Green hydrogen: the economics?

This data-file models the economics and costs of green hydrogen production via the electrolysis of water, powered by renewable energy. IRRs and NPVs are calculated incorporating our best estimates of capex costs, opex costs, power prices, CO2 prices, utilization rates and conversion efficiencies.

A base case hydrogen price around $7/kg ($60/mcfe) is required to earn a 10% unlevered return on a green hydrogen project. The most challenging input is not cost or efficiency, but utilization rate, if a green hydrogen project is to be truly green, and fully powered by renewables.

Our base case input  assumption for the cost of a hydrogen electrolyser is around $1,000/kW.  We expect electrolyser costs to deflate. But we are not sure they can deflate by an order of magnitude, for reasons in the report linked above.

A full cost breakdown is calculated, on a bottom up basis, covering c40 cost lines, including materials, manufacturing and the balance of plant. We have also tabulated data to disaggregate electrolysers’ total system efficiency.

Our numbers are indexed at the electrolyser plant gate. On top of this, a full value chain requires hydrogen storage, hydrogen transport, and hydrogen use in a prive mover such as a fuel cell or fuel cell vehicle.

A more recent question mark has arisen over the degradation rates of electrolysers, if they are powered by wind and solar inputs, with high second-by-second volatility. As a rule of thumb, a 5-10% annual degradation rate raises levelized cost by $1/kg. And our data-file aggregates results from technical papers to substantiate this number.

The full model contains a short summary of our conclusions, and allows you to flex our input assumptions to stress-test the economics. Sensitivity analyses are also included, varying capex, utilization, H2 prices and electricity costs.

Our 3 key points on the costs of green hydrogen production are spelled out in the article sent out our distribution list.

Copyright: Thunder Said Energy, 2019-2023.