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Latest Hydrogen Costings


By Paul Homewood

The EU publishes a quarterly report on European gas markets, which includes a section on hydrogen:

I have added the plots for natural gas (very roughly!!), but the actual figures for August are:


Natural Gas                         – 44.30

Alkaline Electrolyser        – 179.00

Steam Reform (incl CCS) – 76.00

Despite rising gas prices, the cost penalty of using blue hydrogen, ie steam reform, has increased. This is because the process wastes much of the energy, in the form of gas, input. The assumption is an efficiency factor of 69%.

Green hydrogen, electrolysers using renewable energy, also increases in cost as electricity prices rise, which the above graph factors in – wholesale prices up from Eu59/MWh in April to Eu90/MWh in August. This appears to reflect the way European wind power is priced – wholesale + renewable subsidy.

It could be argued that wind power costs are actually less than that now (as opposed to what is paid for it).

If we work back, CAPEX + Non Fuel OPEX come to about Eu25/MWh. Electrolyser plants are assumed to run at 60% efficiency, so with electricity prices at Eu90/MWh, the cost of blue hydrogen would add up to Eu175/MWh.

However, if we assume the cost of wind power is Eu70/MWh, which is in line with the latest CfDs, the cost would be about Eu140/MWh.

Either way, it is still much greater than the current gas price of Eu44.30.

But this is not the whole story.

If electrolysers are attached to wind farms, it may be appropriate to use only the wind power production cost. However, under this scenario, the electrolysers would not run at optimal capacity, (the EU calculations assume 95%). Instead they would have to be ramped up and down with the vagaries of the wind. A factor of 40% would be more realistic, and this would more than double the CAPEX/Non Fuel OPEX costings.

The alternative, and the only practical bulk operation, would be a stand alone facility, which would have to import electricity from the grid. As such, it would of course have to stand the full cost of power, including transmission costs.

And on top of all this comes the cost of storing and distributing hydrogen.

Finally it is worth noting that, according to S&P Platts, electrolyser stack
refurbishment is required every nine years at 45% of capital cost.

Did I hear somebody say our bills would reduce?


DECEMBER 1, 2021

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