Green hydrogen produced with renewable electricity could be a cost-competitive climate solution compared to fossil fuel alternatives by 2030, says a report.

The analysis by the International Renewable Energy Agency (IRENA) shows that a combination of falling costs for solar and wind power, improved performance as well as economies of scale for electrolysers could make it possible for hydrogen to compete on price.

The energy watchdog’s report looks at drivers for innovation and presents strategies that governments can peruse to reduce the cost of electrolysers by 40% in the short term and by up to 80% in the long term.

Francesco La Camera, director-general of IRENA, claims renewable hydrogen could be a “game-changer” in global efforts to decarbonise economies.

“Levelling the playing field to close the cost gap between fossil fuels and green hydrogen is necessary. Cost-competitive green hydrogen can help us build a resilient energy system that thrives on modern technologies and embraces innovative solutions fit for the 21st century.”


Green hydrogen could play “critical role” in decarbonisation strategies as cost-competitive climate solution

IRENA’s report notes that green hydrogen could play a “critical role” in decarbonisation strategies, particularly so where direct electrification is challenging in harder-to-abate sectors, such as steel, chemicals, long-haul transport, shipping and aviation.

But it added that regulations, market design and the costs of power and electrolyser production are still “major barriers to the uptake of green hydrogen”.

Currently, the fuel is two to three times more expensive than blue hydrogen, produced from fossil fuels in combination with carbon capture and storage (CCS).

The production costs for green hydrogen is determined by the renewable electricity price, the investment cost of the electrolyser and its operating hours, according to IRENA.

It said renewables have already become the cheapest source of power in many parts of the world, with auctions reaching record price-lows below $20 per megawatt-hour (MWh).

While low-cost electricity is a necessary condition for competitive green hydrogen, the energy watchdog claims investment costs for electrolysis facilities “must fall significantly too”.


Green hydrogen could compete on costs with blue hydrogen by 2030 in many countries

The analysis identifies key strategies and policies to reduce costs for electrolysers through innovation and improved performance aiming to scale up electrolysers from today’s megawatt to multi-gigawatt (GW) levels.

IRENA believes standardisation and mass-manufacturing of the electrolyser stacks, efficiency in operation as well as the optimisation of material procurement and supply chains will be equally important to bring down costs.

For that, it said today’s manufacturing capacity of less than 1GW would have to “massively grow” to beyond 100GW in the next 10 to 15 years.

In the best-case scenario, the report shows that using low-cost renewable electricity at $20 per MWh in large, cost-competitive electrolyser facilities could produce green hydrogen at a competitive cost with blue hydrogen already today.

If rapid scale-up and aggressive electrolysers deployment take place in the next decade, it added that green hydrogen could then start competing on costs with blue hydrogen by 2030 in many countries, making it cheaper than other low-carbon alternatives before 2040.