Simple math favours green hydrogen after war in Ukraine - Rystad Energy

As the costs of blue and grey hydrogen shot up by over 70% in the matter of days following Russia’s invasion of Ukraine, the math of green hydrogen has become more attractive in comparison, says research group and business intelligence provider Rystad Energy.

According to Rystad Energy’s figures, costs of fossil fuel-derived blue and grey hydrogen went up to USD 12 (EUR 10.91) per kilogramme from USD 8/kg in just days after the start of the war in Ukraine. In some parts of Europe, blue costs USD 14/kg, while grey is priced USD 12/kg.

Green hydrogen, on the other hand, can be produced for as low as USD 4/kg in the Iberian Peninsula, according to Rystad Energy, which calculated the figure using prices based on 2020/2021 renewable energy auctions in Spain and Portugal.

With prices such as these, the feasibility of green hydrogen as a cheap and secure source of renewable energy in Europe is growing, Rystad Energy said.

The war in Ukraine pushed the EU to throw stronger support at hydrogen as part the REPowerEU plan, aimed at reducing the bloc’s dependence on Russia's gas before 2030. For this plan to work, Europe will have to step up the hydrogen production significantly.

The use of gas and coal is set to account for 1,020 TWh and 602 TWh in 2030 and 2040, respectively, in Europe’s power mix base case, Rystad Energy calculates. It would take around 54 million tonnes of hydrogen by 2030 to replace this, and that is without taking into account the hydrogen needed for industrial applications.

According to Rystad Energy’s research, Europe is currently on track to produce 3 million tonnes of green hydrogen per year by 2030. With the REPowerEU plan targeting 15 million tonnes, the research group states that significant ramp up can be expected.

Green hydrogen has the potential to open up new energy economies, which can benefit from exports and the future hydrogen trade. In the words of Rystad Energy’s analysts, “we may be moving from a world where energy is sourced in a few key regions, to a world where production is more spread-out”. If the green hydrogen sector achieves a global production output of more than 10 million tonnes by 2030 and cuts costs to USD 1.5/kg or less, the industry is then set to become a permanent fixture of the global energy mix, the Rystad Energy research concludes.

(EUR 1.0 = USD 0.909)

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