The widespread adoption of green hydrogen as an energy source hinges on lower levelised costs and high efficiency
Just like the levelised cost of energy, the levelised cost of hydrogen (LCOH) measures all expenses involved in producing hydrogen, including initial investments, operational costs, electricity charges, grid fees, and taxes. It also considers any available subsidies and potential income from by-products such as oxygen.
A low levelised cost makes hydrogen more competitive when compared to traditional fossil fuels, encouraging adoption by industry and consumers and ultimately driving the transition to a cleaner energy future. It also helps governments and businesses meet sustainability goals more cost-effectively.
There are some barriers to achieving the low LCOH needed to realise this future, though, most notably the cost of renewable energy. Unlike blue hydrogen, which is produced from fossil fuels with carbon capture and storage, green hydrogen production relies on renewable energy to power electrolysers.
The cost of renewable energy is falling, but not fast enough to see the kind of LCOH that would really activate the market. There are, however, other ways to achieve a lower LCOH, including producing green hydrogen in locations that offer optimal renewable resources, and reducing the cost of electrolysis facilities, the second largest expense after energy.
Electrolysis uses electricity to split water into hydrogen and oxygen. While the basic principle remains the same, there are a range of electrolysis technologies:
- Alkaline electrolysis (AEL)
- Proton Exchange Membrane (PEM)
- Anion Exchange Membrane (AEM)
- Solid Oxide Electrolysis Cells (SOEC)
Each offers distinct advantages and drawbacks. PEM electrolysis, for instance, is highly efficient and results in high-purity H2, but it also relies on noble metals such as platinum that are in limited supply.
AEM electrolysis, on the other hand, doesn’t require scarce materials and it responds well to fluctuations in electricity supply, but membrane durability issues mean additional ongoing costs.
Because there is no universal best option, it’s best to consider each technology in the broader cost and efficiency context, while considering other strategies for cost optimisation. These strategies include factors such as:
- Economies of scale – scaling up production facilities can significantly reduce costs, while standardising plant designs and components streamlines operations, reducing CAPEX and OPEX.
- Energy efficiency – innovations in electrolyser design and modular plant configurations increase efficiency, and integrating hydrogen and electricity storage means better management of renewable energy inputs.
- Material innovations – moving away from materials like platinum can lower costs and improve scalability.
- Optimising end use – tailoring electrolysis systems to specific applications optimises cost across different operational contexts, from industrial needs requiring stable supply to smaller facilities leveraging local renewables.
Production isn’t the only factor in the hydrogen supply chain, though, there’s also transport and storage.
High-pressure gas pipelines are currently the most economical way to transport hydrogen over long distances on land, and existing natural gas pipelines can sometimes be repurposed with minimal modifications. But this option isn’t viable when the hydrogen needs to travel longer distances, or through areas without pipeline infrastructure.
Liquefying hydrogen at temperatures as low as -253°C significantly increases its density compared to its gaseous state. When liquified like this, hydrogen can be efficiently stored and transported. But maintaining temperatures that low throughout the supply chain adds complexity.
Other options include ammonia, a readily transportable gas that releases hydrogen when it decomposes, and liquid organic hydrogen carriers. These oil-like compounds reversibly bind with hydrogen, allowing safe and easy transportation at ambient temperatures. Methanol, which allows hydrogen to be extracted through a reforming process, is another potential carrier.
Achieving cost efficiency and high performance in the green hydrogen supply chain requires a strategic approach that integrates advanced production technologies, cost optimisation strategies, and continuous efficiency improvements.
Fyfe specialises in navigating these complexities, offering expert guidance to help our clients deliver world-class hydrogen solutions.
Each hydrogen project is different, and so is our approach. We carefully evaluate production, storage, and transport methods, designing solutions that work for our clients and their customers.
For more guidance on advancing your hydrogen projects, please contact us.
