We use cookies
to help provide you with a good experience on our website. By continuing to browse the website, you are agreeing to our use of cookies.

‘Big wake-up call’ as energy crisis makes fossil hydrogen a bad investment


‘Big wake-up call’ as energy crisis makes fossil hydrogen a bad investment

The current energy crisis is making “blue” hydrogen derived from natural gas with carbon capture even more impractical than it already was, raising broader questions about the use of gas to produce electricity, a new analysis concludes - The Energy Mix

Heating with blue hydrogen requires fully one-third more gas than if gas itself were used directly to produce heat. Now that prices have risen dramatically, the cost of production for blue hydrogen is 36% higher than the UK government estimated in 2021, states the Institute for Energy Economics and Financial Analysis (IEEFA).

“Europe is facing three challenges, namely reducing gas price, offering a secure supply of energy, and continuing with its energy transition goals,” said report co-author and IEEFA energy analyst Ana Maria Jaller-Makarewicz. “There is only one way to meet all of them: Reduce gas demand. Investing in blue hydrogen production would do quite the opposite.”

Continued investment in blue hydrogen would deepen the country’s vulnerability to gas price volatility and supply uncertainty, at a time when Europe is scrambling to reduce its dependence on gas

IEEFA report

The cost forecast indicates a possible loss of government support for the fuel, which may already be waning—with 26 green hydrogen projects expected to begin construction across the globe, no blue hydrogen projects are in the pipeline.

“Looking ahead to 2030, the cost curve speaks clear,” said Arjun Flora, IEEFA’s director of energy finance studies, Europe. “Since both the price of gas and UK emissions allowances have risen, not only is blue hydrogen no longer a low-cost technology. Its green rival will become cheaper to produce this decade and well before the end of blue hydrogen projects’ lifetimes—which makes blue hydrogen a bad investment.”

The energy crisis is also shifting the conversation about the role of fossil gas in electricity production, IEEFA says.

“I think this is a big wake up call,” said Francesco Starace, CEO of Italian utility giant Enel. “Too much gas” has been used “in a stupid way, because burning gas to produce electricity is, today, stupid.”

With the EU now trying to wean itself from Russian hydrocarbons, Starace says there are more attractive options than gas.

“You can produce electricity better, cheaper, without using gas,” he said. “Gas is a precious molecule and you should leave it for… applications where that is needed.”

Relevant news

Schlumberger to integrate fuel cells into Intelligent Power Management technology
Companies plan to power an onshore drilling rig application with hydrogen as early as fourth quarter of 2022.
SSE thermal and Equinor to acquire triton power in acceleration of low-carbon ambitions
SSE Thermal and Equinor have entered into an agreement to acquire Triton Power Holdings Ltd from Energy Capital Partners.
Amcor, Minderoo Foundation partner to build plastic recycling plants
Sea The Future, will provide investment to build sorting and recycling plants.
OMV Petrom launches the sustainability report for 2021: 11 million Euro on social projects
OMV Petrom, has published the Sustainability Report for 2021.
Fluxys and Equinor launch solution for large-scale decarbonisation in North-Western Europe
Fluxys and Equinor have agreed to develop a major infrastructure project for transporting captured CO2.
Worley to provide engineering support for Chevron’s onshore, offshore assets
Worley has entered into a global master services agreement with Chevron.