High Gas Prices Spur Green Hydrogen Investment-Report

LONDON – Soaring natural gas prices have made hydrogen produced from fossil fuels increasingly uneconomic and spurred more than $70 billion of new investment in hydrogen from renewables since war broke out in Ukraine, a report said on Thursday.

So-called green or clean hydrogen is made using electrolyzers powered by renewable energy to split water from oxygen, while blue hydrogen is made from natural gas with technology to capture and store the carbon dioxide emissions produced.

Grey hydrogen extracts hydrogen from coal or gas using steam methane reforming and is currently the standard industry process.

Green hydrogen has been touted as the key to decarbonizing industries that rely on coal, gas, and oil – such as steel and chemicals. But the costs of production have traditionally been much higher than other forms of hydrogen.

With gas prices having soared more than 70% on international markets since the start of the war in Ukraine in February, the cost of producing hydrogen from fossil fuels has become more expensive than green hydrogen, the report said.

n Europe, fossil-fuel hydrogen asset owners will see their costs of production rising by roughly 50% more than average green hydrogen costs to $7.60/kg, while new blue hydrogen in Asia costs 35% more at $6.40/kg and grey hydrogen is 29% more than green hydrogen.

The continued rapid investment in green hydrogen over the next few years could mean the production cost falls under $2/kg by 2030, from an average of $3.80-$5.80/kg before the war in Ukraine.