Hydrogen and CCUS investment to soar in 2024, risks remain: IEA

Investment in the emergent low-carbon hydrogen and carbon capture and storage sectors is set to soar in 2024, though the outlook for project implementation remains uncertain, the International Energy Agency said June 6.

Investment in electrolyzers for green hydrogen production is expected to more than double in 2024 to $5 billion, driven by new capacity deployment but also by rising costs, which have hit the sector hard in recent years.

Low-carbon and renewable hydrogen project delays are well documented around the world, with policy uncertainty, cost inflation and difficulty securing competitive offtake agreements common barriers.

A small minority -- around 7% -- of announced global clean hydrogen projects have taken positive final investment decisions, data from S&P Global Commodity Insights showed.

Meanwhile, electrolyzer costs have risen 20%-45% since 2021, according to Commodity Insights analysts.

Those costs were expected to fall by only 15%-30% by 2030, with "the majority of costs shifting from 'new' technology like electrolysis stacks, to 'standard' balance-of-plant technology such as heat exchangers, pumps, compressors and storage tanks where cost reduction is incremental," the analysts said in a recent report.

The IEA said much of the investment this year will come from incumbent hydrogen users in the refining and chemicals sectors, rather than higher-risk new industries for hydrogen such as mobility.

China accounts for the largest share, with 40% of global electrolyzer investment, while Europe is less than a third of global investment and the US has around 15%.

The IEA noted a 32,000 mt/year green hydrogen plant is expected to start operations in China in 2024 for ammonia production. It said more than 20 projects of over 100 MW each could be in operation by 2026, with a total capacity of 6.9 GW.

In Europe, Galp is investing $270 million in its 100-MW Sines electrolyzer project (15,000 mt/year hydrogen production), while the 700-MW H2 Green Steel plant in Sweden will see $7 billion in investment.

In the US, the Inflation Reduction Act tax credits are boosting investment, with a number of large-scale projects underway. Fortescue, for example, is developing an 11,000 mt/year liquid hydrogen production plant in Arizona to start in 2026, the IEA noted.

The Platts Hydrogen Price Wall shows hydrogen production costs in the US via grid-based alkaline electrolysis are amongst the lowest globally, averaging $2.60/kg on the Gulf Coast in April, Commodity Insights data shows.

CCUS growth and uncertainty

The IEA said investment in the carbon capture, use and storage sector could increase tenfold by 2025 to $26 billion, if planned final investment decisions are taken this year.

The agency said over 110 capture facilities, as well as transport and storage projects could reach FID in 2024, following investment decisions for 20 commercial-scale projects in 2023.

However, it noted that it was an "open question" as to whether all planned projects would materialize by 2030.

The planned projects could bring global installed CO2 capture capacity to 430 million mt/year, and storage capacity to 620 million mt/year by 2030, the IEA said.

Oil and gas companies are leading CCUS project developments. The Abu Dhabi National Oil Company took FID on a 1.5 million mt/year project in September.

The IEA noted advancements in many direct air capture projects, and said investment was set to more than double on the year to $660 million in 2024.

Platts, part of Commodity Insights, assessed Tech carbon capture credits at $125/mt on June 5, down $15/mt on the year.

The world's largest direct air capture plant -- Climeworks' Mammoth facility -- entered operations in Iceland in May, with a capacity of 36,000 mt/year.

And the 500,000 mt/year Stratos project in Texas, costing $1.3 billion, is aiming to start operations in mid-2025.