Competitiveness of Green and Yellow Hydrogen: A Project-level Analysis

With the growing global focus on hydrogen as a key solution for achieving decarbonization, understanding the most cost-effective and environmentally sustainable production methods is crucial. The objective of this study is to evaluate the economic and environmental performance of different renewable energy sources for hydrogen production, while also considering the impact of geographic location, system sizing, and technological efficiency. This study compares the production of green hydrogen powered by onshorewind, offshore-wind, and solar PV with that of yellow hydrogen (grid-based hydrogen) in terms of cost and environmental impact for a large sample of publicly announced green hydrogen projects in Europe. Using geographic renewable energy data, project-specific details, and prevailing technological standards, we derive each country’s weighted average cost of capital (WACC) to calculate market-based levelized cost of hydrogen. We find onshore-wind projects to have the lowest average levelized cost of green hydrogen , followed by offshore-wind and then by solar PV . The costs for yellow hydrogen depend on the price of electricity. Excluding 2022, yellow hydrogen had lower mean costs than solar PV, but higher costs than both types of wind. The environmental impact assessment finds significant decarbonization potential for green hydrogen, particularly in regions with substantial renewable resources and carbon-intensive energy mixes. The study aggregates the project data at the country level, then clusters the analyzed countries based on economic and environmental metrics to derive specific hydrogen strategies. It concludes that substantial governmental support is essential for the large-scale integration of green hydrogen into the energy system to achieve meaningful decarbonization.