Closing the cost gap between blue and grey hydrogen

From grey to blue: the recent surge in carbon prices is rapidly closing the cost gap between blue and grey hydrogen.

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The surge in European carbon, hovering between €50-55/tCO2eq is having profound implications across energy markets and technologies, hydrogen is certainly one of them.

Steam methane reforming is a rather emission intensive business, with roughly 9kgCO2 for each kg of H2. as such European hydrogen production currently translates into ~100 MT carbon emissions each year.

With carbon prices at €55/t the cost of polluting is becoming increasingly burdensome, equating to over one-quarter of opex of gas-based SMR plants these days.

Meanwhile, the production cost differential with blue hydrogen (SMR equipped with CCS) have dropped from 30% through the 2010s to around 5% nowadays.

Could this provide a boost for European CCS+SMR projects? there is over 30 mtpa of SMR+capture capacity proposed providing a huge potential to clean up Europe’s dirty hydrogen production and bring is closer to net zero.

Dynamic contracts for difference, such as the one proposed for Porthos could facilitate project development and mitigate investment risks…

What is your view? Could blue hydrogen take off in Europe? What are the main challenges ahead?

Source: Greg MOLNAR (connect on LinkedIn)