Electrolyser manufacturer Nel says green hydrogen production costs can be reduced to $1.5/kg by 2025.

Nel CEO Jon Andre Lokke told the First Element conference the figure could be achieved via cost reductions in the supply chain and renewable electricity prices falling to around $20/MWh.

“We believe based on… the cost reductions we are delivering on technology and electrolysers that, by 2025, we will be able to produce green hydrogen at $1.5/kg from a large-scale Nel facility,” he says.

Best-in-class solar and wind projects can deliver electricity at around $20/MWh currently, although wholesale prices are at significantly higher levels in most regions.

The $1.5/kg level is important because that is the point at which green hydrogen can start competing with fossil-based hydrogen—depending on gas prices—Lokke notes.

“At that level you can start to reach fossil parity,” he says. “It will not happen everywhere at the same time, it will happen where renewable costs are lowest first.”

$1.5/kg – Green hydrogen production cost targeted by Nel

Parity can be reached without grant funding from the EU Important Projects of Common European Interest (IPCEI) scheme and without factoring in carbon prices, Lokke adds.

The IPCEI scheme grants hydrogen-related projects capex funding. Nel believes it could theoretically be involved in around 80 of the total 140 schemes that have submitted bids for funding.

“We have systematic dialogue trying to get into many of these projects, and our technology could be relevant,” says Lokke.

Nel has just completed a new 500MW/yr electrolyser manufacturing facility at Heroya, which could potentially be expanded to produce 2GW/yr. This plant will cut production costs in half, with prices expected to fall further when the facility expands further.

The firm has also increased the size of the modular units it sells to 2.5MW to gain economies of scale.

It has signed engineering, procurement, and construction deals with services firms Aibel and Wood to assist with the green hydrogen projects they are developing around the world.

“We are trying to bridge the gap between renewables and downstream applications,” says Lokke.

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Author: Tom Young