Pedro Carmo

Pedro Carmo

Director, Consulting Expert

Green hydrogen is fast emerging as a promising strategy to drive decarbonization and achieve climate goals.  It uses electricity from renewable energy sources to split water into hydrogen and oxygen using a process called electrolysis. During this process, no CO2 is produced, making it one of the most encouraging enablers of the energy transition.

However, there are significant challenges in the transition to this clean energy source. The high cost of production compared to fossil-based hydrogen (e.g., grey, blue and turquoise hydrogen produced using fuel like natural gas via different methods) is one of the biggest barriers. According to an IRENA (International Renewable Energy Arena) report, green hydrogen, on average, costs 2-3 times more to produce than blue hydrogen. 

For green hydrogen to make economic sense, the industry needs to find ways of optimizing the levelized cost of green hydrogen (LCOH2), or in other words, minimize CAPEX and OPEX costs related to its production.

Factors that can contribute to reducing the levelized cost of green hydrogen

The technology used in the electrolyzer, its efficiency and cost are key factors contributing to LCOH2. Other factors include electricity costs, location, access to the grid, available storage and transportation technologies.

There is also an industry consensus that scaling plant production can reduce the LCOH2. This means the more electricity the renewable power plant produces, the lower the LCOH2 per kilogram will be. This understanding is driving a trend of combined renewable electricity and hydrogen generation in areas where power plant capacity can be maximized (e.g. offshore wind, large desert areas, etc.).

Another decision revolves around whether to have a grid-connected power plant or a green hydrogen-dedicated power plant detached from the grid. The latter is an option in remote areas miles away from the grid but with high generation capacity (such as strong winds and consistent sun).

Asking the right questions

Once the plant is in operation, it is critical to continue looking for ways to optimize production output, and as a consequence, continue to optimize LCOH2.

Operators will need to make business-critical decisions related to how to use the electricity and hydrogen produced by the power plant to maximize returns.

Based on the known variables such as power plant power purchase agreement (PPA), hydrogen and electricity “spot” market prices, current production and storage capacity, as well as transmission and conversion losses, these are some key questions that will need to be answered:

  • Should I dispatch the electricity directly to the grid, store it, or liquefy the hydrogen and dispatch it through the transportation network?
  • If my power plant is currently curtailed, should I use the excess energy to produce hydrogen? Have I considered other factors such as connection to the grid, grid capacity, storage capacity and options to liquefy and transport hydrogen?
  • If the volume of natural resources (e.g. wind and solar) available is low, should I use the stored hydrogen to produce electricity?

Using data and technology to get the answers

Once again, data and technology will be key to answer these questions and support effective decision-making.

Establishing real-time bidirectional communication with the electrolyzers and storage equipment to enable real-time supervision, control and data acquisition will improve operational decisions.  From a functional and optimization standpoint, systems capable of supporting scenario analysis or AI-based algorithms can also assist and contribute to improved decision-making.

At CGI, our deep industry knowledge of the energy sector combined with end-to-end services helps clients build a strategy, integrate new processes and technologies, and manage systems to help prepare for the hydrogen future. We also offer a portfolio of IP solutions, including our Renewables Management System (RMS) platform, which provides the basic capabilities and harmonized data sets to help our clients answer most, if not all, of these critical questions.

We believe effective collaboration and knowledge exchange with our clients and ecosystem of partners is fundamental to delivering true business value. It will also be foundational to making hydrogen a viable strategy to decarbonize the global energy economy, meet government targets and save our planet.

Contact me to learn more about how we are helping our clients navigate the energy transition.

About this author

Pedro Carmo

Pedro Carmo

Director, Consulting Expert

With more than 21 years of global experience in the energy and utilities sector, Pedro Carmo serves as a consulting expert, helping to identify client challenges, propose transformation roadmaps and deliver innovative solutions to achieve business outcomes. Currently, he leads business development activities for CGI’s ...