Earlier this month, the International Energy Agency released its annual report on hydrogen. The Global Hydrogen Review 2025 report is in polished, diplomatic, no-offense-to-anybody language. But crouching behind the smiling words is the harsh truth — the global green hydrogen story is not going well.
Here is a datapoint from the report that screams this message aloud. The 2024 report stated that the global hydrogen announcements made indicated that by 2030, the world would be manufacturing 49 million tonnes (mt) of low-emissions hydrogen. The 2025 report revises this downwards to 37 mt, due to “cancellations and delays”. The numbers only confirm the trend with news reports of several high-profile project cancellations (not mentioned in the report) — Thyssenkrupp Nucera, Statkraft, BP, Fortescue, and Nestle, among others.
The world today consumes 100 mt of hydrogen a year: to produce this, it consumes 260 billion cubic metres of natural gas and 90 mt of coal. Low-emission hydrogen – hydrogen produced through processes that release low amounts of greenhouse gases – today accounts for 1 per cent.
The IEA report of 2025 states that low-emission hydrogen projects that actually reached final investment decision (FID), rose “five-fold” in 2024 to 4.2 mtpa, or 4 per cent of global hydrogen consumption by 2030. This indicates that IEA assumes practically no increase in hydrogen consumption — if 4.2 mt is 4 per cent – as the total is around 100 mt. Regardless, IEA believes it will be just around 4 per cent of total hydrogen demand even after five years.
Also, as against 37 mtpa of projects announced, only 4.2 mtpa of projects (11.3 per cent) reached FID.
So, why is there such a gap between (shrinking) ambition and achievement? The answer is cost.
“The cost gap between low-emissions hydrogen and unabated fossil-based production remains a key barrier for project development,” states the IEA report. “The sharp decline in natural gas prices from levels observed in 2022-23 – and the increase in the cost of electrolysers due to inflation and slower than expected deployment of the technology – has led to a larger cost gap with production from unabated fossil fuels,” it says.
However, it adds that “the gap is expected to narrow by 2030”. Why? Because “renewable hydrogen in China could (emphasis added) become cost-competitive by the end of this decade due to low technology costs and cost of capital.”
On the other hand, “In regions where natural gas is cheaper, such as the US and West Asia, the cost gap is set to remain larger,” adds the report.
Tellingly, the report notes that the demand for low-emissions hydrogen “currently remains low and uncertain.” It observes that offtake agreements are mostly preliminary, with only a limited number of firm agreements that include binding conditions for both suppliers and offtakers. “Such agreements account for less than 2 mtpa, or 5 per cent of the potential production that announced projects could achieve by 2030.”
Solar comparison
Some point to the steep decline in solar module prices to suggest that green hydrogen will follow a similar trajectory. Such a comparison is wrong — the IEA report has some pointers to that.
Solar module prices fell from over $1 a watt, their peak in 2010, to an incredible 6-8 cents now. This happened only because China expanded its capacities across the solar value chain — from polysilicon to modules — massively. (This massive scale up of capacities – 1,200 GW of module capacity today, compared with India’s 100 GW — got China over 80 per cent of the global market share, though for a stiff price — a Reuters report in June 2025 quoted Trina Solar’s Chairman, Gao Jifian, as saying that the total Chinese solar manufacturing industry losses amounted to $60 billion last year. However, that is another story.)
China is indeed similarly expanding its electrolyser manufacturing capacity, but the scale-up — unlike solar — is not likely to help global green hydrogen movement. Today, the world has 2 GW of electrolyser capacity by 2024-end, and another 1 GW was added in 2025, till July. As much as 60 per cent of the global capacity is in China, says IEA. China will of course build more, and cheaper. The IEA report puts the cost of electrolysers in China at $600 to $1,200 per kW, compared with $2,000 – 2,600 a kW outside China.
But the lower cost is unlikely to help global green hydrogen manufacturing. Here is why, in IEA’s own words: “However, the cost of equipment is just part of the total investment needed to install an electrolyser. More than half of the total corresponds to engineering, procurement, construction, and contingency costs, which depend on the project location. When transport costs and tariffs are also considered, the cost of installing a Chinese electrolyser outside China is $1, 500 to $2,400 per kW – narrowing the gap with non-Chinese competitors.”
Indian scenario
Today, India has six green hydrogen projects either commissioned or close to be — with a total capacity of 1,27,000 tonnes per year. Additionally, another 6,37,000 tonnes per annum of projects are in the pipeline, according to IH2A. Most of these projects are covered by government incentives. The incentive is ₹50/kg in the first year, ₹40 in the second and ₹30 in the third year. The assumption is that the industry will be able to stand on its own feet after three years.
The gap between the costs of conventional (grey) and green hydrogen is at least $3 a kg — about ₹260. The incentive bridges a small part of this gap.
The industry is betting on the prices of electrolysers and renewable energy falling steeply. The prospect is hazy, as the IEA report shows. Further, the government has not made good on its promise for bringing in a ‘green hydrogen purchase obligation’, a demand push — something the Indian Hydrogen Association (IH2A) has been demanding for long.
In sum, the green hydrogen story — in India and elsewhere — is not rosy.
Published on September 29, 2025