January 12, 2023 | Supply Chain Strategy Blogs
Green and blue hydrogen describes the method used to produce hydrogen while indicating complete or partial elimination of carbon emissions.
For producing green hydrogen, renewable electricity from solar, wind, hydropower and geothermal sources are utilized as a fuel in an electrolyzer. For making blue hydrogen, methane/natural gas or coal is used as source in steam-methane reforming or gasification coupled with carbon capture & storage.
The levelized cost of production/hydrogen (LCOH) is the analysis of capital and operating cost in the hydrogen production process and depends on different types of hydrogen. However, LCOH does not include the hydrogen storage and transportation costs.
The current levelized cost of green hydrogen production lies in the broad range of USD 3-6 per kg, making it uneconomical.
The production cost of green hydrogen greatly depends on the capital cost of electrolyzers (CAPEX), their capacity or utilization factor (OPEX), and the procurement cost of renewable electricity. The CAPEX includes cost associated with electrolyzer system or stack, necessary balance of plant and electricity grid connection. while OPEX include cost associated with several variable and fixed parameters.
The current levelized cost of blue hydrogen production typically lies in the range of USD 2.8-3.5 per kg based on a gas prices ranging from USD 6-11 per MMBtu. The capital cost broadly includes reformer unit, steam turbine, necessary balance of plant and other units depending upon the technology used such as SMR and ATR. However, like green hydrogen, blue hydrogen operating cost includes costs associated with several variable and fixed parameters.
Green hydrogen is produced using electrolyzers, making it the cleanest and costliest than the rest. In fact, green hydrogen is 2-3 times more expensive than blue hydrogen.
Apart from fuel, capital and operating costs, blue hydrogen LCOH also include the cost of carbon transport and storage. Although this LCOH depends upon the location, fuel price and capital cost of the plant but it is lower than green hydrogen LCOH, making it economically attractive.
In November 2022, BP signed a MoU with government of Mauritania to conduct studies for evaluating technical and commercial feasibility of a large-scale green hydrogen project in the country.
The same month, Equinor and Centrica announced development of the Easington Gas Terminal into a blue and green hydrogen hub in the U.K.’s Humber area. Here, natural gas would be used to produce blue hydrogen with carbon capture. Additionally, offshore wind developments would provide electricity for green hydrogen production.
Levelized cost of green hydrogen is anticipated to fall by 2030 due to reduction in the levelized cost of electricity (LCOEs) over the past decade and expected reduction in the cost of electrolyzers. Ongoing technological innovation and economies of scale are also likely to contribute to this price decline.
With current elevated oil and gas prices, the cost parity between green and blue hydrogen have already been achieved in some parts of Europe, making green hydrogen more feasible. It is forecasted that, by 2050, the LCOH of green hydrogen will be slightly lower than that of the blue hydrogen.
Author: Anshuman Saini
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