Rystad Energy says high costs are a show-stopper when it comes to blending green hydrogen production with offshore wind development.
With several large-scale offshore wind farms planned in the next five years in the North Sea, Rystad looked into the economics due to the area having plenty of ageing platforms and pipelines that could host production and transmission of hydrogen, as well as salt caverns to store it at low cost.
Rystad Energy’s modelling is based on combining a green hydrogen project with an offshore wind farm of 1 gigawatt, and assumes about half of the farm’s generated power is used for hydrogen production. At current break-even costs, the bulk of the hydrogen produced needs to be sold at €5.1 ($6.20) per kg which is about four times the price of hydrogen made from fossil fuel.
In combination with a wind farm’s assumed breakeven power price, calculations show that a combination of offshore wind and a hydrogen plant is not economically viable at the current cost scheme as the bulk green hydrogen price will be too high compared with the current price for grey hydrogen.
“Offshore hydrogen production may become more interesting if a higher carbon tax is imposed on grey hydrogen production. This would force existing hydrogen manufacturers to shift more of the production to blue hydrogen (grey hydrogen coupled with carbon capture and storage), which in turn would make green hydrogen projects more cost-competitive,” commented Petra Manuel, energy research analyst at Rystad Energy.