Why is hydrogen fuel so expensive?

Factors Discussed:
• Hydrogen fuel is abundant, versatile, and can be used in a variety of applications.
• It has less energy per unit volume than fossil fuels, contributing to its higher price.
• Other factors include production method, proximity to the end user, and transportation costs.
• The price is falling as demand increases, but initial investments are still required for equipment replacement/transition and infrastructure implementation.

As appealing as H2 is for decarbonization, its price tag remains a barrier to transition for some.

Hydrogen fuel is among the most promising energy sources in the global transition away from fossil fuels.  It is abundant, can be produced in many ways, and can be used in a broad spectrum of applications from home heating and personal transportation to heavy machinery and industry.

With all that said, many wonder why H2 remains comparatively expensive.

On its most basic level, hydrogen fuel contains less energy per unit volume than the fossil fuels it would be replacing.  Therefore, according to the US Department of Energy (DoE), “transporting, storing, and delivering it to the point of end-use is more expensive on a per gasoline gallon equivalent basis.”

Of course, the final cost of H2 has to do with many different factors, ranging from where it is produced to the method of production and everything in between. Other issues that help to determine the final price tag of its use include the proximity of the end user to the production site.

After all, if the H2 is being made on-site at a refueling location, any costs associated with its transportation are eliminated.

The price of hydrogen fuel itself is falling, but its adoption requires initial investments.

As H2 production rates climb to suit rising demand, its price is falling. That said, the ultimate goal in using this form of energy as a part of decarbonization strategies worldwide involves producing it using methods that do not generate carbon emissions. After all, if the point of transitioning to H2 is to achieve carbon neutrality goals, producing it using methods that will still emit greenhouse gases is pointless.

Therefore, the largest expense expected to be associated with a transition to hydrogen fuel isn’t the H2 itself. That will likely to be cost competitive once it is produced at scale. In fact, many experts are indicating that it could end up being cheaper than the fossil fuels it is replacing.

Initial costs

Instead, the largest expenses are expected to be linked with the replacement or retrofitting of equipment that currently runs on fossil fuels, as well as the implementation of the infrastructure to produce H2 using renewable energy (known as green hydrogen), transport, store and distribute it.

“Building a new hydrogen pipeline network involves high initial capital costs, and hydrogen’s properties present unique challenges to pipeline materials and compressor design,” says the DoE website. “However, because hydrogen can be produced from a wide variety of resources, regional or even local hydrogen production can maximize use of local resources and minimize distribution challenges.”

A Look at today’s hydrogen fuel cost for cars

At the California hydrogen stations, a kilogram of hydrogen costs between $15 and $17, making it more expensive than gasoline. UPDATE: Just recently in August of 2023, fuel cell drivers have seen a huge increase to $29 at California pumps. Although, fuel cells are approximately 2.5 times more efficient than gasoline engines, providing users with better fuel efficiency. Additionally, most fuel cell car manufacturers offer three years’ worth of free fuel with a vehicle purchase. It costs around $80 to fill up a 37.5-gallon tank in the 2022 Toyota Mirai XLE sedan, which has an EPA-estimated driving range of up to 402 miles, and the 2022 Toyota Mirai Limited has a range of up to 357 miles. Not too shabby.