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Study finds green hydrogen can be competitive with fossil fuels as soon as 2030


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Study finds green hydrogen can be competitive with fossil fuels as soon as 2030

Green hydrogen could undercut fossil fuels by the end of the decade in Southern California with technologies that are already commercially available, according to a recent analysis of the potential market in Los Angeles.

The Green Hydrogen Coalition, which describes itself as an educational nonprofit, estimated that the cost of the fuel could fall to 69 cents per kilogram by 2030 thanks to new federal tax credits for "clean" hydrogen production.

Green hydrogen is produced by electrolysis, which splits the hydrogen from the oxygen in water, powered by renewable energy.

"Our initial goal was to figure out if mass-scale, low-cost delivered green hydrogen was even possible," Lily Backer, chief of staff and a project manager with the coalition, said in a March 28 presentation of the group's findings.

The Green Hydrogen Coalition launched the program, now known as HyBuild Los Angeles, in 2021 in hopes of developing a market for the fossil fuel alternative. "Excitingly, we learned that yes, it is possible, and it's possible at price points that are even lower than fossil fuels," Backer said.

The feasibility study came as Los Angeles and a group of developers advance a project that would link a 220-MW green hydrogen production and storage complex in Delta, Utah — backed by a $504 million US Energy Department loan — to Southern California via pipeline. The Los Angeles Department of Water and Power, which plans to replace natural gas with green hydrogen to fuel four of its peaker plants, is one of several municipal utilities that has committed to becoming an offtaker.

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The collaboration, operating under the name ACES Delta LLC, is one of the dozens of clean hydrogen infrastructure development projects in the pipeline in the US, many of which are competing for funding from an $8 billion program created by the bipartisan infrastructure law in 2021.

Though the Green Hydrogen Coalition helped spearhead Los Angeles' efforts, Backer clarified that the nonprofit is not applying for US Energy Department funding but is collaborating with a larger California-wide bid.

Reducing the cost of green hydrogen

The coalition's analysis, though "conceptual," assumes the deployment of only commercially proven technologies, Backer said. Other assumptions, such as the availability of hydrogen storage in underground salt domes, are under development.

Based on those inputs, the coalition estimated that the levelized cost of green hydrogen could reach $2.05 per kilogram in 2030, even without government incentives. By factoring in the production tax credit authorized by the US Inflation Reduction Act in 2022, that price cost could fall below 70 cents, allowing hydrogen to compete with diesel in the trucking industry as soon as 2026, the report said.

"Green hydrogen touches nearly every sector of our economy and may be cost competitive sooner than you think," Backer said.

At present, the price of green hydrogen is undercut by fossil fuels and by "gray" hydrogen produced from fossil fuels. As of March 27, California offtakers paid about $1.80 per kilogram for hydrogen produced from natural gas feedstocks, compared to $6.14 for electrolytic hydrogen, according to S&P Global Platts pricing data.

But for some first-movers, including Los Angeles, which has a 100% zero-carbon electricity mandate by 2035, the advantage of green hydrogen produced by electrolysis lies in its low carbon footprint, not the price.

The use of the power sector as an anchor customer has "really been our thesis all along," Mike Ducker, senior vice president for hydrogen infrastructure at ACES partner Mitsubishi Power Americas Inc., said in an interview. "The goal is, first, can you find an anchor customer that has enough demand and enough scale that drives the cost down, that really helps underwrite and secure the first project? Once you have that, then the ancillary projects and other offtakers and synergistic effects really take hold."

S&P Global Platts is an offering of S&P Global Commodity Insights. S&P Global Commodity Insights is owned by S&P Global Inc.

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