EU hydrogen production costs and IRA impact on U.S. green hydrogen imports to EU 2023

Green hydrogen refers to hydrogen produced using renewable energy sources, while gray hydrogen is produced from natural gas and releases carbon emissions. In the EU, the cost of producing green hydrogen domestically was estimated to be between three and four U.S. dollars per kilogram of hydrogen. However, this is more expensive than the estimated costs of producing ammonia and methanol using gray hydrogen, which was estimated to cost between 1.40 and 2.20 U.S. dollars per kilogram for ammonia and 1.80 and 2.20 U.S. dollars per kilogram for methanol. In the U.S., the estimated cost of green hydrogen production is similar to the EU, ranging from three to four U.S. dollars per kilogram. Additionally, there is an estimated cost of 1.50 U.S. dollars per kilogram for transportation and cracking processes associated with U.S. hydrogen production. As such, when the U.S. green hydrogen is imported into the EU, the estimated cost increases to 4.50-5.50 U.S. dollars per kilogram. However, the U.S. Inflation Reduction Act (IRA) helps bridge this cost gap and reduces these costs to a range of 1.50 and 2.50 U.S. dollars per kilogram of hydrogen.