The Ukraine war has 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, according to a new paper by analyst BloombergNEF (BNEF).
Grey hydrogen produced from unabated fossil gas now has a levelised cost of $6.71/kg in the EMEA region, compared to $4.84-6.68/kg for renewable H2 (using Western electrolysers), according to a BNEF study entitled Ukraine War Makes Green Hydrogen Competitive.
Similarly, the cost of green hydrogen in China is currently $3.22/kg (using Chinese electrolysers), compared to $5.28/kg for grey H2, it adds.
Similar conclusions were made for Europe by the consultancy ICIS last November.
The price of green and grey ammonia has followed the same trends, as they are produced by combining hydrogen with nitrogen from the air.
The paper says green ammonia in EMEA and Asia-Pacific would be cheaper than grey with renewable H2 prices at $6.04/kg and $4.50/kg or less, respectively.
These figures are based on prices and costs calculated on 2 March, and exclude carbon pricing on grey H2.
“Russia’s invasion of Ukraine has added pressure to global natural gas prices, which were already at record levels due to tight supply,” says the report, which was ;ead-authored by Meredith Annex, BNEF’s head of heating and hydrogen.
“The price of natural gas-derived products like ammonia, as a result, is up to three times higher now than it was a year ago. This has opened the door for ‘green’ hydrogen and ammonia produced from renewable electricity to compete with unabated natural gas-based processes.”
The note points out that month-ahead gas prices on the Netherlands’ TTF exchange have been more than six times higher than they were a year ago since Russia’s invasion on Ukraine on 24 February. And liquefied-natural-gas prices in Asia have been five times higher over the same periods, according to Platts’ Japan-Korea Marker index.
“These prices could rise further as the conflict in Ukraine continues,” it adds.
“With Europe looking to wean itself off Russian gas imports, which account for a third of the continent’s supplies, gas markets seem set to face substantially higher prices for the foreseeable future.”
The paper points out that it was “unimaginable two years ago” that green H2 and ammonia would be competitive with grey versions without a carbon price.
“While the economic story may change in a few years, companies could still view green hydrogen as a more viable option than they once did — especially as they look to wean themselves off gas for social, environmental and security-of-supply reasons.”
The situation is very different in the US, where natural gas prices have only risen 60% over the past year. Grey hydrogen in the States would cost $1.20/kg at current gas prices, compared to $3.32/kg for renewable H2.
The price of green hydrogen would therefore have to be an impossible $0.12/kg for green ammonia to be cheaper than grey, according to BNEF.
Nevertheless, ammonia prices have tripled on the US Gulf coast since February 2021, partly because of the local need for NH3 imports.