Clean hydrogen will remain much more expensive than expected. Even if production costs were to fall according to the trajectory calculated in the most optimistic assessments, storage and distribution would make green hydrogen competitive little more than a vain hope. A decarbonization strategy that is not cost-effective, even less so than directly removing carbon dioxide from the air.
‘Even if production costs decrease in line with forecasts, storage and distribution costs will prevent hydrogen from being cost-competitive in many sectors,’ explains Roxana Shafiee, a researcher at Harvard University and the lead author of a recently published study in Joule. ‘Our findings challenge the growing idea that hydrogen will be the “Swiss Army knife of decarbonization” and suggest that opportunities for hydrogen may be more limited than previously thought.’
Competitive green hydrogen: the forecasts
In recent years, many studies have predicted that competitive green hydrogen would become a reality in the short term. According to BNEF, surpassing fossil-based alternatives without CO2 recovery (gray hydrogen) will materialize in five markets by 2030 and in 90% of markets five years later. By 2033, green hydrogen is expected to become more competitive than blue hydrogen (from fossil sources but with CO2 capture) even in Europe (in China, as early as 2028). For Hydrogen Europe, green hydrogen would become competitive without incentives—for certain applications and in some European regions—by 2025.
The Harvard study, on the other hand, compares the energy carrier produced from renewable sources with the available alternatives for a range of hard-to-abate sectors, namely carbon capture and storage (CCS). In addition to production costs, it also evaluates the costs related to the use of storage and distribution infrastructure by different end users.
At current prices, the authors conclude, green hydrogen would be a “prohibitively expensive” decarbonization strategy across all end uses examined. Carbon abatement costs would reach $500–$1,250 per ton of CO2, in some cases even exceeding the cost of direct air capture.
In the future? Even if production costs are reduced to the threshold of $2/kg H2, often cited as a tipping point for the carrier’s competitiveness, opportunities for carbon abatement at costs below $250/tCO2 are limited to a single end use: ammonia production.”