A national laboratory of the U.S. Department of Energy

Office of Energy Efficiency & Renewable Energy

National Renewable Energy Laboratory 

Innovation for Our Energy Future 

Electrolysis: 

Information and Opportunities 

for Electric Power Utilities 

B. Kroposki, J. Levene, and K. Harrison 

National Renewable Energy Laboratory 

Golden, Colorado

P.K. Sen 

Colorado School of Mines 

Golden, Colorado

F. Novachek 

Xcel Energy 

Denver, Colorado

Technical Report 

NREL/TP-581-40605 

September 2006 

NREL is operated by Midwest Research Institute ● Battelle Contract No. DE-AC36-99-GO10337 
Electrolysis: 

Information and Opportunities 

for Electric Power Utilities 

B. Kroposki, J. Levene, and K. Harrison 

National Renewable Energy Laboratory 

Golden, Colorado

P.K. Sen 

Colorado School of Mines 

Golden, Colorado

F. Novachek 

Xcel Energy 

Denver, Colorado

Prepared under Task No. HY61.3620 

Technical Report 

NREL/TP-581-40605 

September 2006 

National Renewable Energy Laboratory

1617 Cole Boulevard, Golden, Colorado 80401-3393 

303-275-3000 • www.nrel.gov 

Operated for the U.S. Department of Energy 

Office of Energy Efficiency and Renewable Energy 

by Midwest Research Institute • Battelle 

Contract No. DE-AC36-99-GO10337
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Contents 

Page

Executive Summary iv

I. Introduction 1

II. The Hydrogen Economy 4

III. Hydrogen Production 5

IV. Potential from Renewable Energy Sources—Wind and Solar 9

V. Economics of Electrolysis 12

VI. Opportunities for Electrolysis 20

VII. Future Directions 22

VIII. Conclusions 24

IX. References 25

Figures 

Page

Figure 1 Overview of petroleum imported and consumed in the United States 2

Figure 2 2004 Energy consumption by sector 3

Figure 3 Hydrogen production pathway 5

Figure 4 Picture of the unipolar (tank) design 7

Figure 5 Picture of the bipolar (filter-press) design 8

Figure 6 PV and wind electrolysis configurations 10

Figure 7 Hydrogen potential from solar and wind resources 11

Figure 8 Components of the cost of hydrogen 12

Figure 9 Cost of hydrogen versus electricity without equipment costs 13

Figure 10 Cost of solar technologies (2005−2015) 14

Figure 11 COE baseline and targets for low wind speed technology (LWST) 15

Figure 12 Percent of land area in the continuous United States estimated to 

have a Class 4 or higher wind power 

16

Figure 13 Current (2005) wind hydrogen production system: capacity factor 

and electricity price effects on hydrogen cost in $/kg 

17

Figure 14 Future wind hydrogen production system: capacity factor and 

electricity price effects on hydrogen cost in $kg 

28

Figure 15 Examples of wind electrolysis being produced centrally or 

distributed at the point of use 

18

Figure 16 Xcel-NREL Wind2H2 project diagram 20

iii
Executive Summary

Recent advancements in hydrogen technologies and renewable energy applications show 

promise for economical near- to mid-term conversion to a hydrogen-based economy. As the 

use of hydrogen for the electric utility and transportation sectors of the U.S. economy 

unfolds, electric power utilities need to understand the potential benefits and impacts. This 

report provides a historical perspective of hydrogen, discusses the process of electrolysis for 

hydrogen production (especially from solar and wind technologies), and describes the 

opportunities for electric power utilities. 

iv
I. Introduction 

Because of the effects of carbon emissions into the atmosphere on global climate change, a 

carbon-constrained world is coming and alternative energy sources will be required to 

supplement the carbon-intensive sources that currently power homes, businesses, and motor 

vehicles. Natural gas is available, but the supply is limited and its cost will rise because of 

increased demand. Coal will continue to supply power for most of our electricity demand, 

but technologies to enable carbon sequestration are in their infancy. Advanced nuclear 

energy can be used to produce electricity, but issues that surround nuclear waste disposal 

prevail and no new nuclear plants have been built in the United States in the last 30 years. 

One promising solution to this problem is the direct use of hydrogen. Hydrogen, the lightest 

element, is not a primary energy source like oil or coal, but instead is an energy carrier like 

electricity. Hydrogen can be manufactured or extracted from hydrogen-rich materials such as 

coal, natural gas, biomass, or water. Currently, the primary means of manufacturing 

hydrogen is to strip it from natural gas (mostly methane) via steam methane reforming 

(SMR). However, the technologies to produce hydrogen from nonfossil sources such as 

biomass, wind, and solar are also available. Benefits of hydrogen production from nonfossil 

sources include the fact that the hydrogen production and combustion cycle can produce less 

greenhouse gases than competing fossil pathways and that, unlike electricity, hydrogen can be 

stored quite easily. 

Utility companies are uniquely positioned to play a major role if hydrogen is to become a 

major energy carrier. As the United States moves toward a secure energy future, its domestic 

resources can provide clean energy for various energy sectors. In the near term, utilities can 

begin to consider the current hydrogen market as a first step to building a new energy 

infrastructure: the United States consumed 84.3 billion m3 (7.6 billion kg) of hydrogen in 

2003 [1]. Eventually, utilities can either become hydrogen fuel producers or can supply 

electricity to hydrogen fuel producers who provide the energy needed to fuel vehicles. 

The current market for hydrogen is divided into two segments: captive users, who produce 

the hydrogen at the location where it is to be used, and merchant users, who have their 

hydrogen delivered to the point of use. In the United States and worldwide, the captive 

market is the larger, and includes chemical producers (such as ammonia, methanol, hydrogen 

peroxide, and pharmaceuticals), refineries, fat and oil hydrogenation, and metal production. 

The smaller merchant market serves industries such as electronics manufacturers, float gas 

producers, and public utilities for generator cooling in nuclear plants [1]. 

The future market for hydrogen is much larger. If hydrogen is to be used as a transportation 

fuel, the United States could conceivably replace the 9.1 million barrels per day (bbl/d) (140 

billion gal/yr) of gasoline consumed in 2004 with domestically produced hydrogen (Figure 

1). The energy equivalent of this much gasoline is 17.3 x 1015 Btu, assuming approximately 

5.2 million Btu/bbl of motor gasoline [2]. 

1
Figure 1 depicts the amount of petroleum that is consumed in the United States in millions of 

barrels per day from 1950 to 2004 [2]. The current rate of petroleum use is worrisome, since 

the U.S. production of petroleum has been in steady decline since the 1970s. Our use of 

foreign sources of petroleum has increased to the point where we now import 63% (12.9 

million bbl/d) of our total use [2]. 

Energy Information Administration Petroleum Overview

1950−2004

12.9

Imports

20.6 Petroleum 

Consumed

9.1

Motor

Gasoline 

Consumed 

0 

5 

10 

15 

20 

25 

1950 1960 1970 1980 1990 2000 

Year

Millions Barrels/Day 

Figure 1. Overview of petroleum imported and consumed in the United States 

Figure 2 shows how the energy in motor gasoline consumed compares to the current U.S. 

electricity generation capacity. 

In 2004, 17.3 x 1015 Btu of gasoline were consumed (Figure 2), and 12.9 x 1015 Btu (3,717 

TWh) of electricity were generated by the electric power sector [2]. Thus, the potential to 

participate in the transportation market could lead to significant new opportunities for 

utilities. 

2
EIA Electric Power Net Electricity Generation

and U.S. Motor Gasoline Consumption

Electricity 

Generation

12.9 

Motor 

Gasoline 

Consumption

17.3 

0.0 

5.0 

10.0 

15.0 

20.0 

1950 1960 1970 1980 1990 2000 

Year

Quadrillion Btu (Quad) 

.

Figure 2. 2004 Energy consumption by sector 

3
II. The Hydrogen Economy 

The major advantages of using hydrogen to supply energy include: 

• Hydrogen can be produced from a clean energy sources. 

• Hydrogen can be distributed and stored in a variety of ways. 

• Hydrogen can replace fossil fuels to provide electricity and transportation fuels. 

• Domestic resources can be used to produce the hydrogen and lead to energy 

independence 

The idea of a society that can use hydrogen as an energy carrier is not new. One of the 

earliest concepts for a hydrogen-based economy was proposed in the writings of Jules Verne 

in 1874. In The Mysterious Island, a character remarks that “water will one day be employed 

as fuel, that hydrogen and oxygen of which it is constituted will be used, simultaneously or in 

isolation, to furnish an inexhaustible source of heat and light” [3, 4]. Between 1900 and 

1960, progressive thinkers proposed many ways to produce and use hydrogen in numerous 

applications, but the price of fossil fuels typically was low enough to make these 

opportunities uneconomical. The oil embargo of 1973 forced the United States and other 

countries to reconsider alternatives to the fossil-fuel based economy. The term hydrogen 

economy was first introduced in the early 1970s [5−7] to describe the use of hydrogen to 

replace fossil fuels and as an alternative to the all-electric economy proposed by the nuclear 

industry. 

The all-electric economy, proposed during the 1970s, with the advent of inexpensive nuclear 

electricity [5], has some significant drawbacks. Electricity storage is difficult and expensive. 

Pumped-storage hydro and compressed air use geographic land features and are therefore site 

specific. Today’s battery technology cannot deliver economical utility-scale storage or meet 

the required cost and range targets for vehicular travel. Prototype all-electric vehicles like 

General Motors’ EV1 did not provide the driving range (hundreds of miles) that people 

expect from a car. Another major issue in the transportation sector is that the charging time 

for vehicle applications can be as long as 4 hours depending on the state of charge, whereas 

liquid or gaseous fuel applications can have fueling times shorter than 5 minutes. 

As electric utilities examined the combined potential benefits of the hydrogen economy and 

the all-electric economy, the term hydrogen-electric economy was also developed [8] to 

describe the possibilities of combining production, transmission, and sales of both energy 

carriers. This idea integrates production, storage, and use to maximize system efficiencies. 

If hydrogen can be produced economically, hydrogen-based internal combustion engines 

(ICEs) and fuel cells could be used to provide electrical power in distributed energy 

applications. If the loads can also use the heat from the distributed generators, a combined 

heat and power (CHP) application can increase the overall efficiency of the packaged system. 

4
III. Hydrogen Production 

Hydrogen can be produced from a variety of sources. Figure 3 shows the variety of hydrogen 

production pathways and highlights the methods that are supported by the electric utilities. 

The importance of these pathways for making fuel is that they can be produced domestically 

without relying on foreign sources. 

Figure 3. Hydrogen production pathway 

Global hydrogen production stands at around 448 billion m3

/yr (40 billion kg/yr) [1]. 

Currently, the main methods of producing hydrogen are by reforming natural gas and 

dissociating hydrocarbons. A smaller amount is produced by electrolysis [1]. Reforming 

natural gas is cost effective and accounts for roughly 48% of the hydrogen currently produced 

worldwide [9]. In this process steam is used to split hydrogen from natural gas. 

SMR is currently the least expensive way to produce large quantities of hydrogen ($1.00–

$5.00/kg of hydrogen). A major drawback to using SMR is that the process is based on a 

nonrenewable fossil-fuel source. The feedstock price is volatile, and natural gas is primarily 

a nondomestic resource—liquefied natural gas (LNG) is already imported into the United 

States. The reactions of the SMR process also produce carbon dioxide (which is a risk if the 

world moves to a carbon-constrained global economy), and the hydrogen product gas can 

have high levels of impurities. 

Electrolysis uses direct current (DC) electricity to split water into its basic elements of 

hydrogen and oxygen. Since this process uses only water as a source, it can produce up to 

99.9995% pure hydrogen and oxygen. Electrolysis was discovered in 1800 by William 

5
Nicholson and Sir Anthony Carlisle shortly after Alessandro Volta invented the electric 

battery. The electrolyzer industry grew substantially during the 1920s and 1930s. This 

included products from companies such as Oerlikon, Norsk Hydro, and Cominco in 

multimegawatt sizes [10−12]. Most of these installations were near hydroelectric plants that 

supplied an inexpensive source of electricity. As more hydrogen was needed for industries, 

SMR gradually took over as the hydrogen production process of choice because it was less 

expensive. 

Electrolyzers are still used in places where low electricity prices are available or that have 

high hydrogen purity requirements. As the price of natural gas increases, electrolysis 

becomes a viable option for competition in the hydrogen market, and electric utilities are well 

placed to provide the electricity for electrolysis for producing the hydrogen. In the future 

hydrogen economy, an added benefit of electrolytic hydrogen production is that since the 

electric power industry is almost entirely supported by U.S. energy resources, it offers a more 

stable and secure energy future than oil or imported LNG. 

Ideally, 39 kWh of electricity and 8.9 liters of water are required to produce 1 kg of hydrogen 

at 25°C and 1 atmosphere pressure. Typical commercial electrolyzer system efficiencies are 

56%–73% and this corresponds to 70.1–53.4 kWh/kg [13]. Two basic types of lowtemperature electrolyzers—alkaline and proton exchange membrane—are currently being 

manufactured. 

The first water electrolyzers used the tank design and an alkaline electrolyte [11]. These 

electrolyzers can be configured as unipolar (tank) or bipolar (filter press) designs. In the 

unipolar design (Figure 4), electrodes, anodes, and cathodes are alternatively suspended in a 

tank that is filled with a 20%–30% solution of electrolyte (potassium hydroxide in pure 

water). In this design, each cell is connected in parallel and operated at 1.9–2.5 Vdc. 

The advantage to this design is that it is extremely simple to manufacture and repair. The 

disadvantage is that it usually operates at lower current densities and lower temperatures [11]. 

More recent unipolar designs include operation at high hydrogen pressure outputs (up to 

6,000 psig). 

The bipolar design (Figure 5), often called the filter-press, has alternating layers of electrodes 

and separation diaphragms that are clamped together. The cells are connected in series and 

result in higher stack voltages. Since the cells are relatively thin, the overall stack can be 

considerably smaller than the unipolar design. The advantages to the bipolar design are the 

reduced stack footprints, higher current densities, and its ability to produce higher pressure 

gas. The disadvantage is that it cannot be repaired without servicing the entire stack [11, 14]. 

Fortunately, it rarely needs servicing. Previously asbestos was used as a separation 

diaphragm, but manufacturers have replaced or are planning to replace this with new polymer 

materials such as Ryton® [15]. 

6
Negative Positive Electrodes

Electrodes

Hydrogen

Oxygen

Separation 

Diaphragm

Electrolyte

Solution

Gas Collection

Figure 4. Picture of the unipolar (tank) design

A second commercially available electrolyzer technology is the solid polymer electrolyte 

membrane (PEM). It was originally developed as part of the Gemini space program [11]. In 

a PEM electrolyzer, the electrolyte is contained in a thin, solid ion-conducting membrane 

rather than the aqueous solution in the alkaline electrolyzers. This allows the H+ ion (i.e., 

proton) to transfer from the anode side of the membrane to the cathode side, and separates the 

hydrogen and oxygen gases. Oxygen is produced at the anode side and hydrogen is produced 

on the cathode side. The most commonly used membrane material is Nafion® from DuPont. 

PEM electrolyzers use the bipolar design and can be made to operate at a high differential 

pressure across the membrane. 

Several factors influence the performance of electrolyzers. These usually involve tradeoffs 

between the operating voltage, rate of hydrogen production, and capital costs. The 

optimization for these parameters is unique to each manufacturer. 

Increasing temperature reduces the stack operating voltage of the electrolyzer because the 

amount of energy needed to initiate the reaction (activation) is reduced. In other words, the 

reactions at the electrodes are increased, which lowers the overpotential (loss) at the 

electrode. In addition, the theoretical reversible potential of the electrolyzer cells is reduced. 

7
This means that an overall increase in efficiency can be realized by operating at higher 

temperatures, but this can increase corrosion rates of electrodes and separator membranes 

[11]. Increased temperatures can also require that other materials be used in the balance of 

plant. 

There are also advantages to operating the electrolyzers at higher pressures. These include 

reductions in specific power consumption, a reduced need for gas compressors, and smaller 

electrolysis cells [3, 16]. 

Negative

Electrode

Hydrogen

Separation 

Diaphragm

Positive

Electrode

Oxygen

Electrolyte

Bipolar

Electrode

Figure 5. Picture of the bipolar (filter-press) design

8
IV. Potential from Renewable Energy Sources— 

Wind and Solar 

The idea of using renewable energy to produce electricity for electrolysis was born in the 

early 1900s. In 1923, John B.S. Haldane proposed that hydrogen and oxygen could be 

produced via electrolysis from electricity generated by wind turbines. The hydrogen and 

oxygen could then be stored and later used to make electricity via ICEs or fuel cells when 

electric power is needed or for industrial, transportation, or heating applications [17]. 

In the 1930s, Hermann Honnef conceptualized the use of megawatt-scale wind turbines to 

produce electricity for hydrogen production [18]. Other ideas to use wind turbine technology 

for hydrogen production were proposed in the early 1970s. William Heronemus anticipated 

the increases in wind turbine sizes. He proposed using megawatt-scale offshore wind 

turbines to electrolyze seawater. The hydrogen produced would then be piped back to land. 

Smaller scale wind electrolysis systems that focused on residential applications were also 

proposed by L.W. Zelbey [18]. 

With the advent of new solar technologies in the 1960s and 1970s, electrolysis via solar 

energy was proposed and studied by numerous people [19−21]. Since that time a few 

experiments have detailed the use of solar energy and photovoltaic (PV) systems for 

electrolytic production of hydrogen [22, 23]. There has also been a great deal of research 

about using wind to produce electricity for electrolysis [24−28]. These papers discuss wind 

electrolysis and include techniques for optimization of electrolyzer efficiency by switching 

stack components and integration with power electronics. 

Figure 6(a−e) shows several ways to use renewable energy (electricity) from PV and wind 

energy for hydrogen production. Figure 6(a) shows the direct conversion of water to 

hydrogen and oxygen via a direct photoelectrochemical (PEC) approach. This method may 

offer the most direct and efficient way to produce hydrogen from water, but it is still in the 

research stages. Figure 6(b) uses PV to produce DC electricity and to connect directly to an 

electrolyzer stack. Figure 6(c) shows how PV could supply energy to the grid, which is then 

used to produce hydrogen via electrolysis. This approach allows for the solar electricity 

production to be located separately from hydrogen production. The two wind hydrogen 

pathways shown in Figure 6(d) and Figure 6(e) demonstrate electricity produced at the wind 

site, and transferred to the hydrogen generation point via the grid; and wind used to 

coproduce hydrogen and grid electricity at the wind site. Figure 6(d) the rectifier to produce 

DC electricity for the electrolyzer stack is located at the electrolyzer. In Figure 6(e) DC 

electricity current is taken from a rectifier inside the wind turbine and directly connected to 

an electrolyzer. 

A recent study [29] examined the potential for hydrogen production from renewable 

resources, including solar and wind. Figure 7 shows the potential for hydrogen production 

from wind and solar. This study shows that the United States has ample solar and wind 

resources to meet its transportation fuel needs, and shows where those resources are most 

9
prevalent. However, renewable energy systems face challenges to reduce the cost of 

electricity and to independently meet the energy requirements of distributed fueling stations. 

PV Water Hydrogen

Oxygen

PV Electrolyzer Hydrogen

Oxygen

DC Electricity

PV

Electrolyzer Hydrogen

Oxygen

DC Electricity Inverter AC Electricity Rectifier

DC Electricity

Wind Electrolyzer Hydrogen

Oxygen

DC Electricity

Inverter AC Electricity

Wind Electrolyzer Hydrogen

Oxygen

AC Electricity Rectifier DC Electricity

(b) Direct PV to Electrolysis 

(c) Grid-Connected PV Electrolysis 

To Grid

To Grid

(d) 

(e) Direct Wind DC to Electrolysis with Optional Grid Connection

To Grid

Figure 6. PV and wind electrolysis configurations 

In the past, the greatest drawbacks to using wind and solar technologies were the prohibitive 

capital costs of the technologies and the variable nature of the resources. Over the last 30 

years, the costs of solar and wind have significantly declined. Section V summarizes the 

economics of electrolysis from a variety of production methods, including renewables. 

10
Figure 7. Hydrogen potential from solar and wind resources 

11
V. Economics of Electrolysis 

Figure 8 shows the cost of producing hydrogen from a large-scale electrolysis system that is 

available today and uses either industrial or commercial electricity rates [29]. This analysis 

was conducted with the Hydrogen Analysis (H2A) tool, which was developed to allow 

analysts to use a consistent approach, a standard methodology, and transparent assumptions 

to provide hydrogen production costs [30]. 

Figure 8. Components of the cost of hydrogen

H2A uses $/kg as the standard unit of hydrogen price because one kilogram of hydrogen has 

roughly the same energy content of a gallon of gasoline. If a kilogram of hydrogen and a 

gallon of gasoline have the same cost and are burned in engines with the same efficiency, the 

resultant $/mile will be similar. 

For this study, electricity prices were based on standard H2A projections from 2005 to 2045. 

Industrial rates were $0.044−$0.050/kWh, with a value of $0.045/kWh in 2005. Commercial 

rates were $0.067−$0.077/kWh, with a value of $0.069/kWh in 2005. The study shows that 

electricity costs are the most significant contributor to hydrogen costs produced via 

electrolysis, contributing 60% and 68% of the total cost when industrial and commercial 

electricity rates are used, respectively. The capital costs are the second highest cost 

contributor. 

12
The U.S. Department of Energy (DOE) has set the cost target for hydrogen at $2.00–$3.00/kg 

to serve the transportation market [31]. The costs calculated in Figure 9 include production, 

not delivery. As a result, to meet this target, the cost of hydrogen produced via electrolysis 

from industrial electricity needs to be reduced by at least $1.00, and likely more than $2.00 

(2005 dollars) to meet the DOE cost goals. 

Figure 9. Cost of hydrogen versus electricity without equipment costs

There are opportunities for reducing the capital and operating costs of the electrolyzer, but 

electricity prices are a key driver to hydrogen cost. Figure 9 shows electricity versus hydrogen 

costs, but takes into account only the cost of the electricity used to split the water into 

hydrogen and oxygen. This figure represents a boundary analysis of the electrolysis 

technology. If the electrolyzer were free, had no operation and maintenance costs (other then 

electricity), operated at a 100% capacity factor, and had no delivery or dispensing costs, this 

figure would show the cost at which hydrogen could be produced. The results demonstrate 

that to meet the DOE target of $3.00/kg, electrolyzers with today’s efficiencies would need to 

have access to electricity prices lower than $0.045–$0.055/kWh. Ideal systems would need 

to have access to electricity prices lower than $0.075/kWh, which represents the highest 

possible electricity price that low-temperature electrolyzers would be able to use to produce 

hydrogen at $3.00/kg. The importance of electricity price is a key reason why utilities need 

to be involved if the future hydrogen economy includes electrolysis. 

One of the most promising ways to provide clean, domestic, carbon-free energy to 

electrolysis units is via electricity produced from wind and solar technologies. However, 

these technologies face challenges with electrolysis in the areas of cost and energy output 

variability. Both wind and solar sources produce electricity that varies with the natural 

13
processes that drive them. For a solar system, typical capacity factors are about 25%; wind 

systems are around 35%. These values vary across the United States based on the quality of 

the resource. 

Solar technologies include PV, concentrating solar power (CSP), and solar water heating. 

These technologies have seen a dramatic price decline since the 1970s. Current costs and 

projections to 2015 are shown in Figure 10. This shows that solar technologies that convert 

their power to alternating current (AC) electricity will not to be able to meet the $/kWh levels 

needed to meet the DOE cost targets for hydrogen production before the 2015 range. But 

there may be ways to optimize a directly connected PV array to an electrolyzer that can meet 

the cost targets. Since the PV array produces DC electricity and the electrolyzer stack uses 

DC electricity the elimination of some power electronics could make a direct PV to 

electrolysis system economical. 

Figure 10. Cost of solar technologies (2005−2015) [32]

Wind turbine technologies have also seen a significant decline in the cost of energy (COE) 

since the 1970s. Wind turbines can currently produce electricity at $0.045–$0.055/kWh in 

the Class 4 wind regions that are broadly available across the United States, depending on 

many factors, including project financial structure. Figure 11 shows the Low Wind Speed 

Technology cost targets (in cents) for wind technologies in Class 4 locations [33]. 

14
Figure 11. COE baseline and targets for low wind speed technology (LWST) 

2002−2012

Figure 12 shows the areas of the country that have Class 4 wind locations. Most of the Class 

4 and greater wind resources are in North Dakota, South Dakota, Minnesota, Wyoming, 

Iowa, Colorado, Kansas, and Texas. Since these sites are typically far from major population 

and load centers, transmission costs of the wind electricity or hydrogen must be considered. 

For onshore Class 4 and higher land areas have an area of 568,944 km2 after standard 

exclusions (such as National Park Service areas, Fish and Wildlife Service areas, federal 

lands with special designations, Forest Service lands, and Department of Defense lands) are 

applied. Assuming 5 MW/km2

 [34] installed nameplate capacity calculates to 2,845,000 MW 

of potential for Class 4 and higher locations. The amount of hydrogen that can be produced 

from this class for wind can be calculated by multiplying the amount of energy produced by 

the electrolyzer energy need. Using 58 kWh/kg for the electrolyzer energy need, which is a 

system electrolyzer efficiency of 67% this leads to a hydrogen production rate of 154 billion 

kg/yr from Class 4 and higher wind in the United States. In 2004, the United States used 140 

billion gallons of gasoline [2], so there is the potential to economically supply all of the 

current gasoline needs with wind-generated hydrogen. 

15
Figure 12. Percent of the land area in the contiguous United States estimated to have 

Class 4 or higher wind power [29]

The class of wind is important because it determines the capacity factor of the wind. Both 

the capacity factor and the price of electricity from the wind farm are critical parameters in 

the economics of hydrogen produced from wind. An analysis was conducted to quantify the 

effects of these two parameters on hydrogen delivered from central wind production plants. 

Figure 13 shows how delivered hydrogen price changes with different capacity factors and 

electricity prices for currently available (2005) electrolyzer technologies. In the current case 

the wind farm does not have the capability of coproducing electricity or purchasing electricity 

from the grid so the electrolyzer farm is sized to the maximum capacity of the wind farm, and 

operates with a capacity factor of 30%, 41%, or 55%. The COE at which the wind farm 

produces power was then varied for each capacity factor to determine the effects of electricity 

prices and capacity factors. Higher electricity prices represent higher wind farm costs; lower 

electricity prices represent lower wind farm costs. Higher capacity factors represent more 

efficient or higher class wind farms; lower capacity factors represent less efficient or lower 

class wind farms. 

16
Current Centralized Wind Hydrogen Cost Dependencies on Electricity 

Price for Various Electrolysis Capacity Factors

Assumes: $800/kW electrolyzer installed, 53.4 kWh/kg of hydrogen by electrolyzer (64% LHV 

efficiency), 10% IRR, $3.50/GGE delivery cost 

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

0.000 0.020 0.040 0.060 0.080 0.100 0.120 0.140

Electricity Price ($/kWh)

Hydrogen Cost ($/kg)

0.300

0.410

0.550

Source: Cost, resource requirements, energy requirements, all fuel and feedstock energy contents, and efficiency values 

for the Current (2005) case is from the National Renewable Energy Laboratory and the H2A model, Version 1.0.9 for a 

125,000 kg/day capacity wind electrolysis facility.

Capacity

Factors

Figure 13. Current (2005) wind hydrogen production system: capacity factor and 

electricity price effects on hydrogen cost in $/kg 

As we look at a future case, we make assumptions based on best available plans from 

industry. Figure 14 shows how hydrogen cost changes at different capacity factors and 

electricity prices for a future case where electrolyzer costs have decreased, electrolyzer 

efficiencies have increased, and delivery costs have decreased. The higher capacity factor 

cases here allow for wind farms that have the possibility of buying electricity from the grid so 

that the electrolyzer can operate at its maximum operating capacity factor of 97%. The 

capacity factors and electricity prices were then varied to determine the effects of these 

parameters on hydrogen produced from the system. Higher electricity prices represent either 

higher wind costs, higher grid electricity costs, or a combination of the two. Every lowering 

of the capacity factor can either represent a system with less wind available, or a system with 

less grid electricity available at the specified electricity price. 

In the current case, capacity factor and electricity price increases lead to larger increases in 

hydrogen price when compared to the future case. The capacity factor has a larger effect in 

the current case because of the higher capital cost of the system. It costs more to have the 

current systems idle than the future systems. The electricity price has a larger effect in the 

current systems because the systems are less efficient. In the current systems 53.4 kWh are 

required to produce 1 kilogram of hydrogen; in the future systems, only 44.5 kWh are needed 

to produce 1 kilogram of hydrogen. A higher COE leads to a higher hydrogen price in the 

current system because more electricity is needed to produce each kilogram of hydrogen. 

This simple analysis shows the importance of maximizing the capacity factors of wind 

17
hydrogen systems and minimizing the electricity costs from the wind, or a combined 

wind/grid system. 

Future Centralized Wind Hydrogen Cost Dependencies on Electricity Price 

for Various Electrolysis Capacity Factors

Assumes: $180/kW electrolyzer installed, 44.5 kWh/kg of hydrogen by electrolyzer (76% LHV 

efficiency), 10% IRR, $1.00/GGE delivery cost 

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

0 0.02 0.04 0.06 0.08 0.1 0.12 0.14

Electricity Price ($/kWh)

Hydrogen Cost ($/kg)

0.30

0.50

0.80

0.97

Source: Cost, resource requirements, energy requirements, all fuel and feedstock energy contents, and efficiency values 

for the Future (2030) case is from the H2A model cases modified to reflect the Department of Energy’s Hydrogen Fuel 

Cells, and Infrastructure Technologies Program 2015 cost goals as of November 2005.

Capacity

Factors

Figure 14. Future wind hydrogen production system: capacity factor and 

electricity price effects on hydrogen cost in $/kg 

Another important aspect of the eventual cost of hydrogen is whether it is produced centrally 

and delivered or produced in a distributed fashion at the point of use (Figure 15). Recent 

studies have shown that in the future, hydrogen produced from wind—either at the wind farm 

or at the point of use—has the potential to meet the DOE cost goals of $2.00−$3.00/kg, 

including production, delivery, and dispensing. If electricity from several wind farms is 

available at the filling station for $0.038/kWh, distributed hydrogen production can meet the 

cost goal. Hydrogen production at the wind site makes fiscal sense if the wind/hydrogen 

system can be optimized in such a way that cost reductions of the combined system offset 

delivery cost. The central and distributed systems will require increases in electrolyzer 

efficiencies and decreased capital costs from today’s numbers [35]. 

18
Figure 15. Examples of wind electrolysis being produced centrally or distributed at 

the point of use

19
VI. Opportunities for Electrolysis 

There are several potential benefits of using electrolysis as an integral part of operations in 

the electric power industry. If just the transportation market switched to a hydrogen-based 

product, this could be a large new opportunity for electric utilities to provide electricity for 

electrolysis or possibly provide the hydrogen end product. 

In 2004, the United States used 140 billion gallons of gasoline. This would be equivalent to 

approximately the same number of kilograms of hydrogen if it were combusted in a hydrogen 

ICE. Hydrogen produced via electrolysis would require 8,090 TWh of electricity based on an 

electrolyzer system efficiency of 67%. This would require a doubling of the current 

throughput of the electrical power system. The current electrical system installed capacity is 

938 GW and runs at an overall capacity factor of 45% [2]. If electrolyzers were used only 

during off-peak times, this would increase the efficiency of the electrical power system by 

allowing it to run closer to its rated capacity. 

If off-peak electricity is inexpensive compared to on-peak, energy storage can be a valuable 

resource. Producing and storing hydrogen during off-peak times can add load to the off-peak 

times and create stores of energy to be used in conjunction with a fuel cell or hydrogen 

engine-generator set to produce electricity when it is needed most. Several studies about 

using off-peak hydrogen production have been conducted [36, 37]. 

The benefits of using off-peak electricity to make hydrogen include improving the load factor 

of electric power distribution and transmission facilities and increasing the efficiencies of 

intermediate generation by allowing them to run at their optimal efficiencies. One of the 

biggest drawbacks to using hydrogen is the round-trip efficiency. Since current technology 

electrolyzers, fuel cells, and engines have relatively low efficiencies, the total hydrogen 

production-storage-use system will have low round-trip efficiencies. 

Another benefit of electrolysis is that it can reduce the intermittent electricity production 

from renewable resources. By making hydrogen and storing it for later use, hydrogen 

systems can improve the capacity factor of renewable energy systems. This could help to 

make the output of the renewable energy constant, or it could be used for peaking periods 

only. This would also allow for transmission-constrained areas to store hydrogen off peak 

and use it for grid support on peak. By allowing for coproduction of hydrogen and electricity, 

the utility could optimize its production and storage, and optimize the system based on 

economics or reliability factors. 

Hydrogen production would also be used to capture “stranded” wind resources where new 

transmission cannot be built. Wind hydrogen production systems may also benefit from 

being able to coproduce electricity along with the hydrogen. Analyses have shown that 

systems that are optimized for hydrogen production and electricity generation have slightly 

lower hydrogen prices, even if the electricity is sold at prices as low as $0.03/kWh [38]. 

20
There are also ways to reduce the cost of renewable-electrolysis systems. The power 

electronics of the renewable energy system and electrolyzer [39, 40] might be integrated, and 

wind towers might be used as hydrogen storage tanks [41]. 

A near-term application for electric utilities is the use of electrolysis to produce hydrogen on 

site for generator cooling. Here hydrogen gas, with its high thermal capacity and low density, 

is used as a cooling agent [5]. Electric utilities benefit because they can generate pure and 

pressurized hydrogen on site via electrolysis using inexpensive electricity from their power 

plant. This is often the least expensive option compared with purchasing and storing bottled 

hydrogen that has been produced elsewhere for the same purpose [42]. Another potential 

market for electrolytically produced hydrogen is ammonia production for fertilizer use. In 

this application, hydrogen would need to be produced at lower costs than SMR to be 

economical. The near- and long-term uses for hydrogen would be for transportation fuels. 

There is potential for all U.S. transportation needs to be met with hydrogen that is produced 

from clean energy sources. 

21
VII. Future Directions 

In October 2005 the utility industry, with the help of DOE, the National Renewable Energy 

Laboratory (NREL), the Electric Power Research Institute (EPRI), and the National 

Hydrogen Association (NHA), formed the Hydrogen Utility Group (HUG). Its mission is to 

accelerate utility integration of promising hydrogen energy-related business applications 

through the coordinated efforts and actions of its members in collaboration with key 

stakeholders, including government agencies and utility support organizations. The utilities 

that founded HUG are Arizona Public Service, DTE Energy, Entergy, Fort Collins Utilities, 

Nebraska Public Power District, New York Power Authority, Sacramento Municipal Utility 

District, Southern Company, and Xcel Energy. 

Several projects that examine renewable electrolysis are underway. The City of Fort Collins, 

Colorado, along with support from the Governor’s Office of Energy Management will soon 

have hydrogen and Hythane® (a mixture of hydrogen and natural gas) fueling capability to go 

along with the compressed natural gas (CNG) fueling station [43]. The alkaline electrolyzer 

used in the project is unique in that it will produce hydrogen at 6,500 psig without a 

compressor. Cascade storage will allow 5,000 psig vehicle fueling. The dispenser can fuel 

hydrogen and Hythane vehicles. Vehicles designed to run on CNG can be fueled with 

Hythane, which will result in a 40%–50% reduction in emissions compared to CNG. 

DOE awarded Basin Electric Power Cooperative a contract to investigate a wind-to-hydrogen 

system [44]. The project will install an alkaline electrolyzer that can produce 30 Nm3/h of 

hydrogen gas running in one of four dynamically scheduled power delivery modes. 

Dynamically scheduled wind power will be dispatched to the grid-connected electrolyzer in 

Minot, North Dakota, based on an output signal from one of North Dakota’s geographically 

diverse wind facilities [40]. The University of North Dakota’s Energy & Environmental 

Research Center conducted a feasibility study and determined that hydrogen will be produced 

for $10–$20/kg. 

The University of Minnesota West Central Research and Outreach Center is developing a 

wind-to-hydrogen demonstration system in partnership with Xcel Energy and other 

Minnesota stakeholders [45]. Installation of the 1.65-MW wind turbine was completed in 

March 2005 with funding from the Legislative Commission on Minnesota Resources. 

Completion of the first phase of the three-phase project will include the installation of a 400-

kW alkaline electrolyzer, hydrogen storage tanks, ICE generator, and interconnection to the 

grid. Primary project goals involve the use of wind-derived hydrogen gas to produce 

transportation fuels and agricultural products and mixing with natural gas for utility peakshaving. 

NREL and Xcel Energy are working on a project to analyze and compare hydrogen 

production from wind power and the electric grid. The hydrogen will be produced through 

electrolysis, compressed, stored, and used to run an engine during peak electrical demand 

periods. The project will explore creating synergies from coproduction of electricity and 

22
hydrogen to address the intermittent nature of wind power, creating a ready source of 

electricity for when the wind doesn’t blow or the demand for electricity is high, consistent 

support of the electric grid from off-peak storage of hydrogen, and the potential use of 

hydrogen for vehicle use. Research will include comparing multiple electrolyzer 

technologies, including an alkaline electrolyzer and PEMs to gauge their efficiencies; their 

abilities to be brought on- and off-line quickly; and the development of AC−DC and DC−DC 

converters to direct couple the wind turbine to the electrolyzer to achieve efficiency gains. 

Figure 16 shows a planned layout for the project. 

Figure 16. Xcel-NREL Wind2H2 project diagram

23
VIII. Conclusions 

This report describes the opportunities for the electric power industry as our fossil-fuel 

economy shifts to using hydrogen. The electric power industry is in a unique position, if the 

transportation sector converts to hydrogen produced from clean energy sources, to help the 

country increase energy independence and reduce carbon and pollution levels. The current 

transportation market is larger than the current electricity market. If electrolysis is used to 

produce hydrogen, utilities could more than double the amount of electricity they provide, 

and some could be provided without adding capacity. There are more than enough solar and 

wind resources in the United States to produce all the hydrogen needed from wind and solar 

resources, so utilities could provide a clean, carbon-free fuel. In addition, there are market 

opportunities today for utilities to start gaining experience in hydrogen production, if they 

wish to position themselves as transportation fuel providers of the future. 

Electrolysis can only meet the DOE cost target of $2.00−$3.00/kg for hydrogen if 

inexpensive electricity is available. However, studies have shown that electrolysis is a costeffective way to produce hydrogen from clean energy sources, including renewables like solar 

and wind. Several utilities are currently conducting research into the integration and 

optimization of these technologies into the electric power system. 

24
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7 TAB, 1976. 

25
[21] J. Hanson, “Concepts for Solar Production of Hydrogen,” Hydrogen for Energy 

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[22] R. Foster, R. Tison, and W. Escher, “Solar/Hydrogen Systems for the 1985-2000 

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[28] S. Sherif, F. Barbir, and T. Veziroglu, "Wind energy and the hydrogen economy - 

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atlas/titlepg.html. 

[35] J. Levene, B. Kroposki, and G. Sverdrup, “Wind Energy and Production of Hydrogen 

and Electricity - Opportunities for Renewable Hydrogen,” NREL Report No. CP-560-

39534, 2006. 

[36] J. Burger and P. Lewis, “Energy Storage for Utilities via Hydrogen Systems,” 

presented at 9th Intersociety Energy Conversion Engineering Conference, 1974. 

[37] R. Fernandes, “Hydrogen Cycle Peak-Shaving for Electric Utilities,” presented at 9th 

Intersociety Energy Conversion Engineering Conference, 1974. 

[38] J. I. Levene, “An Economic Analysis of Hydrogen Production from Wind,” NREL, 

Golden, CO NREL/CP-560-38210, May 2005. 

26
[39] C. Elam, B. Kroposki, G. Bianchi, and K. Harrison, “Renewable electrolysis 

integrated system development and testing,” NREL, Golden, CO, DOE Hydrogen 

Program, Progress Report FY2004, 2004. 

[40] L. J. Fingersh, “Optimized Hydrogen and Electricity Generation from Wind,” NREL, 

Golden, CO NREL/TP-500-34364, June 2003. 

[41] R. Kottenstette and J. Cotrell, “Hydrogen storage in wind turbine towers,” NREL, 

Golden, CO, www.nrel.gov/docs/fy03osti/34656.pdf, September 2003. 

[42] D. J. Smith, “Advances in Power Plant Generator Cooling, Driving Plant 

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Center, 2005. 

27
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Electrolysis: Information and Opportunities for Electric Power 

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14. ABSTRACT (Maximum 200 Words)

Recent advancements in hydrogen technologies and renewable energy applications show promise for economical 

near- to mid-term conversion to a hydrogen-based economy. As the use of hydrogen for the electric utility and 

transportation sectors of the U.S. economy unfolds, electric power utilities need to understand the potential benefits 

and impacts. This report provides a historical perspective of hydrogen, discusses the process of electrolysis for 

hydrogen production (especially from solar and wind technologies), and describes the opportunities for electric power 

utilities. 

15. SUBJECT TERMS

hydrogen; hydrogen-based economy; electric utility; electrolysis 

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