How to cut the cost of water electrolysis

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The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Cost reductions in electrolyser technology can be achieved on several fronts

It is increasingly clear that the energy transition will require large amounts of low-carbon hydrogen to replace fossil fuels in a range of industries.

Traditionally-made hydrogen, generated via steam methane reforming (SMR) has a significant carbon footprint, but there are various ways of making the gas with lower emissions.

The one that holds the most promise is “green” hydrogen, made from the electrolysis of water powered by electricity from renewable energy sources. Green hydrogen is free of emissions and could scale to limitless levels, given enough renewable energy capacity.

The challenge with it today is that it is relatively expensive.

BloombergNEF, to take just one piece of research, estimates that green hydrogen today could cost anywhere between $4 and $11 per kilogram to produce. This compares to $1 to $3 per kilogram for traditional or “grey” hydrogen. Plus, it is more expensive than another low-carbon contender, blue hydrogen, which is made by trapping the carbon from SMR and costs between $2 and $5 per kilogram.

FALLING COSTS

To achieve its full potential, green hydrogen needs to cut costs significantly.

The good news is that most of this cut will come from reductions in the cost of renewable energy. As much as 65% of the levelised cost of hydrogen (LCOH)—how much it costs to produce a kilo of hydrogen once investments and operating expenses are factored in—relates to the price of electricity.

This is fortunate because the cost of wind and solar power has seen spectacular reductions in recent decades, stalling only in the last couple of years as post-Covid-19-pandemic demand pushed up the price of commodities used in panels and turbines. The International Energy Agency expects the downward pricing trend will resume from 2023.

Further reductions in LCOH could come from other capital and operational cost factors in electrolysis. The capital cost of projects, which mainly relates to the electrolyser and related assets, contributes to around 25% of LCOH, while operational expenditure—on maintenance, water and so on—makes up the final 10%.

SCOPE FOR SAVINGS

This means electrolyser cost reductions will be able to address just over a third of the total cost of green hydrogen, which is significant enough to warrant serious attention. Electrolyser manufacturers see plenty of opportunities for cost reduction.

Operating costs could go down with access to spare parts, longer-lasting components, the use of preventive maintenance and efficiency improvements to the electrolysis stack, for example by using new membrane materials. Such materials could achieve increased conductivity and enhanced temperature durability, while catalytic improvements could reduce energy losses associated with the electrolysis process.

Capital expenditure (Capex), meanwhile, could go down through manufacturing scale, and electrolyser unit costs can be significantly reduced through standardisation. The use of standard components not only facilitates assembly and helps improve quality and reliability but can also help reduce costs along the supply chain by allowing component manufacturers to scale more easily.

STANDARDISATION KEY

This has been proven in other clean technology industries, from solar photovoltaics to onshore wind and lithium-ion batteries. As the green hydrogen industry grows, the level of standardisation will grow too. For now, the market is indeed populated by a wide range of technologies and design approaches.

A certain amount of standardisation is already present in the alkaline electrolyser market, which is the most mature and widespread technology. Another benefit of alkaline electrolysis is that it does not rely on rare earth materials that could face supply bottlenecks, affecting prices.

Proton exchange membrane (PEM) electrolysis is suitable for green hydrogen production but relies on rare-earth anode and cathode materials and could therefore face challenges in cost reduction. There is also concern that a proposed European Chemicals Agency ban on polyfluoroalkyl substances (PFAS) or “forever chemicals” could affect some electrolysers as they are often reliant on fluoropolymer-coated membranes.

The reason PEM is sometimes chosen for green hydrogen projects is that it works well with the variable renewable power supply that you typically get from wind and solar generation. However, it is not the only electrolyser technology that can achieve this.

UNDER PRESSURE

A further line of research and development focuses on the fact that most of the green hydrogen produced by electrolysis will need to be pressurised before it can be moved or stored.

This pressurisation requires energy, so electrolysis approaches that produce hydrogen under pressure—and not all do—will naturally be more efficient and cost-effective. Pressurisation costs do not rise linearly with pressure; instead, the first few atmospheres are the hardest to achieve and at higher pressures, the energy requirements and costs are lower.

Electrolysers do not need to pressurise hydrogen much to have a significant impact on cost. Smaller electrolysers can have outlet pressures of around 30 bars, while larger prototype electrolysers deliver 35 bars of pressure.

Plant developers should stay abreast of such cost-related innovations, as well as look for ways to simplify and cheapen project integration and design. The path to reducing the cost of green hydrogen to competitive levels is very clear and electrolyser manufacturers are treading it already.

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