Current State and Future Prospects of the Hydrogen Market

Ambitious growth targets have been set for green hydrogen production in both Finland and the EU. In this article, Onni Tikkanen from Fimpec reflects on the prerequisites for this development and the opportunities it presents.

The concept of a hydrogen economy has been familiar since the 1960s and 70s. In its current context, the primary goal of the hydrogen economy is to replace fossil hydrogen with emission-free hydrogen, particularly in hard-to-electrify sectors such as maritime and aviation, substituting fossil fuels with hydrogen and its derivatives. Over time, this concept has resurfaced periodically, often in response to crises, with the most recent resurgence being driven by climate change mitigation efforts. However, what distinguishes this current era from previous ones is a clear determination among nations and organizations to mitigate climate change and reduce dependence on fossil fuels.

Currently, the production and demand of hydrogen is relatively steady. In 2021, global hydrogen consumption was 94 million tonnes, with oil refining representing 40 million tonnes of consumption and the remaining 54 million tonnes being industrial demand. In industry, hydrogen is primarily used for production of ammonia, methanol, as well as direct reduced iron.[1] In 2020, Finland produced 145,000 tonnes of hydrogen, primarily for oil refining.[2] Presently, nearly 99 percent of hydrogen is produced from fossil fuels, primarily through steam reforming of natural gas. Global hydrogen demand is expected to grow by 20–40 percent by 2030, and new applications such as hydrogen reduction in steelmaking will further increase the demand of hydrogen.[1]

In addition to the current demand and new industrial applications for hydrogen, hydrogen is viewed as a substitute for hard-to-replace fossil fuels. As part of the EU’s Fit for 55 legislative package, the REFuelEU regulation sets targets of 1.2 percent synthetic aviation fuel consumption by 2030 and 35 percent by 2050.[3] In the maritime sector, the goal is 1 percent consumption of synthetic fuels by 2030, along with a 6 percent emissions reduction, and an 80 percent emissions reduction by 2050. [4] With new applications, hydrogen demand is expected to rise significantly, though the range of forecasts is quite wide. By 2040, demand is predicted to be between 200 and 300 million metric tons, and by 2050, demand could reach 500 to 600 million metric tons. [5,6]

Green hydrogen is seen as a key part of the solution for reducing industrial emissions

Green hydrogen, produced through electrolysis using renewable electricity and water, is seen as a key part of the solution for reducing industrial emissions. This perspective is based on the fact that many industrial processes using hydrogen do not generate direct emissions, but emissions occur indirectly through hydrogen and electricity production instead, as in the case of ammonia production. Furthermore, the use of hydrogen can help avoid carbon dioxide emissions in various industrial processes, such as the forementioned steelmaking.

To convert the current hydrogen production in Finland entirely green, producing an equivalent amount of hydrogen through electrolysis would require approximately 1–1.4 GW of electrolyser capacity, depending on operating hours and system efficiency, as well as nearly 8 TWh of renewable electricity, equivalent to over 11 percent of Finland’s current electricity production.[7] Therefore, the electricity consumption would be significant compared to Finland’s current electricity production. However, the renewable electricity production in Finland will increase significantly, which is a key prerequisite for hydrogen economy. Finland aims to produce 10 percent of the EU’s green hydrogen, approximately one million tonnes per year, by 2030. [8,9] Achieving this goal would require about 6–9 GW of electrolyser capacity in Finland and a corresponding 60-90 GW at the EU level. By the summer of 2023, Finland has announced plans with a combined capacity of approximately 7.5 GW, which aligns well with the target.[10] However, it’s important to note that most of these announced green hydrogen projects are still in the pre-feasibility or feasibility stage, with no final investment decisions made, except for P2X Solutions’ Harjavalta facility.

Hydrogen electrolysis yields several utilizable products

It is important to note that hydrogen is not the sole product of electrolysis; oxygen and waste heat are also produced as byproducts. Oxygen and heat can be sold for industrial use and waste heat can be utilized in district heating networks, especially in the case of Finland. Moreover, green hydrogen production enables participation in the electricity market. Massive electricity consumption of the electrolyser enables participation in demand response, providing an additional revenue stream and improving the profitability of green hydrogen investments, while also supporting the grid.

Hydrogen is also seen to play a role in energy production. The variability of renewable electricity generation can be balanced by producing hydrogen from excess renewable electricity and converting it back to electricity using fuel cells when the availability of renewable electricity is low. This two-way operation creates synergies, as the oxygen produced as a byproduct of electrolysis can be further utilized as fuel for fuel cells alongside hydrogen. Similarly, the water produced as a byproduct of fuel cell’s electricity generation can be used as feedstock in electrolysis, reducing the overall water consumption of the system.

Another key synergy lies in fuel cell technologies, with Reversible Solid Oxide Fuel Cell (RSOC) being an example. This technology can produce both hydrogen and electricity by changing the direction of the reaction. Consequently, hydrogen producers can participate in both the hydrogen and electricity markets with a single investment.

EU sets requirements for green hydrogen production

Electricity price is not the only mechanism influencing green hydrogen production. The EU’s RFNBO regulation, complementing the Renewable Energy Directive (RED II), which was approved in June 2023, defines production requirements for renewable fuels of non-biological origin.[11]

One of the regulation’s most significant requirements is that, starting from 2030, green hydrogen production must align with the availability of renewable energy on an hourly basis. This is a crucial requirement, despite encountering resistance due to its complexity, as the hydrogen economy should primarily support the green transition rather than impede it.

The author, Onni Tikkanen, works as an energy consultant at Fimpec Consulting and is a master’s student at Aalto University, majoring in energy systems and markets. Tikkanen has been involved in conducting techno-economic pre-feasibility and feasibility studies for green hydrogen production projects and has also acted as the lead analyst in Fimpec’s comprehensive hydrogen market study. This text is a summary of the hydrogen market study.


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  10. Vihreiden investointien dataikkuna – Elinkeinoelämän keskusliitto [Internet]. [Cited 18. August 2023]; Available at:
  11. Delegated regulation on Union methodology for RFNBOs [Internet]. [Cited 18. August 2023]; Available at:

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