Deep dive: Hydrogen & e-fuels — the fastest-moving subsegments to watch

Emerging markets now account for 68% of announced green hydrogen production capacity through 2030, yet only 4% of projects have reached final investment decision—a gap representing over $240 billion in stranded ambition according to the Hydrogen Council's 2024 Global Hydrogen Review. This disparity between announcement and execution defines the central challenge facing hydrogen and e-fuels development in regions from Morocco to Chile, from Namibia to India. While developed economies debate industrial policy frameworks, emerging markets are racing to become the low-cost clean fuel suppliers of the next energy era. Understanding what separates viable projects from vaporware requires examining three interconnected factors: the levelized cost of hydrogen (LCOH) that determines competitiveness, the offtake contracts that enable financing, and the infrastructure bottlenecks that can strand even the most promising initiatives.

Why It Matters

The hydrogen economy is no longer a distant prospect—it is being built now, and emerging markets hold decisive advantages in this construction. The International Energy Agency's Global Hydrogen Review 2024 documented 1,572 announced hydrogen projects globally, with combined capacity exceeding 45 million metric tons annually by 2030. Critically, the most cost-competitive projects cluster in regions with exceptional renewable resources: North Africa's solar irradiance exceeding 2,400 kWh/m² annually, Chile's Atacama Desert offering capacity factors above 35% for solar PV, and Namibia's combined solar and wind resources enabling round-the-clock renewable generation.

The economics are compelling. BloombergNEF's Hydrogen Levelized Cost Update (October 2024) projects that best-in-class green hydrogen production in Chile, Australia, and the Middle East will reach $1.50-2.00/kg by 2030—prices competitive with grey hydrogen produced from natural gas at $1.00-2.50/kg when carbon costs are included. For emerging market producers, this represents not merely an export opportunity but a potential transformation of their position in global energy trade. Countries that currently import 80-100% of their fossil fuels could become net energy exporters within a decade.

The stakes extend beyond economics. Green hydrogen and its derivatives—ammonia, methanol, and synthetic fuels—offer pathways to decarbonize sectors where direct electrification fails: long-haul shipping, aviation, high-temperature industrial heat, and chemical feedstocks. The International Maritime Organization's 2024 revised greenhouse gas strategy targets net-zero emissions by 2050, creating demand for 100+ million tons of green ammonia and e-methanol annually. Emerging market producers with cost advantages and geographic proximity to major shipping lanes are positioning to capture this demand.

Yet the gap between potential and reality remains vast. Of the 45 million tons of announced capacity, only 3.2 million tons were under construction as of Q3 2024, according to the IEA. The remainder exists as feasibility studies, memoranda of understanding, and press releases. Converting these announcements into operating facilities requires solving interconnected challenges that this analysis addresses.

Key Concepts

Levelized Cost of Hydrogen (LCOH) represents the all-in production cost per kilogram, encompassing capital expenditure (electrolyzer, renewable generation, balance of plant), operating costs (electricity, water, maintenance), and financing costs over the project lifetime. LCOH serves as the primary competitiveness metric, but headline numbers often obscure critical assumptions. A project claiming $2.00/kg LCOH might assume 8% weighted average cost of capital (WACC)—achievable in Germany but not in Namibia without concessional finance. Evaluating LCOH claims requires examining capacity factor assumptions, electrolyzer degradation rates, and whether infrastructure costs (storage, transport) are included.

Capacity Factor measures actual energy production as a percentage of theoretical maximum, directly determining electrolyzer utilization and therefore capital cost allocation per kilogram of hydrogen. Solar-only projects typically achieve 20-30% capacity factors; adding wind increases this to 40-55% in favorable locations; including battery storage or grid backup can push utilization above 70%. Higher capacity factors reduce LCOH but require additional capital investment and operational complexity. The trade-off is project-specific: in locations with exceptional solar resources but limited wind, over-sizing solar capacity may prove more economical than adding complementary generation.

Additionality refers to the requirement that renewable electricity powering electrolyzers comes from new generation capacity rather than diverting existing clean power from other uses. The European Union's Delegated Acts on renewable hydrogen (effective January 2025) establish strict additionality requirements for hydrogen qualifying as "green" under the Renewable Energy Directive. Temporal and geographic correlation requirements further constrain project design. Emerging market projects targeting European export must demonstrate that each hour of electrolyzer operation is matched by proportional renewable generation from the same bidding zone. These requirements significantly impact project economics and design.

Measurement, Reporting, and Verification (MRV) encompasses the systems and protocols that validate hydrogen's green credentials throughout the value chain. Effective MRV addresses carbon intensity at production, transportation, and conversion stages. Emerging frameworks include CertifHy in Europe, the Green Hydrogen Standard from the Green Hydrogen Organisation, and various national certification schemes. For emerging market exporters, demonstrating compliance with importing jurisdiction requirements is essential for market access and price premiums. Robust MRV also underpins access to premium offtake contracts and green financing.

Grid Reliability considerations differ fundamentally between emerging and developed markets. Many emerging market hydrogen projects locate in regions with weak or non-existent grid infrastructure precisely because these areas offer the best renewable resources. While this avoids grid reliability concerns, it requires standalone renewable systems with storage or hybrid configurations—increasing capital intensity. Conversely, projects relying on grid electricity for backup or baseload face curtailment risk, intermittent supply, and potentially carbon-intensive grid power that compromises hydrogen's green credentials. Project developers must navigate this trade-off based on local grid conditions and target market certification requirements.

What's Working and What Isn't

What's Working

Integrated Export Hubs with Anchor Offtakers: The most advanced emerging market hydrogen projects share a common model—they combine production, conversion, and export infrastructure in integrated hubs with binding offtake agreements from creditworthy counterparties. NEOM Green Hydrogen Company in Saudi Arabia exemplifies this approach: a $8.4 billion joint venture between ACWA Power, Air Products, and NEOM producing 600 tons of green hydrogen daily, converting to ammonia on-site, and shipping to Air Products' global distribution network under a 30-year offtake agreement. Air Products' investment-grade credit rating enables project financing at rates unavailable to standalone developers. This model is replicating in Morocco (with OCP Group as anchor offtaker for green ammonia fertilizers), Oman (ACWA Power's 1 million ton/year ammonia project with export agreements to Japan and Korea), and Chile (HIF Global's e-fuels project with Porsche AG offtake).

Concessional Finance Unlocking Bankability: Emerging market hydrogen projects face financing costs 300-500 basis points higher than equivalent European projects—a gap that can add $0.50-1.00/kg to LCOH. Development finance institutions are bridging this gap through blended finance structures. The European Investment Bank's €500 million green hydrogen facility provides subordinated debt and guarantees that de-risk senior lending. The World Bank's Hydrogen for Development Partnership mobilized $3 billion in commitments during 2024, specifically targeting projects in Africa, Latin America, and South Asia. Namibia's Hyphen Hydrogen Energy project secured $1.5 billion in debt commitments from Standard Bank, Nedbank, and development finance institutions including the International Finance Corporation and the German development bank KfW. These structures demonstrate that emerging market hydrogen projects are bankable with appropriate risk mitigation.

Strategic Port Infrastructure Development: Forward-thinking emerging markets are investing in port infrastructure before hydrogen production reaches scale, recognizing that export logistics often determine project viability. Morocco's Tanger Med port is developing ammonia import/export facilities targeting 5 million tons annually by 2030. Namibia is upgrading Lüderitz port specifically to handle hydrogen derivative exports. Brazil's Porto do Açu is positioning as a green hydrogen hub with dedicated ammonia and methanol terminals. Egypt leverages its Suez Canal position, developing the Ain Sokhna industrial zone with integrated hydrogen production and maritime fuel bunkering facilities. These investments address the infrastructure bottleneck preemptively, creating competitive advantages for co-located production projects.

What Isn't Working

MOU-Driven Announcements Without Project Economics: The emerging market hydrogen landscape is littered with announced projects that exist primarily as press releases. A 2024 analysis by Wood Mackenzie found that 72% of announced emerging market projects lack published feasibility studies, binding offtake agreements, or identified financing sources. Many announcements follow a pattern: government signs MOU with international developer, developer issues press release with impressive gigawatt figures, then nothing happens. The disconnect reflects misaligned incentives: governments seek foreign direct investment headlines while developers seek first-mover positioning without capital commitment. This dynamic has created announcement fatigue among serious investors, complicating financing for legitimate projects.

Underestimating Water and Land Requirements: Green hydrogen production requires 9-15 liters of water per kilogram of hydrogen—a significant constraint in arid regions with the best solar resources. Several high-profile projects have faced delays or redesigns after inadequately addressing water supply. Morocco's projects increasingly incorporate desalination, adding $0.10-0.20/kg to production costs. Chile's Atacama Desert projects must transport water from coastal desalination facilities or pipeline from distant sources. Land requirements compound these challenges: a 1 GW electrolyzer facility with dedicated solar generation requires 15-25 km² of land, creating conflicts with agricultural use, indigenous land rights, and environmental protection. Projects advancing smoothly have addressed water and land early in development; those that treated these as secondary considerations have stalled.

Regulatory Uncertainty on Green Hydrogen Definitions: The lack of harmonized international standards for green hydrogen creates significant market access risk. European Union additionality and temporal correlation requirements differ from U.S. 45V tax credit provisions, which differ again from Japanese and Korean import specifications. Projects designed for one market may not qualify in others without modification. This fragmentation particularly disadvantages emerging market exporters who lack the policy influence to shape standards and must design projects for moving regulatory targets. India's National Green Hydrogen Mission, while ambitious, has yet to publish detailed certification standards, leaving domestic producers uncertain about export qualification. Until international standards converge—potentially through mechanisms like the Breakthrough Agenda's hydrogen workstream—regulatory risk will dampen investment.

Electrolyzer Supply Chain Concentration: Global electrolyzer manufacturing capacity remains concentrated in China (60%+ of 2024 production), with European and North American capacity scaling but not yet meeting demand. Emerging market projects face extended lead times (18-36 months), limited supplier negotiating leverage, and currency risk on capital goods priced in euros or dollars. Chinese electrolyzer costs run 40-60% below Western equivalents, but some importing jurisdictions (notably under the EU Carbon Border Adjustment Mechanism) may impose requirements on supply chain carbon intensity. This creates procurement dilemmas: lower-cost Chinese equipment may face market access barriers, while Western equipment increases LCOH. Manufacturing localization in emerging markets remains limited, with only India and Brazil developing significant domestic capacity.

Key Players

Established Leaders

ACWA Power (Saudi Arabia) operates the world's largest green hydrogen project portfolio in emerging markets, with 14 GW of announced capacity across Saudi Arabia, Oman, Egypt, and Morocco. Their integrated developer-owner-operator model and relationships with sovereign wealth funds provide competitive financing access.

Air Products (USA) serves as anchor offtaker for multiple emerging market projects, providing the creditworthy counterparty essential for project finance. Their global industrial gas distribution network offers market access that standalone producers cannot replicate.

Fortescue Future Industries (Australia) has announced 15 million tons of annual production capacity across emerging markets including Kenya, Egypt, and Argentina. While execution remains to be proven, their $6.2 billion capital commitment represents serious intent.

TotalEnergies (France) is developing green hydrogen and e-fuels projects in India, Namibia, and Chile, leveraging their existing energy infrastructure and offtake relationships. Their integrated position across production, conversion, and marine fuels creates value chain synergies.

Masdar (UAE) has committed $30 billion to clean hydrogen through 2030, with projects in Egypt, Morocco, and Central Asia. Their combination of sovereign backing and operational renewable energy experience positions them as a patient, well-capitalized developer.

Emerging Startups

Hyphen Hydrogen Energy (Namibia) is developing a 3 GW electrolyzer project with integrated solar and wind generation, targeting green ammonia exports. Their success in securing development finance institution support demonstrates emerging market project bankability.

HIF Global (Chile) has advanced e-fuels production using Patagonian wind resources, with pilot facilities operational and commercial-scale plants under construction. Their offtake agreement with Porsche validates the e-fuels business model.

Enegix Energy (Brazil) is developing the Base One project—a 3.4 GW facility in Ceará state targeting green ammonia production. Strategic location near major shipping routes enhances export competitiveness.

Chariot Limited (Morocco/Mauritania) is developing the Nour Project in Mauritania, a 10 GW green hydrogen initiative leveraging the country's exceptional wind and solar resources for European export.

AMEA Power (UAE/Africa) operates renewable energy projects across 15 African countries, positioning to layer hydrogen production onto existing generation assets with established grid connections and operational track records.

Key Investors & Funders

European Investment Bank has committed €5 billion to green hydrogen globally through 2030, with dedicated facilities for emerging market projects combining concessional terms with technical assistance.

International Finance Corporation (World Bank Group) mobilized $1.2 billion for hydrogen projects in 2024, focusing on emerging markets where development impact aligns with commercial returns.

Japan Bank for International Cooperation (JBIC) provides debt financing and guarantees for hydrogen projects supplying Japanese offtakers, particularly targeting Australian, Middle Eastern, and Latin American production.

African Development Bank launched a $500 million Green Hydrogen Financing Facility in 2024, targeting projects in Morocco, Egypt, Namibia, South Africa, and Kenya.

Breakthrough Energy Ventures has invested in multiple hydrogen technology companies and increasingly focuses on deployment in emerging markets where cost advantages can accelerate commercialization.

Examples

Morocco's OCP Green Ammonia Initiative: OCP Group, the world's largest phosphate producer, is converting from grey to green ammonia for fertilizer production at its Jorf Lasfar facility. The $7 billion project phases in 1 million tons of annual green ammonia capacity by 2027, powered by 5 GW of dedicated solar and wind generation. LCOH targets $2.20/kg by 2027, declining to $1.80/kg by 2030 as electrolyzer costs decrease. The captive offtake model—OCP consumes all production internally—eliminates market risk and enables aggressive capital deployment. Moroccan government support includes streamlined permitting (18-month approval versus 36+ months for European equivalents), free zone tax benefits, and dedicated port infrastructure at Tanger Med. Early results from Phase 1 operations demonstrate 94% electrolyzer availability and carbon intensity of 0.8 kg CO2e/kg H2—well below European green hydrogen thresholds. This project demonstrates that emerging markets can achieve cost and execution advantages over developed market competitors.

Chile's HIF Haru Oni E-Fuels Pilot: Haru Oni in Chilean Patagonia represents the world's first integrated e-fuels production facility, combining green hydrogen with direct air capture of CO2 to produce synthetic methanol and gasoline. The pilot facility, operational since late 2022, produces 130,000 liters of e-gasoline annually using 3.4 MW of wind power. Porsche AG serves as anchor offtaker at prices exceeding $50/liter—reflecting pilot economics, not commercial viability. The commercial-scale facility targets 550 million liters annually by 2027 at production costs below $2/liter. Patagonian wind resources deliver capacity factors exceeding 60%, enabling electrolyzer utilization rates impossible elsewhere. The project demonstrates technical feasibility but also reveals challenges: DAC contributes $300-500/ton CO2 to e-fuel costs, and transportation to end markets adds $0.20-0.40/liter. Success depends on continued cost reduction across the hydrogen and carbon capture value chains.

India's National Hydrogen Mission Projects: India's 5 million ton green hydrogen production target by 2030 is advancing through multiple projects, with Reliance Industries and Adani Green leading capacity announcements. Reliance's Jamnagar project integrates hydrogen production with their existing refinery complex, targeting 100,000 tons annually by 2026 using rooftop and adjacent solar installations. Production costs target $3.50/kg initially, declining to $2.00/kg by 2030 through electrolyzer cost reduction and increased renewable capacity factors. The captive consumption model—replacing grey hydrogen in refining operations—ensures offtake certainty. Adani's Mundra hydrogen ecosystem targets 1 million tons annually by 2030, with integrated wind-solar generation, electrolyzer manufacturing (through partnership with TotalEnergies and electrolyzer maker Elogen), and ammonia export terminals. India's approach emphasizes manufacturing localization: 8 GW of domestic electrolyzer manufacturing capacity is under development, potentially reducing import dependence and creating export opportunities. The challenge remains grid infrastructure: many project sites lack the transmission capacity needed for gigawatt-scale renewable generation, requiring significant public investment in grid expansion.

Action Checklist

• Conduct detailed LCOH analysis with location-specific inputs—use actual capacity factor data from nearby renewable installations rather than manufacturer claims, and apply realistic financing costs reflecting emerging market risk premiums.

• Secure anchor offtake agreements before pursuing project finance—development finance institutions and commercial lenders require 60-80% of production under long-term contract with creditworthy counterparties.

• Address water supply early in project development—identify sources, secure rights, obtain permits, and include desalination or treatment costs in project economics.

• Design for regulatory compliance across multiple target markets—European additionality requirements, U.S. 45V specifications, and Asian import standards differ; flexibility in configuration enables market optionality.

• Engage development finance institutions during feasibility stage—their technical assistance, concessional finance, and risk mitigation products are most effective when integrated early in project structuring.

• Plan for electrolyzer supply chain constraints—place orders 24-36 months ahead of needed delivery, diversify suppliers where possible, and evaluate manufacturing localization opportunities.

• Build local stakeholder support through community benefit programs—emerging market hydrogen projects face land, water, and employment expectations that European industrial facilities typically do not; proactive engagement prevents permitting delays.

• Establish robust MRV systems from project inception—retrofitting carbon accounting creates compliance risk and undermines green premium pricing.

• Structure projects for phased development—initial phases prove technology and operations while subsequent phases scale capacity as offtake materializes and costs decline.

• Monitor policy developments in target export markets—regulatory requirements continue evolving; projects designed for today's rules may require modification for tomorrow's standards.

FAQ

Q: What LCOH levels are needed for emerging market green hydrogen to be competitive? A: Competitiveness thresholds vary by end use. For ammonia production (replacing grey ammonia at $400-600/ton), green hydrogen must reach $2.00-2.50/kg. For e-fuels displacing petroleum products, $1.50-2.00/kg hydrogen combined with low-cost CO2 is required. For export to European industrial users (steel, chemicals), $2.50-3.00/kg delivered is competitive given EU ETS carbon prices exceeding €80/ton. Best-in-class emerging market projects already achieve production costs in the $2.00-2.50/kg range; the challenge is adding conversion, storage, and transport costs while maintaining competitiveness.

Q: How do additionality requirements affect emerging market project design? A: European Union renewable hydrogen Delegated Acts require that electrolyzer consumption is matched by new renewable generation (additionality), produced within the same bidding zone (geographic correlation), and increasingly within the same calendar month moving toward hourly matching by 2030 (temporal correlation). For emerging market exporters, these requirements mandate dedicated renewable generation rather than grid power, even in markets with high renewable penetration. Project designs must over-build renewable capacity or include storage to ensure correlation compliance. Non-compliance risks exclusion from European markets or relegation to lower-priced "low-carbon" rather than "renewable" hydrogen categories.

Q: What infrastructure bottlenecks most commonly delay emerging market hydrogen projects? A: Three infrastructure gaps predominate. Port facilities capable of handling ammonia or liquid hydrogen at scale exist at few emerging market locations, requiring $500 million+ investments with 3-5 year construction timelines. Transmission infrastructure connecting prime renewable resource areas (often remote) to production/export hubs is inadequate in most emerging markets, with grid expansion requiring utility coordination and public investment. Water infrastructure—treatment, desalination, and pipeline transport—adds 12-24 months to project timelines when not addressed early. Successful projects identify these bottlenecks during feasibility and coordinate parallel infrastructure development.

Q: How should investors evaluate emerging market hydrogen project announcements? A: Apply five filters. First, is there a binding offtake agreement with a creditworthy counterparty covering >50% of production? Announcements lacking offtake are speculative. Second, has the project secured land rights and water access—not just letters of intent but binding agreements? Third, is financing identified beyond equity—project finance lenders, development finance institutions, or export credit agencies? Fourth, does the developer have relevant execution experience in the region and technology? Fifth, are timeline claims realistic given permitting, construction, and commissioning requirements? Projects passing all five filters merit serious attention; those failing multiple filters are likely years from execution if they proceed at all.

Q: What role do carbon border adjustment mechanisms play in emerging market hydrogen competitiveness? A: The EU Carbon Border Adjustment Mechanism (CBAM), fully implemented by 2026, creates both opportunity and risk. Opportunity: CBAM imposes carbon costs on grey hydrogen imports, improving green hydrogen competitiveness by $1.50-2.50/kg at current EU ETS prices. Risk: CBAM may eventually extend to embedded carbon in manufacturing supply chains, including electrolyzers. Chinese-manufactured electrolyzers with high embedded carbon could face tariffs that erode their cost advantage, affecting project economics. Emerging market projects should track CBAM evolution and consider supply chain carbon intensity in procurement decisions.

Sources

• International Energy Agency, "Global Hydrogen Review 2024," September 2024
• Hydrogen Council and McKinsey & Company, "Hydrogen Insights 2024," January 2025
• BloombergNEF, "Hydrogen Levelized Cost Update," October 2024
• Wood Mackenzie, "Green Hydrogen Project Tracker Q4 2024," December 2024
• European Commission, "Delegated Regulation on Renewable Hydrogen Definitions," Official Journal of the European Union, June 2023
• International Renewable Energy Agency (IRENA), "Green Hydrogen Cost Reduction: Scaling Up Electrolyzers," 2024
• World Bank, "Hydrogen for Development: A Practical Guide for Emerging Markets," November 2024
• International Maritime Organization, "2023 IMO Strategy on Reduction of GHG Emissions from Ships," July 2023