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Renewables-based hydrogen produced via electrolysis will be crucial in making several no-regret applications climate-neutral.
As long as green hydrogen requires public support to be economically competitive, policymakers need transparent estimates of the levelised cost of hydrogen to guide them in designing support schemes. Key drivers are the assumed electricity costs, the number of full-load hours, the cost of capital and the investment costs for electrolysers.
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Optimal energy system integration leads to fewer full-load hours, increasing the proportion of capital expenditure in the overall cost of green hydrogen production.
For example, most widely-cited German energy scenarios expect electrolysers to run ~3 000 full-load hours in 2030, corresponding to a ~34 percent utilisation rate, which is expected to gradually increase up to 2045. The lower the number of full-load hours, the greater the proportional significance of electrolysis investment costs becomes.
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High-level guidance for policymakers based on simplified levelised cost calculations tends to
underestimate real-world project implementation costs and needs to be clear about these limitations.
The price for electrolyser systems in the EU today is still generally high (significantly above 1 000 Euro/kW), although it is projected to fall considerably in the future.
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A pragmatic approach to cost calculations should focus on detailed fundamental cost drivers within generalised system boundaries while leaving out project- and site-specific considerations.
Other potentially important but non-fundamental cost drivers, such as project financing or tax credits, should generally not be factored in unless explicitly included. While simplified cost estimates are appropriate for high-level studies, their practicality depends on a sufficient degree of consistency and transparency regarding system boundaries and cost drivers.
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