Financial Analysis
Following the technical analysis carried out in this project, the results led to the establishment of three proposed designed parameters for each of the case studies, namely Kentish Flats, Thanet and Hornsea 2 Wind Farms. The size of the Electrolyser or its capacity, the capacity of the Reverse Osmosis (RO) Desalination unit and the estimated annual hydrogen production from each site were estimated, given its particular requirements.
These parameters are summarised in the tables that follow:
Kentish Flats Wind Farm
Parameters | Value |
|---|---|
Electrolyser Capacity (kW) | 50 |
RO Unit capacity (m3/d) | 20 |
H2 produced annually (kg) | 3,650 |
Thanet Wind Farm
Parameters | Value |
|---|---|
Electrolyser Capacity (kW) | 100 |
RO Unit Capacity (m3/d) | 30 |
H2 produced annually (kg) | 12,775 |
Hornsea 2 Wind Farm
Parameters | Value |
|---|---|
Electrolyser Capacity (kW) | 1,000 |
RO Unit Capacity (m3/d) | 40 |
H2 produced annually (kg) | 109,500 |
Levelised Cost of Hydrogen (LCOH)
The Levelised Cost of Hydrogen (LCOH) is the discounted lifetime cost of building and operating a production asset, expressed as a cost per kilogram of hydrogen produced (£/kg). It covers all relevant costs faced by the producer, including the capital, operating, fuel and financing costs.
It is the ratio of the total costs of a generic/illustrative plant to the total amount of hydrogen expected to be produced over the plant’s lifetime. Both values are expressed in net present value terms. This means that future costs and outputs are discounted when compared to costs and outputs today.
The three systems' future capital expenditure (CAPEX) and operational expense (OPEX) were estimated. The Levelised Cost Of Hydrogen, LCOH (£/kgH2), was calculated using Equation (1):
with the storage capability, t Storage (days of storage required) indicated the size of the storage tank where the specific cost of the compressed hydrogen storage tanks, CAPEXSpec.storage (£/kg), was obtained from references.
CAPEX included capital and replacement costs whilst OPEX accounted for operation, maintenance and electricity costs. The parameter r represented an interest/discount rate that applied for an investment, which was assumed as 7% in this project. T was the lifetime of the system, which was assumed as 25 years. MH2,i was the amount of hydrogen produced by the electrolyser (kg/y) for a particular year, i.
Component Costs
The unit costs for each component in the proposed system, namely the electrolyser, the RO unit and the storage and compression units were estimated based on the values in the table below. This was carried out for three separate years, 2025, 2030 and 2050 [1].
Parameters | 2025 | 2050 | 2030 |
|---|---|---|---|
Electrolyser unit (£/kW) | £748.25 | £511.00 | £328.50 |
Desalination Unit (£/(m3 /d)) | £1,240.60 | £1,081.90 | £585.80 |
Hydrogen Storage (£/kgH2) | £ 391.10 | £373.70 | £351.10 |
Hydrogen Compressor | 3% CAPEX | 3% CAPEX | 3% CAPEX |
PEM Electrolysers
The specific CAPEX of PEM electrolysers based on the cost per kW of input electricity was estimated using data from the literature. The future decrease in CAPEX of PEM electrolysers was expected to be driven primarily by scaling up production over time, learning rate, technological improvements, and increase in the module size of the electrolysers. The OPEX of the electrolyser was comprised of input electricity as well as operation and maintenance (O&M) costs, where different cases of electricity cost were considered.
Desalination Unit
The CAPEX of the desalination unit was estimated based on the daily volume of water required by the electrolyser plant. The O&M costs of the RO desalination unit included labour, maintenance, chemical and membrane exchange.
Storage
Depending on the pressure at which hydrogen is stored, the CAPEX of compressed gas hydrogen storage was calculated based on the amount of hydrogen produced per day, MH2 (kg/day), as reported in Equation (2):
Compression
The CAPEX of the hydrogen compressor was estimated based on the power required at the shaft to pressurise the incoming hydrogen. PEM electrolysers produce high purity hydrogen at pressures ranging between 2 and 6 MPa, resulting in the need to compress the produced hydrogen up to about 7 MPa for the onshore sites. Therefore, a value of 3% of the hydrogen storage CAPEX was considered as the cost of compression.
Cost Analysis
Our cost projections were based on the annual energy requirements for operations and maintenance activities and the resulting hydrogen needs for each site. Given the proposed design parameters, it was determined that the electrolyser cost for all three sites would be the highest. The cost of the desalination process was second only to that of the electrolyser, with storage and compression being the least expensive. All the years under consideration—2025, 2030, and 2050—showed a similar tendency.
The levelized cost of hydrogen is lower at the larger sites despite the higher cost of production due to the higher amount of hydrogen they produce for operations. In contrast, because smaller sites produce less hydrogen for their processes, they have higher LCOH. A drop in the LCOH is predicted because of improvements in hydrogen production technology when costs between 2025 and 2050 are compared.
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Reference
Giampieri, A., Ling-Chin, J. and Roskilly, A.P. (2023). Techno-economic assessment of offshore wind-to-hydrogen scenarios: A UK case study. International Journal of Hydrogen Energy. doi:https://doi.org/10.1016/j.ijhydene.2023.01.346.