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The Growing Potential of Green Hydrogen

Toyota hydrogen truck.

The idea of a hydrogen-based economy has been around since the oil crises of the 1970s, but it has not materialized up to this point. Yet according to Jan Cihlar of Ecofys, a Navigant company, hydrogen could still become a key enabler of the low carbon transition, if it is produced with renewable electricity. The potential of further cost reductions make this a possibility in some applications in transport and industry.

Most hydrogen produced today is used in the petrochemical sector and for manufacturing fertilizers. 99% of it comes from fossil fuel reforming as this has been the most economical pathway. This does not have any real climate benefits, since CO2 is emitted in the process.

However, a scalable and potentially low greenhouse gas (GHG) emitting alternative is available through water electrolysis. Such “green hydrogen” could have numerous applications ranging from industrial feedstock to fuel cell vehicles (FCVs) and energy storage.

Whereas its use as a chemical feedstock in the industrial sector and as fuel in transport could soon gain momentum, utilization in stationary applications (e.g. in energy storage) is expected to remain modest

The key question is: can it be competitive? Electrolysis production costs are connected to electricity prices,which have prevented widespread application thus far. However, as prices of renewable electricity are falling, as illustrated by recent record-low solar and wind bids between $24/MWh and $53/MWh, the doors could be opening up.

Cost reduction potential

We evaluated various scenarios for the cost evolution of water electrolysis. Data on current production costs are scarce, mainly because few very large electrolysers have been built so far. In the current state of play, electrolyser capital cost (CAPEX) for a typical polymer electrolyte membrane (PEM) electrolyser (1MW) is around $1000/kW. For large alkaline systems it is about $600/kW.

Although PEM technology is more expensive now, it possesses much bigger cost reduction potential than alkaline, if scaled up. The US Department of Energy estimates that electrolyser capital cost can go down to $300/kW. At this level, if optimal electrolyser efficiency (approximately 75% in power-to-gas applications) is realised, prices for renewable energy continue to fall and carbon taxes rise to between $50-100/ton, green hydrogen based on electrolysis can become a cost-competitive option. If we assume a levelized cost of feed-in electricity in the range of $10-30/MWh, green hydrogen could become 45% cheaper than hydrogen derived from natural gas steam reforming.

For the transport sector, this translates to cost of $5-6/100 miles in end-user fuel costs. This compares favourably to fossil fuel alternatives:

End-user fuel cost comparisons in passenger transport[1]Source: Ecofys – A Navigant Company

Hydrogen has a premium value in transportation as the tank-to-wheel conversion efficiencies of fuel cells can be substantially higher—typically by a factor of two—than those of internal combustion engines (ICEs). This advantage is further emphasised if a carbon tax is added to the price of fossil fuels. These factors are included in the comparison, as are the additional investments needed for hydrogen infrastructure. It is unclear, though, who will finance these.

However, the comparison does not incorporate the difference between purchase prices of ICE vehicles versus FCVs. These currently outdo the cost advantage of using hydrogen instead of gasoline. In other words, even if operating expenses (OPEX) are comparable, the purchase cost of the vehicle (CAPEX) will favour ICE vehicles. In order to make hydrogen competitive, either its retail cost will have to drop way below that of fossil fuels or economies of scale would have to drive down the cost of FCVs significantly. This is certainly not an impossibility.

Seriously engaged

An uptake of green hydrogen would probably unfold in stages, driven by its different applications. Whereas its use as a chemical feedstock in the industrial sector and as fuel in transport could soon gain momentum, utilization in stationary applications (e.g. in energy storage) is expected to remain modest.

One stationary application is the use of green hydrogen to provide flexibility for the grid via conversion of excess electricity from renewables to hydrogen and back to electricity (power-to-gas-to-power). This could in theory be useful at times of high generation and low demand (or vice versa) for security (e.g. grid stability) or economic (e.g. viable business case) reasons, but the costs are currently prohibitive.

Japan plans to have 5.3 million households using hydrogen-based fuel cell micro combined heat and power systems by 2030

Although green hydrogen, then, is still in early phase, many companies and organisations are seriously engaged in its production. For example, in February 2017, Austrian Voestalpine AG announced it is developing one of the world’s largest polymer electrolyte membrane electrolysers using only green electricity to test hydrogen use in various stages of steel production. A similar initiative will be pursued by a joint venture between SSAB, LKAB and Vattenfall in Sweden.

In January 2017, at the World Economic Forum in Davos, a consortium of 13 companies with cumulative revenue of $1 trillion formed the Hydrogen Council. Its primary purpose is to advance the knowledge and use of hydrogen as an energy source. Japan plans to have 5.3 million households using hydrogen-based fuel cell micro combined heat and power systems by 2030, while the city of Leeds in the United Kingdom has proposed converting its natural gas grid into a hydrogen grid by 2026. In transport, hydrogen-based trainsbuses, and trucks are all trying to gain acceptance to fast-track their development.

With a cost potentially as low as $12/GJ (approximately $1.4/kg)[2] for onsite applications[3] and $0.05/mile travelled inclusive of infrastructure costs, the opening is present—first for mobile applications and as a replacement for fossil fuel reforming and other premium applications in industries.

Editor’s Note 

Jan Cihlar is a consultant at Ecofys, a Navigant company. He is an all-round sustainable energy expert and has been advising industrial companies on topics including low-carbon innovations, role of industrial waste in the circular economy or financing models for energy efficiency.

[1] The difference in total production costs between scenario 1 and scenario 2 is caused by varying electricity cost ($30-10/MWh).

[2] For comparison, 1 kg of hydrogen (or about 0.12 GJ of potential energy) has about the same energy content as a gallon of conventional gasoline.

[3] I.e. excluding the cost of compression, storage and dispensing.

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Bob Meinetz's picture
Bob Meinetz on Sep 7, 2017 2:54 pm GMT

100% hype.

H2V PRODUCT’s power-to-gas electrolysis will require 180MJ of energy to produce 1 kg of hydrogen. Given an energy density of 130MJ/kg for H2, the conversion would require 28% more energy than it will produce – at 100% delivered efficiency.

At a real-world deliverable efficiency (90%? 80%? 40%?) who knows how much energy would be wasted/CO2 generated to deliver renewables advocates their “clean” fuel…let’s burn some coal, electrolyze some water, and find out!

Renewables run face-first into the brick wall of physics – again. You’d think they’d learn.

Darius Bentvels's picture
Darius Bentvels on Sep 7, 2017 3:59 pm GMT

In Germany major Power-to-Gas(most H2) is going on. They have ~20 major pilot plants incl. at least 4 P-t-G unmanned plants at car refuel stations for FCEV’s.

They plan to have 2GW operational in 2022 in many pilot plants, using different technologies producing different gasses for different markets.
Regular roll-out is planned in 2024.

Note that all pilots are unmanned, so they operate only when electricity price is low, e.g. <2.5cnt/KWh (av. German whole sale price is ~3cnt/KWh).

Engineer- Poet's picture
Engineer- Poet on Sep 7, 2017 4:19 pm GMT

The US Department of Energy estimates that electrolyser capital cost can go down to $300/kW.

But no mention of capacity factor.  For a fully “green” power supply the electrolyzer banks must be sized to absorb most of the peak output of the generating fleet.  Further, they are not the primary loads.  This means they will be running well below the capacity factor of the generators.  (this is miracle #1.)

If the overall wind capacity factor reaches 40% (which will take quite some time), the electrolyzers might hit 25%.  That’s $1200 per average kilowatt of input.

At this level, if optimal electrolyser efficiency (approximately 75% in power-to-gas applications) is realised

Which makes it $1600/kW of chemical energy output.  (this is miracle #2.)

prices for renewable energy continue to fall

This is probably the only realistic claim in the list.

and carbon taxes rise to between $50-100/ton

Unless there is a massive reversal in public mood, this is not going to happen in N. America.  (this is miracle #3.)

green hydrogen based on electrolysis can become a cost-competitive option.

In other words, unless ALL of that happens it remains uncompetitive (and is grossly so at the moment).

If we assume a levelized cost of feed-in electricity in the range of $10-30/MWh

When much if not most of the energy must go into storage, the hydrogen makers are going to have to pay market price rather than fire-sale prices.  Without that, the generators will go bankrupt.

This is miracle #4 that’s required to make the vision possible.

With a cost potentially as low as $12/GJ….

In other words, even assuming the 4 miracles, a likely floor of almost $13/mmBTU.

A floor barely less than the 2008 peak of natural gas prices in the USA.

Why does anyone take hypedrogen seriously?

… the costs are currently prohibitive.

No kidding.

Darius Bentvels's picture
Darius Bentvels on Sep 9, 2017 8:47 am GMT

Power-to-Gas is developing fast. Primarily thanks to numerous technology improvements which decrease the cost price and improve efficiency of H2 and methane production.

Even France is now following Germany with a number of 100MW PtG plants, the first contract signed with a Norwegian company.

Apparently their NPP fleet (which will produce ~50% in ~2025) is and will not be flexible enough to cooperate with the increasing share of wind and solar generated electricity.

It implies that you may expect further reductions regarding nuclear in France as much cheaper wind and solar will continue to grow.
Thus, the 2050 scenario of their govt institute ADEME, >80% renewable and only one NPP (the new EPR), probably becomes reality.

Darius Bentvels's picture
Darius Bentvels on Sep 11, 2017 11:24 am GMT

France, following Germany, just signed the first framework agreement for a 700MW PtG plant with a Norwegian company.
They plan ~5 of such PtG plants in France.

Other countries such as UK and DK are also expanding PtG….

So may be your estimations are not quite right,

Darius Bentvels's picture
Darius Bentvels on Sep 11, 2017 1:18 pm GMT

Sorry, the agreement concerns a 100MW PtG plant, which is expected to be followed by 6 more 100MW PtG plants in France.

The 100MW plants will have 400 electrolysers each. The produced gas will be injected in the natural gas grid.
A plant costs ~NOK 450 million = $ 58million. So $580/KW. They will be constructed in regions with a lot of wind turbines such as Normandie.

– the plant operates 2000 hrs a year;
– buys electricity at an av. price of ~1.2cnt/KWh;
– 8%/a of the investment for interest+depreciation+labor (unmanned operation); the produced hydrogen will cost ~4cnt/KWh.

The nice thing about these plants is that they:
– they contain little moving parts, only a few pumps, so maintenance costs (labor) may be very low.
– can operate without humans. Their management computer can buy automatic at the power exchange based on the price signals it receives.

Bob Meinetz's picture
Bob Meinetz on Sep 11, 2017 2:03 pm GMT

Bas, please note:

• speed of development
• numerous technology improvements
• efficiency improvements
• contracts with Norwegian companies
• the flexibility of nuclear power plants
• my expectations / your expectations
• your probable reality

will never, ever overcome the laws of thermodynamics. Period. Read my post again, and let it sink in: either ∆U ≠ Q – W , or you are mathematically, certifiably wrong. What are the chances?

Nathan Wilson's picture
Nathan Wilson on Sep 12, 2017 5:26 am GMT

To put Bentvels’ (Bas’) 4¢/kWh hydrogen cost estimates into context, note the conversion factor of 3413 Btu/kWh, so that’s equivalent to $11.7/ MMBtu. That is way too expensive to be a credible replacement for fossil gas in gas-producing countries like the US (where fossil gas is 4x cheaper than that). This also implies that power-to-gas-to-power will be non-viable.

On the other hand, gasoline has an energy content of 34.4 kWh/gallon, so 4¢/kWh corresponds to $1.36 per gallon_of_gas_equivalent. This would be viable, if hydrogen were as desirable as gasoline or diesel to the end user, which it is not. Hydrogen is a very poor automotive fuel; in fact, 5000 psi hydrogen is 3x worse for energy density than 3600 psi methane gas. So cheap fossil gas is a serious problem for this application too.

The case for making ammonia (for fertilizer, or carbon-free fuel) is somewhat better, since even when made from fossil gas, ammonia will cost 30% or so more than fossil gas. Ammonia is more storable and more easily transported than H2; it also beats methane gas (50% more energy throughput in the same pipeline, and 20% more in the same tank).

In addition, power-to-fuel will be limited by the relatively small supply of cheap electricity. That 1.2 ¢/kWh price (used in Bentvels’ calculations) will only be available during times of over-supply, which will only be a small fraction of the time, if the average wholesale price of electricity must remain high enough to allow new investment in power generation. So even though it could be big news for the electrolyzer industry, it won’t matter much to the gasoline industry.

Darius Bentvels's picture
Darius Bentvels on Sep 12, 2017 3:33 pm GMT

US prices for car fuel and NG are much lower than those in Europe.
So while it is economic here (the Germans have several) to have a PtG(H2) plant at the car refill station, it may not be in USA (yet).

H2 require a lot of pressure, but the energy content of H2 is ~7 times higher per kg than normal car fuel. So all in all it’s considered here as a viable car fuel, which will compete with BEV’s and for sure will win with long haul trucks and buses.

Periods of cheap electricity (due to oversupply) will increase with the increase of wind & solar. So this will operate in high renewable (wind & solar) environments. With the continued decrease of the wind & solar prices one can expect that electricity prices will decrease further.

You may be right about ammonia. But do not explain how to battle effectively the odor & poisonous problem of ammonia?

Nathan Wilson's picture
Nathan Wilson on Sep 13, 2017 3:03 am GMT

Regarding the odor and toxicity of ammonia:

First of all, I’d say that the industries that need sustainable carbon-free fuel the most are long haul trucks, buses, trains, and farm/construction equipment (diesel replacements). Supplying just the US diesel market with electric syn-fuel (2,900,000 barrels/day equiv.) will use about 270 GW average, about half of our current electricity consumption. That’s about all you can make with “off-peak” electricity.

These diesel fuel applications have professional drivers and operators, so safe handling can be achieved via gloves and goggles if need be. Technology will also help, as companies have already demonstrated spill-proof fueling nozzles for poisonous methanol, and completely robotic refueling systems for hydrogen.

But the inherent safety of ammonia is actually about the same as gasoline and hydrogen. Ammonia’s greater toxicity is completely offset by the much lower risk of fire and explosion. Ammonia and gasoline are liquid in the tanks, but release vapor when spilled; ammonia vapor rises (moving away from people), but gasoline vapor hugs the ground, and is more likely to find an ignition source, and is much, much more flammable.

Regarding odor (a potential aesthetic problem), all volatile fuels handled by the public must have an odor so leaks are easily detected. The typical pressure in a CNG or H2 tank is 20-100 times higher than in an ammonia tank, so leaks will have a proportionately large flow rate for these fuels. Note that ammonia vapor is harmless at concentrations expected near routine leaks and small spills.

Darius Bentvels's picture
Darius Bentvels on Sep 13, 2017 7:02 am GMT

Let’s see whether anybody will bring ammonia cars on the market. He’ll have a hard time as H2 cars are a step ahead.
NL plans to have 20 H2 refill stations in 2020, which implies that there will be a refill station within 20km in the more populated west (the ‘randstad’).

In addition to Toyota, Hyundai and Honda,
other producers are gearing up.

I had the chance to check the Hyundai FCEV. Found it amazing how small the H2 tanks are while the range would be >500km. The volume of the fuel cells, etc was disappointing.

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