Merchant Hydrogen Generation Market

Countries in North America are increasingly focusing on developing a hydrogen economy as part of their broader strategies to achieve energy transition, climate objectives, and economic resilience. Hydrogen, especially green hydrogen produced using renewable energy, is seen more and more as a crucial solution to decarbonize hard-to-abate sectors like steel, cement, chemicals, and heavy transportation. To speed up this transition, various governments have launched comprehensive plans, policies, subsidies, and incentive programs to support hydrogen development. For instance, Canada introduced the Clean Hydrogen Investment Tax Credit (CHITC) in 2022, which took effect in 2023. This refundable tax credit applies to eligible clean hydrogen assets acquired and operational from 28 March 2023 through 31 December 2034, aiming to boost investment in qualified hydrogen projects.

Hydrogen is a synthetic energy carrier that transports energy generated by various processes. Water electrolysis converts electrical energy into hydrogen. However, besides producing hydrogen, high-grade electrical energy is also used to compress, liquefy, transport, transfer, or store the medium. Energy is required for hydrogen production, and ideally, this energy input should match the energy content of the synthetic gas. Methods like electrolysis and reforming involve energy transformations, where electrical energy or the chemical energy of hydrocarbons is converted into the chemical energy of hydrogen. Unfortunately, energy losses are inevitable at every step of hydrogen creation. During production, about 30% of the energy used for electrolysis is lost, and an additional 10–25% is lost during conversion to other forms. Energy input is also necessary to deliver green hydrogen, whether as fuel for vehicles or through pipelines. Using hydrogen in fuel cells results in further energy loss.

Hydrogen production in North America is expected to change significantly as the region moves toward net-zero emissions. Growing demand for hydrogen and supportive policies are speeding up the shift to low-carbon production methods, especially electrolysis and hydrogen with carbon capture (CCUS). As part of the global transition, hydrogen production could reach about 200 Mt by 2030 and nearly 500 Mt by 2050, mainly driven by clean hydrogen technologies. In North America, hydrogen will be vital in reducing emissions in hard-to-decarbonize sectors such as steel, chemicals, heavy-duty transportation, shipping, and aviation, where direct electrification is still challenging.

Green hydrogen, produced using renewable or other low-carbon energy sources, is emerging as a key solution for decarbonizing energy-intensive sectors such as steel, cement, chemicals, heavy-duty transport, shipping, and aviation. However, its commercial adoption remains limited because green hydrogen currently costs two to four times more than gray hydrogen produced from fossil fuels. This cost gap is driven by high electrolyzer capital costs, limited access to low-cost renewable electricity, and underdeveloped hydrogen infrastructure for production, storage, and distribution. To address these challenges, governments are introducing supportive policies to scale up production and reduce costs. For instance, the European Union’s REPowerEU plan targets 10 million tons of green hydrogen production by 2030, while Japan’s Contracts for Difference (CfD) program subsidizes the cost gap between low-carbon hydrogen and conventional fuels. Such initiatives aim to accelerate green hydrogen deployment and support the global energy transition.