Hydrogen Mythbusting – CarbonTP – Carbon Transition Pathways

Hydrogen Mythbusting

15.09.2023

Hydrogen Mythbusting IV: The cost of green hydrogen will continue to fall and it will eventually become a cheap and abundant (i.e. competitive) source of clean energy.

Hold on, it’s time to back up the FCEV truck.

The reality is that whilst the cost of green hydrogen is set to continue to fall, it’s ALWAYS going to be more expensive than the renewable energy that is required to make it and the efficiency issues, compared to its competition (in energetic use cases), will NEVER be eliminated.

How can one be so certain? Surely, it’s just a matter of more R&D and billions more dollars of government grants before we “crack the code” to this hydrogen nirvana?

Firstly, as Michael Liebreich puts it “however cheaply you can bake a cake, it always costs more than the raw ingredients”. In this example, our green hydrogen cake is made with renewable electricity, a green hydrogen plant (made up of electrolysers and balance of plant), transportation, storage and distribution infrastructure capex and opex.

To illustrate this point let’s take a look at two figures. Firstly, this one from an ANU working paper:

Let’s take the most favourable scenario represented by the black dashed line (Capital Cost (CC) = A$500/kW with Capacity Factor (CF) = 90%). We can see for A$36/MWh electricity we can produce green hydrogen for $A2/kg. If we’re using this hydrogen for energetic purposes, what we’re really buying is energy and not mass so let’s convert from $A/kg into A$/MWh using the Lower Heating Value of hydrogen which is 33.3 kWh/kg. We get a price of $60/MWh which is nearly twice as expensive of the renewable electricity we started with (and this doesn’t even include the transportation, storage or distribution costs!!!!).

This second chart from RMI also illustrates the point well:

Here we see the plummeting costs of solar and wind plotted against those of oil and coal. However, we can also see a green line for Power to X (P2X) which is green hydrogen made from solar and wind. As we can see from the chart, the cost of the green hydrogen is always greater than the cost of its raw ingredients. The lines will NEVER cross and this has very important implications for the cost competitiveness of hydrogen as an energy “source or carrier” vis-à-vis its competition: renewable electricity.

Secondly, we now come to the efficiency issues. There are very well understood laws of physics and thermodynamics that dictate the efficiencies of energetic pathways. No amount of government subsidies or R&D, no amount of project announcements, strategic partnerships or wishful thinking is going to change the fundamental properties of hydrogen. There are upper bounds to how efficient hydrogen heating can be and the electrification alternative (solar, wind, batteries and heat pumps) will always be superior. How far superior you ask? 6 times according to the Hydrogen Science Coalition.

In the transportation space the electrification alternative is 3.3 times superior when we look at how FCEVs stack up against BEVs.

So, there we have it: the cost of green hydrogen will continue to fall but it will certainly never become cheaper than its competition for energetic use cases in the long run and therefore will never be an abundant or cheap source of “clean energy”. Green hydrogen will have a role to play in the energy transition but that role won’t be in applications where electrification alternatives provide a superior alternative.

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