Dr Tom Harries investigates the rewards and risks in reducing the cost of producing green hydrogen.
Green hydrogen is more expensive than its fossil-based counterparts (grey and blue). Without cost parity, hydrogen consumers are unlikely to go green. To drive demand, developers and the supply chain need to reduce the cost of producing green hydrogen. (Alongside carbon pricing and corporate net-zero mandates). The wind industry successfully dropped the cost per megawatt by scaling-up the wind turbines which in turn reduced the cost per output (megawatt-hours). Electrolysers could follow suit.
Electrolysers use electricity to split H2O into oxygen and hydrogen. The input cost of electricity is the biggest factor in the production cost of hydrogen. But this is out of the control of the hydrogen supply chain and is at the mercy of current wholesale power market structures (for example, expensive gas setting the marginal price) and the current levelized cost of electricity of new renewable projects.
There is a large potential for the size and operating efficiency of hydrogen plants to reduce overall costs.1 Today’s announced projects are typically in the range of 1-10MW.2 Scaling green hydrogen plants to 20MW and more could result in O&M cost reductions of around 30%.3 Three-to-four-megawatt size projects are predicted to be the tipping point at which hydrogen plants become significantly cheaper to install.4
Two electrolyser technologies dominate the market: Alkaline and Proton Exchange Membrane (PEM).5 Alkaline is the more mature technology and are the standard in green hydrogen production; they are durable, use relatively lower cost electrodes, and have a higher potential for bigger stacks. A high minimum load limit (10-20% capacity) is an issue for Alkaline electrolysers, meaning that low levels of energy passing through the system, such as intermittent energy from renewables, result in extremely inefficient hydrogen production.6 Integrating a battery energy storage system (BESS) alongside renewables can supply a steadier current, as shown by some recent projects.7
PEM electrolysers are better suited to pairing with renewable energy sources; they have a lower minimal load (0-10%) and can ramp-up and down quicker than alkaline. These advantages come at a cost. PEM technologies are around 50-60% more expensive than alkaline and suffer from expensive components with underlying supply-chain issues.8 The UK’s recent funding round for low-carbon hydrogen dedicated over 70% of the total 38 million pounds towards PEM technologies, notably for projects directly linked to renewable generators.9
The most direct and effective way of lowering green hydrogen costs would be to increase the base size of the electrolysis stack – the cell units, transport layers and plates which physically execute and contain the electrolysis process. The electrolysis stack constitutes 40-50% of main system costs, with the remainder comprising of rectifiers, gas conditioning and the balance of plant.10 Increasing base stack size also increases the overall efficiency of the plant.11 However, increases in stack size and the surface areas of electrolysis cells often bring challenges such as declines in durability, with increased chances of leakages and mechanical instabilities drastically shortening electrolyser lifetimes. Such challenges are yet to be tackled in a way that makes significant stack expansion viable in the next few years.12
A modular system is another option for reducing cost. In this case, stacks will remain small, modular and standardised. Greater volumes of smaller, standardised equipment move a technology faster along the learning curve, reducing the cost of production – this is what happened with solar.
The use of multiple stacks and stack modules not only aids with project flexibility by being able to operate at varying levels of current supply, but it also lends itself to the resilience of the overall project. From an insurance perspective, smaller but more numerous electrolysers will reduce business interruption costs in the event of a claim, with the rest of the plant able to run whilst the damaged electrolyser stacks are being repaired. But a modular system does bring challenges: it increases integration and commissioning risk and adds more interface to operations and maintenance.
Cost savings can also be achieved through optimised balance of plant (BoP).13 BoP components, such as hydrogen compressors, storage units and the current delivery are more mature technologies and easier to scale than electrolysis stacks.14 Improving BoP efficiency can have dramatic effects on overall costs as well as mitigating potential risks like leakages and breakdowns.15 Its synonymous to offshore wind where a technology evolution in BoP — higher capacity cables and larger offshore substations — helped simplify installation, lower the O&M load and reduce cost.
From a technology standpoint, there has been a general move to PEM electrolysers due to their functional advantages, with examples such as ITM’s ‘Gigastack’ factory and PEM projects, or Vattenfall’s integrated hydrogen & wind project all positing ambitious targets for green hydrogen production in a net zero world.16 17 Limiting the future expansion of PEM technology is the technology’s reliance on rare materials. Rare metals such as platinum and iridium form only 10% of a PEM system,18 but they are a crucial limiting factor in expansion, with substantial efforts so far to find alternatives coming up short.19 A heavy reliance on such materials limits PEM to a theoretical maximum of 3-7.5GW a year, falling far short of the 100GW needed by the end of 2030 in the green hydrogen industry.20
Some promising, newer electrolyser technologies such as solid oxide (SOE) and anion exchange membrane (AEM) claim to plug the gaps left by currently dominant electrolyser technologies. AEM electrolysers are in the early development stage with examples by companies such as Enapter still falling far short of the utility-scale sizes required.21 SOE electrolysers have received some industrial development, with projects as large as 2.6MW in the pipeline;22 however, not only do SOE plants require very high operating temperatures, they are also heavily reliant on hard-to-source complex ceramic materials and face similar supply issues to PEM electrolysers.23
The varying pros and cons of each kind of electrolyser and plant design provide an explanation for the sorts of market decisions which we have seen and will see in coming years. Whilst there is much talk about newer, more efficient electrolyser technologies, alkaline electrolysis still dominates in the larger projects being built, such as the stacks supplied by NEL and Thyssenkrupp.24 25 PEM electrolysis plants have also been developed, although future plant construction is threatened by supply shortages. Whilst this is the current state-of-play for global green hydrogen production at the moment, there is optimism in the rapid technological shifts and innovation in PEM, SOE and AEM technologies to provide more efficient, sophisticated, and cheaper stacks and plants in the near future.