IEA Hydrogen Review 2026: Baltic Cost Insights
The IEA Global Hydrogen Review 2026 shows balance-of-plant and EPC now drive electrolyser costs. What the data means for Baltic hydrogen projects and Latvia.
NEWS
PtXBaltic
6/30/20266 min read
The story everyone expected to be true by 2026 was simple: build enough electrolysers, ride the cost curve down the way solar and batteries did, and watch green hydrogen become cheap. The IEA's Global Hydrogen Review 2026 — its sixth edition — tells a more honest story. The cost curve bent sharply in one place. It barely moved everywhere else. And the reason has very little to do with the stack itself.
That distinction matters more than it sounds, especially for anyone planning a project in Latvia or across the Baltic states. Here's what the latest numbers actually say, and what they change for the region.
The stack is no longer where the money goes
For years the industry talked about electrolysers as if the stack — the electrochemical core that splits water — was the thing to drive down. It isn't anymore. The IEA's 2026 cost breakdown shows the larger share of total installed cost now sits in the balance of plant (gas treatment, power electronics, water purification, cooling) and in EPC work: engineering, procurement and construction. The stack has become the smaller slice.
That reframes the whole cost-reduction conversation. As the report puts it bluntly, focusing only on cheaper stacks — or even cheaper electrolyser systems — is not enough. You can halve the price of the stack and still be left holding a plant that's expensive to engineer, connect, permit and build. The savings have to come from system integration, standardised balance-of-plant design, simpler engineering, faster permitting, and more repeatable project execution.
For Latvian and Baltic project developers, that's a useful corrective. The temptation when reading hydrogen headlines is to wait for the next cheaper electrolyser announcement. The IEA's data suggests the bigger levers are local and unglamorous — site selection, grid connection, permitting speed, EPC contractor depth — and those are exactly the things a well-prepared regional project can influence.
The China gap is real, but smaller than it first looks
The second headline finding is a cost gap that refuses to close. In 2025, installing an electrolyser outside China cost broadly USD 1,900–2,500 per kilowatt, roughly in line with 2024. Inside China, the range was USD 500–1,100 per kW. That's a gulf.
But the IEA is careful here, and the nuance is worth carrying into any Baltic feasibility discussion. The gap narrows considerably once a Chinese electrolyser is installed outside China, because EPC, transport, tariffs and contingency costs — all of which are driven by local factors — make up such a large share of the total. China's advantage isn't only cheaper stacks. It's the ability to deliver the whole plant more cheaply, thanks to integrated supply chains, lower EPC costs and faster execution earned through large-scale deployment. There's also a caveat the report flags: fierce domestic overcapacity has pushed some Chinese manufacturers to sell below cost, meaning the headline gap likely overstates the true, sustainable difference.
The practical read for the region: the equipment line item is not where a Baltic project wins or loses. Execution is.
Where costs go from here — and why deployment is the bottleneck
The IEA models a path down. Based on projects that have already reached final investment decision plus those with strong potential to be online by 2030, electrolyser costs outside China could fall to roughly USD 1,500–1,900 per kW by 2030 — approaching China's 2025 range. If every announced project materialised, the figure could drop to USD 1,100–1,500 per kW. The report is candid that this fuller scenario looks unlikely.
The reason is a self-reinforcing trap. Cost reductions depend on high manufacturing utilisation, which depends on orders, which depend on projects reaching FID. But projects are still struggling to secure FIDs and offtake — so deployment lags, factories run under capacity, and costs fall less than hoped, which weakens project economics further. The report adds a sobering near-term risk: inflationary pressure from the conflict in the Middle East could slow electrolyser cost declines, much as the fallout from Russia's full-scale invasion of Ukraine did after 2022.
Some hard numbers frame the scale of the challenge. Global hydrogen demand passed 100 million tonnes in 2025, but almost all of it remains conventional industrial and refining use. Low-emissions hydrogen production grew 20% to reach nearly 1 Mt — a record, and expected to exceed 1% of global production for the first time in 2026, yet still a sliver. New offtake agreements were broadly flat at around 1.7 Mt, with only about a fifth backed by firm contractual commitments. Demand, the IEA states plainly, remains the crucial missing piece.
The Baltic thread runs straight through this report
This is where the global picture turns regional. The Nordic-Baltic Hydrogen Corridor — spanning Finland, Estonia, Latvia, Lithuania, Poland and Germany — appears directly in the IEA's 2026 infrastructure tables as a roughly 2,500 km pipeline market survey involving six gas TSOs, launched in the first quarter of 2026. Alongside it sit Finland's Nordic Hydrogen Route (around 1,400 km) and the Baltic Sea Hydrogen Collector (around 1,250 km), both running their own market surveys in 2026.
That places the Baltic corridor among a relatively small group of European hydrogen transmission projects actively testing market demand right now. The wider context the IEA gives is instructive: more than 40,000 km of hydrogen transmission pipelines have been announced globally to 2035, but only about 9% have reached FID, are under construction, or are commissioned. Market surveys like the Nordic-Baltic one are how that 9% eventually grows. The corridor's progress will be shaped by exactly the demand signals the IEA identifies as the sector's bottleneck — which is to say, by whether firm Baltic offtake materialises.
On the policy side, the report's mapping of how EU member states have transposed the RED III transport targets gives Latvia a concrete set of obligations to plan against. Latvia's national transposition sets a combined RFNBO-plus-advanced-biofuels share of 5.5% by 2030 and a 1% RFNBO target for road transport by 2030, with a non-compliance penalty in the order of EUR 8.4 per kilogram. Lithuania's figures are comparable, with a 5.5% combined target by 2030 and a penalty around EUR 7.2 per kg. These mandates are precisely the kind of demand-pull the IEA argues the sector needs more of — they create a regulatory floor under hydrogen demand that doesn't depend on voluntary offtake.
There's one structural point worth naming for Latvian hydrogen ecosystem stakeholders. The IEA's central recommendation this year is that governments should review their 2030 targets and build credible long-term ambitions, learning from the first wave of strategies. Latvia still does not have an adopted national hydrogen strategy. In a year where the IEA is telling every government to sharpen its long-term framework, that gap is becoming harder to defend — and the corridor work, the RED III obligations and the regional pipeline momentum all make the case that the strategic scaffolding needs to catch up with the infrastructure conversation already underway.
What this means in practice for projects in the region
Pulling the threads together, a few things follow for anyone developing or financing hydrogen in the Baltics.
Execution discipline beats equipment shopping. Since balance of plant and EPC dominate cost, the projects that win will be the ones that nail siting, grid connection, permitting timelines and contractor selection — not the ones holding out for a cheaper stack.
Demand is the unlock, not supply. The IEA is unambiguous that offtake is the missing piece. Baltic projects anchored to a real, contracted buyer — an industrial offtaker, a refinery, a maritime or aviation fuel obligation under RED III — will move; speculative production looking for a buyer will stall.
The corridor is a demand-aggregation opportunity. The 2,500 km Nordic-Baltic market survey is, in effect, a chance to signal regional demand at scale. Participation and visibility in that process matters more than it might appear from the outside.
While still challenged by high costs and low availability, green hydrogen is an increasingly viable route to decarbonising industrial processes — and the 2026 data, for all its caution, shows a sector that is learning. CAPEX is drifting down as manufacturing matures, OPEX can fall through better efficiency and cheaper renewable power, and the next wave of Baltic projects will be built with far more knowledge than the first. The honest message from the IEA is that the trend is right but the pace is slower than the early optimism promised. For a region with strong wind resources, a maturing pipeline conversation and binding RED III obligations on the horizon, that's a workable starting point — provided the strategy work keeps pace with the steel in the ground.
Source: Global Hydrogen Review 2026