By Irina Slav
Hydrogen, the most abundant element in the universe, has been stealing the spotlight from EVs and renewables lately. From a sort of boutique car fuel a couple of decades ago, hydrogen has evolved into one of the clean energy priorities for the future. And this future may be quite bright for it as prices for its production from renewable sources of energy are set to halve. A study commissioned by the International Council on Clean Transportation has found that the average price for a kilo of hydrogen produced through electrolysis using solar or wind power will fall by about 50 percent between 2020 and 2050 in the United States and Europe.
The stuffy examines three scenarios based on whether the electrolyzer—the installation that breaks down water into hydrogen and oxygen—is connected to the grid, to a renewable electricity generator, or is grid-connected but serves as a storage facility. It also looks into three renewable power generation technologies, including utility-scale solar, onshore wind, and offshore wind.
The results from this research are certainly encouraging for companies seeking to make hydrogen the next dominant fuel. And it’s not just companies. None other than the European Union has devised a whole hydrogen strategy for its future, focusing precisely on green hydrogen, as opposed to so-called blue hydrogen, which is produced from natural gas, and gray hydrogen, produced from coal.
The EU has stated that hydrogen will have a leading part to play in decarbonizing transport and manufacturing. It has plans to build at least 40 GW of electrolysis capacity by 2030, with 6 GW of these to be up and running by 2024. The news of lower green hydrogen prices must have been a reason for celebration in Brussels.
However, it’s worth noting that in its focus on green hydrogen, Europe will be spending a lot of money to ensure emission-free hydrogen production rather than using blue hydrogen production, the kind that involves natural gas and the kind which is a lot cheaper than even the future prices of green hydrogen.
Consider this. According to the ICCT-commissioned study, the price per kilo of hydrogen produced at a grid-connected hydrolyzer is currently $8.81. This will fall to $5.77 per kilo by 2050. But the price per kilo of blue hydrogen, produced through carbon capture and storage, is currently $2.36 (2 euro), according to the EU’s hydrogen strategy. Also according to this strategy, the price of green hydrogen varies between $2.95 and $6.49 per kilo (2.5-5.5 euro).
Both studies note that prices are location-sensitive, so they actually vary greatly from place to place. And there is more. The prices calculated in the ICTT-commissioned study do not include the price of building a hydrogen transport and storage infrastructure. The EU’s strategy envisages what Oxford Energy calls a pragmatic approach: building transport infrastructure around the biggest users of hydrogen in clusters initially and only eventually expanding it across the continent. In parts of the continent, hydrogen will be transported via pipelines formerly used for natural gas.
Now, being pragmatic certainly tends to save money. But the EU, if not the U.S., has been giving the impression that pragmatism is not its priority. Cutting emissions is. This will require a lot of money. Incidentally, it will also require a lot of hydrogen projects. As Oxford Energy notes in an analysis of the EU strategy, there are just 4.5 GW of green hydrogen projects under development. If the EU wants to hit its own target, it would need some 20-30 GW of projects in the pipeline, so it could approve 20 to 30 percent of them.
And then there is hydrogen’s future as a vehicle fuel. Currently, hydrogen cars are a tiny minority, and this is because they are even more expensive than some EVs. Hydrogen can be used for electricity generation, and this is what the EU likely plans to use it for primarily. But if plans get even more ambitious and hydrogen fuel cell tech becomes cheaper for cars, then plans will need to be made for filling station networks. And a lot of storage space, which is a special kind of storage space because hydrogen is highly flammable. Special in this context means expensive. And this means that the falling cost of electrolysis using solar and wind power is good news, but we have yet to see if it is good enough news for the hydrogen lobby.
Meanwhile, utilities and oil supermajors are expanding in the hydrogen space. This is where the biggest chance for success is for clean hydrogen: in the private sector. Governments can draft all the strategies they want but without investments from the private sector—and the energy generation know-how the utilities and the supermajors have—all these strategies would be doomed. So the fact that competition is intensifying in the hydrogen space between supermajors and utilities may turn out to be a lot better news than the falling costs of green electrolysis.