Emerging clean technologies: policy-driven cost reductions, implications and perspectives

Abstract

Hydrogen production from water electrolysis, direct air capture (DAC), and synthetic kerosene derived from hydrogen and CO2 (`e-kerosene') are expected to play an important role in global decarbonization efforts. So far, the economics of these nascent technologies hamper their market diffusion. However, a wave of recent policy support in the United States, Europe, China, and elsewhere is anticipated to drive their commercial liftoff and bring their costs down. To this end, we evaluate the potential cost reductions driven by policy-induced scale-up of these emerging technologies through 2030 using an experience curves approach accounting for both local and global learning effects. We then analyze the consequences of projected cost declines on the competitiveness of these nascent technologies compared to conventional fossil alternatives, where applicable, and highlight some of the tradeoffs associated with their expansion. Our findings indicate that enacted policies could lead to substantial capital cost reductions for electrolyzers. Nevertheless, electrolytic hydrogen production at $1-2/kg would still require some form of policy support. Given expected costs and experience curves, it is unlikely that liquid solvent DAC (L-DAC) scale-up will bring removal costs to stated targets of $100/tCO2, though a $200/tCO2 may eventually be within reach. We also underscore the importance of tackling methane leakage for natural gas-powered L-DAC: unmitigated leaks amplify net removal costs, exacerbate the investment requirements to reach targeted costs, and cast doubt on L-DAC's role in the clean energy transition. Lastly, despite reductions in electrolysis and L-DAC costs, e-kerosene remains considerably more expensive than fossil jet fuel. The economics of e-kerosene and the resources required for production raise questions about the fuel's ultimate viability as a decarbonization tool for aviation.

Figures (6)

• Figure 1: Current and projected costs of key emerging technologies in 2030 by region. The range indicates sensitivity analysis for the assumed learning rates, and the deployed capacity in 2030. Electrolysis costs are in USD per kW and L-DAC costs are in USD per tCO$_2$/year capture capacity respectively. ROW stands for the rest of the world. *Assumes 50/50 shares of global deployment for Western/Chinese PEM, learning rates are identical; outcomes for alternative splits in global deployment are illustrated in the supplemental information and interactive dashboard.
• Figure 2: Current and projected water electrolysis capital project costs by technology type and country/region. The error bars depict sensitivity to the assumed learning rates as well as the installed electrolysis capacity in 2030.
• Figure 3: Current (dark blue) and projected (yellow) 2030 capital cost contribution to levelized cost of hydrogen by region (left) and required electricity cost to achieve unsubsidized hydrogen production at $1/kg (orange) or $2/kg (blue) given 2030 capital cost projections (right). The error bars depict sensitivity to the projected capital costs of electrolysis.
• Figure 4: Current and projected LCOH in the United States with and without the 45V production tax credit. See supporting information for plots depicting sensitivity to projected electrolysis capital costs.
• Figure 5: Learning investment (top) and capture capacity build-out (bottom) required to reach decreasing net removal cost targets. The lower and higher dashed curves indicate $0.2\%$ and $3.7\%$ methane leakage rates respectively.