Hydrogen produced with renewable electricity could compete on costs with fossil fuel alternatives by 2030, according to a new report from the International Renewable Energy Agency (IRENA).
A combination of falling costs for solar and wind power, better efficiency and economies of scale for electrolysers could make this possible. ‘Green Hydrogen Cost Reduction: scaling up electrolysers to achieve the 1.5 C climate target’ looks at the drivers for innovation and introduces methods that policymakers should consider to reduce the cost of electrolysers by 40 percent in the short term and by up to 80 percent in the long term.
Green hydrogen could play a critical role in decarbonization strategies especially where direct electrification is a challenge in more difficult sectors, such as steel, chemicals, long-haul transport, shipping and aviation. However, legislation, market design and the cost of power and electrolyser processing are still a major obstacle to the adoption of green hydrogen.
“Renewable hydrogen can be a game-changer in global efforts to decarbonise our economies. Levelling the playing field to close the cost gap between fossil fuels and green hydrogen is necessary. Cost-competitive green hydrogen can help us build a resilient energy system that thrives on modern technologies and embraces innovative solutions fit for the 21st century.”Francesco La Camera, director-general of IRENA.
Green hydrogen today is 2-3 times more costly than blue hydrogen, derived from fossil fuels in combination with carbon capture and storage (CCS). The cost of production of green hydrogen is calculated by the price of renewable electricity, the cost of investment of the electrolyser and its operating hours. Renewables have now become the cheapest source of electricity in many parts of the world, with auctions hitting record prices-lower than $20 per megawatt-hour (MWh). Although low-cost electricity is a critical condition for competitive green hydrogen, the investment costs for electrolysis installations must also fall significantly.
IRENA’s latest study identifies key strategies and policies to reduce the cost of electrolysers through creativity and improved efficiency to scale electrolysers from today’s megawatt to the multi-gigawatt (GW) stage. Standardization and mass production of electrolyser stacks, quality in operation as well as optimization of material sourcing and supply chains would be equally critical in reducing costs. In order to do this, today’s production capacity of less than 1 GW will have to expand dramatically beyond 100 GW in the next 10 to 15 years.
In the best case scenario, using low-cost renewable electricity at 20 USD/MWh in massive cost-effective electrolyser installations might already generate green hydrogen at a competitive price with blue hydrogen. If rapid scale-up and ambitious electrolyser deployment were to take place in the next decade, green hydrogen could start competing for costs with blue hydrogen by 2030 in many countries, making it cheaper than other low-carbon alternatives before 2040, IRENA’s study shows.