Study Forecasts High H2 Costs for Power Plants

Source: E & M powernews

July 3, 2026

The cost of green hydrogen could be significantly higher by 2035 than is widely assumed. A Fraunhofer study identifies transportation and storage in particular as cost drivers.

Production alone does not determine the economic viability of green hydrogen. Transportation and storage can also significantly increase procurement costs. This is the conclusion of a new study by the Fraunhofer Cluster of Excellence “Integrated Energy Systems” (CINES). In it, researchers systematically calculate for the first time the total hydrogen procurement costs for various applications in the year 2035.

According to Fraunhofer CINES, the analysis takes into account not only production costs but also the costs of transport via the hydrogen backbone network and storage. Significant differences emerge between the individual applications. Industrial consumers benefit from comparatively low infrastructure costs. By contrast, these costs are significantly higher for hydrogen-fired power plants, which are used only to cover peak loads in the electricity grid.

Study leader Prof. Dr. Martin Wietschel explains that the study was prompted by uncertainty regarding future hydrogen costs. While numerous analyses of production costs already exist, the actual procurement costs—including transportation and storage—are decisive for investment decisions.

Peak-load power plants particularly affected

According to the study, the hydrogen demand of peak-load power plants arises primarily when renewable hydrogen is not being produced. The fuel must therefore be supplied entirely from storage facilities. Added to this are grid fees for the hydrogen core network. These fees are incurred, among other things, during injection and withdrawal from storage, as well as at the consumer’s site.

Since peak-load power plants operate for only a few hours a year, the fixed grid fees are spread across small quantities of hydrogen. According to the authors, this causes specific transportation costs to rise significantly. Overall, the research team calculated hydrogen procurement costs of between 8.77 and 15.16 euros per kilogram for grid-connected power plants. About half of this amount is attributable to infrastructure costs.

Co-author Benjamin Pfluger therefore questions whether such plants can be operated economically solely through the electricity market. The study cites on-site electrolysis or the use of renewable methanol as possible alternatives.

Industry Benefits from Flexibility

For industrial facilities, the picture is more favorable. According to the study, with consistent hydrogen consumption, infrastructure costs account for no more than 16 percent of total procurement costs. Depending on the scenario, these costs range between 4.41 and 8.43 euros per kilogram. This is due to the significantly higher number of full-load hours over which grid fees can be spread. Storage costs also decrease when hydrogen is stored and retrieved more frequently.

Hydrogen could become even more affordable if companies time their production to match the availability of renewable generation or produce hydrogen directly on-site. However, the authors emphasize that which option is more economical must be calculated on a location-by-location basis.

According to Fraunhofer CINES, the results are intended to help companies in industry and the energy sector make investment decisions under uncertain conditions. Instead of making individual price forecasts, the research team models cost ranges for various regulatory and technical developments. This is intended to provide a more reliable basis for strategic, risk, and investment decisions.

The full study , “Application-Specific Hydrogen Procurement Costs in Germany 2035,” is available for download on the Fraunhofer CINES website.

Author: Davina Spohn