Production of green hydrogen could be cost-competitive by 2030


The production of green hydrogen could be cost-competitive by 2030, according to a new analysis by IHS Markit.

Green hydrogen is produced by “splitting” water—which can be carbon-free provided the electricity used in the process is produced by renewables. This process could become cost-competitive with currently predominant methods that require the use of natural gas as a feedstock.

The use of electrolysis, a process that uses electricity to split water into hydrogen and oxygen to produce green hydrogen is rapidly developing from pilot to commercial-scale operation in many parts of the world, according to IHS Markit.

Investment in so-called “power-to-x” projects, of which hydrogen makes up the large majority, is growing rapidly from around $30 million in 2019 to more than $700 million in 2023.

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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.

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.

Simon Blakey, IHS Markit senior advisor, Global Gas, said: “Costs for producing green hydrogen have fallen 50% since 2015 and could be reduced by an additional 30% by 2025 due to the benefits of increased scale and more standardized manufacturing.”

“Much focus is on economies of scale as a way of reducing costs, developing dedicated renewables in order to get the load factor on the electrolyser up and, of course, continued expectations of falling costs for renewables.

Hydrogen’s overall share in the energy mix will ultimately depend on the extent of decarbonisation 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.

Catherine Robinson, IHS Markit executive director, European Power, Hydrogen and Renewable Gas, said: “In Europe it is now widely agreed that electrification alone cannot deliver the level of emissions reduction that many countries aspire to.

“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 decarbonisation, the greater the likely role of hydrogen in the energy future.”

Shankari Srinivasan, IHS Markit vice president of global and renewable gas, adds: “There is growing potential for hydrogen to be used in transport, heating, industry and power generation.

“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. 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.”

Read more about the report.