The Key Techno-Economic and Manufacturing Drivers for Reducing the Cost of Power-to-Gas and a Hydrogen-Enabled Energy System

Abstract

Water electrolysis is a process which converts electricity into hydrogen and is seen as a key technology in enabling a net-zero compatible energy system. It will enable the scale-up of renewable electricity as a primary energy source for heating, transport, and industry. However, displacing the role currently met by fossil fuels might require a price of hydrogen as low as 1 $/kg, whereas renewable hydrogen produced using electrolysis is currently 10 $/kg. This article explores how mass manufacturing of proton exchange membrane (PEM) electrolysers can reduce the capital cost and, thus, make the production of renewable power to hydrogen gas (PtG) more economically viable. A bottom up direct manufacturing model was developed to determine how economies of scale can reduce the capital cost of electrolysis. The results demonstrated that (assuming an annual production rate of 5000 units of 200 kW PEM electrolysis systems) the capital cost of a PEM electrolysis system can reduce from 1990 $/kW to 590 $/kW based on current technology and then on to 431 $/kW and 300 $/kW based on the an installed capacity scale-up of ten- and one-hundred-fold, respectively. A life-cycle costing analysis was then completed to determine the importance of the capital cost of an electrolysis system to the price of hydrogen. It was observed that, based on current technology, mass manufacturing has a large impact on the price of hydrogen, reducing it from 6.40 $/kg (at 10 units units per year) to 4.16 $/kg (at 5000 units per year). Further analysis was undertaken to determine the cost at different installed capacities and found that the cost could reduce further to 2.63 $/kg and 1.37 $/kg, based on technology scale-up by ten- and one hundred-fold, respectively. Based on the 2030 (and beyond) baseline assumptions, it is expected that hydrogen production from PEM electrolysis could be used as an industrial process feed stock, provide power and heat to buildings and as a fuel for heavy good vehicles (HGVs). In the cases of retrofitted gas networks for residential or industrial heating solutions, or for long distance transport, it represents a more economically attractive and mass-scale compatible solution when compared to electrified heating or transport solutions.