Context and Scale
Hydrogen generated via electrolysis using renewable energy (green hydrogen) has gained prominence as a potential strategy in decarbonizing hard-to-abate sectors of the economy, in which electrification is technically challenging or prohibitively expensive. Many governments have set policy targets and, in some cases, financial incentives for green hydrogen production, with the expectation that production costs will fall rapidly in the coming decades, providing low-cost carbon abatement opportunities across many sectors. Yet, many recent analyses do not consider the storage and distribution costs of delivering green hydrogen to different sectors or how these costs may vary across end uses. Here, we determined the carbon abatement costs (USD per ton of CO2 abated) of using green hydrogen across sectors of the U.S. economy. We base our calculations on current and future delivered prices, which we estimate taking into consideration how each end use will utilize storage and distribution infrastructure. We show that at current prices, green hydrogen is a prohibitively expensive abatement strategy across all end uses examined, with carbon abatement costs of $500–1,250/tCO2 in some cases exceeding the cost of direct air capture. Even if production costs reduce to $2/kgH2, carbon abatement opportunities at less than $250/tCO2 are limited to ammonia production. Without significant cost reductions in storage and distribution, future carbon abatement opportunities will remain limited to these niche applications, demonstrating the need for continued investment in other decarbonization strategies at earlier stages of development.
Summary
Green hydrogen has emerged as a potentially important pathway in decarbonizing the hard-to-abate sectors, including freight, dispatchable power, and industry. Many organizations predict that green hydrogen will become cost competitive with fossil fuels as production costs fall. However, most published green hydrogen cost estimates do not consider storage and distribution costs and how they vary across sectors. We estimate the carbon abatement cost of green hydrogen across major sectors in the United States, considering each sector’s storage and distribution requirements. At current delivered prices, green hydrogen is a prohibitively expensive abatement strategy, with carbon abatement costs of $500–1,250/tCO2 across sectors. If production costs reduce to $2/kgH2, low-cost carbon abatement opportunities will remain limited to sectors already using hydrogen (e.g., ammonia) unless storage and distribution costs decrease. Our findings suggest that green hydrogen’s potential is narrower than suggested, emphasizing the need for diverse technological options to decarbonize hard-to-abate sectors.
