The low costs of renewable energy that have enabled the world to reduce greenhouse-gas emissions over the past decade are continuing to fall, which is welcome news for the effort to address climate change. And now along comes hydrogen, a crucial new energy technology, to provide fresh reason to be optimistic about progress ahead.

For the first time this year, Lazard is including hydrogen in its annual analysis of the so-called Levelized cost of energy — measurements of how various renewable energy technologies compare with conventional fossil-fuel generation. Over the 12 years we’ve been conducting these studies, costs per megawatt-hour for newly built renewable energy technologies have declined substantially, and this past year has been no different. From 2009 to 2019, the cost of utility-scale solar energy fell 89%, and over the past year, it has dropped another 9%. Onshore wind power fell 2% over the past year, after dropping 70% over the previous decade.

The development of hydrogen greatly adds to the stunning prospects for clean energy. A climate-friendly fuel that can be derived from other renewable energy generation, hydrogen has the potential to substitute for natural gas in energy production. In assessing the costs of hydrogen, the Lazard study distinguishes between “blue” hydrogen (produced via steam methane reforming) and “green” hydrogen (produced via electrolyzer powered by onshore wind and utility-scale solar generation) because the technologies make a difference in the extent to which the hydrogen can reduce carbon emissions.

Using blue hydrogen in a combined-cycle power plant could produce emissions 90% lower than if natural gas were used instead. And green hydrogen would eliminate carbon emissions altogether. To be sure, based on current technology, these carbon reductions entail a higher fuel cost than natural gas alone, given the higher cost to produce hydrogen. But as the technology for making hydrogen improves and it comes to be used at larger scale, the costs may well fall. Someday soon, the dramatic emissions reductions associated with hydrogen use may come with lower costs, especially where there is a price placed on carbon emissions.

Hydrogen has another major benefit: It can be stored effectively for many months. This means it can help address wind and solar’s intermittency problem. By absorbing excess generation during periods of high renewable energy generation, and being available as fuel when renewables are operating at lower capacity, hydrogen can stand in for expensive battery storage or fossil-fuel backup to smooth out the fluctuations.

Hydrogen thus holds great promise in the transition to renewable energy. Policy makers, utilities and other energy market participants would be wise to expand its use as time passes. As the costs of all forms of renewable energy continue to fall, hydrogen is emerging as a potent new force for averting climate change.