Thanks to Richard Boocock of Boocock Advisory Ltd. for his insightful contributions.
For close to a decade, Hydrogen (H2) has been touted as one of the keys to the energy transition. It will play a critical role acting as both an energy carrier enabling the storage and transportation of renewable electricity (i.e., from solar and wind), as well as the “leading” answer to help decarbonize sectors that are difficult to electrify such as steel, power generation, heavy-duty transportation, and select industrial processes. Over the last few years, hydrogen has made noteworthy progress; however, most of the potential projects and production are still in planning or even earlier stages according to the International Energy Agency’s (IEA’s) most recent Global Hydrogen Review. Less than 10% of the projects targeted to be online prior to 2030 have reached final investment decision (FID) stage. There are several reasons for the delays including increased costs, licensing and permitting issues and lack of off-takers, but clearly one of the key contributors is slow and incomplete progress on the policy/regulatory front. Consequently, we take a closer look at global progress (surveying all the major industrial regions) in establishing regulations that support and encourage infrastructure development, applications development and use of hydrogen.
History & Background
The signing of the Paris Climate Accord (PCA) was the impetus that moved countries forward to establish formal strategies to address Green House Gas (GHG) emissions, and one of the key components of these strategies was the establishment of a “hydrogen strategy” containing spending, infrastructure, and end-markets targets to assist in achieving those country goals. Japan is credited with releasing the world’s first national hydrogen strategy in December 2017, which contained H2 production and cost reduction targets, infrastructure development approaches, market incentives and global collaboration recommendations. It was a solid strategy that helped propel other countries to do the same. According to the International Renewable Energy Agency (IRENA), as of mid-2024 there were 46 national strategies and 8 roadmaps on H2 that have been drafted and published globally, and at least 20 more countries in the process of making or publishing such strategies. Now clearly, plenty has changed since 2017 along with many lessons learned, which have contributed to needed adjustments and considerations to be included to have more robust and ultimately successful H2 strategies.
Considerations
Some of the additional areas that have been added to enhance more recent H2 strategies include:
- Broader solutions – multiple solutions (i.e., low-carbon H2) are required beyond renewable hydrogen to deliver on carbon neutrality in desired timeframes.
- Key Sectors – although the are many areas that can benefit from utilizing H2, the most economical sectors (in the near term) appear to be heavy-duty transport, power generation and select heavy industries.
- Market creation – there is an existing H2 market and it will convert to clean H2 as the economics equalize, but to achieve desired GHG reductions, greater focus on new market creation supported by “realistic” policies and incentives to stimulate demand is required.
- Public/private partnership – these are crucial for providing the support and momentum, as well as educating the public regarding the benefits of H2.
In addition, there are other considerations and trends that in many respects are difficult to forecast but are just as important and have to be considered in H2 strategy development such as:
- Country Leadership Changes – there were elections in more than 60 countries in 2024 and it turned out to be a difficult year for incumbents and traditional political parties….many of them had been supportive of the current energy transition strategy and timetable. So, expect some things to change…
- Home Industry Protections – with long term health of local/regional economies of paramount interest, the impact of low-cost electrolyzers from China as well as potential tariff impacts on select commodities, adds complexity to the ultimate value proposition that the energy transition will deliver.
- Economic Challenges – the cost of the energy transition is significant now and for the foreseeable future. In addition, many economies have significant economic and budget challenges at the same time, which have contributed to the outcome of recent elections. As a result, expect to see timetables and funding to change.
- Carbon Pricing Disconnect – there is no unified global carbon pricing system, with various countries and regions having implemented their own systems, tailored to their specific economic and environmental contexts. The absence of a globally coordinated approach to carbon pricing leads to inconsistent policies across borders, and is creating confusion and uncertainty for multinational companies and potentially delaying investment in clean technologies.
The ‘green’ agenda is being challenged around the world, and in certain geographies it is less certain than even 2 years ago,” states Richard Boocock, Director of Boocock Advisory Ltd. “This lack of certainty along with the change in the political landscapes for many nations is just one factor that has contributed to the slow-uptake of clean hydrogen projects.
So, there is a lot to consider, when establishing a policy and regulatory framework. It must be flexible and align with the changing technology and political landscape, be supported by leading industry and thought leaders, and hopefully grow in its acceptance by the general public. That is a tall order to achieve but crucial to the success of any hydrogen strategy. So, let’s take a look at progress globally.
Progress-to-date
Asia
Several countries are actively developing hydrogen regulations to support the energy transition, with China leading the way with a comprehensive “Hydrogen Industry Development Plan.” It sets a significant increase in green H2 production, strengthening the policies and standard systems that underpin industry development, increasing infrastructure development (i.e., nationwide hydrogen transport pipeline network), and reclassification of H2 as an energy resource, rather than hazardous chemical to speed government and project support. Currently, China is the leader in green hydrogen system production (via electrolysis) in both manufacturing capacity and overall production with market share in excess of 50%.
In Japan, they updated their H2 strategy in June 2023, which set ambitious goals for H2 usage by 2040 as well as outlining a pathway to low-carbon H2. In mid-2024, the Japanese parliament approved two energy-related bills into law: the Hydrogen Society Promotion Act and the Carbon Capture and Storage (CCS) Business Act. These are Japan’s first laws relating to the business of H2 and the business of CCS, respectively, reaffirming the Japanese government’s commitment to the energy transition. The Act, specifically, introduces a Contract for Difference (CfD) type subsidy for the supply of low-carbon hydrogen, which more effectively enables the introduction of low-carbon H2.
South Korea is one of the world’s leaders in developing H2 technologies, with hydrogen-powered vehicles already widely deployed and utility-scale fuel cell power plants operational. It continues to have H2 at the forefront of its economy and has policies and projects in place to move towards clean H2. In 2024, South Korea fully implemented the Clean Hydrogen Portfolio Standards (CHPS), which incentivizes power producers to use clean H2 by offering long-term purchase contracts. The system will open a forward market in 2027. Also in 2024, South Korea launched the world’s first clean H2 power generation auction market, allowing power companies to enter 15-year H2 purchase contracts. Bidders are evaluated based on the price of electricity and emissions from H2 production.
India is a late adopter launching an ambitious “National Green Hydrogen Mission” in 2023 with the goal of producing at least 5 Million Tons per year (TPY) of green H2 by 2030, and aiming to position itself as a global leader in green H2 production through significant investments in renewable energy and domestic electrolyzer manufacturing. By 2026, the focus is on creating demand and expanding local electrolyser manufacturing, as well as develop regulations and standards to align with global practices.
Australia
The new 2024 National Hydrogen Strategy represents a comprehensive formal review and update of their 2019 National Hydrogen Strategy. It focuses on accelerating clean H2 industry growth which will be achieved through increasing global cost competitiveness by supporting industry development at scale. The strategy identifies four (4) objectives, cost competitive global supply, identification and support of key demand sectors, community benefit awareness, and establishment of trade at scale and leveraging partnerships. Central to the updated Strategy are the production incentives announced as part of the Government’s $22.7 billion Future Made in Australia plan which includes a $2 (AUS) per kilogram Hydrogen Production Tax Incentive eligible to producers of renewable H2 through Australia’s tax system, forming the basis of government support to the sector to 2040. These were announced through the 2024-25 Federal Budget.
Europe
It developed its first H2 strategy in July 2020, and since then with many enhancements and linkages, has resulted in a well-developed regulatory framework. It focuses on promoting renewable H2 production through binding targets in the revised Renewable Energy Directive (RED III), and includes specific criteria for defining “renewable H2” and methodologies to calculate its GHG emissions savings.
The Hydrogen and Decarbonized Gas Market Package, formally adopted in May 2024, is also in place to facilitate dedicated H2 infrastructure development and market creation. However, while the regulatory framework appears to be largely in-place, significant implementation and standardization work remains, with most hydrogen projects still in early stages of development. The UK has continued to develop its hydrogen sector by expanding hydrogen policies, frameworks and investment schemes (i.e., Hydrogen Allocation Rounds, Low Carbon Hydrogen Standard, etc.), designed to deliver the five-year plan originally set out in the 2021 Hydrogen Strategy. Key aspects include requiring gas transporter licenses for hydrogen pipeline developers and a revenue support model for green and blue hydrogen production through the Energy Act 2023, essentially providing subsidies to incentivize investment in hydrogen projects. “Another factor, not solely confined to the UK, has been the evolution of knowledge, and subsequent policy development of regulators regarding the safe handling of hydrogen in a more retail or community (rather than industrial) environment,” states Richard Boocock. “Recent examples of this would be the UK’s Crawley and Gatwick hydrogen bus fueling facility where stored hydrogen inventory has been restricted in part due to proximity to community buildings, and the Hybont project in Wales where permits have reportedly been granted following reductions in capacity of tube trailers moving in and out of the site.“
MENA
In North Africa, countries are actively promoting green hydrogen development with various policies and action plans in place, but a comprehensive, unified regulatory framework for hydrogen is still emerging, with each nation developing their own specific regulations to facilitate investment and production of green hydrogen, particularly focused on renewable energy integration and export potential. However, Morocco stands out with a dedicated National Hydrogen Commission and roadmap for green hydrogen development. In March 2024, the country launched the “Morocco Offer” providing a holistic, transparent and pragmatic approach designed to give investors visibility on scope, land, infrastructure for the development of a green hydrogen sector, incentives and the process for selecting investors, as well as the governance of the green hydrogen sector.
North Africa has many attractive factors as a source of hydrogen from renewables for Europe,” said Richard, “with available land, proven capability in renewable energy projects, and pipeline connections to Europe. However, stakeholder concerns relating to the long-standing drought in the region, and the ethical and moral considerations of economic exploitation of Africa for the benefit of Europe, are growing.
The Middle East also lacks a comprehensive regulatory framework for hydrogen, meaning there are currently no dedicated standards or certification schemes for hydrogen production, distribution, storage, and utilization, leaving a significant gap in regulating hydrogen projects within the region. The most visible country is Saudi Arabia which first outlined a national hydrogen strategy in 2020, and has moved forward gradually under guidance of the Saudi Ministry of Energy. Its diverse hydrogen pathways include numerous initiatives of state oil company Saudi Aramco and affiliates and the new NEOM project, but significant obstacles remain as Saudi industries confront basic cost factors and regulatory uncertainties in foreign markets, which combine to preclude a rapid expansion into low-carbon hydrogen. “Other countries in the region are also active in this space such United Arab Emirates (UAE), and Oman,” states Richard. “These countries, along with Saudi Arabia, have significant solar and wind potential, along with petrochemical infrastructure making them well-suited for clean hydrogen production, and potentially presenting an opportunity for energy arbitrage with higher energy cost regions.”
The Americas
For the past 3+ years, the Government of Canada, has been working with companies, and local/global organizations to implement the recommendations from its original December 2020 Hydrogen Strategy. In May 2024, they published a Progress Report detailing achievements and progress towards their goals. Major policy and regulatory updates remain focused on Low-carbon hydrogen, which has been Canada’s original goal, promoting its production and use. In addition, several related tax credits have been incorporated into the national budget including the Clean Hydrogen Investment, Clean Electricity/Technology Investment and Carbon Capture Utilization and Storage Investment to name a few. Several regulations have also been implemented as well, to drive demand and lower emissions around Clean fuels, methane and carbon emissions pricing.
Since the PCA, the United States (US) has been an “up and down” supporter of hydrogen’s role in the energy transition. The latest policy and regulatory news (in December 2024) have clearly been the Department of Energy’s released update to the 45VH2-GREET model, which has been adopted by the Department of the Treasury for the purposes of calculating well-to-gate emissions of hydrogen production facilities, for the clean hydrogen production tax credit established in Internal Revenue Code (referred to as 45V tax credit). However, on the flip side, the new administration (as of late January) has instructed all government agencies to “immediately pause the disbursement of funds” from the two acts of government that created subsidies for the clean hydrogen industry. This means that no more funding can be handed out (for now) to any of the seven regional clean hydrogen hubs that were awarded billions of dollars by the previous administration under the 2021 Infrastructure Investment and Jobs Act (commonly known as the Bipartisan Infrastructure Law). So, it appears another change in direction has begun…
While there is growing interest in clean hydrogen development in South America, the regulatory landscape is still evolving with many countries discussing and implementing policies to support its production and export. However, countries like Columbia, Brazil and Chile are actively developing national hydrogen strategies and roadmaps, pushing regional interest in the hydrogen industry, particularly for green hydrogen production and export potential. Chile is clearly the leader having established their original Green Hydrogen strategy back in 2022, and in April 2024 unveiled its latest iteration called Green Hydrogen Action Plan 2023-2030. The plan which outlines 81 action items across 18 different categories, aims to industrialize the national economy by replacing polluting industries with sustainable ones and achieve the country’s goal of carbon neutrality by 2050. However, most projects are still in the planning or memorandum of understanding (MOU) stage due to a lack of clear regulatory frameworks and projected demand clarity.
I expect the world to be watching the Americas, and the US in particular, very closely in the coming year,” said Richard. “The direction of the new administration has been strongly positive on hydrocarbons, and less so on renewables. A US that has a strong focus on hydrocarbons for industry, and a desire to perpetuate an energy cost base of $3 to $4 per MMBTU for natural gas, will only increase pressure on industries and governments in other world regions in terms of decarbonization ambitions and fundamental global competitiveness.
Outlook
The global landscape for clean hydrogen can be described as “plenty of promise and targets, but little delivered to this point.” The reasons are complex but fundamentally it is a matter of short term versus long term priorities, and the allocation of funds in meeting those priorities…while still keep 2050 NetZero targets attainable. Most people around the world don’t believe climate change is a hoax any longer, especially with unexplainable events occurring more and more such as the first-ever Blizzard Warning for the Gulf coasts of Louisiana and southeastern Texas (in the US) this past January. However, short term economic challenges, driven by geopolitical and macroeconomic events, have caused shifts in governmental leadership that will make it more difficult to advance the energy transition agenda in the short term.
