Green hydrogen, produced by renewable power, can help eliminate carbon dioxide (CO2) emissions in challenging sectors like steel, chemicals, longhaul transport, shipping and aviation. Thanks to the decline in renewable power costs, hydrogen could become a cost-competitive clean energy carrier worldwide by 2030. The costs of green hydrogen reflect renewable electricity prices, investment costs for electrolysers and operating hours. All these factors currently make it between two and three times more expensive than blue hydrogen, the kind produced with fossil fuels in combination with carbon capture and storage (CCS). Continuous innovation and policy attention will be essential to make green hydrogen viable as part of a sustainable energy mix. Regulations, market design, and the costs of power and electrolyser production will all come into play.
As the world strives to cut greenhouse gas emissions and reach carbon neutrality by 2050, energy-intensive industries and transport present a major challenge. Emissions are especially hard to abate in sectors such as steelmaking and cement, aviation and long-haul shipping.
Hydrogen based on renewables, also known as “green” hydrogen has emerged as a vital clean energy carrier, the only hydrogen type ultimately compatible with net-zero emission targets and sustainable, climate-safe energy use. “Grey” and hybrid “blue” hydrogen can also boost energy supply and power system flexibility, but without eliminating fossil-fuel use.
Energy planning has recently started to include green hydrogen for several reasons:
- It results in no residual greenhouse gas emissions.
- It can increase system flexibility, particularly through seasonal storage, helping to integrate higher shares of solar and wind power.
- Although currently expensive, it will become more competitive due to rapidly falling costs for electricity from renewables. Solar photovoltaic (PV) and wind power costs have already declined 80% and 40%, respectively, in the last decade, with these trends expected to continue.
Green hydrogen now costs USD 4-6/kilogram (kg), 2-3 times more than grey hydrogen. The largest single cost driver is renewable electricity, which is becoming cheaper every year. But electricity itself is not the only factor to consider.
Electrolysers – which split water into hydrogen and oxygen – must also be scaled-up and improved to make green hydrogen cost-competitive. Their costs, having fallen 60% since 2010, could fall another 40% in the short term and 80% in the longer term, the latest IRENA analysis indicates. Achieving these reductions hinges on innovation to improve electrolyser performance, scaling up manufacturing capacity, standardisation, and growing economies of scale.
This could bring green hydrogen cost below USD 2 /kg – a crucial milestone for cost competitiveness – before 2030.
How electrolyser scale-up drives down costs
Four policy pillars would help move green hydrogen from niche to mainstream:
- Developing national hydrogen strategies. These define each country’s level of ambition and can provide a valuable reference for private investment and project finance.
- Setting priorities. Along with use as a fuel or re-conversion to electricity, hydrogen can support a wide range of end-uses for industry and transport. Policy makers must identify the applications that provide the highest value. Industrial uses, for example, could be prioritised over low-grade heat or fuel blending.
- Guarantees of origin. Clear labels are needed to reflect carbon emissions over the whole life cycle of hydrogen. This would increase consumer awareness and allow incentives for green hydrogen use.
- Enabling policies. With the right overall policy framework, green hydrogen can create significant industrial, economic and social value, including new jobs.
Green hydrogen promises to become a game changer for energy efficiency and decarbonisation. To achieve its potential, it needs to be widely affordable, including for developing economies seeking affordable ways to build sustainable future energy systems. With the right policies put in place now, it could soon become a cornerstone of the world’s shift away from fossil fuels.
The article has been sourced from IRENA’s latest quarterly newsletter and can be accessed by clicking here