The cost of clean hydrogen-generated electricity…

… and the challenge of going mainstream

Fig. 1: Learning curve-based LCOE estimates for renewable and conventional power plants in Germany by 2035, taken from Fraunhofer ISE’s March 2018 study “Levelized Electricity Cost – Renewable Energy Technologies.”
© Fraunhofer ISE

This article will review the cost of clean, hydrogen-generated electricity based on the levelized cost of energy, grid parity, baseload, and intermediate and peak load. The question to answer is, what power prices can consumers and industrial customers expect at the point of use?

The LCOE specifies the per-unit cost of electricity over an energy-generating asset’s lifetime. The LCOE is calculated dividing the total energy generated by the asset’s net present value, which includes the initial investment, operation and maintenance costs, fuel prices and the cost of capital.

In 2020, the LCOE of utility-scale solar was already lower than that of brown coal in Germany (see fig.1).

The levelized cost shows the point where average revenues allow a project to break even. Often, the LCOE is calculated by a given plant’s operating term, which usually is 20 to 24 years.

Grid parity, or socket parity, is when an alternative energy source generates electricity at an LCOE less than or equal to the price of grid power. The term is most commonly used when discussing renewables, notably solar and wind. The results depend on whether one is calculating from the utility’s or the consumer’s perspective. Grid parity is one of the most misused concepts in clean energy debates since, due to varying wind speeds, sunshine hours and available baseloads, the same technology can give highly diverse results.

Wholesale prices are paid to electricity producers. Retail prices charged to end customers reflect the full cost of delivering power 24/7. Note, however, that generation, the largest expenditure, accounts for only 44 percent of the total cost. [1]

About loads

Even if solar breaks even with fossil fuel and nuclear sources, grid parity is just one factor in clean energy making a meaningful contribution to the grid. Many conventional energy sources are also used to provide a steady supply of electricity, but baseload plants cannot raise or lower output efficiently. Intermediate power plants, however, like natural gas combined cycle stations, can. And peak-load systems can be started up and shut down quickly to meet demand when it is highest.

… Read more in the latest H2-International e-Journal, Feb. 2021

Author: Girana Anuman-Rajadhon, GA ECO Group, Bangkok

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