November 18, 2024 • 3 min read
Reducing green hydrogen costs through innovation
Green hydrogen is a promising zero emissions energy source for heavy industries, but its production costs remain a barrier to widespread adoption. Producers must lower the levelized cost of hydrogen (LCOH) through innovation and targeted investment to make it commercially viable.
“Green hydrogen production requires significant investment to meet future demand,” says Greg Stock, Director of the Green Hydrogen Centre of Excellence. “With net zero targets set between 2030 and 2050, there is limited time to develop and scale solutions.”
It’s possible to reduce the capital expenditures (capex) and operating expenditure (opex) associated with green hydrogen, although safety standards should not be compromised.
“LCOH calculates the total production cost for hydrogen over its lifecycle. Currently, about 30 percent of LCOH stems from capex,” explains Stock. “Opex accounts for the remaining 70 percent, most of which can be attributed to the energy needed to power electrolysis.”
Producing green hydrogen at scale requires an industrial electrolyzer powered by renewables to split water into hydrogen and oxygen. Currently, this process requires approximately 55 kilowatt hours of electricity per kilogram of hydrogen produced, which is substantial.
So, what actions can industry players take to reduce the costs of green hydrogen production before time runs out to achieve energy targets?
Addressing the capex of green hydrogen facilities
For green hydrogen to compete with other energy sources, the solutions must be scalable, modular and easily deployable across different sites.
“We are developing a standardized hydrogen product to reduce capex, designing the most cost-effective and safe hydrogen plant possible using modular components to create a minimum viable product,” says Stock. “Starting with smaller plants [100–200 megawatts], we’re learning to optimize costs at a lower scale and applying those insights to larger projects.
“The early results are promising. As plant capacity grows, our studies indicate a downward trend in LCOH.”
Technology costs account for 30–35 percent of a plant’s total installed cost. Beyond that, expenses for manufacturer-provided components like power and compression systems add up quickly.
We’re forming strategic partnerships across our supply chain to reduce costs from manufacturers. Our technology-agnostic approach allows us to choose the most cost-efficient technologies to integrate into a standardized solution.
Greg Stock
Director of the Green Hydrogen Center of Excellence
Implementing standardization of modular components for cost reduction
Though the hydrogen industry is still maturing, reaching a consensus on common solutions among producers and regulators should be a priority. We believe the appropriate course is to standardize modular components for a green hydrogen plant industry wide.
Agreement between involved parties will allow facility operators to order standardized components in bulk, allowing them to cut costs while improving efficiency and safety through prefabricated modular construction.
“Modularization, while more costly upfront, brings savings in construction phases. It helps us streamline engineering, supply chain, and construction costs,” explains Stock.
Reducing opex by optimizing energy use
Energy costs make up the largest component of LCOH. To reduce them, we have partnered with IBM and ABB on a prototype digital platform – the Asset Optimization Centre (AOC).
The AOC dynamically adjusts hydrogen production, enabling peak operation during times of highest renewable energy generation. Simultaneously, a digital twin (virtual replica) of the plant also supports predictive maintenance, minimizing downtime and helping to ensure energy efficiency.
“Reducing energy consumption is key,” says Stock. “The AOC helps identify real-time savings, producing hydrogen at the lowest possible cost.”
Progress requires collaboration
Green hydrogen is an emerging industry and collaboration among stakeholders from various sectors will be essential to make the rapid progress needed to achieve sustainability goals.
According to Stock, “Driving down the levelized cost of hydrogen requires a united industry effort, with partnerships across the supply chain, technology providers, and government bodies. Collaboration is key to achieving the necessary cost reductions.”
