We have all read articles from enthusiastic environmentalists and climate-conscious political leaders promoting vastly increased hydrogen use. They claim that more hydrogen production and consumption – especially green hydrogen – is essential in order to reduce fossil fuel consumption, advancing the energy transition to net zero and addressing climate change.
Is hydrogen, grey or green, a technically and economically feasible replacement for fossil fuels such as gasoline and natural gas? How much of what we read is realistic? How much is enthusiastic fantasy?
Hydrogen enthusiasm
The main reasons for hydrogen enthusiasm are that it:
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- Produces no greenhouse gases (GHG) when burned for energy
- Is as versatile as natural gas and gasoline
- Offers much higher energy density than lithium-ion batteries
- Is the most common element in the universe
Some environmentalists and politicians downplay multiple cost issues that offset these advantages. These will dampen the enthusiasm and slow the adoption of various forms of hydrogen. We will explore the issues in this article.
Comparing hydrogen to gasoline at the pump
California has made significantly more effort than most states and countries to offer hydrogen as a low-carbon alternative to gasoline for automobiles. Nonetheless, it is hampered by a lack of reliable distribution infrastructure and continuing high hydrogen prices at fueling stations.
The middle line on the chart below shows the price at which hydrogen is competitive with gasoline as an automobile fuel. The California hydrogen price is now 3.5 times higher than the gasoline-equivalent price.
Figure 1 – Feature: Logistical woes and high pump prices stall California H2 market development, S&P Global
California’s much higher hydrogen price presents a major disincentive for the widespread adoption of hydrogen as a routine automobile fuel. The difference between the two fuels is even higher elsewhere.
Comparing hydrogen to gasoline on the road
The chart below shows how the price of hydrogen almost triples the cost of operating an automobile compared to gasoline.
Figure 2 – How does the cost of hydrogen stack up against gasoline? (Stillwater Associates Insights).
The limited selection of hydrogen automobiles is another deterrent. Gasoline-powered vehicles, electric vehicles (EVs), and hybrids tend to have lower purchase prices.
Comparing hydrogen to natural gas production costs
Hydrogen can be produced or manufactured through electrolysis, a process that separates water molecules into hydrogen and oxygen. The product is called green hydrogen when the required electricity is produced without creating GHG emissions. This table estimates the costs of producing green hydrogen.
The cost of producing natural gas, at about $0.14 to $0.28 per kg, is less than one-tenth the price of green hydrogen. Grey hydrogen, produced from natural gas, costs from $1.06 to $1.64 per kg, as shown in Figure 4.
Figure 3: Green Hydrogen: A Multibillion-Dollar Energy Boondoggle, Manhattan Institute.
The highest-cost component of green hydrogen production is the cost of electricity consumed by the electrolyzers (Line 4 in Figure 3). Because the cost of electricity is unlikely to decrease materially in the foreseeable future, green hydrogen is not likely to become competitive with natural gas or gasoline alternatives.
The much lower cost of natural gas and its higher energy density explain why it is so widely used and distributed while hydrogen is not.
Comparing the cost of various hydrogen production technologies
Figure 4 compares multiple alternatives for producing hydrogen, as calculated by the U.S. Department of Energy’s National Energy Technology Laboratory (NETL). Currently, the petrochemical industry consumes nearly all of the hydrogen produced as a feedstock.
Unsurprisingly, the hydrogen produced today uses the steam methane reforming approach because it is the cheapest, despite the GHG emissions associated with grey hydrogen.
Figure 4: Which hydrogen production method has the lowest cost? – Power Engineering.
Most of the higher-cost alternatives capture the GHG emissions using carbon capture and storage (CCS). It is doubtful that consumers are willing to pay for the cost of adding CCS to the cost of hydrogen. That reality will also inhibit the adoption of hydrogen as a fuel.
Comparing hydrogen to batteries
Figure 5 compares the weight of a vehicle powered by a fuel cell that produces electricity using hydrogen and its tank to one powered by lithium-ion battery.
Figure 5 – Fuel Cell and Battery Electric Vehicles Compared – H2Gen Innovations, Inc.
The chart illustrates that hydrogen offers a significant vehicle-weight advantage over even the best-performing lithium-ion batteries. The difference is due to the higher energy density of hydrogen.
Refuelling a hydrogen vehicle takes about the same time as a gasoline-powered one. Recharging lithium-ion batteries takes much longer.
Despite these hydrogen advantages, the cost of hydrogen and the lack of refuelling infrastructure mean electric and hybrid vehicle sales far exceed hydrogen sales.
Comparing hydrogen to fossil fuels
Those who remind us that hydrogen is the most common element in the universe skip over the critical fact that much of the easily accessible hydrogen on Earth exists in molecules bonded with other elements. A prominent example is water, where two hydrogen molecules are bonded to a single oxygen molecule.
Creating hydrogen requires breaking those molecular bonds. That breaking requires a production facility that consumes a lot of energy.
By comparison, no molecular bonds have to be broken for:
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- Natural gas or methane. It occurs naturally in mixtures with other molecules, such as ethane, propane, butane, carbon dioxide, and water. Natural gas must be separated from these molecules in a processing plant.
- It is produced in refineries from the many other molecules found in crude oil. Gasoline must be separated from naphthene, aromatic, asphaltene, and water molecules.
While refining natural gas or gasoline is not economically trivial, it is much cheaper because it requires less energy than producing hydrogen from water.
Comparing manufactured hydrogen to natural hydrogen
Until recently, the consensus among geologists was that the Earth’s crust did not contain elemental hydrogen. But the discovery of natural hydrogen seeping into a water well in Mali led to exploration activity looking for natural hydrogen on every continent.
Environmentalists are excited by the prospect of natural hydrogen because it qualifies as green hydrogen. At this point, how big a role natural hydrogen will play in future energy supplies is unclear. Estimates of natural hydrogen reserves vary widely because so few exploration wells have been drilled. The cost of producing, processing, and distributing this hydrogen is yet to be determined.
In the best case, natural hydrogen will be cheap and plentiful enough to address all the cost issues described here.
Achieving competitive green hydrogen
Figure 6 illustrates the cost reductions required to achieve cost parity between grey hydrogen, produced from natural gas, and green hydrogen, produced by electrolysis.
Figure 6 – Green hydrogen cost reduction, IRENA, 2020.
Achieving cost-competitive green hydrogen will require significant cost reductions, increased efficiency, and extended operating lifetimes for electrolyzers. The availability of these improvements is unknown, despite considerable investments being made.
Until cost reductions and infrastructure improvements are achieved, the widespread adoption of green hydrogen remains a fantasy, as the incremental cost that most consumers are willing to pay for environmental benefits is modest.
(Yogi Schulz, BIG Media Ltd., 2025)
