European policy makers have earmarked the development of a traded hydrogen market as a key factor in achieving the goals of decarbonisation and security of supply. The European Commission’s REPowerEU plan quadrupled hydrogen supply targets by 2030 and set criteria to ensure that hydrogen production comes from renewable energy.
To unlock investments of up to EUR 500 billion outlined in the Commission’s hydrogen strategy, investors, policy makers and participants in the hydrogen sector therefore need accurate and reliable pricing tools, aligned with Net Zero goals.
Covering the technologies and locations adopted by the market, ICIS’s European Renewable Hydrogen Assessments were produced through in-depth consultation with energy market participants. Crucially, ICIS’s European Renewable Hydrogen Assessments are the first market-based assessments structured to comply with European Union and UK Government standards for renewable hydrogen production (renewable fuels of non-biological origin).
These hydrogen price assessments accurately reflect the business conditions that renewable hydrogen projects face, providing participants with the confidence to carry out strategic investment plans, conduct bilateral negotiations and address volatility.
“ICIS considers the provision of prices for truly renewable hydrogen as a key factor in the energy transition”, Simone Elli, says the head of hydrogen analysis at ICIS. “These assessments are an important step in ICIS ‘commitment to provide price transparency to the renewable hydrogen market. They are the first truly independent reflection on the cost of renewable hydrogen production and will give investors the confidence they need to bring the online capacity “.
“Based on our experience in benchmarking commodities such as ICIS TTF and ICIS NBP, as well as providing price transparency to global ammonia markets, the assessments will provide the clarity needed to develop the European hydrogen economy”, said Stuart Wood, Head of Energy Strategy a ICIS.
The assessments combine ICIS’s cross-commodity energy analysis with long-term Power Purchase Agreement (PPA) price assessments provided by Pexapark, a trusted provider of renewable energy pricing data, software and services. These PPAs should be the primary means of supplying renewable energy for the production of electrolytic hydrogen. The PPA-based hydrogen price is therefore the closest representation of the fair value for renewable hydrogen during the formative phase of market development.
Based on the European assessments of ICIS renewable hydrogen:
- Evaluations of ICIS renewable hydrogen showed that PPA-based renewable hydrogen has avoided equivalent energy market volatility over the past 20 months.
- Northwest Europe offshore wind production based on a 10-year PPA starting in 2025 increased from € 4-4.5 / kg H2 in early 2021 to € 6.10-8.15 / kg H2 in September 2022.
- By comparison, the electrolytic hydrogen (yellow) of the energy-based wholesale electricity market for delivery in 2025 went from around € 3.8 / kg H2 in early 2021 to around € 15 / kg H2 in September 2022with a peak of 28.1 € / kg H2.
- The production costs of Spanish renewable hydrogen are among the lowest in Europewith an average of € 5.28 / kg H2 (solar) and € 4.85 / kg H2 (onshore wind) over the course of 2022.
ICIS evaluations on renewable hydrogen.
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