BNEF head of strategy Kobad Bhavnagri told the 2022 Australian Hydrogen Forum today that there was around 100GW of blue hydrogen and the same amount of green hydrogen projects proposed across the world globally.
Blue hydrogen proponents have argued that the method of steam methane reforming with the associated emissions captured and stored, would help spearhead the industry and create supply and demand for the emerging hydrogen economy as the cost of electrolysers come down.
However, Bhavnagri said the cost reduction of electrolysers, particularly in countries like China, combined with high gas prices meant green hydrogen is already winning the economics race.
"Green hydrogen is set to outcompete blue hydrogen everywhere, including US, Russia and Saudi Arabia," he said.
"Blue hydrogen projects are likely to become white elephants - in order to compete with green, you need to procure gas at below cost of extraction.
"If you're a natural gas producer thinking "blue hydrogen is going to be my transition plan", you really need to think again."
In its BNEF Hydrogen Outlook published at the end of last year, its analysis was based on prevailing market prices at the time where gas prices were around US$3 per million British thermal units. Now gas prices have reached levels 10 times that figure as the Russian conflict in Ukraine, and supply disruption have sowed immense volatility in international spot markets.
"So that was really cheap gas and we're not in that world anymore," Bhavnagri said.
"You have to be brave to say that you can get gas for under $2-3/MMBtu because then what are you paying for your extraction cost."
He also noted BNEF's analysis on hydrogen with CCS was done with a CO2 capture rate of 90% - a rate that has never been practically demonstrated before.
"We are yet to see evidence that people can make the business case work and the technical work at scale at 90% capture," he said.
"I think the emissions intensity is a very pertinent question for blue hydrogen project proponents and something have to prove."
Speaking on the follow up panel discussion, Hexagon Energy managing director Merrill Gray said there could be a window for blue hydrogen projects that are integrated into broader supply chains.
"There isn't a fully integrated approach to the whole value chain taken, everyone wants to talk about the production, the transportation and handling," she said.
"I'm very positive around green hydrogen and ammonia but I think it will take time and scale."
Hexagon is developing a 250,000 tonne per annum blue ammonia project in Western Australia, near Karratha, aiming to use SMR to produce it.
A prefeasibility study Hexagon completed earlier this month concluded that the plant could be placed near established infrastructure and CO2 users, with the intention of creating offtakes to third party toll service providers.
The company wants to supply ammonia to export markets as well as for shipping fuel purposes.
BNEF analysis has seen hydrogen used in industrial purposes, including methanol, ammonia, steel and oil refining as having the biggest early demand potential - with European steel makers already beginning to use hydrogen to produce green steel and Australian miners racing to catch up.
Hydrogen storage was described as the "poor cousin", with Bhavnagri saying more attention and investment in this sector would be needed, as it could be used as a powerful, emission-free way to firm up renewables.
"Large scale geological storage will be essential, more needs to be done here," he said.
Infinite Blue Energy CEO Stephen Gauld told the discussion that the company's Arrowsmith green hydrogen project, also in WA, was looking at the transport sector as an early demand source.