Is producing renewable hydrogen as ammonia in EU cheaper than importing it?

Importing renewable hydrogen as ammonia from countries with abundant renewable sources could be more expensive than producing it domestically in the European Union, a new study found.

The study, titled “The economics and greenhouse gas emissions of renewable hydrogen and e-fuels imported in the European Union”, has been published by the International Council on Clean Transportation (ICCT).

The paper dives into the economic costs and climate impacts of importing renewable hydrogen and e-fuels into the European Union. It focuses on Brazil and Egypt, where the European Union has recently expanded engagement to facilitate renewable hydrogen and e-fuels imports.

Renewable-abundant countries such as Brazil or Egypt may produce renewable hydrogen at a lower cost than the European Union. Still, the costs of shipping—including converting hydrogen to ammonia, transporting it over a long distance, and then “cracking,” or reconverting the ammonia back into hydrogen—can be as high as the production cost itself. For example, even in a scenario that assumes mid-level technology costs and current Brazilian government incentives, the cost of importing renewable hydrogen from Brazil in 2030 is nearly 50% higher than the ICCT’s projected EU average when assuming ‘pessimistic’ technology costs, the study shows.

On the other hand, the cost of importing renewable e-fuel could be lower than producing it domestically in the European Union. However, authors of the paper estimate that it is unlikely for imported e-fuel to reach cost parity with fossil diesel unless the cost of fossil diesel increases, while renewable electricity, electrolyzers, and DAC all have significant technology breakthroughs that enable deep cost reductions for e-fuels.

As explained, e-diesel produced in any country will likely remain substantially more expensive than fossil diesel until 2030.

“We anticipate that the price of e-diesel, either imported from Brazil or Egypt or produced within the European Union, will likely not be lower than €2 per liter in 2030. The 2023 wholesale diesel cost in the European Union (excluding taxes and carbon price) was €0.9 per liter. Even when considering carbon pricing, we do not expect e-fuels to be cheaper than diesel in the near term. Yet, importing e-diesel from Egypt or Brazil could be about 20% cheaper than producing it in the European Union on average,” Yuanrong Zhou and Chelsea Baldino, authors of the study, noted.

The European Union has additionality and geographic and temporal matching requirements to help prevent indirect emissions when sourcing renewable electricity for hydrogen production. To ensure imported renewable hydrogen and e-fuels effectively decarbonize transport, these fuels must be properly certified by third parties as meeting these requirements.

Otherwise, their greenhouse gas emissions could be significantly higher than those of fossil fuels, particularly in regions with a high share of fossil in the power grid, such as Egypt, the authors concluded.

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