Delivered hydrogen prices of below €3/kg ($3.10/kg) would be needed for breakeven green steel production in Europe in the current high energy price environment, industry group Hydrogen Europe said in a new report.

The cost of producing renewable hydrogen via alkaline electrolysis in Europe was assessed at €10.70/kg ($11.18/kg), based on month-ahead power prices, as per S&P Global Commodity Insights data.

Hydrogen prices would need to fall to below €1.50/kg in an ‘adjusted prices scenario,’ which assumed prices falling to reflect potential future fossil fuel price drops, Hydrogen Europe said in its "Steel from Solar Energy" report, published 11 May.

The estimated breakeven CO2 price in both scenarios is €140/Mt, it said.

The report models the costs for hydrogen-based direct reduction of iron ore coupled with an electric arc furnace, versus a base case of blast furnace steel production. Blast furnace steel production typically produces around 1.6-2.0 Mt of CO2 per ton of crude steel.

With current renewable hydrogen production and delivery costs, the higher costs of the DRI route with hydrogen would add around €100-170 per vehicle for a typical internal combustion engine car.

Hydrogen Europe noted that its estimates were based on current electrolyzer and solar photovoltaic costs.

"It is expected that a further decrease of the solar PV technology costs, coupled with a reduction in electrolyzer capex, resulting from scaling-up and automation of the manufacturing process, should lead to a significant fall in renewable hydrogen production costs in the coming decade."

Quotation from Hydrogen Europe's "Steel from Solar Energy" report

Electrolyzer capex costs alone were expected to fall by around three quarters compared to current levels in that period.

In the meantime, Hydrogen Europe said, ‘significant financial support would be needed’ if consumers are not willing to pay a green premium.