Potential pathways towards green molecule viability

Hydrogen and synthetic methane are widely seen as essential green molecules of the future. They have enormous promise in decarbonising sectors where electrification is challenging (see the hydrogen ladder from Michael Liebreich). Today, however, many of the most high-profile projects in this space are stalled or shelved, and the reason for this is simple: green molecules remain far too expensive and, currently, nobody can bear the cost premiums. 

Take hydrogen. Even presumed flagship projects are being paused. For example, Shell’s €1 billion Rotterdam Port project was halted despite being a key part of Rotterdam’s green energy transition. This was not a result of technical failure, but due to shifting regulations in an uncertain market. These have eroded the economic feasibility of the project as ultimately no buyers are willing to pay the high price of hydrogen required to make the business case work. And that is far from the only example. Other energy majors such as Ørsted and BP have also walked away from major hydrogen projects after reaching final investment decision (FID), citing similar challenges. These examples highlight a market stuck in limbo: technically ready, but economically unviable.

So, for those of us working towards a regenerative future, the next question is: what would it take to make these molecules viable? 

At World Fund, we see four key shifts that could break the current deadlock. If even one of these materialises, we’d be ready to back companies building in this space. That said, some pathways strike us as more realistic than others.

1. Cheaper and more accessible renewable electricity

The main driver of green molecule costs in power-to-liquid pathways (in contrast to bio-based pathways) is the price of clean electricity. This is because electricity constitutes a large share of the cost stack, especially at the high operating hours required to economically amortise CapEx costs.

Take hydrogen for example. The thermodynamic minimum energy requirement to split water into hydrogen is ~40kWh/kg hydrogen (ΔH). Given that modern alkaline and PEM electrolysers can generally reach ~80% efficiency (HHV), a good rule of thumb is that it takes ~50kWh to produce a kg of hydrogen via water electrolysis. If your electricity price is 5¢/kWh, this results in costs of $2.50 per kg just for the input electricity. Furthermore, for every cent increase in your electricity price, your hydrogen cost will increase another 50¢. 

Fortunately, over the last few years, wind and solar have become the cheapest form of electricity generation in many regions. Since 2009, the cost of solar has come down 90% with a learning rate of 20%, while wind has experienced a learning rate of 15% (Figure 2). Paired with the rapid decrease in battery costs, these variable energy resources are becoming increasingly viable for more demand profiles. In the meantime, the levelised cost of energy from fossil fuels has largely stagnated (or even risen) and in most cases has already been surpassed by renewables. In fact, on an levelised cost of electricity basis, 91% of utility-scale renewable projects built in 2024 were cheaper than the lowest-cost fossil fuel alternative. 

Going forward, we believe that co-located solar (or other cheap renewables) and e-fuel production projects, where solar panels directly feed electrolysers for hydrogen or reactors for methane production, can help create decentralised, low-cost and resilient setups that could make the molecule economics more attractive. In the right geographies, such as solar-rich Spain (Turn2x, Synhelion) or the Nordics with their hydro and wind resources (Norsk e-Fuel, Ren-Gas Oy), this approach is already being trialled.

2. High carbon taxes on fossil fuels 

The green premium, the cost gap between synthetic and fossil-derived fuels, remains too high for the market to absorb. Synthetic molecule green premiums currently range from 50% to upwards of 500%, depending on the product and production pathway. With the EU ETS price currently around €70/t CO₂, green molecules are currently unable to compete. However, if fossil fuels paid their true environmental cost, that gap could shrink quickly.

This would require governments to design regulations in such a way that they reflect the true costs of fossil fuels, including their externalities. If carbon taxes were high enough, green molecules would automatically become a more cost-effective option, stimulating investment and adoption. Estimates range widely, but studies have calculated the social cost of carbon to be as high as $1,367/t, with others placing estimates around $283/t. For reference, the German Environment Agency (UBA) recommended a social cost of carbon price of €300/t in 2024 with a 1% discount rate (which rises to €880/t without the time-based discount).

Given EU ETS projections for the coming years, it is unlikely that this mechanism alone will overcome the current green premiums. Additional carbon pricing that more accurately reflects true climate impacts could help close this gap, but such measures are likely to be unpopular and carry economic consequences. Figure 3 illustrates the carbon price required to neutralise the molecule’s green premiums, assuming combustion. The results show that required prices for all molecules are far above the current ETS level, and in most cases also exceed common estimates of the social cost of carbon.

3. Breakthrough technologies

There are promising new approaches to green molecule production emerging across Europe, with some already on our radar. While many are still early-stage, the right innovations could unlock dramatic cost and efficiency gains. We covered several of these in our first green molecules article.

Advances range from electrolysis efficiency improvements to entirely new production pathways, with the potential to lower both CAPEX and OPEX. These innovations are still early, but exciting players such as Ki Hydrogen, Vema, and Electrochaea are emerging. With continued development, it is possible we could see cost parity with fossil incumbents this decade.

4. Enforceable renewable energy mandates  

The EU’s Renewable Energy Directive III (RED III), adopted in 2023, set a binding EU-wide target of at least 42,5% renewable energy consumption by 2030. RED III also sets sector-specific targets, including a requirement for 42% of hydrogen used for final energy and non-energy consumption in industry to be a renewable fuel of non-biological origin by 2030. This rises to 60% by 2035 and will require the ammonia, methanol, and petrochemical industries (outside of transport fuels and biofuels) to shift their input hydrogen feedstocks to green sources.

Despite its ambition, RED III has yet to be translated into national law across most member states. After the May 21, 2025 implementation deadline, the European Commission launched infringement proceedings against nearly all member states in July (with the exception of Denmark) for failing to comply. If fully transposed and enforced, RED III could unlock demand for green molecules such as hydrogen, ammonia, and e-methanol by creating stable markets and catalysing investment. However, uncertainty over its enforcement is already delaying investment decisions and decreasing market confidence. 

It remains to be seen if, in the current economic climate, governments will be willing to impose the necessary compliance pressure on their energy intensive sectors. Take Germany for instance, following two consecutive years of negative GDP growth, we expect full implementation of such measures to be challenging. The question then becomes what appetite the European Commission has for following through and enforcing non-compliance. We don’t have a crystal ball, but we’re not holding our breath, as we predict such proceedings will move quite slowly. 

Our takeaways

Although any one of these four developments could be transformative, we believe the most immediate and realistic pathway is to leverage cheap electrons. Falling renewable costs are likely to outpace regulatory enforcement and will do more in the short term to make green molecules commercially viable. We therefore urge policymakers, industry leaders, and fellow investors to bet on cheap, renewable electricity as the biggest lever for scaling green molecules.

This is a pivotal time to be having this conversation. In addition to bearing massive market potential and providing novel paths toward decarbonisation, green molecules are a means for Europe to secure resilience in the face of an increasingly uncertain and unstable geopolitical landscape. 

China has spent two decades reducing reliance on fossil fuels, investing heavily in renewables, scaling battery production and dominating EV supply chains. As a result, 86% of new energy generation capacity built in China today comes from renewables. Furthermore, China has taken control of a global value chain that was once led by Europe. Germany, by contrast, spent over €80bn to import fossil fuels and nuclear energy in 2024 - twice the amount it invested into renewable energy.

As tariffs rise and supply chains look increasingly unreliable, Europe must build its energy resilience and security as we outlined in our recent White Paper. Additionally, it must resist the temptation to rely on cheap imports that undermine innovation and local value chains while simultaneously inhibiting innovation. Now is the time to be honest about why our green molecule progress has stalled, and what needs to change.

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Are you a company innovating in this area?

These are the questions we at World Fund ask ourselves when looking at any new green molecule investment opportunity: Does it lower the green premium significantly? More than competitors? Is the production process able to handle intermittent energy input? Is the resulting fuel a drop-in solution for its intended use? Is there an existing market willingness to pay a premium? Can the process co-locate with cheap inputs?

Do you address some or all of these areas? If so, please get in touch at mark@worldfund.vc.

About Dr. Mark Windeknecht, Principal, World Fund

Dr. Mark Windeknecht is a Principal at World Fund. He is also an advisory board member at aedifion and an observer at cylib and IQM.

Mark previously worked for Vito One, where he was responsible for the operational business. There, he invested across the PropTech, ConTech, and EnergyTech verticals. Mark began his career in academia as a researcher at the Technical University of Munich (TUM), having completed his doctorate in Electrical and Computer Engineering and a Master’s degree in Energy and Process Engineering at TUM.