On behalf of Innovation Norway and the Investment and Development Agency of Latvia (LIAA), Menon Economics has conducted this analysis on the development of the hydrogen industry in Norway. The purpose of the analysis is to highlight key early-stage learnings from Norway's efforts to build a hydrogen industry. These lessons will be relevant to early-stage development across the entire value chain in Latvia.

In this report, we place particular emphasis on small- to medium-scale hydrogen production and use cases. Green hydrogen can play a crucial role in hard-to-abate sectors. However, as hydrogen production and storage costs are high, the report highlights the need for careful cost-benefit assessments compared to alternatives such as electrification or carbon capture, and the importance of a strong system of state support.

Norway is currently the second-largest green hydrogen producer in Europe, with 38 MW of electrolyser capacity installed. Despite some cancellations and delays, many projects remain in the pipeline. Our report shows that the hydrogen economy in Norway has developed gradually, with coordinated support across the entire value chain playing a crucial role. This support has been essential in addressing both the uncertainty of demand and the challenges related to limited access to green hydrogen and insufficient infrastructure. Clear regulations on hydrogen production and handling, access to renewable grid electricity, and industry expectations about future emissions costs have also played important roles.

In contrast, Latvia does not yet have commercial hydrogen production, and offtake potential remains limited. Nonetheless, several green hydrogen projects are planned, and hydrogen is being tested in multiple sectors, despite certain regulatory hurdles. Latvia benefits from good access to the grid and plans to expand renewable energy production, allowing it to classify grid electricity as green.

However, to overcome key barriers — such as the cost gap between hydrogen and fossil fuels, and the lack of hydrogen infrastructure — a comprehensive system is needed. This system must simultaneously address production, infrastructure, and demand in end-use applications, while ensuring that hydrogen is only used where it is more cost-effective than other decarbonisation solutions.