When and where can green hydrogen actually compete on cost?
Green hydrogen can compete with fossil fuels only under specific conditions—not everywhere or anytime soon. A 2025 UK study shows that if you combine multiple strategies (using electricity from wind farms that would otherwise be wasted, selling the heat produced during electrolysis to district heating networks, and applying existing policy supports like carbon pricing), the total cost of green hydrogen drops by 78%. Under a high natural gas price scenario, this makes green hydrogen cost-competitive with natural gas by the mid-2030s [1]. Without those interventions, green hydrogen remains too expensive.
In China, a 2025 study found that coupling the electricity sector with hard-to-electrify industries (like steel and chemicals) by sharing hydrogen infrastructure reduces the overall energy system cost by 6%. If all those savings are allocated to the hydrogen used as fuel, the cost of green hydrogen drops by 24% compared to a system where sectors are kept separate. This makes green hydrogen comparable in cost to gray hydrogen (made from fossil fuels without carbon capture) by 2050 [2].
Location matters enormously. In Uruguay, where 97% of electricity already comes from renewables, the levelized cost of green hydrogen ranges from $2.11 to $4.12 per kg—but the literature suggests it needs to fall below $1.40 per kg to be a competitive export [5]. In Jordan, using solar power to produce hydrogen yields a cost of $3.13 per kg, compared to $4.42 per kg using grid electricity [4]. In Iraq, an off-grid solar system can produce hydrogen for $3.23 per kg [6]. These numbers are still roughly double the cost of fossil-based hydrogen.
What drives the cost of green hydrogen, and how can it be lowered?
The biggest cost driver is electricity. In Uruguay, the cost of renewable energy accounts for over 40% of the final hydrogen price [5]. In Norway, a 2023 study found that renewable fuel costs (including hydrogen) could fall by 41% to 68% by 2050, but the cost of electricity remains a major factor [3]. The second biggest factor is the electrolyzer itself—the device that splits water into hydrogen and oxygen. In polymer electrolyte membrane (PEM) electrolyzers, the electrolyzer can account for more than 30% of the total cost [5].
New technology can help. A 2022 breakthrough design—a capillary-fed electrolysis cell that avoids bubble formation—achieved 98% energy efficiency, using only 40.4 kWh per kg of hydrogen versus about 47.5 kWh in commercial cells. That higher efficiency directly lowers the electricity cost per kilogram [7]. However, this is still at the lab scale and not yet commercial.
Using otherwise-wasted resources also cuts costs. The UK study found that using curtailed wind (electricity that would otherwise be discarded because the grid cannot absorb it) reduces hydrogen cost by 17.5%, and selling the waste heat from electrolysis to district heating networks cuts cost by 24.7% [1]. In Italy, a wind-powered system for steelmaking achieved an 88% reduction in CO₂ emissions compared to traditional methods, but the hydrogen cost was still around €6.5 per kg ($7.10)—well above fossil fuel parity [8].
Can policy and market conditions close the gap?
Yes, policy interventions are critical. The UK study found that existing policy measures (such as carbon pricing and sustainability-linked bonds) can lower green hydrogen costs by 39% on their own [1]. A 2024 analysis of the chemical industry found that the price of natural gas and electricity has the biggest impact on whether green hydrogen can compete with gray hydrogen. When natural gas prices are high and CO₂ certificate prices are also high, green hydrogen can become competitive even today [11].
However, relying on high fossil fuel prices is risky. The same study notes that CO₂ certificate prices currently have only a minor influence on hydrogen costs compared to natural gas prices [11]. In Libya, a 2024 review suggests that green hydrogen could become economically competitive with fossil fuels if renewable energy is added to the public grid, but the country currently lacks the infrastructure and safety standards needed for large-scale production [9].
Some researchers argue that alternative hydrogen production pathways—like using concentrated solar energy to split water thermochemically (called 'white hydrogen') or to pyrolyze methane (called 'aquamarine hydrogen')—could be cheaper than green hydrogen by 2030, potentially undercutting even gray hydrogen without carbon capture [10]. But these technologies are still in early development.
Sources used in this answer
Blending interventions to achieve green hydrogen cost competitiveness for industrial decarbonisation
Blending interventions (curtailed wind, waste heat sales, policy support) can reduce green hydrogen costs by 78%, achieving cost parity with natural gas by the mid-2030s under high gas prices.
Economic benefits and cost competitiveness of green hydrogen in decarbonizing China’s electricity and hard-to-electrify sectors
In China, coupling electricity and hard-to-electrify sectors via shared hydrogen infrastructure reduces system cost by 6% and makes green hydrogen cost-comparable to gray hydrogen by 2050.
Renewable hydrogen and synthetic fuels versus fossil fuels for trucking, shipping and aviation: A holistic cost model
Renewable fuel costs for trucking, shipping, and aviation could fall 41–68% by 2050, but carbon-neutral transport will still face cost disadvantages, especially in shipping.
Potential of Producing Green Hydrogen in Jordan
In Jordan, green hydrogen from solar PV costs $3.13/kg, versus $4.42/kg from grid electricity; the PV system pays back in 11 years and cuts CO₂ by 3,042 tons/year.
Green hydrogen production in Uruguay: a techno-economic approach
In Uruguay, green hydrogen costs $2.11–$4.12/kg; electricity accounts for >40% of cost, and electrolyzer cost >30% for PEM; costs must fall below $1.40/kg for export competitiveness.
Techno-Economic Assessment of Green Hydrogen Production by an Off-Grid Photovoltaic Energy System
An off-grid solar system in Iraq produces hydrogen at $3.23/kg with an optimally sized 8 kW electrolyzer paired with a 12 kWp PV array.
A high-performance capillary-fed electrolysis cell promises more cost-competitive renewable hydrogen
A capillary-fed electrolysis cell achieves 98% energy efficiency (40.4 kWh/kg H₂), outperforming commercial cells (~47.5 kWh/kg) and promising lower costs.
Techno-economic analysis of wind-powered green hydrogen production to facilitate the decarbonization of hard-to-abate sectors: A case study on steelmaking
Wind-powered green hydrogen for Italian steelmaking can cut CO₂ emissions by 88% but costs about €6.5/kg ($7.10), far above fossil fuel parity.
Review paper on Green Hydrogen Production, Storage, and Utilization Techniques in Libya
In Libya, green hydrogen could become economically competitive with fossil fuels if renewable energy is added to the grid, but infrastructure and safety issues remain.
There are hydrogen production pathways with better than green hydrogen economic and environmental costs
Alternative pathways (white and aquamarine hydrogen using concentrated solar) could be cheaper than green hydrogen by 2030, potentially undercutting even gray hydrogen.
Green hydrogen in the chemical industry - Key factors and cost competitiveness
Electricity and natural gas prices dominate green vs. gray hydrogen competition; CO₂ certificate prices have only a minor influence at current levels.