Hydrogen prices to remain high for decades to come, analysts warn

The research firm expects prices for such 'gray' hydrogen to remain largely the same through mid-century

Wed, 01 Jan, 2025 - 19:40

Green hydrogen has been touted by politicians and business leaders alike as a key fuel for a carbon-free future, but it will remain far more expensive than previously thought for decades to come, according to an estimate from BloombergNEF.

Hydrogen companies worldwide are already struggling with cancelled projects and sluggish demand.

BloombergNEF had in the past forecast steep declines in the price of green hydrogen, which is made by splitting it from water with machines called electrolyzers running on renewable power.

However, in its recent forecast, the firm more than tripled its 2050 cost estimate, citing higher future costs for the electrolyzers themselves.

BloombergNEF now forecasts green hydrogen to fall from a current range of $3.74 to $11.70/kg to $1.60 to $5.09/kg in 2050.

For comparison, the most common form of hydrogen used today — stripped from natural gas, with the carbon emissions vented into the atmosphere — costs from $1.11 to $2.35/kg, according to BloombergNEF.

The research firm expects prices for such “gray” hydrogen to remain largely the same through mid-century.

“The higher costs for producing green hydrogen without any subsidies or incentives means it will continue to be challenging to decarbonize hard-to-abate sectors, such as chemicals and oil refining, with hydrogen produced via electrolysis powered by renewables,” said BloombergNEF analyst Payal Kaur.

Those industries, along with steel mills and power plants, have been tagged as possible end users of the gas. However, doing so would require expensive new equipment — which has stunted demand.

Only two markets — China and India — are likely to see green hydrogen become cost-competitive, according to BloombergNEF. There, the cleaner fuel will reach a comparable price to gray hydrogen by 2040.

The forecast puts outgoing US president Joe Biden’s goal of driving US hydrogen costs down to $1 per kilogram by 2031 out of reach. Many analysts consider that price essential to convincing potential customers to start using the fuel.

Slow hydrogen demand growth has forced companies worldwide to scale back their ambitions. Equinor, Shell, and Origin Energy all cancelled hydrogen production projects this year due to a lack of buyers.