Clean hydrogen could compete with fossil fuels by 2030

20 December 2020
International Renewable Energy Agency says regulations, market design and costs impede green hydrogen uptake

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Hydrogen produced with renewable electricity could compete on costs with fossil fuel alternatives by 2030, according to a new report from the Abu Dhabi-headquartered International Renewable Energy Agency (Irena).

It said a combination of falling costs for solar and wind power, improved performance, as well as economies of scale for electrolysers could make this possible

The report reviews green hydrogen’s role, as well as scaling up electrolyser production, in order to help tackle climate change and meet the 1.5°C climate goal.

It looks at drivers for innovation and presents strategies that governments can tap to “reduce the cost of electrolysers by 40 per cent in the short term and by up to 80 per cent in the long term”.

"The production cost for green hydrogen is determined by the renewable electricity price, the investment cost of the electrolyser and its operating hours." - Irena

According to the report, issued on 17 December, green hydrogen could play a critical role in decarbonisation strategies, particularly in harder-to-abate sectors where direct electrification is challenging. These sectors include steel, chemicals, long-haul transport, shipping and aviation.

“However, regulations, market design and the costs of power and electrolyser production are still major barriers to the uptake of green hydrogen,” the report said.


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Game-changer

Francesco La Camera, Irena director-general, said renewable hydrogen can be a game-changer in global efforts to decarbonise economies.

According to the executive, this would require “levelling the playing field to close the cost gap between fossil fuels and green hydrogen.”

MEED understands green hydrogen is currently two to three 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 electrolyser and its operating hours.

The report added that renewables have already become the cheapest source of power in many parts of the world, with auctions reaching record price-lows of less than $20 a megawatt-hour (MWh).

It added: “While low-cost electricity is a necessary condition for competitive green hydrogen, investment costs for electrolysis facilities must fall significantly, too.”

In the best-case scenario, using low-cost renewable electricity at $20/MWh in large, cost-competitive electrolyser facilities could produce green hydrogen at a competitive cost with blue hydrogen, the report added.

Irena’s analysis further shows that if rapid scale-up and aggressive electrolyser 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.

 

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