Clean hydrogen is essential in many sectors for achieving global climate goals
The EU alone wants to use at least 20 million tons of clean hydrogen in 2030 and produce 10 million of them in the EU
To achieve this, electrolyzer capacities of around 120 GW must be built up by 2030, but so far only projects with a total of 3 GW of output have been financed or under construction
Germany wants to achieve around 10 GW of electrolysis capacity by 2030, but has so far only financed projects with a total of 550 MW and has fewer than 100 MW in operation
In order for a global hydrogen market to emerge, more targeted incentives from governments are needed, and producers and buyers must cooperate more closely

Clean hydrogen is considered essential worldwide to advance decarbonization. However, the market for the key technology is hardly getting off the ground. This is the result of the study “Navigating the Hydrogen Ecosystem - What's preventing Progress and how to gain Momentum” by Strategy&, PwC's global strategy consultancy. Accordingly, there is a huge gap between the plans announced worldwide for the production of hydrogen and the concrete projects that are already being implemented. Although hydrogen projects with a global capacity of 840 gigawatts (GW) are planned, only projects with 15 GW are actually fully financed or under construction, which corresponds to 1.8%. The capacity of hydrogen projects that are already in operation is even lower and is around 1 GW. Germany is also lagging significantly behind its plans. The Federal Republic wants to build 10 GW of capacity by 2030, but less than 100 MW is currently in operation. In order to achieve its goal, Germany would have to add 1 to 2 GW of electrolysis capacity per year; in the last two years, however, only around 250 MW of expansion received the final financing decision. Europe must expand 20 times as quickly as before Overall, more than half of all clean hydrogen projects announced worldwide are in Europe. At the end of 2023, together they resulted in a potential output of 200 GW. However, the EU is a long way from realizing this achievement. Currently, only electrolysis plants with an output of 0.2 GW are in operation; additional plants with an output of 3 GW are under construction or are financed. In 2022 and 2023, projects with a total output of 1 GW received final financing or went into construction. However, in view of its own goals, the EU would have to build electrolyzer systems with a total of 120 GW of output by 2030, which corresponds to an increase of 20 GW per year and therefore an expansion rate 20 times faster than before. Since large amounts of renewable energy are required to produce clean hydrogen, significant capacities must also be created here. For example, 24,000 new wind turbines would be needed for the targeted 120 GW of output. "The capital-intensive hydrogen market is still in its infancy and has recently had to struggle with high interest rates and inflation in material prices. We are observing several fundamental challenges that need to be addressed as quickly as possible," says Dirk Niemeier, Director at Strategy& Germany and co-author of the study. "The biggest barrier is the lack of large-volume purchase contracts, which prevents the financing and thus completion of the production projects. The prerequisite for such purchase contracts is, in turn, funding that, similar to renewable electricity, compensates for the initial additional costs compared to fossil alternatives. A similar chicken-and-egg problem "We are observing the infrastructure that is essential for storage and transport, but will only be built once enough hydrogen has been produced. In addition, there is a shortage of renewable energies that are so urgently needed for clean hydrogen." China is ahead when it comes to implementation A global comparison shows that these challenges apply to all regions, but are of varying severity - and are also being solved with varying degrees of success. If you look at the announced production capacities, Africa and Latin America are in second and third place after Europe. However, both regions are struggling with high levels of uncertainty regarding the specification of the projects. China, South Korea and Japan are completely different: The Asian trio are at the forefront of implementation and already have twice as much production capacity in operation, financed or under construction as Europe. China alone is planning an increase in actual operating electrolyzer capacity for 2024 that corresponds to the volume under construction or financed in Europe in 2023 (3.3 GW). The USA is primarily relying on cheaper, low-carbon hydrogen, which is produced from gas using CCS (carbon capture and storage technology), in order to integrate its gas industry into the future hydrogen ecosystem. "Hydrogen is one of the decisive keys to achieving the global climate goals. In order for the market to get going, all players have to make a joint effort, which can later pay off in several ways for today's pioneers," says Dr. Daniel Haag, Director at Strategy& Germany and co-author of the study. "Specifically, governments are obliged to define internationally uniform standards and create incentive systems. Above all, producers must get costs under control, for example through new technologies, economies of scale or optimized production processes. Consortia of producers and buyers can also be helpful in order to create more security for both sides. At the same time, buyers in the various industries must commit to hydrogen, while distributors, traders and intermediaries should coordinate closely with producers and buyers when expanding the infrastructure. as they strategically bundle demand and thus bridge the gap between production costs and market prices." The full results of the study "Navigating the Hydrogen Ecosystem - What's preventing Progress and how to gain Momentum" are available upon request or at: https://www.strategyand.pwc.com/de/en/navigating-the-hydrogen-ecosystem .html About Strategy& Strategy& is PwC's global strategy consultancy. We develop individual business strategies for leading global companies based on differentiating competitive capabilities. We are the only strategy consultancy as part of a global professional services network. We combine our expertise with technology and use it to develop a suitable strategy that can be implemented efficiently. For us, “Strategy, made real” means driving forward digital change, helping to shape the future and making visions become reality. 3,000 strategy consultants and more than 364,000 PwC employees in 151 countries contribute to this with high-quality, industry-specific services in the areas of auditing, tax and management consulting. In 2024 we will look back on 10 years of Strategy& as part of the PwC network and more than 100 years of tradition as a strategy consultancy. Further information at www.strategyand.pwc.com/de

The EU and Germany Run the Risk of Missing Their Own Hydrogen Targets