Why green hydrogen could be cheaper than fossil fuels in just a few years

New research suggests that bigger and better electrolysers will be key to producing green hydrogen at a lower cost than fossil fuels, and Australia’s abundance of cheap solar means this cross-over point will come ‘sooner rather than later’.

The analysis has been detailed in a paper published in in the journal Cell Reports Physical Science, which identifies the potential pathways for a renewable hydrogen to achieve cost competitiveness with fossil fuels, including gas, coal and transport fuels.

Researchers from the University of New South Wales modelled a number of technology scenarios to build an understanding of the cost drivers of renewable hydrogen and where there were opportunities to drive down costs.

The study found that the current cost of renewable hydrogen ranged between $AUD4.04 to $AUD6.53 per kilogram, but the researchers were able to identify scenarios that would deliver renewable hydrogen costs consistent with targets to get production costs below $2 per kilo, a widely recognised benchmark where renewable hydrogen becomes competitive with fossil fuels.

“After plugging all these different values into our algorithm and getting a range of prices of hydrogen energy, we then said, ‘Okay, so there were some cases where we got closer to that $US2 per kilogram figure ($AUD2.80). What was it about those cases that got it down so low?’” report co-author Nathan Chang said.

“Capital costs of electrolysers and their efficiencies still dictate the viability of renewable hydrogen,” co-author Dr Rahman Daiyan added. “One crucial way we could further decrease costs would be to use cheap transition metal-based catalysts in electrolysers. Not only are they cheaper, but they can even outperform catalysts currently in commercial use.”

“Studies like these will provide inspiration and targets for researchers working in catalyst development.”

The study found that reductions in the cost of electrolyser technologies will be the key to getting the cost of producing renewable hydrogen to a globally competitive level, and that is is likely that renewable hydrogen will soon be produced at a lower cost to that produced using fossil fuels.

In particular, the UNSW researchers found that Australia is well placed to lead the emergence of a commercially viable renewable hydrogen industry that can out compete fossil fuels, leveraging Australia’s abundance of solar resources.

The analysis found that it will be possible to produce low cost hydrogen in remote parts of Australia, where the solar resource could be maximised and would avoid the need to invest in new grid infrastructure.

Regions like Port Hedland in Western Australia could deliver competitively priced renewable hydrogen into export markets like Japan and South Korea, which are both aiming to boost their use of renewable hydrogen but do not enjoy the same access to solar resources as Australia does.

The research has been prepared with the support of the Australian Renewable Energy Agency (ARENA), which is preparing to provide $70 million in funding support for several large-scale electrolyser projects in Australia.

Low emissions hydrogen featured prominently in the Technology Roadmap recently unveiled by the Morrison government, but which will advocate for investment in fossil fuel hydrogen paired with carbon capture and storage alongside renewable hydrogen.

However, the researchers said that it was only a matter of time before renewable hydrogen became a cheaper source of energy than traditional fossil fuels, with the cost of solar energy continuing to fall dramatically.

“Because PV costs are reducing, it is changing the economics of solar hydrogen production,” Dr Chang said.

“In the past, the idea of a remote solar driven electrolysis system was considered to be far too expensive. But the gap is reducing every year, and in some locations there will be a cross-over point sooner rather than later.”

The researchers added that it was crucial that governments played an active role in helping to increase the scale of production, including by supporting the development of bigger and better electrolyser technologies.

“With technology improvements in electrolyser efficiency, an expectation of lower costs of installing these types of systems, and governments and industry being willing to invest in larger systems to take advantage of economies of scale, this green technology is getting closer to being competitive with alternative fossil fuel production of hydrogen,” Dr Daiyan added.