By Frank Wouters, Chairman at the MENA Hydrogen Alliance
The current geopolitical storm will certainly put more focus on energy resilience, and renewable energy’s middle name is resilience. But resilience also exists in a market environment and economics always matter.
New energy technologies usually follow a similar pattern. They mature until a tipping point is reached, then they follow Wright’s Law, which sets out the so-called learning rate, a metric that describes the cost reduction per doubling of installed base. This is the fundamental growth engine of new energy technologies, more deployment leads to lower cost, which leads to even more deployment.
We know that solar and wind technology are now the cheapest forms of power generation almost everywhere, and we have seen that in action for many years now. Last year 90% of all new additions were renewable, building on decades of technology and market development. But where are batteries and hydrogen?
Let’s look at batteries first. It is safe to say that lithium-ion battery packs can now be purchased at prices well below $100/kWh, with some sources claiming a global benchmark price of $90/kWh in 2025 due to a slowdown in EV sales. Current demand is estimated to be 1.6 TWh, for which a ~2.3 TWh manufacturing capacity was set up. This leads to downwards price pressure; good deals can be had today. BESS systems cost $150/kWh if the packs are $90/kWh, and this is cheaper than gas peakers. So, batteries have crossed their tipping point, with market uptake accelerating.
But what about hydrogen? We are not there yet. Despite very promising cost numbers from India and China, hydrogen cannot compete with unabated grey or black hydrogen, and without a global price of CO2, many, if not most, fossil alternatives are cheaper. But Wright’s Law fundamentally applies to hydrogen because technologies can be scaled and learning rates apply. To get us to the tipping point for hydrogen, more effort is needed. Given the large number of potential projects, supply will materialize. We need focus on the demand side, and the world should seriously introduce carbon pricing. And regulations must be simpler and more robust.
Hydrogen is an indispensable part of a resilient future energy system. Diversification away from fossil fuel import dependencies is a necessity. Europe for example, now imports LNG from the US instead of piped gas from Russia. There are far more resilient energy choices than those two options, and hydrogen is one of them.
The time to act is now.