H2Tech Market Data 2023 - 45

for PEM electrolyzers, while the estimated requirement is
100 GW for cost-effective green H2
by 2030. Electrolyzer
material solutions, such as switching to AEM cells that do
not require non-abundant metals or replacing the nickel
and cobalt in alkaline systems, are effective strategies that
the industry is turning towards.
Regional availability and cost of renewable energy
will be the major disparities in the overall levelized
cost of H2
production. For most of the industry, the cost
of renewable electricity has been a larger concern than
electrolyzer capital cost. The cost of renewable energy
has faced major challenges due to lasting supply chain
bottlenecks and the rising cost of materials. For instance,
56% of solar buildouts faced delays or cancellations with
a nearly 300% increase in the cost of polysilicon, a core
component in solar systems. Simultaneously, the heavily
subsidized photovoltaic (PV) market witnessed an 89%-
95% cost decline in 2020. However, rapid normalization
of market and supply chain disruptions and government
policies have placed solar and wind back on the track that
they have shown over the past decade, which were cost
reductions of 80% and 40%, respectively.
The overall electricity generation market trend shows
the clear dominance of clean wind and solar-based power
generation. As a consequence of
rapid technological
developments, policy incentives, aggressive investment
and large-scale deployment, the cost of renewable electricity
is projected to decrease rapidly over the next 3 yr,
and more gradually over the long term by nearly 75% for
solar and 40% for wind (FIG. 3).
According to the International Renewable Agency's
(IRENA's) analysis, the global weighted average cost of
electricity may reduce by 26% for onshore wind, 35% for
offshore wind, at least 37% for concentrating solar power
(CSP) technologies and 59% for solar PV by 2025. The low
cost of renewable electricity will drive down the cost of
green H2
produced via electrolysis nearly proportionately.
Cost simulations indicate that if the price of green electricity
is reduced to $20/MWh, electrolyzer technology
is evolved enough to close the gap with the cost of fossil
fuel-based energy (FIG. 4).
As shown in FIG. 4, the cost reduction in electrolyzers
alone cannot compensate for the price of renewable
electricity. Regional disparity in the access to renewable
energy will continue to affect the cost of electricity and
subsequently the cost of green H2
production. For example,
in some sun-belt locations (e.g., the Middle East) or in
countries where hydroelectricity is cheap, green H2
could
be affordably produced at $1.60/kg, while it may be more
expensive ($4/kg-$5/kg) in countries where renewable
energy is expensive or not accessible.
Economies of scale. Expanding stack production
capacities to GW-scale facilities hinging on the industrial
autonomous will drive a step change in cost. A stack is
about 45% of the total cost of manufacturing at low rates
but will reduce to about 30% at higher rates, and the
scale-up of manufacturing capacity will allow a nearly 50%
reduction in the tipping point for typical plants. Significant
cost savings will also result from system standardization
and integrated plant design and digitalization initiatives
being actively employed at manufacturing plants.
Local government regulations and incentives will be
pivotal in determining the cost of H2
production and
primary investment decisions. The ambitious energy
transition aligned with key international climate goals will
drive a rapid cost reduction for electrolyzers. Although the
electrolyzer market size is growing at the rate of > 6.4%,
the trajectory needed to achieve global climate goals
will
require solid policy support to make electrolyzers
FIG. 3. The cost of renewable electricity, wind and solar-based. Source: bp.
40% cheaper by 2030. Governments can aid in achieving
cost-effective green H2
support by:
through electrolysis with policy
45
MARKET DATA 2023 | H2
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H2 TECHNOLOGIES
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H2Tech Market Data 2023

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