Green hydrogen remains scarce and expensive

 

 "Strict EU regulations make production in Germany disproportionately expensive.

The fact that the sluggish ramp-up of the hydrogen economy is a problem doesn't need to be explained to the designated Federal Minister for Economic Affairs, Katherina Reiche, who is now taking over as head of the authority for the CDU, is very familiar with the subject. Through her work as chair of the National Hydrogen Council, she has earned considerable respect in the industry. But even Reiche can't simply conjure up the coveted energy source, which is considered the key to climate neutrality in Europe.

 

Politicians have tried many things to break the vicious cycle of lacking demand and equally limited supply. But high costs, sluggish investment, and geopolitical uncertainties are slowing market development. Climate-friendly hydrogen remains scarce, and the limited quantities available are too expensive.

 

Germany is already further ahead than many other European countries in one respect: Planning for the most important domestic pipelines is complete – an important signal for investors. By 2032, the goal is to build the most important hydrogen pipelines. 9,000 kilometers of new natural gas pipelines will be built or old ones will be repurposed. A pragmatic model has been devised to finance this so-called core network, which also involves future users contributing to the construction costs. The first section in the Central German Chemical Triangle went into operation just a few days ago.

 

The geographical distribution of the pipelines is also better than their reputation suggests.

Hydrogen is most urgently needed in the production of methanol, ammonia, fertilizers, and steel, as well as in refineries.

The use of climate-friendly gases can reduce CO2 emissions particularly quickly here – which is why they were given priority for connection to the core network.

 

In this respect, it seems strange that the coalition agreement mentions expanding the core network to include routes in southern and eastern Germany, allegedly because industrial centers were not taken into account. In fact, some aluminum and paper producers will not receive expensive connections for the time being. However, these industries are not necessarily dependent on hydrogen, because they have an alternative for decarbonizing their processes with electricity as an energy source. A cost-efficient energy transition also means, when in doubt, concentrating first on the most important routes.

 

Despite the prospect of a transport network, the chemical and steel industries are hesitant to invest in restructuring their production processes. The difficult economic environment has also hit those companies that could now use climate-neutral gases at affordable prices. However, the production costs of green hydrogen, i.e. hydrogen produced by electrolysis using green electricity and water, are higher and are falling more slowly than expected.

 

Prices of eight euros per kilogram are not competitive on the market.

 

This is not only due to the lower full-load hours of renewable energies compared to Spain or the Middle East. Strict EU regulations also make production in Germany disproportionately expensive. According to these regulations, hydrogen is only considered green if the green electricity used is generated by additional solar systems or wind turbines, and practically at the same time. This is roughly as if politicians were to require drivers to use their electric cars only when the sun is shining and the electricity from a new solar system is supplied by the own roof.

 

Another hurdle to the competitiveness of the green molecule is the decline in natural gas prices, which have halved since mid-February – partly because more and more American liquefied natural gas is entering the European market.

 

Blue hydrogen, which is produced from natural gas by steam reforming but relies on the capture of the resulting CO2, is currently significantly cheaper than its green alternative at five euros per kilogram.

 

But here too, the required quantities are lacking. The eternal question of green or blue must therefore simply be answered with "both."

 

Anyone who falls into pessimism in the face of so many hurdles should be reminded that this involves nothing less than the transformation of the entire industry and that a completely new economic sector is being created from scratch. Renewable energies also took almost 20 years to become as widespread and inexpensive as they are today.” [1]

The only real competition in this for us is China. We are losing this competition:

 

Green hydrogen costs in China are currently in the range of $2.2 to $11 USD per kg, with estimates suggesting a potential for further cost reductions. Green hydrogen is more expensive than gray hydrogen, which is produced from fossil fuels. However, China's cost for green hydrogen is lower than that of Western Europe, with estimates in the range of $4.2 to $4.6 USD/kg.

Cost Factors:

 

    Electrolyzer Technology:

    .

 

The cost of electrolyzers, which are used to split water into hydrogen and oxygen, is a significant factor in green hydrogen production.

Renewable Energy Costs:

.

Green hydrogen production relies on renewable energy sources, and the cost of electricity from these sources varies.

Storage and Transportation:

.

The cost of storing and transporting green hydrogen can also impact the overall price.

Market Competition:

.

As the market for green hydrogen grows, competition may drive down costs.

 

China's Green Hydrogen Market:

 

    China is a major player in the green hydrogen market, with ambitious goals to reduce costs and increase production.

 

China's green hydrogen costs are already competitive in regions with abundant renewable energy.

The cost of green hydrogen in China is expected to continue to decline as the market matures and technology advances.

 

Comparison to other regions:

 

    In Western Europe, the cost of green hydrogen production is higher, ranging from $7.1 to $12.4 USD/kg.

 

In the US, green hydrogen production can range from $10 to $15 USD/kg.

 

China's green hydrogen cost is lower than these regions, in part due to the lower cost of green electricity.

 

 

1. Grüner Wasserstoff bleibt knapp und teuer. Frankfurter Allgemeine Zeitung; Frankfurt. 05 May 2025: 15.  Von Hanna Decker