Green hydrogen costs falling

22 July 2020


Analysis by IHS Markit suggests that the production of “green” hydrogen could become cost competitive with conventional hydrogen production methods by 2030. The market analyst says that the costs of producing green hydrogen have fallen by 50 per cent since 2015 and could be reduced by a further 30 per cent by 2025, boosting prospects for the wider use of the fuel in the energy transformation.

Green hydrogen is generated by the electrolysis of water using renewable energy, and is rapidly developing from pilot to commercial-scale operation in many parts of the world as economies seek technology solutions for the energy transition. Investment in so-called “power-to-x” projects – of which hydrogen makes up the large majority – is growing rapidly. Investment is expected to grow from around $30 million in 2019 to more than $700 million in 2023.

Economies of scale are a primary driver for green hydrogen’s growing cost competitiveness. The average size for power-to-x projects scheduled for 2023 is 100 MW – ten times the capacity of the largest project in operation today – according to the IHS Markit Power-to-X Tracker, which tracks hydrogen projects around the world. Hydrogen production that uses natural gas as a feedstock, via a process known as methane reforming, currently supplies the hydrogen to the chemical and refining industries that today make up the bulk of global hydrogen demand.

“There is growing potential for hydrogen to be used in transport, heating, industry and power generation, said Shankari Srinivasan, IHS Markit Vice president, Global and Renewable Gas, IHS Markit. Both green hydrogen and so-called blue hydrogen – methane reforming coupled with carbon capture technology – are likely to play a role in the energy future as demand expands. "Blue and green hydrogen are extremely complementary, Srinivasan added. “If they are developed in parallel, hydrogen will be able to make a big contribution to future energy demand, especially with the ambitious goals on carbon.”

Hydrogen’s overall share in the energy mix will ultimately depend on the extent of decarbonization that is desired. In Europe, currently the primary market for hydrogen projects, hydrogen could account for as much as one third of the energy mix if the aim was 95% decarbonization or greater.

“In Europe it is now widely agreed that electrification alone cannot deliver the level of emissions reduction that many countries aspire to,” said Catherine Robinson, IHS Markit executive director, European Power, Hydrogen and Renewable Gas. “Hydrogen is a highly versatile fuel—both in terms of how it can be transported and the variety of its potential end-use applications. The greater the degree of a decarbonization, the greater the likely role of hydrogen in the energy future.”



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