Green hydrogen costs could be as low as €2.9/kg ($2.9/kg) in the EU and €2.2/kg in countries with good wind conditions in northern Europe, according to the Clean Hydrogen Monitor report from industry body Hydrogen Europe.

This is a significantly lower price than other recent estimates, which rarely go below €4/kg.

The report’s analysis is based on the levelised cost of electricity from the cheapest renewable sources in particular EU countries, assuming they are directly connected to an electrolyser. According to the report, Spain is able to achieve its lowest-cost green hydrogen production using solar, and Norway using wind.

These figures could even over-estimate the cost, the report says, as countries are likely to have areas where renewable resources perform better than the national average and therefore where green hydrogen production is “considerably less expensive”.

€2.2/kg – Current lowest production cost for green hydrogen in Europe

Further cost optimisation can be achieved by combining solar PV and wind resources, and by electrolyser operators connecting to the grid to sell excess renewable energy that could not be used for hydrogen production back at times of high electricity prices.

“Being connected to the grid… would allow the plant to optimise revenues by prioritising the dispatching of electricity to the grid when prices are high and the production of hydrogen when electricity prices are low,” says the report. This strategy could reduce average production costs to well below €2/kg, it adds.

Based on recent renewable auction results in some EU countries, the downward trend in production costs seen since 2012 should continue, the report says.

Cost-competitive

Green hydrogen is now becoming cost-competitive with the grey variety—for which average EU production costs in 2021 are estimated at €2.65/kg—in certain regions, according to the report.

“As positive a development as this is, one should refrain from drawing too far-reaching conclusions from it as it is more related to the significant increase in natural gas prices than with the sharp reduction in renewable hydrogen production costs,” it says, noting a cost gap still exists compared with historical grey hydrogen production of at least €1.2/kg.

Furthermore, the electrolyser capital costs for the study are based on a 100MW system installed at a pre-prepared site, which might not be possible at all sites. The production costs also do not take into account storage, compression or distribution.

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Author: Tom Young