Report | 2021
Fueling the Transition: Accelerating Cost-Competitive Green Hydrogen
An achievable zero-carbon solution for decarbonizing industry
Green hydrogen production costs could fall below $2 per kilogram in many locations in the next five years. This zero-carbon fuel will be critical to decarbonizing some of the hardest-to-abate sectors, such as shipping and steelmaking. Achieving the crucial $2/kg target for cost-competitiveness will enable decarbonization of multiple sectors and play an important role in aligning the globe to a pathway that limits warming to 1.5°C.
RMI’s report, Fueling the Transition: Accelerating Cost-Competitive Green Hydrogen, analyzes the cost reduction opportunity and the critical enabling tools required to bring cost-competitive green hydrogen to market this decade. This report is intended for industry executives, regulators, and policymakers.
Reduced electrolyzer capex is the largest driver to realize near-term cost reduction. This makes sub-$2/kg production costs achievable in locations previously not cost-competitive producers of green hydrogen.
Note: We assume $200/kW electrolyzer capex, $500/kW solar capex, $800/kW wind capex, hydrogen storage capex at $516/kg, electrolyzer system energy requirement 44 kWh/kg, constant hourly production rate.
Reduced electrolyzer capital expenditure is the largest driver to realize near-term cost reduction. From today’s price range, a 50%–70% cost reduction is achievable in 2026–2030 via a combination of economies of scale, system design improvements, manufacturing optimization, and power system optimization. This makes sub-$2/kg production costs achievable in locations that were previously not cost-competitive producers of green hydrogen.
Among the report’s main conclusions:
- Low-cost green hydrogen production can be achieved faster with lower volumes of deployment than currently expected.
- Policy support will be needed for development of projects, realization of market off-take, infrastructure development, and further de-risking. While there is significant policy momentum, current policy support in most locations falls short of supporting announced targets.
- There are multiple paths to scale, from large off-take in hard-to-abate sectors, partial off-take from existing demand sectors, or a combination of these. Several sectors, such as refining and ammonia, can start scaling ahead of policy implementation, with the support of first movers.
This report presents analysis developed by RMI as a part of the Green Hydrogen Catapult (GHC). Visit the GHC website for more information on the coalition.