The production of green hydrogen could compete with fossil fuel-based hydrogen by 2030 in certain countries, should power prices for renewables reach USD 30 per MWh
A new report has revealed that the production of green hydrogen could compete with fossil fuel-based hydrogen by 2030 in Australia, Germany and Japan, should power prices for renewables reach USD 30 per megawatt-hour (MWh). The research conducted by Wood Mackenzie reveals that at present that price is in the range from USD 53 to USD 153/MWh in those markets for wind and solar power purchase agreements (PPA).
The research shows that less than 1 percent of all hydrogen produced today comes from renewable electricity, relying instead on natural gas and coal. Switching to hydrogen produced by wind and solar via electrolysis which splits water molecules into hydrogen and oxygen atoms, offers a significant opportunity to decarbonise its production and reach emissions targets. According to Wood Mackenzie, from 2000 to the end of 2019, 252 megawatts (MW) of green hydrogen projects will have been deployed worldwide. By 2025, this will increase by 1,272 percent, with the deployment of a further 3,205 MW of electrolysers dedicated to green hydrogen production.
Ben Gallagher, a senior analyst at Wood Mackenzie, said that the large increase in the 2019-2025 period is partially due to the nascency of the market. But aggressive targets in East Asia and increased interest from major international stakeholders will drive deployment in the near term.
“While cost-competitiveness might be out of reach in most scenarios by 2025, national targets and pilot projects will produce enough volume to realise substantial capex declines beyond 2025,” he added.
Gallagher said that as renewable energy deployment grows, so too will the green hydrogen market.
But there are challenges. While green hydrogen has made gains in a number of key markets, including Japan, Germany and Australia, at present it cannot compete with the low costs of locally produced coal and natural gas-produced hydrogen in China and the US, for example. On top of this, it remains unclear if renewable PPA prices worldwide will fall fast enough to make green hydrogen production competitive. However, the overall outlook of the research is optimistic about the green hydrogen sector’s future.
“We are just embarking on the energy transition,” Gallagher said. “There are several unknowns that would further spur adoption of green hydrogen: changing policy dynamics, new carbon regimes, new ways to monetise grid flexibility and lower-than-expected costs of renewables.”