Green hydrogen cheaper than natural gas in Europe boosts investment
The price of liquefied natural gas is higher than green hydrogen in eight European countries, providing a major tailwind to invest in hydrogen.
The levelized cost of green hydrogen produced with alkaline electrolysers, i.e., not including any subsidies, is cheaper than natural gas in countries including the UK, Sweden, Italy, Spain, France, Germany and Poland, according to data from BloombergNEF.
The price of natural gas has soared over the past year as Russia reduced supplies to Europe amidst its invasion of Ukraine. Meanwhile, the cost of renewable energy and electrolysers used to produce green hydrogen continues to fall.
The levelized cost of green hydrogen produced with alkaline electrolysers, i.e., not including any subsidies, is cheaper than natural gas in countries including the UK
BloombergNEF’s analysis found that Sweden and Italy were capable of producing the cheapest hydrogen in Europe, while the cost of production would be highest in Germany and Poland, reflecting relative renewable energy costs.
Onshore wind is the cheapest source of electricity across Europe, while solar is the cheapest in Turkey and the United Arab Emirates, according to BloombergNEF. Green hydrogen is not currently cheaper than natural gas in China, the US, or the UAE where gas prices are lower.
While natural gas prices are predicted to decline towards the end of the decade, so will the cost of green hydrogen.
According to a report earlier this year by Rethink Energy, the cost of green hydrogen will fall from about $3.70/kg today to just over $1/kg in 2035 and $0.75/kg by 2050. Green hydrogen will be produced for $1/kg in some countries by 2030, according to Wood Mackenzie.
The cost of green hydrogen is reliant on the price of renewable energy, which has been steadily falling for decades and continues to do so.
Green hydrogen also has the advantage that its production costs are predictable and steady, contrasting with natural gas, which is a highly volatile commodity, the price of which can be manipulated by the few large players, such as Russia, that control global supplies.
The cost of green hydrogen is reliant on the price of renewable energy, which has been steadily falling for decades and continues to do so.
Green hydrogen’s current price advantage over natural gas makes short-term investment decisions easier, particularly when it is replacing natural gas in industrial processes, heating and energy production.
Today’s price dynamics are also important because the traditional way of making hydrogen is through steam reforming natural gas, also known as grey hydrogen.
It was only in March that BloombergNEF data showed that green hydrogen production costs were below grey. Now it is cheaper even than grey hydrogen’s main input.
The numbers speak for themselves. Clean hydrogen is not only the future; it is the present.
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