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Green hydrogen faces high hurdles, massive potential: IRENA report

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Green hydrogen faces high hurdles, massive potential: IRENA report

Highlights

Best location wind/solar seen competitive within five years

Green hydrogen costs currently double blue hydrogen

Feedstock costs, utilization rates, electrolyser capex key

  • Author
  • Andreas Franke
  • Editor
  • Jonathan Loades Carter
  • Commodity
  • Electric Power

London — Green hydrogen faces high cost and technology hurdles but offers potential in the post-2030 energy transition, the International Renewable Energy Agency (IRENA) said in a report published this week.

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The Abu Dhabi-based intergovernmental organization offers detailed projections based on renewable energy cost assumptions ranging between $23/MWh to $55/MWh for wind and $17.50/MWh to $85/MWh for solar.

Projects involving the electrolysis of wind and solar farms in the very best locations could become competitive with blue hydrogen (hydrogen production from natural gas plus carbon capture and storage) within five years, IRENA said.

With green hydrogen costs twice those of blue hydrogen today, however, progress would be slow until 2030 to 2040, when average green hydrogen costs would dip below those for fossil fuels plus CCS in all cases.

Provided low-cost green electricity is available, the challenge is ensuring a high load factor to the electrolyser, IRENA said.

High-quality wind and solar projects may yield 4,161 (48%) and 2,356 (26%) hours respectively, resulting in better economics but still not sufficient to achieve competitiveness today.

Hybrid wind and solar plants may improve load factors, minimizing the impact of electrolyser amortization on the levelized cost of hydrogen (LCOH), it said.

ELECTROLYSER COST DECLINES, GAS, CARBON PRICES

Electrolyser cost declines are modest in the report, only halving from USD 840/kW today to USD 375/kW in 2050.

ITM Power, a UK-based developer currently building Europe's biggest PEM-electrolyser at Shell's Rheinland refinery inGermany, estimates a much steeper cost decline, falling from Eur1,000/kW for 1 MW scale units today to Eur500/kW by the mid-2020s for units of up to 100 MW.

Overall, wind-based hydrogen project costs (LCOH) are currently pegged between $3-$4/kgH2 and solar-based between $3.5-$7/kgH2 compared to $1-$2/kgH2 for fossil-fuelled grey or blue hydrogen.

That compares with an assessment of Eur1-Eur1.50/kgH2 for grey hydrogen, Eur2-Eur2.50/kgH2 for blue hydrogen and Eur5-Eur6/kgH2 for green hydrogen by experts at Dutch bank ING given this week at the S&P Global Platts European Gas Summitin Amsterdam.

The IRENA forecast is based on a natural gas price of $8/mmbtu for gas-based SMR (steam methane reforming) with CCS, it added.

CO2 pricing makes for a more compelling case for green hydrogen, especially versus grey hydrogen, while blue hydrogenoffers some attractive features, but is not inherently carbon neutral, estimating 5% to 15% leakage.

POLICY RECOMMENDATIONS

Important synergies exist between hydrogen and renewables due to its storage potential as well as integration with other sectors, the report said.

Electrolysers can also add demand-side flexibility, helping to offset the cannibalization impact of wind/solar oversupply in system with very high RES penetration.

European countries such as the Netherlands and Germany are facing future electrification limits in end-user sectors that can be overcome with hydrogen, it added.

Germany and the Netherlands aim to be at the forefront of hydrogen with a recent spate of 100 MW-plus project announcements.

Total transition costs for a mixed technology decarbonization are lower compared to a full electrification scenario, various studies show.

Germany's government plans to present a hydrogen strategy by the end of the year with the government's target of a 65% share of renewables in the power mix by 2030 requiring new solutions.

Selected Hydrogen Projects

Project Capacity (MW) Country Developer Start Notes
Rheinland Refinery 10 DE Shell, ITM Power 2020 World's largest PEM electrolyser to date
Delfzijl 20 NL Nouryon, Gasunie tba FID planned 2019
Hybridge (Lingen) 100 DE Amprion, OGE 2023 TSOs plan €150 mil investment
Element Eins 100 DE Tennet, Gasunie, Thyssengas 2022 Second power, gas TSO project
GET H2 (Lingen) 105 DE RWE, Siemens etc tba Industrial scale pilot
BP Rotterdam Refinery 250 NL BP, Nouryon, PoR tba FID planned 2022
Port of Hamburg 100 DE tba tba FID planned end-2019

Source: S&P Global Platts

-- Andreas Franke, andreas.franke@spglobal.com

-- Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com