Green Hydrogen is likely to play a key role in the decarbonization of the energy system, particularly the hard-to-abate sectors such as chemicals, shipping and steel. However, its demand hinges on its cost competitiveness vis-à-vis conventional Hydrogen. One of the key equipment for manufacturing of Green Hydrogen is the Electrolyser which uses renewable electricity (solar, wind or hydro) to produce Green Hydrogen through electrolysis. So, the cost of Electrolyser is the key component of the capital cost or CAPEX and cost of electricity (renewable) is the major component of operating cost or OPEX for production of Green Hydrogen. Additionally, capacity factor is another important metric guiding cost of production of Green Hydrogen as solar or wind electricity is not continuously produced making Green Hydrogen production process intermittent.
There is a wide variation in the cost of Electrolyser globally depending upon the type, capacity, and cost of labor and material. Installed Electrolyser system capital cost is estimated as low as USD 900/KW in China and as high as USD 2300/KW in the Rest of the World as per a report from International Energy Agency. However, with mass manufacturing and economies of scale, the cost of installed Electrolyser system could be reduced by 40-50% by 2030.
Based on the above factors, Levelized Cost of Production (LCOP) of Green Hydrogen presently hovers in the range of USD 4-12 per kg with lower end in the markets with lower cost of Electrolyser and renewable electricity such as China and higher end corresponding to higher cost such as parts of Europe, Latin America and Middle East. Solar electricity cost in the range of USD 20-110 per MWh with a capacity factor of 12-35% and wind electricity cost in the range of USD 25-100 per MWh with a capacity factor of 3-53% form the basis of the estimation of the above LCOP of green hydrogen. At this cost, Green Hydrogen is far away from being competitive vis-à-vis conventional hydrogen (produced from Natural Gas through Steam Methane Reforming) with LCOP of USD 1-4 per kg. Even the Blue Hydrogen i.e. Hydrogen Produced from Natural Gas with use of Carbon Capture Utilization and Storage (CCUS) to reduce CO2 emission, at a cost of USD 1.5-5.0 per kg, is quite competitive vis-à-vis Green Hydrogen.
However, with Electrolyser cost likely to fall in future and solar and wind electricity cost also coming down, LCOP of green hydrogen could ratchet down to USD 2-10 per kg in major markets of the world by 2030. At the lower end of this cost and coupled with implementation of CO2 pricing mechanism (adding to cost of conventional Hydrogen), Green Hydrogen could compete with conventional Hydrogen produced from Natural Gas by the end of the decade.
About Author: Satyendra Kumar Singh, B.Tech. (Chemical Technology) + M.B.A., is proprietor of Satsha Management Services-an award winning design engineering and management consulting company (www.satshamanagement.com). He possesses approximately 30 years’ experience in engineering consultancy in process and energy industries. Satyendra has authored several papers on energy, business and management, which have been published in some renowned journals/magazines such as ‘Chemical Engineering’, ‘Process Worldwide’, ‘Modern Manufacturing India’. He may be reached at satyendra.singh@satshamanagement.com, Ph. +919811293605.
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