Hopeful technology developers, aggressive government subsidies and continued corporate interest aim to usher in a new era of energy supply and demand where hydrogen fuel cells satisfy a significant portion of our stationary and transportation energy needs.
However, despite an $83 billion global hydrogen supply chain today, adoption of fuel cells is extremely limited. In order to determine the economic viability and potential of an expansive hydrogen economy in the energy sectors, the entire cost of hydrogen generation, distribution, storage and consumption must be assessed in an effort to find the greatest bottlenecks and opportunities.
By examining all realistic combinations of the hydrogen supply chain, our firm found that hydrogen costs can range from $2.80 per kg to $15.40 per kg, but today hover at $6 per kg. Steam methane reforming (SMR) remains the best option for hydrogen generation due to its relatively low cost. Furthermore, price fluctuations in the feedstock – natural gas – have minimal impact on the resulting hydrogen cost. Generation accounts for only 18% to 33% of hydrogen costs, while compression, storage and distribution present bottlenecks in cost reduction.
Using the various hydrogen supply costs, we examined the total cost of ownership (TCO), payback period and levelized cost of energy (LCOE) for various fuel cell technologies and applications. Proton exchange membrane (PEM) fuel cells for telecom power and backup will reach $1 billion in 2030, while fuel cells for residential, commercial and utility generation will not prove cost-effective or appealing.
PEM fuel cells will reach $2 billion on the backs of forklifts and light-duty vehicles, while buses will remain miniscule. A robust hydrogen vehicle fueling infrastructure is necessary but ultimately insufficient to overhaul the passenger vehicle market.
Our analysis finds that the hydrogen supply chain is not the long-heralded bottleneck in fuel cell adoption. Furthermore, increased hydrogen demand from fuel cell adoption will have a marginal impact on global hydrogen demand by 2030.
Adoption of fuel-cell-powered passenger vehicles hinges on the cost of the fuel cell and hydrogen storage, and is strongly dependent on oil prices going forward.
Hydrogen cost strongly impacts fuel cell market adoption for stationary applications. However, hydrogen fuel accounts for only 35% of the TCO, while fuel cell cap-ex and membrane replacement present the largest costs.
All told, hydrogen demand from fuel cells will total 140 million kg in 2030, a meager 0.56% of global merchant hydrogen demand across all industries.
Brian Warshay is a research associate with Lux Research, an independent advisory and research company that focuses on emerging technologies. More information about the larger study from which this report is based, ‘The Great Compression: The Future of the Hydrogen Economy,’ is available HERE.