The U.S. Energy Information Administration (EIA) recently unveiled its new Hydrogen Market Module (HMM) within the Annual Energy Outlook 2025 (AEO2025), projecting a substantial 80% increase in U.S. hydrogen production by 2050 compared to 2024. This new modeling capability indicates that the vast majority of this growth, over 80% in the Reference case, will be met by hydrogen derived from natural gas through steam methane reforming (SMR), with electrolysis contributing less than 1% to the total supply across most scenarios, despite existing supportive policies.

The EIA's analysis, which considers laws and regulations in place as of December 2024, incorporates tax credits from the 2022 Inflation Reduction Act (IRA), including the Section 45V Clean Hydrogen Production Tax Credit designed to incentivize electrolysis from renewable electricity. However, the projections do not account for more recent legislative changes, such as those introduced by the One Big Beautiful Bill Act, which could modify incentives for both hydrogen production and renewable electricity generation.

Establishing a historical baseline, the EIA utilized data from its 2018 Manufacturing Energy Consumption Survey, estimating the U.S. hydrogen market at 10 million metric tons (MMmt), equivalent to approximately 1340 trillion British thermal units (TBtu). This volume represented about 1.8% of total end-use energy consumed in the U.S. that year. Nearly all hydrogen in the United States is consumed by refiners and chemical manufacturers in the industrial sector as feedstock. Of the 2018 total, 8 MMmt was defined as market hydrogen, explicitly modeled in the HMM.

In the AEO2025 Reference case, the EIA projects market hydrogen supply to reach 14.3 MMmt by 2050, translating to just over 1900 TBtu, or approximately 2.5% of total delivered energy in the U.S. Of this volume, about 12 MMmt, or over 80%, is projected to be supplied by SMR. Byproduct hydrogen from industrial chemical processes, such as ethane cracking, constitutes the second-largest supply source. Steam methane reforming with carbon capture and sequestration (SMR+CCS) is projected to supply between 1.5 MMmt and 2 MMmt of hydrogen at its peak in the 2030s, but its contribution becomes negligible by 2050 due to the expiration of its supporting tax credits after 2045. Notably, electrolysis contributes a negligible amount to market supply throughout the projection period in the Reference case, even with the assumed availability of the 45V tax credit.

Several AEO2025 side cases further illustrate key market sensitivities. In the Low Oil and Gas Supply case, elevated natural gas feedstock costs diminish the economic viability of SMR, leading to reduced hydrogen production. Conversely, the High Macroeconomic Growth case shows the largest hydrogen supply volumes, reaching 15.5 MMmt in 2050, driven by robust bulk chemicals growth, with SMR, SMR+CCS, and byproduct hydrogen all achieving their highest levels. The Alternative Transportation case, which removes key policy drivers for hydrogen fuel cell deployment in heavy-duty vehicles, represents the lower bound of total hydrogen supplied, demonstrating minimal growth over the projection period when transportation sector demand is not policy-driven. In all other AEO2025 cases, the transportation sector accounts for most of the rising hydrogen consumption.