Green hydrogen - $1/kg by 2030 in prospect

Brazil and Chile are expected to be among the frontrunners of harnessing cheap renewables to produce green hydrogen off-grid by 2030, according to new analysis from Wood Mackenzie.

While subsidies will likely be implemented to stimulate green hydrogen development, ultimately its widespread uptake will depend on its cost effectiveness compared to alternatives.

And that in turn will depend largely on the electricity price and utilisation rate as well as the cost of the electrolysers.

“The hydrogen boom is well underway, but not all hydrogen is created equal. A spectrum of hydrogen colours are in play – but the real gamechanger will come when low-carbon green hydrogen costs become competitive in major markets,” says WoodMac Hydrogen Research Analyst Bridget van Dorsten.

The analysis by WoodMac indicates that the project pipeline is gathering pace as investors bet on its long term potential, growing seven-fold over the past year. The company reports tracking more than 560 low carbon projects with a minimum of 180GW total electrolyser capacity designation, with most still at early development stage.

Until 2019, the global estimated electrolyser manufacturing capacity was just 200MW. By mid-2021 that had jumped to 6.3GW of announced capacity, with 1.3GW added in Q1 alone.

WoodMac says electrolyser capex is falling fast and a significant drop is expected by 2025, driven down by a range of factors including economies of scale, new entrants to the market, greater automation and increased modularity.

For example, the costs of alkaline and polymer electrolyser membrane types, which account for almost all the projects in the pipeline, are forecast to fall by 35-50% by 2025.

Combine this capex reduction with cheap renewable PPAs and good renewable utilisation in many markets, the potential for competitive green electrolysis-based hydrogen really starts to grow, says WoodMac, pointing to an average price below $0.03/kWh to achieve sub $2/kg hydrogen by 2030.

Overall WoodMac believes $0.02/kWh and 30-40% load are reasonable cases in many countries by 2030 to suggest that green hydrogen will be competitive in at least a dozen markets, Brazil and Chile among them, by that year and more by 2050.

Notably Chile’s green hydrogen strategy released in November 2020 targets a price below $1.50/kg by 2030 and as low as $0.80/kg by 2050.