Rising gas prices make green hydrogen cheaper than grey hydrogen

As green hydrogen was more than twice as expensive as hydrogen produced with fossil fuels, its widespread use wasn’t expected for another decade, but the skyrocketing cost of natural gas has changed that, financial daily Handelsblatt reports. Indeed, sustainable hydrogen is now paying off much faster than expected and could significantly accelerate the ramp-up of the hydrogen economy, the newspaper writes. “The change is already here,” said Michael Sterner, a hydrogen expert at the Regensburg University of Applied Sciences. “Wherever the production of green electricity is cheap, for example with hydropower in Scandinavia or with a lot of wind and sun in Namibia, power-to-X products such as green ammonia are already cheaper than the fossil alternative." According to an analysis from Bloomberg New Energy Finance (BNEF), green hydrogen is already cheaper than fossil hydrogen from natural gas in parts of Europe, the Middle East and Africa. It notes that a kilogram of grey hydrogen currently costs 6.71 US dollars in these regions compared to 4.84 to 6.68 dollars per kilogram for green hydrogen – due mainly to the price of gas, which has been climbing since the end of last year and shot up significantly with the Russian attack on Ukraine. “A year ago we were still paying 350 euros for a tonne of grey ammonia, whereas green ammonia cost between 600 and 700 euros,” Sterner said. “Now that the price of natural gas has multiplied, things have changed.” Companies like electrolysis manufacturer Sunfire in Dresden are also seeing a clear price reversal. “All of a sudden it can be more economical for industry to use green hydrogen than grey,” said Sunfire CEO Nils Aldag. “This development would otherwise have taken years.”

German climate policy research institute IKEM recently called for the EU to increase support for producers of green hydrogen and facilitate the expansion of electrolyser technology in order to achieve a successful energy transition. The German government is aiming for an electrolysis capacity of about 10 gigawatts (GW) by the end of the decade.