Hydrogen Generation Market Size, Share & Trends Analysis Report By System (Merchant, Captive), By Technology (Steam Methane Reforming, Coal Gasification), By Application, By Source, By Region- Global Industry Analysis, Share, Growth, Regional Outlook and Forecasts, 2024-2033

The global hydrogen generation market size was exhibited at USD 170.15 billion in 2023 and is projected to hit around USD 417.84 billion by 2033, growing at a CAGR of 9.4% during the forecast period of 2024 to 2033.

Key Takeaways:

• Asia Pacific accounted for the largest revenue share of over 36.0% in 2023.
• Shifting focus on cleaner energy along with favorable government regulations are preponderance for hydrogen generation market.
• Coal gasification hold a revenue share of more than 34.0% in 2023.
• Natural gas led hydrogen generation industry with a revenue share of more than 72.0% in 2023.
• Based on system, the merchant generation segment led with a revenue share of about 61.0% in 2023.
• Ammonia production accounted for the largest revenue share of above 21.0% in 2023.

Hydrogen Generation Market: Overview 

The hydrogen generation market is witnessing a significant surge in interest and investment owing to its pivotal role in the global transition towards sustainable energy solutions. Hydrogen, often touted as the "fuel of the future," holds immense promise in decarbonizing various sectors such as transportation, industry, and power generation. This overview delves into key aspects of the hydrogen generation market, encompassing its growth drivers, challenges, technological advancements, and market trends.

Hydrogen Generation Market Growth

The hydrogen generation market is experiencing robust growth driven by several key factors. Firstly, heightened environmental awareness and the imperative to combat climate change have accelerated the adoption of hydrogen as a clean energy alternative. Governments worldwide are implementing supportive policies and incentives, spurring investments in hydrogen technology development and infrastructure. Additionally, advancements in hydrogen production processes, such as electrolysis and steam methane reforming, are driving down costs and enhancing efficiency. Furthermore, the diversification of energy sources and the versatility of hydrogen as an energy carrier contribute to its appeal across various sectors. As industries strive to decarbonize and reduce their carbon footprint, hydrogen emerges as a promising solution.

Hydrogen Generation Market Report Scope

Hydrogen Generation Market Dynamics

• Policy Support and Investments:

Government policies and investments play a pivotal role in shaping the trajectory of the hydrogen generation market. Many countries are enacting regulations and incentives to promote the adoption of hydrogen as a clean energy solution. Substantial government investments are being directed towards research, development, and deployment of hydrogen technologies, including production, storage, and transportation infrastructure. These policies and investments create a conducive environment for market growth by reducing barriers to entry, encouraging innovation, and stimulating private sector participation. Moreover, international collaborations and agreements further bolster the hydrogen market by facilitating knowledge sharing, technology transfer, and market expansion across borders.

• Technological Advancements and Cost Reductions:

Technological advancements are driving significant improvements in the efficiency, scalability, and cost-effectiveness of hydrogen generation processes. Innovations in electrolysis, steam methane reforming, and other hydrogen production methods are leading to lower capital and operating costs, making hydrogen more competitive with traditional fossil fuels. Additionally, advancements in hydrogen storage and transportation technologies are enhancing the feasibility and reliability of integrating hydrogen into existing energy infrastructure. As costs continue to decline and performance improves, hydrogen becomes increasingly viable as a mainstream energy solution across a diverse range of applications, from transportation to industrial processes. 

Hydrogen Generation Market Restraint

• Infrastructure Development Challenges:

One of the primary restraints hindering the growth of the hydrogen generation market is the significant infrastructure development required to support widespread adoption. Establishing a robust hydrogen infrastructure involves building production facilities, storage tanks, transportation pipelines, and distribution networks, as well as retrofitting existing industrial facilities and developing hydrogen refueling stations. These infrastructure projects are capital-intensive and require coordination among various stakeholders, including government agencies, energy companies, and technology providers. Moreover, the lack of a comprehensive hydrogen infrastructure presents a chicken-and-egg dilemma, where the limited availability of refueling stations and distribution networks impedes the adoption of hydrogen-powered vehicles and other applications, while the low demand for hydrogen inhibits investments in infrastructure development.

• Cost Competitiveness and Economic Viability:

Despite significant advancements in hydrogen production technologies, cost competitiveness remains a critical barrier to the widespread adoption of hydrogen as a mainstream energy source. The production, storage, and distribution of hydrogen entail considerable capital and operating expenses, which can be prohibitively high compared to conventional fossil fuels in many cases. While the costs of hydrogen production from renewable sources are gradually declining, they still exceed those of fossil fuel-derived hydrogen, particularly in regions with abundant and cheap natural gas resources. Additionally, the economics of hydrogen are highly sensitive to factors such as energy prices, carbon pricing mechanisms, and government incentives, which can fluctuate over time and vary across different regions.

Hydrogen Generation Market Opportunity

• Emergence of Green Hydrogen:

The growing emphasis on decarbonization and renewable energy integration has led to a surge in interest in green hydrogen, produced through electrolysis powered by renewable energy sources such as solar and wind. Green hydrogen offers a sustainable and environmentally friendly alternative to conventional gray and blue hydrogen, which are derived from fossil fuels and associated with carbon emissions. With declining costs of renewable energy and electrolysis technology, green hydrogen is becoming increasingly competitive, particularly in regions with abundant renewable resources. The emergence of green hydrogen presents a significant opportunity for market growth, as it aligns with global climate goals and addresses concerns about energy security and sustainability.

• Integration with Renewable Energy:

Hydrogen's versatility as an energy carrier makes it an ideal candidate for integrating renewable energy sources into the energy system. Excess renewable electricity can be used to produce hydrogen through electrolysis during periods of low demand or surplus generation. This concept, known as "power-to-gas," not only helps to balance the intermittency of renewable energy sources but also enables energy storage and grid flexibility. Hydrogen can be stored for extended periods and converted back to electricity or used as a feedstock for various industrial processes when needed. The integration of hydrogen with renewable energy presents a compelling opportunity to maximize the value of renewable resources, enhance energy system resilience, and accelerate the transition towards a clean and sustainable energy future.

Hydrogen Generation Market Challenges

• Infrastructure Development Hurdles:

Establishing a robust infrastructure for hydrogen production, storage, and distribution poses a significant challenge for the hydrogen generation market. The current infrastructure is largely built around fossil fuels, and transitioning to hydrogen requires substantial investments in new facilities and technologies. Building hydrogen production plants, storage tanks, transportation pipelines, and refueling stations requires significant capital and coordination among various stakeholders, including government entities, energy companies, and technology providers. Moreover, retrofitting existing infrastructure to accommodate hydrogen can be complex and costly. The lack of a comprehensive hydrogen infrastructure hampers the widespread adoption of hydrogen as an energy carrier, limiting its market penetration and potential applications. 

• Cost Competitiveness and Economic Viability:

Despite technological advancements, hydrogen production remains more expensive than traditional fossil fuels in many cases, posing a challenge to its widespread adoption. The cost of producing hydrogen depends on factors such as the feedstock used, the production method employed, and the scale of operation. While renewable hydrogen produced through electrolysis is becoming increasingly competitive, it still faces challenges in achieving cost parity with fossil fuel-derived hydrogen, particularly in regions with abundant natural gas resources. Additionally, the economics of hydrogen are highly sensitive to energy prices, carbon pricing mechanisms, and government incentives, which can vary significantly across different regions and timeframes.   

Segments Insights:

Technology Insights

Based on technology type, global market is divided into steam methane reforming, coal gasification, and others. Steam methane reforming process is a mature and advanced technology in hydrogen generation. Growing global demand for hydrogen generation is a crucial driving factor for steam methane reformers technology, as this is the most economical hydrogen generation method. Other growth driving factors include operational benefits such as high conversion efficiency associated with steam methane reforming process. Steam methane reforming segment is expected to maintain its lead during the forecast period.

Coal gasification hold a revenue share of more than 34.0% in 2023. Coal gasification which uses coal as a raw material for producing hydrogen has been in practice for nearly two centuries, moreover, is it also recognized as a mature technology for hydrogen generation. U.S. has a huge domestic resource in coal. Use of coal to generate hydrogen for transportation sector is expected to aid America in reducing its dependency on imported petroleum products.

Technologies in “others” segment include electrolysis and pyrolysis process and electrolyzers. Over the last decade, there has been an increase in new electrolysis installations with an aim to produce hydrogen from water, wherein PEM technology is gaining a significant market share as the process emits only oxygen as a byproduct without carbon emission. Presently most electrolysis projects are in Europe; however, new and upcoming projects have been announced in Australia, China, and America.

Source Insights

Natural gas led hydrogen generation industry with a revenue share of more than 72.0% in 2023. Hydrogen is produced from natural gas reforming which produces hydrogen, carbon monoxide, and carbon dioxide. Hydrogen production from natural gas is the cheapest method of producing hydrogen. Hydrogen production from natural gas is expected to keep its lead in the forecast period.

System Insights

Based on system, the merchant generation segment led with a revenue share of about 61.0% in 2023. Merchant generation of hydrogen means hydrogen is produced at a central production facility and is transported and sold to a consumer by bulk tank, pipeline, or cylinder truck. In many countries such as the U.S., Canada, and Russia there is an extensive existing natural gas pipeline network that could be used to transport and distribute hydrogen. Merchant generation segment is expected to retain its leading position from 2024 to 2033.

Application Insights

Ammonia production accounted for the largest revenue share of above 21.0% in 2023. It is expected to maintain its lead throughout the forecast period. Ammonia’s potential as a carbon-free fuel, hydrogen carrier, and energy store represents an opportunity for renewable hydrogen technologies to be deployed at an even greater scale. Hydrogen is typically produced on-site at ammonia plants from a fossil fuel feedstock. Natural gas is the most common feedstock, which feeds a steam methane reforming (SMR) unit. Coal can also be used to produce ammonia via a partial oxidation (POX) process.

The market is anticipated to witness steady growth across all segments as the demand for hydrogen increases. Methanol is currently considered one of the most useful chemical products and is a promising building block for obtaining more complex chemical compounds, such as acetic acid, methyl tertiary butyl ether, dimethyl ether, methylamine, etc. Methanol is the simplest alcohol, appearing as a colorless liquid with a distinctive smell. It can be produced by converting CO2 and H2 and is expected to benefit by significantly reducing CO2 emissions in atmosphere.

Hydrogen-based power generation technology has comfortably positioned itself in mature markets, such as North America and Europe, where clean yet effective energy is one of the primary aspects. Hydrogen-based power generation, which is cost-effective and a reliable source of power generation, is generating optimistic demands.

Turning crude oil into various end-user products such as transport fuels and petrochemical feedstock are some of the major applications of hydrogen. Hydrotreatment and hydrocracking are the main hydrogen-consuming processes in refineries. Hydrotreatment is used to remove impurities, especially Sulphur, and accounts for a large share of refinery hydrogen use globally. Hydrocracking is a process that uses hydrogen to upgrade heavy residual oils into higher-value oil products.

Regional Insights

Asia Pacific accounted for the largest revenue share of over 36.0% in 2023.China led it in 2023, in terms of revenue. Presence of a high number of refineries in major countries such as China and India has resulted in driving the utilization of hydrogen generation. Furthermore, governments in some Asia Pacific countries such as Japan and Australia are evaluating greener and cleaner technologies for hydrogen generation.

Regional hydrogen producers are looking to expand their geographical reach and target countries like Vietnam, Indonesia, and South Africa among other developing nations, to boost their revenue. U.S.-based market players like Praxair Inc. and Air Liquide are looking to expand their operations in countries with increasing demand for hydrogen as part of their strategic growth plans.

Expansion of hydrogen generation industry in North America has been underway for several years. Industry has grown at a brisk pace with contributions from each application and technology. Methanol production and ammonia production are the fastest growing sectors with countries such as the U.S. and Canada witnessing significant growth in the last five years.

Growth in hydrogen generation is expected on account of fuel cell development and deployment in Europe, which is witnessing an increase due to the projects announced by European Commission (EU) through organizations such as Fuel Cells and Hydrogen Joint Undertaking (FCH JU). These projects have been announced with an objective of increasing adoption of fuel cell vehicles in Europe and this will aid in development of supportive hydrogen infrastructure for fuel cell vehicles in major European countries.

Some of the prominent players in the hydrogen generation market include:

• Air Liquide International S.A
• Air Products and Chemicals, Inc
• Hydrogenics Corporation
• INOX Air Products Ltd.
• Iwatani Corporation
• Linde Plc
• Matheson Tri-Gas, Inc.
• Messer
• SOL Group
• Tokyo Gas Chemicals Co., Ltd.

Segments Covered in the Report

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2021 to 2033. For this study, Nova one advisor, Inc. has segmented the global hydrogen generation market.

Technology

• Steam Methane Reforming
• Coal Gasification
• Others

Application

• Methanol production
• Ammonia Production
• Petroleum Refining
• Transportation
• Power Generation
• Others

System

• Captive
• Merchant

Source

• Natural Gas
• Coal
• Biomass
• Water

By Region

• North America
• Europe
• Asia-Pacific
• Latin America
• Middle East & Africa (MEA)