Hydrogen Supply Evidence Base–BEIS

By Paul Homewood



I mentioned my FOI to the BEIS the other day, asking for more detail on hydrogen costs. This was what they sent me:








I have selected three pages regarding electrolysis:







Beginning with the capital costs on the first page, and assuming the PEM (Proton Exchange Membrane), which I believe is the most likely system, base costs currently are £750/KW. To put this figure into perspective, Boris 10-point plan calls for 5 GW of hydrogen production capacity by 2030. CAPEX using PEM would be £3.7bn. (As we shall see later, operating costs will be more than the total cost of natural gas, so this capital spend will be money down the drain.)

Capacity of 5 GW would produce 42 TWh of hydrogen (@96% load). UK’s total primary energy consumption is 2320 TWh, so the new hydrogen capacity would be tiny in comparison. To build enough to supply a tenth of our energy needs, say, would cost about £20bn, though costs would be expected to come down with economies of scale. (These figures of course don’t include storage or distribution costs.)

We are also given the electrical efficiency, which is 55 KW per kg of hydrogen currently. The energy density of hydrogen , however, is 33.3 Kwh per kg, which means that the electrolysis process only works at 60% efficiency. In other words, 40% of the energy input is wasted.


Moving onto the costed example, they look at a standalone wind farm. This has the advantage of not paying for electricity distribution, but the disadvantage of intermittent operation. Note that this example is based on the lower 2025 CAPEX costs.

We know from the first table that you need 52 KWh to produce 1 KG of hydrogen (2025 assumptions). Assuming wind power costs of £50/MWh, electricity input would cost £2.60/kg. This translates to £78.08/MWh.

To that we can add:

  • Fixed OPEX for PEM = £914,000 pa. Annual output of hydrogen is 87600 MWh = £10.43/MWh
  • Variable OPEX = £0.0077/KWH = £7.70.MWh
  • Storage = £255,000 pa = £2.91/MWh

In total then, the operating costs of hydrogen work out at £99.12/MWh. This does not include CAPEX. When this is added in, according to Element Energy, the total cost rises to £137/MWh

We can compare this with the price of gas:

The current wholesale price of natural gas is around 40p therm. The conversion rate of 29.3 KWh per therm means a price of £13.60/MWh. The cost of hydrogen via electrolysis therefore will be ten times as much as gas. As I already pointed out, even the operational costs, excl CAPEX, are much greater.


Finally let’s compare all of this with what the CCC estimated for steam reforming costs:



Put simply, hydrogen made via electrolysis costs about three times as much as steam reforming, which itself is triple the cost of gas.

None of this should in any way be surprising. We know that electricity costs much more than gas. We also now know that you throw away nearly half of the electricity used in electrolysis, and also have to spend money building and running electrolysis plants.

Yet some people still think hydrogen is a good idea!!



March 19, 2021 at 10:48AM

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