By NOT MANY PEOPLE KNOW THAT
By Paul Homewood
The cost of manufacturing and installing electrolyzers for green hydrogen production in China, the US and Europe – three of the world's largest markets – has increased by more than 50 percent year-on-year, according to research institute BloombergNEF (BNEF). However, in its analysis, this had not led to a gradual reduction, as had previously been indicated.
The main culprit for Western manufacturers is inflation, which has driven up the cost of materials, utilities (such as water and electricity) and labor in the U.S. and Europe, BNEF said in its new report, “Electrolyser Price Survey 2024.”
As a result, the average system cost (including chimney and residual plant) for an electrolyzer made in China is now in the mid-range of US$600/kW, while machines made in Europe or the US cost around US$2,500/kW.
This makes Western electrolyzers four times more expensive than their Chinese counterparts, and this gap has not closed since the last report, BNEF noted.
The research institute had previously predicted that costs would gradually decline over a three-year period starting in 2022 as more and more major projects moved closer to completion.
https://www.hydrogeninsight.com/electrolysers/cost-of-electrolysers-for-green-hydrogen-production-is-rising-instead-of-falling-bnef/2-1-1607220
Green hydrogen, once touted as the savior of net-zero emissions, seems to have faded from the scene recently. A few years ago, there were wild, unproven predictions that hydrogen would be so cheap and easy to produce that we could all do without fossil fuels.
Instead, Bloomberg now reports, the costs of electrolyzers are rising instead of falling. In addition, the real costs of wind energy are much higher than previously thought, so green hydrogen is becoming significantly more expensive as a result.
So let’s take a closer look at these costs.
BEIS published this report back in 2018:
https://www.gov.uk/government/publications/hydrogen-supply-chain-evidence-base.
I analyzed the report here.
This table was included:
I expect PEM (Proton Exchange Membrane) technology to be the most likely to be adopted, with base cost in 2025 estimated at £500/kW.
A study last October put the average price at €727, or about £630 per kilowatt. Bloomberg puts it at $600, but that's based on extremely low Chinese production costs, which are almost certainly heavily subsidised. Tellingly, it's estimated that electrolysers made in Europe are four times as expensive.
We can therefore reasonably estimate costs to be in the region of £600.
The BEIS study assumed 52.0 kWh/kg H2 in 2025. However, the energy density of hydrogen is 33.3 Kwh per kg, which means that the electrolysis process only works at 64% efficiency. In other words, 36% of the energy used is lost.
Previous cost estimates were based on the lowest cost of renewables, in particular offshore wind, which would have to provide the majority of the electricity needed for electrolysis in the UK. As we now know, these costs were never realistic. The administrative strike price for offshore wind for AR6 is now £100/MWh at 2023 prices. Therefore, taking into account an energy efficiency of only 64%, the energy input cost of hydrogen is £156/MWh.
Then there are the running costs. BEIS calculated £21/MWh in 2018, which is now probably in the region of £30.
So we are already at £186/MWh, without adding in the capital costs. BEIS estimated this to be around £30/MWh in 2018, but this assumed a loan interest rate of 5%. Given the rise in interest rates since then and general inflation, a capital expenditure of £60/MWh is not unreasonable.
The total cost is therefore £246/MWh.
Wholesale natural gas prices have ranged from 55p to 85p per therm this year. The conversion rate is 29.3kWh per therm, giving a cost of £23.90 per MWh, based on a mean of 70p.
Does anyone still think hydrogen is a good idea?
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