The cost gap between grey and green hydrogen is expected to come down from its current level of $2.0-2.5 per kg but linger at $1.0-1.5 per kg over the next three financial years, potentially delaying offtake mandates and heightening project risks, Crisil Ratings said on Monday.
To be competitive with grey hydrogen, the levelised cost of green hydrogen needs to fall by more than half from current levels, Crisil Ratings said.
“This would need the capital cost of both the main components, RTC (round the clock )renewable plant and electrolyser, to drop 40-50%, which seems unlikely over the next 2-3 fiscals. That besides the need to perk up the efficiency of electrolysers to over 80% from 60-65% at present,” it said .
Green hydrogen is produced by electrolysing water using round-the-clock (RTC) renewable energy. The renewable plant accounts for nearly two-thirds of total project costs, while the electrolyser makes up about a third. Additional costs cover water procurement and construction.
Electrolyser costs fell 42% between 2010 and 2020 but have slowed to a 20% reduction between 2021 and 2024, Crisil said. As of March 2025, electrolysers still cost more than $1,000 per kilowatt, with efficiency levels stagnating at 60–65%.
The slower cost declines are attributed to technological hurdles, limited commercial-scale production, and stable prices of rare earth materials, which are essential raw materials in electrolysers.
“Industry players are expecting a 30–35% reduction in electrolyser costs by 2030, along with a 5–10 percentage point improvement in efficiency, driven by technology innovation, R&D, and scale,” said Ankit Hakhu, Director, Crisil Ratings. “Even if these expectations materialise, the price differential between grey and green hydrogen will persist at $1.0–1.5 per kg over the next three years.”
Hakhu noted that more than 90% of global electrolyser projects remain at the feasibility or planning stage, and substantial cost reductions will likely only materialise once new capacities are built and operational, Hakhu said.
