Green hydrogen holds transformative potential in combating climate change, but its adoption depends on addressing the challenges of cost, infrastructure and technology.
Industries that can benefit from green hydrogen need extensive retooling to incorporate hydrogen into their processes, which poses a significant financial burden
Green hydrogen holds transformative potential in combating climate change, but its adoption depends on addressing the challenges of cost, infrastructure and technology.
Green hydrogen produced through electrolysis is estimated to cost between $3 and $7 per kg, which is expensive compared to grey hydrogen ($1–2 per kg) and blue hydrogen ($2–3 per kg). This cost difference is due to the expensive electrolysis machinery and the dependence on costly renewable energy, which makes it less competitive.
Further, electrolysis, which splits water into hydrogen and oxygen, suffers from 30–35% energy losses. This makes green hydrogen less attractive than direct electrification solutions such as battery storage. Electrolyser technologies rely on expensive materials such as platinum and iridium. Limited mass production and economies of scale further inflate costs.
Hydrogen’s unique properties, such as being highly flammable and the smallest molecule, necessitate specialised infrastructure for safe and efficient storage, transport and distribution. Retrofitting natural gas pipelines or constructing new hydrogen-specific systems requires significant investment.
Many industries that could benefit from green hydrogen, such as steel, refining and chemicals, need extensive retooling to incorporate hydrogen into their processes. These sectors are reliant on fossil fuels and the transition to hydrogen-based systems would involve high costs for new equipment, retrofitting existing plants, and re-engineering production lines. This represents a significant financial burden, especially when the economic benefits are not immediately apparent.
Electrolysers cost $800–1,500 per kW of installed capacity, and capital expenditures form a significant portion of production costs. However, advancements and scaling are projected to reduce costs by 60–70% by 2030.
Further, renewable electricity accounts for 50–70% of production costs, with geographic variability influencing competitiveness. For instance, regions with abundant solar and wind resources, such as West Asia, have a cost advantage compared to Europe.