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IRENA outlines path to cost-competitive green hydrogen at scale: report

Highlights

H2 price could fall below US $2/kg within decade

Canada putting C$1.5 billion into low-carbon fuel

New York — Hydrogen produced with renewable electricity could compete on costs with fossil fuels by 2030 if solar and wind power costs continue falling and economies of scale reduce costs for electrolyzers, according to a Dec. 17 report. Additionally, Canada said it will put C$1.5 billion into a low-carbon and zero-emissions fuel fund that would include hydrogen.

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The report called "Green Hydrogen Cost Reduction: Scaling up Electrolyzers to Meet the 1.5⁰C Climate Goal," prepared by UAE-based International Renewable Energy Agency, considers innovation drivers and offers strategies that governments can use to reduce the cost of electrolyzers by 40% in the short term and by up to 80% in the long term, according to an emailed statement.

While green hydrogen has been getting a lot of attention for its potential role in decarbonization strategies, regulations, market design and the costs of power and electrolyzer production remain major barriers to the wide expansion of a green hydrogen market, the statement said.

Nevertheless, green hydrogen produced from clean energy resources holds promise where direct electrification is challenging in "harder-to-abate sectors, such as steel, chemicals, long-haul transport, shipping and aviation," according to the statement.

"Renewable hydrogen can be a game-changer in global efforts to decarbonize our economies," Francesco La Camera, IRENA's director general, said in the statement, adding that "levelling the playing field to close the cost gap between fossil fuels and green hydrogen is necessary."

For example, Canada Dec. 16 unveiled a hydrogen strategy aimed at being one of the world's top-three producers of the low-emitting fuel by 2050.

The country could be producing more than 20 million tons per year of clean hydrogen by then at a price of C$1.50/kg to C$3.50/kg. The government estimated that at that level of hydrogen production, there would be an annual reduction of as much as 190 Mt/y of carbon dioxide-equivalent emissions.

Hydrogen costs

Green hydrogen is currently two to three times more expensive than blue hydrogen, produced from fossil fuels in combination with carbon capture and storage, or CCS, according to IRENA.

Green hydrogen production costs are determined by renewable electricity prices, the investment cost of the electrolyzer and its operating hours, IRENA said.

Renewables have already become the cheapest source of power in many parts of the world, with auctions reaching record price-lows below US $20/MWh, and while low-cost electricity is a necessary condition for competitive green hydrogen, investment costs for electrolysis facilities must fall significantly too, the agency said.

According to IRENA, "in the best-case scenario," using low-cost renewable electricity at US $20/MWh in "large, cost-competitive electrolyzer facilities" could produce green hydrogen at a competitive cost with blue hydrogen already today.

If rapid scale-up and aggressive electrolyzer deployment takes place in the next decade, green hydrogen could then start competing on costs with blue hydrogen by 2030 in many countries, making it cheaper than other low-carbon alternatives before 2040, IRENA's analysis shows.

The agency said that if its recommendations are adopted, in price terms, the resulting green hydrogen could fall below US $2/kg within a decade.

"But getting there depends on defining the right business model, creating markets, and optimizing the supply chain in a way that both developed and developing countries, equally, can enjoy the transition to a clean, resilient energy system," La Camera said in the report's introduction.