Investors in the infrastructure sector are abandoning green hydrogen projects
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In the pursuit of a greener future, green hydrogen has been heralded as a potential solution to reduce carbon emissions. However, a recent analysis has revealed that the cost of green hydrogen remains stubbornly expensive, casting doubts on its viability as a widespread energy source.
According to the International Energy Agency (IEA), the cost of green hydrogen could remain as high as $5.09 per kilogram over the coming decades, making it significantly more expensive than grey hydrogen, which is produced using fossil fuels and costs on average $1.5 per kilogram.
The high cost of green hydrogen production can be attributed to several factors. One of the main contributors is the high capital expenses for electrolyzers, which typically cost between USD 800-1,200 per installed kW. This makes upfront capital costs a major barrier.
Another significant factor is the cost of electricity from renewable sources. The prices of electricity vary widely by location, ranging from about USD 20/MWh in sunny regions to USD 80/MWh elsewhere. Additionally, there are additional costs beyond production, such as storage, compression, transportation, and delivery infrastructure, which add approximately USD 0.50-1.00/kg of hydrogen, increasing the total cost significantly.
Energy conversion and efficiency losses also play a role in the high cost of green hydrogen. When factoring in storage, transport, and end-use efficiency (e.g., in fuel cells at ~60% efficiency), the effective cost of usable hydrogen energy can more than triple from the production cost alone.
The volatility and intermittency of renewable energy sources also add to the challenges and costs associated with green hydrogen production. Renewable power supply variability causes challenges that may add costs related to system balancing and storage.
Despite these challenges, some experts remain optimistic about the potential of green hydrogen. Paul Martin, a hydrogen expert, has stated that while hydrogen is "not a decarbonisation strategy but a decarbonisation problem", it has the potential to play a role in the future energy mix.
However, the high cost of green hydrogen has led to a slowdown in investment and development. The European Court of Auditors has warned that the EU's ambition to produce 10 million tons of green hydrogen by 2030 needed a reality check, and there has been an 80% reduction in new green hydrogen project announcements relative to 2023.
The hydrogen vehicle industry is also struggling, with the industry essentially dead in the water. Share prices in hydrogen companies such as Green Hydrogen Systems and Plug Power have fallen by more than half to historic lows after repeated losses.
Trade tensions could also pose a challenge to the green hydrogen industry, as European green hydrogen producers may be unable to import cheap Chinese electrolysers to reduce costs. Current EU anti-subsidy investigations are targeting Chinese green technology products, which could further drive up the cost of green hydrogen production.
In conclusion, the high cost of green hydrogen production remains a significant barrier to its widespread adoption. Without further technology improvements, scale-up, and supportive policies, it is unlikely that green hydrogen will become a viable alternative to grey or blue hydrogen in the near future. It is essential that efforts are made to address these challenges and drive down the cost of green hydrogen production if it is to play a role in the transition to a low-carbon economy.
Green hydrogen, while promising as a potential solution for reducing carbon emissions, faces challenges due to its high cost, particularly when compared to grey hydrogen. This high cost is attributed to factors such as expensive electrolyzers, costly electricity from renewable sources, and additional costs for storage, compression, transportation, and delivery infrastructure.
In the realm of general news, the slowdown in investment and development of green hydrogen, as well as the struggles of the hydrogen vehicle industry, highlight the need for technology improvements and supportive policies to drive down the cost of green hydrogen production. In the sports of negotiation, trade tensions could also wages, potentially affecting the cost of green hydrogen production if EU producers are unable to import cheaper Chinese electrolyzers.
