Studies by Quebec's International Reference Centre for the Life Cycle of Products, Processes and Services, CIRAIG, as well as European studies released consecutively in spring 2020, show beyond any doubt that, all trends considered, globally, the cost of producing hydrogen is expected to reach $4 U.S. per kilogram by 2030. In terms of deployment, what I call transportation and distribution, we're talking about $2 U.S. per kilogram.
So the first challenge with the green hydrogen molecule as opposed to the grey one is to produce it at the lowest possible cost to allow companies to reduce their emissions. However, if companies receive grey hydrogen, it will have no impact on reducing greenhouse gas emissions. It's called “carbon capping” for major polluters. It means that, beyond a certain threshold, those companies don't need to offset their greenhouse gas emissions. So, if they continue to use grey hydrogen, they are not required to offset. On the other hand, if they use green hydrogen such as we are going to produce at H2 V Energies, they avoid the whole “carbon capping” component.
So, that affects two things. It has a direct impact on the price, if our price is below the 2030 target of $4 U.S. That is the case at H2 V Energies. The second big factor in decision-making for companies making the energy transition is that it has an impact on reducing their greenhouse gas emissions as well.
Therefore, if we can produce green hydrogen, perhaps not at the price of grey hydrogen, but at a competitive price, it means we are going to have to mass-produce it and work on distribution and transportation. However, if a company manages to produce it more cheaply, that will drive down the cost of transportation, and at that point, decision-makers will see many advantages to adopting green hydrogen.
The agreement with Germany speaks for itself. The Germans want green hydrogen because they are aware of the benefits, particularly with respect to the greenhouse gas emission thresholds, expressed in CO2 equivalent, to which industry is also subject in Europe.
I hope that explains a little about the dynamics and the difference between grey and green hydrogen.