CSIRO’s stunning predictions for low cost battery storage and hydrogen electrolysers

The CSIRO has predicted battery storage and hydrogen electrolyser technologies will continue to undergo stunning cost reductions as uptake increases, which can be accelerated by governments adopting more ambitious climate change policies.

On Friday, the CSIRO released the consultation draft for its latest iteration of its annual GenCost assessment, which includes calculations and projections for the expected cost of a range of electricity generation technologies.

The GenCost assessment has reconfirmed that wind and solar technologies continue to hold the status as the lowest-cost sources of new electricity supplies.

The CSIRO found that the integration costs of variable renewable energy sources were modest and did not prevent wind and solar from remaining cheaper than coal and gas generators even after accounting for the costs of new network infrastructure and backup storage, and at high renewable shares.

For the first time, the CSIRO has also included projections of the cost of electrolysers used in the production of hydrogen using electricity – showing dramatic projected cost reductions each year for at least the next three decades.

The CSIRO included projections under three climate policy scenarios; a ‘current policies’ scenario where no new policy measures are introduced, a ‘zero net emissions by 2050’ where climate ambition is significantly enhanced, and a ‘zero net emissions post 2050’ scenario where the world reaches zero net emissions, but not until the second half of the century.

The GenCost report shows electrolyser costs (the chart below includes projections for the cost of polymer electrolyte membrane electrolysers), falling by more than 90 per cent over the next three decades as global demand for hydrogen ramps up.

"Electrolyser deployment is being supported by a substantial number of hydrogen supply and end-use trials globally and in Australia," the GenCost report says.

"Experience with other emerging technologies indicates that this type of globally coincident technology deployment activity can lead to a scale-up in manufacturing which supports cost reductions through economies of scale."

Such electrolysers can be powered by wind and solar, creating the potential for a low cost and zero emissions supply of hydrogen that could be used to decarbonise a wide range of hard to abate industries, including metals production and heavy transport fuels.

While hydrogen electrolyser costs are expected to undergo rapid cost reductions of a similar scale across each climate policy scenario, the GenCost assessment shows that the more ambitious scenarios would have a much more significant impact on battery storage costs.

If governments were to adopt policies consistent with achieving a transition to zero net emissions by 2050, the GenCost report suggests this would help significantly accelerate cost reductions of battery storage by helping to achieve greater economies of scale.

For example, battery costs could fall by more than 55 per cent by 2030 with a global trajectory to net zero emissions by 2050. Battery costs are still expected to fall by around 20 per cent by the end of the decade even under current policy settings.

By 2030, the GenCost report suggests the levelised cost of 8-hours of battery storage would be starting to fall below $150 per MWh, almost half the expected cost of the technology under current policy settings.

Comparing these costs to other 'firming' technologies, it would see 8-hours of battery storage become cheaper than equivalently sized pumped hydro energy storage ($311 per MWh in 2030) and beginning to directly compete with large open-cycle peaking gas generation (between $111 and $177 per MWh) before the costs of carbon capture and storage are considered.

"Batteries have been able to sustain high rates of cost reduction over time and the use of different learning rates by scenario has meant the projections can reflect some uncertainty as to how well they will be able to continue to achieve historical cost reduction trends," the report says.

"Battery deployment is strongest in the Global NZE by 2050 scenario reflecting stronger deployment of variable renewables increasing electricity sector storage requirements and stronger uptake of electric vehicles to support achieving net zero emissions by 2050. Together with an assumed high learning rate this leads to the fastest cost reduction."

With the cost of pumped hydro energy storage projects unlikely to achieve the same dramatic reductions in cost - as hydropower is a long-established technology with a lesser opportunity for cost improvements - it will likely see battery storage become the cheaper option for medium-term storage (up to 8-hours) before the end of the decade.

The GenCost assessments are a key input into the development of the Australian Energy Market Operator's Integrated System Plans, which have predicted dramatic increases in renewable energy uptake and investment in battery storage and hydrogen technologies due to the dramatic falls in cost.

The recently published draft of the 2022 Integrated System Plan included a dramatic 'hydrogen superpower' scenario, where Australia takes a leading role as a global supplier of zero emissions hydrogen, powered by 255GW of wind and 300GW of solar capacity installed by 2050.

Under that scenario, AEMO projects Australia's total electricity generation would increase almost seven-fold by 2050 while entirely removing coal and fossil gas generators from the system, to meet potentially surging demand for renewable electricity from a massively expanded renewable hydrogen industry.

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