The costs for the production of green hydrogen decreased over 2023. The cost of grey hydrogen was still lower, but the cost differential was decreasing. This is the conclusion of HyXchange, initiative for a hydrogen exchange, in the 2023 annual review of its ‘hydrogen cost indicator‘, the HYCLICX. This index shows the variable generation costs of green hydrogen in the Netherlands at the cheaper moments when there is a lot of wind and solar power. The index is suitable for the European rules for green hydrogen, according to a recent HyXchange market simulation for 2030.
The HYCLICX is an instrument to estimate the variable production costs for renewable hydrogen from electrolysis in the Netherlands. Currently, the HYCLICX only includes the variable costs of producing hydrogen. To this must be added the fixed costs for the investment in the electrolyser. These are also substantial, but differ greatly from situation to situation, and are therefore not (yet) included. For the production of the HYCLICX, HyXchange is working together with the German company E-bridge, which publishes the German HYDEX hydrogen index: many principles are the same.
Decrease during 2023
Variable costs for all types of hydrogen decreased during 2023. Green hydrogen is produced from green electricity, which has seen a price decrease. This remains very dependent on the weather: at times of strong wind power and solar power, green electricity, and therefore green hydrogen, can be cheaper than grey/blue hydrogen. At other times, it’s more expensive. This varies per day and month, as shown in the annual graph below. For comparison, next to green hydrogen, this also includes the variable costs for grey and blue hydrogen, which are still made from natural gas.
Two HYCLICX indices: monthly (best 50%) and daily (2x6h)
The monthly HYCLICX always selects (afterwards) the 50% hours per month that electricity was cheapest on the spot market: these are usually the hours with a high percentage of solar and wind power in the energy mix. Then allows for economical production of sustainable hydrogen. In 2023, this green hydrogen index was already close to grey hydrogen in some months: especially in July, October and December.
The daily HYCLICX also produces in 50% of the hours, however based on times 6-hour fixed blocks per day, which are cheap on average to produce hydrogen. This is less of an optimization, so it is higher cost on average, but it does show the daily variations very well. On some days, green hydrogen can have lower variable cost than grey hydrogen, due to an abundance of solar power and wind power, potentially convertible into hydrogen economically. On many other days, with less sun and wind generation, the production of hydrogen can be much more expensive.
Correlation with European rules for green hydrogen
The HYCLICX is in line with European rules for green hydrogen. These prescribe correlation: the hydrogen must be produced from green electricity generated at the same time. This is to guarantee that the hydrogen is truly sustainable. HyXchange has analyzed this for 2023. The HYLICX hours, with low electricity prices, will also contain more sustainable electricity than average in 2023. The correlation in 2023 is considerable: not yet perfect, but enough for the requirement of correlation per month that still applies until 2030 according to European rules.
Outlook 2030: recent market simulation shows improving correlation, hourly.
This correlation will continue to improve in the coming years, as more and more wind turbines and solar panels are added in line with the Dutch policy goals. HyXchange has recently published a market simulation for 2030 (see Final report H2SMS, policy report). The data shows that the HYCLICX in 2030 will also be suitable for the stricter European requirement of sustainable correlation per hour from 2030 onwards. By then, all electricity used to produce green hydrogen should come from solar or wind power on hourly basis. The HYCLICX is well suited for this because it assumes the lowest prices per hour, in the future nearly always the hours with the most solar and wind power. As a result, the (variable) cost difference between green and grey hydrogen is also expected to decrease. To achieve this, strong continued growth in solar panels and wind turbines is required.
The HYCLICX index can be followed on https://hyxchange.nl/hyclicx/
For the HYCLICX annual report 2023, see: https://hyxchange.nl/HYCLICX-annual-report-2023/
About the HyXchange initiative
The HyXchange initiative is made possible by Gasunie, the Port of Rotterdam Authority, Groningen Seaports and North Sea Port (Vlissingen, Ghent, Terneuzen). The HyXchange initiative is being followed with great interest by a group of 70 market players active in energy, industry, and sustainable generation, who participate in the meetings and activities of HyXchange. The aim is to set up a hydrogen exchange on the Dutch hydrogen infrastructure as a central trading point and central price indicator, both nationally and internationally.