Reducing electrolyser costs key to cost-competitive green hydrogen


Reducing the cost of electrolysers is key to making green hydrogen a cost competitive solution, according to the International Renewable Energy Agency (IRENA).

In late December, IRENA published a report, identifying strategies for reducing electrolyser costs through continuous innovation, performance improvements and upscaling – from megawatt to multi-gigawatt levels. Green hydrogen will prove critical as more countries pursue deep decarbonisation strategies, the report set out, especially in harder-to-abate sectors. However, alongside regulations and market design, the cost of production is proving a major barrier to uptake.

Despite falling renewable costs having an impact, green hydrogen remains 2-3 times more expensive than blue hydrogen, meaning greater efforts are needed, namely by tackling the cost of electrolysis facilities – the second largest cost component of production.

The report set out a series of strategies to reduce investment costs for electrolysis plants from 40% in the short-term to 80% in the long-term. Increased module size and innovation with increased stack manufacturing were found to have significant impacts on costs, as did increasing plant size from 1MW to 20MW, which could see costs fall by a third. Optimal designs can maximise efficiency and flexibility, while procurement of materials is also key, with scarce materials impeding electrolyser cost reduction and scale-up.

It further highlighted how an ambitious energy transition, aligned with international climate goals, can drive rapid cost reduction with green hydrogen. A deployment pathway in line with a 1.5°C climate target could see electrolysers 40% cheaper by 2030, it found.

In IRENA’s best case scenario, using low-cost renewable electricity at $20/MWh (£14.75/MWh) in large, cost competitive electrolyser facilities could see green hydrogen produced at a competitive cost with blue hydrogen today. Rapid scale-up and aggressive deployment of electrolysers taking place over the next decade would see green hydrogen start competing on costs with blue hydrogen by 2030 in many countries, before becoming cheaper than other low carbon alternatives by 2040.

It made a point to emphasis the importance of innovation moving forwards, stating it to be crucial to reducing cost and improving the performance of electrolysers. IRENA outlined how governments can support this by issuing clear long-term signals that support policy on facilitating investment in production logistics and utilisation of green hydrogen; establishing regulations and design markets that support investments in innovation and scale-up the production of green hydrogen; support research, development and demonstration; and by seeking to foster coordination and common goals across the hydrogen value chain, borders, relevant sectors and between stakeholders.