A dramatic fall in electrolyser prices will help some nations produce green hydrogen from renewable energy for $1/kg by 2030, with sub-$2/kg achievable in many countries, according to a new report from analyst Wood Mackenzie.
The study, Hydrogen costs 2021: getting ready to scale, finds that the cost of alkaline and PEM electrolysers are set to fall by 35% and 50% respectively by 2025, with solid oxide electrolysers seeing the “most dramatic [price reductions] in the next six to eight years”.
“Costs are being driven down by a range of factors, including economies of scale, new entrants to the market, greater automation and increased modularity,” WoodMac explained.
Bridget van Dorsten, a hydrogen research analyst at the company, added: “Capex [capital expenditure] reduction will help drive down the levelised cost of hydrogen production. Combined with cheap renewable PPAs [power-purchase agreements] and good renewable utilisation in many markets, the potential for competitive green electrolysis-based hydrogen really starts to grow.”
To reach a levelised cost of green hydrogen of under $1/kg, the renewable energy fed to electrolysers would need to cost $10/MWh or lower, with a capacity factor of 50%, the report shows. This would be possible at wind/solar hybrid projects in countries with very high solar irradiation and strong winds, such as Brazil and Chile, it suggests.
Grey hydrogen produced from unabated methane or coal, which provides 95-99% of the H2 currently used today, was estimated by the International Energy Agency to cost an average of €1.50 ($1.70) per kilogram in 2019.
But recent high natural gas prices have led analysts such as ICIS to conclude that green hydrogen is actually cheaper to produce today than grey — £3.39 ($4.47) per kilo compared to £4.16 in the UK in early November.
Van Dorsten pointed out that the economics of grey and blue hydrogen (the latter being derived from methane with carbon capture and storage) have become “less favourable than they were a year ago”.
“This combination of forces means that we believe green hydrogen will be competitive in 12 markets — those with the highest utilisation rates and lowest renewable electricity prices — by 2030,” she said.
“Brazil and Chile are amongst the front-runners of harnessing cheap renewables to produce green hydrogen off-grid. And by 2050, 20 of the 24 countries in our analysis see very competitive green hydrogen costs.”
Recharge asked WoodMac to clarify which particular markets it is referring to, but it declined to do so.
This article was amended to correct the previous assertion that Saudi Arabia was among the countries that could see $1/kg green hydrogen by 2030.