This is a trend that experts had noted, but without anticipating its speed. Green hydrogen has thus become cheaper than gray hydrogen in different places on the planet. This is due to the war in Ukraine which suddenly caused natural gas prices to rise. This is what a BloombergNEF study reveals, published on March 4.
BloombergNEF, a branch of the famous Bloomberg group, analyzes the impacts of the energy transition in the energy production, industry, transport, construction and agriculture sectors.
Green hydrogen is mainly produced by electrolysis of water using renewable electricity. Gray hydrogen, for its part, is produced from fossil fuels such as natural gas.
On March 4, Meredith Annex, head of analysis of the heating and hydrogen sectors at BloombergNEF, published a message on the agency’s Twitter account entitled “Ukraine War Makes Green Hydrogen Competitive” including a table which shows that the prices of green ammonia (used to decarbonize transport) are lower than those of gray ammonia, in Europe, but also in Asia. But this is not the case everywhere.
Indeed, in North America, green ammonia remains much more expensive than gray ammonia.
Unlike oil prices which are global, gas prices are continental. In North America, a major exporter of natural gas, prices have not increased linearly as in Europe or Asia.
Also, gray hydrogen produced from fossil gas has a cost of 6.71 US dollars/kg in Europe, the Middle East and Africa (EMEA) compared to 4.84 to 6.68 US dollars/kg for green hydrogen.
In China, green hydrogen costs US$3.22/kg compared to US$5.28/kg for gray hydrogen.
All experts nevertheless wonder whether the prices of green hydrogen will remain more advantageous than those of gray hydrogen, and for how long.
In April, BloombergNEF published a study which indicated that the prices of green hydrogen would fall in the long term, or even that they could become lower than those of natural gas by 2050. Also in April, strong demand in Europe had already driven up natural gas prices.
The future seems uncertain. What will the market look like in Europe and what will be its balance between demand and supply of natural gas when Russia provided more than a third of supplies to Europe before the war in Ukraine?
However, this balance will influence the prices of green hydrogen. If the price of natural gas remains high, green hydrogen could remain more competitive than gray hydrogen.
But if natural gas prices fall due to a reduction in tensions and perhaps the end of the war in Ukraine, green hydrogen would once again become more expensive than gray hydrogen.
