Rising Costs Threaten Green Hydrogen's Viability
Bonn, Tuesday, 14 January 2025.
Green hydrogen struggles as electricity prices soar, losing ground to conventional hydrogen. Economic strategies are crucial to maintain its competitive edge.
Price Shock Hits Green Hydrogen Market
I’ve been analyzing the latest market data, and the numbers are concerning. Green hydrogen production costs have jumped significantly, with marginal costs rising by 76 €/MWh to 192 €/MWh (6.40 €/kg) in just one week [1]. This spike is directly linked to a 75% increase in spot electricity prices, now averaging 115 €/MWh [1]. Meanwhile, conventional hydrogen is gaining a competitive advantage as gas prices fall by 6%, making the cost gap between green and conventional hydrogen even wider [1].
Implementation Challenges Mount
The reality of green hydrogen deployment is sobering. In 2023, only 7% of globally announced capacity was actually completed on schedule [2]. Looking at specific projects, 86% of those announced in 2021 faced delays, and 14% were cancelled entirely. The situation worsened for 2022 announcements, with only 3% completed on time, 76% delayed, and 21% completely disappearing from the pipeline [2]. These setbacks are largely attributed to supply chain disruptions, rising energy prices, and increasing global interest rates [2].
Economic Viability Under Pressure
The cost comparison presents a stark picture. Green hydrogen currently costs about US$150 MWh−1 more than natural gas and US$121 MWh−1 more than grey hydrogen [2]. Based on current projections, green hydrogen won’t achieve cost parity with grey hydrogen until 2034, and natural gas parity isn’t expected until 2044 [2]. To bridge this gap, I’ve found that implementing all announced projects by 2030 would require approximately US$1.3 trillion in subsidies without carbon pricing [2].
Risk Management Strategies
Recent research shows that incorporating risk management strategies in green hydrogen projects can make a significant difference. A risk-prone approach could lower expected costs by 8%, while a risk-averse strategy might reduce overall risk by 5% [3]. These findings suggest that careful planning and risk assessment are crucial for project success, especially given the current market volatility.