The cost of green hydrogen – for which offshore wind is increasingly seen as a source – will fall by up to 64% by 2040, according to new research from Wood Mackenzie.
With the announced project pipeline for green hydrogen growing from 3.5 GW to just over 15 GW in the last 10 months, Wood Mackenzie says volumes will be large enough and stable enough for the nascent market to scale.
Wood Mackenzie senior research analyst and report author Ben Gallagher said, “On average, green hydrogen production costs will equal fossil fuel-based hydrogen by 2040.
“In some countries, such as Germany, that arrives by 2030. Given the scale up we have seen so far, the 2020s is likely to be the decade of hydrogen.”
As previously highlighted by OWJ, in June the authorities in Germany unveiled the country’s national hydrogen strategy, a strategy that foresees an important role for offshore wind as a source of green hydrogen.
Green hydrogen produced using electricity from offshore wind is also being investigated in projects elsewhere in Europe. Analysts at Cornwall Insight believe National Grid’s latest Future Energy Scenarios could give a further boost to offshore wind deployment in the UK.
Ørsted and its partners in the Westküste 100 project – the first large-scale hydrogen project in Germany – recently received funding confirmation from the German Federal Ministry of Economic Affairs and Energy.
In the PosHYdon pilot project, the Netherlands is examining the feasibility of re-using offshore oil and gas infrastructure to produce green hydrogen using offshore wind, and bring power ashore not as electrons, but as molecules.
“Rising fossil fuel prices will boost green competitiveness, further strengthening the case for this technology in the coming years,” said Mr Gallagher.
As noted in the research, sub-US$30/MWh renewable electricity prices and high utilisation rates will still be required for competitiveness.
While in 2020 grey hydrogen is the lowest cost hydrogen colour, excluding China, Wood Mackenzie expects costs to rise by 82% by 2040. This is primarily due to the forecast increase in natural gas prices. In Saudi Arabia and the US, grey hydrogen will continue to be the lowest cost colour until 2040.
Blue hydrogen costs are also expected to rise, with an increase of 59% by 2040. The success of blue hydrogen is linked to the success of carbon capture and storage technology, which has been plagued by high costs and project cancellations. Like grey hydrogen, the forecast cost profile is largely determined by natural gas prices.
“Even with a multitude of challenges that await the nascent green hydrogen market, we firmly believe there will be some form of low-carbon hydrogen economy soon,” said Wood Mackenzie.
“Given the degree of explicit policy, corporate and social support that has blossomed in 2020, green hydrogen will successfully scale and realise huge production cost declines.
“Moreover, if additional explicit policy support comes to fruition in the coming months, we could see costs fall even faster, and more universally, than outlined in our report.
“The energy transition is dynamic. If 2020 is any indication, so too will be the low-carbon hydrogen landscape,” Mr Gallagher concluded.