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Green hydrogen cost to halve by 2030

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Onsite green hydrogen production cost is expected to halve by 2030, suggesting an rise in South Korea’s hydrogen ambitions, according to Wood Mackenzie.

Under the administration of president Moon Jae-In, the Government has announced ambitious plans to become an economy dependent on hydrogen by 2050. This includes proposals for three hydrogen-powered cities by 2022 and accelerating fuel cell vehicle (FCV) deployments, both of which have spiraled the country into a frenzied search for hydrogen investments.

“Cost is the biggest challenge today as green hydrogen costs 2-4 times more than fossil-fuel hydrogen. This is set to change by 2030. Net-zero emissions policies, falling renewables costs and strong business activity in electrolyser manufacturing and efficiency gains could deliver up to 50% cost decline for green hydrogen by 2030. This magnitude of cost reduction will require sub-US$30 per megawatt-hour renewable electricity prices, large size electrolyser deployments and high load hours.”

 Prakash Sharma, Wood Mackenzie research director.

Currently, the world’s fifth largest hydrogen market, demand from South Korea is projected to reach 4.44 million metric tons this year, with approximately 86 percent of demand coming from refineries.

The main use case of hydrogen in refineries is desulfurisation. Refineries are using hydrogen to extract sulphur and other impurities from gasoline and diesel because of air quality issues. The supply of hydrogen is produced locally using fossil fuels, and is high in emissions.

South Korea is looking to extend the use of hydrogen through manufacturing, heating and mobility sectors. FCV production (including exports) will rise from below 2,000 units today to 810,000 by 2022, and 6.2 million by 2040. The Government is preparing to import and produce hydrogen domestically.

Globally, mobility is the lowest market demand for hydrogen, representing less than 0.1 percent of global demand for hydrogen in 2020. Although the hydrogen refuelling station network is expected to expand rapidly, refuelling stations today have low utilization levels because of the limited number of FCVs.

Since 2010 this sector has grown more than 24 times but continues to be a very small portion of demand.

“The hydrogen journey for South Korea will not be a smooth sailing one. Continued investments in hydrogen infrastructure and policy support are needed to meet long-term goals.”

 Prakash Sharma, Wood Mackenzie research director.

Solar and wind power in South Korea is also making headway in the power market. The country is expected to hit its 20 percent goal for renewables by 2030.

“South Korea has lagged behind other countries in renewable deployments to date but declining costs and the ‘New Green Deal’ initiative will help the country to catch up in the next decade. 

“Over US$46 billion will be invested in South Korea’s renewables sector by 2030, quadrupling the share of wind and solar in generation to 13%. Another 6% will be sourced from biomass and other renewables taking South Korea to 19%, just shy of its 20% target.”

Alex Whitworth, research director.

New wind and solar projects are already becoming competitive with gas power, and are expected to be able to compete directly with coal-fired power in South Korea by 2025, according to Wood Mackenzie’s equalized electricity cost.

“By 2030 new utility-scale solar and onshore wind will be 20% cheaper than coal-fired power, while offshore wind and distributed solar will both be cheaper than gas-fired power. Lower renewables costs will help South Korea displace fossil fuels with cleaner power, while still maintaining stable end-user power prices.

“These remarkable technology changes are fundamentally reshaping South Korea’s power industry. Beyond 2030 we expect subsidy-free renewables investments in South Korea to accelerate further.”

Alex Whitworth, research director.

*Onsite cost does not include transport or storage costs.

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