(Bloomberg) -- The cost of producing hydrogen using renewable energy sources is set to drop sharply over the next decade, making it competitive with supplies extracted from fossil fuels and enhancing its role in the clean energy transition, according to BloombergNEF.
Renewable hydrogen costs may fall to as low as $1.40 per kilogram by 2030 from the current range of $2.50 to $6.80, BNEF said in a report. That could slide further to 80 cents by 2050, equivalent to a natural gas price of $6 per million British thermal units.
“Once the industry scales up, renewable hydrogen could be produced from wind or solar power for the same price as natural gas in most of Europe and Asia,” Kobad Bhavnagri, BNEF’s head of special projects, said in the report. “These production costs would make green gas affordable and puts the prospects for a truly clean economy in sight.”
Though hydrogen has been hailed for decades as a carbon-free energy source, widespread use has been challenged by production, which can be costly and polluting, as well as the gas itself being volatile and highly inflammable. If produced on a large scale, it can help decarbonize a range of sectors, from long-haul transport to steel-making, from which it is otherwise difficult to remove emissions. It can also be stored and shipped, as well as used to produce electricity.
The sharp cost reduction is expected to be driven by the growing use of alkaline electrolyzers in the production process, according to BNEF, adding that Chinese manufactures have demonstrated the low costs achievable for the technology. Fossil fuels are currently the source for about 96% of global hydrogen production, with just 4% coming from water electrolysis.
To contact the reporter on this story: James Thornhill in Sydney at jthornhill3@bloomberg.net
To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jasmine Ng
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