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Accelerating the transition: How renewables are pushing green hydrogen to displace fossil fuels

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Head of Energy Content, Curation

The energy content team at Curation tracks ongoing and emerging trends across a wide range of energy sectors for some of the world's largest companies.

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  • Mar 23, 2021

This item is part of the Power Generation - March 2021 SPECIAL ISSUE, click here for more

By Jack Elliott, Energy Editor at Curation

As the global energy transition gains momentum, green hydrogen is emerging as a promising resource to enable a shift from fossil fuels to power vehicles, industrial operations and national power systems with renewables.

Green hydrogen production can draw an electrical generation from wind and solar projects to power electrolysis, providing a way to extract additional value from renewables project while accelerating a reduction in emissions.

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But, with hydrogen produced through electrolysis estimated by the International Renewable Energy Agency (IRENA) to have made up just 5% of global production in 2019, the sector will need an integrated policy approach, substantial investment and rapid innovation in the coming years to reach its potential, and for the high production costs to fall.  

Scaling up

Green hydrogen has attracted significant interest from project developers in recent months, including from energy majors which have previously been focused on fossil fuels. A number of key projects are now in development globally, with significant deployment of renewable power planned to support a boom in production in the coming years.

Many of these projects are emerging in northern Europe, which is fast becoming a prime location for green hydrogen development. The NortH2 scheme, for example, is a collaboration between Equinor, RWE and Shell and intends to produce hydrogen using renewable energy generated by wind farms off the Dutch coast. The project is notable for its planned scope, with the project partners aiming for 1 GW of wind power capacity for electrolysis by 2027, rising to over 10 GW by 2040, equating to one million mt of green hydrogen by 2040.

Europe is also home to the AquaVentus project, another 10 GW wind-to-hydrogen project that could be completed by 2035. The project is based in Heligoland, where RWE – which is said to be among the project partners – operates 297 MW of offshore wind, with 342 MW set to come online in 2021.

Outside of Europe, Australia is also emerging as a hotspot led by the Asian Renewable Energy Hub, which is set to have 26 GW of wind and solar capacity. This will power the production of green hydrogen for the domestic market and for export to Japan and South Korea. In Port Gladstone, meanwhile, Austrom Hydrogen is planning to develop a 3.6 GW facility in Port Gladstone powered by solar energy

Sizeable projects are also being planned in China, where energy utility Beijing Jingneng has announced a $3bn project to use hydrogen to store output from a 5 GW combined solar and wind project in Inner Mongolia. 

Production costs 

A key roadblock to development has been prohibitive production costs, with green hydrogen costing between two to three times more to produce than hydrogen from fossil fuels in 2020. There is significant optimism within the industry, however, that costs will fall sharply in the years ahead, with IHS Markit predicting a 15% drop by 2025 and a 30% fall by 2030.

Among the factors expected to drive this reduction are improvements in electrolyser design and size, economies of scale as more multi-GW projects emerge, and falling renewable power costs, which are especially significant given the price of electricity is the main contributor to the cost of green hydrogen. According to IRENA, the average weighted cost of electricity produced by offshore wind could fall by nearly 50% by 2030 from its 2019 level, while the cost of solar could fall by 55% over the same period.

Electrolyser innovation is, meanwhile, also occurring at pace. Shell, Mitsubishi and Vattenfall are developing a 100 MW green hydrogen facility in Hamburg that will utilise a 100 MW electrolyser, which would be 10 times larger than the biggest in operation. Orsted and ITM Power are, meanwhile, among the firms exploring combining electrolysers with wind turbines to generate hydrogen offshore, allowing seawater to be used in the electrolysis process. This would potentially address the challenge of deploying electrolysers in hot and dry regions where there is restricted availability of freshwater but an abundance of seawater.  

Green and blue

At current costs, blue hydrogen – produced using fossil fuels in conjunction with carbon capture and storage technology – is closer to cost parity with grey, unabated fossil-fuel based hydrogen than green hydrogen. It has, therefore, caught the attention of energy majors such as Equinor and Shell, which both have projects in development.

Critics argue the pursuit of blue hydrogen over green could hamper global decarbonisation efforts. According to a recent report by IRENA, however, green hydrogen could be cost competitive with its blue equivalent by 2030. Such assumptions are leading European policymakers to accept that natural gas will be needed in the short- to medium-term, but only as a bridge to the end goal of green hydrogen.

It is true that electrification will likely remain the key strategy for decarbonisation to limit hydrogen conversion losses, investment and transport costs, but for those difficult to tackle sectors – heavy transport, steelmaking, refineries – wider adoption of the green hydrogen, and the renewable power inherent in its production, is inevitable.

Matt Chester's picture
Matt Chester on Mar 23, 2021

Your note about the green hydrogen progress ramping up in Europe, Australia, China checks with what I've often seen-- I'm wondering why the U.S. seems to lag behind and not prioritize being a leader here. Any thoughts on that? 

David Pratt's picture
David Pratt on Mar 24, 2021

Yes indeed the US has lagged behind Europe and China in terms of investment in green hydrogen infrastructure to date, and has instead principally been focused on hydrogen production from fossil fuels.

A number of US utilities, have, however recently announced pilot projects to increase green hydrogen production for power generation as the penetration of renewables in the grid increases, and these projects are expected to give the sector a lift. One example is NextEra’s pilot project to produce hydrogen from solar power to replace some of the natural gas required to fuel a power plant, which is due online in 2023.

Matt Chester's picture
Matt Chester on Mar 24, 2021

Wow, I love seeing near-term targets like 2023-- my eyes will be on that pilot project for sure. Thanks for the follow up, David. 

Julian Jackson's picture
Julian Jackson on Mar 29, 2021

Thanks for this update, Jack.

It seems various large organizations are getting behind hydrogen - just a few days ago bp announced a 1GW blue hydrogen project to be constructed in the north of the UK. This would supply 20% of Britain's projected 2030 hydrogen target.

I also am keeping an eye on China as they seem to be planning a variety of blue and green projects (although most of theirs is produced from fossil fuels in  polluting way).

David Pratt's picture
David Pratt on Mar 31, 2021

As you point out, blue hydrogen appears to be moving ahead with big projects as it remains cheaper to produce (for now). Many of the larger energy companies consider it to be a kind of bridge between now and a time when electrolysis is "affordable" and there's plenty of renewable power to spare. But by 2030 or sooner, we expect green hydrogen projects to become much more prevalent. 

We're also tracking some interesting uses for green hydrogen as a renewables store and even its use in providing grid management services, so there's potential for new revenues to support such projects.

Conrad St. Pierre's picture
Conrad St. Pierre on Apr 6, 2021

Immediate and continued investment being planned in Green Hydrogen is a must at this point. It will be in these early Green Hydrogen plants where the large gains in cost reduction and reliability will be realized.

David Pratt's picture
David Pratt on Apr 7, 2021

And in delivering proof of concept. There is an assumption that green hydrogen will become the commodity of the future but until some of these big nameplate projects are in running, there may still be some of the hesitancy in deploying capital that has held back other clean tech in the past. As we've learned from solar and wind though, once that damn breaks and there is confidence, costs will plummet and investment will rise.  

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Thank David for the Post!
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