Decarbonisation Technology - February 2024 Issue

US$/kg H

2018

4.5 3.5 2.5 3.0 4.0 2.0 1.0 0.0 0.5 1.5

Grey

Blue Green (ALK)

Green (PEM)

Grey Blue Green (ALK)

Green (PEM)

Grey Blue Green (ALK)

Green (PEM)

Renewable LCOE US$/MWh)

30–45

18–26

14–18

Figure 3 Hydrogen production cost development by technology type Notes: ALK = alkaline water electrolysis, LCOE = levelised cost of energy, MWh = megawatt hour, PEM = polymer electrolyte membrane. Cost assumptions based on green field projects, excluding cost for buildings and cost for building cooling requirements. Source: (Anouti, et al., 2020), (IEA, 2019)

Green hydrogen – a promising source The majority of hydrogen today is used in industry, mainly in oil refining to produce transport fuels, followed by the production of ammonia, methanol, and steel. Low carbon intensity hydrogen is considered essential in the energy transition. Initially, the addition of carbon capture capacity to retrofit existing production capacity makes sense, but in planning additional capacity to meet the growing hydrogen demand, more sustainable production technologies that will reduce our reliance on fossil fuels should be considered. Of the two main emerging technologies (electrolysis and pyrolysis), electrolysis is the most mature, with many projects planned to come on-stream over the next decades. Advancements in green hydrogen technology are making the use of hydrogen more attractive as a means to decarbonise different industries. In transportation, hydrogen fuel can act as a direct replacement for gas and diesel. Hydrogen may be effective as a fuel in its own right, for example in city buses, as well as long-haul trucking, where using heavy batteries would be inefficient. Unlike electric vehicles, which can take around 30 minutes to charge with the fastest charging stations, hydrogen fuel cell vehicles can be ready to go in minutes. However, fuel cells, which convert hydrogen fuel to usable energy, are still expensive. While Japan has invested

solar and wind sources with hydrogen from fossil fuels in plants equipped with CCS. IRENA anticipates a steep fall in the cost of hydrogen from solar and wind between 2020 and 2025 (IRENA, 2019). Low-cost wind and solar resources will start to achieve parity with fossil-based hydrogen from 2030 and are expected to approach US$1/kg by 2045. IRENA forecasts the cost of producing green hydrogen is projected to range from below US$1/kgH 2 for most regions by 2050 to US$1.3/kgH 2 using more pessimistic assumptions for PV and electrolyser costs (IRENA, 2022). The costs in Figure 2 are consistent with estimates from the US Department of Energy (DoE), which estimate that the current cost of generating hydrogen from renewable energy is approximately US$5/kg, or three times higher than the cost of producing hydrogen from natural gas. The DoE’s objective is to reduce clean hydrogen production costs by 80%, aiming to reach US$1/kg within the next decade (US DOE, 2019). Anouti et al., also compare production cost for different hydrogen technologies (see Figure 3 ). While the current costs of green hydrogen are roughly twice as much as grey hydrogen on an LCOE (levelised cost of energy) basis, they project green hydrogen will reach parity with grey by 2030 and become the lowest cost by 2050 (Anouti, et al., 2020).