Production of green hydrogen could be cost competitive by 2030

The production of hydrogen fuel produced by electrolysis – a process that uses electricity to split water into hydrogen and oxygen, and which can be carbon-free and ‘green’ provided the electricity used in the process is produced by renewables – is rapidly developing from pilot to commercial-scale operation in many parts of the world. Its production could become cost competitive with current predominant methods that require the use of natural gas as a feedstock as early as 2030, according to analysis by the IHS Markit Hydrogen and Renewable Gas Forum.

‘Costs for producing green hydrogen have fallen 50% since 2015 and could be reduced by an additional 30% by 2025 due to the benefits of increased scale and more standardised manufacturing, among other factors,’ says Simon Blakey, IHS Markit Senior Advisor, Global Gas.

Investment in so-called ‘power-to-x’* projects – of which hydrogen makes up the large majority – is growing rapidly, with investment expected to grow from around $30mn in 2019 to more than $700mn in 2023. Economies of scale are a primary driver for green hydrogen’s growing cost competitiveness. The average size for power-to-x projects scheduled for 2023 is 100 MW – 10 times the capacity of the largest project in operation today – according to the IHS Markit Power-to-X Tracker, which tracks hydrogen projects around the world.

Hydrogen production that uses natural gas as a feedstock, via a process known as methane reforming, currently supplies the hydrogen to the chemical and refining industries that today make up the bulk of global hydrogen demand.

‘There is growing potential for hydrogen to be used in transport, heating, industry and power generation,’ comments Shankari Srinivasan, IHS Markit Vice President, Global and Renewable Gas, IHS Markit. Both green hydrogen and so-called blue hydrogen – methane reforming coupled with carbon capture technology – are likely to play a role in the energy future as demand expands. ‘Blue and green hydrogen are extremely complementary,’ Srinivasan adds. ‘If they are developed in parallel, hydrogen will be able to make a big contribution to future energy demand, especially with the ambitious goals on carbon.’

Hydrogen’s overall share in the energy mix will ultimately depend on the extent of decarbonisation that is desired. In Europe, currently the primary market for hydrogen projects, hydrogen could account for as much as one third of the energy mix if the aim was 95% decarbonisation or greater.

‘In Europe it is now widely agreed that electrification alone cannot deliver the level of emissions reduction that many countries aspire to,’ notes Catherine Robinson, IHS Markit Executive Director, European Power, Hydrogen and Renewable Gas. ‘Hydrogen is a highly versatile fuel – both in terms of how it can be transported and the variety of its potential end-use applications. The greater the degree of a decarbonisation, the greater the likely role of hydrogen in the energy future.’

* Projects that convert surplus power to different forms of energy and/or chemicals such as power-to-hydrogen, power-to-gas, power-to-heat, power-to-ammonia, power-to-chemicals, power-to-fuel, power-to-liquid and power-to-methane.