Hydrogen Electrolysis Price Projections from Main Organizations Low by 60% to 300%

Join day by day information updates from CleanTechnica on e-mail. Or observe us on Google Information!

Final Up to date on: twenty fourth February 2025, 01:49 am

For years, main organizations just like the IEA, IRENA, BNEF, the Hydrogen Council and CSIRO have been projecting future prices for hydrogen electrolysis programs and the long run value of inexperienced hydrogen that don’t stand as much as scrutiny. In consequence, their projections of future prices improve yearly, but real-world knowledge from tasks exhibits that they’re nonetheless far underneath sensible prices for right now, 2030, and 2050.

The next charts and knowledge are modified and repeated from nice work achieved by Visa Siekkinen, an vitality transition researcher now with Häme College of Utilized Sciences in Finland and Andrew Fletcher, Adjunct Business Analysis Fellow at Griffith College in Australia. I’ve normalized all currencies into US {dollars} from euros and Australian {dollars} in what follows. Any errors in transcription and international change are mine, and I’ll present hyperlinks to the unique materials as properly.

This chart is an adaptation of 1 by Siekkinen from a LinkedIn article printed December of 2024, exhibiting hydrogen imaginative and prescient electrolyzer capex from 2020 and 2021 from the Worldwide Renewable Power Company (IRENA) and the Lappeenranta-Lahti College of Know-how (LUT) in Finland within the two very low-cost strains alongside the underside, and from newer and knowledgeable however nonetheless unrealistically low projections from Bloomberg New Power Finance (BNEF) and from the Hydrogen Council (HC), which supplies Mckinsey & Firm some huge cash to do research like that yearly.

As Siekkinen factors out, the EU’s hydrogen ambition elevated from 40 GW (Hydrogen Technique 2020) to 140 GW (RePowerEU 2022), but the estimated funding value solely rose from €22–42 billion to €50–75 billion by 2030. This suggests a system value of ~€450/kW, aligning with IRENA (2020) projections. Nevertheless, BNEF (2024) estimates recommend a €300 billion funding want, making a €225–250 billion funding hole. This shortfall explains why €0.5/kg in public funding over ten years from the EU Hydrogen Financial institution has not been ample to drive the inexperienced hydrogen transition.

Enter Andrew Fletcher, who submitted a pair of paperwork, 2024–2025 GenCost Session Submission and Draft 2025 IASR Stage 1 Session, to the Commonwealth Scientific and Industrial Analysis Organisation (CSIRO), Australia’s nationwide science company to make a collection of suggestions on how they might enhance their hydrogen electrolysis capex and therefore hydrogen value projections.

CSIRO and the Worldwide Power Company (IEA) each share remarkably bullish projections for hydrogen electrolyzer system capital prices, and each are seeing substantial will increase yearly of their projected prices. Like IRENA and LUT, the 2 companies have been very optimistic about prices of hydrogen in 2020, and every year they’ve turn out to be much less optimistic.

The 2020 and 2021 projections have been extremely influential with policymakers in Europe, Australia, and elsewhere, and so they have been clearly flawed. The Hydrogen Council and BNEF capex projections from 2024 are far larger. Nevertheless, there’s excellent motive to consider that the Hydrogen Council and BNEF are each nonetheless far too optimistic. Why? As a result of precise 2024 capex for electrolyzer programs have been nonetheless a lot larger than their capex projections.

This chart is customized from Fletcher’s CSIRO submission and transformed to US {dollars}. The Aurecon prices are those CSIRO makes use of for its present estimates for 2024 prices. Fletcher believes Aurecon’s estimates lack accuracy, as they align with Class 5 (tough order of magnitude) estimates from H2Kwinana and Port of Newcastle Hydrogen Hub, which have a large uncertainty vary (-50% to +100%) and low challenge maturity. He doesn’t think about them primarily based on detailed research.

The opposite bars on the chart are prices from actual tasks and bids for tasks from Australia and Europe. The Netherlands Organisation for Utilized Scientific Analysis (TNO) knowledge contains over a dozen European tasks, whereas the bars on the correct are from particular person tasks in Australia. The true tasks prices common $3,000 per kW of electrolyzer system, whereas the Aurecon estimates common $1,800. That’s regardless of the Aurecon estimates together with compression gear which the challenge knowledge excludes.

Fletcher’s suggestions for inclusions in estimates emphasize incorporating compression prices, transmission connection, and hydrogen storage capex, as assuming zero value contradicts Australian Power Regulator (AER) forecasting rules. Moreover, estimates ought to account for contingencies, infrastructure upgrades (electrical energy transmission, hydrogen pipelines, water, and port infrastructure), and different potential prices that affect challenge feasibility and complete construct value.

Fletcher’s paperwork embrace a literature overview. A key part of that doc offers with the expertise curve value reductions anticipated for electrolysis programs, one thing that’s been a constant level of clear inaccuracy in hydrogen electrolysis programs projections.

Fletcher cites a 2020 paper, Accelerating low-carbon innovation by Malhotra & Schmidt, which lays out a studying charges framework for know-how tasks, and engineering agency Ramboll’s 2023 whitepaper What is going to it take to scale back CAPEX in inexperienced hydrogen manufacturing?, which applies the framework to electrolyzers. I’ve synthesized the framework, Ramboll’s materials, and Fletcher’s references to different studying charges materials into the graphic above. (Any errors in transcription or interpretation are mine.)

As a reminder, studying charges are additionally known as Wright’s Legislation or the expertise curve. They discuss with the diploma of discount of prices over time, sometimes in opposition to doubling of manufactured items. They’re finest regarded as an S-curve or sigmoid, in that they begin out with comparatively low reductions in value, then when scaled manufacturing arrives obtain the 20% to 27% Wright’s Legislation asserts, after which see lowered value reductions once more for totally mature merchandise.

Fletcher factors out that electrolyzers solely characterize 20% of complete electrolyzer system value at current and declining, so the upper studying price for them can be much less and fewer related to future prices of hydrogen electrolyzer programs. Pertinent to CSIRO, Aurecon considerably overstates the electrolyzer as a part of value inside its a lot decrease general prices, understating stability of plant, building, allowing, and the like considerably.

What this implies for 2030 and 2050 electrolyzer capex is that it’ll decline so much much less from present value factors than asserted by CSIRO, BNEF, the Hydrogen Council, and IEA have been asserting. That has direct implications on the price of inexperienced hydrogen in 2030 and 2040, in that it’ll keep excessive. Visions which assumed dust low cost electrolyzers, assumed dust low cost electrical energy, ignored stability of plant prices, and assumed huge studying price value reductions have been all flawed.

Fletcher does dip right into a key space that turns into pertinent to studying curves, which is the amount of inexperienced hydrogen that can be manufactured. He approaches it from two views. The primary is the query of supply of low-carbon hydrogen to meet demand. If blue hydrogen or white hydrogen fulfills substantial quantities of demand, then inexperienced hydrogen demand can be decrease, decreasing the variety of electrolyzers manufactured, and therefore their doublings that cut back prices. The best demand cited from CSIRO is 440 million tons yearly.

So far, I’m fairly positive that demand goes to be vastly decrease than that. I’ve a heterodox projection of hydrogen demand largely as a result of I’ve by no means believed that inexperienced hydrogen can be low cost, and even that blue hydrogen can be low cost sufficient to distribute in every single place for heating and transportation gas. That’s as a result of I saved doing my very own technoeconomic workups and studying analyses of chemical plant engineering and prices by consultants like Paul Martin. His Distilled Ideas on Hydrogen are really helpful studying.

Having achieved numerous estimation of advanced programs, I dodged simplistic value instances that excluded a lot of the prices, and knew that already commoditized parts wouldn’t see vital studying charges in hydrogen electrolysis programs installations. That implies that my estimates of finish 2024, 2030, and 2050 inexperienced hydrogen prices are monitoring way more carefully to the fact being found by actuals discovered from detailed planning workout routines and building of electrolysis amenities.

I additionally began from a distinct perspective than a lot of the hydrogen projections, the place the query wasn’t Will hydrogen be aggressive in opposition to alternate options? however How a lot inexperienced hydrogen is required to switch fossil fuels in all of those use instances? That meant that I had numerous use instances like floor transportation electrifying in addition to longer haul aviation and delivery working on biofuels. It meant that ammonia fertilizer demand declined as hydrogen feedstock prices rose as a result of extra precision agriculture and agrigenetic nitrogen fixing can be utilized as a result of they’d be cheaper. It additionally meant that the largest present demand space, petroleum refineries, was going to see an enormous discount in demand as refineries declined solely to petrochemical manufacturing and took the most affordable, lightest crude closest to water to refine.

The one progress areas for hydrogen in my projection are a possible progress of inexperienced metal utilizing hydrogen as a lowering agent, one thing which is in danger as molten oxide electrolysis and the brand new Chinese language excessive temperature technique could outcompete it, and hydrogen for hydrotreating biofuels.

In consequence, my demand projection declines to round 80 million tons from the roughly 120 million tons together with syngas consumed right now. That’s underneath a fifth of CSIRO’s demand, and therefore fewer doublings once more. That’s going to hit the educational price value reductions.

A key level to remove from this comparability of actual prices is that they’re all far above the 2024 value projections by BNEF, CSIRO, IEA, and the Hydrogen Council, even after these projections had risen sharply over the 4 previous years. No main company is getting its hydrogen value projections proper but. Additional, larger prices for inexperienced hydrogen make all use instances for it much less aggressive in opposition to alternate options, together with direct electrification, biomass pathways for issues like methanol, and biofuels. As we decarbonize, these larger prices will imply that alternate options to hydrogen will outcompete it and issues made with low cost hydrogen right now received’t be used as a result of they’ll value extra.

In consequence, BNEF’s announcement of tripling of 2050 inexperienced hydrogen prices to $1.60 and $5.09 per kilogram, with the low finish solely in China and India, continues to be far too optimistic. When it was introduced, my speedy response was that they have been going to must up it once more. My vary for manufactured inexperienced hydrogen prices in 2050, not distributed, however on the electrolysis facility, is $6 to $8 per kg in present forex values. Distribution will stay costly, so it received’t be distributed. Simply as 85% of hydrogen right now is manufactured at level of demand as an industrial feedstock, 85% of hydrogen sooner or later can be electrolyzed the place it’s wanted as an industrial feedstock, within the quantities required, when it’s required.

Siekkinen’s and Fletcher’s work, together with Ramboll’s and others, is beginning to get near actuality, and is beginning to inform main organizations’ projections. But it surely’s embarrassing and tough for organizations like BNEF, CSIRO, the Hydrogen Council — which has its personal clear biases to take care of on prime of this — and the IEA to confess that they have been as flawed as they’ve been and begin from scratch on robust estimates. In consequence, they’re solely slowly rising the fee projections to keep away from any given improve making it clear how flawed they have been.

That implies that policymakers and buyers are nonetheless utilizing dangerous knowledge from organizations which they belief to make selections, and making dangerous selections in consequence. Everybody stays anchored beneath sensible value factors and isn’t pivoting quickly sufficient in consequence. It additionally implies that the USA’ moonshot purpose of $1 per kilogram inexperienced hydrogen is an entire fantasy, simply as I knew it was when it was introduced.

Whereas Fletcher is targeted on CSIRO, my name to motion is to all organizations with projections within the area: begin from a clean slate with real-world knowledge, and reside with the outcomes and embarrassment. We’re in a local weather disaster and accelerated vitality transition, and might’t afford to waste time on the lifeless finish of hydrogen for vitality simply because you are attempting to save lots of organizational face.