Rethinking the Cost of Green Hydrogen and Ammonia

Introduction: Are Green Fuels Really Too Expensive?

In discussions about the energy transition, one common concern is the cost of green hydrogen and green ammonia. Compared with conventional fossil fuels, these emerging energy carriers are often described as expensive, raising questions about their long-term competitiveness.

Today, producing hydrogen using renewable electricity typically costs around USD 3–8 per kilogram, significantly higher than hydrogen produced from natural gas, which can cost about USD 0.5–1.7 per kilogram depending on gas prices. (IEA)

These numbers are frequently used to argue that green hydrogen may struggle to compete with existing energy sources. However, this comparison may overlook an important question:

Are we evaluating future energy systems using the cost structure of today’s markets?

Why Green Hydrogen and Ammonia Appear Expensive Today

Several factors contribute to the current cost of green hydrogen and green ammonia.

First, production technologies such as electrolysis are still scaling up. Electrolyzers require significant capital investment, and many projects are still in early deployment stages.

Second, new supply chains must be built. Unlike fossil fuels, the infrastructure for transporting, storing, and trading green hydrogen and green ammonia is still developing. In many analyses, costs such as:

• hydrogen liquefaction or ammonia conversion
• long-distance shipping
• specialized storage facilities

are often included directly in the price of the fuel itself.

From a project perspective, this makes sense. When infrastructure does not yet exist, early projects must account for these costs individually.

However, this method of cost comparison can sometimes give the impression that green energy carriers are inherently expensive.

A Useful Historical Perspective: Oil and Electricity

Looking at today’s mature energy systems provides useful context.

Modern energy markets rely on vast infrastructure networks. For example:

• global oil supply chains include pipelines, tanker fleets, ports, and refineries
• electricity systems depend on transmission lines, substations, and distribution grids

These systems require trillions of dollars in cumulative investment.

Yet when we discuss the price of oil or the price of electricity, we rarely think about the full infrastructure cost behind them. Instead, these investments are spread across large volumes of energy and many decades of operation.

As a result, infrastructure costs become part of the broader energy system, rather than being attributed directly to the price of the energy commodity itself.

The Emerging Role of Green Hydrogen and Green Ammonia

Green hydrogen and green ammonia are often discussed today as alternative fuels. But in the long term, their role may be much broader.

Both energy carriers have the potential to become key components of a future low-carbon energy system. They can serve multiple functions, including:

• decarbonizing heavy industry
• enabling long-distance renewable energy trade
• storing renewable energy for weeks or months
• supporting sectors such as shipping, aviation, and chemicals

According to the International Energy Agency (IEA), hydrogen can also help integrate large shares of renewable electricity by acting as a form of long-duration energy storage.

As deployment expands, we may see the development of dedicated infrastructure such as:

• hydrogen pipelines
• ammonia export terminals
• large-scale storage caverns
• global shipping networks

Over time, these systems could become foundational elements of the global energy infrastructure—similar to the oil and electricity networks that exist today.

Rethinking How We Compare Energy Costs

This perspective suggests that the perceived cost of green hydrogen and green ammonia may partly depend on how we frame the comparison.

If these energy carriers are evaluated as standalone fuels, every infrastructure component appears as an additional cost. Under that lens, the numbers can seem discouraging.

But if we consider them as components of a future integrated energy system, the economics look different.

As infrastructure expands and technologies scale, costs can decline rapidly. In fact, projections suggest that renewable hydrogen production could fall to around USD 1.3 per kilogram in regions with excellent renewable resources by 2030, approaching the cost of fossil-based hydrogen with carbon capture. (IEA)

This pattern is not unusual. Many energy technologies—from liquefied natural gas to solar power—experienced significant cost reductions as infrastructure expanded and markets matured.

Looking Ahead

Energy transitions rarely happen overnight. The development of global oil markets, LNG trade, and modern electricity grids all took decades of technological progress and infrastructure investment.

Green hydrogen and green ammonia are still at an early stage of that journey.

As production scales, infrastructure develops, and global trade networks emerge, the economics of these energy carriers will likely evolve significantly. Over time, what today appears as project-level cost may simply become part of the background infrastructure of a new energy system.

In that context, the real question may not be whether green hydrogen and green ammonia are expensive today.

The more important question is how they will function within the energy system of tomorrow.