Germany-based Siemens Energy expects the costs of producing green hydrogen in the US to fall to $1.5/kg by 2025 from $4.5/kg currently, according to a report issued in partnership with Reuters Events.

Current costs of production in the US are around $4.5/kg. However, even at $1.5/kg green hydrogen will struggle to compete economically with the grey variety of the fuel, according to Rich Voorberg, president of Siemens North America.

“When you evaluate the business cases, the lower cost of natural gas makes it very hard to switch to hydrogen,” he says in a report titled How can North America achieve net zero carbon? A Siemens Energy View.

Early investors in green hydrogen are taking the risk that prices will come down far enough to be competitive, hoping they see a return on investment over a 5-10 year time period, Voorberg says. But more demand is needed to bring the price down, he adds.

“The government, specifically the Department of Energy, has a role to play here by offering tax incentives,” Voorberg continues.

In June, the Biden administration issued a new goal of slashing the cost of clean hydrogen by 80pc, to $1/kg, within a decade.

“The Department of Energy has a role to play here by offering tax incentives,” Voorberg, Siemens

At the same time the treasury proposed the creation of a low-carbon hydrogen production tax credit at the rate of $3/kg of hydrogen between 2022 and 2024 and $2/kg between 2025 and 2027, subject to an annual inflation adjustment. Construction of a qualified facility must begin by the end of 2026 to be eligible for the credit. The proposals still need to be passed into law.

Utilities are actively looking at ways of incorporating hydrogen into their operations as a viable, long-term alternative source of energy, according to Katy Perry, proposal manager for new energy business at Siemens Energy.

“As the utilities companies try to figure out how to decarbonise their current plants, they see that they can put hydrogen into gas blending for their gas turbines,” she says.

Siemens manufactures technologies that enable utilities to burn up to 50pc hydrogen in their gas turbines.

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Author: Tom Young