Debunking The Myth: Surplus Renewable Electricity Will Not Make Hydrogen Cheap

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A commonly cited argument is that surplus electricity from renewable sources, particularly solar and wind, makes hydrogen production both economical and practical. The rationale seems simple: when the sun shines brightly or winds blow strongly, there’s an abundance of electricity, potentially making hydrogen cheap. But this claim oversimplifies the economic realities.

This is a companion article to the Cranky Stepdad vs Hydrogen for Energy material. In a similar manner to John Cook’s Skeptical Science, the intent is a rapid and catchy debunk, a second level of detail in the Companion to Cranky Stepdad vs Hydrogen for Energy, and then a fuller article as the third level of detail.

Wasting cheap electricity on hydrogen is like using a gold spoon to stir a cup of diner coffee—it’s inefficient and over-the-top.

Electrolyzers are capital-intensive assets. For hydrogen production to be economically viable, electrolyzers need consistently high utilization rates. But surplus electricity from renewables is, by nature, intermittent and unpredictable. Operating electrolyzers only during periods of excess generation significantly reduces their utilization, increasing hydrogen’s production cost rather than reducing it.

Ruhnau and Qvist (2022) underscore this, noting that intermittent utilization of electrolyzers drastically increases the overall cost of hydrogen, undermining the argument that surplus renewable electricity inherently leads to cheap hydrogen.

According to the European Union’s Hydrogen Strategy (2022), relying exclusively on surplus renewable energy is fundamentally inadequate for large-scale hydrogen production. The strategy explicitly highlights that surplus renewable energy alone cannot provide a sustainable economic model due to its limited availability.

Similarly, the California Energy Commission (CEC, 2023) emphasized that excess renewable electricity isn’t reliably abundant enough to support the consistent, large-scale hydrogen production needed for cost efficiency. Low utilization of electrolyzers translates directly into high production costs.

The International Renewable Energy Agency (IRENA, 2021) points out that surplus renewable electricity is insufficient to achieve the economies of scale necessary for competitive hydrogen pricing. Simply put, the intermittency of surplus renewable energy means electrolyzers remain idle far too often, inflating costs rather than reducing them.

Supporting this, the Energy Transitions Commission (ETC, 2021) report notes that scaling up electrolyzers effectively demands consistent, predictable electricity inputs—something surplus renewables inherently fail to provide. Attempting to base large-scale hydrogen production solely on surplus energy leads to an unreliable and costly system.

Peer-reviewed and governmental reports identify alternative, economically viable uses for curtailed renewable electricity. Demand response programs, for instance, allow consumers to shift or reduce electricity consumption during surplus periods, enhancing grid flexibility and cost-effectiveness (Ecofys & Fraunhofer IWES, 2017). Additionally, the establishment of local flexibility markets utilizing storage systems, electric vehicles, and demand-response mechanisms significantly improves grid stability and reduces the necessity for curtailment (BBC News, 2022).

These alternatives not only provide competitive, economically attractive options compared to hydrogen production but also effectively mitigate the challenges of renewable intermittency.

Another critical consideration is the geographic mismatch between areas with frequent renewable energy curtailment and locations with high hydrogen demand. Surplus renewable energy is often generated in remote or rural areas far from industrial centers where hydrogen demand is concentrated. Consequently, transporting hydrogen from production sites to demand centers significantly increases costs, complicating the economic viability (IEA, 2021).

Studies by the U.S. Department of Energy (2022) highlight that hydrogen transportation costs, including compression, liquefaction, and pipeline or truck delivery, substantially add to the overall expense, often undermining the anticipated cost savings from cheap surplus electricity. This geographical constraint and associated transport costs further weaken the economic case for hydrogen produced solely from curtailed renewables.

Recent forecasts by BloombergNEF (BNEF, 2023) have tripled their projected hydrogen prices for 2050 due to slower-than-expected reductions in electrolyzer facility costs. This revision underscores the persistent economic challenges associated with achieving significant cost declines in hydrogen production technologies, further dampening optimism about surplus renewable electricity significantly driving down hydrogen costs.

The idea that surplus renewable energy will drive down hydrogen costs is superficially appealing but ultimately flawed. Competing for limited and intermittent surplus energy results in poor electrolyzer utilization, driving up the real cost of hydrogen production rather than reducing it.

Instead of focusing on intermittent surplus renewables, viable hydrogen strategies require dedicated, stable renewable capacity, ensuring electrolyzers operate at consistently high utilization rates. This approach, rather than hoping for periodic surpluses, offers a realistic path to cost-effective hydrogen.

Reflect on this next time someone suggests surplus renewables are a silver bullet for cheap hydrogen.

References:

• Ruhnau, O., & Qvist, S. (2022). The impact of electricity market dynamics on hydrogen economics.
• European Union. (2022). Hydrogen Strategy for a Climate-Neutral Europe. Brussels: European Union.
• California Energy Commission. (2023). Hydrogen Production Viability Report.
• IRENA. (2021). The Role of Green Hydrogen in Energy Transitions.
• Energy Transitions Commission (2021). Making Hydrogen Competitive: Scaling Up Electrolysis with Renewable Energy.
• Ecofys & Fraunhofer IWES. (2017). Smart Market Designs in Distribution Networks.
• BBC News. (2022). UK introduces incentives for off-peak electricity usage.
• International Energy Agency (IEA). (2021). Global Hydrogen Review 2021.
• U.S. Department of Energy. (2022). Hydrogen Transportation and Delivery Challenges.
• BloombergNEF (BNEF). (2023). Long-term Hydrogen Price Outlook Revised Significantly Upward.