Green and blue hydrogen describes the method used to produce hydrogen while indicating complete or partial elimination of carbon emissions.
For producing green hydrogen,renewable electricity from solar, wind, hydropower and geothermal sources are utilized as a fuel in an electrolyzer. For making blue hydrogen, methane/natural gas or coal is used as source in steam-methane reforming or gasification coupled with carbon capture & storage.
The levelized cost of production/hydrogen (LCOH) is the analysis of capital and operating cost in the hydrogen production process and depends on different types of hydrogen. However, LCOH does not include the hydrogen storage and transportation costs.
Levelized Production Costs of Green & Blue Hydrogen
The current levelized cost of green hydrogen production lies in the broad range of USD 3-6 per kg, making it uneconomical.
The production cost of green hydrogen greatly depends on the capital cost of electrolyzers (CAPEX), their capacity or utilization factor (OPEX), and the procurement cost of renewable electricity. The CAPEX includes cost associated with electrolyzer system or stack, necessary balance of plant and electricity grid connection. while OPEX include cost associated with several variable and fixed parameters.
The current levelized cost of blue hydrogen production typically lies in the range of USD 2.8-3.5 per kg based on a gas prices ranging from USD 6-11 per MMBtu. The capital cost broadly includes reformer unit, steam turbine, necessary balance of plant and other units depending upon the technology used such as SMR and ATR. However, like green hydrogen, blue hydrogen operating cost includes costs associated with several variable and fixed parameters.
Green hydrogen is produced using electrolyzers, making it the cleanest and costliest than the rest. In fact, green hydrogen is 2-3 times more expensive than blue hydrogen.
Apart from fuel, capital and operating costs, blue hydrogen LCOH also include the cost of carbon transport and storage. Although this LCOH depends upon the location, fuel price and capital cost of the plant but it is lower than green hydrogen LCOH, making it economically attractive.
Market Trends
- Tax credit system implemented to increase investments: A new tax credit system proposed in the U.S. is expected to attract more players in the blue andgreen hydrogen space. According to this credit system, producers are required to generate not more than 0.45 kg of CO2-equivalent emissions for each kg of hydrogen produced to claim USD 3/kg credit.
- Interest from start-ups and private companies: Due to the U.S. government’s effort to build a national hydrogen economy, manyprivate and public companies have proposed hydrogen hub initiatives. These include Hydrogen City inTexasand Obsidian Pacific Northwest Hydrogen Hub.
- Low variable renewable energy/electricity cost: The cost for procuring renewable electricity from solar PV and onshore wind farms has decreased substantially over the last decade, offering an opportunity to lower the high LCOH for green hydrogen. The global weighted average LCOE (levelized cost of electricity) for utility-scale solar PV of newly commissioned projects fell by 13% Y-o-Yfrom USD 0.055/kWh to USD 0.048/kWh.
- Expected reduction in the cost of hydrogen electrolyzers: The cost of procuring electrolyzers is anticipated to fall rapidly in the coming years. The capital cost of electrolysis has fallen by 60% since 2010, resulting in a decrease of hydrogen cost from a range of USD 10-15/kg to USD 4-6/kg.
In November 2022, BP signed a MoU with government of Mauritania to conduct studies for evaluating technical and commercial feasibility of a large-scale green hydrogen project in the country.
The same month, Equinor and Centrica announced development of the Easington Gas Terminal into a blue and green hydrogen hub in the U.K.’s Humber area. Here, natural gas would be used to produce blue hydrogen with carbon capture. Additionally, offshore wind developments would provide electricity for green hydrogen production.
Conclusion
Levelized cost of green hydrogen is anticipated to fall by 2030 due to reduction in the levelized cost of electricity (LCOEs) over the past decade and expected reduction in the cost of electrolyzers. Ongoing technological innovation and economies of scale are also likely to contribute to this price decline.
With current elevated oil and gas prices, the cost parity between green and blue hydrogen have already been achieved in some parts of Europe, making green hydrogen more feasible. It is forecasted that, by 2050, the LCOH of green hydrogen will be slightly lower than that of the blue hydrogen.
Author:Anshuman Saini
Sources and references:
irena.org/publications/2020/Nov/Green-hydrogen
https://www.linkedin.com/pulse/what-levelized-cost-clean-hydrogen-production-greg-perkins/
spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/blue-hydrogen-serves-as-low-carbon-bridge-to-green-hydrogen-future-experts-say-66321776
spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/hydrogen-tax-credit-would-support-both-green-blue-production-67404374
spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/geography-matters-hydrogen-hub-proposals-spring-up-across-north-america-70997688
saurenergy.com/research/irena-report-on-renewable-power-generation-costs-in-2021
upstreamonline.com/hydrogen/bp-looks-at-potential-of-large-scale-green-hydrogen-in-mauritania/2-1-1348127
upstreamonline.com/hydrogen/easington-gas-terminal-to-convert-to-hydrogen-hub/2-1-1346408
goldmansachs.com/insights/pages/carbonomics-the-clean-hydrogen-revolution.html
FAQs
The current levelized cost of green hydrogen production lies in the broad range of USD 3-6 per kg, making it uneconomical. The production cost of green hydrogen greatly depends on the capital cost of electrolyzers (CAPEX), their capacity or utilization factor (OPEX), and the procurement cost of renewable electricity.
What is the current production cost of green hydrogen? ›
Green hydrogen now costs USD 4-6/kilogram (kg), 2-3 times more than grey hydrogen. The largest single cost driver is renewable electricity, which is becoming cheaper every year. But electricity itself is not the only factor to consider.
How much does green and blue hydrogen cost? ›
Blue hydrogen, or hydrogen produced with fossil fuels but subject to carbon capture, costs $1.8-$4.7 per kilogram. And green hydrogen, which is produced by running an electric charge through water, costs a whopping $4.5-$12 per kilo.
What is the outlook for the green hydrogen industry? ›
January 31 - Hydrogen-dedicated renewable energy capacity is expected to grow by 45 GW between 2022 and 2028, some 35% lower than forecast a year ago, the International Energy Agency (IEA) said in its latest Renewables report.
What is the levelized cost of blue hydrogen? ›
As such, depending on the market, the levelised cost of producing grey hydrogen from unabated fossil gas this year ranges from $0.98-2.93/kg while blue — where most of the CO2 produced is captured and stored (or used) — costs between $1.80-4.68/kg.
What is the US levelized cost of hydrogen? ›
The levelized hydrogen production cost ranges from approximately $1.30 to $4.50 per kilogram, with the lowest production costs associated with traditional fossil fuel pathways such as coal and natural gas.
What is the cheapest way to produce green hydrogen? ›
Green hydrogen is created when fossil fuels are replaced with renewable energy sources, such as solar or wind power, during the electrolysis of water. Water is electrolyzed by passing an electrical current across it, causing the water molecules to separate into hydrogen and oxygen.
What is the difference between green hydrogen and blue hydrogen? ›
Green hydrogen is when the energy used to power electrolysis comes from renewable sources like wind, water or solar. Blue hydrogen is hydrogen produced from natural gas with a process of steam methane reforming, where natural gas is mixed with very hot steam and a catalyst.
Who is the largest producer of green hydrogen? ›
The world's largest green hydrogen project, which generates hydrogen from solar and wind renewables without emitting carbon dioxide, produced its first batch of "green hydrogen" on Thursday in Ordos, Inner Mongolia Autonomous Region in north China.
What is cheaper blue or green hydrogen? ›
Green hydrogen is more sustainable (lower emissions) but also more expensive. Blue hydrogen is cheaper but causes higher remaining emissions due to methane leakage and incomplete CO2 capture.
The price of blue hydrogen is dependent on the price of fossil fuels, reformation technology used to create hydrogen, and the cost of carbon capture and long-term storage. The price of green hydrogen depends on the price of renewable energy, electrolysers and water used to create hydrogen.
What are the cons of blue hydrogen? ›
Blue hydrogen is not clean, not a low-carbon source of energy and not a solution to the global climate crisis. The model used by the U.S. government significantly underestimates methane emissions used to produce hydrogen with fossil fuels.
What are the top 3 green hydrogen stocks? ›
Comparison Results
| Name | Price | Market Cap |
|---|
| PLUG Plug Power | $2.57 | $1.76B |
| NFE New Fortress Energy | $28.06 | $5.75B |
| APD Air Products and Chemicals | $231.64 | $51.49B |
| BE Bloom Energy | $9.63 | $2.17B |
4 more rowsThe fundamental problem lies in the laws of physics. Between 50 and 80 percent of the energy value of clean electricity is lost in the process of making hydrogen and then burning it to generate electricity. Some of those losses occur in the electrolysis process, which is roughly 70 to 75 percent efficient.
What are the problems with producing green hydrogen? ›
According to the Hydrogen Council [23], meeting the projected global demand for GH and its expanding applications are hindered by high production costs, lack of market, and investment risks due to regulatory uncertainties, and the need for extensive production technologies and infrastructure [24].
How much does green hydrogen cost per MMBtu? ›
Green hydrogen costs are expected to decline to about $15/MMBtu ($2/kg) by 2030 and $7.4/MMBtu ($1/kg) in 2050. However, this must be considered against the much lower IMF 2024 projected Henry Hub cost for NG at $2.65/MMBtu. The World Bank expects that the NG price at Henry Hub will stabilise at $4 per MMBtu by 2030.
What is the cost of hydrogen production? ›
Depending on regional gas prices, the levelised cost of hydrogen production from natural gas ranges from USD 0.5 to USD 1.7 per kilogramme (kg). Using CCUS technologies to reduce the CO2 emissions from hydrogen production increases the levelised cost of production to around USD 1 to USD 2 per kg.
What is the cost analysis of hydrogen production? ›
The cost analysis of hydrogen production involves evaluating various factors such as capital investment, operational expenses, energy source costs, equipment efficiency, and scale of production to determine the overall cost per unit of hydrogen produced.
What is levelized cost of renewable energy? ›
The levelized cost of electricity (LCOE) is a measure of the average net present cost of electricity generation for a generator over its lifetime. It is used for investment planning and to compare different methods of electricity generation on a consistent basis.
