Electric Hydrogen’s mission to produce renewable hydrogen at fossil-parity

­­­ Figure 1. View of EH2 LCOH model, made publicly available
­­­ Figure 1. View of EH2 LCOH model, made publicly available

The economics of renewable-based electrolytic hydrogen

In 2021, the US Department of Energy announced ambitious targets to reach a milestone of $2/kg of hydrogen produced using renewable electricity by 2026. Here, we will look at the conditions needed to achieve this target without support mechanisms (e.g., tax credits). We will use Texas as a case study, a location with good conditions for utility-scale electrolysis.

Figure 2. LCOH with today’s electrolyzer technology in Texas
Figure 2. LCOH with today’s electrolyzer technology in Texas

Meeting the 2026 US DOE target

In order to reach the $2/kg mark without financial incentives, a significant CapEx reduction is needed, as noted above. Using EH2 LCOH+, and as shown in figure 3, installed electrolysis plants will need to cost between $285/kW and $325/kW by 2026, about 3x-4x decline in the next 4 years. Is this achievable? At Electric Hydrogen we believe it is, but under one condition: a complete system re-design that pushes electrochemistry and system performance beyond current limits — the thesis behind the company’s existence.

Figure 3. Capex needed to reach LCOH of 2$/kg, using the same LCOE, CF and water assumptions as above, expected to adequately reflect those inputs in 2026 in Texas
Figure 3. Capex needed to reach LCOH of 2$/kg, using the same LCOE, CF and water assumptions as above, expected to adequately reflect those inputs in 2026 in Texas

How about green hydrogen production intermittency?

Intermittent renewable power invariably produces intermittent hydrogen. Today, it is rare for the “quality” of the hydrogen production to be mentioned, but industrial customers of hydrogen will need a more continuous supply to run their processes. Until a hydrogen grid and geologic storage infrastructure is built to compare to what exists today for natural gas, a form of storage (electricity or hydrogen) or enhanced design of the renewable power and electrolysis plants (for instance, hybridizing solar and wind, and/or electrolyzer supply top-up using the grid) will likely be needed. Electric Hydrogen does not shy away from this: EH2 LCOH+ includes a storage sizing and costing feature that estimates different storage options. Intermittent hydrogen might be sufficient in many instances when supplementing another hydrogen source, but for renewables-based electrolytic hydrogen as the primary H2 source, storage is vital.

Accelerants to the adoption of renewable based electrolysis

The US Build Back Better plan (BBB) proposes support mechanisms for low-carbon hydrogen in the United States. Its future is currently uncertain (as of March 2022), but the latest plans provide a good initial framework to test their impact on the LCOH. Europe and other countries like Australia have been leading the charge to support the scaling up of the low carbon hydrogen value chain; in these countries, hydrogen strategies have been released (mostly in 2020) and significant funding made available mainly in the form of grants to cover part of the capital expenditures (most notably under the IPCEI, Important Projects of Common European Interest). EH2 LCOH+ allows the user to include such support mechanisms and test their impact.

Figure 4. PTC-H2 levels as a function of the well-to-gate carbon intensity as proposed by the Build Back Better plan
Figure 4. PTC-H2 levels as a function of the well-to-gate carbon intensity as proposed by the Build Back Better plan
Figure 5. Back calculated renewables based LCOH required for fossil-parity
Figure 5. Back calculated renewables based LCOH required for fossil-parity

Concluding remarks

Around 30% of global emissions come from the industrial sector. To decarbonize the industrial segments that cannot be directly electrified, we must unlock cost-competitive renewable hydrogen. A rigorous LCOH-focused approach is essential to this.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store