Green hydrogen report targets 58% cut in production costs

A new report from RenewableUK and Hydrogen UK “Splitting the Difference – Reducing the Cost of Green Hydrogen to Accelerate Deployment” includes recommendations that the trade associations say could drive the cost of production down from £241 per megawatt hour (MWh), which was achieved in the first Hydrogen Allocation Round in 2023, to less than £100/MWh.

The UK has “massive potential” to use renewable electricity to produce hydrogen in electrolysers that split water into hydrogen and oxygen, the report said, and key measures could unlock economies of scale.

Recommendations include removing barriers to locating hydrogen production at renewable energy plants and incentivising electrolysis to happen when electricity is cheapest. The report also calls for the government to reform the hydrogen production business model to secure the maximum amount of investment, and to introduce an “ambitious” strategy to enable development of a hydrogen transmission network, with pipelines linking Scotland to England and Wales to optimise the availability of green hydrogen.

The price of electricity currently represents about 70% of the final cost of green hydrogen, so reducing it is “imperative”, the trade association said. Another one of the 11 key recommendations is to reduce the charges that project developers have to pay for access to the grid.