Green hydrogen, heralded by politicians and business leaders for a carbon-free future, faces a daunting economic hurdle.
Despite initial hopes for price reductions, recent estimates from BloombergNEF (BNEF) show that green hydrogen will remain costly for decades. The price forecast for green hydrogen in 2050 has surged, tripling past predictions due to higher expected costs for electrolysers, the equipment used to split water into hydrogen using renewable energy.
While only China and India are likely to see green hydrogen prices become competitive with gray hydrogen by 2040, other regions face financial barriers. The US market, in particular, is stalled as projects await final rules on a tax credit designed to boost hydrogen production. Despite these roadblocks, Texas is expected to produce the cheapest green hydrogen in the US, albeit with costs predicted to remain high compared to conventional hydrogen sourced from natural gas.
The continued high production costs for green hydrogen pose a significant challenge to decarbonizing industries like chemicals and oil refining. These sectors, along with steel mills and power plants, are potential users of green hydrogen, yet demand remains low due to the expense of necessary new equipment. The lofty production costs also cast doubt on President Joe Biden’s ambitious goal to reduce US hydrogen prices to USD 1 per kilogram by 2031.
Slow growth in hydrogen demand has forced companies worldwide to scale back their plans. Equinor ASA, Shell PLC, and Origin Energy Ltd. have all canceled planned hydrogen production ventures due to insufficient demand. These challenges highlight the hurdles green hydrogen faces, with its promise of cleaner energy as yet unfulfilled for many regions outside of China and India.
