Global hydrogen investment to jump 70% in 2025 despite project delays
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.
Ontras, H2 Energy Europe partner on hydrogen network
German transmission system operator (TSO) Ontras and H2 Energy Europe have partnered to establish a green hydrogen transport network between Denmark and Germany, Kallanish reports.
Under an MOU, the companies will explore options to transport green hydrogen from H2 Energy Europe’s planned 1-gigawatt production facility in Denmark through the proposed German hydrogen core network (HCN). If successful, the hydrogen could be delivered to German industrial customers in Salzgitter, Berlin, Eisenhüttenstadt, Magdeburg and Leipzig-Halle, the companies said in a joint statement Thursday. These will include steelmakers, chemical manufacturers and power generators.
The companies say they could utilise the Ontras Green Octopus Mitteldeutschland pipeline, a roughly 300-kilometre-long pipeline connecting the industrial regions to the HCN. German utility EnBW, the parent company of Ontras, is investing €1 billion ($1.09 billion) to build HCN, which is estimated to come into operation by 2032.
Ontras and H2 Energy Europe plan to assess the technical and commercial transport requirements, as well as potential exit points, to bring green hydrogen from H2 Energy’s Esbjerg plant to Germany. Ultimately, the two companies intend to enter a long-term capacity contract.
“This agreement perfectly symbolises our dedication to creating a comprehensive hydrogen backbone on a European level,” says Ralph Bahke, Ontras’ managing director of controlling and development. “Hard-to-abate industries will be able to substantially reduce their carbon emissions using renewable hydrogen delivered to them through our network from sources such as this ambitious project in Denmark.”
H2 Energy Europe’s so-called Njordkraft project plans to construct a 1-GW green hydrogen production facility in Esbjerg, Denmark. The plant is expected to produce 90,000 tonnes/year of green hydrogen using power from offshore wind farms, with commercial operations planned for 2028.
Cyril Cabanes, chief executive of H2 Energy Europe, adds that connecting the proposed project to Ontras’ gas transport network in Germany, would “contribute to the development of an integrated, reliable hydrogen economy that spans across Europe.”
Reethu Ravi UK
EC approves €6.9 billion state aid for H2 infrastructure
The European Commission approved on Thursday €6.9 billion ($7.4 billion) in state aid funding for hydrogen infrastructure-related projects in seven EU countries, Kallanish reports.
The so-called IPCEI Hy2Infra scheme was planned by France, Germany, Italy, the Netherlands, Poland, Portugal and Slovakia. It awards 32 companies, including five SMEs, and 33 projects in areas of electrolysis, pipelines, storage and handling terminals.
“While the renewable hydrogen supply chain in Europe is still in a nascent phase, Hy2Infra will deploy the initial building blocks of an integrated and open renewable hydrogen network,” comments Margrethe Vestager, EC vice president in charge of competition policy. “This IPCEI will establish the first regional infrastructure clusters in several member states and prepare the ground for future interconnections across Europe, in line with the European Hydrogen Strategy.”
The public funding is expected to unlock another €5.4 billion in private investments. The projects cover the deployment of around 3.2 gigawatts of electrolyser capacity; construction of 2,700 kilometres of transmission and distribution pipelines; development of 370 gigawatt-hours of hydrogen storage capacity; and construction of handling terminals and port infrastructure to handle 6,000 tonnes/year of liquid organic hydrogen carriers (LOHC).
The electrolysers should be operational between 2026 and 2028, and the pipelines between 2027 and 2029. The timelines will vary depending on locations, projects and companies, but the EC expects overall completion in 2029.
According to the awards list seen by Kallanish, the majority of projects are based in Germany (24). The country had project approvals in all four Hy2Infra workstreams, with 10 for electrolysers and nine for pipelines. Some of the companies granted support include Air Liquide, EWE Hydrogen, Linde, Lingen, Thyssengas, Gasunie, AquaDuctus, VNG and Hydrogenious.
The West Germany cluster, for instance, will have three electrolysers built in the Rhine-Ruhr area. It will be connected to three different pipeline projects and have access to a storage facility. According to Vestager, by mid-2027, the renewable hydrogen produced in the cluster will be supplied to companies operating in the steel, cement, chemical, refining, and mobility sectors. The cluster will also connect to the Dutch national hydrogen network, she notes.
“For a successful roll-out of renewable and low-carbon hydrogen, all pieces of the puzzle need to come together,” adds commissioner Thierry Breton.
The EU has previously approved two other Important Project of Common European Interest (IPCEI) state aid schemes – the Hy2Tech in July 2022 and the Hy2Use in September 2022.
France, Germany, Poland and Portugal included their participation in their Recovery and Resilience Plans, thus can partially fund some of their projects through the Recovery and Resilience Facility. The amount granted to each company and project will be made public by the EC later, once any confidential business secrets are removed from the EC’s decision documents.