According to research, since the conflict in Ukraine broke out, rising natural gas prices have made hydrogen produced from fossil fuels increasingly unprofitable and have encouraged over $70 billion in new investment in hydrogen from renewable sources.
In order to separate water from oxygen, so-called green or clean hydrogen is produced using electrolyzers powered by renewable energy, whereas blue hydrogen is produced from natural gas using equipment that captures and stores the carbon dioxide emissions.
Grey hydrogen is now the industry standard method for obtaining hydrogen from coal or gas using steam methane reforming.
Green hydrogen has been hailed as the solution to decarbonizing sectors like steel and chemicals that depend on coal, gas, and oil. But compared to other kinds of hydrogen, production costs have often been substantially greater.
The cost of manufacturing hydrogen from fossil fuels has risen above the cost of green hydrogen, according to the analysis, with gas prices surging more than 70% on global markets since the start of the conflict in Ukraine in February.
Fossil fuel hydrogen asset owners in Europe will witness an increase in production costs of almost 50% to $7.60/kg from the average cost of green hydrogen, while new blue hydrogen in Asia will cost 35% more at $6.40/kg and grey hydrogen will cost 29% more than green hydrogen.
By 2030, the production cost of green hydrogen could be as low as $2/kg, down from an average of $3.80 to $5.80/kg before the conflict in Ukraine, if green hydrogen investment continues to grow at its current rate.
According to the research, this puts existing fossil hydrogen assets worth more than $100 billion in danger of becoming stranded assets by 2030.
According to the International Energy Agency, this year has seen an increase in the deployment of renewable energy as nations attempt to wean themselves off of Russian gas.
Since the commencement of the Ukraine crisis, 25 nations have reportedly pledged $73 billion in public and private financing to the production of green hydrogen, with Germany, Morocco, and the United States making the largest commitments.