Cost-Competitive Electrolysis-Based Hydrogen 

Under Current U.S. Electric Utility Rates

Omar J. Guerra

Josh Eichman, Bri-Mathias Hodge, and Jennifer Kurtz

NREL/PR-5D00-72710

October 30, 2018

2018 AIChE Annual Meeting

Pittsburgh, Pennsylvania
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Outline

Motivation

Methods

Electric utility rates

H2 production cost & Fuel cost for 

transportation

Conclusions & future work
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Motivation: H2@SCALE concept

Electrolysis-based hydrogen production and storage could improve the operation of the 

electric grid while integrating a variety of disparate systems including transportation, 

agricultural, industrial, and residential sectors. 
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Motivation: H2 production pathways (Staffell et al. 2017)
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Motivation: Challenges for H2 and fuel cell technologies 

• Reduce capital costs and increase the efficiency of electrolyzers and fuel cells.

• Development of new materials with improved stability and activity for

electrolyzers, storage devices, and fuel cells.

• Assessing the increased operational flexibility of electrolyzers.

• Obtaining increased data on hydrogen production costs at national and

regional scales.

Research questions

Q1: Which are the locations (regions, cities, etc.) with potential market for

hydrogen and what is the hydrogen production cost for these locations?

Q2: What is the optimal operational strategy for electrolysis-based hydrogen

production?
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Methods: RODeO-Revenue Operation and Device Optimization Model 

Grid

Hydrogen 

Storage

Electrolyzer

Tube Truck

System to be modeled Optimization framework

Research aims:

• Explore electrolysis-based hydrogen production cost, optimizing retail rates

• Improve competitiveness of hydrogen technologies
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Electric utility rates: Retail tariff structure (Faruqui et al. 2010)

Energy and demand charges:

Energy charges are associated with the quantity of energy consumed during a 

single interval, i.e., kWh, while demand charges refer to the maximum demand

that occurs during a billing period, i.e., kW. 

No charge (NO): There is no charge for either energy or demand.

Flat rate (Flat): A single constant charge is used for electricity during each

billing period.

Time of use rate (TOU): Time-varying rates, including time-of-use (TOU), critical

peak pricing (CPP), and real-time pricing (RTP).

https://www.sce.com/wps/wcm/connect/sce_content_en/content/business/rates/time+of+use/time+of+use+faqs
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Electric utility rates: Data set of retail tariffs

Data set: 7,182 commercial and industrial utility rates (retail prices) from the

utility rate database (URDB)--> https://openei.org/wiki/Gateway:Utilities

Tariff structure: EnergyCharge_DemandCharge

Tariff structure

(retail tariff)

Energy charge

(US cents/kWh)

Demand charge

(US$/kW)

Flat_NO (2670) 2.8-18.3 0

Flat_Flat (2500) 0.045-15.9 0.01-21.7

Flat_TOU (489) 1.1-11.7 0.4-19.5

TOU_NO (723) 5.2-15.5 0

TOU_Flat (224) 1.6-15.7 0.5-23.4

TOU_TOU (576) 1.0-13.1 0.3-20.1

Outliers: Based on interquartile range (IQR), which is defined as the difference

between 75th (Q3) and 25th (Q1) percentiles, i.e. IQR= Q3-Q1. The potential

outliers were identified as any value that lies outside the lower and upper

whiskers, which were defined as Q1-1.5*IQR and Q3+1.5*IQR, respectively.

78.8%

21.2%

47.2%

37.9%

14.8%
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Electric utility rates: Energy (Fig. a) & demand charges (Fig. b)

• Energy charges are higher for utility rates that have no charge for demand:

Flat_NO ~US₵11.8/kWh, Flat_Flat ~US₵8.5/kWh, and Flat_TOU ~US₵7.7/kWh.

TOU_NO ~US₵12.7/kWh, TOU_Flat~US₵8.6/kWh, and TOU_TOU ~US₵9.0/kWh.

• Flat demand charges are higher than average TOU charges:

Flat_FlatUS$9.1/kW, and Flat_TOU ~US$8.6/kW. TOU_Flat US$9.3/kW, and

TOU_TOU US$7.4/kW.
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Electric utility rates: Geographic distribution of tariffs
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H2 production cost: Modeling framework & assumptions

System configurations and technology 

assumptions (1 MW electrolyzer) 

• Capital cost: $1,691/kW

• Replacement cost: $18.64/kW-year

• H2 storage capital cost: $1000 /kg

• Fixed O&M cost: $75.2/kW-year

• Lifetime: 20 years

• Interest rate: 7%

• Efficiency: 54.3kWh/kg

• Minimum part load: 10%

• Operation modes: Base load and Flexible

• Capacity factor (CF): 40%, 60%, 80%, 90%, 

and 95%

• Storage duration: 8 h

• Time horizon: 1 year (8,760 time periods) 

Ref: Eichman J. et al. National Renewable Energy Laboratory (NREL),

Golden, CO, 2016.

RODeO

Other 

inputs

Utility 

service

ISO/RTO 

electricity 

markets

Maximum revenue

Operational profile

Energy & demand charges

x

RODeO: Revenue Operation and Device Optimization price taker model. It is formulated as

a mixed-integer linear programming (MILP) model in GAMS.
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H2 production cost: Effect of tariff structure

• Base load and flexible electrolyzer operation modes were evaluated using RODeO.

• Hydrogen demand was constant for each CF.

• The objective function reduces to the minimization of the total annual system cost.

Tariff structure

(retail tariff)

Base load

(US$/kg)

Average reduction in electricity 

cost for flexible mode @CF=90%

(%)

Flat_NO (2670) 3.9-12.3 0

Flat_Flat (2500) 2.6-11.4 0

Flat_TOU (489) 3.4-9.7 ~0

TOU_NO (723) 4.7-11.2 2.8 (max 14.4%)

TOU_Flat (224) 4.5-11.4 1.8 (max 7.0%)

TOU_TOU (576) 3.3-10.5 3.2 (max 13.7%)

• U.S. Department of Energy (DOE) technical targets: @2011U.S. $4.2 kg-1,

@2015U.S. $ 3.9 kg-1, and @2020U.S. $2.3 kg-1

• Hydrogen production cost < U.S. $4 kg-1 for 81 commercial & industrial utility rates

• Hydrogen production costs are cheaper for tariffs that include demand charges.
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H2 production cost: Effects of capacity factor

For tariffs with dynamic pricing for energy and/or demand, there is a trade-off

between electricity cost and equipment, FOM, and storage costs. 
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H2 production cost: Geographic distribution of electricity cost

• Hydrogen electricity costs vary depending on the structure of the tariffs.

• Hydrogen electricity costs are lower for tariffs that have demand charge.
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Fuel cost for transportation: Gasoline and Diesel versus H2

• Fuel cost gasoline cars: US$5.0-8.6 per 100 km. H2 cost fuel cell cars: US$4.9-6.3 per 100 km.

• Hydrogen cost is more competitive for medium duty than for heavy duty vehicles.

All 7,182 tariffs

81 utility rates (H2 Cost ≤ US$ 4.0/kg) 
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Conclusions & future work

Conclusions

• There are 81 utility rates for which hydrogen costs are below US$4/kg.

• Electrolysis-based hydrogen is cost-competitive with gasoline and medium duty diesel

vehicles in several locations in the United States.

• Optimal equipment sizing is a balance between the equipment costs and how dynamic

are the rates (extends beyond electrolysis).

Future work

• Analysis of projected hydrogen demand and future wind and solar power curtailment

across the U.S.

• Hydrogen-based long-term energy storage for power systems with high penetrations of

variable renewables.
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