What are the challenges in scaling Hydrogen production?

What are the challenges in scaling Hydrogen production?

Hydrogen has long been hailed as a cornerstone of the clean energy transition. As the world races to decarbonise hard-to-abate sectors such as heavy industry, shipping, and long-haul transport, hydrogen provides a zero-emission fuel alternative with versatility and storage potential. However, despite its vast promise, the pathway to scaling hydrogen production is fraught with challenges, ranging from high costs and technological limitations to infrastructure and policy gaps. This blog explores the barriers to widespread hydrogen adoption and the strategies needed to overcome them.

Why is Hydrogen key to the clean energy transition?

Hydrogen's role in a low-carbon future is multifaceted. It can power fuel cells in trucks and trains, store excess renewable energy for later use, and replace coal and gas in industrial processes such as steelmaking and fertiliser production. Unlike fossil fuels, green hydrogen (produced using renewable electricity and water electrolysis) emits no carbon dioxide when used.

There are three main types of hydrogen:

• Grey hydrogen is made from natural gas via steam methane reforming (SMR) without capturing emissions.

• Blue hydrogen uses the same process but includes carbon capture and storage (CCS).

• Green hydrogen is the cleanest form, using electrolysers powered by renewable sources like wind and solar.

Green hydrogen is critical to long-term decarbonisation strategies in the EU, UK, Japan, and other economies. Yet its scalability remains a pressing concern.

High production costs and limited commercial viability

A major challenge in increasing hydrogen production is its cost. Specifically, green hydrogen is costly because of the high prices associated with electrolysers and the renewable electricity needed to operate them. The process of electrolysis is still energy-intensive, achieving only 60–70% efficiency in turning electricity into usable hydrogen.

When comparing energy prices, hydrogen currently struggles to compete with fossil fuels on a cost-per-kWh basis. For example, while natural gas may be available at £0.05/kWh, green hydrogen can cost over £0.15/kWh, depending on regional electricity prices and the efficiency of the electrolyser.

Investors remain cautious due to these cost disparities and the long payback periods associated with hydrogen infrastructure. Without clear demand signals and stable policy support, the financial risks stay excessively high for numerous private entities.

Hydrogen production: infrastructure and storage limitations

Another significant barrier is the absence of dedicated hydrogen infrastructure. Unlike oil or natural gas, hydrogen lacks an established network of pipelines, storage terminals, and filling stations. The current hydrogen supply chain is fragmented and underdeveloped, especially in areas where production and end-use centres are widely separated.

Storage also presents unique challenges. Hydrogen must be either pressurised to 350–700 bar, liquefied at -253°C, or stored in chemical carriers - all of which entail energy losses and increased costs. Furthermore, hydrogen is susceptible to leakage and can embrittle metals, complicating its transport and integration into existing systems.

Building a comprehensive hydrogen infrastructure - encompassing production hubs, refuelling stations, pipelines, and storage facilities - will require significant upfront investment and long-term coordination across public and private sectors.

Technology and efficiency bottlenecks

Despite recent advances, scalable hydrogen production is still hindered by technology. Although electrolysis efficiency is improving, it remains below optimal levels. PEM (proton exchange membrane) and alkaline electrolysers are the dominant technologies; however, both encounter scalability and durability challenges.

There are also innovation gaps in hydrogen reforming and storage systems. To reduce costs and increase yields, breakthroughs in materials science, system integration, and modular electrolyser designs are necessary.

Research and development (R&D) will play a critical role in making hydrogen viable at scale. However, R&D funding has historically lagged behind other clean technologies such as solar PV and batteries, and a stronger focus is now needed to close the gap.

Regulatory and policy uncertainty

Another challenge hindering the growth of hydrogen is policy fragmentation. Although numerous countries have released hydrogen roadmaps, only a limited number have implemented enforceable policies that include binding targets or financial incentives comparable to those for solar or wind energy.

The absence of standardised frameworks for hydrogen certification, such as guarantees of origin or carbon intensity labelling, creates market confusion and inhibits cross-border trade. Permitting delays, lack of harmonised safety codes, and overlapping jurisdictional responsibilities further complicate project development.

Inconsistent government support across regions only adds to the uncertainty. For example, while the EU is offering billions in hydrogen subsidies under its REPowerEU plan, other markets remain more tentative in their commitments.

Supply chain and resource constraints

Scaling hydrogen production also depends on securing the raw materials and workforce needed to build and operate the technology. Electrolysers require scarce metals such as platinum and iridium, which are not only expensive but also subject to geopolitical risk and supply chain volatility.

Manufacturing capacity for electrolysers, compressors, and hydrogen tanks remains limited, and there is a growing need for skilled labour in engineering, operations, and maintenance. Additionally, green hydrogen competes for resources with other clean technologies, such as electric vehicles and wind turbines, further straining the supply chain.

Case studies: regional efforts to scale Hydrogen

Europe has positioned itself as a leader in the hydrogen economy. The EU Hydrogen Strategy aims to install at least 40 GW of electrolysis capacity by 2030, supported by the European Hydrogen Bank and the Important Projects of Common European Interest (IPCEI) scheme. Nations such as Germany, the Netherlands, and Spain are spearheading public-private partnerships to deploy infrastructure and stimulate demand.

The United States has ramped up support through the Inflation Reduction Act (IRA), which provides generous tax credits for the production of clean hydrogen. The Department of Energy is investing in hydrogen hubs across multiple states, each focusing on different production methods and use cases.

In the Asia-Pacific region, countries like Japan and South Korea have long invested in hydrogen as part of their industrial policy. Australia, with its vast renewable resources, is emerging as a major exporter of green hydrogen, targeting the Asia-Pacific market.

Pathways to overcome scaling challenges

Several strategies can help accelerate hydrogen scalability:

• Innovation: Advancements in electrolyser design, such as solid oxide and anion exchange technologies, can improve efficiency and reduce costs.

• Policy Instruments: Governments can support uptake through carbon pricing, production subsidies, feed-in tariffs, and tax incentives.

• Infrastructure Planning: Coordinated investment in hydrogen corridors, ports, and storage facilities will enable economies of scale.

• International Cooperation: Harmonising standards and creating global markets will facilitate trade and attract investment.

Scaling hydrogen production is essential for achieving net-zero ambitions and decarbonising sectors beyond the reach of electrification. Yet the journey from niche pilot projects to global deployment is fraught with challenges, including high costs, infrastructure bottlenecks, and regulatory fragmentation.

To overcome these hurdles, stakeholders must align on innovation priorities, create robust policy frameworks, and invest in the supply chains that underpin a thriving hydrogen economy. With coordinated effort and international collaboration, hydrogen can become a linchpin of the clean energy future, not just a promise on the horizon.