Written by Kruthika A. Bala
The green hydrogen industry, once buoyed by early optimism, is now facing significant challenges. Many projects in Europe and the US have either stalled or been delayed. In the US, regulatory uncertainty and in Europe, bureaucratic hurdles and insufficient funding are slowing progress. Earlier this year, the European Court of Auditors highlighted that the EU’s hydrogen goals face feasibility challenges. A McKinsey report states that 18% of North American and 5% of European clean hydrogen projects planned for 2030 have reached a final investment decision (Hydrogen Council).
While progress in the US and EU is measured, emerging markets like Saudi Arabia, Morocco, and Chile are rapidly advancing their green hydrogen ambitions, leveraging abundant renewable resources and supportive policies. Yet, to sustain this momentum, these regions must overcome critical barriers, most notably water scarcity and material constraint – factors that will ultimately shape the viability of green hydrogen globally. Overcoming these challenges will require innovation in water efficiency, alternative materials, and recycling. Though progress is promising, these constraints remain central to the industry’s ability to scale effectively.
A PARCHED PATH: WATER AND ENVIRONMENTAL HURDLES
The production of green hydrogen through electrolysis is water intensive. The production through electrolysis proportionally requires about 9-14 litres of water per kilogram of hydrogen, with additional water for purification and cooling, bringing total consumption to 20-30 litres per kilogram, depending on electrolyser efficiency, water quality, and cooling systems. This reliance on water exacerbates existing pressures in water-stressed regions. A growing global concern. For example, Saudi Arabia, home to the NEOM Green Hydrogen Project, despite its abundant renewable energy, faces severe water scarcity. Green hydrogen production, requiring significant water for electrolysis, poses a challenge in this “hyper-arid” environment (The Forum ERF).
In Saudi Arabia, the NEOM project seeks to tackle the challenge of securing sufficient fresh water by relying heavily on desalination, an energy-intensive process requiring 4 to 5 kWh per cubic meter of water (UNEP). While renewable energy sources are used to power some desalination, the energy demand remains high, and the associated costs could undermine the economic feasibility of green hydrogen production in such a water-scarce region. In some markets, this could also divert renewable energy from the grid, limiting availability for other sectors.
Additionally, the disposal of brine, a byproduct of desalination, presents environmental risks, particularly in marine ecosystems (UNEP). In Oman, for instance, desalination plants are facing challenges related to the high salinity of brine discharge, which negatively impacts coastal ecosystems (IEA).
Morocco and Chile are also emerging as global hubs for green hydrogen production and face significant challenges due to water scarcity. Both countries are leveraging their abundant solar and wind resources, making them ideal for electrolysis-based hydrogen production, but their water resources are constrained. In Morocco, agriculture accounts for 88% of total water use (The World Bank), while in Chile, the Atacama Desert is among the driest regions on Earth, competing for water between mining, agriculture, and industrial use (IWA).
Nevertheless, international partnerships, pilot projects, and growing market demand are accelerating the development of green hydrogen ecosystems in both countries. Morocco’s Green Hydrogen Strategy aims to produce 4 million tonnes of green hydrogen per year by 2030 (netzerocircleorg), while Chile is positioning itself as a key player in global hydrogen exports, with several high-profile projects in the pipeline (gh2org). Yet, both countries will need substantial investment in infrastructure, including water-efficient technologies and low-energy desalination methods, to ensure that green hydrogen production remains both sustainable and economically viable.
To mitigate these challenges, green hydrogen projects need to focus on efficient water use and adopt innovative solutions like closed-loop water systems, which recycle water used in electrolysis, minimising overall consumption (Xylem). Furthermore, the development of low-energy desalination technologies, such as reverse osmosis and electrodialysis, can help reduce both the energy consumption and cost of desalination, making it a more viable option (Veolia). New desalination techniques could reduce energy costs by up to 30% compared to traditional methods (IEA-OES).
While these solutions offer potential, the competition for water in already-stressed regions cannot be overlooked. To ensure sustainability, hydrogen production must be planned strategically, prioritising regions where water use can be balanced with local needs, especially in areas already facing severe water scarcity.
As green hydrogen scales up, these projects should be designed to minimise strain on limited water resources and ensure access to water for essential uses, including agriculture and drinking water.
A PRECIOUS STRAIN: MATERIAL DEPENDENCE AND COSTS
The green hydrogen industry also faces challenges from its reliance on scarce and costly materials like iridium and platinum, essential for electrolyser production. Iridium, with a global output of just 8–9 metric tons annually, is a by-product of nickel and copper mining (Enapter) and one of the most expensive elements, with prices driven by demand from electronics, aerospace, and automotive sectors (SFA Oxford). Platinum, though more abundant, has seen prices rise over 400% in recent years due to high demand from industries like automotive (catalytic converters), jewellery, and industrial applications (Platinum Investment).
As the green hydrogen sector grows, reliance on rare metals for proton exchange membrane (PEM) electrolysis could become a bottleneck. PEM electrolysers require 300 to 400 kg of iridium per gigawatt (GW) of production capacity (Heraeus). With global PEM electrolyser capacity potentially reaching 30 GW, iridium supply is already stretched, and current production rates do not meet the forecasted demand. IRENA projects 5,700 GW of electrolyser capacity by 2050. As of 2023, global capacity was 1.4 GW, expected to reach 5 GW by 2024.
To address supply constraints, researchers are exploring alternatives to iridium and platinum, such as non-precious metal catalysts (NPMCs) and metal-organic frameworks (MOFs), to reduce material dependence and costs in hydrogen production (MDPI). Recycling could also alleviate pressure on the iridium supply, but extracting iridium from electrolyser components presents technical challenges. Efficient recovery requires advanced technologies, and cost-effectiveness must be assessed against savings from reduced reliance on primary iridium. Supportive regulations are also necessary to incentivise recycling and ensure environmental sustainability (Johnson Mathey).
Alkaline electrolysers use nickel, relative to iridium, as a more cost-effective option for large-scale hydrogen production. While widely used for this purpose, they are increasingly being outpaced by PEM electrolysers, which are better suited for smaller-scale, modular applications. As demand for green hydrogen increases, PEM technology is preferred for fuel cell vehicles and industrial processes. Both alkaline and PEM electrolysers offer unique benefits and drawbacks, with the best choice depending on specific use cases and operational needs (Idetechex).
Reducing material dependence and managing supply chain complexities are key to scaling green hydrogen production. Strategic investments in alternative materials, advanced recycling, and diversified electrolyser designs are crucial to addressing resource bottlenecks limiting growth.
ON BALANCE
Water scarcity and material demand are real challenges for green hydrogen but not insurmountable. With enough time and investment, solutions such as improved water management, recycling, and alternative materials can address these issues.
However, the greatest barrier is not the challenges themselves, but the time and financial resources required to overcome them. As green hydrogen aims to integrate with established clean technologies like wind, solar, and battery storage, its ability to compete will be shaped by the availability of these critical resources.
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