In the recently published Annual Energy Outlook 2025 (AEO2025), US Energy Information Administration (EIA) introduced their new Hydrogen Market Module (HMM), which allows us to model the market for hydrogen in the coming decades.
In most of the cases the EIA ran, they considered laws and regulations in place as of December 2024, which meant including tax credits implemented under the 2022 Inflation Reduction Act (IRA), such as the Section 45V Clean Hydrogen Production Tax Credit designed to support hydrogen production generated by electrolysis from renewable electricity sources. More recently, the One Big Beautiful Bill Act modified incentives for hydrogen production and renewable electricity, which can be used to generate hydrogen during electrolysis. It did not take those changes into account. To establish a historical baseline for the hydrogen module, the EIA used estimates from our 2018 Manufacturing Energy Consumption Survey. In 2018, the estimated the of the hydrogen market was 10 million t, equivalent to approximately 1340 trillion Btu or about 1.8% of end-use energy consumed in the US that year. Refiners and chemical manufacturers in the industrial sector consume almost all hydrogen in the US as feedstock. Of this 2018 total, the EIA defined 8 million t as market hydrogen and represented its supply explicitly in AEO projections using the HMM. Market hydrogen includes the following supplies:
- Hydrogen produced for consumers via technologies, such as SMR with and without carbon capture and sequestration (SMR, SMR + CCS) or electrolysis.
- Byproduct hydrogen from other industrial processes that is delivered to a consumer and not self-consumed.
In the Reference case, EIA project this market grows to reach 14.3 million t by 2050, just over 1900 trillion Btu or about 2.5% of total delivered energy in the US. Of the total volume, about 12 million t – over 80% – is supplied by SMRs. Hydrogen produced as a byproduct of industrial chemical processes, such as ethane cracking and propane dehydrogenation, is the next-largest supply source. SMR + CCS production supplies around 1.5 – 2 million t of hydrogen to the market at its peak in the 2030s, but by 2050, its contribution to US supply is negligible because the tax credits subsidising the deployment of this technology expire after 2045. Electrolysis contributes a negligible amount of hydrogen to market supply across the projection period in the Reference case despite assuming the availability of the 45V tax credit.
Several specific AEO2025 side cases demonstrate how key factors affect these hydrogen market projections:
- In the Low Oil and Gas Supply case, the high cost of natural gas feedstock makes SMR technology less economical compared with the Reference case, reducing the amount of H2 produced.
- The High Macroeconomic Growth case sees the largest volumes of hydrogen supplied to market due especially to stronger bulk chemicals growth, reaching 15.5 million t in 2050. Hydrogen production via SMR and SMR + CCS, as well as hydrogen byproduct supplied to the market, all reach their highest levels in this case.
- The Alternative Transportation case removes several key policies from our projections and represents the lower bound of total hydrogen supplied to US markets through 2050. Total H2 supplied hardly increases over the projection period. In all other AEO2025 cases, the transportation sector accounts for most of rising hydrogen consumption as hydrogen fuel cells in heavy-duty vehicles are deployed to meet policy standards. When these policies are not in effect, growth in H2 in the transportation sector is negligible.