The world economy has committed about $73bn of private and public funds to green hydrogen production in response to a surge in natural gas prices sparked by the war in Ukraine, according to NGO Carbon Tracker.

Twenty-five countries, mostly in the Global North, have committed funds—with Germany, Morocco and the US pledging the most.

The acceleration in investment has been driven by a 70pc+ rise in gas prices since the start of the war in February. This has caused the levelised cost of blue and grey hydrogen to “skyrocket”, making green hydrogen relatively cheaper in most regional markets on a levelised cost of energy basis, Carbon Tracker says.

“The price of green hydrogen has steadily decreased over the past few months” Carbon Tracker

“More investments and capacity pledges to scale up green hydrogen have resulted from the disruption of the gas and energy markets,” the NGO says in a new report, Clean Hydrogen’s Place in the Energy Transition. “The price of green hydrogen has steadily decreased over the past few months, and this technology is gradually becoming more alluring to both public and private sector money.”

In Asia today, new blue hydrogen costs $6.4/kg, which is 35pc higher than the base average green hydrogen cost. The cost of grey hydrogen has exceeded the base average green hydrogen cost by about 29pc, Carbon Tracker says.

European fossil hydrogen asset owners—meaning those producing grey or blue hydrogen—will see their cost of production rise to roughly 50pc ($7.6/kg) higher than their green technology counterparts, it adds.

Carbon Tracker estimates that more than $100bn worth of existing fossil hydrogen assets— particularly those exposed to Russian gas—could be stranded before 2030 due to supply insecurities, high gas prices, and commitments to reduce gas use in line with net-zero scenarios set out by the IEA and the UN’s Intergovernmental Panel on Climate Change.

Growing pains

Green hydrogen could be produced for under $2/kg in most regions by 2030, assuming electrolyser manufacturing can scale up, and asset and production costs continue to fall, Carbon Tracker says.

However, inefficiencies in electrolyser technologies, combined with the sector’s heavy reliance on freshwater, could limit the future growth of green hydrogen production if the issue is not addressed.

About 30-35pc of the energy required to produce hydrogen is wasted along the production chain. A further 13-25pc is lost when liquefying it or converting it to other carriers such as ammonia, and then an additional 10-12pc of the energy in the hydrogen is needed to convey or transport the product.

“These inefficiencies, if not addressed, would require a considerable increase in the usage of renewable energy assets to bridge the inefficiency gap,” Carbon Tracker says.

Based on IEA projections of hydrogen use in all sectors of the economy, freshwater demand for electrolysis is likely to surpass 25pc of current global freshwater consumption, Carbon Tracker says.

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Author: Stuart Penson