Overcoming Green Hydrogen’s Major Operational Cost: Electricity

There are many ways to create hydrogen from renewable energy resources. The challenge is to reduce the cost of such fuel production, in order to position green hydrogen as a viable option to support decarbonization efforts.

As governments and organizations across the world race toward achieving a more sustainable energy future, the energy sector is increasingly turning toward green hydrogen as a solution. Adoption of green hydrogen—a fuel generated by renewable energy or low-carbon power—is expected to accelerate exponentially, with the market projected to reach $72 billion by 2030, compared to the current market size of $1 billion. However, that adoption is contingent on two significant hurdles—reducing the operating costs associated with green hydrogen production, and the ability to scale manufacturing to meet demand.

1. Green hydrogen is a fuel produced using power from renewable energy, including solar and wind power. Most hydrogen production today uses fossil fuels, often natural gas. Source: Shutterstock

Green hydrogen (Figure 1) is produced from electricity and water with electrolyzer systems using renewable energy, such as solar, wind, hydro, and geothermal. A closely related version of this are those electrolyzers powered by nuclear energy, which is sometimes referred to as “pink hydrogen.”

The vast majority of today’s hydrogen is produced using fossil fuels, often where methane or coal is combined with water to produce hydrogen and carbon dioxide (CO₂). Today, this industry accounts for more than 2% of global CO₂ emissions. This “gray hydrogen” from fossil fuels costs three times less than green hydrogen on average today.

Two Categories of Electrolyzers

Electrolyzers in today’s market fall into two categories—liquid water or gaseous steam (cold and hot). Liquid water electrolyzers include alkaline and PEM (polymer electrolyte membrane) technologies. They require large amounts of electricity to electrolyze water, usually more than 50 kilowatt-hours per kilogram (kWh/kg) of hydrogen produced.

Conversely, steam electrolyzers, such as solid oxide electrolyzers, work with 700-degree superheated steam. By working with steam, the electricity requirements are significantly lower—well below 40 kWh/kg is possible. But that high-temperature steam requires expensive equipment in the system, along with additional maintenance, and significant effort is required to prevent heat loss. These solid oxide systems also have struggled to scale up in size.

Regardless of the category, the main driver of the exorbitant price of green hydrogen production is electricity, at more than 70% of the cost on average, which will only grow larger as a share of total cost in the future.

There are excellent ways to create low-cost green hydrogen. However, it’s first important to understand why there are so many reasons to do so. By transitioning to industrial green hydrogen, we can reduce our dependence on fossil fuels, which are subject to supply risks and unstable prices.

By decarbonizing existing hydrogen production and using hydrogen in relevant industries, such as green steel, green hydrogen can help abate more than 10% of CO₂ emissions globally. In some localities, the price of carbon emissions continues to increase, thus the use of green hydrogen in heavy industries (such as steel, fertilizers, and chemical production) can reduce the cost of these emissions, negating the need for expensive carbon capture and storage solutions, or the need to pay for emissions credits.

Environmental Benefits

The implementation of electrolyzer technology provides several other notable environmental benefits, the most important being that green hydrogen production doesn’t emit any harmful pollutants, such as sulfur dioxide, nitrogen oxides, or particulate matter, unlike fossil fuels. Replacing gray and even blue hydrogen (hydrogen produced from fossil fuels but supported by carbon capture and storage) with green hydrogen in heavy industries will lead to the elimination of dangerous pollutants and improved air quality.

Another major advantage of green hydrogen is its ability to be used in the production of dense, easy-to-store fuels such as ammonia and methanol. These fuels can be used as backup power or peaking power generation in situations where a stable and reliable source of energy is needed, or in remote locations. Finally, the economic impact of green hydrogen adoption will lead to an increase in job creation along every step, from research and development, to installation of green hydrogen infrastructure, to heavy industry customers and their skilled laborers, including:

■ Ongoing production of green hydrogen through electrolysis requires skilled workers, such as engineers, technicians, and operators.

■ Development and installation of green hydrogen infrastructure, such as pipelines, storage tanks, and chemical process reactors, also requires a skilled workforce.

■ The use of green hydrogen in heavy industries such as steel, fertilizers, and chemical production creates new job opportunities for business and project development.

■ A corporate-focused adoption of the green hydrogen industry stimulates economic growth and new opportunities for small- and medium-sized enterprises that support or are developing new products and contributing to job creation at various levels.

As green hydrogen producers begin to see all of these benefits manifest, decarbonizing hydrogen in many cases starts through shareholder pressure and business strategy foresight. For the other producers and users of hydrogen, upcoming regulation will force accelerated decarbonization of their industries.

For example, recent trade agreements could create a boon for green steel, produced using green hydrogen direct reduced iron, or DRI. Recent U.S. legislation such as the Infrastructure Investment and Jobs Act, and Inflation Reduction Act, also create strong incentives for domestic manufacturing, industrial decarbonization, and the creation of hydrogen hubs that will help this technology thrive. European regulations are likely to do the same, while promoting additional renewables deployments to supply electrolyzer projects with clean electricity.

Macro-Level Challenges

While current U.S. legislation incentivizes certain aspects of hydrogen adoption and production, macro-level challenges around hydrogen demand stimulation and infrastructure generally exist. Hydrogen is difficult and costly to transport and store. In most cases, the production and immediate use of hydrogen at the same location is most economical, as it avoids the pitfalls of transport and storage. Nonetheless, this requires grid transmission capacity and renewable power purchase agreements (or similar) to be in place. It would not be surprising to see innovations regarding how clean electricity is supplied to industrial electrolyzer sites at high capacity factors, similar to how data centers are working to source the cleanest electricity possible at relevant times of the day.

Furthermore, it is likely we’ll see many industrial steel, fertilizer, and chemical projects in locations with good access both to markets (ports, rail, pipelines, etc.) and abundant renewables. These renewables would feed the electrolyzers directly, removing the need for 24/7 grid supply, though some complimentary off-peak grid supply would likely still be valuable.

The pathways and solutions to enable cost-effective green hydrogen are straightforward. The most important is to use the lowest-cost sources of clean electricity with the highest capacity factors possible. This industry depends acutely on the continued successful deployments of clean electricity sources.

2. Advanced Ionics’ Symbiotic Electrolysis technology is able to create lower-cost green hydrogen by tapping into existing process and waste heat sources at industrial facilities. Courtesy: Advanced Ionics

Furthermore, well-integrated, onsite hydrogen production using steam electrolyzers has obvious advantages with low electricity usage. Lastly, utilizing electrolyzer technologies (Figure 2) that leverage simple, large-scale manufacturing processes, with abundant materials, will allow the industry to ramp up production quickly while avoiding supply chain and geopolitical constraints. These are the key features that electrolyzer technology companies are working to address—making efficient steam electrolyzers that operate at mild temperatures, with abundant materials and massively scalable manufacturing.

The increased focus on decarbonizing industries and reducing greenhouse gas emissions, coupled with the declining cost of renewable energy and electrolysis technology, will drive the demand for green hydrogen. Governments and private sector stakeholders are also investing heavily in the development of hydrogen infrastructure, research and development, and pilot projects, which will help accelerate the adoption of green hydrogen.

Creating green hydrogen at a lower cost than gray hydrogen will transform the net-zero targets of governments and corporations. As a result, the use of green hydrogen in heavy industries such as steel, fertilizer, and chemical production is expected to increase significantly, contributing heavily to a strong, stable world economy and sustainable energy future for our planet.

—Chad Mason is CEO of Advanced Ionics, a company developing electrolyzer technology and a green hydrogen platform to support sustainability efforts of industrial hydrogen producers and users.