Energy giants team up to halve green hydrogen costs by 2026

Companies including Orsted and Iberdrola have teamed up in a bid to increase the world’s green hydrogen production fifty-fold by 2026 – in a move they claim will halve costs.

Supported by the UN, the new Green Hydrogen Catapult has been created in the hopes of scaling up renewable hydrogen production, which accounted for less than 5% of the world’s total hydrogen production in 2020. Most production is still completely reliant on fossil fuels, meaning that hydrogen is not, in and of itself, a silver bullet for hard-to-abate sectors like heat and shipping.

Business members of the Catapult include Iberdrola, Ørsted, ACWA Power, CWP Renewables, Envision, Yara, and Snam. Away from the private sector, non-profit the Rocky Mountain Institute will provide support alongside the UN’s pre-COP26 ‘Race to Zero’ campaign.

In the coming years, the organisations will work collaboratively to encourage the deployment of 25GW of green hydrogen production capacity by 2026. Work from the firms will include liaising with governments and private sector investors as well as making their own investments; it is thought that reaching the target will require around $110bn of investment.

Should this milestone be met, the Catapult claims, the average global cost of producing green hydrogen will fall below $2 per kilogram by the end of 2026. Some 120,000 jobs would also be created in the energy sector and related industries.

The Catapult said in a statement that it hopes to create a “tipping point” whereby green hydrogen becomes the “energy source of choice across multiple sectors — including steel and fertilizer production, power generation, and long-range shipping”. It noted that near-term demand to add capacity is likely to be highest in Europe and other geographies with net-zero targets and hydrogen-specific policy supports.

“From an industry perspective, we see no technical barriers to achieving this, so it’s time to get on with the virtuous cycle of cost reduction through scale-up,” ACWA Power’s chief executive Paddy Padmanathan said.

Hydrogen in the spotlight

The formation of the new Catapult comes shortly after trade bodies including WindEurope and SolarPowerEurope received backing from Bill-Gates-backed Breakthrough Energy to form the Renewable Hydrogen Coalition.

Given that the Brexit transition period is fast closing, it is unclear whether this Coalition will support the UK’s industry. However, the UK does play host to the Hydrogen Taskforce, backed by businesses including  Shell and BP, and to trade bodies like RenewableUK.

RenewableUK recently published a study outlining the benefits of scaling up the UK’s ‘green’ hydrogen economy and the changes needed from policy and business to bring these benefits to fruition.

The study recommends that the Department for Business, Energy and Industrial Strategy (BEIS) adopts a cost reduction target of £2 per kilogram of green hydrogen by 2030 – a target that could be realised by bringing 5GW of renewable electrolyser capacity online within the same timeframe. At this reduced price, green hydrogen would be cost-competitive with hydrogen produced using fossil fuels. BEIS is also being encouraged to include large-scale hydrogen projects that are co-located with renewables in the Contracts for Difference (CfD) auctions.

Policymakers in the UK are taking increasing notice of such bodies. As part of his ten-point plan for the green recovery. Boris Johnson recently confirmed a £500m funding package to support 5GW of domestic low-carbon hydrogen production by 2030. The support formed part of Boris Johnson’s ten-point plan for the green recovery.

Hydrogen projects underway in the UK include Equinor’s ‘Gigastack’ in the Humber and hubs in the North West and the Isle of Wight, where major projects have been granted planning permission.

Sarah George