Green hydrogen could be cost-competitive with natural gas by 2030 if production of the zero-carbon fuel reaches industrial scale, Dutch bank ABN Amro says.

Analysts have calculated that green hydrogen can be produced at a cost of €2.19/kg ($2.66/kg) by the start of the next decade compared with €1.78/kg for natural gas. While these prices remains favourable for gas, the hydrogen industry has significant further means to reduce costs to become cost-competitive by the end of the decade, ABN Amro analysts argue.

“We still have a long way to go before green hydrogen is competitive, but energy companies and industrial enterprises are not sitting on their hands in the meantime either. By all indications, price parity between fossil fuels and green hydrogen is on the horizon,” says Shanawaz Bhimji, senior strategist at ABN Amro.

“By all indications, price parity between fossil fuels and green hydrogen is on the horizon” Bhimji, ABN Amro

A key determinant of the cost-competitiveness of hydrogen is the carbon tax. The price for EU Allowances (EUAs) under the EU emissions trading scheme could rise above €50/t by 2030, according to research service BloombergNEF, making fossil-based fuels considerably more expensive. Various European countries are even planning to levy additional national taxes on emitters.

ABN Amro researchers mention the falling cost for electrolysers, the potential for even higher EUA prices and EU plans to include scope three downstream emissions in the EU taxonomy as factors that could further improve green hydrogen’s case against natural gas.

“All in all, it seems that there are decent upside risks which could ultimately drive equivalence between fossil fuels and green hydrogen in 2030,” the analysts say.

Hydrogen is widely seen as a key fuel to tackling the energy transition from CO₂-heavy energy resources to forms of energy that are less harmful to the climate. It is mainly used in heavy industrial processes such as oil refining and fertiliser production, but its application in power generation, transport and buildings is expected to significantly reduce carbon-intensity and contribute to reaching global climate goals.

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Author: Karolin Schaps