Rapid fall to parity predicted for Australian renewable hydrogen costs | RenewEconomy

Rapid fall to parity predicted for Australian renewable hydrogen costs

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ANU study says cheaper solar and wind, combined with falling costs for electrolysers, will mean green hydrogen will soon beat fossil fuel alternatives.

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Work on a Siemens electrolyser. Image by Siemens
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Significant and continued cost reductions to solar PV and wind technologies, as well as cost reductions to electrolysers, will mean that the cost of green hydrogen in Australia could reach $A3/kg “in the near future” and that a “stretch goal” of $A2/kg will likely come into reach, “possibly rapidly”, according to a new paper.

The new paper was published on Friday by researchers from the Crawford School of Public Policy’s Centre for Climate & Energy Policy at the Australian National University.

The authors of the paper sought to investigate whether the production of green hydrogen – which is hydrogen created using electricity from renewable energy sources – could be accomplished at a cost “that makes it attractive compared to hydrogen produced from fossil fuels.”

The main cost factors creating a barrier to affordable green hydrogen are the cost of the electricity  and the cost of electrolysers, together with capacity utilisation rates.

However, as the authors point out, the cost of renewable electricity from technologies such as solar PV and wind have fallen dramatically over the last few years and are expected to fall even further in the years ahead.

“In many parts of the world, wind and solar power is already the cheapest form of energy for any new built generating capacity. Its average cost is cheaper than electricity from natural gas in many places including Australia and is often cheaper than wholesale prices on the grid,” the report says.

As such, production of renewable hydrogen is becoming more competitive with that produced by fossil fuel electricity, especially when you take into consideration fossil fuel-generated hydrogen’s “highly emissions-intensive” nature. Even when coupled with carbon capture and storage, the authors point out that fossil fuel-generated hydrogen still suffers from “significant remaining carbon dioxide emissions.”

Basing their analysis heavily in figures from the International Renewable Energy Agency (IRENA), the authors point out that “Typical up-front capital costs for solar PV installations fell by 79% from 2010 to 2019 and by 24% for onshore wind generators.”

Further, “The levelised cost of electricity (LCOE) for large scale solar PV installations in 2020 is between A$41-60/MWh in Australia according to CSIRO estimates … and A$49-64/MWh internationally according to the IRENA auction database.”

With renewable electricity costs falling dramatically, the next focus is the efficiency and capital cost of electrolysers – the device which splits water into hydrogen and oxygen using electrical energy.

As with renewable electricity, though to a much lesser degree, capital costs of electrolysers have also seen some reduction in recent years, and the authors believe that electrolyser manufacturing costs could fall “substantially as demand for electrolysers increases.”

The authors show that for every $A10/MWh decrease in electricity costs there is an attendant decrease in hydrogen production costs of $A0.47/kg. So, taking into account a series of other factors, the 2020 estimates for green hydrogen production from solar (capacity factor 30%) ranged from $A3.12/kg to $A3.82/kg.

Looking forward, however, and based on a mean cost of solar PV in 2030 of $A33/MWh, hydrogen costs could fall to range from $A2.25/kg to $A2.94/kg. Lower range projections for the cost of solar PV of around $A25/MWh yielded hydrogen costs in the range of $1.89/kg to $A2.56/kg.

Things get even better when onshore wind generation is involved, with its higher capacity factor of 45%. Hydrogen production costs ranged from $A3.10/kg to $A3.60/kg in 2020 and $A2.70/kg to $A3.20/kg in 2030 – though 2030 figures do not expect a dramatic mean cost of wind as they do solar. With lower range projections for wind electricity by 2030 of $A40/MWh (as compared to around $A50/MWh), green hydrogen production costs could fall to $A2.40/kg to $A2.90/kg.

These figures compare well with existing cost predictions and estimates, especially those laid out in CSIRO’s National Hydrogen Roadmap published back in 2018. These later figures assume a lower capital cost for electrolysers as compared to CSIRO’s 2018 projections.

All told, applying all analyses, the authors conclude that hydrogen production cost estimates for 2030 are between $A1.89/kg to $A3.71/kg.

The authors conclude by explaining that “the production of green hydrogen at costs of below A$3/kg is likely to be possible, and a reduction of production costs over the next decade to approach A$2/kg is plausible.” Moreover, “Australia is well placed to achieve low-cost green hydrogen production due to its low-cost renewable energy supply and the potential to achieve large economies of scale.”

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