Bad news for Morocco. While our country is gradually establishing itself as a key player in the development of green hydrogen and has clearly expressed its ambitions to become a regional leader and a major exporter of this energy, a new report recently published by BloombergNEF (BNEF) throws a stone into the pond. While it until recently anticipated a rapid decrease in the cost of hydrogen, the cabinet has now revised its forecasts downwards.
Indeed, due to higher than expected costs, particularly for electrolyzers, BNEF now forecasts that the price of green hydrogen will evolve from its current range of $3.74 to $11.70/kg to a range of 1. 60 to $5.09/kg by 2050. For comparison, “gray” hydrogen, from natural gas, today has a cost between 1.11 and $2.35/kg.
Still according to BNEF, “the cost of production and installation of electrolysers for the production of green hydrogen has increased by more than 50% globally, including in China, compared to last year. Among the main causes identified are persistent inflation and delays in granting subsidies.”
Remember that in 2022, BNEF had anticipated a 30% reduction in EPC (engineering, procurement and construction) investment costs over a period of three years, with a constant annual decline. According to these projections, total system costs should have decreased by 8 to 10% in 2023, compared to 2022, thanks to economies of scale, technological advances, vertical integration and reduced margins. However, it is clear that this cost reduction trajectory, announced in a 2022 report, has not materialized.
A mixed global dynamic
Same story from the International Energy Agency (IEA) in its report Renewables 2023: Analysis and Forecast to 2028. According to the latter, the production of green hydrogen is progressing slowly and several regions of the world are struggling to align ambitions and achievements, due to structural and economic challenges.
According to the IEA, only 45 GW of new green hydrogen production capacity will be operational by 2028, which represents just 7% of initial projections. Far from the objectives, this slowness could lead to an insufficient supply to meet the growing demand for green hydrogen in the industrial, transport and energy sectors.
In Europe, although the EU is on track to meet its first renewable hydrogen use targets (42% in industry and 1% in transport fuels by 2030), achieving milestones following will strongly depend on the support policies put in place. The IEA emphasizes that clear and sustainable financial mechanisms are necessary to guarantee the profitability of projects in the long term.
In the United States, the situation is similar. The report highlights the potential for acceleration if tax incentives from the Inflation Reduction Act (IRA) make renewable hydrogen competitive with fossil alternatives. However, such dynamics rely on the ability of decision-makers to maintain favorable conditions for investments in the sector.
-In other regions, such as Latin America or the Asia-Pacific region, forecasts for green hydrogen production are being revised downwards. These markets, although rich in potential due to their renewable electricity production capacity (solar and wind), encounter logistical, technical and financial problems which slow down the implementation of projects.
By 2030, however, certain exporting countries
oil companies like Saudi Arabia could emerge. The NEOM project, for example, could symbolize the rise of large-scale production, intended for international markets.
A strategic bet in a complex global context
Morocco benefits from ideal conditions for producing green hydrogen. Indeed, the country has some of the best solar and wind potential in the world, with high levels of sunshine and areas suitable for the installation of wind farms. It has also already invested heavily in renewable energy production projects, such as the Noor solar complex in Ouarzazate, which could be integrated with electrolysis projects. Especially since in 2021 it presented its “Roadmap for green hydrogen”, aiming to capture between 2 and 4% of the global market by 2030 and to attract international investors.
But despite its advantages, Morocco does not escape the global challenges linked to the production of green hydrogen. The latter is produced from water and renewable electricity via electrolysis. However, the cost of electrolyzers remains high since it represents around 30% of the total production cost. Also note that delays in the manufacturing and delivery of electrolyzers on a global scale, often linked to supply chain problems, slow down projects.
Note that although Morocco benefits from a low production cost for renewable electricity, it remains dependent on solar and wind infrastructure which require massive financing to be operational on a large scale. There volatility of global markets also poses a problem. The materials needed to manufacture solar panels and wind turbines, such as silicon or rare earths, are experiencing an increase in prices.
Hassan Bentaleb
