Hydrogen: Cycles

From clean hydrogen hype to a wave of delays

Hydrogen has no traded spot price; it is captive or sold under long on-site contracts with gas cost passed through. Its cost cycles with natural gas: when European gas hit a monthly average of $70/MMBtu in August 2022 (World Bank), grey hydrogen there cost well over $10/kg and some ammonia plants shut. The floor is set by US and Middle East gas, the ceiling by the cost of importing ammonia or methanol instead. For clean hydrogen the cycle is one of policy and capital: announced projects swelled in 2021-2023, then shrank as costs rose and buyers did not sign.

India 2025: about $4.5/kg green against about $2.1/kg grey on LNG, a premium of about $2.4/kg (JMK Research 2025; PTI 2025).

Booms and busts

1. 2021-2022

   European gas rose about tenfold. Grey hydrogen became more expensive than green hydrogen on paper, and European ammonia and refinery users cut output or bought imports.

   World Bank Europe gas rose from $7.27/MMBtu (Jan 2021) to $70.04/MMBtu (Aug 2022); grey hydrogen cost in Europe rose above $10/kg (indicative, basis: 0.16 MMBtu per kg)

2. 2023-2025

   Clean hydrogen hype turned to delays. Electrolysis projects drove more than 80% of the fall in announced 2030 supply, and offtake deals signed fell from 2.4 Mt a year in 2023 to 1.7 Mt in 2024.

   Electrolyser installed cost stayed at $2,000-2,600/kW outside China (IEA 2024)

3. 2025

   India ran the first large competitive tenders for green hydrogen at refineries. Prices fell from about $5.5/kg to $4.4-4.5/kg.

   IOCL Panipat: Rs 397/kg (about $4.6/kg), 10 kt a year for 25 years; Ocior Energy bid $4.39/kg for BPCL/HPCL (PTI, Sep 2025)

4. 2026

   The Hormuz disruption raised LNG and ammonia prices in Asia, lifting grey hydrogen cost for LNG-based users such as India.

   World Bank Japan LNG rose from $11.49/MMBtu (Jan 2026) to $15.65/MMBtu (Apr 2026)

What drives the cycle

• Natural gas price. Sets 60-80% of grey hydrogen cost, so TTF, Henry Hub and LNG prices drive the cost of almost all hydrogen made today.
• Refinery runs and fuel sulphur rules. Refining takes over 40% of demand. Diesel desulphurisation rules and crude slate set how much hydrogen refiners need.
• Fertiliser demand. A third of hydrogen goes into ammonia, so farm economics and urea prices pull hydrogen demand.
• Subsidy and mandate policy. US 45V credits, EU RFNBO targets and India's SIGHT incentives decide whether clean projects reach FID.
• Electrolyser and renewable power costs. Power is 60-70% of green hydrogen cost; Chinese electrolysers at $600-1,200/kW could cut capex if trade barriers ease.

Metrics to track