Costs for green hydrogen to decrease significantly in the coming decade

Production costs for green hydrogen from electrolysis are projected to undergo a significant reduction over the next decade. Together with increasing costs of fossil-based alternatives, this will make green hydrogen increasingly attractive especially in applications where direct electrification is not an option.


At THEMA Consulting, we are dedicated to providing in-depth analysis and expert insights on the future of the energy industry. One of our areas of expertise is hydrogen, and THEMA now provides an outlook for future Hydrogen prices.

Hydrogen is widely seen as having a key role to play in the future energy system. The gas is versatile in terms of production, storage, and transport, making it a suitable candidate for a wide range of applications. It can be used as precursor for ammonia production, combusted for heat and power, used as a process gas to decarbonise hard-to-abate industry processes or to produce zero or low emission fuels for heavy-duty transportation.

However, despite its potential, there are still several regulatory, financial, and technical barriers that need to be overcome in order to establish a functioning large-scale hydrogen market. One of these barriers is the economic competitiveness of green hydrogen production via water electrolysis compared to other production routes and energy carriers. The electrolysis process is very power-intensive. Consequently, the cost of power makes up to 70 to 90 percent of the overall production costs. Because we currently have unusually high electricity prices, this translates into high hydrogen production costs.

However, we find that there is a significant potential for cost reduction in green hydrogen production. With normalizing power prices and declining investment costs for electrolysers and renewable power generation, the cost of green hydrogen production is likely to decrease significantly in the coming years. We find that within 10 years production costs around 2 EUR/kg will be possible under favourable conditions, depending on location, access to renewable electricity, and future power market trends, even without further financial incentives. This could make green hydrogen competitive in many of the applications mentioned above.

At THEMA we will continue to monitor the hydrogen sector and provide regular updates and insights on the potential for cost reduction in green hydrogen production.

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