It may be a key piece on the energy board of the future, as some voices in the sector emphasize, but if green hydrogen wants to expand, it needs to face an important challenge: reduce costs. And to show a button. The multinational steel company ArcelorMittal, which is facing the decarbonization of part of its facilities in Gijón with an ambitious plan that includes the use of green hydrogen, recently recognized that as long as it is not “commercially sustainable” it will be forced to resort to gases of fossil origin. . The decision, as reported by La Nueva España, responds to a question of “competitiveness”.
Now we can have a more accurate idea of its price.
All thanks to the new Hydrix index.
What is Hydrix? The first market-based hydrogen index. Or so, at least, its promoter claims, the European Energy Exchange (EEX) reference exchange, which ensures that it will provide information on the negotiated prices of green hydrogen according to supply and demand and partners in the sector.
“With a market index based on actual hydrogen prices we provide a benchmark that can be used for investment decisions,” says Peter Reitz, CEO of EEX: “We pave the way for a carbon-free future in the energy industry.”
How does it work? The data is updated every Wednesday and is published in euros per megawatt hour (€/MWh). Its managers defend that, unlike the rest of the indices, it considers both the prices offered by the supplier and those of the consumer. “All the others reflect only the possible costs on the supplier’s side,” they explain from EXX, and underline: “Hydrix will reveal information on the actually marketed prices of green hydrogen.”
And what do your data show? The index has already published values for the period between week 18 and 22 of 2023, which covers the entire month of May. Throughout that strip it has fluctuated between €231.63/MWh and €217.72/MWh. The data is already interesting in itself, but it is even more interesting when compared to natural gas. During this period, the TTF (Title Transfer Facility), a reference for the price of gas in Europe, fluctuated between 38.83 and 26.85 euros. The difference between the two is thus bulging, with a price of hydrogen, as El Periódico de España emphasized these days, some eight times higher.
Has there always been that much of a difference? No. Throughout 2022 the evolution of the price of hydrocarbons, including gas, was conditioned by the war in Ukraine, which caused it to reach values much higher than the current ones. At the end of August of last year, the Dutch TTF actually reached 340 euros per MWh. Shortly before, in the midst of the escalation of fossil fuel prices, The Wall Street Journal had already warned that in eight European countries, including Spain, hydrogen generated with renewables was cheaper than LNG.
And what are the forecasts? When drawing up its short-term strategy for its facilities in Gijón, ArcelorMittal proposes resorting to gases of fossil origin until hydrogen is “commercially sustainable”. When exactly that level will be reached is not easy to specify, but there are reports that do agree on a forecast: the cost of green hydrogen will not always be so high.
A Rethink Energy study points in this direction, which recently calculated that its market will reach a valuation of 850,000 million in 2050; Aurora Energy Research or Wood Mackenzie, which has arrived, estimates that the costs of hydrogen produced with renewables will fall by up to 64% by 2040. In 2021, even the president of the EC, Ursula von der Leyen, saw “attainable” that green hydrogen be stand at less than 1.8 euros per kilo in 2030.
Cover image: Appolinary Kalashnikova (Unsplash)
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