Surging power, gas prices push European hydrogen production costs higher in March

Soaring feedstock gas and power prices following Russia's invasion of Ukraine on Feb. 24 have sent hydrogen price assessments sharply higher in Europe, underlining the region's potential for imports of the renewable energy carrier.

The UK remained the highest priced region globally for low-carbon hydrogen production, with the Netherlands close behind, the S&P Global Commodity Insights Hydrogen Price Wall showed.

UK electrolysis production prices averaged around $20/kg in March, more than six times the cheapest locations in Western Australia and the US Gulf Coast.

UK prices were also more than 40% higher than in Japan, another potential importer.

"As well as regional comparisons, understanding the different options across different production pathways is vital when considering the most appropriate option in each region," S&P Global Commodity Insights Head of Energy Transition Pricing Alan Hayes said.

The US is emerging as a low-cost steam methane reforming hydrogen production center, with that production pathway shown as the cheapest globally.

The Hydrogen Price Wall shows the lowest cost region for hydrogen production (via conventional steam methane reforming without carbon capture and storage, or CCS) was the US midcontinent at just $1.21/kg.

Prices in the midcontinent slipped below other US regions, with power and gas input prices falling steeply on mild weather and reduced demand.

The price wall also shows, however, that in locations where power feedstock is cheap, electrolysis production is already under $3/kg.

Electrolysis production costs in Australia and the Middle East were lower than fossil-based production with CCS in the same locations.

While hydrogen price increases were acutely felt in Europe, prices also rose sharply in Japan, with knock-on effects from global surging LNG prices following the Russian invasion and an earthquake that hit northern Japan on March 16, temporarily shutting down several thermal power plants in the region.