As the cost of blue and gray hydrogen increase in line with rising fossil fuel prices, the feasibility of green hydrogen as an affordable and secure source of renewable energy in Europe is growing, according to Rystad Energy research.
Green hydrogen production was already set to take off this year globally and pass the 1-GW-milestone in 2022, however the war in Ukraine has turbocharged the sector.
Namely, green hydrogen’s potential win comes at the expense of its fossil fuel-linked blue and gray alternatives, whose costs have increased by over 70% since the start of the war in Ukraine, rising from about $8/kg to$12/kg in a matter of days, according to Rystad.
In addition, the EU has announced plans for a €300 million funding package for hydrogen as well as the Hydrogen Accelerator initiative from REPowerEU, aiming to reduce its dependence on Russian gas with a further wave of support packages for green hydrogen specifically likely to emerge.
Since the Russian invasion of Ukraine, the economics of green hydrogen have become increasingly attractive with lower production costs of $4/kg (particularly in the Iberian Peninsula) compared to $14/kg for blue and $12/kg for gray in other part of Europe
Rystad stated.
Regional and country breakdowns
For Europe green hydrogen is an attractive alternative, with Germany already planning to produce 25 gigawatts (GW) by 2040 and Spain on track to produce more than 4 GW by 2030, however, the amount of hydrogen required to replace gas and coal in Europe’s power sector is enormous.
Currently, Europe is on track to produce 3 million tons green hydrogen per annum by 2030 so the gap is considerable. The new RePowerEU target put it at 15 million tons for Europe, so significant ramp up can be expected.
India has also announced a new policy on green hydrogen which is set to boost production. Costs are already low at $5 to $6 per kg and are expected to drop by 40% under the country’s new guidelines.
Green hydrogen
Green hydrogen will dominate over fossil-derived production with carbon capture and storage (blue hydrogen). In 2021, 188 electrolysis projects were announced versus 24 for fossil-based low-carbon methods.
Ammonia as a carrier
Ammonia is standing out as one of the key carriers for hydrogen. Existing infrastructure for the 150 million tons used by the fertilizer industry each year can facilitate global trade.
With the emergence of ammonia engines, demand for it as a shipping fuel is expected to quickly rise, doubling the current 150-million-tons-level from 2040
Rystad concluded.
