Dynamics of price-based competition between blue and green hydrogen with net zero emissions targets

The early development of blue hydrogen is often proposed to ‘kick-start’ a hydrogen economy however, the volatility of the cost of gas, different emission intensities of blue technological options, and projected cost reductions in electrolysers could lead to stranded assets. We develop a model to interrogate the dynamics of hydrogen supply and demand using different cost trajectories for green and blue hydrogen production, and under different carbon pricing scenarios. We find that the window of opportunity for blue hydrogen is mostly determined by how quickly green hydrogen costs reduce. We show that blue hydrogen assets deployed within the next three decades are likely to be significantly underutilised, unless the cost of green hydrogen remains at the high end of projections. This analysis implies that there is a substantial risk that investments in blue hydrogen will lead to stranded assets, which could occur without high-quality information and clear policies.