Green hydrogen has been praised as a potential solution for reducing carbon emissions, but its price is expected to stay higher than projected for several decades.
According to a BloombergNEF report, the cost of producing green hydrogen will not drop as much as previously thought, mainly due to higher expected costs for the necessary equipment called electrolyzers.
Currently, green hydrogen costs between $3.74 and $11.70 per kilogram. BloombergNEF now estimates that by 2050, prices will range between $1.60 and $5.09 per kilogram. This is a significant adjustment from earlier predictions that anticipated a sharper decline in costs. In contrast, gray hydrogen, the most common form today, costs between $1.11 and $2.35 per kilogram and is expected to maintain similar prices until mid-century.
Only China and India are predicted to achieve cost-competitiveness for green hydrogen by 2040. In these regions, the price of green hydrogen is expected to rival that of gray hydrogen. However, this outlook challenges the U.S. goal of reducing hydrogen costs to $1 per kilogram by 2031, a target seen as critical for widespread adoption of the fuel. In Texas, for example, current costs may decrease from $7.22 to $4.82 per kilogram by 2030, potentially reaching under $1 by 2040 with a $3 per kilogram tax credit.
The uncertainty surrounding U.S. hydrogen policy, influenced by changes in presidential administration, further complicates the market dynamics. While Joe Biden’s administration has been supportive of hydrogen initiatives, including tax credits, the future remains unclear with a potential shift in policies.
The slow growth in hydrogen demand has led to project cancellations by major companies like Equinor, Shell, and Origin Energy, revealing the challenges faced by the industry in scaling green hydrogen production without sufficient market backing.
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