With the right policies in place, clean hydrogen could be deployed over the next 30 years to cut up to 34% of global greenhouse gas emissions from fossil fuels and industry, a new report from BloombergNEF has forecast. The falling cost of making hydrogen from wind and solar power offers a viable route to cutting emissions in fossil-fuel-dependent sectors of the economy such as steel, heavy-duty vehicles, shipping and cement, BNEF’s Hydrogen Economy Outlook concludes.

The report’s findings suggest that renewable hydrogen could be produced for $US0.8 to $US1.6/kg in most parts of the world before 2050. This is equivalent to gas priced at $US6-12/MMBtu, making it competitive with current natural gas prices in Brazil, China, India, Germany and Scandinavia on an energy-equivalent basis. When including the cost of storage and pipeline infrastructure, the delivered cost of renewable hydrogen in China, India and Western Europe could fall to around $US2/kg ($US15/MMBtu) in 2030 and $US1/kg ($US7.4/MMBtu) in 2050, the report says.

“Hydrogen has potential to become the fuel that powers a clean economy. In the years ahead, it will be possible to produce it at low cost using wind and solar power, to store it underground for months, and then to pipe it on-demand to power everything from ships to steel mills,” says BNEF head of industrial decarbonization and lead author of the report Kobad Bhavnagri.

Hot stuff

Renewable hydrogen can be made by splitting water into hydrogen and oxygen, using electricity generated by cheap wind or solar power. The cost of the electrolyzer technology to do this has fallen by 40% in the last five years and can continue to slide if deployment increases.

For hydrogen to become as ubiquitous as natural gas today, a huge, coordinated program of infrastructure upgrades and construction would be needed, the authors say. Between three and four times more storage infrastructure would need to be built at a cost of $US637 billion by 2050 to provide the same level of energy security as natural gas. However, cost efficient large-scale options do exist and could be used to supply industrial customers with the clean gas, the report says.

“If the clean hydrogen industry can scale up, many of the hard-to-abate sectors could be decarbonized using hydrogen, at surprisingly low costs,” Bhavnagri says.

The study found that a carbon price of $US50/tCO2 would be enough to switch from coal to clean hydrogen in steel making by 2050, $US60/tCO2 to use hydrogen for heat in cement production, $US78/tCO2 for making chemicals like ammonia, and $US145/tCO2 to power ships with clean fuel, if hydrogen costs reach $US1/kg. Heavy trucks could also be cheaper to run on hydrogen than diesel by 2031, although batteries remain a cheaper solution for cars, buses and light trucks.

Policy trigger

Policy settings will be a critical step. “The clean hydrogen industry is currently tiny and costs are high,” Bhavnagri says. “There is big potential for costs to fall, but the use of hydrogen needs to be scaled up and a network of supply infrastructure created. This needs policy coordination across government, frameworks for private investment, and the roll-out of around $US150 billion of subsidies over the next decade.

“That may sound daunting but it is not, in fact, such a huge task – governments around the world currently spend more than twice that every year on fossil fuel consumption subsidies.”

Summary of the economics of a hydrogen economy

Source: BloombergNEF. Note: Clean hydrogen refers to both renewable and low-carbon hydrogen (from fossil-fuels with CCS). Abatement cost with hydrogen at $US1/kg (7.4/MMBtu).