Cost of green hydrogen production is now lower than gray H2 in the EU

Analyst ICIS’ calculations suggest that renewable H2 is more affordable than produced with fossil fuel and CCS.

The ICIS analyst firm has released the results of a recent calculation that indicates that the cost of green hydrogen production is now lower than that of blue H2 produced from methane and with carbon capture and storage (CCS) in Europe.

The price of natural gas has been rising dramatically in European countries.

Because of this and several other factors, the London-based analyst’s calculations now suggest that the price of producing green hydrogen using renewable energy has become cheaper than making gray H2 from highly polluting methane-based methods. Moreover, this makes it considerably cheaper than blue H2, which takes the gray and uses CCS to help control the greenhouse gas emissions resulting from producing the emission-free fuel.

ICIS says that renewable H2 has been cheaper than the more polluting forms since September. It states that the total production cost of gray reached almost £6 (about $8) per kilogram in early October. This was a substantial increase over the £1.43 it cost back in April.

On the other hand, the price of green hydrogen has stayed steady during that same timespan.

Renewable H2’s power purchase agreement (PPA) of £45/MWh has stayed at a consistent £3.39 per kilogram. On November 8, ICIS recorded the price of gray H2 to be £4.16 per kilogram, which was 20 percent more expensive than renewable H2.

“The price correlation shown for the UK would also apply to Europe,” said Jake Stones, an ICIS hydrogen editor as quoted in a recent Recharge report. “Gas and power prices have surged across the continent, therefore any PPA-derived hydrogen around the region we modelled would likely be competitive now.”

As both solar and wind energy are typically purchased under PPAs instead of being sold on wholesale markets, the price of renewable power has remained essentially the same even as the wholesale price of natural gas has risen throughout Europe.

To underscore the trend, ICIS stated that hydrogen produced using electrolysis powered by grid power at wholesale market prices would currently cost about £11.60 per kilogram. That is a substantial increase over April’s £4.

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