Low-cost green hydrogen can be achieved faster and with lower deployment volumes than currently expected, according to thinktank the Rocky Mountain Institute (RMI).

Green hydrogen production costs could fall below $2/kg in many areas in the next five years, RMI says in a new report, Fuelling the Transition: Accelerating Cost-Competitive Green Hydrogen.

For offtakers which can accept a fluctuating hydrogen supply, an estimated $1/kg could be achieved due to reduced storage requirements, the report says. The Biden administration set a goal to produce hydrogen at $1/kg by 2030 as part of its Hydrogen Shot Initiative.

“Green hydrogen is not a future aspiration. The technology and markets are ready, and ready to scale quickly,” says the report.

$1/kg – US targeted cost of hydrogen production by 2030

This $2/kg price point is already a reality in some locations—such as Chile, Saudi Arabia, and Western Australia—while others—such as India, Spain and the US—are not far behind, according to the report, which says the potential for zero-carbon hydrogen is “significantly more advanced than is currently assumed”.

Green hydrogen capacity must scale up significantly to align with a 1.5°C future, the report says. This scaling will require new policies and private-sector leadership to overcome bottlenecks in the market in the next five years, such as a doubling of national targets by 2026.

In a separate report, thinktank the Energy Transmissions Commission says demand for hydrogen will grow from 115mn t/yr today to 800mn t/yr by 2050 under a 2050 net-zero scenario.

Policy support needed

Policy support will be needed to develop projects, secure offtake deals, build infrastructure and carry out further de-risking, the RMI report continues.

While there is significant policy momentum, support in most locations falls short of what is needed to achieve the announced targets. Competitive regions should focus on environmental regulation, permitting, electricity services and infrastructure, the RMI adds.

Policymakers must also look beyond the ‘colours’ of hydrogen and regulate based on greenhouse gas emissions, although hydrogen produced with electrolysis is likely to become the cheapest option eventually.

“Considering upstream and residual emissions, with emerging cost declines, we are confident that ‘green’ hydrogen will emerge as the frontrunner,” the report says.

Reduced electrolyser capex is the largest driver to realising near-term cost reductions for green hydrogen. A 50-70pc cost reduction is achievable from 2026-2030 with a combination of economies of scale, system design improvements, and manufacturing and power system optimisation. Cheaper electrolysers will not need to be run continuously, so green hydrogen can be produced competitively in locations with intermittent renewable energy supplies.

“It is a whole new industry that is being formed” Weiss, RMI

Strategic and sizeable procurement that would allow for targeted investment in gigawatt-scale electrolyser factory capacity production is needed to achieve this, however. Continued research and development of advanced designs is essential, with higher efficiencies and reduced reliance on precious metals, the RMI report says.

Development of a whole-systems design approach to technology development is also necessary. Large cost reductions can be achieved almost immediately by adopting world-class manufacturing and standardising power supply and conditioning. A fall in electrolyser prices from $700/kW to $200/kW is achievable using these measures, according to RMI.

The report includes analysis developed by RMI as a part of the Green Hydrogen Catapult, a private sector coalition aiming to deploy at least 45GW by 2027 and targeting a green hydrogen cost below $2/kg.

The goal of 45GW is more than sufficient to create a market where supply can meet geographically distant demand, with significant cost reductions likely to happen with the deployment of 25GW or less, according to report co-author Tessa Weiss, who notes project deployment is the key factor, rather than electrolyser manufacture.

“The challenge is the messy middle: how you get projects off the ground,” she says.

Permitting challenges and stakeholder alignment are particularly difficult in a nascent industry.

“It is a whole new industry that is being formed, and we are trying to do that in the pressure cooker environment of the need to get to net zero,” says Weiss.

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Author: Ros Davidson