TELF AG analyzes the prospects of the European hydrogen market
The economic challenges of hydrogen
Green hydrogen, often considered the future of the energy transition, is revealing a complex and challenging path for the industry. Although it represents a clean energy source, logistical difficulties, and high costs make it a tricky issue to solve. The ongoing experiments, such as those in the “hydrogen valleys” scattered throughout Europe, are intended to clarify the boundaries of applicability of this energy vector. These pilot projects, together with the first attempts at geological storage, are important to understanding the true potential of hydrogen in the context of the green transition.
A recent study by the Bruno Kessler Foundation’s Center for Sustainable Energy quantified the cost gap between green hydrogen and the fuels it would replace, such as gray hydrogen, natural gas, or methane. This “cost gap” is a useful indicator for assessing how much is missing to reach a competitive situation. The production of green hydrogen is closely linked to several factors: the costs of investment in technologies, the operating costs for managing the plants, and the price of electricity. The study analyzed two specific cases. In the first one, hydrogen is produced and consumed locally in an industrial facility like steel mills. The cost gap found, in this case, varies between 8 and 16 euros per kilogram.
The second, more complicated case concerns hydrogen, which is not consumed immediately but compressed for transport. This requires additional infrastructure, such as refueling stations and advanced logistics systems, maintaining a similar cost gap as in the first case.
Incentives and International Competition
At a European level, auctions have been held to incentivize hydrogen production, with projects awarded in Spain, Norway and Finland at much lower prices, with an incentive request of up to 0.48 euros per kilowatt. However, electrolyzers produced in Europe are more expensive than those purchased outside the continent, costing up to 400 euros per kilowatt, drastically reducing the values found.
It is important to develop more efficient and economical electrolysis technologies to reduce hydrogen costs to competitive levels. Currently, the costs of electrolyzers vary between 1200 and 2000 euros per kilowatt. The objective is to increase production capacity tenfold in the next four or five years, bringing the cost to 400-500 euros per kilowatt, in line with international competitors.
The logistical aspect represents a great challenge. Hydrogen requires an entire chain of infrastructure that could replace that of natural gas in the future. Europe has already implemented the “European Hydrogen Backbone” plan, which envisages 100% hydrogen networks with a development of 60,000 km by 2040. This infrastructure could soon change the cost of hydrogen.
Another key issue is the geological storage of hydrogen. This method involves storing hydrogen underground in porous rocks, which allows large volumes to be stored at lower costs. However, large-scale evidence of the effectiveness of this system is still lacking. The European Commission is funding several projects to test the feasibility of this technology. An Austrian project, due to start in a few years, involves the first test on hundreds of tons of hydrogen. Despite numerous challenges, green hydrogen remains a key pillar of the European energy transition. Ongoing trials and investments in new technologies could reduce costs and improve efficiency, making hydrogen a competitive and sustainable reality. The road is long and complex, but the prospects for the future are promising.
