Record high gas prices sparked the scramble for green hydrogen. European countries have long planned to increase green hydrogen’s place in their energy mixes but the process has been slow.
It wasn’t until gas prices began rising in Europe last year that the case for green hydrogen was solidified. Prices have soared 450% over the past year on the back of tightening global supply and, most recently, the conflict in Ukraine.
The industry has long been held back by high costs, but this is expected to change. Green hydrogen is produced using a process known as electrolysis where H2O (water) is separated into H (hydrogen) and O (oxygen), enabling hydrogen to be extracted.
Only 0.1% of the world’s hydrogen supply is actually green, which is largely due to the fact that the process is more expensive than its non-green equivalent. Now, by virtue of soaring gas prices, green hydrogen has become the more cost-effective option.
Adding to that is the rising price of carbon in the EU, which has nearly doubled in the past year, making the green version even less expensive by comparison.
The EU has now doubled green hydrogen targets, and wants to have 80 GW of capacity by the end of the decade, up from less than 1 GW currently. The UK is doing likewise, and has set a goal of producing 5 GW of power from electrolyzers by 2030.
Companies are already pouring bn’s into production plants and infrastructure projects to facilitate the transition. Australian iron ore producer Fortescue Metals Group have agreed to a USD 50 bn project to develop the hydrogen supply chain with German utilities company E.On while hydrogen infrastructure investment platform Hy24 has earmarked some USD 1.6 bn for various projects.
“The economics are moving in favor of green hydrogen. The projects we’re seeing look more bankable from a finance perspective now,” Ivan Pavlovic, executive director at French bank Natixis CIB, told Bloomberg.
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