Green hydrogen will be cheaper than gas by 2050: BNEF

Renewably-produced hydrogen will be cheaper than natural gas by 2050 in many markets according to Bloomberg New Energy Finance, in one of the most bullish assessments yet of the potential for green hydrogen to replace fossil fuels.

The study makes some significant adjustments to BloombergNEF’s previous assumptions, which were already among the most optimistic around.

It predicts the cost to produce one kilogram of green hydrogen will fall to “well below” $US2 by 2030, and “well below” $US1 by 2050 in most markets. That represent a 13 per cent improvement on BloomberNEF’s previous 2030 modelling, and a 17 per cent improvement its previous 2050 modelling.

The 2050 cost will be 85 per cent below today’s costs, the report says. The study covered 28 markets. It said in more than half of those, green hydrogen would be cheaper than natural gas by 2050.

Green hydrogen is made using electrolysis to split water molecules into hydrogen and oxygen. To be “green”, the electrolysis must be powered by 100 per cent renewably-generated energy.

The report says the plummeting cost of solar photovoltaics is driving the improved outlook for green hydrogen.

“We now think that PV electricity will be 40 per cent cheaper in 2050 than what we had thought just two years ago, driven by more automatic manufacturing, less silicon and silver consumption, higher photovoltaic efficiency of solar cells, and greater yields using bifacial panels,” the report’s authors said.

They say green hydrogen will eclipse other methods of manufacturing hydrogen, including “blue hydrogen” which uses steam reforming to extract hydrogen from methane (CH4). The process creates carbon dioxide, most but not all of which is captured and stored using carbon capture and storage technology (CCS).

The report also predicts green hydrogen will be cheaper than “grey hydrogen”, which uses the same process as blue hydrogen but without the CCS.

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

“By 2030, it will make little economic sense to build ‘blue’ hydrogen production facilities in most countries, unless space constraints are an issue for renewables. Companies currently banking on producing hydrogen from fossil fuels with CCS 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,” he said.

The potential for green hydrogen to fill many of the roles of fossil fuels currently fill – particularly in industrial and long-haul transportation and steelmaking – has sparked the beginnings of a green hydrogen investment boom.

In Australia, Andrew Forrests’s Fortescue Metals and the Asian Renewable Energy Hub are leading efforts to build a massive green hydrogen manufacture and export industry here. Forrest has almost absurdly ambitious plans to build 1,000 gigawatts of renewable capacity around the world – including 40 GW in Australia – most of which will be used to manufacture green hydrogen. He says he will bring the first green hydrogen to market in 2023.

However, the technology is untested, and there is a good deal of scepticism about how big a role hydrogen can play in a net zero world. A report by Norwegian energy researcher Rystad last week made the striking claim that for hydrogen to play a really dominant role, it “needs batteries to fail”.