KUALA LUMPUR (March 22): As the cost of blue and gray hydrogen surge in line with rising fossil fuel prices, the feasibility of green hydrogen as an affordable and secure source of renewable energy in Europe is growing.

According to Norway-based independent energy research and business intelligence company Rystad Energy, green hydrogen production was already set to take off this year globally and pass the 1-GW-milestone in 2022.

However, it said the war in Ukraine has turbocharged the sector.

Rystad said green hydrogen’s potential win comes at the expense of its fossil fuel-linked blue and gray alternatives, whose costs have increased by over 70% since the start of the war in Ukraine, rising from about US$8/kg to US$12/kg in a matter of days.

It said the EU has announced plans for a €300 million funding package for hydrogen as well as the Hydrogen Accelerator initiative from REPowerEU aiming at reducing the region’s dependence on Russian gas with a further wave of support packages for green hydrogen specifically likely to emerge.

Meanwhile, it said individual member states have also accelerated their domestic plans.

Since the Russian invasion of Ukraine, the economics of green hydrogen have become increasingly attractive with lower production costs of US$4/kg (particularly in the Iberian Peninsula) compared to US$14/kg for blue and US$12/kg for gray in other part of Europe.

The firm said green hydrogen promises energy security as well as potential new regional economies for renewable energy.

While some countries are focused on domestic usage, others are focusing on exports, suggesting that we may be moving from a world where energy is sourced in a few key regions, to a world where production is more spread-out.

Rystad said the decade ahead is a make or break one for the green hydrogen sector – if production can be increased as planned to more than 10 million tons globally by 2030 and costs cut to US$1.5/kg or less, then the industry will become a permanent fixture of the global energy mix.  

Rystad head of hydrogen research Minh Khoi Le said while industry and governments are heading in the right direction, their challenge is to lower the risks for green hydrogen investors and create incentives necessary to scale up quickly both the demand and supply.

“Fundamentally, a world where green hydrogen fulfills the role currently played by oil, gas and coal will look very different,” said Minh.