BloombergNEF forecasts green hydrogen should be cheaper than natural gas by 2050 in some markets; falling costs of solar PV key
In a new piece of research, BloombergNEF (BNEF) finds that the levelized cost of hydrogen (LCOH2) made from renewable electricity is set to fall faster than it previously estimated. BNEF now forecasts that green hydrogen from renewables should be cheaper than natural gas (on an energy-equivalent basis) by 2050 in 15 of the 28 markets modeled, assuming scale-up continues. These countries accounted for one-third of global GDP in 2019.
In all markets modeled, BNEF found that green hydrogen should get cheaper than both blue hydrogen (from fossil fuels with carbon capture and storage - CCS) and even polluting grey hydrogen from fossil fuels without CCS.
According to the BNEF forecast, the costs of producing green hydrogen from renewable electricity should fall by up to 85% from today to 2050, leading to costs below $1/kg ($7.4/MMBtu) by 2050 in most modeled markets.
These costs are 13% lower than BNEF’s previous 2030 forecast and 17% lower than its old 2050 forecast. BNEF said that its updated forecast on the levelized cost of renewable electricity (LCOE) is the main driver of the drop in the LCOH2 projection.
BNEF expects the average levelized cost of solar PV to be 40% lower by 2050 than it did two years ago, driven by more automatic manufacturing, less silicon and silver consumption, higher photovoltaic efficiency of solar cells, and greater yields using bifacial panels.
The cost of electricity will account for the majority of the cost of producing renewable H2 by 2030, with electrolyzer-related costs accounting for the rest.
Such low renewable hydrogen costs could completely rewrite the energy map. It shows that in future, at least 33% of the world economy could be powered by clean energy for not a cent more than it pays for fossil fuels. But the technology will require continued government support to get there—we are at the high part of the cost curve now, and policy-supported investment is needed to get to the low part.
By 2030, it will make little economic sense to build blue hydrogen production facilities in most countries, unless space constraints are an issue for renewables. Companies currently banking on producing hydrogen from fossil fuels with CCS will have at most ten years before they feel the pinch. Eventually those assets will be undercut, like what is happening with coal in the power sector today.
On one hand the reduction in the forecast was surprising, on the other hand not. This is how it goes with clean energy. Every year it gets cheaper, faster than anyone expects. The key driver is the falling cost of solar PV electricity. We now think solar PV power will be 40% cheaper by 2050 than what we had thought just two years ago.—Martin Tengler, lead hydrogen analyst at BloombergNEF
BNEF’s LCOH2 analysis covers 627 modeled projects in 28 markets. All inputs and LCOH2 results are available in BNEF’s Hydrogen Project Valuation (H2Val) Model.