How to Determine the ROI of a Hydrogen Renewable Energy System

If you're thinking of investing in a hydrogen renewable energy system, you may be wondering how to determine its ROI. Before diving into the specifics, let's take a quick look at its sources, applications, and cost. Friedmann says it's not useful to think of the green hydrogen cost as energy return on investment, but rather as a return on investment. He explains the reasons why. Read on to learn more.


Hydrogen is a renewable energy source with a wide range of potential applications. Despite its relative inefficiency, it can be used to address critical energy challenges and decarbonise sectors. The oil industry and chemical industries, which use hydrogen as a feedstock, are already highly reliant on the fuel. But by decarbonising these industries, hydrogen can improve air quality and reinforce energy security. Globally, energy-related CO2 emissions reached an all-time high in 2018. Meanwhile, outdoor air pollution is one of the biggest health concerns, contributing to premature deaths.

The optimum hydrogen pathway depends on trade-offs between several factors. These factors include initial capital investment, efficiency, and decarbonisation impact. Changing the energy system requires a substantial investment, and some options may be less costly initially but provide less carbon-savings than others. Hydrogen blends with CH4 will not result in optimal decarbonization, but they will be easier to implement and allow off-loading of surplus renewable power.

In the United States, approximately 7,600 hydrogen fuel-cell cars are on the road today. During the same period, there were 326,400 plug-in electric cars sold. Hydrogen is expected to play a significant role in decarbonizing certain vehicle segments. The benefits of hydrogen will most likely be felt in heavy-duty trucks and forklifts. The next step will be to increase the production of hydrogen fuel cells.

Hydrogen production is possible in three primary ways: thermochemical reforming of fuel, electrolysis, and photolysis. All of these processes produce hydrogen and have varying levels of efficiency. The most advanced method is SMR, which produces ninety percent of hydrogen globally, while electrolysis provides less than one percent. SMR is also the cheapest option, but requires CCS technology to deliver low-carbon hydrogen. While the cost of electrolysis is comparatively high, it offers a viable alternative to grid electricity.


The energy efficiency of hydrogen is one of the most coveted goals in the decarbonization process. But hydrogen isn't free of problems. Some critics point to its gross inefficiency in producing electricity, whereas others say the problem is a more basic one. Sources of hydrogen include natural gas pipeline infrastructure and blue hydrogen. But how much does blue hydrogen cost? And what is its potential for industrial applications and long-distance heavy-duty vehicles and aircraft?

The cost of producing hydrogen via electrolysis is around $3 to $8 per kilogram by 2020. This cost is much lower for countries such as California, where the cost of gas is low. Higher gas import costs mean that hydrogen production costs are higher in gas-importing countries. Nevertheless, water electrolysis is growing in popularity and the price of fossil fuels is falling. Hydrogen production by hydrothermal reforming still relies on fossil fuels, but the process is getting more affordable as electricity is becoming more affordable.

It has enormous potential in decarbonising niches such as aviation, maritime and heavy transport. Several hydrogen projects are already underway. Projects like Hycarus and Cryoplane, endorsed by the European Union, aim to put hydrogen in passenger aircraft. The EU is also promoting the use of hydrogen in heavy vehicles and trains. This will reduce fuel costs and save the environment. If it's available, hydrogen will eventually make transportation cleaner, more efficient, and more environmentally friendly.

A new generation of fuels for hydrogen production has come in the form of green and blue gas. While blue hydrogen is made using natural gas and captures carbon dioxide emissions, green hydrogen uses electricity to split hydrogen molecules from oxygen molecules in water. It also produces byproduct water. The global demand for hydrogen is expected to increase by 25 to 30% by 2040, but the world will look very different in 2050. Sources of hydrogen renewable energy cannot meet all the needs of the world. However, there are several methods of extracting hydrogen.


With the growing demand for energy, the world's fossil fuel economy is becoming depleted. Because fossil fuels do not replenish themselves, they have no renewable properties. Additionally, most of the people who use them do not live in the region where they are extracted, so consuming nations have an incentive to control fuel supply regions. The use of hydrogen as an alternative source of energy is therefore the most promising way to help the world decarbonize.

Stationary fuel cells are becoming increasingly popular in data centers and hospitals as a backup power source for computers and servers. In fact, Microsoft has recently started testing backup generators powered by hydrogen. Hydrogen offers a wide range of options for mobile power generation. The earliest fuel cells were developed by NASA for spacecraft. These hydrogen-powered generators are highly efficient and can provide power for 13 hours or more. Hydrogen fuel cells also make good backup generators for trucks and other mobile devices.

Another use for hydrogen is in the chemical industry. Hydrogen can be used to make fertilizers, ammonia, and petroleum products. Hydrogen is being considered for use in the steel industry, which is already under immense pressure in Europe due to its pollution-causing effects. Hydrogen can help change the processes of steel-making, as well as save money on fossil fuels. But hydrogen is not a viable alternative for every industry.

Today, most hydrogen used in the world is produced through steam methane reforming. In this process, hydrogen is created by a catalyst reacted with methane. In addition to hydrogen, carbon monoxide and carbon dioxide are produced. Once this reaction is complete, the hydrogen remains pure, while carbon dioxide and hydrogen remain separated. Other fossil fuels, such as oil, can be used for hydrogen production. Although hydrogen is not a great energy source, it can be a useful commodity in transportation and power generation.


Hydrogen is a highly sustainable form of energy. Its use has increased tremendously since the 1970s, and the demand has doubled since then. Today, global consumption is around 70 million tonnes per year. Furthermore, hydrogen is a clean energy source that produces no residue in the atmosphere. Furthermore, its production and use are cost-effective, and local governments often subsidize their costs. However, this energy source has limited capacity as a baseload operation.

To assess the cost-effectiveness of hydrogen production, consider several factors. The size of the installation determines its cost. There are different pathways for generating hydrogen, which can further reduce the cost. Currently, most hydrogen is produced in centralized plants, but there are also smaller-scale hydrogen production systems that can be used to supply the market. Costs associated with centralized production are typically higher than those of distributed production, as the hydrogen must be transported to different locations. However, many authors consider distributed production as the most likely pathway during the market development phase.

Hydrogen is a cleaner energy source than coal, and it can compete with traditional forms of fuel and energy. For instance, the Norwegian electrolyzer maker Nel ASA is targeting a cost of $1.50/kg by 2025. Meanwhile, Malaysian oil and gas giant Petroliam Nasional Bhd. aims to produce green hydrogen at a cost of $1-$2 per kilogram by 2025. However, there are some challenges to overcome. To achieve this, investors need to invest across the value chain.

Despite high costs, some experts say that the cost curve is likely to bend in the coming years. The cost of hydrogen and electricity are highly correlated with the availability of a low-carbon electricity source. While there are many costs associated with producing green hydrogen, the fuel cost will ultimately be the limiting factor. The P2X business case separates dedicated green electricity from excess green electricity. Hydrogen is the preferred energy for this application, but the cost of fuel will drive the profitability of the project.


In a rapidly growing global energy industry, hydrogen is proving to be a highly viable and cost-effective source of renewable energy. A growing demand for the gas has led to a rapid growth of the production of hydrogen. Currently, over 6% of global natural gas and 2% of global coal are used for the production of hydrogen. This process is responsible for emitted CO2 of up to 830 million tonnes per year – the equivalent to the emissions produced by the United Kingdom and Indonesia combined.

The recent federal funding for hydrogen research and development in the recently passed infrastructure bill is raising questions about the future of this fuel and elevating its role in state carbon plans. In addition, advocates argue that hydrogen's potential role in reducing carbon emissions in heavy industry and long-haul transportation could be critical in achieving the goals set by the Paris Climate Agreement. In addition, the recent investment in U.S. hydrogen research shows that hydrogen is a promising fuel that is essential in a low-carbon future.

Currently, hydrogen is largely used in the petroleum refining and chemical processing industries. The key piece of infrastructure needed for hydrogen production is the electrolyzer, which is a process in which hydrogen is converted from a liquid into a gas. There are two basic types of electrolyzers: solid polymer electrolyzers and alkaline water electrolyzers. Solid oxide electrolyzers are currently being used in space and are expected to eventually replace PEM devices. In Iowa, renewable H2 is already competitive with conventional fuels.

State and regional efforts to build hydrogen hubs are underway to make hydrogen more accessible to consumers. The IIJA program will provide $8 billion for hydrogen hubs and has created a significant opportunity to leverage existing infrastructure and assets. The US Department of Energy's Office of Clean Energy Demonstrations is working to facilitate hydrogen hub development. Further, individual states are seeking hydrogen hubs to facilitate the economic development of hydrogen. However, state and regional governments will need tools to identify opportunities for hydrogen hubs and connect them with potential partners.

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Written by Dana

Capstone Green Power Corporation

Renewable Energy Corporation (REC)