Model predicts green hydrogen prices fall below natural gas by 2050

The levelized cost of hydrogen (LCOH2) made from renewable electricity (called green hydrogen) is expected fall lower in price than natural gas by 2050 in 15 of the 28 markets, according to BloombergNEF’s Hydrogen Project Valuation (H2Val) Model. The model estimates are on an energy-equivalent basis and assumes current scale-up rates continue.

The costs of producing green hydrogen from renewable electricity are 13% lower than BNEF’s previous 2030 forecast and 17% lower than its old 2050 forecast. The cost may fall by up to 85% by 2050, leading to costs below $1/kg ($7.4/MMBtu).

Green hydrogen is expected to cheaper than both blue hydrogen (created using fossil fuels with carbon capture and storage) and grey hydrogen (created using fossil fuels without CCS) in all the markets modeled.

The average levelized cost of solar PV is expected to be 40% lower by 2050 than expected two years ago. The change is driven by more automatic manufacturing, less silicon and silver consumption, higher photovoltaic efficiency of solar cells, and greater yields using bifacial panels. The majority of the cost of producing renewable H2 by 2030 will be mostly born by the cost of electricity. Electrolyzer-related costs account 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," wrote Martin Tengler, lead hydrogen analyst at BloombergNEF in a report that covers 627 modeled projects in 28 markets. "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."