Background & Accountability

With the Hydrogen (H₂) Calculator, Impact Hydrogen has done their best to display the possible price trends of natural gas and hydrogen as transparently as possible. This makes it a tool for companies to obtain information and make a choice for a possible conversion from natural gas to hydrogen. Since a possible conversion requires long-term expectations, the price development up to 2050 was examined.

An attempt has been made to indicate the uncertainties in prices by using "high", "medium" and "low" scenarios. In reality, prices vary from hour to hour and year to year. So prices will sometimes be in one scenario for a period, and later in another. Especially in the shorter term, prices can vary widely, and can also be higher than the highest prices from this calculator, and lower than the lowest. However, the purpose of the calculator is to expect prices in the longer term.

To develop the price scenarios, Impact Hydrogen used PBL's Climate and Energy Outlook ("KEV"), which are also used by the government. These KEV scenarios were made before the sharp price increases of natural gas and the ETS-CO₂price of the past period. Users can, if they wish, already take this into account by choosing the high natural gas price and high CO₂ price scenarios. When the KEV comes out with new scenarios, these scenarios will be integrated into the Hydrogen H₂) Calculator.

If a user continues to use natural gas, and therefore continue to emit CO₂, his final cost will be the sum of the price of natural gas and the cost of the CO₂ he emits. Both prices are expected to rise in the future.

Green H₂
If a user uses green hydrogen, he pays no CO₂ emission costs. It is assumed that the green hydrogen is made with electricity from the grid. Green hydrogen is expected to become increasingly cheaper over time due to cost reductions in electrolysis technology. So-called dedicated green hydrogen was also considered, where electricity from, for example, Dutch wind turbines is directly and completely converted into hydrogen. The cost prices of this dedicated green hydrogen varied between high and low green hydrogen prices based on grid electricity, and are not otherwise included separately in this calculator.

Blue H₂
When a user uses blue hydrogen, they pay no CO₂ emission charges. Blue hydrogen uses natural gas as a feedstock, but captures CO₂ emissions, and stores this CO₂ underground (so-called CCS). Because natural gas is used as a feedstock, the cost of blue hydrogen is expected to increase over time.

Currently, the calculator only includes the cost of natural gas and hydrogen (commodity). This means that other cost elements are not included. These include: distribution to the user, any storage costs (due to varying use or production), connection costs, and conversion costs of end-use equipment. For a general background on hydrogen pricing, see [1] and [2].

For making natural gas and electricity prices, the KEV scenarios [3] were used. For the period after 2040, linear extrapolation was used. For the 2030-2040 period, a combination of inter- and extrapolation was used because KEV does not provide numbers for all years. The KEV electricity prices already include the cost of CO₂ emissions according to KEV's cost estimates.

For the CO2 prices, no distinction is made between ETS and non-ETS users. This makes the assumption that these sectors will not diverge too much in the future. For the CO₂ prices, the low-to-mid scenario of KEV is used [3]. Starting point of the high CO₂ price scenario is 60 €/tCO₂, partly based on a German statement in the German coalition agreement that they would like to have this as a European minimum price for the ETS [13]. Furthermore, the high scenario uses the Dutch industry levy, which rises to 127.05 €/tCO₂ in 2030 [11]. For 2050, a value of 180 €/tCO₂ is assumed for the low scenario, and a value of 220 €/tCO₂ for the high scenario. These are based on values used within the Dutch WLO for SCBAs [12]. The middle scenario is linear from 2022 to 2050, with the 2022 and 2050 values being the average of the high and low scenarios.

The green hydrogen price is loosely based on the cost and learning curves of [6], [7] and [9]. A learning curve of 11% per year is assumed for CAPEX, 8% for OPEX, and 1.5% per year for efficiency. An operating time of 50% is assumed, making the electricity used 10% cheaper than the average annual price of KEV. The blue hydrogen price is based on a UK study [4]. However, the CO₂ transport and storage costs are not based on this UK study, but on Dutch costs [5].

For questions or comments regarding the above background information or justification, please contact info@impacthydrogen.com