Cost-competitiveness of green hydrogen and its sensitivity to major financial and technical variables

This study investigates the sensitivity of solar-based hydrogen production cost to variations in rarely explored financial parameters including gearing, cost of equity, cost of debt along with technical factors of electrolyser stack lifetime and system degradation rate. The objective is not to calculate an authoritative value for the levelized cost of hydrogen (LCOH), but rather to ascertain the possible trade-offs between influential parameters to reach lower values for the LCOH. Along with a comparison between solar-based hydrogen production and the current industrial method, the impact on LCOH of a green subsidy based on CO 2-eq emissions is examined. Finally, the study explores how major parameters should change to reach the target LCOH, set at AUD 3/USD 2. The study found that the LCOH was meaningfully impacted by the financial factors. The negative impacts of unfavourable financial factors were not offset effectively by improvements in the technical factors. However, the two technical parameters can offset each other's negative impact on the LCOH to an almost equal extent. Green subsidy would be a highly desirable hedge against the strongest influence of the parameters, with different extent of impact on the technical and financial variables. The results also indicate that to reach the target LCOH, significant reduction of electrolyser CAPEX is a key objective. • Sensitivity of levelised cost of hydrogen to influential factors examined, singly and in pairs. • Gearing, cost of equity, cost of debt, stack lifetime and degradation rate considered. • Better stack lifetime and degradation rate cannot overcome unfavourable financial conditions. • Green subsidy is effective in improving financial viability but not solely sufficient. • The key development required to reach LCOH = USD2/kg is reduced electrolyser CAPEX.