The production of green hydrogen could compete with hydrogen produced from fossil fuels by 2030 in Australia, Germany and Japan, if renewable energy prices reach 30 dollars per megawatt hour (MWh), says a new research study by consulting firm Wood Mackenzie. Today, the prices of wind and solar power purchase agreements (PPA) vary between $ 53 and $ 153 / MWh in those markets.
Wood Mackenzie’s research shows that less than 1% of all hydrogen currently produced comes from renewable electricity, relying mostly on natural gas and coal.
The shift to hydrogen produced by wind and solar through electrolysis, which divides water molecules into hydrogen and oxygen atoms, offers a significant opportunity to decarbonize their production and meet emissions targets.
According to Wood Mackenzie, from 2000 to the end of 2019, 252 megawatts (MW) of green hydrogen projects will have been deployed worldwide. By 2025, capacity will increase by 1.272%, with the deployment of another 3,205 MW of electrolysers dedicated to the production of green hydrogen.
Ben Gallagher, senior analyst at Wood Mackenzie, said: “The big increase in the 2019-2025 period is partly due to the fact that this is a nascent market. But aggressive targets in East Asia and increased interest from key international stakeholders will drive the deployment in the short term.
“While cost competitiveness may be out of reach in most scenarios by 2025, national targets and pilot projects will produce sufficient volume to achieve substantial falls in capital expenditure beyond that date,” he added.
Gallagher said as the deployment of renewable energy grows, so will the green hydrogen market. But there are challenges. While green hydrogen has made gains in several key markets, including Japan, Germany and Australia, it currently cannot compete with the low costs of locally produced coal and hydrogen produced with natural gas in China and the United States, for example.
In addition, it is unclear whether prices for renewable PPPs worldwide will fall fast enough for green hydrogen production to be competitive.
However, Gallagher is optimistic about the future of the green hydrogen sector. “We are embarking on the energy transition,” he said. “There are several unknowns that would further stimulate the adoption of green hydrogen: changes in policy dynamics, new carbon regimes, new ways to monetize grid flexibility and lower-than-expected renewable energy costs.