Hydrogen produced with renewable electricity could compete in costs with fossil fuel alternatives by 2030, according to a new report from the International Renewable Energy Agency (Irena).
They argue that a combination of declining costs for solar and wind, coupled with better performance and economies of scale for electrolyzers could make this possible.
The international body’s document entitled “Reducing the cost of green hydrogen: Scaling up electrolyzers to meet the 1.5 C climate goal” analyzes the drivers of innovation, presenting strategies that governments can carefully examine to reduce the cost of electrolyzers by 40% in the short term and up to 80% in the long term.
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“Green hydrogen could play a critical role in decarbonization strategies, particularly so where direct electrification is challenging in harder-to-abate sectors, such as steel, chemicals, long-haul transport, shipping and aviation.
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However, regulations, market design and the costs of power and electrolyzer production are still major barriers to the uptake of green hydrogen,” the IRENA report says.
“Renewable hydrogen can be a game-changer in global efforts to decarbonise our economies,” said Francesco La Camera, Director-General of Irena.
“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.”
According to Irena green hydrogen is 2-3 times more expensive than “blue” hydrogen, produced from fossil fuels in combination with carbon capture and storage (CCS).
The production cost for green hydrogen is determined by the renewable electricity price, the investment cost of the electrolyzer and its operating hours.
Irena’s new study identifies key strategies and policies to reduce costs for electrolyzers through innovation and improved performance aiming to scale up electrolyzers from today’s megawatt to multi-gigawatt (GW) levels.
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They say that standardization and mass-manufacturing of the electrolyzer stacks, efficiency in operation as well as the optimization of material procurement and supply chains will be equally important to bring down costs.
For that, today’s manufacturing capacity of less than 1 GW would have to massively grow beyond 100 GW in the next 10 to 15 years.
In the best-case scenario, using low-cost renewable electricity at US$20/MWh in large, cost-competitive electrolyser facilities could produce green hydrogen at a competitive cost with blue hydrogen already today.
“If rapid scale-up and aggressive electrolyzers deployment take place in the next decade, green hydrogen could then start competing on costs with blue hydrogen by 2030 in many countries, making it cheaper than other low-carbon alternatives before 2040,” Irena’s analysis demostrates.
