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Low-carbon 'blue' hydrogen will play a role in the energy transition alongside renewable green production, but the market has underestimated the speed of the green hydrogen rollout, the CEO of electrolyzer manufacturer Nel said Sept. 8.

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Jon Andre Lokke said blue hydrogen, produced from fossil fuels with carbon capture and storage, would be needed in the energy transition alongside green hydrogen powered by renewable electricity, as the size of projected demand was so large.

But green hydrogen was likely to come onstream and be cost-competitive with conventional 'gray' hydrogen before large blue hydrogen projects were up and running.

"When people say that blue can be an early kick starter and help us in that way, I think maybe it will be the other way around because I think we will be mature and available and ready for the market before the blue guys are ready with their technology," Lokke said.

Nel, which is targeting renewable hydrogen production at $1.50/kg by 2025, is ramping up its production facility at Heroya, Norway, that will be able to produce 500 MW/year of alkaline electrolyzers, more than five times the total global demand in 2020.

"Green hydrogen can compete with gray in 2025," Lokke said.

"If you want to make turn gray hydrogen into blue, you need to add cost. So, it is going to be easier for us to compete with blue, they need to compete with gray. Gray is the toughest competition there is. Blue is easier."

"Fundamentally, we need both because I am uncertain whether green can solve it all," he said. "But when it comes to what is coming first, I honestly think that people on the blue side are underestimating the speed of the green side."

Blue hydrogen would be an attractive production pathway for large-scale production sites close to CO2 storage facilities, such as industrial clusters or a city grid, Lokke said. But green hydrogen is more easily deployed across a range of locations, he said.

"We can reach economies of scale much, much faster," he said, noting that a blue hydrogen plant would need to operate at a gigawatt scale from the start, requiring large offtakers, which would be more difficult than finding customers for 50 MW or 100 MW of hydrogen production.

In the short term, blue hydrogen production costs are seen as much lower than for green production pathways.

S&P Global Platts assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur7.12/kg ($8.42/kg) Sept. 7 (Netherlands, including capex). PEM electrolysis production was assessed at Eur8.67/kg, while blue hydrogen production by steam methane reforming (including carbon, CCS and capex) was Eur3.80/kg.