The concept of a hydrogen economy has rapidly progressed from theoretical ambition to policy-driven strategy. Governments across the globe are committing substantial financial and regulatory resources to support hydrogen’s role in the decarbonization of energy systems, industrial production, and heavy transport.
Hydrogen has gained renewed attention due to its compatibility with net-zero goals. Unlike other alternative fuels, hydrogen can serve as both a feedstock and an energy carrier. According to the International Energy Agency's Global Hydrogen Review 2024, global hydrogen demand reached 97 million tonnes in 2023, marking a 2.5% increase from the previous year.
Despite this growth, the demand remains primarily concentrated in traditional sectors such as refining and chemical production, with hydrogen largely produced from unabated fossil fuels. Low-emissions hydrogen accounted for less than 1 million tonnes of production in 2023, underscoring its marginal role in the current hydrogen landscape. This gap is driving aggressive public sector interventions aimed at scaling up clean hydrogen production.
National Hydrogen Strategies and Investment Commitments
Over 40 countries have released or are preparing national hydrogen strategies as of late 2024. These strategies reflect differentiated priorities. Europe focuses on green hydrogen made from renewable power. The United States supports both green and blue hydrogen, the latter produced using natural gas with carbon capture. Japan and South Korea are investing in hydrogen imports and fuel cell infrastructure.
The European Union has pledged to produce ten million tonnes of renewable hydrogen and import another ten million tonnes by 2030 under the RePowerEU plan. The European Commission's July 2023 Hydrogen Bank initiative set aside USD 855 million to subsidize green hydrogen projects, offering fixed premiums for output. Additionally, the EU Innovation Fund allocated USD 3.2 billion to large-scale hydrogen electrolyzer deployment.
In the United States, the Inflation Reduction Act (IRA) of 2022 introduced tax credits of up to USD 3 per kilogram of clean hydrogen, depending on lifecycle emissions. The U.S. Department of Energy (DOE) selected seven regional hydrogen hubs in October 2023 for a combined federal investment of USD 7 billion. These hubs are expected to collectively produce over three million tonnes of clean hydrogen annually.
China, the largest producer of hydrogen, is also transitioning. In 2022, its National Development and Reform Commission issued a hydrogen plan through 2035. It targets a production capacity of 100,000 to 200,000 tonnes of green hydrogen per year by 2025. Provincial governments, including those in Inner Mongolia and Hebei, have launched pilot projects powered by solar and wind.
Japan was the first country to adopt a national hydrogen strategy in 2017. The country’s Green Growth Strategy revised in 2023 sets a target of increasing hydrogen supply to 3 million tonnes by 2030 and 20 million tonnes by 2050. Japan is also investing in liquid hydrogen shipping infrastructure with partners such as Australia.
South Korea’s Hydrogen Economy Roadmap targets the deployment of 6.2 million fuel cell electric vehicles and 1,200 refueling stations by 2040. The Korean government has committed over USD 2.3 billion in subsidies and R&D support through 2025.
Scaling Electrolyzers and Infrastructure
Hydrogen production through water electrolysis has become central to most clean hydrogen plans. Electrolyzer capacity needs to grow more than 100-fold to meet projected demand. According to the IEA, global installed electrolyzer capacity was around 700 megawatts in 2022. Projects under construction or planning suggest this could reach 134 gigawatts by 2030.
The European Clean Hydrogen Alliance expects about 40 gigawatts of electrolyzer capacity in the EU by the end of the decade. Germany alone plans to install 10 gigawatts. The German Federal Ministry for Economic Affairs and Climate Action approved USD 8.5 billion in funding in 2023 for 62 hydrogen projects, focusing on electrolyzers and pipelines.
The United States Hydrogen and Fuel Cell Technologies Office reported that by the end of 2024, over 80 electrolyzer projects had been announced, of which 10 had entered the construction phase. The 45V tax credit from the IRA makes clean hydrogen cost-competitive at production costs as low as USD 1 per kilogram for the cleanest processes.
In NEOM, Saudi Arabia is putting together one of the biggest green hydrogen projects worldwide. This USD 8.4 billion facility will tap 4 gigawatts of solar and wind energy to churn out 600 tonnes of hydrogen every day by 2026. The government’s Vision 2030 plan includes hydrogen as a core pillar of industrial diversification.
Pipeline, Storage, and Port Readiness
While hydrogen can be produced nearly anywhere, its transport and storage present engineering and policy challenges. Most pipelines today are built for natural gas and are not fully compatible with hydrogen without retrofitting. The European Hydrogen Backbone initiative, supported by 33 transmission system operators, plans to build 53,000 kilometers of hydrogen pipelines by 2040. Roughly 60 percent of these will involve repurposing existing infrastructure.
In the U.S., the DOE’s 2023 National Clean Hydrogen Strategy and Roadmap emphasizes regional infrastructure development to avoid long-distance transport costs. The plan promotes co-locating hydrogen production near industrial users and export terminals. The Gulf Coast and Appalachian hubs have been identified as early candidates.
Underground salt caverns are considered the most cost-effective method for large-scale hydrogen storage. The DOE’s Strategic Petroleum Reserve sites are being assessed for potential hydrogen storage conversion. Europe is exploring similar storage solutions in Germany and the Netherlands.
Port infrastructure is changing. The Port of Rotterdam plans to become a significant center for hydrogen. It will manage hydrogen imports and hydrogen pipeline connections into Europe. The Netherlands established a goal of 4 gigawatts of electrolyzer capacity for operation by 2030.
Sectoral Use Cases and Industrial Decarbonization
The push toward a hydrogen economy hinges on replacing fossil fuels in hard-to-abate sectors. These include steelmaking, chemicals, shipping, and heavy-duty transport.
In steel, hydrogen can act as a reductant instead of coal in direct reduced iron (DRI) processes. Sweden’s HYBRIT project, supported by the Swedish Energy Agency, aims to produce fossil-free steel at a commercial scale by 2026. Germany’s Thyssenkrupp is investing EUR 2 billion in hydrogen-based steel transition.
In chemicals, companies like BASF and Yara are integrating hydrogen into ammonia and methanol production. The IEA estimates that replacing fossil hydrogen in ammonia production alone would require 100 gigawatts of electrolyzer capacity.
Shipping is expected to shift toward ammonia or methanol fuels derived from clean hydrogen. The International Maritime Organization’s 2023 revised greenhouse gas strategy calls for net-zero emissions from international shipping by 2050. To meet this, hydrogen-based fuels are expected to comprise 30 to 50 percent of the energy mix by 2050.
Long-haul trucks are another priority. According to a 2023 report from the U.S. National Renewable Energy Laboratory, hydrogen fuel cell trucks could become economically viable for freight routes longer than 500 kilometers by 2030, particularly in regions with abundant renewable power.
Cost Trends and Financial Support
Cost reduction is central to hydrogen’s competitiveness. BloombergNEF projects that the levelized cost of green hydrogen could fall from USD 4 to USD 1 per kilogram by 2030 in regions with cheap solar and wind. This would make it competitive with gray hydrogen made from fossil gas, which averages around USD 1.5 per kilogram.
Public funding remains critical to bridge this gap. According to the Hydrogen Council and McKinsey, government funding commitments for hydrogen exceeded USD 280 billion globally by the end of 2023. However, only USD 50 billion had reached the investment stage, indicating delays in permitting, regulation, and supply chain readiness.
The World Bank launched the Hydrogen for Development Partnership in 2023 to provide technical and financial assistance to emerging markets. The goal is to help countries design bankable hydrogen projects and attract private capital.
IEA Executive Director Fatih Birol stated in 2022, “Clean hydrogen is currently enjoying unprecedented political and business momentum, with the number of policies and projects expanding rapidly.” This growth, however, depends on consistent government intervention to avoid stranded assets and technology lock-in.
Risks, Dependencies, and Long-Term Outlook
Several dependencies could affect hydrogen scale-up. These include availability of renewable electricity, mining capacity for electrolyzer materials like iridium and platinum, water use in arid regions, and geopolitical risks tied to hydrogen trade routes.
Water usage is gaining attention. Producing one kilogram of hydrogen via electrolysis requires around nine liters of deionized water. In desert regions like the Middle East or North Africa, this creates trade-offs with agriculture and municipal water needs. Innovations such as seawater electrolysis or brine splitting are under R&D but not yet commercially viable.
Hydrogen also faces competition from battery electrification in mobility and direct electrification in industry. Yet, for sectors requiring high-temperature heat or long energy storage, hydrogen remains more technically feasible. If policy commitments remain stable, IEA forecasts suggest that low-emission hydrogen could account for 10 to 15 percent of global final energy use by 2050.
Conclusion
The hydrogen economy is no longer a vision of the distant future. Through coordinated public-sector investment, regulatory reform, and infrastructure development, hydrogen is emerging as a core pillar of industrial decarbonization. The success of this transition hinges on scale, cost, and infrastructure alignment. With more than 140 million tonnes of projected clean hydrogen demand by 2050, national governments hold the key to unlocking this next phase of energy transformation.
