$1/KG HYDROGEN

After extensive analysis of the forecast of hydrogen pricing by 2031 by the DOE, it was recently found US clean hydrogen producers are unlikely to meet President Biden’s ambitious target of cutting costs by 80% to $1/kg without subsidy.

Despite the pessimism of reaching the ambitious target without intense subsidy, it could be achieved if the US builds additional research and development into their existing work programmes, new analysis from the US Department of Energy (DOE) also found.

It is worth noting that significant reductions in the price of hydrogen/ kg are still expected from $3-5/kg. This would provide a cost reduction of around 60 per cent. However, more could be done to ensure this comes into a competitive price to incentive more private investment and uptake in hydrogen use.

$1/kg target slowly slipping away

These reductions would be an effect of expected cost declines in renewable electricity and electrolysers but would only work with the expected rampup of reliable hydrogen storage and distribution infrastructure.

Global cost increases and supply chain issues may cause temporary price differences and could stall the beginning of many projects, but with the IRA coming into force across the states, these issues could be ironed out sooner than expected.

The report expanded on this: “Expects the capital costs of (uninstalled) alkaline electrolysers to plummet by 70% to $230-400/kW by 2030, while proton exchange membrane (PEM) electrolysers fall by 60% to $380450/kW.”

Research and innovation advances will also help reduce costs across the board as the sector finds more efficient ways of working and producing hydrogen. R&D for innovation has been supported through a bumper $750m hydrogen research and development fund, which aims to overcome technical barriers to cost reduction.

Reaching the target set by President Biden: “Would require additional [research and development] compared to what industry players are building into their current forecast,” the DOE said.

Other renewable developments proving

To Be A Bottleneck For Green Hydrogen

Renewable energy installations are also a core concern to meeting these targets, as the US would require a further 200GW of new wind or solar capacity to meet the 2030 goal of 10 million tonnes of hydrogen per year for domestic consumption, let alone the target to help reduce the costs to $1/kg.

This would be an effective doubling of the US’s current wind and solar capacity of 226GW and enable the US to achieve 90% of its target with green hydrogen, the DOE said, noting that this would also require an electricity price of $20/MWh.

Long-term viability for hydrogen looking good despite $1/kg doubts

Looking at the long-term viability of hydrogen more closely, the report found: “Electrolysis projects that claimed the

PTC are more likely to operate at full utilisation after the PTC sunset due to fully depreciated capital assets compared to projects built post-PTC expiration.

In the long-term, the economic viability of hydrogen production projects will vary by off-taker (dependent on the offtaker’s willingness to pay), the hydrogen production technology, and whether the project began construction before or after the PTC sunset in 2032.

Most industrial use cases have the sufficient willingness to pay to justify new construction after 2032 and continued operations of existing projects that no longer qualify for the PTC after ten years in operation.

Without these cost-downs, producers may pass prices onto consumers, dramatically increasing the price to cover operational expenditure. This is most likely to happen after the PTC ends. This is why it is essential that the levelised costs are reduced in this time period.

Setting out broad guidelines in ways the hydrogen market could develop until 2035, the report broke down the process into three stages:

• Near-term expansion to 2026 prioritising the decarbonisation of the US’s current hydrogen usage, mainly in ammonia production and oil refining

• A scale-up is driven by research and development and which pushes down costs further

• A self-sustaining market that operates cost-effectively without subsidies

These three stages require substantial private investment across the US and really on the previous steps being executed effectively.

Navigating the obstacle that comes with each stage will require a lot of holistic thinking, and the long-term vision will need to be continued with successive presidencies, something that is riddled with further challenges.