Green hydrogen now cheaper to produce than grey - ICIS report
The recent surge in the price of natural gas in Europe has led to green hydrogen - H2 derived from renewable energy - becoming cheaper to produce than its highly polluting grey counterpart, according to new research by London-based analyst ICIS.
Producing grey hydrogen in the UK has actually been more expensive than green H2 since mid-September, with the former hitting almost £6 (€8) per kg in early October, up from £1.43 in April.
By comparison, the price of green hydrogen under a power-purchase agreement (PPA) of £45/MWh has stayed the same at £3.39/kg. Last week, the price of grey hydrogen was £4.16/kg, almost 20% more expensive.
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"The price correlation shown for the UK would also apply to Europe," ICIS hydrogen editor Jake Stones told Recharge News. "Gas and power prices have surged across the continent, therefore any PPA-derived hydrogen around the region we modelled would likely be competitive now."
Wind and solar are usually purchased via PPAs instead of wholesale markets, and as a result, renewable energy prices have been mostly unaffected by the surge in power prices across Europe. To further highlight this, ICIS pointed to the present £11.60 per kg cost price of electrolytic hydrogen derived from grid electricity, up from £4 in April.
ICIS found that blue hydrogen - H2 made from natural gas with carbon capture and storage (CCS) - costs a further £0.50 to £1.50 per kg more than grey due to the additional expense of CCS.
The oil and gas sector advocates blue hydrogen be produced at scale to effectively offer low-carbon fossil fuel alternatives. Nonetheless, this would still result in significant emissions of greenhouse gases as a result of upstream methane leakage and flaring, as well as the inability of CCS to capture all CO2 emissions.
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While the price of blue and grey hydrogen would be relative to any fluctuations in the cost of natural gas, the kind of price volatility seen this year highlights the danger faced by Europe with the continual importing of fossil fuels for its energy.
"What this has shown is that green hydrogen can avoid price volatility if power is supplied via a PPA, and the avoidance of risk or uncertainty could build support for the zero-carbon commodity," added Stones.
Similar calculations made by Australian maths-as-a-service company Keynumbers also showed that green hydrogen was cheaper to produce than grey or blue in Europe.
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