On the Cost Competitiveness of Blue and Green Hydrogen

39 Pages Posted: 13 Jul 2023

See all articles by Falko Ueckerdt

Falko Ueckerdt

Potsdam-Institut für Klimafolgenforschung (PIK)

Philipp Verpoort

Potsdam-Institut für Klimafolgenforschung (PIK)

Rahul Anantharaman

SINTEF Energy Research

Christian Bauer

Paul Scherrer Institute (PSI)

Fiona Beck

Australian National University (ANU)

Thomas Longden

Macquarie University, Macquarie Business School; CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

Simon Roussanaly

SINTEF Energy Research

Date Written: July 5, 2023

Abstract

Despite huge cost reduction potential for green hydrogen production, it is uncertain when cost parity with blue hydrogen will be achieved. While technology costs, electricity and natural gas prices are key drivers, hydrogen’s competitiveness will be increasingly determined by carbon costs or regulation associated with its life-cycle emissions. Theoretically and numerically we show that higher residual emissions of blue hydrogen can close its competitive window much earlier than cost parity of green hydrogen would imply. In regions where natural gas prices will remain substantially higher (~40 EUR/MWh) than before the energy crisis, such a window is narrow or may have closed already. Blue hydrogen could play a role in bridging the scarcity of green hydrogen, yet uncertainties about the beginning and end of blue hydrogen competitiveness might impede investments. By contrast, in regions where natural gas prices fall below 15 €/MWh, blue hydrogen can remain competitive until ~2040, if it is produced with high CO2 capture rates (>90%) and low methane leakage rates (<1%).

Keywords: hydrogen, techno-economic assessment, renewable energy, carbon capture and storage, carbon pricing

JEL Classification: Q42,Q55, Q54, Q48, O31, O33

Suggested Citation

Ueckerdt, Falko and Verpoort, Philipp and Anantharaman, Rahul and Bauer, Christian and Beck, Fiona and Longden, Thomas and Roussanaly, Simon, On the Cost Competitiveness of Blue and Green Hydrogen (July 5, 2023). Available at SSRN: https://ssrn.com/abstract=4501786 or http://dx.doi.org/10.2139/ssrn.4501786

Falko Ueckerdt (Contact Author)

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Philipp Verpoort

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Rahul Anantharaman

SINTEF Energy Research ( email )

Kolbjørn Hejes vei 1A
Trondheim, NO-7034
Norway

Christian Bauer

Paul Scherrer Institute (PSI) ( email )

5232 Villigen PSI
Switzerland

Fiona Beck

Australian National University (ANU)

Thomas Longden

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici ( email )

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Simon Roussanaly

SINTEF Energy Research ( email )

Kolbjørn Hejes vei 1A
Trondheim, NO-7034
Norway

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