Hydrogen: UK’s fuel of the future

October 4, 2023

Mahmoud Elkazaz

Producing hydrogen from renewable sources (known as green hydrogen) that would otherwise be wasted is an innovative form of energy storage. But there are challenges to the technology. Not least, the unit cost per kg of hydrogen and the cost efficiency of electrolyzers.

Why do we need green hydrogen?

The need for green hydrogen is driven by the global ambition to reduce greenhouse gas emissions in order to mitigate the effects of climate change. More immediately, the gas could be used to mitigate the problem of curtailment of renewable energy sources.

Currently, in the UK for example, there is not enough transmission capacity to carry power generated from places that are rich in renewable energy sources to places where the power is most needed. Scottish windfarms, for instance, are at the opposite end of the country to where most power is actually needed, in Southeast England. The 6GW transmission capacity of the National Grid falls far below the generation capacity of the wind farms. Consequently, these assets are paid to curtail their production while gas power stations are paid to meet demand. In 2022, this approach cost around £800 million.[1]

By using Scottish power to create green hydrogen to store energy, curtailment costs could be avoided. However, this needs to be balanced against the cost of producing the gas.

Green hydrogen cost challenge

The main cost of producing green hydrogen is the power used in the electrolysis process. Other costs, such as the cost of electrolyzers, storage and transmission, also need to be considered. The result is that there is no simple way of calculating a standardized cost per kg of green hydrogen, as costs vary from country to country.

The EEX Hydrix Index for Germany, for example, calculated a cost at the end of July 2023 of €6.73 per kg.[2] BloombergNEF (BNEF), however, calculated a range of costs that varied according to the technology used and the source of electrolyzers (Chinese versus Western manufacturers).[3] The BNEF calculations suggest that costs range from $2.38-$5.89 per kg when using relatively cheap Chinese electrolyzers. These costs rise to the range of $4.18-$11.07 per kg with alkaline electrolyzers from Western sources and rise again to $4.57-$12.00 per kg with proton exchange membrane (PEM) electrolysis machines. The report also suggests that green hydrogen will compete with grey (produced using fossil fuels and no carbon capture) hydrogen by 2030.

A growing need

IRENA forecasts that both green and blue (producing using fossil fuels with carbon capture) hydrogen production will grow from a very low base to 154 million tonnes by 2030 and 614 million tonnes by 2050.[4] With green hydrogen currently costing up to 300% more than blue hydrogen, cost reductions are forecast to come from falling prices for renewable energy sources and lower costs per unit for electrolyzers as production scales up.

To put this in the context of the UK power industry, one kilogram of hydrogen has an energy value of just over 33 kWh. A tonne of the gas would produce 33MWh and a million tonnes about 33TWh. The UK Government’s hydrogen strategy forecasts that up to 460TWh of hydrogen could be needed by 2050, representing 35% of the UK energy consumption.[5] Current projects underway include plans by Scottish utility SSE to produce 1,600 tonnes of green hydrogen a year at its 109MW Gordonbush wind farm. In Glasgow, Scottish Power Renewables’ Whitelees windfarm – the biggest in the UK – is being equipped with the UK’s largest electrolyzer (539MW) specifically to create green hydrogen. Meanwhile, in Lincolnshire, Centrica is injecting hydrogen into a 49MW gas-peaking plant. Across the Channel, the EU aims to have 40GW of electrolyzers powered by renewables installed by 2030, with a target of producing 10 million tonnes of the gas each year.

How PSC can help

PSC’s global energy experts can help with strategic planning and technology choices for deploying green hydrogen production as part of an overall strategy to maximize the productivity of renewables. Contact us to learn more about our services to help.