Policies and cost reduction strategies to reach net-zero emissions
Green hydrogen: a game-changer on the path to carbon neutrality /
As the world strives to cut emissions to meet the 1.5 climate goal and fend off climate change, green hydrogen can form a cornerstone of the shift away from fossil fuels.
Green hydrogen could become a game-changer for hard to decarbonise sectors in transport and industry, complementing electrification and energy efficiencies on the path to carbon neutrality by 2050.
Falling renewable power costs, economies of scale and improving electrolyser technologies could make green hydrogen a cost-competitive option within the next decade.
What is green hydrogen?
Hydrogen comes in many shades, from fossil-fuel based grey, blue and turquoise to renewable-based green. 95% of hydrogen produced today is grey, produced from fossil fuel.
Only green hydrogen is compatible with the sustainable and climate-safe use of energy and with a net-zero emission ambition. It will reduce our reliance on fossil-based grey and hybrid blue hydrogen.
Hydrogen costs today
The costs of hydrogen vary depending on the technology pathway. Green hydrogen currently costs between two and three times more than blue hydrogen.
The production cost for green hydrogen is determined by the renewable electricity price, the investment cost of the electrolyser and its operating hours. The main cost driver is the electricity price.
If rapid scale-up and aggressive electrolysers deployment take place in the next decade, and with the sustained continuing decline in renewable electricity costs, green hydrogen could start competing on costs with blue hydrogen by 2030.
Cost reduction potential
Electricity represents the largest cost driver for green hydrogen. Power consumption can be adjusted to follow actual solar and wind output, which vary with different seasons, times of day and weather conditions.
Electrolysers split water into hydrogen and oxygen. Their biggest cost driver is electricity. With the best possible renewable resources, green hydrogen could almost compete on costs with other energy types today.
Electrolyser loads can adjust economically with solar and wind supply, which can vary by season, time of day and weather conditions. But the costs of building and operating electrolysers also make a difference. In the coming decade, electrolyser cost reduction strategies could further narrow the gap – and broaden the range of feasible, cost-effective locations for green hydrogen uptake.
The journey to cost-competitive hydrogen
Renewable-based electrolysis plants are being re-designed and optimised, thereby reducing investment costs by up to 80% by 2050.
Strategies to achieve the required cost reduction include innovation to improve the performance of the electrolyser, scaling up manufacturing capacity, standardisation and learnings from deployment.
These could bring down costs below the 2 USD per kg mark and make it competitive.
Policy and regulatory framework to stimulate investment
Moving hydrogen from niche to mainstream gigawatt levels will require enabling policy and regulatory framework designed to stimulate private investment in hydrogen production.
Governments are central in defining national hydrogen strategies to define the level of ambition and serve as a reference for private sector actors to attract financing.
Policy support for hydrogen in industry, aviation and shipping
Green hydrogen can support a wide range of end-uses other than just fuel.
It can provide for additional system flexibility and storage, contribute to energy security, reduced air pollution and bring other socio-economic benefits such as economic growth and job creation, and industrial competitiveness.
Policy makers can harness the benefits of green hydrogen by designing the ecosystem for green hydrogen to ensure industrial, economic and social value.
Far steeper growth is needed
Green hydrogen cannot take off without widespread and co-ordinated support across the value chain.
Today, there are more than 100 countries with a political commitment to a net-zero goal. A growing number of regions, cities and companies are committing to achieving net-zero emissions. Industry investors plan at least 25 gigawatts (GW) of electrolyser capacity for green hydrogen by 2026.
Still, far steeper growth is needed – in renewable power as well as green hydrogen capacity – to fulfil ambitious climate goals and hold the rise in average global temperatures at 1.5°C.
IRENA drives international cooperation on hydrogen
Sectors such as aviation and shipping will require solutions that work across borders.
Industrial sectors such as iron, steel and cement or petrochemicals are traded regionally and globally and fuels like hydrogen will increasingly be traded between countries. Reaching zero emission in end-use sectors will require a high degree of international collaboration.
International cooperation is key to bring together the government policy and the industry perspective. IRENA drives the discussion through the Collaborative Framework on hydrogen activities.