Nowadays, we hear more and more about hydrogen. Japan, South Korea, Australia, and the European Union, which are leaders in this field, have big plans for it. At the same time, we must recognize that despite the remarkable and encouraging developments and results achieved in recent years in the field of hydrogen-related innovation, hydrogen is not yet a competitive alternative to hydrocarbons.
In my previous articles, I have already discussed in detail the fact that Japan, South Korea, and the European Union are in a vulnerable position when it comes to energy sources and rare earth metals. It is therefore no coincidence that, following the Russian-Ukrainian war and the tariff war launched by the US under Donald Trump, they are providing even more financial resources for hydrogen-related innovation and are striving to increase their hydrogen production capacity. The European Union adopted an EU green hydrogen strategy in 2020. Subsequently, the REPowerEU plan announced in 2022, as well as the Competitiveness Compass and the Clean Industry Agreement adopted in early 2025, also address hydrogen, further accelerating developments related to hydrogen, and within that, green hydrogen, and their rapid practical application and dissemination.
According to the unanimous opinion of industry experts, bearing in mind the fight against climate change and sustainability expectations, the transformation of the energy sector has become inevitable.
The question is: what tools should be used for this transformation? Despite the fact that research and development related to hydrogen has accelerated considerably in recent years, hydrogen is unfortunately not yet competitive as an energy source and energy storage medium. According to the latest data from the International Energy Agency (IEA), global hydrogen demand reached 97 million tons (Mt) in 2023, representing a 2.5% increase compared to 2022. However, consumption continues to be concentrated in refining and the chemical industry, and is almost entirely covered by hydrogen produced from fossil fuels without emission reductions. Low-emission hydrogen continues to play only a marginal role, with production of less than 1 million tons in 2023. Hydrogen production reached 97 million tons in 2023, less than 1% of which was low-emission. Based on announced projects, low-emission hydrogen production could reach 49 million tons/year by 2030 (compared to 38 million tons/year in the 2023 global hydrogen survey). Installed water electrolysis capacity reached 1.4 GW by the end of 2023 and could reach 5 GW by the end of 2024. China leads in terms of committed projects and could account for nearly 70% of capacity in 2024. Announced projects suggest that capacity could grow to nearly 520 GW by 2030, although only 4% have reached final investment decision (FID) or are under construction. For fossil-based production with carbon capture, utilization, and storage (CCUS), 14% of announced potential production has reached FID, aided by an acceleration in FIDs over the past 12 months. Progress is being made, albeit at a much slower pace than expected a few years ago. Over the past 12 months, approximately 6.5 GW of electrolyzer capacity has reached final investment decision (FID), which is nearly 12% less than in the 12 months prior to the 2023 GHR. More than 40% of this capacity is located in China and 32% in Europe, where there has been a fourfold increase compared to the previous 12 months. The planned projects are mainly focused on industry or the production of hydrogen-based transport fuels. On the other hand, a number of projects have been cancelled due to uncertainty about demand or regulations, financial obstacles, and licensing issues.[1]
Electrolyzer production capacity doubled in 2023, reaching 25 GW/year, with China accounting for 60% of this. This capacity is largely underutilized, with production of only 2.5 GW in 2023. Taking into account projects with a final investment decision or under construction, capacity could reach over 40 GW/year in 2024. The number of projects lasting until 2030 exceeds 165 GW/year, 30% of which have reached the final investment decision stage. Renewable hydrogen production is currently typically one and a half to six times more expensive than continuous fossil-based production. This cost premium is much lower in later stages of the value chain; for consumers, it typically represents only a few percentage points of the price of end products (e.g., approximately 1% for electric vehicles whose steel is produced with renewable hydrogen), but acceptance of higher prices varies by product.
Approximately 40% of planned low-emission hydrogen production projects are located in water-scarce regions, where the exploitation and sustainable management of diverse water resources will be key. Project developers are exploring large-scale desalination and wastewater treatment to ensure adequate water supply.
Although the European Union is a market leader in renewable hydrogen production, green hydrogen still accounts for a negligible share of the EU's total energy mix. Hydrogen accounts for less than 2% of Europe's current energy consumption and is mainly used to produce chemical products such as plastics and fertilizers. Ninety-six percent of hydrogen production still relies on natural gas (i.e., blue hydrogen rather than green hydrogen), resulting in significant CO2 emissions of more than 70–100 million tons per year.
Although hydrogen is the most abundant element on Earth, it is rarely found in its pure form, so we have to extract it from other compounds, such as water or methane. Therefore, hydrogen is not an energy source, but an energy carrier that can be produced using energy.
1.      The main methods of hydrogen production:
•   The vast majority of production involves the conversion of natural gas into steam. During this process, water vapor reacts with methane at high temperatures (700–1100 °C) to produce carbon monoxide and hydrogen.
•   Another production method, mainly used in China, is coal gasification. In this process, coal, oxygen, and water vapor react at high temperatures and high pressures.
•   The third method is electrolysis. There are three technologies for this: alkaline, proton exchange membrane, and solid oxide electrolysis, of which alkaline electrolysis is the most mature.
There are other processes as well, but these three methods are the most common for industrial quantities.
According to IEA data, 75% of European hydrogen is produced from natural gas, 23% from coal, and the remaining 2% from other methods. Only 0.1% of hydrogen is produced by water electrolysis. Producing the annual global demand of 75 million tons of hydrogen through electrolysis would require enormous amounts of energy.[5]Â
The costs of hydrogen production vary significantly depending on the method used. The three main types of hydrogen are green, blue, and gray hydrogen, each with different production processes and associated costs:
Grey hydrogen:
Grey hydrogen is produced from natural gas using steam methane reforming (SMR) without capturing the resulting carbon dioxide emissions. It is currently the cheapest form of hydrogen, costing around €1-2 per kilogram.
Blue hydrogen:
Blue hydrogen also uses SMR, but also incorporates carbon capture and storage (CCS) technologies to reduce emissions. This process makes blue hydrogen more expensive, typically costing between €1.50 and €3 per kilogram.
Green hydrogen:
Green hydrogen is produced by electrolysis, using renewable energy to split water into hydrogen and oxygen. It is the most sustainable but also the most expensive, costing between €3 and €7 per kilogram, depending on renewable energy prices and the efficiency of the electrolyzer.
In 2024, the hydrogen industry, especially green hydrogen, saw a gradual decline in costs thanks to advances in electrolysis technology and increased renewable energy capacity. However, for hydrogen to become a mainstream energy solution and compete with hydrocarbons, further cost reductions are needed.
Today, China is the world's largest producer of hydrogen, but Europe leads in the production of green hydrogen.
2.      Hydrogen storage
Hydrogen is important primarily because of its role in long-term energy storage. Today, hydrogen produced by hydrolysis using renewable energy can be stored in small quantities primarily in tanks, and in larger quantities in salt caverns or depleted gas fields.
Like natural gas, stored hydrogen is used to drive power-generating turbines when needed. However, unlike natural gas, the combustion product is water rather than CO2.
3.      Hydrogen transport
There are currently around 5,000 kilometers of hydrogen pipeline networks in operation worldwide, of which around 1,500 kilometers are located in Europe. Hydrogen pipelines are becoming increasingly important in the field of zero-emission energy storage and transport. Existing gas pipelines are also partially suitable for transporting hydrogen. At the same time, announced new pipeline projects could reach nearly 40,000 km by 2035. Infrastructure development is a capital-intensive and lengthy process. Pipelines are the most cost-effective transport option, especially for large volumes, and transport can also be cheaper over longer distances. This will require new port infrastructure and suitable tankers. Based on the projects announced, more than 100 new hydrogen and ammonia terminals and port infrastructure projects could be completed on several continents by the end of the decade. More than half of these projects are new ammonia export terminals.[8]
4.      Hydrogen filling stations
According to data from the European Alternative Fuels Observatory (EAFO) for December 2024, there were a total of 175 high-pressure hydrogen filling stations in Europe. According to EU plans, the number of stations is to be increased by 2028 so that there will be a hydrogen filling station every 100 kilometers. This is contradicted by the fact that H2 Mobility, Europe's largest public hydrogen filling station network operator, announced in March 2025 that it would permanently close its 22 hydrogen stations in Germany. This represents more than a quarter of the company's own stations in Germany (79) and the total number of high-pressure hydrogen stations available in the country (85).[10]
5.      Natural gas and/or hydrogen
The world market price of 1 m3 of gas varies and depends on a number of factors, such as demand, supply, the political situation, and geopolitical risks. In general, the price of gas is constantly changing on the world market. According to a report by Trading Economics, the price of TTF gas was EUR 35.98/MWh[11]. The current price is up 3.46% from the previous day and 2.39% from the previous month.
The production cost of hydrogen depends largely on the method and location of production. The price of blue hydrogen produced from natural gas through carbon capture and storage has been USD 5-7/kg in the United States and USD 7-11 in Europe and Australia in recent years. The price of green hydrogen produced from renewable energy sources by electrolysis is USD 10-15/kg, depending on availability. The production cost of green hydrogen is basically determined by two cost items: the price of the electrolyzer and the electricity used. A joint study by NITI Aayog and RMI estimates that the current cost of green hydrogen from electrolysis ranges from USD 7 to USD 4.10/kg, depending on the technology choices and associated indirect costs[12]. Green hydrogen is produced by electrolysis, using renewable energy to split water into hydrogen and oxygen. This is the most sustainable but also the most expensive method, costing between €3 and €7 per kilogram, depending on renewable energy prices and the efficiency of the electrolyzer. However, for hydrogen to become a mainstream energy solution, further cost reductions are needed.[13]
When it comes to green hydrogen, the most efficient and cheapest way to produce it in Northern and Central Europe is with onshore wind farms, while in Mediterranean countries, solar panels are the cheapest source of electricity for electrolysis. I would like to mention here the study published on June 11, 2025, by Enertis Applus+, a Spanish engineering consulting firm, entitled “Cost Optimization and Competitiveness in Green Hydrogen: Critical Factors and Determining Variables,” which discusses in detail the competitiveness of green hydrogen and its essential components[14]. With regard to reducing the production costs of green hydrogen, the above-mentioned study also highlights the need for location, planning and implementation taking into account local conditions (number of hours of sunshine, wind conditions, topography, etc.).
However, it should be noted that in August 2022, a situation arose (primarily due to the Russian-Ukrainian conflict) in which the world market price of natural gas rose to such an extent that the price of green hydrogen produced in Europe was cheaper than natural gas. This case highlighted that geopolitical influences on the energy sector make the entire sector highly vulnerable and can lead to changes that can suddenly shed new light on previously less competitive solutions.
One advantage of hydrogen is that it can replace natural gas in many areas, can be produced almost anywhere, and its price is stable. Moreover, green hydrogen production capacity is growing exponentially.
We often say that hydrogen is the future, but its use is still negligible. Further development is needed in the areas of renewable power plants producing green hydrogen and the infrastructure necessary for the transport, storage, and distribution of hydrogen. A good example of this is the dramatic decline in the production cost of photovoltaic solar panels over the past 10 years, accompanied by a steady increase in their efficiency. Looking to the future, a similar process is entirely realistic for hydrogen.
[1]Â https://www.iea.org/reports/global-hydrogen-review-2024/trade-and-infrastructure
[2] https://blog.sintef.com/energy/hydrogen-in-europe-executive-summary/
[3] https://www.eea.europa.eu/en/analysis/maps-and-charts/eu-energy-mix
[4] https://www.xylem.com/nb-no/brands/sensus/blog/hydrogen-from-production-to-usage/
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[5] https://www.iea.org/energy-system/low-emission-fuels/hydrogen
[6] https://technetics.com/hydrogen-production-the-challenges-and-practical-applications/
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[7]https://www.energy.gov/eere/fuelcells/hydrogen-storage
[8] https://www.iea.org/reports/global-hydrogen-review-2024/trade-and-infrastructure
[9]https://www.sciencedirect.com/topics/engineering/hydrogen-transportation
[10] https://h2.live/en/press/network-consolidation-700-bar-h2-mobility-continues-to-drive-transformation-towards-commercial-vehicles/
[11] https://tradingeconomics.com/commodity/eu-natural-gas, date 11.06.2025
[12] https://rmi.org/insight/harnessing-green-hydrogen/
[13] https://montel.energy/resources/blog/hydrogen-production-cost-trends-2025
[14] https://www.enertisapplus.com/cost-optimization-and-competitiveness-in-green-hydrogen-critical-factors-and-determining-variables/
[15] https://www.mdpi.com/1996-1073/15/13/4741
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