As global economies strive for carbon neutrality, cost-competitive renewable hydrogen is possible within the decade.
Green hydrogen, produced by renewable power, can help eliminate carbon dioxide (CO2) emissions in challenging sectors like steel, chemicals, long-haul transport, shipping and aviation. Thanks to the decline in renewable power costs, hydrogen could become a cost-competitive clean energy carrier worldwide by 2030.
However, ongoing innovation and consistent policy attention are needed 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.
The International Renewable Energy Agency (IRENA) has released two in-depth studies on how to scale up hydrogen production based on renewable power sources in time to meet climate goals:
• Green hydrogen: A guide to policy making (Nov 2020)
• Green hydrogen cost reduction: Scaling up electrolysers to meet the 1.5°C climate goal (Dec 2020)
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, or green hydrogen, has emerged as a vital clean energy carrier.
This is the only hydrogen type fully compatible with net-zero emission targets and sustainable, climate-safe energy use. Grey and hybrid blue hydrogen can also boost energy supply, but without eliminating fossil fuel use. Blue hydrogen, while cleaner than grey, still relies on carbon capture and storage (CCS).
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.
Hydrogen, meanwhile, can be converted into other energy carriers like methanol, ammonia and synthetic liquids for a broadening range of uses.
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 costs below the USD 2/kg mark – a crucial milestone for cost competitiveness – before 2030 (see Figure 1).
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.
• Requiring 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.
• Adopting 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.
[Credit: IRENA]
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Bringing hydrogen to the forefront
While 2020 may be remembered for the tragic COVID-19 crisis, it was also an unprecedented year for the global energy transition and the growing momentum of hydrogen technology. Many countries, in aligning their pandemic response with longer-term goals, have announced strategies to develop hydrogen as a key energy carrier. In parallel, numerous countries, cities and companies have adopted net-zero targets for energy-related carbon dioxide emissions, bringing the need for hydrogen to the forefront.
But not all types of hydrogen are compatible with sustainable, climate-safe energy use or net-zero emissions. Only “green” hydrogen – produced with electricity from renewable sources – fulfils these criteria, which also entail avoiding “grey” and hybrid “blue” hydrogen. Green hydrogen uptake is essential for sectors like aviation, international shipping and heavy industry, where energy intensity is high and emissions are hardest to abate.
Green hydrogen, however, is still not ready to take off without widespread and coordinated support across the value chain. The Collaborative Framework on Green Hydrogen, set up by the International Renewable Energy Agency (IRENA) in mid-2020, offers a platform to strengthen support in co-operation with IRENA’s member countries and partners.
The past two years have witnessed increased momentum, with around 20 countries adopting a national hydrogen strategy or announcing their intention to do so. Industry investors plan at least 25 gigawatts of electrolyser capacity for green hydrogen by 2026. Still, far steeper growth is needed – in renewable power as well as green hydrogen capacity – to fulfil ambitious climate goals and hold the rise in average global temperatures at 1.5 degrees Celsius.
Green hydrogen, on average, costs between two and three times more to make than blue hydrogen, with the true potential and viability of the latter requiring further investigation. With electricity input accounting for much of the production cost for green hydrogen, falling renewable power costs will narrow the gap. Attention, meanwhile, must shift to the second-largest cost component, electrolysers.
With larger production facilities, design standardisation and insights from early adopters, the proposed strategies could cut costs by 40% in the short term and up to 80% in the long term, this study finds.
In price terms, the resulting green hydrogen could fall below the USD 2 per kilogram mark – low enough to compete – within a decade. This opens the way for large-scale manufacturing capacity, new jobs and economic growth. But getting there depends on defining the right business model, creating markets, and optimising the supply chain in a way that both developed and developing countries, equally, can enjoy the transition to a clean, resilient energy system.
IRENA stands ready to help countries worldwide, whatever their energy challenges or level of economic development, make the leap.
