Grey Hydrogen Market Continues Steady Growth Despite Rising Clean Energy Transition

According to a new report published by Allied Market Research, the grey hydrogen market size was valued at $131.8 billion in 2022 and is projected to reach $174.9 billion by 2032, growing at a CAGR of 2.9% from 2023 to 2032. Despite increasing global focus on low-carbon energy solutions, grey hydrogen continues to play a critical role in meeting industrial hydrogen demand due to its commercial viability and established production infrastructure.

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Understanding Grey Hydrogen and Its Market Significance

Grey hydrogen is produced primarily through steam methane reforming (SMR) of natural gas or through coal gasification, without the use of carbon capture and storage (CCS) technologies. As a result, it generates significant carbon dioxide emissions, making it the most carbon-intensive form of hydrogen production. However, its low production cost and mature technology have positioned grey hydrogen as the dominant source of hydrogen globally.

The grey hydrogen market benefits from rising energy demand, rapid industrialization, and growing hydrogen consumption across refining, chemical production, and ammonia manufacturing. Increasing interest in hydrogen as an alternative fuel-particularly in transportation and heavy industry-has further contributed to market expansion.

Market Drivers Supporting Growth

The increasing demand for hydrogen across multiple industrial sectors is one of the primary drivers of the grey hydrogen market growth. Hydrogen plays a vital role in oil refining processes such as hydrocracking and desulfurization, making refineries one of the largest consumers of grey hydrogen globally. Similarly, chemical industries rely heavily on hydrogen for producing ammonia, methanol, and other essential chemicals.

Another important growth factor is the widespread availability of natural gas. The expansion of natural gas resources, combined with advancements in SMR technology, has improved production efficiency and reduced operating costs. Enhancements in reactor design, catalyst performance, and heat recovery systems have made hydrogen generation more economical, reinforcing the dominance of grey hydrogen in the global energy mix.

Restraints: Climate Commitments and Policy Challenges

Despite its economic advantages, the grey hydrogen market faces strong restraints due to growing climate concerns and global net-zero commitments. Governments and industries worldwide are shifting toward cleaner alternatives such as green hydrogen, blue hydrogen, renewables, and synthetic fuels to reduce carbon emissions.

Grey hydrogen production generates approximately 9-12 kg of CO2 per kilogram of hydrogen, according to international energy estimates, making it a significant contributor to greenhouse gas emissions. As a result, stricter environmental regulations and decarbonization policies pose challenges to long-term market growth.

In addition, the lack of standardized policy frameworks and the complexity of the hydrogen value chain hinder investment confidence. The increasing availability of renewable energy and rapid scaling of green and blue hydrogen technologies are expected to further limit the expansion of the grey hydrogen industry during the forecast period.

Emerging Opportunities and Strategic Outlook

Despite environmental concerns, government policies and corporate strategies are expected to create grey hydrogen market opportunities in the near term. In many developing economies, grey hydrogen remains a practical and cost-effective solution to meet immediate industrial hydrogen demand while cleaner alternatives mature.

Several countries are adopting transitional hydrogen strategies, where grey hydrogen continues to support industrial output while investments are gradually redirected toward low-carbon hydrogen solutions. This phased approach provides opportunities for infrastructure optimization, operational efficiency improvements, and integration of partial emission-reduction technologies.

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Market Segmentation Analysis

The grey hydrogen market size is analyzed based on source, production method, application, and region.

By source, the market is segmented into natural gas, coal, and others. The natural gas segment dominated the grey hydrogen market share in 2022 and is expected to maintain its dominance throughout the forecast period. Natural gas-based SMR is preferred due to lower emissions compared to coal-based gasification and better economic feasibility.

Based on production method, the market is classified into steam reformation, gasification, and others. Steam reformation accounted for the largest market share in 2022 and continues to dominate due to its technological maturity and cost efficiency. Although SMR generates significant emissions, ongoing technological advancements have reduced energy consumption and operational costs.

By application, the market is divided into refineries, ammonia production, methanol production, chemical production, and others. The refineries segment held the highest market share in 2022, driven by sustained hydrogen demand for fuel processing. Meanwhile, the ammonia production segment is projected to grow at the highest CAGR, as ammonia remains a critical input for fertilizers, refrigeration systems, and pharmaceuticals.

Regional Outlook

Region-wise, the grey hydrogen market is analyzed across North America, Europe, Asia-Pacific, and LAMEA. Asia-Pacific dominated the global market in 2022 and is expected to register the highest growth rate during the forecast period. This dominance is attributed to large-scale hydrogen projects and strong industrial demand in countries such as China, Japan, India, and Australia.

North America also represents a significant market, with hydrogen production concentrated in states such as Texas, Louisiana, and California in the U.S. Canada contributes substantially through hydrogen production linked to its oil and gas sector. Europe, while increasingly focused on green hydrogen, continues to rely on grey hydrogen to support its existing industrial base.

Competitive Landscape

The grey hydrogen industry is characterized by the presence of major multinational energy and industrial gas companies. Key players operating in the market include Linde plc, Air Liquide, Ørsted A/S, Iberdrola SA, Air Products & Chemicals, Inc., Indian Oil Corporation Ltd., Reliance Industries, China National Petroleum Corporation, Exxon Mobil Corporation, and Messer Group GmbH.

These companies are focusing on operational efficiency, strategic partnerships, and gradual diversification into low-carbon hydrogen technologies to maintain market competitiveness amid changing regulatory landscapes.

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Conclusion

In conclusion, the grey hydrogen market is expected to witness steady growth over the next decade, supported by strong industrial demand, cost-effective production methods, and established infrastructure. While environmental concerns and clean energy transitions pose challenges, grey hydrogen will continue to play a transitional role in the global hydrogen economy, particularly in regions with high industrial energy demand.

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Allied Market Research (AMR) is a full-service market research and business-consulting wing of Allied Analytics LLP based in Portland, Oregon. Allied Market Research provides global enterprises as well as medium and small businesses with unmatched quality of "Market Research Reports" and "Business Intelligence Solutions." AMR has a targeted view to provide business insights and consulting to assist its clients to make strategic business decisions and achieve sustainable growth in their respective market domain.

Pawan Kumar, the CEO of Allied Market Research, is leading the organization toward providing high-quality data and insights. We are in professional corporate relations with various companies and this helps us in digging out market data that helps us generate accurate research data tables and confirms utmost accuracy in our market forecasting. Each and every data presented in the reports published by us is extracted through primary interviews with top officials from leading companies of domain concerned. Our secondary data procurement methodology includes deep online and offline research and discussion with knowledgeable professionals and analysts in the industry.

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