Green hydrogen projects based on newbuild wind power generation face rising costs as turbine manufacturers raise prices after suffering major losses over the past two years.

Turbine maker Siemens Gamesa increased its average selling price to €890,000/MW ($923,533/MW) in Q3 2022, a 41pc increase year-on-year. Meanwhile, rival European manufacturer Vestas raised its average selling price to €1.06mn/MW in the third quarter this year, up by €100,000/MW from the previous quarter and €330,000/MW from Q3 2020.

There is further room for manufacturers to increase prices by another 15–25pc over the next 4–5 quarters, says Shashi Barla, director at consultancy Brinckmann.

€1.06mn/MW – Average selling price for Vestas turbines in Q3 2022

Turbines account for 70pc of the capital costs of wind projects, he estimates. Rising capital costs will also increase the levelised cost of electricity (LCOE) of wind power, in turning raising green hydrogen costs as electricity accounts for 70–80pc of the cost of production. A 20–30pc increase in turbine costs could drive up wind’s LCOE by 5–10pc, Barla says.

“If you ran the business case for a green hydrogen project 24 months ago, to build it now you would definitely see an escalation in price,” Barla says.

Electricity prices in Europe are already elevated as surging gas prices set spot power prices, although governments are looking to decouple renewable power from gas-linked markets.

Near-term potential

Siemens Gamesa plays down the potential impact of rising turbine prices on green hydrogen costs, especially in the near term. It points to the findings of its Brande Hydrogen pilot project that suggest the biggest near-term potential for green hydrogen is in adding hydrogen facilities to existing onshore wind infrastructure, thus limiting the impact of rising capital costs for newbuild wind over the next 2–3 years.

“Even if the current macroeconomic and geopolitical context is still uncertain, in the mid and long term, our estimation is that the current headwinds will likely not have a major impact on hydrogen prices from the late 2020s onwards,” the company tells Hydrogen Economist.

“We strongly believe that the wind industry will be the principal one to support the bulk of green hydrogen generation. From our side, Siemens Gamesa will continue with its commitment to develop more efficient and optimised products, with the ambition to continue spearheading the green energy transition.”

But a decision has yet to be reached on EU regulations that could require renewables additionality in order to certify hydrogen as ‘green’ from the late 2020s, potentially forcing hydrogen projects to take power from newbuild wind projects rather than existing ones.

---

Author: Polly Martin