In recent days, the price of fossil natural gas in Europe has risen in all directions, but mostly on average. As a result, many aspects of sustainability are quite appealing. Green hydrogen isn’t directly involved here.
This month, the market price for natural gas was more than ten times greater than a year before.
In comparison to 2018, when the hydrogen boom was at its peak in the Netherlands, natural gas prices are at an all-time high. At the time, producing hydrogen from water using renewable energy (green hydrogen) was 4 to 5 times more expensive than producing the same hydrogen from natural gas without CO2 storage ( grey hydrogen ).
Natural gas is now at least 5 times as costly as it was back then. Green hydrogen is currently cheaper than gray hydrogen, according to a simple conclusion. This straightforward conclusion has been conveyed to me numerous times in recent days.
The first caution is that, despite all of the major announcements made since 2018, very few people are producing green hydrogen. Green hydrogen cannot be cheaper than gray hydrogen if it is not for sale.
The paper is behind a paywall, however, the comparison’s based on market prices for gray hydrogen and notional cost prices for green hydrogen, or really for ammonia created from both hydrogen hues, as seen in the graph on the left, which has been given to me several times.
The second caution is as follows: When you compare a bare cost estimate to a real market price, you get some useful information, but you can’t do much with it. If green hydrogen were for sale, its price would be determined by the same market forces that govern natural gas today.
Green hydrogen and gray hydrogen have the same chemical make-up. Green hydrogen would have at least the same market worth as gray hydrogen if they were both for sale. At the very least, there are probably definitely still parties on the market willing to pay a premium for hydrogen with a smaller CO2 footprint.
Is it a good idea to move to your own production of green hydrogen if you now acquire gray hydrogen or purchase natural gas to make gray hydrogen for your industrial process? After all, you don’t have to travel to the market; instead, you may create at a low cost for your own use.
Green premiums are the same
That, too, is debatable. Green power is required to make green hydrogen. The price of power on the open market is currently as high as it is for natural gas.
After all, natural gas power plants provide the majority of our electricity, and they also determine the market price for electricity for the vast majority of the time. And, just as with green hydrogen, you’ll have to factor in a premium on top of the market price when buying green energy.
At prevailing energy costs, the investment in a green hydrogen plant is not readily recouped.
The creation of sustainable power under our own supervision might be a reasonable next step. You can make green energy at cost price with your own wind or solar park, and you can also produce green hydrogen at cost price for your own use or sale at today’s highly lucrative market pricing.
Not the cheapest, but crucial
This leads you directly to the following point. You may also sell the wind or solar electricity you generate in this case at extremely high market prices right now.
The 20 to 30 percent green power lost due to conversion losses in the generation and post-processing of green hydrogen adds to the case for not purchasing an electrolyzer. Putting electricity on the market directly is faster, with a lower and less risky investment. You may easily add the electrolyzer later if necessary.
It’s time to put the excitement behind and get to work on some serious output. Even if green hydrogen isn’t always less expensive than gray hydrogen. Because it won’t be for a long time.
