While the hydrogen industry is booming, not all hydrogen is made equal.
A spectrum of hydrogen colors is at play – but the true game changer will occur when the cost of low-carbon green hydrogen becomes competitive in large markets.
In Hydrogen costs 2021: scaling up, we examined the economics of green, grey, brown, and blue hydrogen. Complete the form to receive a sample excerpt and continue reading for an introduction.
Green hydrogen — hydrogen produced by the electrolysis of water using renewable energy – currently accounts for a negligible portion of the global energy market. It remains mostly uncompetitive with fossil-fuel alternatives at the moment. However, the momentum behind net zero objectives indicates that investors believe in the long-term viability of the initiative.
As a result, the pipeline for hydrogen projects has increased sevenfold since December 2020. In our database, we track over 560 low-carbon projects with a minimum of 180 GW total electrolyser capacity designation. The majority of new projects are still in the early stages of development, with the majority of new projects advancing through Q2 this year.
Until 2019, the expected global capacity for electrolyser manufacture was only 200 MW. By 2021’s midpoint, that figure had risen to 6.3 GW of announced capacity, with 1.3 GW added in Q1.
As we near the conclusion of the fourth quarter, electrolyser manufacturers are significantly boosting their plans for gigawatt-scale plants. Recent weeks have seen the announcements of large-scale plants by Ohmium, Clean Power Hydrogen, Green Hydrogen Systems, Sunfire, and FFI, joining Cummins, Haldor Topsoe, ITM, Nel, McPhy, Siemens, Thyssenkrupp, and Plug Power.
By 2025, we anticipate a significant decrease in electrolyser capex. Costs are being reduced as a result of a variety of variables, including economies of scale, new market entrants, higher automation, and improved modularity.
Cost drivers vary according on electrolyser type. While cost reductions for solid oxide electrolysers are expected to be greatest in the next six to eight years, alkaline and polymer electrolyser membrane (PEM) costs are expected to decline 35-50 percent by 2025.
Reduced capital expenditures will contribute to lowering the levelized cost of hydrogen production (LCOH). When combined with low-cost renewable PPAs and high renewable utilization in a wide variety of sectors, the potential for competitive green electrolysis-based hydrogen begins to develop significantly. Simultaneously, as the world adjusts to higher commodity prices and demand recovers from the Covid-19 lows, the economics of blue, grey, and brown hydrogen have deteriorated relative to a year ago. (However, the realm of blue hydrogen – which combines natural gas reforming with carbon capture and storage (CCS) – is also emerging, with a rapidly growing pipeline of CCS-related hydrogen projects.)
By combining these forces, we think that green hydrogen will be competitive in 12 markets by 2030 — those with the highest utilisation rates and the lowest renewable energy prices. Brazil and Chile are pioneering the use of low-cost renewable energy to generate green hydrogen off-grid. And by 2050, twenty of the twenty-four countries included in our analysis will have highly competitive green hydrogen costs.
Hydrogen costs in 2021: preparing for scale provides a country-by-country breakdown of green, blue, grey, and brown hydrogen LCOH predictions through 2050. To learn more, complete the form at the top of the page to receive a complimentary excerpt.
