Latest costs are in line with 2030 forecasts…
Recent datapoints highlight the accelerating cost curve in green hydrogen
Interest in hydrogen as the 'clean fuel of the future' is rising, highlighted in this week's deep dive into the global hydrogen market. In this follow up note we look at the latest data points on Hydrogen in the energy sector.
With electrolysers at $350/kW, green hydrogen costs are already $2.7 per kg
For many years, experts under-estimated the pace at which wind and solar costs could decline. And in the case of hydrogen, there is an obvious overlap since further reductions in wind and solar costs will drive green hydrogen costs even lower. Hydrogen costs could halve if renewable power is available at $20/MWh, something which is already achievable in some of the lowest cost projects worldwide.
At $2.7 per kg, hydrogen is at energy cost parity with oil at $45-50/bbl (UBSe)
Our analysis suggests final energy delivered from hydrogen could be at parity with oil at $45-50/bbl, even ignoring the various taxes applied on oil today, the environmental cost of carbon, and the potential additional revenue streams for hydrogen producers (e.g. storage or ancillary services to the power grid). Including these would surely mean we are already at energy cost parity today (although fuel cells are still more expensive than combustion engines). As power and fuel cell costs fall, a scenario therefore comes into view where green hydrogen might start to cap the future price of oil.
Overall, hydrogen looks to be a strong positive force for the utility sector
We see three areas of benefit for utilities: first, hydrogen can be a new area of investment and value creation, expanding the utility value chain; second, hydrogen developments imply large capex increases in renewables and networks; third, long term hydrogen contracts may offer a new route to market for renewables which bypasses the public auctions, which pressured returns in recent years. Overall, the implications are long term but in our view positive for utilities, as well as for the planet.