The recent sharp decline in the cost of renewable energy suggests that the production of hydrogen from renewable power through a power-to-gas process might become more economical. Here we examine this alternative from the perspective of an investor who considers a hybrid energy system that combines renewable power with an efficiently sized power-to-gas facility. The available capacity can be optimized in real time to take advantage of fluctuations in electricity prices and intermittent renewable power generation. We apply our model to the current environment in both Germany and Texas and find that renewable hydrogen is already cost competitive in niche applications (€3.23 kg−1), although not yet for industrial-scale supply. This conclusion, however, is projected to change within a decade (€2.50 kg−1) provided recent market trends continue in the coming years.
Jones, N. Liquid hydrogen. Nat. Clim. Change 2, 23 (2012).
van Renssen, S. A business case for green fuels. Nat. Clim. Change 3, 951–952 (2013).
Goodall, C. Fuels from air and water. Carbon Commentary https://tinyurl.com/ybn4tu8z (2017).
Power-to-Gas in a Decarbonized European Energy System Based on Renewable Energy Sources (European Power to Gas, 2017).
Jacobson, M. Z. Clean grids with current technology. Nat. Clim. Change 6, 441–442 (2016).
Zakeri, B. & Syri, S. Electrical energy storage systems: a comparative life cycle cost analysis. Renew. Sustain. Energy Rev. 42, 569–596 (2015).
Evans, A., Strezov, V. & Evans, T. J. Assessment of utility energy storage options for increased renewable energy penetration. Renew. Sustain. Energy Rev. 16, 4141–4147 (2012).
Hydrogen on the rise. Nat. Energy 1, 16127 (2016).
Sterner, M. & Stadler, I. Energiespeicher: Bedarf, Technologien, Integration (Springer, Berlin, 2014). .
Hosseini, S. E., Wahid, M. A., Jamil, M. M., Azli, A. A. M. & Misbah, M. F. A review on biomass-based hydrogen production for renewable energy supply. Int. J. Energy Res. 39, 1597–1615 (2015).
Holladay, J. D., Hu, J., King, D. L. & Wang, Y. An overview of hydrogen production technologies. Catal. Today 139, 244–260 (2009).
Davis, S. J. et al. Net-zero emissions energy systems. Science 360, eaas9793 (2018).
Wiser, R. et al. Expert elicitation survey on future wind energy costs. Nat. Energy 1, 16135 (2016).
Comello, S., Reichelstein, S. & Sahoo, A. The road ahead for solar PV power. Renew. Sustain. Energy Rev. 92, 744–756 (2018).
Hosseini, S. E. & Wahid, M. A. Hydrogen production from renewable and sustainable energy resources: promising green energy carrier for clean development. Renew. Sustain. Energy Rev. 57, 850–866 (2016).
Shaner, M. R., Atwater, H. A., Lewis, N. S. & McFarland, E. W. A comparative technoeconomic analysis of renewable hydrogen production using solar energy. Energy Environ. Sci. 9, 2354–2371 (2016).
Mohsin, M., Rasheed, A. K. & Saidur, R. Economic viability and production capacity of wind generated renewable hydrogen. Int. J. Hydrogen Energy 43, 2621–2630 (2018).
Touili, S., Alami Merrouni, A., Azouzoute, A., El Hassouani, Y. & Amrani, A.-i A technical and economical assessment of hydrogen production potential from solar energy in Morocco. Int. J. Hydrogen Energy 43, 22777–22796 (2018).
Reichelstein, S. & Sahoo, A. Time of day pricing and the levelized cost of intermittent power generation. Energy Econ. 48, 97–108 (2015).
Hirth, L. The market value of variable renewables: the effect of solar wind power variability on their relative price. Energy Econ. 38, 218–236 (2013).
Sensfuß, F., Ragwitz, M. & Genoese, M. The merit-order effect: a detailed analysis of the price effect of renewable electricity generation on spot market prices in Germany. Energy Policy 36, 3076–3084 (2008).
Farhat, K. & Reichelstein, S. Economic value of flexible hydrogen-based polygeneration energy systems. Appl. Energy 164, 857–870 (2016).
Engelhorn, T. & Müsgens, F. How to estimate wind-turbine infeed with incomplete stock data: a general framework with an application to turbine-specific market values in Germany. Energy Econ. 72, 542–557 (2018).
Wozabal, D., Graf, C. & Hirschmann, D. The effect of intermittent renewables on the electricity price variance. OR Spectrum 38, 687–709 (2016).
Renewable Electricity Production Tax Credit (PTC) (US Department of Energy, 2016).
Gesetz für den Ausbau erneuerbarer Energien (EEG, 2017).
Gahleitner, G. Hydrogen from renewable electricity: an international review of power-to-gas pilot plants for stationary applications. Int. J. Hydrogen Energy 38, 2039–2061 (2013).
Buttler, A. & Spliethoff, H. Current status of water electrolysis for energy storage, grid balancing and sector coupling via power-to-gas and power-to-liquids: a review. Renew. Sustain. Energy Rev. 82, 2440–2454 (2018).
Simbeck, D. & Chang, E. Hydrogen Supply: Cost Estimate for Hydrogen Pathways - Scoping Analysis (National Renewable Energy Laboratory, 2002).
Michaelis, J., Genoese, F. & Wietschel, M. Evaluation of large-scale hydrogen storage systems in the German energy sector. Fuel Cells 14, 517–524 (2014).
Corporate Sourcing of Renewables: Market and Industry Trends (IRENA, 2018).
Pilotprojekte im Überblick (Deutsche Energie-Agentur, 2016); https://tinyurl.com/y7a9z447
Curtin, S. & Gangi, J. Fuel Cell Technologies Market Report 2016 (US Department of Energy, 2017).
Technical Targets for Hydrogen Production from Electrolysis (US Department of Energy, 2018).
Bertuccioli, L. et al. Study on Development of Water Electrolysis in the EU (Fuel Cells and Hydrogen Joint Undertaking, 2014).
Felgenhauer, M. & Hamacher, T. State-of-the-art of commercial electrolyzers and on-site hydrogen generation for logistic vehicles in South Carolina. Int. J. Hydrogen Energy 40, 2084–2090 (2015).
Weidner, S. et al. Feasibility study of large scale hydrogen power-to-gas applications and cost of the systems evolving with scaling up in Germany, Belgium and Iceland. Int. J. Hydrogen Energy 43, 15625–15638 (2018).
Schmidt, O., Hawkes, A., Gambhir, A. & Staffell, I. The future cost of electrical energy storage based on experience rates. Nat. Energy 6, 17110 (2017).
Saba, S. M., Müller, M., Robinius, M. & Stolten, D. The investment costs of electrolysis – a comparison of cost studies from the past 30 years. Int. J. Hydrogen Energy 43, 1209–1223 (2018).
Staffell, I. & Pfenninger, S. Using bias-corrected reanalysis to simulate current and future wind power output. Energy 114, 1224–1239 (2016).
Ketterer, J. C. The impact of wind power generation on the electricity price in Germany. Energy Econ. 44, 270–280 (2014).
Paraschiv, F., Erni, D. & Pietsch, R. The impact of renewable energies on EEX day-ahead electricity prices. Energy Policy 73, 196–210 (2014).
Woo, C. K., Horowitz, I., Moore, J. & Pacheco, A. The impact of wind generation on the electricity spot-market price level and variance: the Texas experience. Energy Policy 39, 3939–3944 (2011).
T-Raissi, A. in Energy Production and Storage: Inorganic Chemical Strategies For A Warming World (ed. Crabtree, R.) 365–375 (John Wiley & Sons, Hoboken, 2010).
Islegen, O., Reichelstein, S., Islegen, Ö. & Reichelstein, S. Carbon capture by fossil fuel power plants: an economic analysis. Manage. Sci. 57, 21–39 (2011).
We gratefully acknowledge financial support from the Hanns-Seidel-Stiftung with funds from the Federal Ministry of Education and Research of Germany, and thank G. Friedl and A. Rieger for helpful comments. We also thank F. Steffen for providing valuable assistance with our data collection.
The authors declare no competing interests.
Publisher’s note: Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
About this article
Cite this article
Glenk, G., Reichelstein, S. Economics of converting renewable power to hydrogen. Nat Energy 4, 216–222 (2019). https://doi.org/10.1038/s41560-019-0326-1
Current Opinion in Chemical Engineering (2021)
Journal of Cleaner Production (2021)
Green hydrogen in Europe – A regional assessment: Substituting existing production with electrolysis powered by renewables
Energy Conversion and Management (2021)