Renewable Energy

Could Green Hydrogen Be Cost-Effective by 2030?

Today for the green hydrogen sector is what 2008 was for electric vehicles.

When EVs first came out, I had plenty of friends, colleagues and readers tell me that EV sales wouldn’t amount to a hill of beans.

A base model could be had for $98,950. They were just too expensive.

But I said, “When EVs are made in volume, the price will come down dramatically.” And it has.

Now the same thing can be said for green hydrogen.

It’s expensive to produce. And it’s not cost-effective. But we haven’t reached the tipping point yet.

Green Hydrogen: Scaling It Up

In the green hydrogen sector, it’s still the first inning of a nine-inning ballgame.

Right now, green hydrogen costs between $3 and $6 per kilogram. In order to reach the economic tipping point for widespread adoption, producers need to pump it out for $2 per kilogram or less.

Volumes of electrolyzers and fuel cells are still tiny. And green hydrogen producers are still few and far between.

But that won’t be the case for long. There are no technical barriers to producing green hydrogen in large volumes.

Scaling up green hydrogen is crucial to economies around the globe. Achieving net-zero emissions by 2050 and staying under the annual global temperature rise of 1.5 degrees Celsius won’t happen without green hydrogen.

The opportunity for companies in this sector is simply incredible. The global total addressable market for green hydrogen could reach $12.2 trillion by 2050.

And that’s just for the utility sector.

Green Hydrogen: Once-in-a-Generation Investment Opportunity

Green hydrogen could easily become the largest electricity “customer” by 2050. It could even double the demand for electricity in Europe.

That would have a profound impact on other sectors. For example, annual wind and solar additions could triple by 2050.

And there’s one important concern green hydrogen could solve: the seasonal difficulties of renewable energy.

Excess hydrogen produced in the summertime can be stored for use during winter – when there is less renewable production.

It also solves another problem for utilities.

Many are wondering what to do with natural gas-fired power plants. Utilities are already moving away from natural gas and toward renewables.

Today’s natural gas peaker plants could become tomorrow’s giant cleanup projects. But there is a more elegant solution.

Utilities can modify gas turbines to run on green hydrogen. And it won’t cost them very much to do so.

The plants could continue to be used as peaker plants. That is much more cost-effective than scrapping the whole thing.

Most of the existing infrastructure could be used. That includes existing natural gas pipeline networks.

But let’s look closer at the investment opportunity.

The production of green hydrogen needs electrolyzers. These systems use electricity to separate water into hydrogen and oxygen.

The electrolyzer market in Europe alone could grow to 650 times its current size by 2030. And by 2050, it could increase to a staggering 8,000 times or more its current size.

Green hydrogen could be the silver bullet for hard-to-decarbonize sectors. These include heavy-duty transport and shipping.

Also, hydrogen would be crucial for high-temperature manufacturing processes, like steelmaking and other smelting processes.

How to Play the Sector

Exchange-traded funds (ETFs) that focus on the green hydrogen sector are one of the best ways to invest in the space before it goes ballistic.

One is the Defiance Next Gen Hydrogen ETF (NYSE: HDRO). It’s been trading since only the beginning of March.

Its top holdings include Plug Power (Nasdaq: PLUG), Ballard Power Systems (Nasdaq: BLDP), Nel ASA (OTC: NLLSF) and Bloom Energy (NYSE: BE).

The other is the Direxion Hydrogen ETF (NYSE: HJEN). Its top holdings include the same cast of characters from the first ETF.

At this point in the development of green hydrogen, these are two excellent ways to play the sector.

I can confidently tell you that making green hydrogen cheaply at scale will happen.

I believe the collective entrepreneurship and ingenuity of today’s private sector companies can deliver it for $2 per kilogram or lower between 2025 and 2030.

And if you don’t believe me, just wait…

In 10 years or less, I’m going to reference this article in a “see, I told you so” follow-up.

Good investing,

Dave

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