In many places of the world, green hydrogen is currently cheaper than gray hydrogen. The biggest reason is the conflict in Ukraine.
As is generally known, the conflict in Ukraine has driven up the price of natural gas, which was already quite expensive. This is terrible news for many industries, and it shows up in residential energy costs.
There is, however, another, far more favorable phenomenon. Green hydrogen, which is made from renewable energy, is now competing with gray hydrogen, which is made from fossil sources and does not collect CO2. This is the situation in the economic region of Europe, the Middle East, and Africa (EMEA).
As a result, gray hydrogen made from untapped fossil gas now costs $6.71 per kilogram in EMEA, compared to $4.84 to $6.68 per kilogram for renewable hydrogen (using Western electrolyzers).
According to the study, “Ukraine War Makes Green Hydrogen Competitive,” the situation in China is similar. Green hydrogen costs $3.22/kg (when utilizing Chinese electrolyzers), but gray hydrogen costs $5.28/kg.
As a result, green ammonia (which is partly manufactured using hydrogen) is less expensive than gray ammonia. Europe, the Middle East, and Africa, as well as China, are all affected.
How long?
The article stated that “the Russian invasion of Ukraine has raised pressure on global natural gas prices, which had already hit record highs due to constrained supply.” “As a result, natural gas products like ammonia are up to three times more expensive today than they were a year ago.” This has given ‘green’ hydrogen and ammonia, made from renewable energy, a chance to compete with natural gas-based operations that aren’t being shut down.”
According to the analysis, natural gas costs may continue to grow as the war in Ukraine drags on. “As Europe attempts to break free from Russian gas imports, which account for a third of the continent’s gas supply,” the Commission stated, “it appears that gas markets may face considerably higher pricing in the near future.”
It was “inconceivable” two years ago that green hydrogen and ammonia could compete with their gray counterparts, especially because carbon price was not included.
While the economic landscape may alter in the next years, businesses may still regard green hydrogen as a more realistic choice than previously, especially if they wish to transition away from gas for social, environmental, and security reasons.
However, this is not the situation in the United States, where gray hydrogen – and gray ammonia – are still far cheaper than green hydrogen.
