European policy support for green hydrogen will increase in the wake of the war in Ukraine, accelerating both demand and the decline in prices, according to risk management company DNV.

The firm’s latest modelling, which assumes Europe imports no Russian natural gas from 2025 in response to the invasion of Ukraine, implies a 12pc drop in green hydrogen prices compared with its pre-war base case for 2030. Green hydrogen demand in 2030 is 25pc higher compared with the pre-war base-case.

“Europe has limited capacity for producing sufficient renewable electricity to simultaneously phase out fossil fuels from the power mix and produce meaningful amounts of green hydrogen,” DNV says.

“We anticipate higher support for green hydrogen as part of the new push for renewables” DNV

“Nevertheless, policymakers continue to prioritise both objectives. Consequently, we anticipate higher support for green hydrogen as part of the new push for renewables.”

The European Commission has already increased its targets for domestic production from 5.6mn t/yr to 10mn t/yr in response to the Ukraine crisis and has planned for another 5mn t/yr of hydrogen imports, replacing 25-50bn m³/yr of imported Russian gas by 2030.

Blue decline

DNV expects uptake of blue hydrogen in Europe to decline as a result of the war in Ukraine as natural gas supplies tighten—despite signs that the energy crisis in Germany is softening opposition to blue hydrogen.

“When Europe is in dire need of gas to replace the phase-out of Russian gas, it is unlikely that significant amounts of surplus natural gas will be available for producing blue hydrogen,” it says, noting that the rise in gas prices is making blue hydrogen less competitive against green.

“Even if blue hydrogen remains cheaper than green hydrogen (produced from renewables by electrolysis) for the next few years, we find blue hydrogen uptake low in Europe towards 2030 and decreasing rather than increasing as a consequence of the war,” DNV says.

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Author: Stuart Penson