Diamond List is looking for more European and Nordic climate investors to join and nominate top early-stage climate startups. Investors: apply to become a nominator here. Here’s an article about Diamond List by Canary Media. [Note: The Diamond Lists launch party in SF this May was amazing!]
To make green hydrogen competitive with fossil-based hydrogen, the cost of green hydrogen has to come down dramatically.
Two key factors that affect the cost of green hydrogen:
Renewable electricity cost
The below diagram illustrates the step changes that need to take place for green hydrogen to achieve 1$/kg H2 production cost and thereby, cost competitiveness with fossil-based hydrogen.
1. Renewable electricity cost
IEA estimates that renewable electricity costs can make up 50-90% of the green hydrogen’s total production expenses (IEA, 2021). Thus, reducing the cost of renewable electricity will be critical.
The lower we can push the price of renewable electricity, the cheaper green hydrogen will be.
It is important to note that cost reduction in electrolyzers alone cannot compensate for high renewable electricity prices. A low price of renewable electricity is a must for pushing down the cost of hydrogen.
How reachable is the 20$/MWh electricity price? Explore more here.
As the production of green hydrogen requires renewable electricity, it follows that green H2 production is likely to concentrate on areas with high renewable energy resources. This means places where the sun shines and where the wind blows constantly around the year.
2. Electrolyzer cost
The electrolyzer cost is the second largest cost component of green hydrogen production.