BCG: Green hydrogen will be more expensive in Europe than previously estimated

The wholesale price of green hydrogen in Europe in 2030 will be significantly higher than previously expected. This is according to an analysis by leading consultancy Boston Consulting Group (BCG).

This is because projects currently under development indicate that the cost of producing green hydrogen in 2030 will not be at the expected level of around 3 EUR/kg (roughly 75 EUR/MWh) in Europe, but will instead range from 5 to 8 EUR/kg (roughly 125 to 200 EUR/MWh). As a result, green hydrogen is uncompetitive for most potential applications compared with alternative technologies that help decarbonise industry.

The most significant factor contributing to the higher price of green hydrogen is the cost of electricity from renewable energy sources, which has risen rather than fallen in recent years. Other factors include higher investment costs, supply chain problems for electrolyzers and wind farms, and, last but not least, inadequate infrastructure that limits the potential for price reductions.

The BCG report also states that in most European countries, green hydrogen must be produced using additional, unsubsidised renewable energy sources. This is due to concerns that electrolyzers could draw electricity from the grid, which would then need to be replaced with electricity generated from fossil fuels.

The new Renewable Energy Directive (RED) also puts large hydrogen consumers in Europe, such as fertilizer, steel and engineering companies, at risk. The directive requires that 42% of the hydrogen used in industry and 1% of transport fuels be produced using renewable energy sources by 2030.

This could make it cheaper to import finished green products such as ammonia, methanol or steel from countries outside the EU with more favourable conditions for renewable energy.

New European regulations and expanded financial support for projects such as H2Global or the European Hydrogen Backbone (EHB). could help bring the price of green hydrogen below 5 EUR/kg.

Despite all the concerns raised, the document says that the emerging hydrogen market is a rare opportunity. The question is not whether it will flourish, but rather when, where and how.