Green hydrogen set to be competitive with fossil fuels by 2040

Green hydrogen – made from renewables – will be able to compete on price with producing the gas from fossil fuels within the next two decades, according to research.

On 25 August, Wood Mackenzie said that green hydrogen costs will fall 64% by 2040 and tipped the 2020s to likely be the “decade of hydrogen”. It highlighted the project pipeline for green hydrogen, which has grown from 3.5GW to over 15GW in the last ten months, stating that volumes will be large enough and stable enough for the nascent market to scale.

It added that increasing the scale of production will be key to bringing costs down to compete with fossil fuels, with sub $30/MWh (£22.80) renewable electricity prices and high utilisation rates needed for competitiveness.

It said that while in 2020, grey hydrogen is the lowest cost hydrogen colour – excluding China – costs will rise by up to 82% by 2040. This is mostly owed to a projected rise in natural gas prices. In the cases of Saudi Arabia and the United States, grey hydrogen will continue to be the lowest cost colour until 2040. Rising costs are also expected with blue hydrogen, largely determined by natural gas prices as well, with Wood Mackenzie forecasting a 59% increase by 2040. It added that its success would be linked to the success of CCS technology – “which has been plagued by high costs and project cancellations”.

Wood Mackenzie