Technology is enabling the cheap production of green hydrogen
Green hydrogen is formed by using renewable energy to power electrolysis that splits water molecules into their constituent elements: hydrogen and oxygen. Advances in electrolysis technology and the falling cost of renewable energy are enabling the mass production of “green hydrogen,” which is more environmentally sustainable. Green hydrogen is a clean energy source that can be stored for a long time and transported over considerable distances.
These developments have altered the calculus for hydrogen and created a significant opportunity for countries to boost economic growth and move away from fossil fuels. Previously, the traditional means of producing hydrogen generate large volumes of carbon dioxide.
Developments in various electrolysis technologies over the past decade, specifically polymer electrolyte membrane, have increased system efficiencies to nearly 90 percent, and the operational lifetime of the process is approximately 80,000 hours. We estimate that new and cheaper materials will reduce the overall capital cost of polymer electrolyte membrane equipment, lowering the capital cost per kilowatt (kW), currently between $800 and $1,400, to as little as $200/kW by 2050.
Two major changes will make green hydrogen cheaper to produce:
- Decreasing costs of renewables
Electricity represents a large share in the operating costs of electrolysis processes (roughly 50 percent for PEM electrolysis, assuming electricity prices of 4.5 cents/kilowatt-hour). However, we expect that the installation of more low-cost solar photovoltaic and wind power plants globally over the next decade will produce the required electricity for less than 2 cents/kWh according to the prices of recent tenders.
- Increased economies of scale
Yearly additions to electrolysis capacity, along with larger average project sizes, are creating larger economies of scale and a reduction in project capital costs.
Based on these factors, Strategy& estimates that the production cost of a kilogram of green hydrogen using the PEM technology will fall from $2.30-$2.80 in 2018 to $0.70-$0.90 by 2050.