Power-to-Gas Market Size, Share & Industry Analysis, By Technology (Electrolysis and Methanation), By Capacity (Upto 100 KW, 100 KW -1000KW, and Above 1000KW), By End-User (Utility, Commercial, and Industrial), and Regional Forecast, 2024-2032

The global power-to-gas market size was valued at USD 36.70 million in 2023 and is projected to be worth USD 40.39 million in 2024 and reach USD 89.37 million by 2032, exhibiting a CAGR of 10.44% during the forecast period. North America dominated the power-to-gas industry with a market share of 36.53% 2023.

Power-to-gas transforms electricity into synthetic gases such as hydrogen and methane. This technology plays a crucial role in transitioning to renewable energy systems, substituting fossil fuels in the industrial, transportation, and heating sectors. These synthetic gases significantly contribute to decarbonization, reducing reliance on fossil fuels, thereby lowering greenhouse gas emissions and combating global climate change effectively. Governments and industries worldwide are increasingly investing in P2G as part of their strategies to achieve climate goals and reduce dependency on fossil fuels. This growing global interest and investment in excess renewable energy technologies, coupled with supportive policies and incentives, are driving the expansion of the P2G market on a global scale.

The global impact of COVID-19 on power-to-gas market trends was moderate, as it hampered consumption in many end-use industries' growth due to the disruption of services and technology supply chain and the hindrance in activities due to social distancing norms. Furthermore, China, the U.S., and India are among the significant countries processing and deploying power-to-gas technology. These countries went through various regional and national level shutdowns of industrial operations to contain the spread of this viral infection, which led to a fall in demand for power-to-gas processes.

Power-to-Gas Market Trends

Development of Innovative Technologies with Government Support Creates Commercial Opportunities

Governments around the world are providing substantial financial incentives, grants, and subsidies to support research and development in P2G technologies. These funds reduce the financial risks associated with pioneering new technologies and encourage private-sector investment. For example, the European Union’s Horizon 2020 program allocated significant funds to hydrogen and P2G projects, fostering innovation and enabling the commercialization of new technologies.

Japan’s government has been a significant proponent of hydrogen technology, including P2G. The Japanese government’s Basic Hydrogen Strategy aims to establish a "hydrogen society" by 2050, involving substantial investments in hydrogen production, infrastructure, and technology development. Government support includes funding for pilot projects, subsidies for hydrogen infrastructure, and collaboration with private companies. For instance, the Fukushima Hydrogen Energy Research Field (FH2R) is a government-supported project that utilizes renewable energy to produce hydrogen via electrolysis and methanation, demonstrating the feasibility and potential of P2G technology on a large scale.

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Power-to-Gas Market Growth Factors

Provisions for Promoting Hydrogen Production Technologies to Unlock New Potential for Industry

Governments are offering subsidies, tax credits, and grants to lower the initial costs associated with hydrogen production technologies. For instance, the European Union implemented the Hydrogen Strategy, which includes funding to scale up green hydrogen production. By reducing financial barriers, these incentives encourage investment in P2G projects, accelerating their deployment and technological advancements.

Allocating funds for research and development help overcome technical challenges in hydrogen production and storage. In the U.S., the Department of Energy’s Hydrogen and Fuel Cell Technologies Office supports research to improve electrolyzer efficiency and reduce costs. Enhanced R&D leads to innovative solutions, making P2G more viable and cost-effective.

Implementing carbon pricing mechanisms, such as carbon taxes or cap-and-trade systems, makes fossil fuel-based energy more expensive relative to cleaner alternatives. The European Union’s Emissions Trading System (ETS) is an example of a system where the cost of carbon emissions incentivizes the adoption of green hydrogen. This shift in economic dynamics encourages industries to adopt power-to-gas systems to mitigate carbon costs.

Flourish in Renewable Energy Sources to Promote Market Development

The active use of renewable energy sources in power-to-gas technologies converts surplus renewable energy, such as solar and wind power, into hydrogen or synthetic methane. This process provides a method for energy storage and also helps balance the grid, reduce greenhouse gas emissions, and facilitate the integration of renewables into the energy system.

Renewable energy sources such as wind and solar are intermittent by nature, producing energy only when the sun is shining or the wind is blowing. P2G provides a solution by converting excess electricity generated during peak production periods into hydrogen, which can be stored and used later. This conversion helps in addressing the challenge of intermittency, making renewable energy more reliable and increasing its share in the energy mix.

Denmark plans to leverage its abundant wind resources to produce green hydrogen. The Green Hydrogen Hub, a project in Denmark, aims to use excess wind power to generate hydrogen, which will be stored and used in various sectors. This project enhances energy storage capabilities and also supports Denmark’s ambitious renewable energy and decarbonization targets.

RESTRAINING FACTORS

Low Efficiency and Energy Loss Can Hamper the Market Growth

The efficiency of the conversion process directly affects the cost of producing hydrogen or synthetic methane. Low efficiency means that a larger amount of input energy is required to produce the same amount of gas, leading to higher production costs. This can make power-to-gas less competitive compared to other energy storage and conversion technologies, such as batteries or pumped hydro storage, which can offer higher efficiencies.

High energy losses during the conversion process result in wasted renewable energy. For example, if an electrolyzer used in P2G operates at only 60% efficiency, 40% of the input energy is lost as heat. This inefficiency undermines the goal of maximizing the utilization of renewable energy resources, making it less attractive to stakeholders looking to invest in sustainable energy solutions.

Although the power-to-gas industry aims to support renewable energy integration and reduce greenhouse gas emissions, low efficiency can reduce these environmental benefits. The additional energy required to compensate for losses often comes from non-renewable sources, leading to higher overall carbon emissions. This reduces the global power-to-gas market growth with the environmental advantage of P2G over traditional fossil fuel-based systems.

Power-to-Gas Market Segmentation Analysis

By Technology Analysis

Electrolysis is Dominating Market Due to its High Efficiency and Wide Availability

Based on technology, the market is segmented into electrolysis and methanation.

Electrolysis holds a dominant share of the market due to its high efficiency and wide availability. Modern electrolyzers, such as Proton Exchange Membrane (PEM) and solid oxide electrolyzers, have achieved efficiencies of 70-80%, making the process economically viable. Additionally, electrolysis technology is mature and widely available, facilitating its adoption in various applications, from industrial use to transportation and energy storage. This accessibility and efficiency make electrolysis the preferred choice in the power-to-gas market.

Methanation holds the second major share in the global market and is less efficient than direct hydrogen production. It benefits from existing natural gas infrastructure and offers a way to store renewable energy in a form compatible with current gas networks. This compatibility and the ability to utilize CO2 make methanation a crucial complementary technology in the P2G landscape.

By Capacity Analysis

100 KW -1000KW is Dominating Market Due to its Rising Demand in Fuel Production

Based on capacity, the market is segmented into Upto 100 KW, 100 KW -1000KW, and above 1000KW.

The 100 kW to 1000 kW capacity range is dominating the power-to-gas market share due to the increasing demand for fuel production. This range is optimal for industrial applications and decentralized energy systems, offering a balance between scalability, efficiency, and cost. As industries seek to decarbonize and adopt clean fuels such as hydrogen, these medium-sized P2G systems meet the growing needs for renewable energy storage, grid balancing, and localized hydrogen production, driving the market.

The segment up to 100 kW is the second dominating segment in the market due to its suitability for small-scale and pilot projects, residential applications, and localized energy systems. These smaller units are crucial for testing and demonstrating P2G technologies, facilitating early adoption and paving the way for larger installations to drive the global power-to-gas market size.

By End-User Analysis

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Growing Demand of Hydrogen Consumption for Utilities to Propel Adoption of Power-to-Gas Technology

Based on end-users, the market is segmented into utility, commercial, and industrial.

Utilities are dominating the market due to the rising demand for hydrogen as a clean energy source. Utilities force P2G technologies to convert surplus renewable electricity into hydrogen, facilitating large-scale energy storage, grid balancing, and the integration of renewable energy sources. This capability supports the transition to a sustainable energy system, aligning with regulatory and environmental goals.

Industries such as chemicals, refining, and steel production require large amounts of hydrogen for various processes. As these sectors strive to reduce carbon emissions and transition to greener operations, P2G technologies provide a reliable and scalable solution for on-site hydrogen production. This demand for sustainable hydrogen production methods fuels the significant presence of industrial in the P2G market.

REGIONAL INSIGHTS

The market has been studied geographically across five main regions: North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.

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Globally, North America dominates the market and accounts for the majority of Power-to-Gas (P2G). North America is leading a robust renewable energy sector, where wind and solar power capacity has been rapidly expanding. This provides ample renewable electricity that can be utilized for P2G processes, supporting the region's transition toward sustainable energy solutions. In the U.S., initiatives such as the Department of Energy's Hydrogen Program and partnerships between utilities and renewable energy developers are promoting P2G projects. For instance, the Advanced Clean Energy Storage project in California aims to demonstrate large-scale renewable hydrogen production through electrolysis.

Asia Pacific is the second leading region in the market. The region has witnessed rapid economic growth and urbanization, driving significant energy demand. This demand, coupled with increasing environmental concerns and commitments to reduce carbon emissions, has urged investments in renewable energy technologies, including P2G. South Korea's Hydrogen Economy Roadmap outlines investments in hydrogen production infrastructure, fuel cells, and P2G technologies. Such initiatives underscore the region's commitment and capability to drive the growth of the P2G market.

Europe’s market size has established a strong for hydrogen production, with initiatives such as the EU Hydrogen Strategy and national hydrogen strategies in countries such as Germany and France. These strategies promote the development of hydrogen production technologies, including P2G, to support various sectors, such as industry, transport, and heating. European Union has set ambitious goals under the European Green Deal, aiming for climate neutrality by 2050. This includes significant investments in renewable energy sources such as wind and solar, which provide the necessary electricity for P2G processes.

KEY INDUSTRY PLAYERS

Companies Focus on Project Expnsion to Specific Demands of the End-use Industry to Strengthen their Position

The global power-to-gas market is highly fragmented, with key players and some medium-scale regional players delivering a wide range of power technology at local and country levels across the value chain. Numerous companies are actively operating in different countries to cater to the specific demands of the customers.

McPhy delivered a 4 MW hydrogen production platform to Jiantou Yanshan (Guyuan) Wind Energy in China's Hebei province. The compact system includes two McLyzer 400-30 electrolysis modules and transforms surplus electricity from a 200 MW wind farm into clean hydrogen.

List of Top Power-to-Gas Companies:

• Nel ASA (Norway)


• ITM Power (U.K.)


• McPhy Energy (France)


• Siemens (Germany)


• MAN Energy Solutions (Germany)


• Hitachi Zosen Inova AG (Switzerland)


• Thyssenkrupp (Germany)


• Electrochaea (Germany)


• ENTSOG AISBL (Belgium)


• GRTgaz (France)

KEY INDUSTRY DEVELOPMENTS:

• June 2024: Siemens Energy secured a long-term maintenance agreement valued at USD 1.5 billion for two gas-fired power plants in Saudi Arabia. This 25-year contract includes Siemens providing power plant technologies that will collectively generate nearly 4GW of electricity for the country. The power plants, named Taiba 2 and Qassim 2, are scheduled for construction in Saudi Arabia's western and central regions over the coming years.


• May 2024: Nel Hydrogen Electrolyser AS, a wholly-owned subsidiary of Nel ASA, signed a technology licensing agreement with Reliance Industries Limited (RIL). Under this agreement, RIL gains exclusive rights to use Nel’s alkaline electrolyzers in India. Additionally, RIL is authorized to manufacture Nel’s alkaline electrolyzers globally for internal use.


• March 2024: ITM Power announced its partnership with Sumitomo Corporation for the delivery and installation of a NEPTUNE electrolyzer at Tokyo Gas Co Ltd’s Yokohama Techno Station. This marks the inaugural deployment of a megawatt-class PEM electrolyzer manufactured abroad and imported into Japan.


• March 2024: Thyssenkrupp agreed with gas transmission system operators Nowega, OGE, and Thyssengas to link its Duisburg steel plant in Germany to the GET H2 hydrogen pipeline network by 2028 as part of its decarbonization efforts. The GET H2 pipeline project aims to connect green hydrogen production hubs with industrial consumers in the Lower Saxony and North Rhine-Westphalia regions.


• September 2023: Fortum Battery Recycling, Europe’s leading battery recycler, received a USD 4.5 million grant from Business Finland to develop its recycling facility in Ikaalinen, Finland. Fortum Battery Recycling aims to expand the mechanical processing capacity of this plant, thereby enhancing the operations of its hydrometallurgical plant in Harjavalta.


• October 2021: ITM Power announced that it had achieved sub-second response times for both its refueling station and power-to-gas equipment. The completion of the InnovateUK-supported Power Electronics project demonstrated a system "turn on" response of 800 milliseconds (40 cycles) and "turn off" in 140 milliseconds (7 cycles). This achievement qualifies ITM Power's electrolyzer systems for frequency response services that are more rigorous than the current primary grid balancing payment structure. It also positions them to receive higher availability payments due to their enhanced responsiveness potentially.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on key aspects such as leading companies, product/service process, and leading source of the battery. Besides, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that contributed to the growth of the market in recent years.

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