High natural gas prices have made hydrogen produced from fossil fuels increasingly uneconomical and have spurred more than $70 billion in new investment in hydrogen from renewables since the start of the war in Ukraine, according to a report released Thursday.
Green or clean hydrogen is made using electrolysers powered by renewable energy to separate water from oxygen, while blue hydrogen is made from natural gas with technology to capture and store the carbon dioxide emissions produced.
Gray hydrogen extracts hydrogen from coal or gas using steam methane reforming and is currently the industry standard process.
Green hydrogen has been touted as the key to decarbonizing industries that rely on coal, gas and oil, such as steel and chemicals. But production costs have traditionally been much higher than other forms of hydrogen.
With gas prices having soared more than 70% on international markets since the start of the war in Ukraine in February, the cost of producing hydrogen from fossil fuels has become more expensive than green hydrogen, according to The report.
In Europe, owners of fossil hydrogen assets will see their production costs increase by around 50% more than the average green hydrogen costs at $7.60/kg, while new blue hydrogen in Asia costs 35% more at $6.40/kg and gray hydrogen. is 29 percent more than green hydrogen.
Rapid and continued investment in green hydrogen over the next few years could mean the cost of production falls below $2/kg by 2030, from an average of $3.80 to $5.80 /kg before the war in Ukraine.
This puts more than $100 billion in existing fossil hydrogen assets at risk of becoming stranded assets by 2030, the report said.
Renewable energy deployment has increased this year as countries attempt to wean themselves off Russian gas, the International Energy Agency said this week.
Carbon Tracker estimates that 25 countries have committed $73 billion in public and private funds to green hydrogen production since the start of the conflict in Ukraine, with Germany, Morocco and the United States being the largest.
Updated: October 21, 2022, 5:30 a.m.