Soaring gas prices have rendered green hydrogen cheaper now in the UK than its grey, methane-based sister, analysts have claimed.
London-based consultancy ICIS calculate that vertiginous rises in wholesale gas prices since September have benefitted consumers by making the gas’s green variant, split off from water with renewable electricity, almost 20% cheaper to produce than the predominant grey.
Until recently, industry wisdom has held that plentiful steam-powered methane crackers in well established refineries mean grey hydrogen will always be produced in higher quantities and at lower prices beyond the reach of its cleaner, greener rival.
Cost estimates from the IEA back up the conventional view. In April the UN body estimated green hydrogen’s average price worldwide varies between £ 2.23 and £5.96 per kilogramme, against a range of £ 0.37 to £ 1.26 /kg for grey hydrogen.
But those numbers fail to account for 2021’s 250% rise in natural gas on European markets, ICIS argue. Their calculations identify a rise in production costs for the grey, steam-reformed gas from £1.43 per kilogramme in April to almost £ 6.00 in early October.
Against that, says the consultancy, green hydrogen’s power source, renewable electricity made from wind or solar, is usually bought under fixed price PPAs or power purchase agreements.
Power fixed at a UK market-average of £ 45 per MWh throughout the gas crisis would mean factory-gate supply of green electrolysed hydrogen coming in in early November at £ 3.39 / kg. That compares with £4.16 / kg, quoted in markets last week for grey hydrogen.
The ICIS revelations were made in an energy trade publication and picked up by a national newspaper. As in the UK, so in continental Europe, the analysts argue. More on ICIS’ analysis here.
The news came as energy asset developer Getech announced its clean gas subsidiary H2 Green had signed a two-year deal to turn the Sussex port of Shoreham into a hub for the renewables-based gas.
Addressing shareholders this morning, London-based Getech said H2 Green had secured exclusive rights until 2023 to develop a hydrogen and clean energy hub at the port, initially to provide hydrogen and power to the port’s 39 forklift trucks and 12 heavy lorries, removing up to 45,000 tonnes of CO2.
Electricity generation from new solar and wind assets would enable onsite production, storage and refuelling of the gas, said Getech. A second stage will enable decarbonisation of more than 800 tricks that enter Shoreham Port daily, and to provide fuel to ships. A terminal for imported ammonia may follow.
Getech’s shares rose 22% by mid-afternoon on the news.
Sheffield’s ITM Power added to another big day for green hydrogen. It confirmed the signing of a sales contract for a 12 MW electrolyser and related equipment, for delivery in 2022. Both the buyer and its contract value remain commercially confidential.
