The 2020s to be ‘the decade of hydrogen’: Wood Mackenzie

Economies of scale will see the cost of ‘green’ hydrogen fall by up to 64 per cent by 2040, according to Wood Mackenzie.

Hydrogen is made from natural gas or coal, which is cheap but dirty, or from water using 100 per cent renewable energy, which is ‘green’ but formidably expensive right now.

The challenge is to bring those costs down to a point where they are competitive with mainstream alternatives.

With the announced project pipeline for green hydrogen growing from 3.5 gigawatts (GW) to just over 15GW within the last 10 months, Wood Mackenzie says volumes will be “large enough and stable enough” for the embryonic market to scale.

“On average, green hydrogen production costs will equal fossil fuel-based hydrogen by 2040. In some countries, such as Germany, that arrives by 2030,” Wood Mackenzie senior research analyst Ben Gallagher says.

“Given the scale up we’ve seen so far, the 2020s is likely to be the decade of hydrogen.”

Rising fossil fuel prices will boost green competitiveness, further strengthening the case for this technology in the coming years, Gallagher says.

“Even with a multitude of challenges that await the nascent green hydrogen market, we firmly believe there will be some form of low-carbon hydrogen economy soon,” he says.

“Given the degree of explicit policy, corporate and social support that has blossomed in 2020, green hydrogen will successfully scale and realise huge production cost declines.

“Moreover, if additional explicit policy support comes to fruition in the coming months, we could see costs fall even faster, and more universally, than outlined in our report.”

The energy transition is dynamic, says Gallagher; if 2020 is any indication, so too will be the low-carbon hydrogen landscape.