The Era of Green Hydrogen Parity Is Coming

Grey hydrogen is currently the main source, while green hydrogen is the most expensive but environmentally friendly

From the perspective of hydrogen production methods, the main hydrogen production methods include three categories: fossil fuel hydrogen production, industrial by-product hydrogen production and electrolytic water hydrogen production. At present, the world mainly relies on fossil fuel hydrogen production and industrial by-production hydrogen, IEA data show that in the global hydrogen production sources, natural gas hydrogen production accounts for 62%, and industrial by-production hydrogen accounts for 18%. China is currently the world's largest hydrogen producer, mainly coal hydrogen production, accounting for 57%, followed by natural gas hydrogen production accounted for 22%, industrial by-product hydrogen accounted for 18%, and electrolytic water hydrogen production accounted for only 1%. The main advantage of hydrogen production from fossil fuels is that the production cost is low and the process is mature, but it produces a lot of carbon emissions in the production process.

Hydrogen can be divided into gray hydrogen, blue hydrogen and green hydrogen according to the preparation source and carbon emission. Hydrogen production from fossil energy sources has high carbon emissions, of which coal hydrogen emissions are the highest, carbon emissions of 1kg of hydrogen are more than 20kg of carbon dioxide, natural gas hydrogen production is about half of coal hydrogen production, the two are collectively referred to as gray hydrogen. The use of electricity for electrolytic water hydrogen production, because most of China's electricity is currently from thermal power, so the carbon emissions are very high, even more than coal hydrogen production. Renewable energy electrolytic water hydrogen production (green hydrogen) has the lowest carbon emission, close to zero. Hydrogen production from fossil energy coupled with carbon capture technology (blue hydrogen) will greatly reduce carbon emission intensity, but it is still higher than hydrogen production from renewable energy, and brings higher carbon capture costs.

The cost of green hydrogen is expected to decline rapidly due to multiple factors

From the calculation results, electricity price, power consumption, annual operating time, equipment investment is the key to determine the cost of hydrogen production from electrolytic water. Large-scale equipment and equipment production scale: At present, the hydrogen production scale of alkaline electrolyzer device is basically 1000Nm³/h, and the investment of a single set of equipment is about 9 million yuan. At the same time, the electrolyzer as a whole shows a trend of large-scale development. Currently, 2,500 nm ³/h alkaline electrolyzer products have been released in China. Drive down the cost of hydrogen in the whole system.

Electrolytic technology progress: 1) In terms of power consumption, most of the current DC power consumption of alkaline electrolytic cell products in China is 4.5-5kWh/Nm³. According to estimates, every 0.1kWh/Nm³ reduction in hydrogen production DC power consumption can reduce the unit cost of hydrogen production by 1.2%-2%, and there is still some room for reducing the cost of hydrogen production driven by DC power consumption. 2) In terms of operation time, according to the estimated data of the national power investment, when the working time of the electrolyzer is increased from 2000 hours to 4000 hours, the hydrogen cost is expected to decrease by 4.6%; 3) In terms of equipment current density, increasing the equipment current density to drive the increase of hydrogen production can reduce the cost of unit hydrogen production.

Carbon trading prices increase the cost of gray hydrogen and improve the economy of green hydrogen. On April 25, 2023, the Council of the European Union approved the Carbon Border Adjustment Mechanism (CBAM, also known as carbon tariff), which is one of the key measures of the EU's Fit for 55 emission reduction plan (by 2030, EU greenhouse gas emissions will be at least 55% lower than the 1990 baseline). By imposing carbon tariffs on imported products that do not comply with EU carbon emission regulations, the average carbon price in the EU carbon market in 2023 will be around 80 euros/ton of CO2. In the United States, the Clean Competition Act of 2023 (CCA) proposes to verify the average carbon emissions of specific industries and charge a carbon tax of $55 / ton of CO2 for the emissions of domestic producers and importers whose products exceed the industry baseline.

At present, only the power generation industry is included in the national carbon market, and the current carbon price is about 55-60 yuan/ton of CO2, and the carbon price still has a large room to rise compared with the overseas. It is expected that after China's carbon trading market is included in the expansion of the scope of the industry in the future, the carbon trading price is expected to increase. At present, the carbon emission of hydrogen production from coal is about 25-30kg CO2/kgH2, and the carbon emission of hydrogen production from natural gas is about 10-12kg CO2/kgH2. The cost of hydrogen production from coal will increase by 2.5-3 yuan /kg, and the cost of hydrogen production from natural gas will increase by 1-1.2 yuan /kg, and when the electricity price reaches 0.15 yuan /kWh, the whole can be at parity with the cost of hydrogen production from coal. Therefore, the rising price of carbon trading will further enhance the economics of green hydrogen.

Overall, electrolytic hydrogen production technology has great development potential in terms of reducing costs. The China Hydrogen Energy Alliance mentioned in the "China Green Hydrogen energy Development Roadmap" that it is expected that after 2027, the cost of hydrogen production from electrolytic water in China will reach 15 yuan /kg, and it is expected that after the cost parity of hydrogen production from electrolytic water as a whole, the demand for green hydrogen will be greatly improved. At the same time, the China Hydrogen Energy Alliance expects that by 2050, about 70% of hydrogen will be made from renewable energy electrolytic water.