With the legal framework currently set for 2030, the full cost of green hydrogen for future projects is around €11/kg H2 for the customer – even after accounting for technical advances and revenues from system services. These costs include investment and operating expenses, the price of electricity used, plus grid fees and levies applicable to new electrolyser installations from 2030. They also cover costs for transport and demand-based hydrogen delivery. This is far too high, as the competing product, grey hydrogen (excluding CO2 costs), costs only about €3/kg H2.
The good news is that hydrogen’s competitiveness can be significantly increased by reducing production and supply costs. The biggest lever for substantially lowering the full cost is pragmatic regulatory simplification:
a. Adjustment of European regulation: €3 to €4/kg H2
The European Emissions Trading Scheme is fully sufficient as an incentive instrument; the Delegated Act adds no value. By abolishing the restrictive criteria of the Delegated Act for green hydrogen (“RFNBO”), costs in Germany can be reduced by about €2/kg H2. Moreover, improved electricity availability would both reduce operational risks for electrolysers and enable continuous supply to customers. Fluctuating hydrogen production due to variable renewable power supply would be eliminated and the need for physical interim storage significantly reduced.
A permanent extension of electricity price compensation, which expires after 2030, would strengthen the competitiveness of European industry. At the same time, costs for green hydrogen could be reduced by a further €1 to 2/kg H2 from 2030 onwards.
b. Supportive national regulation: more than €3/kg H22
With the right regulatory framework adjustments, the cost reduction potential for domestic green hydrogen production is over €3/kg H2 overall:
- The current exemption from electricity grid fees for electrolysers will expire for projects coming into operation after August 2029 – this is worth about €2/kg H2. Electrolysers can be integrated into the future reduction of grid fees for industry and commerce according to their market and system-friendly use of flexibility potential via a simple adjustment regulation. Electrolytically produced low-carbon hydrogen would also benefit.
- The exemption from levies (offshore grid levy, CHP levy amounting to about €1/kg H2 in total) currently applies only to plants for producing green hydrogen that come into operation before 2030. Extending this to later plants would make investment in forward-looking technologies attractive.
- A revision of the pricing criteria in Section 13k of the EnWG (‘use instead of curtailment’) would allow electrolysers attractive participation in the corresponding Section 13k market and enable system- and grid-friendly power procurement (reduction of about €0.5/kg H2).
Overall effect: With these changes to EU and national regulations, the total cost of green hydrogen in Germany in 2030 could drop from roughly €11 to below €6/kg H2.
