Green hydrogen produced from renewable energy is set to become cost-competitive with high-emission grey hydrogen by 2030, according to a new study by the Hydrogen Council and consultant McKinsey.
“Within five to ten years — driven by strong reductions in electrolyser capex of about 70-80% and falling renewables’ levelised costs of energy (LCOE) — renewable hydrogen costs could drop to about $1-1.50 per kg in optimal locations, and roughly $2-3 per kg under average conditions,” says the report, Path to Hydrogen Competitiveness: A cost perspective.
Grey hydrogen — derived from steam reforming of natural gas and resulting in 9-12 tonnes of CO2 being emitted for every tonne of H2 produced — currently costs an average of about $1.50 per kg, excluding a price on the carbon emitted in its production. Green hydrogen — produced by electrolysis (splitting water molecules into hydrogen and oxygen) inside machines called electrolysers — today costs roughly $6/kg.
Achieving cost-competitive green hydrogen by 2030 will require economies of scale equivalent to the deployment of 70GW of electrolyser capacity worldwide, the report explains, requiring $20bn of investment. About 1GW of electrolyser projects have been announced to date.
“Beyond 2030, after reaching economic competitiveness, the cost of renewable hydrogen will further decrease,” says the report.
Green hydrogen production will be cheapest in parts of the world with strong winds and plentiful sunshine, it adds.
“Regions such as Chile, Australia and Saudi Arabia have access to renewables from both wind and solar at low LCOE which enables high load factors for hydrogen production through electrolysis. They thus offer optimal potential for producing renewable hydrogen at minimum costs,” says the report. “Under these optimal conditions, hydrogen production could become available at costs of about $2.50 per kg by the early 2020s, declining to $1.90 per kg in 2025 and perhaps as low as $1.20 per kg in 2030. This is well below the average for grey hydrogen, and even close to parity with optimal grey hydrogen costs in 2030 if CO2 costs are factored in.”
Green hydrogen produced by dedicated European off-grid offshore wind farms would reach about $2.50 per kg by 2030, the study adds.
However, green hydrogen would face stiff competition from so-called blue hydrogen — grey hydrogen that has most of its CO 2 emissions captured and stored, up to a technical maximum of 95%. A carbon price of $50 per tonne would allow blue hydrogen — referred to by the Hydrogen Council as “low-carbon hydrogen” — to reach parity with grey, says the report.
“With enough scale, costs [of low-carbon hydrogen] could drop to about $1.20 per kg in 2025 in regions like the US or the Middle East. For regions with higher average natural gas costs like Europe, low-carbon hydrogen from reforming plus CCS will cost around $2.10 per kg in 2020, declining to approximately $1.80 in 2030 due to the lower cost of carbon capture and carbon storage opportunities.”
The report adds that the blue and green hydrogen will be the cheapest options for many types of transport by 2030 — outperforming fossil fuels and battery power. These include long-distance buses, heavy- and medium-duty trucks, taxi fleets, regional trains and large passenger vehicles such as SUVs.
The study did not examine the use of hydrogen as a form of long-term energy storage.
The Hydrogen Council is a group of 81 companies involved in the hydrogen industry, including Shell, BP, Saudi Aramco, Total, Equinor, Siemens, BMW, Audi, Honda, Toyota, Daimler, GM, Hyundai, Kawasaki, EDF and Engie. It describes itself as a “CEO-led organisation that uses its global reach to promote collaboration between governments, industry and investors, and to provide guidance on accelerating the deployment of hydrogen solutions around the world”.