Grey Hydrogen Market to Reach USD 222.2 Billion by 2035 at 3.8% CAGR | Analysis Report by TMR

One of the key drivers supporting the grey hydrogen market is cost, based on decades of existing production and infrastructure.

WILMINGTON, DE, UNITED STATES, September 15, 2025 /EINPresswire.com/ -- The grey hydrogen market was valued at USD 147.4 billion in 2024 and is projected to reach USD 222.2 billion by 2035. Driven by growing industrial demand and energy transition efforts, the market is expected to expand at a steady CAGR of 3.8% between 2025 and 2035.

The grey hydrogen market implies the production and sales of hydrogen made by using steam methane reforming (SMR) or coal gasification, with the carbon dioxide emissions produced from those processes not captured. Grey hydrogen represents the largest share of the hydrogen supply globally, as it is produced at low cost and delivered with the existing infrastructure to use it conveniently.

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The natural availability and scalability of grey hydrogen makes it a preferable choice for industries where supply of hydrogen tonnage is constant and reliable. However, as the process of hydrogen production occurs with CO₂ emissions and therefore is carbon-intensive, grey hydrogen is under looming scrutiny with respect to CO₂ emissions and environmental impact.

Grey hydrogen will remain a major part of the hydrogen economy today as it is the least expensive way to obtain hydrogen in large volumes. The primary drivers of any growth in this market are the ongoing demand from existing industries (refining, the manufacture of ammonia and methanol, steel making), the availability of existing gas- and coal-based feedstock, and existing SMR/coal-gasification infrastructure that provides attractive unit economics. The production process, steam methane reforming or coal gasification produces hydrogen and CO₂. It is grey as it carries carbon intensity but is immediately deployable and can scale to volume.

Market Segmentation

The grey hydrogen market can be segmented based on several key factors:

By Sourcing Type

Natural Gas: Steam Methane Reformation (SMR) is the dominant and most cost-effective method for producing grey hydrogen, accounting for the largest share of the market.

Coal: Coal gasification is another method, particularly in regions with abundant coal resources, but it is more carbon-intensive than SMR.

By Application and Industry Vertical

Grey hydrogen is essential for a range of industrial processes. The petroleum refining sector is the largest consumer, using hydrogen for processes like hydrocracking and hydrodesulfurization to produce cleaner fuels. Other significant applications include:

Chemical Production: Primarily for the production of ammonia and methanol.

Steel & Metalworking: Though a newer application for hydrogen, the industry's demand is growing as companies look to decarbonize.

Food Processing and Glass Manufacturing.

By Region

While the grey hydrogen market is global, its growth and consumption patterns vary significantly by region.

Asia-Pacific (APAC) is projected to be the fastest-growing region, driven by rapid industrialization and large-scale manufacturing in countries like China and India.

Europe holds a significant market share, but its growth may be slower as ambitious decarbonization policies push for a transition to green and blue hydrogen.

North America, led by the U.S., will see continued demand from its established refining and chemical industries.

Market Drivers and Challenges

Market Drivers 📈

Cost Competitiveness: Grey hydrogen's low production cost, a fraction of that of green hydrogen, makes it the most economically viable option for industries that require a consistent, large-volume supply.

Established Infrastructure: The existing and extensive infrastructure for natural gas and SMR plants provides a ready and reliable supply chain for grey hydrogen, eliminating the need for new, costly infrastructure.

Rising Industrial Demand: As industries like refining and chemical production expand, so does their need for hydrogen feedstock.

Market Challenges 📉

Environmental Concerns: The primary challenge is its high carbon footprint. For every kilogram of hydrogen produced via SMR, 8–10 kilograms of carbon dioxide are emitted, directly contradicting global decarbonization efforts.

Competition from Clean Hydrogen: The long-term threat to the grey hydrogen market is the rapid development and increasing policy support for blue hydrogen (with carbon capture) and green hydrogen (from renewables). As the costs for these alternatives decrease, they will become more competitive.

Regulatory Pressure: Governments worldwide are implementing policies, carbon taxes, and incentives to promote clean hydrogen production, which could limit the future growth and profitability of grey hydrogen.

Future Outlook and Key Study Points

The period between 2025 and 2035 will be a pivotal decade for the grey hydrogen market. While demand will remain stable in the short to medium term, its long-term viability is uncertain. Grey hydrogen is seen by some as a necessary "bridge fuel," providing a cost-effective and scalable supply of hydrogen while the infrastructure and technology for cleaner alternatives mature.

Key Market Study Points:

Cost Parity: The timeframe for when blue and green hydrogen can achieve cost parity with grey hydrogen will be a critical factor. Projections suggest this could happen by the early to mid-2030s in some regions.

Policy and Regulation: The future of the market will largely depend on government policies, including carbon pricing, hydrogen strategies, and subsidies for clean hydrogen.

Carbon Capture Adoption: A key trend will be the integration of carbon capture, utilization, and storage (CCUS) technologies with existing SMR plants, effectively converting grey hydrogen facilities into blue hydrogen producers.

Competitive Landscape and Recent Developments

The grey hydrogen market is currently fragmented, with numerous large and small producers. Key players include major industrial gas companies and chemical manufacturers who often produce hydrogen for captive use. The market is expected to see a degree of consolidation as larger players acquire smaller ones and as a few companies invest heavily in transitioning their grey hydrogen production to blue.

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Recent developments are largely focused on the broader hydrogen economy, with a strong emphasis on green and blue hydrogen. However, this has a direct impact on the grey hydrogen market:

Massive Investments in Clean Hydrogen: Governments and private companies are pouring billions of dollars into large-scale clean hydrogen projects, from electrolyzer manufacturing to hydrogen pipeline networks.

Partnerships and Acquisitions: Major companies are forming strategic partnerships to scale up clean hydrogen production and infrastructure.

Regulatory Changes: The U.S. Inflation Reduction Act (IRA) and Europe's REPowerEU plan are key examples of policies providing significant financial incentives for clean hydrogen, which will directly compete with grey hydrogen on a cost basis in the future.

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