Cheap green hydrogen to push out alternatives and threaten gas: BloombergNEF

Cheaper solar power making green hydrogen production competitive in many countries by 2030 in a boon for use in Australia but a hurdle for dreams of a huge export market.

Cheap green hydrogen to push out alternatives and threaten gas: BloombergNEF

Green hydrogen made from renewable electricity will be cheaper than so-called blue hydrogen across the world by 2030, according to energy research house BloombergNEF.

Due to the plunging price of solar power, BNEF cut its 2030 green hydrogen price forecast 13 per cent to well below $US2/kg for most markets.

BNEF lead hydrogen analyst Martin Tengler said such low renewable hydrogen costs could completely rewrite the energy map.

"It shows that in future, at least 33% of the world economy could be powered by clean energy for not a cent more than it pays for fossil fuels," Tengler said.

"This is how it goes with clean energy. Every year it gets cheaper, faster than anyone expects.

"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."

BNEF considered more than 600 projects in 28 markets, including Australia. It expects green hydrogen to be produced for less than $US1/kg by 2050 in most areas after cutting its estimate of solar energy costs in 2050 by 40 per cent compared to two years ago.

Tengler said in Australia green hydrogen from renewable energy would be cheaper than blue hydrogen before 2030 due to a combination of cheap renewable energy and relatively expensive gas. Blue hydrogen is made from gas with greenhouse emissions dealt with by carbon capture and storage.

"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," Tengler said.

"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."

BNEF's view is a world away from an outlook Woodside presented 2½ years ago that saw blue hydrogen remaining cheaper for 30 years and negligible production in 2030.

Source: Woodside presentation October 2019

Export dream challenged

The ability to produce cheap, clean hydrogen is a boon for many until now hard to abate industrial emissions and the future of energy-intensive manufacturing and minerals processing in Australia.

However, Australia's plan for a significant export trade is made difficult as green hydrogen can be produced cheaply in many markets but is expensive to transport.

"Indeed, we think exporting hydrogen by ship will be very costly and hard to justify on the basis of pure economics," Tengler said.

"But countries like Japan and South Korea, which have shown interest in importing hydrogen, are low on space for solar panels and wind turbines, which means that they might still need to buy imported hydrogen."

Tengler said by 2030, Australia may be able to produce green hydrogen for less than the cost of so-called grey hydrogen produced from gas but with the emissions vented to the atmosphere.

Tokyo-based Tengler told Boiling Cold that Australia was one of the 15 markets where BNEF predicts green hydrogen would be cheaper than gas buy 2050.

The BNEF analysis had several conservative assumptions that, if addressed, could make green hydrogen more competitive.

No carbon price was applied to the greenhouse emissions from burning natural gas or making grey hydrogen.

BNEF also assumed the capacity of solar or wind power matched the capacity of the electrolysers. Tengler said a larger power plant would increase the utilisation of electrolyser capacity and push down modelled prices by 10 per cent in 2050.

Electricity to power hydrogen electrolysers was assumed to come from solar panels or onshore wind. Projects like the Pilbara's Asian Renewable Energy Hub that has both solar and wind would likely achieve much higher utilisation of the electrolysers.

hydrogen colours primer

  • Gas: CH4 + O2 -> heat + CO2 + H2O
  • Grey hydrogen: CH4 -> H2 + CO2 (most global production now)
  • Blue hydrogen: grey hydrogen with the CO2 captured and stored
  • Green hydrogen: H2O + renewable electricity -> H2 + O2
  • Black or brown hydrogen: like grey hydrogen but from black or brown coal, not gas
  • Hydrogen can be burnt for heat like gas or produce electricity in a fuel cell. In both cases, only water is emitted.