Green hydrogen costs are projected to remain high, exceeding $3.74 per kilogram through 2050, according to a new report from BloombergNEF (BNEF). This substantial increase from previous estimates highlights challenges in achieving cost parity with gray hydrogen, a more affordable fossil-fuel-derived alternative.
While select regions like China, India, and Texas may lead the way in reducing costs, the majority of global economies are unlikely to see significant price drops for green hydrogen.
“The higher costs of producing green hydrogen without subsidies or incentives mean it will remain challenging to decarbonize hard-to-abate sectors, such as chemical production and oil refining, using hydrogen produced through electrolysis powered by renewable energy,” explains BNEF analyst Payal Kaur.
Updated Green Hydrogen Cost Projections
Currently, green hydrogen prices range between $3.74/kg and $11.70/kg, depending on renewable energy availability and electrolyzer costs. By comparison, gray hydrogen—produced from fossil fuels without carbon capture—costs significantly less, averaging $1.11/kg to $2.35/kg.
BNEF forecasts that even by 2050, green hydrogen will cost between $1.60/kg and $5.09/kg, marking a sharp increase from estimates made just 12 months ago. Meanwhile, gray hydrogen costs are expected to remain stable, maintaining a price advantage.
Factors Driving High Green Hydrogen Costs
BNEF identifies four primary barriers preventing significant cost reductions for green hydrogen production:
- Electrolyzer Manufacturing Costs
The cost of equipment required for hydrogen production has risen sharply, outpacing earlier projections. - Limited Economies of Scale
Stagnant demand and the cancellation of large-scale projects have hindered cost reductions typically seen with scaling. - Decarbonization Challenges in Key Sectors
Industries like petrochemicals, steel production, and oil refining require costly infrastructure to adopt green hydrogen as a decarbonization tool. - Reliance on Incentives and Policies
Green hydrogen remains heavily dependent on subsidies, such as the $3/kg U.S. tax credit. However, these measures are insufficient to bring prices in line with gray hydrogen in most regions.
Regional Bright Spots: China, India, and Texas
While most regions struggle with high green hydrogen costs, a few exceptions stand out:
- China and India: These countries are expected to achieve price parity between green and gray hydrogen by 2040, thanks to favorable renewable energy conditions and lower production costs.
- Texas: By 2030, Texas could see green hydrogen prices drop to $4.82/kg without subsidies, making it a U.S. leader in affordable renewable hydrogen. With targeted incentives, costs could fall further, reaching below $1/kg by 2040.
The Future of Green Hydrogen Cost
Green hydrogen has the potential to drive global decarbonization efforts, but its cost remains a significant obstacle. For hard-to-decarbonize sectors like steelmaking and refining, affordability challenges persist. Without major policy interventions and technological advances, widespread adoption may remain out of reach for many economies.