Green hydrogen is set to become cost-competitive with grey H2 derived from unabated fossil fuels within two years, according to a new report by analyst Rethink Energy.
“With the promised economies of scale of this production buildout, as well as a plummeting cost of renewables, and a rising cost of carbon, green hydrogen — produced using renewable energy — is set to become cost-competitive with existing fossil-fuel-based [grey] hydrogen in just two years — far before any other analyst groups have previously forecast,” writes Rethink lead analyst Harry Morgan.
“This will see a violent shakedown of industries that have plodded on with a business-as-usual approach to decarbonization, without innovation.
“While these laggards continue to push CCUS (carbon capture) approaches or complain about a ‘chicken-and-egg’ problem for hydrogen demand, the companies making the zero-regret investments in green hydrogen now will dominate the hydrogen supply for existing ammonia and oil refining sectors by 2035, with an overall demand of 73 million tons by 2050, although by then there will be scant requirement from oil.”
The cost of green H2 will fall from about $3.70/kg today to just over $1/kg in 2035, and around $0.75/kg by mid-century, suggests the report, entitled Hydrogen to Clean Up Energy with $10 Trillion Spend.
It predicts that the learning rate for electrolysers will be 14% — in other words, the cost per unit will fall by 14% every time global manufacturing capacity doubles.
“The economies of scale that it will bring will see the capital cost of electrolyzer units fall by over 85% from around $1,400 per kW to $340 per kW by 2030,” it says.
The study also explains that more than 35GW of electrolyser gigafactories have been announced since July 2019.
“At the rate at which these facilities are being announced, the global production capacity is likely to be well in excess of 100GW by 2030, which is more than enough to satisfy existing government or corporate targets.”
This is in stark contrast to a report by US investment bank Jefferies, which estimated in November that the worldwide supply of electrolysers will only reach 47GW by 2030, adding that this figure “could sit somewhere in the 30-40GW range”. That note concluded that it was “unlikely to be sufficient supply even for the proposed projects out to 2030, even in the lowest demand scenario”.
The Rethink Energy report also predicts that hydrogen will power 95% of heavy-duty trucks, 22% of light commercial vehicles and 2.4% of cars by 2050.
And it forecasts that ammonia “will be used as a carrier for hydrogen in 74% of ships by 2050, with the first ships being made available as soon as this year”.