BAKU, Azerbaijan, December 22. Canada and the US are the G7 members with the largest potential for renewable hydrogen production - 70 and 100 times, respectively, of their expected 2030 demand, the International Renewable Energy Agency (IRENA) said, Trend reports, citing the latest publication from the Agency.
According to the IRENA, this is due to the large land area these countries have.
Meanwhile, Japan will only be able to produce less than 3 percent of the hydrogen it needs at a cost lower than $2 per kgH2, the report said.
"The rest of the G7 members would be able to produce three to five times what they need by 2030 at a cost lower than $2/kgH2, but this would quickly decrease as demand rises towards its 2050 value. An advantage for renewable hydrogen is that the amount of hydrogen that can be produced below a certain threshold will increase over time as technologies become cheaper and the production cost decreases," the agency noted.
As the IRENA explained, renewable hydrogen does not use any fuel, and all the costs come from physical assets, with the cost of electricity is the dominant driver, which s defined by the capital expenditure (CAPEX) and operating hours of the upstream renewable generation.
"This makes weighted average cost of capital (WACC) a key parameter defining the hydrogen production cost. In 2020, WACC across G7 members ranged from 1.95 percent in Germany to more than 8 percent in parts of the EU (Croatia) for solar PV. At the same time, the CAPEX for solar PV differed by a factor of more than two across G7 members, from $694/kW in Germany to more than $1,693/kW in Japan. Based on these factors, the cheapest hydrogen production from solar PV among G7 members is Germany, with $4.1/kgH2, despite having a relatively low resource quality (full load hours over a year are less than 15 percent in the best locations) than other members. The combination of low CAPEX and WACC have a larger influence on the cost," the report added.
According to the IRENA, the electrolyzer needs to operate at least 2,500 to 3,000 hours a year to be able to achieve the largest reduction in the cost contribution from the CAPEX component.
"When coupled with solar PV, the generation plant needs to be oversized to reach such a number of operating hours, and some electricity will be curtailed. For G7 members, the optimal configurations at their best locations have a PV capacity that is double the one from the electrolyzer, curtailing 11 percent to 18 percent of the electricity. An alternative to improve the operating hours of the electrolyzer is to combine solar PV with onshore wind. The optimal configuration and dominant renewable technology will depend on the quality of the renewable resources and the CAPEX ratio between technologies. Solar PV needs to be at least two to three times cheaper than onshore wind to compensate for the lower operating hours. In 2021, the global average CAPEX for onshore wind was about 1.5 times higher than for solar PV ($1,325/kW as opposed to $857/kW)," the report said.