Green hydrogen is often referred to as the “fuel of the future.” Alongside renewable energy sources and expanded electricity coverage across industries, green hydrogen is poised to play a critical role in reducing carbon emissions and combating global warming.
Currently, the cost of producing green hydrogen, a clean and sustainable form of energy, is significantly higher than grey hydrogen, which dominates the market today. However, green hydrogen is essential to meeting the objectives of the Paris Agreement to limit global warming, owing to hydrogen’s abundance and its unique attributes. Unlike fossil fuels, green hydrogen can be used in gaseous or liquid forms, and its only by-product is water, not carbon dioxide (CO₂), a major greenhouse gas.
According to an analysis published in ScienceDirect, a database of journal articles, the adoption of green hydrogen could reduce decarbonisation costs by 15% to 22%. Another report from the International Renewable Energy Agency (IRENA) further highlights that clean hydrogen could contribute 10% of the total mitigation measures needed to keep global warming under control.
A study by PwC underscores green hydrogen as a long-term solution for achieving climate control targets. It projects a substantial reduction in production costs over time, driven by advancements in technology and economies of scale. Currently, the global production cost of green hydrogen ranges between USD 3.7 and USD 9.87 per kilogram, varying by region due to differences in input material and energy costs. The production process is carbon-neutral, involving the electrolysis of water powered by renewable energy sources like wind and solar.
Growth Projections
Global demand for green hydrogen is expected to grow modestly until 2030, with significant acceleration after 2035. By 2050, demand could rise to 500 million metric tonnes per year, a dramatic increase from current negligible levels. Projections suggest that future demand will vary between 150 and 500 million metric tonnes annually, depending on regional needs and industrial adoption.
Presently, most hydrogen production comes from grey hydrogen, which is derived from fossil fuels using a carbon-intensive process. Grey hydrogen production costs range from USD 1.23 to USD 2.47 per kilogram, making it far cheaper than green hydrogen. However, according to an analysis by Wood Consulting, a leading engineering consultancy firm, grey hydrogen production accounts for approximately 3% of global greenhouse gas emissions, underscoring the urgent need for a shift to cleaner alternatives.
Production Cost Projected to Come Down Significantly
According to PwC, technological advancements, increased production scales, and ongoing research are expected to reduce green hydrogen production costs by nearly 50% by 2030. By 2050, these costs could fall further to a range of USD 1.23 to USD 1.85 per kilogram, making green hydrogen as affordable as grey hydrogen is today.
A report by the Organisation for Economic Co-operation and Development (OECD) projects similar cost declines, driven by reductions in electrolyser and renewable energy costs.
The levelised cost of hydrogen (LCOH) or the cost of the producing green hydrogen depends on electrolyser capital costs and electricity costs. Currently, electrolyser costs are high. According to the International Energy Agency, alkaline electrolysers cost USD 500-1,400/kW, PEM units cost USD 1,100–1,800/kW, and SOEC units cost USD 2,800-5,600/kW.
However, these costs are expected to decrease significantly to USD 500/kW by 2030. Combined with renewable power at USD 0.02/kWh, green hydrogen production costs could reach USD 3 per kg.
Industry Applications and Future Opportunities
Hydrogen is a key ingredient for fertiliser production with grey hydrogen being a key input for urea synthesis. This process alone contributes 3% of global greenhouse gas emissions says the Wood Consulting paper. Grey hydrogen is also extensively used in steel manufacturing, methanol production, petrochemicals, and electronics. Replacing grey hydrogen with green hydrogen in these industries presents a significant opportunity for emissions reduction.
Green hydrogen is also seen as a game-changer decarbonizing solution for other sectors, including transportation, shipping, power generation, and heating systems. Its potential further extends to providing energy independence in remote areas, where microgrids powered by green hydrogen can serve as reliable and sustainable energy sources.
