In 2020 global electrolyser capacity stood at 0.3 GW, mostly using grid electricity to produce hydrogen. Planned project pipelines in almost 30 countries indicate that global electrolyser capacity could reach almost 17 GW by 2026. Based on project announcements, we estimate that almost half of the planned expansion to use existing renewable capacity. Most announced projects range from 1 MW to 10 MW in size and are close to industrial sites and ports. The additional renewable capacity installed for these small projects is expected to be limited, as they will mostly use renewable electricity from the grid through bilateral agreements with developers and utilities.
Larger projects (10-100 MW) are expected to bring almost 18 GW of additional renewable capacity during 2021-2026 dedicated to the production of hydrogen or ammonia from renewables, accounting for only 1% of our main case forecast growth in renewables. This includes some developers using a combination of renewable electricity from the grid and new capacity in the initial phases of project development. If planned projects are commissioned by 2026, China, Chile, Spain and Australia could together bring 85% of the additional 18 GW of renewable capacity dedicated to green hydrogen production. The combination of targets and financial support, coupled with solar and wind resource availability, make these countries lead the short-term large-scale expansion of hydrogen produced by dedicated renewable capacity.
By October 2021 the announced electrolyser project pipeline had reached over 260 GW globally. We estimate that this could bring an additional 475 GW of wind and solar PV capacity, one-third of total installed variable renewables today, dedicated mostly to green hydrogen production. The majority of planned projects consider hybrid wind, solar PV and battery storage plants for hydrogen production.
Europe has the greatest planned electrolyser and associated renewable capacity globally, mostly from offshore wind and solar PV. This is driven by the European Union’s green hydrogen targets and associated funding to scale up production to decarbonise hard-to-abate sectors in line with the bloc’s long-term Net Zero by 2050 target. With excellent wind and solar resource availability, Australia has the second-largest pipeline following Europe, the country aiming to export green hydrogen and ammonia. Similar drivers make the business case for electrolyser expansion in the Middle East and Eurasia. In China and Latin America, projects announced for the long term remain limited, but the upside potential remains, especially to reduce curtailment and to abate CO2 emissions in the industrial sector.
While large companies and countries have announced ambitious green hydrogen expansion plans for the next two decades, it remains uncertain how many of these projects will actually be commissioned on time and on budget. Globally, almost USD 30 billion of government subsidies for green hydrogen have already been announced as part of stimulus packages. Despite this, financing challenges concerning the profitability of green hydrogen projects remain; in many parts of the world the cost of producing hydrogen from renewable electricity remains higher than fossil fuel alternatives. The pace of electrolyser capacity expansion is key to achieving the cost reductions necessary to make hydrogen production from renewable electricity comparable or lower than fossil fuel alternatives.
In addition, the mismatch between currently planned projects and the demand for green hydrogen output remains a key uncertainty for future electrolyser expansion. Government policies are currently more focused on decarbonising hydrogen production than developing demand for new applications, and current country ambitions to stimulate hydrogen use in new applications are not sufficient to meet their net zero pledges (IEA, 2021a).