Power-to-Gas Market Trends

Growth Drivers

• Strong national hydrogen approaches: The existence of policies, such as Europe’s REPowerEU plan, Japan’s Green Growth Strategy, and the U.S.’s Inflation Reduction Act (IRA), has created an unprecedented demand for the power-to-gas market globally. This demand takes into consideration mandated consumption targets, direct subsidies, and tax credits for clean hydrogen production. According to an article published by the Congress Government in August 2022, the IRA in the U.S. has imposed a minimum tax of 15% of the average yearly adjusted financial statement, which has readily exceeded USD 1 billion within 3 years. Additionally, the act has also imposed a non-deductible 1% excise tax on the overall market value of stock repurchased, which is positively driving the market’s growth.
• Industrial decarbonization pressure: The purpose of significantly decarbonizing industries, such as refining, steelmaking, and ammonia production, is the primary source of bankable offtake and firm demand, which is creating an optimistic outlook for the power-to-gas market. This also provides the revenue certainty, which is essential for undertaking investment-based decisions on large-scale PtG plants. As per an article published by the Department of Energy in 2025, industry accounts for an estimated 30% of U.S. primary energy-related carbon dioxide (CO2) emissions, initially through manufacturing. Besides, the international market for decarbonization and clean energy technologies is predicted to be nearly USD 23 trillion by the end of 2030, which is rapidly uplifting the market’s development.
• Energy security imperatives: The energy supply and geopolitical instability have readily accelerated the focus on clean energy and domestic sources. This positioned PtG as a tactical technology for diminishing reliance on imported natural gas. As stated in an article published by the IRENA Organization in 2025, there is a huge need for the overall international renewable power generation capacity to triple by the end of 2030, and successfully reach 11,000 GW under IRENA’s 1.5 degree Celsius. Based on this, wind power and solar photovoltaic (PV) significantly account for almost 90% of renewable energy capacity additions. Moreover, the yearly investment in renewable power generation needs to reach USD 1,300 billion within the same year in comparison to USD 486 billion as of 2022, thus creating a positive impact on the market.

Challenges

• Underdeveloped downstream and midstream infrastructure: This is a severe roadblock for the power-to-gas market, which remains in the absence of standard infrastructure for hydrogen storage and transport. While natural gas pipelines can efficiently be repurposed, this requires a suitable investment for addressing issues and material upgradation, such as hydrogen embrittlement. New dedicated hydrogen pipeline networks, including the Europe-based Hydrogen Backbone vision, are decades from complete realization. Therefore, with the lack of this midstream infrastructure, PtG projects are frequently restricted to a point-to-point model, wherein production needs to be collocated with offtake. This has critically limited the market scalability and flexibility, thereby creating a gap in the growth and expansion.
• Permitting complexity and regulatory uncertainty: The market significantly operates in a fragmented and often immature regulatory landscape, leading to uncertainty that tends to delay Final Investment Decisions (FIDs). In addition, challenges, such as the lack of a notable accepted as well as legally binding definition for renewable or green hydrogen, especially concerning the temporal correlation. Besides, permitting for pipeline infrastructure, associated renewable generation, and large-scale electrolysis facilities is considered a multi-jurisdictional and lengthy process that can be time-consuming and involves project risk and significant soft expenses. Furthermore, the present energy market design in different regions does not adequately value the long-duration and grid-balancing storage services, thus causing a hindrance in the market’s growth.