Green hydrogen prices nearly triple as energy costs rise: S&P

Diving Brief:

  • The cost of electrolytic hydrogen from renewables reached $16.80/kg at the end of July, three times recent price norms, according to S&P Global Commodity Insights.

  • Because hydrogen must be derived from inputs such as natural gas or renewable electricity, the cost of hydrogen increases along with these resources, according to Alan Hayes, head of energy transition pricing for S&P Global Commodity. Insights. Soaring energy costs in the Electric Reliability Council of Texas market led to the biggest increases in hydrogen prices, Hayes said.

  • Despite recent price trends, long-term interest in hydrogen as an alternative energy resource continues to grow, according to Brian Murphy, senior hydrogen and low-carbon fuels analyst for S&P Global Commodity. Insights.

Overview of the dive:

Hydrogen, it seems, is not immune to the inflationary pressures experienced in recent months by other energy resources.

The cost of hydrogen from U.S. electrolyzers jumped to $16.80/kg in July due to energy price hikes that took place in the ERCOT market during a heat wave between July 6 and July 12 , according to data from S&P Global Commodity Insights. Electrolytic hydrogen is derived from water and electricity, especially excess renewable energy, to create a carbon-free fuel source. That means hydrogen prices fluctuate alongside electricity prices, Murphy said.

The vast majority of hydrogen produced today comes from natural gas rather than electrolysis. Abroad, prices for this conventional hydrogen have also seen spikes of up to twice their usual levels – more than $10/kg – since the start of the year, according to S&P Global Commodity Insights. The cost of conventional hydrogen has remained more stable on the US Gulf Coast. For conventional hydrogen, sometimes called “grey” hydrogen, prices match the availability and cost of natural gas, Hayes said.

“Everything that happens in [natural] gas markets have an immediate and direct impact” on hydrogen, Hayes said. Regions where natural gas prices and electricity prices have soared have suffered “the double whammy of all possible production pathways impacted by gas and electricity prices”, he said. he declares.

Multiple initiatives have set targets to bring the cost of clean hydrogen in line with fossil energy resources, including the U.S. Department of Energy’s “Hydrogen Kick” which targets $1/kg for low-carbon hydrogen. carbon content.

Hayes and Murphy do not believe these goals are in jeopardy. Long-term projections, Murphy said, indicate that hydrogen prices should continue to decline as the technology becomes more sophisticated and the scale of production increases. Long-term interest in hydrogen also remains high, he said, and the number of hydrogen projects underway continues to grow.

“It’s important to distinguish between the swings in the market right now, and we can see that direct link, and the long-term factors at play that indicate the direction of travel is lower hydrogen prices.” , said Hayes.

But recent developments could shed light on the future of hydrogen production in the United States, where the cost of natural gas remains relatively low, Hayes said. If the price differential between natural gas and electricity is large enough, he said, U.S. hydrogen producers could choose to extract their product from natural gas, coupled with carbon capture, rather than relying on renewable energy and electrolysis.

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