Clean Hydrogen Production Costs to be Brought Well Below USD 2/kg by 2030: ETC

In its parallel report, the ETC states that the production costs for clean hydrogen can be brought well below USD 2/kg by 2030.

In its parallel report Making the Hydrogen Economy Possible: Accelerating clean hydrogen in an electrified economy, the ETC sets out the complementary role for clean hydrogen and how a combination of private-sector collaboration and policy support can drive the initial ramp up of clean hydrogen production and use to reach 50 million tonnes by 2030. The authors believe that the production costs for clean hydrogen can be brought well below USD 2/kg by 2030.

It adds that clean hydrogen will play a complementary role to decarbonise sectors where direct electrification is likely to be technologically very challenging or prohibitively expensive, such as in steel production and long-distance shipping. A net zero GHG emissions economy by mid-century will likely need to use about 500 to 800 million tonnes of clean hydrogen per annum, a 5-7 fold increase compared to hydrogen use at present. 

Green hydrogen, produced via the electrolysis of water, is likely to be the most cost-competitive and therefore the major production route in the long-term, due to falling renewable electricity and electrolyser equipment costs. It could account for approximately 85 percent of total production by 2050. However, blue hydrogen, produced from natural gas with carbon capture (with 90 percent+ capture rates) and low methane leakage (<0.05 percent), will play an important role in transition and in some specific very low-cost gas locations.

The report highlights how critical rapid ramp-up of production and use in the 2020s is to unlock cost reductions (bringing clean hydrogen costs below USD 2/kg) and to make mid-century growth targets achievable. However, even once clean hydrogen becomes cheaper than grey hydrogen, using hydrogen in different industry and transport sectors will often still impose a “green cost premium” compared to current high-carbon technologies. 

Public policy is therefore essential to drive uptake of clean hydrogen at pace. Policymakers will also need to anticipate growing hydrogen transport and storage needs. In total, 85 percent of investments required to ramp-up hydrogen production is for renewable electricity provision (included in the renewables investment above). Additionally, ca. USD 2.4 trillion (USD 80 billion per annum) will be required between now and 2050 for hydrogen production facilities and transportation & storage.

“We now have the technologies to completely decarbonise electricity generation at low cost: and electrification is the key to zero-carbon production in most of the economy. By mid-century even rich developed countries will need 2-3 times as much electricity as today, and developing economies 5-10 times as much. Governments, businesses and investors need to recognise the scale of the new industrial revolution required and the huge opportunities it creates,” Lord Adair Turner, Chair, ETC.

The report suggests that public policy needs to pull forward clean hydrogen demand in the 2020s to drive production volumes up (reaching 50 million tonnes by 2030). This requires rapid decarbonisation of hydrogen production for already existing uses and accelerated technology development, piloting and early adoption of hydrogen in other key sectors with lower levels of technology readiness but large potential demand, like steel, shipping and synthetic aviation fuels. Instruments to achieve that early demand growth while supporting the scale-up of clean hydrogen supply.