Greensight
Hydrogen

Electrolyser CAPEX & Efficiency - How should it be measured?

Measuring electrolysers in cost per kW rewards poor efficiency. Electrolysers should be measured in CAPEX per unit of production capacity such as capital cost per kilogram or tonne of daily capacity.

Actors in both commercial, and research instituitions continue to refer to electrolyser CAPEX in terms of cost per kW effect, as evidenced in the figure adapted from NREL. This is not only a confusing metric, but also a misleading one for decision makers.

Case in Point:

Lets look at 2 electrolysers. Both have a calculated cost per kW of $600 USD, but similarities end there. The first electrolyser has an efficiency of 4,4 kWh/Nm3, or 49 kWh/kg and the second has an efficiency of 4,9 kWh/Nm3 or 54,5 kWh/kg. Both electrolysers sound like they have the same cost, and they do... when looked at a cost per kW of effect. 

When looked at from the perspective of hydrogen output, the first electrolyser has a cost of $1,2 MUSD for 1 000 kg of daily output capacity, while the second electrolyser has a cost of $1,35 MUSD for the same amount of daily output capacity. This would give identical costs per kW since they have different efficiencies (or total kW used).

This deception is misleading, because when it comes to efficient electrolysers – the cost per kW formula is actually penalizing higher efficiency:

Total System Cost / Total kW

So two systems might have the same total cost, same production capacity, but different efficiencies and therefore on a Cost/kW the better (more efficient) electrolyser will actually look worse! Not only is the better electrolyser actually cheaper in terms of CAPEX, but it is also cheaper in terms of OPEX as it consumes less electricity per unit of hydrogen produced.

Why we believe this is the right move:

In electrolysis, the goal is to produce hydrogen, not to consume electricity.

Try out our conversion tool below to compare electrolysers:

Author

Benjamin Fram

Economist, Greensight

Ben is an Economist who is interested primarily in electricity markets. Prior to joining Greensight, he worked as a market analyst at Monitoring Analytics LLC, the independent market monitor for PJM Interconnection, where he gained extensive knowledge about electricity market design and dynamics. He holds a master’s degree in economics from the University of Gothenburg and is currently finishing up his PhD at the Norwegian School of Economics (NHH).

Celine Solstad

Energy Analyst, Greensight

Celine is an engineer with a MSc in energy from the University of Bergen with specialisation in hydrogen. She is a graduate, but has earlier been a part of Greensight's team both as a practicant and intern.

Ethan McChristian

Intern, Greensight

Ethan is one of our interns and studies Energy, Natural Resources, and the Environment at The Norwegian School of Economics. He specializes in Electricity Markets and Data Analytics. 

Headshot - Kjetil Trovik Midthun.

Kjetil Trovik Midthun

Manager Greensight, Greensight AS

Kjetil is the Manager of Greensight, and brings with him strong experience from Sintef and BKK. Before joining Greensight he worked as the Head of Production Planning in BKK, with responsibility for the operations planning and close cooperation with power sales. He has a PhD in industrial economics from NTNU and has 11 years experience as a Research Manager and Research Scientist in Sintef working primarily with optimization and techno-economic analyses within the energy sector.

Marte Waage Haga

Energy Analyst, Greensight

Marte is a Mechanical Engineer with specialization in materials from HVL and NTNU. Before joining Greensight she worked in Equinor within project execution, operations and maintenance. She has extensive knowledge from the energy sector to ensure safe and reliable project designs and future operation. 

 

Runa Bårdsgård

Energy Advisor, Greensight

Runa is a Process Engineer with an MSc from the University of Bergen, where she wrote her master's thesis on solar energy. With a background as a Production Engineer at Wintershall Dea, she has broad experience with operations and maintenance from several countries in Europe, both offshore and onshore. Runa's focus area in Greensight is the use of hydrogen and renewable energy in industrial processes.

Headshot - Tine Louise Trøen.

Tine Louise Trøen

Project Manager / Maritime Energy Advisor, Greensight

Tine is a Marine Engineer with specialization in offshore wind from NTNU. With a background as Package Lead in TechnipFMC, she has extensive knowledge on project execution, engineering and technology transfer, as well as being Greensight’s expert on the maritime market.

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