Russia’s invasion of Ukraine has pushed the cost of hydrogen produced from fossil gas way beyond that of H2 made from renewable power, Rystad Energy said.
As the cost of grey hydrogen (made from unabated fossil gas) and blue hydrogen (made from gas linked to carbon capture and storage) surge in line with rising fossil fuel prices, the feasibility of green hydrogen (produced from renewables via electrolysis) as an affordable and secure source of renewable energy in Europe is growing, the research company said.
Green hydrogen production was already set to take off this year globally and pass the 1GW milestone, but the war against Ukraine has turbocharged the sector, Rystad said, as the costs of blue and grey H2 have surged by over 70% since the start of the invasion, rising from about $8 per kilogramme to $12-$14/kg in a matter of days.
That compares to green hydrogen production costs of $4/kg (particularly on the Iberian Peninsula), according to Rystad.
The analysts’ research showed an increasing price gap between renewable and fossil-based hydrogen.
BloombergNEF earlier this month had already pointed out the Ukraine war had pushed up natural gas prices to the point where green hydrogen is now cheaper than highly polluting grey H2 in Europe, the Middle East and Africa (EMEA) and China, but the difference the price difference then still was much more moderate.
Rystad’s analysts also stress EU plans for a €300m ($330m) funding package for hydrogen as well as the Hydrogen Accelerator Initiative from the REPowerEU plan by the European Commission to weave the bloc off its dependence on Russian energy imports.
“While industry and governments are heading in the right direction, their challenge is to lower the risks for green hydrogen investors and create incentives necessary to scale up quickly both the demand and supply,” said Minh Khoi Le, head of hydrogen research with Rystad Energy.
“Fundamentally, a world where green hydrogen fulfils the role currently played by oil, gas and coal will look very different.”
The decade ahead is a make or break one for the green hydrogen sector, Rystad said, adding that if production can be increased as planned to more than 10 million tonnes globally by 2030 and costs cut to $1.5/kg or less, then the industry will become a permanent fixture of the global energy mix.