International Journal of Hydrogen Energy 128 (2025) 473–487

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International Journal of Hydrogen Energy

journal homepage: www.elsevier.com/locate/he

Techno-economic analysis of hydrogen production: Costs, policies, and

scalability in the transition to net-zero
Eliseo Curcio 1
Blend Tiger, New York, US

A R T I C L E I N F O A B S T R A C T

Handling Editor: Dr M Mahdi Najafpour This study presents a comprehensive techno-economic analysis of gray, blue, and green hydrogen production
pathways, evaluating their cost structures, investment feasibility, infrastructure challenges, and policy-driven
cost reductions. The findings confirm that gray hydrogen ($1.50–$2.50/kg) remains the most cost-effective
today but is increasingly constrained by carbon pricing. Blue hydrogen ($2.00–$3.50/kg) offers a transitional
pathway but depends on CCS costs, natural gas price volatility, and regulatory support. Green hydrogen ($3.50–
$6.00/kg) is currently the most expensive but stands to benefit from declining renewable electricity costs,
electrolyzer efficiency improvements, and government incentives such as the Inflation Reduction Act (IRA),
which provides tax credits of up to $3.00/kg. The review is confined to data from 2015 to 2023 geographically
focused on the policy active regions i.e. EU, US and Asia Pacific, and limited to analyzing gray, blue and green
hydrogen production pathways. The analysis shows that renewable electricity costs below $20–$30/MWh are
essential for green hydrogen to achieve cost parity with fossil-based hydrogen. The DOE’s Hydrogen Shot
Initiative aims to lower green hydrogen costs to $1.00/kg by 2031, emphasizing the need for CAPEX reductions,
economies of scale, and improved electrolyzer efficiency. Infrastructure remains a critical challenge, with
pipeline retrofitting reducing transport costs by 50–70 %, though liquefied hydrogen and chemical carriers
remain costly due to energy losses and reconversion expenses. Investment trends indicate a growing shift toward
green hydrogen, with over $250 billion projected by 2035, surpassing blue hydrogen’s expected $100 billion.
Carbon pricing above $100/ton CO2 is likely to make gray hydrogen uncompetitive by 2030, accelerating the
shift to low-carbon hydrogen. Hydrogen’s long-term viability depends on continued cost reductions, policy in­
centives, and infrastructure expansion, with green hydrogen positioned as a cornerstone of the net-zero energy
transition by 2035.

1. Introduction zero carbon emission during production. Additionally, the competi­

tiveness of hydrogen as an alternative fuel depends on evolving regu­
The increasing urgency to decarbonize energy systems and mitigate latory frameworks, investment incentives, and technological
climate change has placed hydrogen at the forefront of global energy advancements [2,3]. Hydrogen production methods are broadly cate­
transition strategies. As a versatile energy carrier, hydrogen has the gorized into three pathways: gray, blue, and green, each with distinct
potential to serve as a clean alternative to fossil fuels across multiple economic and environmental trade-offs [4]. Gray hydrogen, produced
sectors, including industrial processes, transportation, and energy stor­ from natural gas via steam methane reforming (SMR) without carbon
age [1]. However, despite its promise, the widespread adoption of capture, remains the dominant and lowest-cost production method
hydrogen is hindered by economic, technological, and policy challenges. today. However, its high carbon footprint is increasingly subject to
The high costs associated with hydrogen production, storage, and regulatory pressures and carbon pricing schemes [5]. Blue hydrogen,
transportation—particularly for green hydrogen—remain key barriers which integrates carbon capture and storage (CCS) with SMR, offers a
to scalability. lower-emission alternative while leveraging existing natural gas infra­
Green hydrogen refers to the hydrogen produced through water structure. Yet, its economic feasibility remains dependent on the cost
electrolysis powered entirely by renewable energy resources resulting in and efficiency of CCS technologies and the volatility of natural gas prices

E-mail address: [email protected].

1
Independent Researcher.

https://doi.org/10.1016/j.ijhydene.2025.04.013
Received 18 February 2025; Received in revised form 29 March 2025; Accepted 1 April 2025
Available online 18 April 2025
0360-3199/© 2025 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights are reserved, including those for text and data mining, AI training, and
similar technologies.
E. Curcio International Journal of Hydrogen Energy 128 (2025) 473–487

[6]. Green hydrogen, produced via electrolysis using renewable elec­ credibility, and applicability to hydrogen market trends. The study relies
tricity, presents the most sustainable solution, eliminating direct carbon on publications from the International Journal of Hydrogen Energy,
emissions. However, its adoption is constrained by high electricity Hydrogen Council, McKinsey & Co., DNV Maritime Forecast, and leg­
consumption, capital expenditures for electrolyzers, and infrastructure islative frameworks such as the U.S. Inflation Reduction Act (IRA) [3].
limitations [7]. These sources provide quantifiable metrics on production costs, infra­
Hydrogen energy has emerged as a critical enabler of the global structure challenges, and investment trends. Particular emphasis was
transition as it offers versatile solution for decarbonizing hard abates placed on reports that outline cost breakdowns for hydrogen technolo­
sectors such as aviation and heavy industry. While existing the literature gies, including capital expenditures (CAPEX), operational expenditures
extensively explores the hydrogen production pathways like electrolysis (OPEX), and feedstock pricing, as well as studies evaluating the levelized
and steam methane reforming. Recent studies significantly highlight the cost of hydrogen (LCOH) across different production pathways [4]. The
gaps in the holistic assessment integrating technology viability [8–10], data was cross-referenced where possible to ensure consistency and
policy incentives and infrastructure scalability. For instance, regional remove outliers that might skew financial assessments [5]. The financial
analysis often overlooked into play between hydrogen production analysis applies a levelized cost of hydrogen (LCOH) framework to
caused and renewable energy availability. While broader systemic determine the economic feasibility of hydrogen production [6]. LCOH is
challenges such as energy loses during storage. Despite its advantages, calculated by dividing the total annualized cost of production by the
including high energy density, compatibility with existing gas infra­ annual hydrogen output, incorporating CAPEX, OPEX, and feedstock
structure and zero operational emissions for green hydrogen, key bar­ inputs [7]. The modeling considers electricity price variability for green
riers persist; prohibitive production cost, policy fragmentation [11] and hydrogen, reflecting how fluctuations in renewable energy costs impact
safety risk associated with flammability. production economics [12]. A Net Present Value (NPV) model was
This study aims to provide a comprehensive techno-economic anal­ developed to assess investment feasibility, using a 7 % weighted average
ysis of hydrogen production, evaluating cost structures, financial feasi­ cost of capital (WACC) and a 20-year project timeline [13]. The model
bility, and the impact of policy incentives across different production evaluates profitability under different hydrogen pricing scenarios,
pathways. A key objective is to determine the levelized cost of hydrogen identifying the break-even point at which NPV turns positive. This en­
(LCOH) for green, blue, and gray hydrogen under varying economic and ables a comparative assessment of how green, blue, and gray hydrogen
market conditions. The study employs financial modeling projects perform under various market conditions [14].
tools—including net present value (NPV), internal rate of return (IRR),
and sensitivity analysis—to assess investment feasibility and break-even 2.2. Assumptions and scope of analysis
thresholds [12,13]. In addition to production costs, the study examines
hydrogen’s scalability, transportation challenges, and storage re­ Key assumptions were established to provide a consistent basis for
quirements, which are critical factors influencing its market adoption financial projections. Electricity costs for green hydrogen were assumed
[14]. A major component of this analysis is the evaluation of to range from $20–$50/MWh, aligning with global trends in renewable
policy-driven incentives such as the U.S. Inflation Reduction Act (IRA) energy pricing [18]. Carbon capture efficiency for blue hydrogen was
hydrogen production tax credits, which have been designed to enhance modeled at 85–90 %, based on industry benchmarks for CCS technology
the economic viability of low-carbon hydrogen [15]. The study quan­ [19]. Transportation and storage costs were estimated using current
tifies how such incentives reduce LCOH, improve investment attrac­ infrastructure costs, acknowledging that future reductions may occur as
tiveness, and shift market preferences toward cleaner hydrogen hydrogen networks expand [20]. Table 1 summarize the key energy
pathways. Furthermore, the research explores how carbon pricing system and renewable energy sources.
mechanisms, renewable energy cost reductions, and advancements in While demand growth is expected to play a crucial role in deter­
electrolyzer efficiency influence hydrogen’s competitiveness over time mining investment feasibility, the study does not account for potential
[16]. market shocks or unforeseen regulatory changes that could significantly
This research is structured as follows: First, a detailed breakdown of alter hydrogen’s economic landscape [21]. This methodology ensures
hydrogen production costs is presented, identifying the key cost drivers that all findings are based on factual analysis rather than hypothetical
for each production method. Next, transportation and storage challenges projections [22]. By integrating financial modeling, policy impact
are analyzed, assessing the feasibility of hydrogen distribution via assessment, and sensitivity analysis, the study provides a comprehensive
pipelines, liquefaction, and chemical carriers. The study then evaluates evaluation of hydrogen’s commercial viability across different produc­
financial models to determine the economic feasibility of hydrogen in­ tion pathways [23]. The financial models developed in this analysis rely
vestments under different pricing scenarios and policy conditions. on key assumptions regarding CAPEX, OPEX, electricity pricing, and
Lastly, a comparative analysis of global investment trends is conducted, policy support [24]. These assumptions serve as the foundation for
highlighting the shifting market dynamics as capital flows toward low- evaluating the economic feasibility of hydrogen production across
carbon hydrogen solutions [17]. By integrating financial modeling, different technologies. Table 2 outlines the primary cost assumptions
cost assessments, policy impact analysis, and scalability considerations, used in this study [25].
this study provides a data-driven evaluation of hydrogen’s economic
trajectory.

2. Methods

2.1. Data collection and modeling approaches Table 1

Green hydrogen production methods and renewable energy sources.
This study employs a structured approach to evaluating the eco­ Renewable Energy Input Electrolysis Technology Efficiency
nomic viability of hydrogen production, integrating financial modeling, Sources %
policy analysis, and data sourced from industry reports, peer-reviewed Solar (PV) Electricity PEM, Alkaline 60–75
research, and government publications [1]. The analysis focuses on Wind Electricity Alkaline, PEM 65–80
quantifying the costs, investment feasibility, and policy incentives Geothermal Electricity + High temperature 70–85
associated with green, blue, and gray hydrogen, ensuring that findings Heat electrolysis
Hydropower Electricity Alkaline 70–80
are derived from factual, data-driven insights rather than speculative
assumptions [2]. The selection of data sources was guided by relevance, Source: Hydrogen Infrastructure [12].

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Table 2 Table 4
Key assumptions for hydrogen financial modeling. LHS transportation costs [$/Kg].
Parameter Green Blue Hydrogen Gray Hydrogen Transport Mode Liquefaction Cost Shipping Cost ($/kg H2 Boil-Off
Hydrogen ($/kg H2) per 1000 km) Losses (%)

CAPEX ($/kW) 1700 1100 900 LH2 (large-scale 1.5–2.0 0.50–1.20 0.2–0.4
OPEX ($/kg H2) 0.50 0.30 0.20 ship)
Electricity cost ($/MWh) 50 N/A N/A LH2 (small-scale 2.0–3.0 1.00–2.00 0.3–0.5
Carbon price ($/ton CO2) 100 50 0 barge)
Break-even H2 price ($/kg) 4.5–6.0 2.5–3.5 1.5–2.0
Source: Hydrogen Infrastructure Report [6].
Source [25].
these cost structures, LH2 transport is most economically feasible for
3. Results and discussion distances above 2000 km, where pipelines become impractical. How­
ever, high liquefaction costs and energy losses make this option viable
3.1. Hydrogen production pathways and their challenges only when coupled with low-cost renewable energy sources at the point
of hydrogen production.
3.1.1. Transportation costs Trucking compressed hydrogen is suitable for short-distance delivery
Hydrogen transportation costs vary significantly depending on the and small-scale distribution but becomes prohibitively expensive over
mode and scale of delivery. This section presents a comparative analysis longer distances [1]. Table 5 presents the cost structure for compressed
of key transportation methods such as Pipeline Transportation, Lique­ hydrogen trucking. As can be seen, the cost structure for compressed
fied Hydrogen (LH2) Shipping, Compressed Hydrogen Trucking and hydrogen trucking is influenced by the storage pressure (350–700 bar),
Hydrogen Carriers (Ammonia, LOHCs). trailer capacity, and fueling infrastructure [2]. Higher pressures reduce
Hydrogen pipelines represent the most efficient method of trans­ transport costs per kg of hydrogen but increase CAPEX for reinforced
portation for large-scale and long-distance distribution [1]. However, composite storage tanks [3]. Trucking is most viable for local hydrogen
the costs of dedicated hydrogen pipelines are significantly higher than distribution within 200–500 km. Beyond this range, pipeline transport
those for natural gas due to material constraints and operational chal­ or LH2 shipping becomes more cost-effective.
lenges [2]. Hydrogen is highly diffusive and can cause embrittlement in To overcome hydrogen’s storage and transport limitations, chemical
steel pipelines, necessitating specialized alloys or internal coatings to carriers such as ammonia (NH3) and liquid organic hydrogen carriers
prevent leakage and structural degradation [3]. The cost of pipeline (LOHCs) offer an alternative means of long-distance hydrogen transport
infrastructure depends on whether existing natural gas pipelines can be [1]. These methods allow hydrogen to be transported at ambient con­
repurposed or if new hydrogen-dedicated pipelines must be constructed ditions, reducing compression and cryogenic storage costs [2]. However,
[4]. According to infrastructure cost models derived from existing they require conversion and reconversion infrastructure, adding an
studies, hydrogen pipeline costs vary based on diameter, pressure, and additional cost layer [3,28]. While ammonia and LOHCs reduce direct
regional labor costs [5]. Repurposing existing natural gas pipelines can hydrogen handling costs, the energy losses during reconversion make
reduce costs by as much as 50–70 % compared to building new hydrogen these options less efficient than direct LH2 transport [1]. Table 6 high­
pipelines [6]. However, the feasibility of retrofitting depends on pipe­ lights the synthesis, transport, and reconversion costs for ammonia and
line material compatibility, as hydrogen embrittlement remains a major LOHCs, showing that ammonia incurs lower transport costs
technical concern [7]. A comparative analysis of hydrogen pipeline costs (0.30–0.70/kgH2 per 1000 km) compared to LOHCs (0.50–1.00/kg H2
based on available case studies is presented in Table 3 [12]. The per 1000 km), but both face significant reconversion expenses (up to
cost-effectiveness of hydrogen pipelines improves with higher utiliza­ $1.50–2.50/kg H2). Nonetheless, ammonia is emerging as a leading
tion rates, making them more viable in regions with dense industrial candidate for hydrogen trade due to its established shipping infra­
hydrogen demand [26]. However, for lower-demand scenarios, alter­ structure and ease of storage [2].
native transportation methods must be considered.
For international trade and large-scale transportation, liquefied 3.1.2. Storage costs
hydrogen (LH2) shipping is a key consideration [1]. Hydrogen must be Compressed hydrogen storage is one of the most widely used
cooled to − 253 ◦ C to reach a liquid state, a process that consumes 30–40 methods for short-term and mobile applications, particularly in fuel cell
% of the hydrogen’s energy content [2]. This high energy requirement, vehicles, industrial facilities, and transport logistics [1]. Hydrogen is
combined with the specialized infrastructure needed for liquefaction, typically stored at high pressures ranging from 350 to 700 bar to
storage, and regasification, significantly increases costs [3]. The CAPEX improve its energy density [2]. However, the need for specialized ma­
of liquefaction plants ranges from $300 M to $1B [27], depending on terials to withstand high-pressure conditions significantly increases
size and technological efficiency, while the OPEX is driven by electricity storage costs [3]. A breakdown of compressed hydrogen storage costs,
costs and maintenance of cryogenic systems [4]. Transporting LH2 also based on the Hydrogen Infrastructure Report, is provided in Table 7 [4].
presents boil-off losses, typically between 0.2 and 0.4 % per day, which While compressed storage is flexible and relatively mature, the high
adds to operational costs over long distances [5]. A cost comparison of costs associated with tank fabrication, energy-intensive compression,
liquefied hydrogen transportation is presented in Table 4 [6]. Given and material degradation over time pose significant economic chal­
lenges [1]. This method is best suited for short-term storage applications

Table 3
Pipeline transportation costs [$/Kg]. Table 5
Compressed transportation costs [$/Kg].
Pipeline Type CAPEX OPEX Maximum Estimated
($/km) ($/kg H2) Capacity (tons/ Energy Loss Transport Mode Compression Cost Trucking Cost ($/kg Storage
day) (%) ($/kg H2) H2 per 1000 km) Pressure (bar)

New hydrogen 1.0 M− 0.10–0.15 100–500 0.5–1 High-pressure 0.5–1.0 2.00–5.00 350–700
pipeline 2.0 M tube trailer
Repurposed gas 0.3 M− 0.07–0.10 50–300 1–2 Cryo-compressed 1.0–1.5 1.50–3.50 250–400
pipeline 0.6 M truck

Source: Hydrogen Infrastructure [12]. Source: Hydrogen Economy: The Fundamentals, Technology, Economics [2].

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Table 6 Table 9
Hydrogen carrier transportation costs [$/Kg]. Underground storage costs [$/Kg].
Carrier Synthesis Cost Transport Cost ($/kg H2 Reconversion Cost Storage CAPEX OPEX ($/kg Storage Capacity Cycle
Type ($/kg H2) per 1000 km) ($/kg H2) Type ($/kg H2) H2/yr) (tons) Efficiency
(%
Ammonia 1.0–1.5 0.30–0.70 0.75–1.50
LOHCs 1.2–1.8 0.50–1.00 1.00–2.00 Salt cavern 0.15–0.60 8 0.02–0.07 10,000–100,000 5–95
Depleted 0.30–0.90 0.03–0.12 50,000–500,000 75–90
Source: Hydrogen Economy: The Fundamentals, Technology, Economics [2]. gas field
Aquifer 0.40–1.20 0.04–0.18 100,000–1,000,000 70–85
storage
Table 7
Source: Calculations and Assumptions developed by author
Compressed hydrogen storage costs [$/Kg].
Storage Type CAPEX ($/kg OPEX Storage Efficiency
H2) ($/kg H2/ Pressure (bar) Loss (%) hydrogen release and reconversion [2]. Table 10 quantifies these
yr) trade-offs, revealing synthesis costs of 1.2–1.80/kgH2 for ammonia,
350 bar steel 650 - 1200 6–12 350 5–10
1.5–2.2/kg H2 for LOHCs, and 2.2–3.5/kgH2 for metal hydrides.
tank Reconversion costs further escalate expenses, reaching up to1.70/kgH2
700 bar 1200–2000 9–18 700 10–15 for ammonia, 2.50/kgH2, for LOHCs, and 3.20/kg H2 for metal hy­
composite drides. Efficiency losses—ranging from 25 % to 50 %—compound the
tank
economic challenges.
High-capacity 1800–2700 12–22 700 10–20
cylinders Three key factors affect the cost of hydrogen storage: capital in­
vestment (CAPEX) in infrastructure; maintenance and energy input
Source: Hydrogen Economy: The Fundamentals, Technology, Economics [2].
operating expenditure (OPEX); and energy losses in storage and
retrieval. For example, as mentioned in the Table 11, gas storage under
and localized hydrogen distribution networks [2]. compression requires use of 350–700 bar high-pressure tanks requiring
Liquefied hydrogen storage enables higher volumetric energy den­ costly composite materials, which translates to CAPEX between $1200
sity compared to compressed storage by cooling hydrogen to − 253 ◦ C, and $2700 per kilogram of hydrogen (kg H2) in addition to energy-
allowing for larger quantities to be stored in a smaller footprint [1]. hungry compression procedures eating up 0.5–1.0 kWh/kg H2. With
However, the energy cost of liquefaction is substantial, requiring its higher energy density, liquid hydrogen (LH2) storage pays for high
approximately 30–40 % of the hydrogen’s total energy content [2]. CAPEX ($1.5–2.0/kg H2) for cryogenic chilling to − 253 ◦ C and results in
Additionally, maintaining cryogenic conditions requires continuous daily boil-off losses of 0.2–0.5 %). With CAPEX as low as $0.15–0.60/kg
refrigeration, adding to operational expenses [3]. A detailed cost com­ H2, underground storage in salt caverns is a low-cost choice for large-
parison of LH2 storage is provided in Table 8, which outlines the CAPEX scale use; its practicality is geographically constrained. Apart from 25
(1800–4500/kgH2),OPEX (45–110/kg H2/yr), and boil-off losses to 50 % energy losses, chemical carriers as ammonia and liquid organic
(0.1–0.5 %) for small- and large-scale cryogenic tanks. The primary hydrogen carriers (LOHCs) contribute additional synthesis and recon­
barrier to widespread adoption of LH2 storage is the high energy cost of version expenditures ($1.0–1.8/kg H2 and $0.75–2.50/kg H2, respec­
liquefaction and boil-off losses, making it more viable for long-distance tively), which enable transportation of hydrogen using current
transport and large-scale hydrogen hubs rather than small-scale appli­ infrastructure. Energy losses also vary by method: LH2 and chemical
cations [1]. carriers have 25–50 % losses from boil-off or inefficiencies in recon­
For large-scale seasonal and long-term hydrogen storage, under­ version; compressed gas systems lose 10–15 % of stored energy. These
ground geological formations such as salt caverns, depleted gas fields, trade-offs highlight the need of matching storage solutions to targeted
and aquifers offer cost-effective solutions [1]. These storage methods applications, such as short-term mobility (compressed gas), long-
have the advantage of low operational costs and large capacity, making distance transportation (LH2), or seasonal storage (salt caverns).
them particularly well-suited for industrial applications and grid
balancing [2]. 3.1.3. CAPEX, OPEX, and feedstock costs
Table 9 summarizes the economic and technical parameters of un­ Capital investment in hydrogen production facilities includes elec­
derground hydrogen storage, including CAPEX (0.15–1.20/kgH2), trolyzer or SMR unit costs, ancillary equipment, site preparation, and
OPEX (0.02–0.18/kg H2/yr), and storage capacities ranging from 10,000 grid or pipeline connections [1]. Electrolysis-based production incurs
to 1,000,000 tons. Notably, salt caverns exhibit the lowest costs (CAPEX: higher CAPEX because of the relatively early-stage maturity of
$0.15–0.60/kg H2) and high cycle efficiency (75–95 %), reinforcing large-scale electrolyzer technologies [2]. Alkaline and proton exchange
their suitability for seasonal energy storage. However, these methods membrane (PEM) electrolyzers currently dominate the market, with
require extensive geological assessments, regulatory approvals, and PEM systems being more expensive but offering greater efficiency and
long-term monitoring to prevent leakage and contamination risks [1]. flexibility in intermittent renewable energy scenarios [3]. In contrast,
Chemical storage methods, such as ammonia (NH3), liquid organic blue and gray hydrogen CAPEX primarily depends on the scale of SMR
hydrogen carriers (LOHCs), and metal hydrides, enable hydrogen to be units and, in the case of blue hydrogen, the integration of CCS
stored at ambient pressure and temperature, reducing the need for
expensive high-pressure tanks or cryogenic facilities [1]. However, these
methods involve additional energy and conversion costs associated with Table 10
Other hydrogen storage costs [$/Kg].

Table 8 Storage Cost Storage Cost Synthesis Efficiency

Type ($/kg H2) ($/kg H2/yr) Reconversion Cost Loss (%)
LH2 storage costs [$/Kg].
($/kg H2)
Storage Type CAPEX ($/kg OPEX ($/kg H2/ Boil-Off Loss
Ammonia 1.2–1.80 0.35–0.80 0.80–1.70 25–40
H2) yr) (%)
(NH3)
Small-scale LH2 tank 2500–4500 55–110 0.3–0.5 LOHCs 1.5–2.2 0.55–1.10 1.20–2.50 30–45
Large-scale cryogenic 1800–3800 45–85 0.1–0.3 Metal 2.2–3.5 0.90–1.80 1.70–3.20 35–50
tank hydrides

Source: Calculations and Assumptions developed by author Source: Calculations and Assumptions developed by author

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Table 11 Table 13
Cost and performance of hydrogen storage system. OPEX for different Hydrogen Technologies and different Plant Sizes.
Storage Method CAPEX OPEX ($/kg Energy Ideal Use Production OPEX (1 MW) OPEX (10 MW) OPEX (100 MW)
($/kg H2) H2/yr) Loss (%) Method ($/kg H2) ($/kg H2) ($/kg)

Compressed gas 1200–2700 9–18 10–15 Short tem mobile Green hydrogen 0.04–0.09 0.03–0.07 0.02–0.06
(700 bar) applications Blue hydrogen 0.07–0.12 0.06–0.10 0.05–0.09
Liquid 1800–3800 45–85 25–30 Long distance Gray hydrogen 0.06–0.10 0.05–0.09 0.04–0.08
hydrogen transport
Salt caverns 0.15–0.60 0.02–0.07 5–10 Seasonal/large Source: Calculations and Assumptions developed by author
scale storage
Ammonia 1.0–1.8 0.35–0.80 25–40 International procurement and carbon management make up the largest portions of
trade
OPEX [5]. CCS efficiency plays a critical role, as systems that achieve
LOHCs 1.2–1.8 0.55–1.10 30–45 Medium term
centralized higher carbon capture rates require more energy and larger capital in­
storage vestments [6]. The operational costs for carbon sequestration infra­
Metal hydrides 2.2–3.5 0.90 1.80 35–50 Niche structure—including compression, transport, and long-term
applications
monitoring—add further complexity to the financial equation [7]. Gray
Source: Calculations and Assumptions developed by author hydrogen OPEX is closely tied to natural gas prices, and its economic
feasibility fluctuates with global methane markets [12]. Maintenance
technologies [4]. Table 12 quantifies these differences, showing that and operational costs remain relatively low, but environmental concerns
green hydrogen CAPEX ranges from 1500 to 2500/kW for 1 MW plants and the increasing implementation of carbon taxes could push OPEX
to 800–1500/kW for 100 MW systems, while blue hydrogen CAPEX upwards in the coming years [13].
decreases from 900 to 1500/kW (1 MW) to 700–1000/kW (100 MW), Feedstock costs constitute the largest variable cost component in
and gray hydrogen remains the lowest at $500–800/kW for large-scale hydrogen production [1]. Green hydrogen’s primary feedstock is elec­
plants [5]. Green hydrogen CAPEX includes the cost of electrolyzer tricity, and its cost structure is highly dependent on the availability of
stacks, balance of plant (BOP) components such as cooling systems, low-cost renewable power [2]. Table 14 details the feedstock cost ranges
rectifiers, water purification, and hydrogen compression, as well as the and sensitivities: green hydrogen requires 1.50–3.00/kgH2 (highly
integration of renewable electricity sources [1]. Costs can be signifi­ sensitive to electricity price volatility), blue hydrogen 0.90–1.80/kg H2
cantly reduced through economies of scale, with larger 100 MW in­ (medium sensitivity to natural gas and carbon costs), and gray hydrogen
stallations costing up to 40 % less per kW compared to 1 MW units [2]. $0.80–1.50/kg H2 (low sensitivity to natural gas prices). Blue and gray
Blue hydrogen CAPEX includes conventional SMR units, but CCS tech­ hydrogen depend on natural gas as their main feedstock [1]. While
nology can add between 20 and 40 % to the capital cost [3]. CCS natural gas prices have historically been more predictable than elec­
infrastructure requires additional pipelines for CO2 transport and per­ tricity prices, geopolitical factors, supply chain disruptions, and growing
manent geological sequestration sites, contributing to increase CAPEX, demand for liquefied natural gas (LNG) exports have led to increased
particularly in regions without established storage infrastructure [4]. volatility in recent years [2]. The introduction of carbon pricing schemes
Gray hydrogen remains the lowest in CAPEX, as existing refinery and also has a direct impact on feedstock costs, particularly for blue
industrial hydrogen production facilities can be leveraged with minimal hydrogen, which must account for the added cost of carbon capture [3].
modifications [5]. However, regulatory shifts introducing carbon pric­ Fig. 1 illustrates the distribution of cost components—production,
ing mechanisms could erode its cost advantage over time [6]. transportation, and storage costs—as a percentage of total costs across
OPEX includes routine maintenance, labor, energy consumption, hydrogen production scales of 1 MW, 10 MW, and 100 MW [4]. It is
and, in the case of blue hydrogen, carbon capture and sequestration evident that production costs dominate the overall cost structure,
expenses [1]. Green hydrogen benefits from relatively low maintenance consistently accounting for the largest share across all scales, approxi­
costs due to the simplicity of electrolyzer units, but electricity costs are a mately 90 % [5]. Transportation costs contribute a moderate share,
dominant factor in determining its long-term viability [2]. Electricity increasing slightly with scale but remaining under 10 % of the total [6].
costs for green hydrogen production vary significantly depending on Storage costs, while the smallest component, exhibit a marginal increase
renewable energy availability [1]. A large share of production costs as plant capacity scales up, and yet remain below 5 % of the total costs
stems from electricity input, with some estimates suggesting that elec­ [7]. This cost breakdown underscores the critical role of production
tricity can account for 50–70 % of total OPEX [2]. Table 13 quantifies efficiency in reducing overall hydrogen costs, especially for larger-scale
these operational expenses, showing that green hydrogen OPEX ranges projects [1]. The relatively stable percentage distribution across scales
from 0.04 to 0.09/kgH2 for 1 MW plants to 0.02–0.06/kg H2 for 100 MW highlights the importance of optimizing production technologies, as the
systems, reflecting economies of scale [3]. Ensuring a steady supply of transportation and storage components contribute less significantly to
low-cost renewable electricity is key to reducing green hydrogen costs. cost variations [2]. Larger plants benefit from economies of scale, as
Water consumption is another minor but relevant OPEX component, indicated by the minimal change in the percentage cost shares, rein­
with electrolysis requiring approximately 9 L of purified water per ki­ forcing the potential for cost reductions in high-capacity hydrogen
logram of hydrogen produced [4]. For blue hydrogen, natural gas production [3].

Table 12
CAPEX for different Hydrogen Technologies and different Plant Sizes.
Table 14
Production Method CAPEX (1 MW) CAPEX (10 MW) CAPEX (100
Feedstock costs [$/KgH2].
($/kW) ($/kW) MW) ($/kW)
Production Feedstock Cost ($/kg Sensitivity to Market Prices (%)
Green hydrogen 1500–2500 1200–1700 800 - 1500
Method H2)
(electrolysis)
Blue hydrogen (SMR 900 - 1500 800 - 1200 700 - 1000 Green hydrogen 1.50–3.00 High (electricity price variability)
+ CCS) Blue hydrogen 0.90–1.80 Medium (natural gas & carbon
Gray hydrogen 700 - 1000 600–900 500–800 costs)
(SMR) Gray hydrogen 0.80–1.50 Low (natural gas prices)

Source: Calculations and Assumptions developed by author Source: Calculations and Assumptions developed by author

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The following values, as detailed in Table 15, represent fact-based

estimates derived from published reports and studies. Green hydrogen
remains the most expensive production pathway due to high CAPEX and
energy consumption [1]. While cost reductions in electrolyzers and
renewable energy are expected to drive LCOH down over time, current
estimates suggest that green hydrogen requires significant cost re­
ductions to reach parity with blue or gray hydrogen [2]. Blue hydrogen,
positioned as a transitional technology, provides a cost-effective alter­
native with reduced emissions, though its long-term viability is contin­
gent on the evolution of CCS costs and carbon pricing policies [3]. Gray
hydrogen, while economically attractive today, faces increasing regu­
latory pressure and potential carbon taxation that could shift its cost
advantage in the coming years [4].

3.2. Financial analysis of hydrogen production and investment

Fig. 1. Cost Share for different Plan Sizes [%]. considerations

3.1.4. Levelized cost of hydrogen 3.2.1. Break-even analysis and profitability metrics
Capital expenditure (CAPEX) is a dominant cost component in Profitability in hydrogen production is fundamentally tied to the
hydrogen production, particularly for green hydrogen, where electro­ market price of hydrogen relative to production costs [1]. The
lyzer costs can range between $800–$1700/kW depending on system break-even hydrogen price is defined as the point at which revenue from
scale, efficiency, and technological maturity [1]. For comparison, blue hydrogen sales covers total production costs, including CAPEX recovery,
hydrogen CAPEX values typically fall between $1000–$1200/kW, while operational expenses, and feedstock expenditures [2]. If the market
gray hydrogen, benefiting from conventional SMR infrastructure, re­ price of hydrogen remains below the LCOH, projects will operate at a
mains the least capital-intensive option at $800–$1000/kW [2]. Elec­ financial loss, making them unviable without external policy in­
trolyzer costs for green hydrogen have been declining due to advances in terventions [3]. Conversely, projects that can sustain hydrogen prices
material science, improved manufacturing processes, and increased above LCOH will generate positive cash flows and become attractive for
production scale, but remain a significant cost barrier compared to investors [4].
gas-based hydrogen pathways [3]. The operational expenditure (OPEX) Fig. 2 illustrates the profitability trends of green, blue, and gray
varies widely across production technologies [4]. Green hydrogen OPEX hydrogen, which exhibit marked differences due to their distinct cost
is dominated by electricity costs, which can constitute up to 70 % of total structures [5]. Green hydrogen, characterized by high CAPEX and sig­
production costs, making energy price fluctuations a major determinant nificant electricity consumption, requires a market price above $5.50–
of LCOH [5]. The efficiency of electrolyzers, currently ranging from 55 $7.00 per kg to generate consistent returns [2]. Without cost reductions
% to 70 %, influences the amount of electricity required per kilogram of in electrolyzer manufacturing and renewable electricity procurement,
hydrogen, with lower efficiencies translating into higher production green hydrogen remains financially constrained in the current market
costs [6]. Blue hydrogen OPEX includes additional costs for carbon [3]. Blue hydrogen, leveraging lower CAPEX and existing natural gas
capture, compression, and transport, which can add $0.50–$1.00/kg to infrastructure, achieves break-even at approximately $3.50–$4.00 per
the overall production cost [7]. Gray hydrogen, lacking carbon con­ kg, positioning it as a transitional solution in the low-carbon hydrogen
straints, maintains the lowest operational expenses, primarily driven by landscape [4]. Gray hydrogen, with its reliance on mature SMR tech­
natural gas prices, which remain subject to geopolitical factors and nology, remains cost-competitive at $2.00–$3.00 per kg, though its
regional supply-demand dynamics [12]. Feedstock costs play a crucial economic future is threatened by the implementation of carbon pricing
role in determining LCOH across all production pathways [13]. For mechanisms [5]. This profitability analysis underscores the structural
green hydrogen, electricity prices dictate production feasibility, with cost disadvantage of green hydrogen compared to fossil-derived alter­
renewable energy sources such as solar and wind providing the natives [6]. While future cost declines in electrolyzer technology and
lowest-cost option [14]. Studies indicate that a renewable electricity renewable electricity generation could shift this balance, the near-term
price below $20–$30/MWh is necessary for green hydrogen to become economic case for green hydrogen remains weak unless policy frame­
cost-competitive with fossil-based alternatives [15]. In contrast, blue works provide sufficient incentives or penalties to alter market dynamics
and gray hydrogen rely on natural gas prices, typically ranging between [7].
$6–$10/MMBtu, which significantly impact overall production costs If we focus for a moment on green hydrogen, there are some
[16]. The presence of carbon pricing mechanisms could further alter the important considerations. As shown in Fig. 3, the profitability of green
economic landscape, making gray hydrogen less attractive in jurisdic­ hydrogen at varying electricity costs highlights the critical role that
tions enforcing stringent emission reduction policies [17]. Capacity electricity prices play in determining the economic viability of green
factor and system efficiency directly affect LCOH by influencing the hydrogen production [1]. As electricity cost directly influences the
annual hydrogen output [29]. Higher capacity factors reduce unit pro­ Levelized Cost of Hydrogen (LCOH), its impact cascades through the
duction costs by spreading capital and operational expenses over a
greater output volume [18]. Green hydrogen systems typically operate Table 15
at lower capacity factors due to the intermittent nature of renewable Model estimations.
energy sources, whereas blue and gray hydrogen benefit from contin­ Parameter Green H2 Blue H2 (SMR + Gray H2
uous operation, resulting in higher annual production and lower LCOH (Electrolysis) CCS) (SMR)
values [19]. Financing costs, represented in the CRF, further impact CAPEX ($/kW) 1,7 1,1 900
hydrogen economics [20]. A higher discount rate increases the effective OPEX ($/kg H2) 0.05–0.09 0.07–0.12 0.06–0.10
cost of capital, raising LCOH, while longer project lifetimes help amor­ Feedstock cost ($/kg 1.50–3.00 0.90–1.80 0.80–1.50
H2)
tize CAPEX over an extended period, reducing annualized costs [21].
Efficiency (%) 60–70 70–80 75–85
Policymakers and investors assessing hydrogen projects must carefully LCOH ($/kg H2) 3.50–6.00 2.00–3.50 1.50–2.50
evaluate financing structures to optimize project economics [22].
Source: Calculations and Assumptions developed by author

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Fig. 2. Profitability of hydrogen vs hydrogen selling price.

Fig. 3. Profitability of Green Hydrogen Vs Hydrogen Selling Price for different Electricity prices. (For interpretation of the references to colour in this figure legend,
the reader is referred to the Web version of this article.)

entire economic structure of hydrogen production [2]. At low electricity hydrogen to become a competitive alternative to blue or gray hydrogen,
prices, such as $20/MWh, the profitability curve for green hydrogen substantial reductions in electricity costs are necessary [7]. Policy
rises significantly, with break-even points achieved at lower hydrogen mechanisms such as subsidies for renewable energy, direct financial
selling prices [3]. This scenario is achievable in regions with abundant support for electrolyzer deployment, and market reforms aimed at
renewable energy resources, such as areas with high solar or wind ca­ reducing electricity costs can significantly alter this dynamic [12]. For
pacity, where renewable electricity prices have fallen below $30/MWh instance, the Inflation Reduction Act (IRA) in the United States provides
[4]. Conversely, at higher electricity prices like $60/MWh, the profit­ tax incentives that can effectively reduce the cost of electricity used in
ability curve shifts upward, making green hydrogen economically viable electrolysis, thereby enhancing green hydrogen’s competitiveness [13].
only at a significantly higher hydrogen selling price, typically above Moreover, the chart illustrates the steep incline of the profitability curve
$6/kg [5]. This underscores the sensitivity of green hydrogen’s financial at lower electricity costs [14]. This suggests that even minor reductions
feasibility to energy costs, given that electricity contributes to nearly 70 in electricity price can have a disproportionately large impact on prof­
% of its production cost [6]. The results demonstrate that for green itability, making it a key leverage point for policymakers and investors

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aiming to accelerate the green hydrogen transition [15]. The sensitivity regulatory uncertainty related to carbon pricing [3]. These results
analysis underscores that without affordable renewable energy, green reinforce the notion that green hydrogen remains a long-term invest­
hydrogen remains cost-prohibitive in many markets [16]. However, as ment requiring substantial cost declines in electrolysis and renewable
renewable energy costs continue to decline globally, green hydrogen electricity generation to become financially attractive [4]. Meanwhile,
could soon reach parity with blue and gray hydrogen, especially in re­ blue hydrogen is positioned as the most practical option in the interim,
gions with favorable renewable energy conditions [17]. This insight balancing cost considerations with emissions reductions [5].
highlights the importance of strategic investments in renewable infra­ A sensitivity analysis was conducted to assess the impact of key cost
structure as a complementary strategy for scaling green hydrogen pro­ drivers on overall project profitability [1]. As shown in Fig. 6, this
duction [29]. analysis quantifies the influence of hydrogen price fluctuations, CAPEX
Net Present Value (NPV) is a fundamental metric for assessing reductions, and feedstock price variability on NPV and IRR [2]. The
hydrogen investment feasibility, quantifying the total value a project results show that hydrogen price is the dominant determinant of project
generates over its lifespan after accounting for capital investment, viability, with a $1 per kg increase in selling price improving NPV by
operating costs, and discounting future cash flows [1]. A positive NPV over $10 million for a 10 MW plant [1]. CAPEX reductions, while
indicates that a hydrogen facility will produce sufficient revenue to beneficial, only marginally improve LCOH, with a 30 % decline in
justify its initial capital expenditure, whereas a negative NPV suggests electrolyzer costs translating to an approximate $1 per kg decrease in
that the project will fail to recover its costs over time [2]. Fig. 4: Net production cost [2]. Feedstock costs, particularly electricity for green
Present Value Vs Hydrogen Price the NPV analysis highlights the hydrogen and natural gas for blue and gray hydrogen, introduce addi­
financial challenge of green hydrogen, which remains unprofitable tional risk, reinforcing the importance of securing long-term energy
across most market price scenarios [1]. Even at a market price of $6 per procurement contracts [3]. This analysis highlights the financial risks
kg, green hydrogen projects struggle to recover initial capital in­ associated with hydrogen investments [30] and underscores the need for
vestments, reinforcing the need for targeted cost reductions or direct market stabilization measures, policy interventions, and continued
financial incentives [2]. Blue hydrogen presents a more favorable in­ technological improvements to enhance competitiveness [4].
vestment case, with NPV turning positive at approximately $3.50 per kg
[3]. Gray hydrogen maintains strong NPV values at price points above 3.2.2. Scalability impacts
$2.50 per kg but remains vulnerable to future regulatory constraints on Fig. 7 demonstrates how the cost per kilogram of hydrogen decreases
carbon emissions [4]. These results indicate that, under current market as plant size increases [1]. Green hydrogen shows the largest cost
conditions, blue hydrogen presents the most viable investment pathway reduction due to improvements in electrolyzer efficiency and economies
in the near term, while green hydrogen requires additional of scale in renewable energy procurement [2]. Blue and gray hydrogen
cost-reduction strategies or policy support to improve financial attrac­ also exhibit cost reductions, but the rate of improvement is less pro­
tiveness [5]. nounced due to the relatively lower capital intensity of SMR-based
The Internal Rate of Return (IRR) provides a measure of the expected pathways [3]. The significant drop in LCOH for green hydrogen at
annual return on capital investment [1]. Hydrogen projects must ach­ higher scales suggests that large-scale electrolysis is a necessary condi­
ieve an IRR above the minimum acceptable rate for energy infrastruc­ tion for achieving competitive costs against fossil-based alternatives [4,
ture investments, typically in the range of 8–12 %, to attract investor 31].
interest [2]. Fig. 5 confirms that green hydrogen struggles to meet in­ Capital expenditure per megawatt is a key cost driver in hydrogen
vestment return thresholds under current cost structures, requiring production [1]. As demonstrated in Fig. 8, larger plants reduce unit costs
market prices above $7 per kg to achieve IRRs above 10 % [1]. Blue significantly, with green hydrogen showing the steepest decline [2].
hydrogen, benefiting from lower capital costs, achieves competitive This is attributed to cost reductions in electrolyzer stack production,
IRRs at price points between $4 and $5 per kg, making it a more balance-of-plant integration, and site development costs [3]. Blue and
attractive short-term investment [2]. Gray hydrogen maintains robust gray hydrogen also experience CAPEX reductions, though to a lesser
IRR values at prices as low as $2 per kg but is increasingly subject to extent, as they primarily rely on well-established SMR infrastructure [4].

Fig. 4. Net present value vs hydrogen price.

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Fig. 5. IRR vs hydrogen price.

3.3. Policy, incentives, and the financial viability of hydrogen

3.3.1. Impact of carbon pricing on hydrogen costs

The Inflation Reduction Act’s Section 45V Clean Hydrogen Produc­
tion Tax Credit offers a substantial reduction in hydrogen costs [17].
Green hydrogen projects can receive up to $3.00/kg in tax credits,
effectively lowering their levelized cost of hydrogen (LCOH) to a more
competitive range [29]. Blue hydrogen is eligible for up to $1.00/kg,
partially offsetting the costs associated with carbon capture [18]. These
tax credits are structured to favor low-emission hydrogen, effectively
penalizing carbon-intensive pathways such as gray hydrogen, which
remains ineligible for any financial support [19]. The effects of these
policies on LCOH are illustrated in Fig. 10 [20].
As shown in Fig. 10, the impact of carbon pricing and the Inflation
Reduction Act (IRA) tax credits on the levelized cost of hydrogen
Fig. 6. Sensitivity analysis: Key cost drivers. (LCOH) for gray hydrogen (SMR), blue hydrogen (SMR with CCS), and
green hydrogen (electrolysis) [1]. This analysis highlights the role of
The results highlight the necessity of scaling up green hydrogen pro­ carbon pricing and policy incentives in shifting cost structures and
duction to achieve cost parity with fossil-derived alternatives [5]. competitiveness across hydrogen production pathways [2]. Gray
As shown in Fig. 9, NPV trends confirm that larger plants achieve hydrogen, produced without carbon capture, sees a direct and propor­
greater financial viability, with blue and gray hydrogen projects tional increase in LCOH as carbon pricing rises [3]. This cost escalation
reaching profitability more quickly than green hydrogen [1]. While reflects the inherent emissions intensity of gray hydrogen, which gen­
smaller-scale green hydrogen projects struggle with negative NPVs due erates approximately 9–10 kg of CO2 per kg of hydrogen [4]. With no tax
to high initial capital costs, larger projects begin to approach break-even credits available, gray hydrogen becomes significantly less competitive
pricing, suggesting that investments in large-scale electrolysis could at carbon prices exceeding $100/ton CO2 [5]. At a carbon price of
become financially feasible with continued reductions in renewable $200/ton CO2, the LCOH for gray hydrogen reaches nearly $4/kg,
electricity costs and electrolyzer efficiency improvements [2]. This emphasizing its declining economic viability under stringent carbon
highlights the importance of strategic scaling when planning hydrogen pricing policies [6]. Blue hydrogen benefits from partial decarbon­
infrastructure investments [3]. The scalability analysis underscores the ization due to carbon capture and storage (CCS), which reduces direct
need for large-scale deployment strategies to unlock the full economic emissions by up to 90 % [7]. Consequently, its LCOH increases more
potential of hydrogen [4]. Smaller projects face significant cost disad­ gradually with rising carbon prices [12]. While blue hydrogen achieves
vantages, particularly for green hydrogen, but larger installations lower costs than gray hydrogen at all carbon price levels, the additional
benefit from capital efficiency and declining LCOH [5]. These findings costs associated with CCS infrastructure and operation prevent it from
reinforce the argument for policy support and investment incentives achieving the cost stability of green hydrogen [13].
aimed at accelerating the deployment of large-scale hydrogen produc­ At a carbon price of $200/ton CO2, blue hydrogen’s LCOH ap­
tion facilities [32], particularly for green hydrogen, which remains proaches $3/kg, maintaining a competitive edge but signaling the
capital-intensive yet highly scalable with the right financial and tech­ growing pressure on blue hydrogen in markets with high carbon taxa­
nological advancements [6]. This analysis provides the foundation for tion [14]. Green hydrogen, produced through electrolysis powered by
the next section, where we will explore the impact of carbon pricing on renewable energy, achieves the lowest LCOH under the IRA tax credits,
hydrogen production pathways and how regulatory frameworks influ­ with costs remaining below $2/kg across all carbon pricing scenarios
ence investment decisions [7]. [15]. The absence of direct carbon emissions insulates green hydrogen

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Fig. 7. LCOH vs plant size.

Fig. 8. Capex vs plant size.

from carbon price increases, and the $3/kg production tax credit under hydrogen [20]. Without such measures, the cost disparity between these
the IRA further enhances its competitiveness [16]. This flat trend technologies could impede the broader adoption of hydrogen as a clean
highlights the transformative role of incentives in making green energy vector [21]. The data also highlights the importance of aligning
hydrogen a financially viable solution, particularly in jurisdictions with carbon pricing strategies with technology-specific incentives to ensure
abundant renewable energy resources [17]. The chart underscores that an equitable transition that prioritizes environmental and economic
carbon pricing significantly penalizes high-emission technologies while outcomes [22].
rewarding low-carbon alternatives [29]. Gray hydrogen’s financial
viability diminishes rapidly as carbon costs rise, while green hydrogen’s 3.3.2. Investment trends in hydrogen technologies
competitiveness improves, bolstered by policy incentives like the IRA Investment trends in hydrogen infrastructure have shifted in
[18]. Blue hydrogen occupies an intermediate position, reliant on both response to these financial mechanisms [1]. Historical data from 2010 to
carbon pricing mechanisms and CCS subsidies to remain cost-effective 2025 reveals that gray hydrogen investments are in decline, as investors
[19]. For stakeholders, this analysis reveals that sustained policy sup­ pivot toward projects eligible for policy-driven incentives [2]. Green
port, such as carbon pricing and production tax credits, is critical for hydrogen has emerged as the dominant recipient of new capital,
accelerating the transition from gray and blue hydrogen to green particularly in regions with strong renewable energy policies and

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Fig. 9. NPV vs plant size.

Fig. 10. Impact of carbon pricing on hydrogen LCOH

low-cost electricity [3]. Blue hydrogen maintains a role in the transition hydrogen investment exhibits steady growth but at a slower pace
but is increasingly viewed as a temporary solution rather than a compared to green hydrogen [14]. This trend reflects the transitional
long-term competitor to fully renewable hydrogen [4]. Fig. 8 illustrates role of blue hydrogen in decarbonizing industrial processes [15]. In­
these shifts in investment patterns, demonstrating the accelerating vestments in blue hydrogen are sustained by policies supporting carbon
momentum behind low-carbon hydrogen technologies [5]. capture and storage (CCS), but the technology’s reliance on natural gas
Fig. 11 highlights the trajectory of investments in green, blue, and and concerns about methane leakage temper its growth [16]. By 2035,
gray hydrogen technologies under the influence of policy measures such blue hydrogen investments reach approximately $100 billion, indicating
as the Inflation Reduction Act (IRA) [6]. Green hydrogen investments continued interest but a clear preference for long-term green hydrogen
dominate the trend, with exponential growth projected from 2020 to deployment [17]. Conversely, investments in gray hydrogen experience
2035 [7]. This upward trajectory reflects the alignment of global a sharp decline, driven by rising carbon costs and regulatory pressures to
financial commitments with decarbonization goals, driven by policy phase out high-emission technologies [29].
incentives, falling renewable energy costs, and advancements in elec­ By 2030, gray hydrogen investments become negligible, reflecting
trolyzer technology [12]. By 2035, cumulative green hydrogen in­ the industry’s shift toward cleaner alternatives [18]. This decline
vestments surpass $250 billion, underscoring the prioritization of this highlights the impact of carbon pricing mechanisms and corporate
zero-emission pathway in achieving net-zero targets [13]. Blue sustainability goals, which discourage reliance on fossil-based hydrogen

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Fig. 11. Hydrogen investment trends under IRA policy support.

without emissions mitigation [19]. The data indicates that policy proactive policy measures to accelerate the energy transition [25].
frameworks, such as the IRA, play a pivotal role in shaping investment
trends [20]. Governments offering substantial subsidies for electrolyzer 3.3.3. Net present value (NPV) sensitivity to carbon pricing and IRA
deployment, tax credits for carbon capture, and penalties for incentives
high-emission technologies are effectively steering capital flows away Net Present Value (NPV) analysis further highlights the role of policy
from gray hydrogen and toward green and blue pathways [21]. This in determining project profitability [1]. Under carbon pricing scenarios
transition not only accelerates the adoption of low-carbon hydrogen but above $50 per ton CO2, gray hydrogen rapidly becomes unprofitable, as
also signals a broader industry commitment to sustainability and its operating costs rise beyond sustainable levels [2]. Blue hydrogen
long-term financial resilience [22]. remains viable at moderate carbon prices but loses competitiveness at
For stakeholders, the chart underscores the need to align investment extreme levels above $200 per ton CO2 [3]. Green hydrogen, despite its
strategies with emerging market dynamics and policy incentives [23]. high initial capital costs, benefits significantly from tax incentives and
Green hydrogen, with its scalability and emissions-free profile, emerges remains resilient to carbon pricing fluctuations [4]. Fig. 12 provides a
as the most attractive long-term option [33]. However, blue hydrogen detailed view of NPV trends across different hydrogen technologies
retains a critical role in near-term decarbonization, particularly in re­ under various carbon pricing conditions, illustrating the threshold at
gions with existing natural gas infrastructure and CCS capacity [24]. The which policy-driven cost reductions enable clean hydrogen to become
decline in gray hydrogen investments further reinforces the necessity of self-sustaining [5].

Fig. 12. NPV sensitivity to Carbon Pricing and IRA incentives.

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Fig. 12 compares the profitability of hydrogen pathways under carbon electricity costs exceeding $80/MWh push LCOH beyond $6/kg,
pricing and IRA incentives affect the profitability of different hydrogen creating economic barriers [4]. Fig. 13 depicts the interaction between
production pathways [6]. Each pathway reacts uniquely to these electricity price and hydrogen cost reinforcing the need for targeted
external factors, showcasing the diverse challenges and opportunities renewable energy incentives alongside hydrogen-specific tax credits [5].
within the hydrogen economy [7]. Green hydrogen’s profitability re­ As shown in Fig. 13, there is a strong correlation between electricity
mains constant across all carbon price scenarios [12]. This stability re­ pricing and the viability of green hydrogen [6]. The steep increase in
flects its zero-carbon production process, which exempts it from any LCOH at higher electricity rates suggests that regions with expensive
carbon pricing penalties [13]. The plateau in Net Present Value (NPV) grid electricity will struggle to establish competitive green hydrogen
indicates that its financial viability is largely independent of carbon production [7]. This underscores the importance of power purchase
taxation [14]. Instead, green hydrogen’s competitiveness is tied to agreements (PPAs) with renewable energy developers, as well as
robust policy incentives like the $3/kg production tax credit offered ongoing investments in solar, wind, and hydroelectric infrastructure to
under the Inflation Reduction Act (IRA) [15]. These incentives effec­ ensure stable, low-cost electricity supplies for electrolysis [12].
tively counterbalance the high production costs associated with
renewable electricity and capital-intensive electrolyzers [16]. However, 4. Conclusion
this stability also underscores green hydrogen’s dependence on sus­
tained policy support [17]. Without these incentives, the technology’s This study provides a comprehensive techno-economic evaluation of
high upfront and operational costs could limit its deployment, especially hydrogen production, analyzing cost structures, investment feasibility,
in regions lacking low-cost renewable energy [29]. In contrast, blue infrastructure challenges, and policy-driven market dynamics. The re­
hydrogen shows a gradual decline in NPV as carbon prices rise [18]. This sults demonstrate that gray hydrogen remains the most cost-effective
trend reflects its reliance on carbon capture and storage (CCS) to miti­ option today ($1.50–$2.50/kg) but is increasingly constrained by car­
gate emissions from steam methane reforming (SMR) [19]. While CCS is bon pricing and regulatory pressures, making long-term adoption un­
an effective tool for reducing CO2 emissions, it does not achieve full certain [1]. Blue hydrogen ($2.00–$3.50/kg) presents a viable
decarbonization [20]. The residual emissions expose blue hydrogen to transitional pathway, but its cost-effectiveness is dependent on natural
increasing carbon price penalties as thresholds climb [21]. Despite this, gas prices, carbon capture efficiency [44], and policy incentives [2].
blue hydrogen remains competitive in scenarios with moderate carbon Green hydrogen ($3.50–$6.00/kg) remains the most expensive
pricing, particularly when supported by tax credits for carbon capture or pathway, but its competitiveness is improving due to declining renew­
lower natural gas prices [22]. However, its long-term financial viability able electricity costs, electrolyzer efficiency improvements, and policy
is contingent on the efficiency and scalability of CCS technologies, as mechanisms such as the Inflation Reduction Act (IRA), which provides
well as policy stability [23]. Abrupt changes in carbon pricing or re­ up to $3.00/kg in tax credits [3].
ductions in CCS subsidies could severely impact blue hydrogen’s market The study confirms that electricity costs are the primary driver of
position [33]. Gray hydrogen, being entirely fossil-based, exhibits a green hydrogen’s competitiveness, with renewable electricity prices
sharp decline in NPV with rising carbon prices [24]. Its lack of emission below $20–$30/MWh necessary for achieving cost parity with fossil-
mitigation measures leaves it fully exposed to carbon pricing mecha­ based hydrogen [4]. In regions with abundant renewable resources,
nisms, leading to significant financial penalties [25]. This rapid loss of green hydrogen production could reach $2.50–$3.50/kg by 2030,
profitability highlights gray hydrogen’s declining market viability as making it increasingly competitive [5]. Additionally, the DOE’s
decarbonization policies intensify [34]. The results signal that reliance Hydrogen Shot Initiative targets $1.00/kg green hydrogen by 2031, a
on gray hydrogen is increasingly untenable, both from an environmental goal that, while ambitious, could be attainable with further CAPEX re­
and financial perspective, making it a high-risk investment option in ductions, improvements in electrolyzer efficiency, and increased
regions adopting stringent carbon pricing frameworks [35]. The chart manufacturing scale [6].
reveals critical insights for stakeholders [36]. For investors, it highlights Infrastructure remains a major barrier to hydrogen deployment,
that while green hydrogen offers long-term financial stability, this de­ particularly for storage and transportation. The study highlights that
pends heavily on continued policy support and advancements in pipeline transport is the most cost-effective long-term solution, with
renewable energy cost reductions [37]. Blue hydrogen represents a repurposed natural gas pipelines reducing costs by up to 50–70 % [7].
viable transitional solution, but its market competitiveness is closely tied However, hydrogen embrittlement and compatibility with existing
to carbon pricing thresholds and CCS efficiency [38]. Meanwhile, gray infrastructure remain technical challenges. Liquefied hydrogen (LH2)
hydrogen’s profitability is rapidly eroding under rising carbon taxes, transport, though viable for long-distance trade, remains costly due to
emphasizing the urgency of transitioning to cleaner alternatives [39]. high energy losses (30–40 %), while ammonia and LOHCs provide
For policymakers, the analysis underscores the necessity of aligning alternative transport options but introduce reconversion costs of up to
carbon pricing mechanisms, subsidies, and renewable energy policies to $2.50/kg, limiting their efficiency in large-scale applications [12].
accelerate the shift toward a low-carbon hydrogen economy [40]. In The financial analysis indicates that scaling hydrogen production
conclusion, the analysis illustrates the pivotal role of carbon pricing and significantly reduces costs, with electrolyzer CAPEX expected to decline
policy incentives in shaping the hydrogen market [41]. While green and by 30–50 % as deployment scales beyond 100 MW [13]. The study finds
blue hydrogen pathways show potential for profitability under sup­ that investment is shifting toward green hydrogen, with over $250
portive conditions, gray hydrogen’s future is increasingly constrained by billion projected in global green hydrogen projects by 2035, surpassing
its unsustainable carbon footprint [42]. The findings reinforce the blue hydrogen’s projected $100 billion [14]. This shift is driven by
importance of targeted policy measures to drive investment into corporate decarbonization strategies [45], government-backed funding
low-carbon hydrogen technologies and achieve meaningful progress in mechanisms, and the need for long-term energy security [15].
global decarbonization efforts [43]. Policy mechanisms play a critical role in accelerating hydrogen
adoption, with the IRA’s 45 V tax credit reducing green hydrogen costs
3.3.4. Electricity costs and green hydrogen competitiveness by up to 50 %, significantly improving its competitiveness in U.S.
Electricity cost remains the most influential factor for green hydro­ markets [16]. Additionally, the study finds that carbon pricing mecha­
gen’s competitiveness [1]. Since electrolysis is inherently nisms exceeding $100/ton CO2 could make gray hydrogen uneconomi­
energy-intensive, its LCOH is directly tied to the price of renewable cal by 2030 [11], further incentivizing the transition to low-carbon
electricity [2]. In markets where electricity costs fall below $40/MWh, hydrogen pathways [17].
green hydrogen production costs drop below $4/kg, making it Overall, this study confirms that hydrogen’s long-term viability de­
competitive with subsidized blue hydrogen [3]. Conversely, high pends on continued cost reductions in production, storage, and

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Fig. 13. LCOH Vs Electricity Price for green hydrogen. (For interpretation of the references to colour in this figure legend, the reader is referred to the Web version of
this article.)

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requirements.
including coating, and hybrid natural gas hydrogen blending [12] Hydrogen Infrastructure: Understanding Costs in Hydrogen Networks. Report
strategies highlighting economic and technical challenges of hydrogen transportation,
3. The future researchers may explore AI/ML driven optimization for storage, and delivery systems.
[13] Profitability of Hydrogen Production. Detailed financial modeling of CAPEX,
hydrogen supply chains including predictive maintenance of elec­ OPEX, and feedstock costs influencing the economic feasibility of hydrogen
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[15] Global Hydrogen Investment Trends Under Policy Support. Tracks historical and
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[16] Understanding Costs in Hydrogen Infrastructure Networks. Report highlighting the
Declaration of competing interest economic and technical challenges of hydrogen transportation, storage, and
delivery systems.
[17] Hydrogen Pathways and Policy Frameworks. Analysis of the regulatory
The authors declare that they have no known competing financial environment influencing hydrogen market competitiveness, with a focus on
interests or personal relationships that could have appeared to influence Contracts for Difference (CfDs) and carbon pricing structures.
[18] LCOH Green Hydrogen Cost Optimization. Investigated key variables affecting
the work reported in this paper.
green hydrogen’s production cost, including electricity price volatility and
electrolyzer efficiency.
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