Production Cost Model for Blue Hydrogen: Techno-Economic Site Comparisons
The ramp-up of a climate-neutral hydrogen economy is a key prerequisite for the decarbonization of energy-intensive industries such as the chemical industry or steel production. While green hydrogen from renewable electricity is the long-term vision, the focus is sometimes on more cost-effective transitional solutions in the short term. One of these is blue hydrogen, which is produced from natural gas using CO₂ capture and storage (CCS).
Model structure
Similar to green hydrogen (see FfE study), there is also a considerable range of cost estimates for blue hydrogen in the existing literature. With the help of a model, the FfE provides a uniform, consistent basis for analyses of blue hydrogen.
The production model for blue hydrogen is based on the HyPTraDe hydrogen model chain. This allows regional differences in natural gas prices, financing costs and CO₂ infrastructure to be mapped. The spatial resolution in Europe corresponds to the NUTS 3 level, with a PyPSA (Python for Power System Analysis) network being optimised for each area. The entire value chain of blue hydrogen is mapped: from natural gas supply to hydrogen production by steam methane reforming (SMR) or autothermal reforming (ATR), including CO₂ capture, to the transport and geological storage of CO₂ in oil and gas fields.
European results: Strong spatial differences
European modelling shows that the levelized cost of hydrogen (LCOH) and cost components for blue hydrogen vary greatly within Europe. Key cost drivers are:
- Natural gas prices and national financing conditions
- CO₂ capture rates of the technologies used
- Distance to suitable CO₂ storage sites and transport costs
The coastal regions around the North Sea and Adriatic Sea in particular benefit from low costs, as they have direct or short access to offshore storage facilities (e.g. in the North Sea). If onshore storage sites are also considered for CO₂, there are significant cost advantages, especially in Eastern Europe, although regulatory hurdles exist.
With the uniform model landscape for different production paths for blue hydrogen, meaningful comparisons can be made about production technologies. The retrofitting of existing SMR plants (SMR-grey) with CO2 capture (CC-retro) leads to similar hydrogen production costs as the construction of new large-scale ATRs with integrated CO2 capture (ATR+CC). Blue hydrogen is already economically competitive with grey hydrogen in some places under the assumption of CO2 emission pricing, while green hydrogen currently causes significantly higher costs.
Global Analysis
In addition to the EU, the production of blue hydrogen was also modelled at the global level. The global analysis at the country level shows the same cost structures. For example, blue hydrogen can be produced comparatively cheaply in regions with low natural gas prices – such as North America, the Middle East or Algeria – and thus contribute cost-effectively to the hydrogen market ramp-up, while green hydrogen will be more expensive in each country in the short to medium term. Although there are significant cost differences between the countries considered, the intercontinental transport and trade of blue hydrogen has economic disadvantages compared to domestic production in Germany.
Conclusion
A direct comparison with green hydrogen shows that blue hydrogen has cost advantages in all regions in the short to medium term. However, high CO₂ capture rates, a reliable CO₂ transport and storage infrastructure and constant gas prices at a low level are crucial. In addition, regulations and emission limits for hydrogen and end products must be observed. For policymakers and industry, the modelling of blue hydrogen can provide important information on where and to what extent blue hydrogen can be meaningfully integrated into hydrogen strategies.
