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Latest Hydrogen Costings

December 1, 2021
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By Paul Homewood

 

The EU publishes a quarterly report on European gas markets, which includes a section on hydrogen:

 

 

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I have added the plots for natural gas (very roughly!!), but the actual figures for August are:

                                          Eu/MWh

Natural Gas                         – 44.30

Alkaline Electrolyser        – 179.00

Steam Reform (incl CCS) – 76.00

Despite rising gas prices, the cost penalty of using blue hydrogen, ie steam reform, has increased. This is because the process wastes much of the energy, in the form of gas, input. The assumption is an efficiency factor of 69%.

Green hydrogen, electrolysers using renewable energy, also increases in cost as electricity prices rise, which the above graph factors in – wholesale prices up from Eu59/MWh in April to Eu90/MWh in August. This appears to reflect the way European wind power is priced – wholesale + renewable subsidy.

It could be argued that wind power costs are actually less than that now (as opposed to what is paid for it).

If we work back, CAPEX + Non Fuel OPEX come to about Eu25/MWh. Electrolyser plants are assumed to run at 60% efficiency, so with electricity prices at Eu90/MWh, the cost of blue hydrogen would add up to Eu175/MWh.

However, if we assume the cost of wind power is Eu70/MWh, which is in line with the latest CfDs, the cost would be about Eu140/MWh.

Either way, it is still much greater than the current gas price of Eu44.30.

But this is not the whole story.

If electrolysers are attached to wind farms, it may be appropriate to use only the wind power production cost. However, under this scenario, the electrolysers would not run at optimal capacity, (the EU calculations assume 95%). Instead they would have to be ramped up and down with the vagaries of the wind. A factor of 40% would be more realistic, and this would more than double the CAPEX/Non Fuel OPEX costings.

The alternative, and the only practical bulk operation, would be a stand alone facility, which would have to import electricity from the grid. As such, it would of course have to stand the full cost of power, including transmission costs.

And on top of all this comes the cost of storing and distributing hydrogen.

Finally it is worth noting that, according to S&P Platts, electrolyser stack
refurbishment is required every nine years at 45% of capital cost.

Did I hear somebody say our bills would reduce?

22 Comments
  1. mikewaite permalink
    December 1, 2021 7:51 pm

    What we have seen in the past with renewable schemes and even more so in the covid business (and it is a business) is that the usual rules of economic viability , commonsense and technical issues mean nothing if politicians can bask in the glow of approval from the BBC and other ideologically motivated groups – no matter what harm to the economy , businesses, taxpayers and the general wellbeing, mental and physical, of the population.
    Therefore arguments about the relative costs of the schemes will never hold any weight with the political decision makers . However one of the many increasingly relevant Feynman
    quotes is one to the effect that no technology will be successful if it ignores basic physical or chemical laws: “nature will not be fooled” .
    I wonder , to be specific, about the “storing and distribution ” mentioned briefly above. Some of us grew up , if not in the shadow of , but within sight of, gasometers which stored a gas with about 40% hydrogen . Will these have to reappear across the land and in crowded cities? Or will it be as a liquid in refrigerated underground tanks? Is this really practical?

    • StephenP permalink
      December 2, 2021 7:38 am

      In addition, if as is widely suggested, hydrogen is used to power vehicles, IIRC the energy content of one lorry load of gasoline would equate to 16 lorry loads of hydrogen.
      We don’t seem to have enough drivers of heavy goods vehicles as it is, so where do we get the extra transport resources from? I suppose by being classified as ” well paying green jobs.”
      If in addition the delivery lorries are powered by hydrogen, how big a fuel tank would be needed?
      Presumably 16 times the size of a current lorry gas tank.

  2. Sobaken permalink
    December 1, 2021 8:02 pm

    I did my own calculations, and got similar numbers. From the sources I’ve found online (GWPF, ElementEnergy, Timera, some research papers), capital cost of building electrolysers is estimate to be around 0.8-1.2 million euro per MW (of hydrogen production, not electricity consumption), operations cost is 0.12-0.28 million per MW per year, and their lifetime is around 10 years. Even taking the lower values of 0.8 mn CAPEX, 0.12 mn OPEX, and 9 years life after which they can be refurbished for 45% of the price once, and no interest/discounting/inflation involved for simplicity of calculation, that amounts to 0.185 mn a year in fixed costs. At ideal full utilization that would produce 8760 MWh a year, so already would add up to 21 €/MWh. Using the higher cost estimate gives a number of 43 €/MWh. With a more realistic 40% capacity factor, that becomes 53 to 108 €/MWh. If the electricity from dedicated wind installations is priced at 70 €/MWh (which I’d assume is some combination of cheaper onshore plants selling at 40-50 and more expensive offshore plants with prices of over 100), and considering that electrolyser efficiency is around 60%, you add to that a “fuel” cost of 117 € per MWh of electricity consumed, for a total of 170-225 € per MWh of hydrogen produced. Which is 3.8 to 5 times more expensive than natural gas! And that is without considering the pipelines needed to transport hydrogen from where it’s produced to where it is to be used, the very problematic storage of hydrogen, and the power lines to connect wind farms to electrolysers. Even if scaling up electrolyser manufacturing made the devices 10 times cheaper (as it had happened with batteries and solar panels), you’d still be looking at prices around 130 € per MWh of hydrogen, since most of the costs would be in buying electricity (and it is very unlikely that wind power will get any cheaper in the future). I doubt that anyone in Europe is willing to pay three times as much for gas, so until someone invents a better way to produce hydrogen (using nuclear power perhaps), these whole plans for “hydrogen economy” will have to wait.

    • It doesn't add up... permalink
      December 2, 2021 3:18 am

      As I understand it, PEM plant is modular with quite small cells for reasons of chemistry, like not wanting large water pressure at the bottom of electrodes – as at the Shell REFHYNE project at their Wesseling, Germany refinery. There is obviously some scope for reducing costs when building them by the hundred rather than 10 at a time.

      There is a new study of the costs of the REFHYNE project available here:

      https://refhyne.eu/publications/

      The slides give the flavour, although there are extra revelations in the full report. Of course, they don’t discuss the whole system implications when they start looking at negative/very low prices in periods of surplus: key is that as the fraction of time spent in those conditions increases, so must the charges on the useful renewables output to cover its cost.

  3. Hervé permalink
    December 1, 2021 8:29 pm

    Using CfD prices for “green wind electricity” cost is no more than hype.
    Using 70€/MWh has nothing to do with reality. Please re-do with correct costs, including fundings, taxes exemptions, grid upgrades,..
    No need to further read present demonstrations…

  4. Tim Leeney permalink
    December 1, 2021 8:36 pm

    Hydrogen is difficult to handle, and is so light that it tends to escape the earth’s atmosphere, but is an essential component of the natural system. So nature’s way is to fix it by attaching it to carbon so it can be safely managed, and oxidised in due course to produce energy where needed, with the bonus that reconversion of the carbon to carbon dioxide yields more energy at point of use. What’s not to like?

    • December 1, 2021 9:37 pm

      The lightness of hydrogen results in relatively high molecular speeds, and therefore relatively high rates of leakage from pipes and vessels.

      • dave permalink
        December 2, 2021 8:53 am

        It is not just the smallness of the hydrogen molecule and its consequent speed of motion which matters. Actually more important is the fact that the hydrogen molecule dissociates into single protons and electrons when it attaches to the surface of the containing metal. The elementary particles are so small that they diffuse easily through the metal.

  5. Graeme No.3 permalink
    December 1, 2021 8:54 pm

    My understanding is that continuous hydrolysis is theoretically 62% efficient at producing hydrogen, although that can be boosted slightly by adding mid-range heat.
    Intermittent hydrolysis (such as using renewables) is theoretically 38% efficient.
    So your figures are far closer to reality than the estimates coming from the EU Group thinking bureaucrats or those from the Peppa Pig Cabinet.

    • Martin permalink
      December 2, 2021 6:12 am

      Sorry to be a pedant, but the term is electrolysis. Hydrolysis is something quite different

  6. Coeur de Lion permalink
    December 1, 2021 8:58 pm

    What’s it all for?

  7. Gamecock permalink
    December 1, 2021 9:16 pm

    I’m not comfortable with the units Eu/MWh when it comes to nat gas or hydrogen.

    How ’bout Btu’s or megajoules?

  8. David Wojick permalink
    December 1, 2021 9:22 pm

    I have noticed that “wind and solar” is being replaced by “wind, solar and hydrogen” in the MSM. So they acknowledge intermittency but it is solved! In print anyway, but not in reality.

    I also enjoyed the recent news piece on the high cost of heat pumping, written by a hydrogen promoter. Let them fight that one out publicly. The bad versus the worse.

    • Sobaken permalink
      December 1, 2021 10:17 pm

      Heat pumps cost upwards of 1.5 million €/MW(th), spread over the supposed lifetime of equipment of 20 years it amounts to 75000 €/MW(th) per year. If you wanted to provide 100000 MWh of heat a year, you’d need around 25 MW(th) of capacity (judging by monthly non-industrial gas consumption in the coldest periods), so ~19 €/MWh just in capital costs. With COP 2.5, the heat pumps would consume 40000 MWh of electrical energy. Which, if priced at 90 €/MWh, would result in an additional 36 €/MWh in operational cost, with total cost being 55 €/MWh of heat, which doesn’t seem much more expensive than gas. This of course would get more expensive if heat pumps require costly installation process, or if coefficient of performance proves to be lower, as it may well be in particularly cold weather. Still, this is probably way cheaper than pure hydrogen, likely at something close to 150-200 €/MWh (or more, if efficiencies drop from 60% to 40% in intermittent operation, as noted above). The problem however would be providing the electric generation capacity to power that many heat pumps. So many standby power plants and wind plant overcapacity which gets regularly curtailed could certainly push electricity prices way above 90 €/MWh, raising electric heating cost further. Oh, and unless you also use hydrogen to fuel the backup power plants (or have a nuclear-hydro power grid), this doesn’t even reduce emissions to zero. Hydrogen is still probably more preferable, because it could be mixed with natural gas, and because it doesn’t automatically stop working whenever there’s a blackout, of which there is going to be quite many if dependence on wind grows without provision of sufficient standby capacity.

      • December 2, 2021 8:52 am

        There’s clearly no point in mixing hydrogen made using gas, with gas — unless expensive and energy-intensive carbon capture is used to pacify climate fanatics. But hydrogen from renewable electricity is also an expensive process.

        All this absurdity must become obvious to people at some point, if it happens. Maybe only when their bills become crazy and/or their energy supplies cease to be reliable for various possible reasons.

  9. December 1, 2021 9:31 pm

    I would love to see all wind farms taken off the grid, and used to generate hydrogen, with customers for the hydrogen paying the full market price for it, removing all wind power subsidies and the cost of intermittency from electricity bills.

    It won’t happen of course, electricity bill payers are stuck firm in a parasitic Borg hive, sucking money from our bank accounts and feeding it to the Green Blob.

  10. December 1, 2021 10:04 pm

    Farage Trump interview : Trump is really dissing wind power
    Later GBnews stayed in with Ofcom by bringing on the ex- Foe big guy Tom Burke now Chairman of the environmental think tank E3G
    clip … https://twitter.com/GBNEWS/status/1466149230020546561

    It made me think
    if wind power is working why is the UK importing so much power from Europe ?
    The way Boris talks you’d think we’d be exporting 30% of UK electricity instead of importing 10% like we actually are.

    • December 1, 2021 10:16 pm

      GBnews have put up 3 tweets in total with video of Tom Burke
      ex-executive director of FOE

      • It doesn't add up... permalink
        December 2, 2021 3:22 am

        The volume of lies he came out with was astonishing. He needed some serious fact checking.

  11. roger permalink
    December 1, 2021 10:30 pm

    I watched the eponymous burke interview and Nigel left him spluttering incoherently with the last word.

  12. It doesn't add up... permalink
    December 2, 2021 3:42 am

    As far as I can see PEM hydrogen will face the reality that it will only be able to access cheap electricity at times of renewables surplus. Since wind will have to pay for itself at times of shortage when other generation is setting the market price, it will need those market prices to be higher to recover its cost over only part of its output. Of course, you can fudge it by pretending that the real world is different and subsidising supply to electrolysers, but that simply shifts cost onto consumer bills. Here’s one way they plan to do that:

    In Germany, current legislation implementing the Fuel Quality Directive, which will now be updated by the RED II, is imposing penalties of €470/tCO2 to fuel suppliers failing to comply with its emission reduction requirement of 6% vs. fossil fuels.

    However, the underlying reality is this:

    https://datawrapper.dwcdn.net/nZM72/1/

    You will always be curtailing some surpluses because it will never be economic to run some plant at just a few percent utilisation. Getting reasonable utilisation at all requires quite a significant level of over-generation and curtailment. These facts depend only on the stochastic random nature of wind and of demand.

  13. cookers52 permalink
    December 2, 2021 7:15 am

    While the UK’S Prime Minister continues to audition for the role of village idiot, in the meantime the policies of government follow the net zero Pantomime script.

    This is who we are, we heap praise and reward on those who invented a covid vaccine that the rest of the world shuns.

    We are quite happy to let inequality and poverty stalk the population but wish to remove history of what we now allow.

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