'By 2030, blue hydrogen will make little economic sense' versus green: BNEF

  • Apr 08, 2021
  • Recharge News

Renewables-generated hydrogen is set to “rewrite the global energy map” in the coming decades, with collapsing costs powering the way forward for green H2 to displace both fossils-fuelled blue and grey varieties’ roles in the rapidly emerging market, according to the latest report on the sector from BloombergNEF.

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The analyst group, in its first-half of 2021 Hydrogen Levelized Cost Update, forecasts that green hydrogen is on track to be cheaper than natural gas by 2050 in 15 of the 28 markets modelled – countries that accounted for one-third of global gross domestic product in 2019 – and undercut both blue and grey H2 on cost per kilogram (kg).

“Such low renewable hydrogen costs could completely rewrite the energy map. It shows that in future, at least 33% of the world economy could be powered by clean energy for not a cent more than it pays for fossil fuels,” said BNEF leader hydrogen analyst Martin Tengler.

“But the technology will require continued government support to get there – we are at the high part of the cost curve now, and policy-supported investment is needed to get to the low part.”

BNEF predicts the cost of producing hydrogen from renewable electricity should fall by up to 85% from today to 2050, leading to costs below $1/kg ($7.4/MMBtu) by 2050 in most international markets.

“By 2030, it will make little economic sense to build blue hydrogen production facilities in most countries,” said Tengler, “unless space constraints are an issue for renewables.

“Companies currently banking on producing hydrogen from fossil fuels with CCS [carbon capture and storage] will have at most ten years before they feel the pinch. Eventually those assets will be undercut, like what is happening with coal in the power sector today.”

The “key driver” lying behind green hydrogen’s cost-cratering, noted BNEF, was the falling price of solar power, with Tengler pointing out that renewables-H2 costs are 13% lower than in the analysts’ previous 2030 scenario and 17% below an earlier 2050 version.

“On one hand the reduction in the forecast was surprising, on the other hand not. This is how it goes with clean energy. Every year it gets cheaper, faster than anyone expects. The key driver is the falling cost of PV electricity [which] we now think will be 40% cheaper by 2050 than what we had thought just two years ago.”

According to the International Energy Agency (IEA), grey hydrogen is currently available at $1-3/kg, while CCS to turn it blue would add at least $0.50/kg. Green H2 from onshore wind and solar costs $2.50-6/kg, the agency says. Analyst Bloomberg NEF expects the cost of green hydrogen to become cheaper than blue by 2030.

Of course, it is hard to make any firm cost predictions, given all the variables involved. The cost of green hydrogen will vary wildly depending on the price of the electricity used to power the electrolyser and the numbers of hours the electrolyser is in operation per year — and that’s without factoring in the cost of storage and distribution. And the cost of blue hydrogen will depend on the price of natural gas and the cost of capturing and storing the CO2.