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FRANKFURT, March 30 (Reuters) - The falling cost of
producing hydrogen from renewable power offers a promising route
to cutting emissions, but governments need to step in and
provide $150 billion of subsidies over the next decade to scale
up the technology, according to research from Bloomberg New
Energy Finance (BNEF).
Renewable hydrogen can be made by splitting water into
hydrogen and oxygen, using electricity generated by cheap wind
and solar power.
The technology to do this is currently funded by companies,
but BNEF estimates that if governments worldwide were to provide
$150 billion in funding over the next 10 years - less than half
the amount currently spent on subsidies for fossil fuel
consumption - that would help halve the cost of producing
hydrogen from renewable energy sources.
The BNEF Hydrogen Economy Outlook said that usage of
carbon-free hydrogen is currently small and costs are high,
slowing the deployment of hydrogen production, storage and
transport infrastructure, which could help industries
decarbonise.
"This needs policy coordination across government,
frameworks for private investment and the roll-out of around
$150 billion of subsidies over the next decade," said Kobad
Bhavanagri, head of industrial decarbonisation at BNEF.
The cost of electrolyser technology to make hydrogen from
renewable power has fallen by 40% in the last five years in
Europe and North America, while Chinese-made systems are 80%
cheaper than those in the West, according to BNEF.
This has encouraged industries such as steel, heavy
vehicles, shipping, cement, fertilisers and power generation to
explore measures to replace natural gas usage with hydrogen, to
cut carbon emissions under climate targets.
In Japan, carmaker Toyota seeks to establish
hydrogen-powered cities and transport and in Germany, oil majors
and utilities including BP and RWE plan plants
and pipelines while the government is drawing up a hydrogen
strategy.
BNEF said the cost of producing a kilogram of hydrogen from
renewable power could fall to a range of $1.14-2.71 per kilogram
in 2030, compared with $2.53-4.57/kg now, if subsidies to the
tune of $150 billion were provided.
In 2050, the production cost could even fall to $0.8-1.6 in
most parts of the world, making hydrogen competitive with
current gas prices in Brazil, China, India, Germany and
Scandinavia, it estimated.
However, achieving this hinged on how governments enforced
CO2 curbing targets to drive out conventional processes, it
said.
(Reporting by Vera Eckert, editing by Susan Fenton)
