Green hydrogen
What is green hydrogen?
Green Hydrogen is hydrogen produced by splitting water into hydrogen and oxygen using electricity from renewable resources (e.g. solar and wind) in a process known as electrolysis. Green hydrogen offers a low carbon intensity alternative to the current method of hydrogen production via fossil fuels.
How can etasca help?
The etasca team has worked across the green hydrogen production value chain including electrolyser technology reviews, integration issues, understanding green hydrogen markets and pricing mechanisms. We have extensive expertise from renewable energies through to power-to-X processing.
We support project finance and equity investment into the largest green hydrogen projects globally.
Interested? contactus@etasca.com
million tons
of clean hydrogen will
be in demand by 2050
%
CAGR
growth expected
between 2022-2050
Commercial considerations:
Green hydrogen production is set for rapid growth due to an exponential increase in investments and the need to decarbonise the economy.
- Green hydrogen production represents less than 0.5% of global hydrogen production currently – but it is expected to represent 40% of the hydrogen production growth by 2030 (1).
Green hydrogen project developments are spread across the globe with Asia-Pacific region leading the way (28% of total announced projects), driven mainly by Australia and China.
- Other key regions include Europe (23%), South America (15%), Africa (13%), Middle East (12%) and North America (8%).
There is a diverse range of applications for green hydrogen. The feasibility of green hydrogen projects is normally dictated by the availability of offtakers.
- Green hydrogen can be used to displace higher carbon intensity grey hydrogen production in existing applications (e.g. refining) or in new applications (e.g. green steel) or can be processed into different power-to-X products (e.g. green ammonia, e-SAF). In order for these projects to be financed a long term offtake is normally required given the cost of the final product is more expensive than its grey counterpart.
There has been large scale investments in electrolyser manufacturing in recent years with capacity increase from under 5GW in 2020 to over 30GW by the end of 2023.
- Whilst underscoring the industry’s confidence in the scalability, viability, and cost reduction there is a higher announced rate of electrolyser capacity increase relative to projects reaching FID.
The production cost of green hydrogen is projected to fall below $2 per kilogram by 2030, from around $3 to $6.5 per kilogram today (depending on region and technology).
- This decrease is pivotal as it moves towards achieving parity with grey hydrogen, which currently costs around $1 to $1.8 per kilogram. Economies of scale and technological improvements, particularly in electrolysis, are essential to this cost reduction.
Policies are a major driving force and are driving green hydrogen use in many varied applications. For instance, the European Union aims to boost its green hydrogen production to 10 million tonnes and import another 10 million tonnes by 2030.
- Similarly, the U.S. Department of Energy launched the ‘Hydrogen Shot’ initiative, which seeks to reduce the cost of clean hydrogen to $1 per kilogram within a decade. Such governmental commitments can significantly influence market dynamics and investment flows.
Technical considerations:
There are four main technologies being adopted for green hydrogen production (PEM, Alkaline, AEM and SOEC).
- Alkaline and PEM electrolysis are the most commercially advanced electrolysers. Modern alkaline electrolysers operate at about 60-70% efficiency, while PEM electrolysers can reach up to 70-80% under optimal conditions. Increasing the efficiency of these systems through technological innovations is crucial to making green hydrogen a viable alternative.
- Solid Oxide Electrolyser Calles (SOECS), operate at higher temperatures (about 700 to 800°C), can achieve efficiencies approaching 80-90% significantly lowering operational costs. However, these are at a lower level of commercialisation currently.
- Technology choice is dictated by cost, reliability required and response to varying loads.
The cost of green hydrogen production is dominated by the cost of renewable electricity.
- Green hydrogen makes most sense where there is a low cost of renewable electricity.
- Levelised cost of hydrogen LCOH is used as a measure to compare the competitiveness of difference project. This terms allow investors and policy makers to compare the lifetime costs of projects.
Increasing integration with renewable energy grid to leverage surplus low-cost renewable energy during periods of high generation.
- This integration enhances grid stability and maximizes the utilization of renewable energy resources, paving the way for a more resilient and sustainable energy infrastructure.
Electrolysers, required for green hydrogen production, are a significant cost component.
- Stated prices can be as low as $500/kW in China (alkaline based) and as high as $1500/kW in Europe (PEM based). Cost benchmarking across different technologies is a key consideration for project developers.
Electrolysis also produces both heat and oxygen. These should be considered for maximum project efficiency.
- Up to 20 percent of electrolyser energy is consumed generating process heat which can be utilised for e.g. district heating.
1. IEA Stated Policies Scenario
2. Biogas Market Size, Growth, Drivers & Opportunity 2033 | FMI