Understanding Hydrogen’s Levelized Costs: Methodologies and Their Impacts on Perceived Viability

Author

Alexander M. Economides, in collaboration with Enerdatics Energy Analytics Team

Purpose

This article was written in collaboration with Enerdatics Energy Analytics to clarify how methodological choices affect the perceived economics of hydrogen production. It forms part of a broader initiative to enhance transparency and comparability in global hydrogen cost assessments, supporting investors, developers, and policymakers in understanding the financial realities behind levelized cost modeling.

Summary

Tax credits can make or break the economics of hydrogen projects. This Enerdatics article by Alexander M. Economides shows how 45V and 45Q incentives dramatically shift levelized cost outcomes, depending on whether analysts use pre-tax or NPV-based financial models.

The piece quantifies these differences: a full $3/kg 45V credit can alter electrolysis costs by up to 18%, while 45Q can halve costs for large steam-methane reforming (SMR) projects with carbon capture. It also discusses the policy ambiguity surrounding whether SMR-CC projects should qualify for 45V, and highlights the industry’s polarized responses—from ExxonMobil and bp seeking technology-neutral rules to Air Products aligning with current guidance.

By linking real-world reactions to quantitative modeling, the article provides investors and developers with a grounded perspective on how tax credit eligibility determines project viability in the evolving U.S. hydrogen market.

Tags: Hydrogen, Levelized Cost, Enerdatics, LCOE, Energy Transition, Project Finance, Methodology