Updated Hydrogen Costings
By Paul Homewood
The cost of producing and installing electrolysers for green hydrogen production in China, the US and Europe — three of the world’s biggest markets — has risen by more than 50% compared to last year, research house BloombergNEF (BNEF) has found, rather than the gradual reduction its analysis had previously indicated.
The main culprit for Western manufacturers has been inflation, which has pushed up the costs of materials, utilities (such as water and electricity) and labour in the US and Europe, said BNEF in its new report, Electrolyser Price Survey 2024.
As a result, average system-level cost (including both stack and balance of plant) is now at a mid-range of $600/kW for an electrolyser made in China, while machines made in Europe or the US are around $2,500/kW.
This makes Western electrolysers four times more expensive than Chinese equivalents, a gap that has not closed at all since the previous report, BNEF noted.
The research house had previously predicted that costs would gradually decline over three years from 2022, as more large-scale projects approached completion.
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Green hydrogen, once touted as a saviour of Net Zero, seems to have gone off the radar recently. A few years ago there were wild, unsubstantiated predictions that hydrogen would become so cheap and easy to produce that we could all give up fossil fuels.
Instead, as Bloomberg now report, costs of electrolysers are going up, not down. Moreover the real cost of wind power is also much higher than previously thought, so green hydrogen will be much more expensive as a result.
So let’s take a closer look at these costs.
Back in 2018, BEIS published this report:
https://www.gov.uk/government/publications/hydrogen-supply-chain-evidence-base.
I analysed the report here.
It featured this table:
I gather that PEM technology (Proton Exchange Membrane) is the most likely one to be rolled out. The Base Cost in 2025 was predicted at £500/kW.
A study last October suggested a mid-range cost of Eu727, equivalent to about £630/kW. Bloomberg reckon $600, but this is based on ultra-low Chinese manufacturing costs, almost certainly highly subsidised. Significantly they estimate that European made electrolysers are four times the price.
We can reasonably work on a cost therefore of around £600.
The BEIS study assumed 52.0 kWh/kg H2 in 2025. The energy density of hydrogen , however, is 33.3 Kwh per kg, which means that the electrolysis process only works at 64% efficiency. In other words, 36% of the energy input is wasted.
Previous cost estimates have been based on rock bottom costs of renewable energy, particularly offshore wind, which would have to supply most of the power needed for electrolysis in the UK. As we now know, these costs were never realistic. The Administrative Strike Price of offshore wind for AR6 is now £100/MWh at 2023 prices. Allowing for energy efficiency of only 64%, the energy input cost of hydrogen is therefore £156/MWh.
On top of that, are operational costs. BEIS reckoned £21/MWh in 2018, which is probably in the range of £30 now.
Already, therefore, we are up to £186/MWh, before adding CAPEX. BEIS estimated this at about £30/MWh in 2018. But this assumed loan interest rates of 5%. Given interest rate rises since then and general inflation, a CAPEX of £60/MWh is not unreasonable.
This therefore gives us a total cost of £246/MWh.
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Wholesale prices of natural gas have been ranging between about 55 and 85p/therm this year. The conversion rate is 29.3 kWh/therm, giving a cost of £23.90/MWh, based on a mid-point of 70p.
Anybody still think hydrogen is a good idea?
NOT A LOT OF PEOPLE KNOW THAT 
If they were ‘equivalents,’ the Chinese would charge more.
Recently watched a youtube video of a diy build of a 1.5kW water wheel generator. The builder went to great lengths to make the most efficient system but fitted a Chinese 2kW permanent magnet generator because it was a quarter of the price of his originally intended German unit. However whenever it got above a 750W load it dangerously overheated. He opened it up and measured the windings cable diameter and from basic physics worked out it could never have generated at more than 800W before meltdown/short circuit. He later found the same models being sold online as 5kW and even 10kW generators. Despite complaints Alibaba refused to refund his money.
By the time he eventually got around to ordering the original German unit, inflation had kicked in and it was 5 times the price. The difference was it actually worked and his diligent efficiency with the rest of the system meant he actually managed 1750W.
As he wryly said at the end …”this Chinese stuff is crap. It will always end up costing you way more. Never go anywhere near it”.
Alibaba? No great surprise there. There is no doubt decent Chinese equipment exists and is cheaper because their energy costs for manufacturing are cheaper. All part of closing down Europe’s industry – especially Germany’s.
And talking of Germany, all of their great hydrogen plants seem to have closed down due to financial problems. Quelle surprise as they say.
OT sealevel rise …
Satellite based and does not match land based tide gauge data.
I don’t think any genuine engineer/chemist/scientist has thought it a good idea unless they are on the subsidy gravy train.
The answer to all Net Zero problems, perceived or real, is to consign it to history, as the climate gravy train beneficiaries must be starting to fear.
No one else, nor the planet, would suffer in the slightest.
Once you have this 25p per kWh hydrogen, would you use it to fill in wind lulls? If so, there is the small matter of storage costs and energy efficiency, transmission costs and losses (including in pipelines), then perhaps CCGT generation. That looks like perhaps 40% efficiency at best. Thus the wholesale price of electricity through this process will be in excess of 60p per unit (£600/MWh).
And at the end of all this eb, it combusts to produce a Climate destroying gas called water vapour.
If hydrogen is ever produced by electrolysis the power will come from
small modular nuclear units that must run at near max output 24/7 and so
have cheap power available but more likely it will be produced by steam
reforming in Russian gas fields and shipped a ammonia which is what the
German Canadian hydrogen project intended except there use of offshore
wind power proved uneconomic.
Hydrogen will only ever, if at all, be mass produced via fossil fuel or nuclear power
If the idea is a renewables/hydrogen electricity system it will never make sense to run the electrolysers unless there is a surplus of renewables output. Otherwise you are burning hydrogen to make less hydrogen than you burned. It makes more sense to use all the available renewables power to meet demand when there is no surplus.
Such surpluses will be intermittent and of varying size. That means that the utilisation of the electrolysers will be low, and many will not run when the surplus is limited. Intermittency will reduce efficiency as well. The combined effect is that the capital cost must be recovered from limited operating hours, and reduced efficiency also pushes up costs. Getting above 25% utilisation will be impossible until we have a gargantuan wind fleet. See chart
https://datawrapper.dwcdn.net/nZM72/1/
It makes better sense to scrap net zero altogether, get fracking, build more CCGT and nuclear, scrap the deceitful CCA, CCC & Ofgem and get someone running the Energy Dept with power Engineering competence and experience
+1
Off topic, but in my locality there are numerous road works being carried out by Northern Gas Networks. They are upgrading the gas network pipes. Does this seem like a company who are expecting the gas network to be shut down in the not too distant future? I don’t think so!
Yet an incoming Labour Govt and its DESNZ Minister, Red Ed, are pledged to end all NS gas & oil licences, putting investment in those sectors at high risk of disappearing completely – the Westminster clown show just doesn’t have a clue about energy and we will all pay a heavy price for that sheer incompetence
Sadly, you are right.
I’ve tried getting the message through to the two main [i.e. Con and Lab] candidates in my constituency – no joy.
Load of DESNZ bumph from the Tory – I didn’t print it out, as I have Andrex.
The Labour cove sent some wishful thinking about off-shore generation back – but refuses to respond when I ask about batteries – where they will come from, and how they might be paid for.
Others are encouraged to try with their local would-be MPs, but, note ‘clown show’ is a fair description, where energy matters are concerned – for about all the candidate I know.
Auto
The dept name “DESNZ” is a complete joke. Energy Security and Net Zero are totally contradictory. It should be “DNENZ” – “Dept for No Energy with Net Zero”.
And just as important, who will own them? Privately owned batteries are NOT backup.
energypost.eu recently (April 4th 2024) had an article entitled ‘Green Steel:pathways for the new hydrogen powered DRI-EAF projects’
” H2-DRI-EAF uses hydrogen(H2) to produce direct reduced iron (DRI) which is then processed in an electric arc furnace (EAF) to produce steel. Clean green hydrogen production is in its infancy and therefore so are green steel plans”
“To sustain the operation of large scale hydrogen based DR plant a consistent supply of renewable electricity must be guaranteed throughout the year. The variability of wind and solar necessitates oversizing of capacity and implementing energy storage solutions to enable continuous energy supply. This necessity contributes to an escalation in the initial investment costs for renewables that can dwarf the CAPEX needed for steel making facilities”
They note that although a substantial number of projects have been announced (305GW0 the total electrolyser capacity for green hydrogen has “only surpassed 1GW” and that “power grids dominated by hydropower offer an advantage”
The article links to a longer study.
And as Germany’s clowns have realised, the steel will be uneconomic and so in order to have buyers for it, they will introduce a law requiring German companies use it. As if German industry is not already sufficiently handicapped. It might just be used for domestic demand but that then means everyone is spending more on projects and so money is wasted.
gezza: Do people realise that arc produced steel does not display a predictable tensile strength so what do designer use in the equations? I experienced this when in another country there was an insistence to use locally produced steel. From random testing a decision was made to downgrade the strength of reinforcing steel to a point at which nearly twice the weight was required over bog-standard re-bar.
I’ll stick with gas please – the net zero scam is hitting reality all over the place, great to see
off topic, but given that the climate catastrophisers like to highlight the alleged high number of deaths due to excess heat, how long until the death of Michael Mosley is blamed on Global Warming by BBC news.
The neatest thing about H is that as the smallest and simplest of the Elements. It is the easiest one to study fundamental particles and forces.
As to saving Earth from climate catastrophe, not so much.
“The BEIS study assumed 52.0 kWh/kg H2 in 2025. The energy density of hydrogen , however, is 33.3 Kwh per kg, which means that the electrolysis process only works at 64% efficiency. In other words, 36% of the energy input is wasted.”
To get hydrogen into the state where its mass can be weighed it needs liquifying.
“The drawback of hydrogen liquefaction is the amount of energy involved. This is partly due to the very low temperatures required to condense into its liquid state (about -253°C).
State of the art (well just prior to 2020 when the article was published) hydrogen liquefaction technology has a power consumption of 12 kWh/kg. This is equivalent to 36% of the useable energy contained in 1 kg of hydrogen (33.33 kWh/kg, see above).”
https://www.idealhy.eu/index.php?page=lh2_outline
There are also other, usually overlooked/poorly understood problematic issues regarding large scale liquefaction of hydrogen.
Not all hydrogen is the same. There are 2 principal forms are known as “spin isomers” i.e Ortho-hydrogen and Para-Hydrogen which have different energetic states. Electrolysis produces artificially high levels of ortho which on cooling drop down to the lower energetic state of para. Even Wikipedia highlights this problem
“Parahydrogen is in a lower energy state than is orthohydrogen. At room temperature and thermal equilibrium, thermal excitation causes hydrogen to consist of approximately 75% orthohydrogen and 25% parahydrogen. When hydrogen is liquified at low temperature, there is a slow spontaneous transition to a predominantly para ratio, with the released energy having implications for storage.”
https://en.wikipedia.org/wiki/Spin_isomers_of_hydrogen
“Heating up” is rather a problem….and then there is the “reverse” Joule Thomson effect of hydrogen which can expand on cooling rather than contracting.
All in all there are major obstacles to hydrogen on all fronts and on all levels which is largely why free H2 is so rare on Earth.
+1 Thanks Ray.
I was unaware of Ortho-hydrogen & Para-Hydrogen. 👍
Hydrogen’s ‘reverse’ Joule Thomson effect creates another external-energy-sapping requirement – the need for a chiller, especially when refuelling FC vehicles:
The increase in temperature makes the rapid refuelling of vehicles problematic, not least because the relatively lightweight hydrogen tanks used on FCEVs (so-called Type IV tanks) contain materials which are not rated for temperatures above 85°C.
To ensure refuelling is safe, it is important to cool the hydrogen gas to a pre-defined temperature (called the T rating of the refuelling). In the case of 700bar passenger FCEVs, refuelling according to the current industry standard is carried out at -40°C, and is therefore called T40 fuelling.
https://www.sae.org/standards/content/j2601_202005/
Which begs the obvious question, why not just use petrol/diesel which can be stored without pressurised systems, and can refuel at a wide range of ambient temperatures, so greatly minimising cost, and maximising reliability and safety?
Thanks for that Joe, I didn’t know your refuelling points. Looks like we both learnt something new today. The interweb isn’t always a bad thing!
Black and white is it not, hydrogen is NOT a goer!
The ‘global warming potential’ (for believers in that concept) of hydrogen is nearly half that of methane i.e. natural gas, according to Wikipedia.
https://en.wikipedia.org/wiki/Global_warming_potential
The UK at least is worried about hydrogen leakage…
However, any leakage of hydrogen will affect atmospheric composition (with implications for air quality) and have an indirect warming effect on climate, partially offsetting some of the climate benefits of the reduction in carbon dioxide. [bold added]
The report therefore recommends that hydrogen leakage is minimised and that consideration be given to how hydrogen is used to reduce the atmospheric impacts of energy use.
https://www.gov.uk/government/publications/atmospheric-implications-of-increased-hydrogen-use
If you have access to the S. Telegraph business section from last Sunday I commend the short article by Liam Halligan which covers the nonsense of renewables with which we are all familiar but , I guess, the S. Telegraph readers have not seen so succinctly put. Better late than never but it has taken months for such journalists to summon up the effort to condense the facts in one article.
I do not suppose that the BBC will stop, read and learn once they recognise Halligan as a GB News financial commentator.