrated in North America, though some planned projects in the region have recently been cancelled.
Government backing remains crucial for sector development, with policy support continuing globally in 2025.
The report notes that hydrogen projects “remain heavily dependent on policy and regulatory support,” given current cost structures.
Platts, part of S&P Global Commodity Insights, assessed the cost of renewable hydrogen production via alkaline electrolysis in the Netherlands, backed by renewable power purchase agreements, at Eur7.77/kg ($8.80/kg) on June 5, compared with Eur2.72/kg for unabated fossil fuel-based production.
Low-emissions steel
The IEA flagged steel production as a key area where hydrogen technology is being deployed to decarbonize industry, but highlighted declining investment in the sector.
Steel producers are switching to electric arc furnaces and hydrogen-fed direct reduction iron plants, though these plans are progressing more slowly than previously expected.
“Projections for the coming years indicate a significant decline in the volume of low-emissions steel capacity expected to come online, with around $9 billion worth of projects scheduled to become operational in 2026, a drop of over 60% from the previous year,” the IEA said. “This points to a substantial preceding underinvestment in these technologies, reversing the upward trend observed until now.”
Europe, though, was an exception.
“While global investment in hydrogen-based steelmaking dropped nearly threefold in 2024, Europe continues to dominate, accounting for more than 70% of new investment in this area,” the IEA said. “Overall, Europe invested nearly $15 billion in clean industrial technologies in 2024, with 80% of this funding directed towards steel decarbonization projects.”
The IEA noted that these technologies, and hydrogen-based steel production in particular, were still in their early stages and expensive to implement.
The EU has implemented several supportive measures as a result, including tightening carbon pricing, phasing out free allowances by 2026 and the carbon border adjustment mechanism.
