Green hydrogen costs will fall by up to 64% by 2040 and match fossil-based H2 within 10 years in some markets, according to a report from research group Wood Mackenzie.
WoodMac said that with the announced project pipeline for green H2 – hydrogen made via electrolysis powered by renewables such as wind and solar – growing from 3.5GW to just over 15GW within the last ten months, volumes will be large enough and stable enough for the nascent market to scale up.
“On average, green hydrogen production costs will equal fossil fuel-based hydrogen by 2040. In some countries, such as Germany, that will arrive by 2030,” said Ben Gallagher, WoodMac’s senior research analyst and report author. “Given the scale up we’ve seen so far, the 2020s is likely to be the decade of hydrogen.
“Rising fossil fuel prices will boost green competitiveness, further strengthening the case for this technology in the coming years.”
The research noted that sub $30/MWh renewable electricity prices and high utilisation rates will still be required for competitiveness.
While in 2020 grey hydrogen from unabated fossil fuels is the lowest cost H2, excluding China, WoodMac expects costs to rise by 82% by 2040. This is primarily due to the forecasted increase in natural gas prices. In Saudi Arabia and the US, grey hydrogen will continue to be the lowest-cost colour until 2040.
Blue hydrogen made from abated fossil costs are also expected to rise, with an increase of 59% predicted by 2040. The success of blue hydrogen is linked to the success of carbon capture and storage technology, which has been plagued by high costs and project cancellations. Like grey hydrogen, the forecasted cost profile is largely determined by gas prices.
“Even with a multitude of challenges that await the nascent green hydrogen market, we firmly believe there will be some form of low-carbon hydrogen economy soon,” said Gallagher.
“Given the degree of explicit policy, corporate and social support that has blossomed in 2020, green hydrogen will successfully scale up and realise huge production cost declines.
“Moreover, if additional explicit policy support comes to fruition in the coming months, we could see costs fall even faster, and more universally, than outlined in our report.
“The energy transition is dynamic. If 2020 is any indication, so too will be the low-carbon hydrogen landscape,” he added.
The ability of green hydrogen to meet spiralling global demand – and whether blue H2 is better placed – has become one of the defining questions of the energy transition that was debated in a recent Recharge digital roundtable on the subject.
A study from the Institute for Energy Economics and Financial Analysis this week warned that the ballooning number of global green hydrogen projects won’t produce nearly enough to meet early global demand for the fuel that’s seen as key to the energy transition.