News - Green hydrogen and OPEX

June 2024

What role do operating costs (OPEX) play in the production of green hydrogen?

Promising green hydrogen
Governments around the world are setting ambitious climate targets and committing to the continuous reduction of greenhouse gas emissions. Green hydrogen is considered as an important factor and cornerstone on the way to Germany's climate neutrality by 2045 and the decarbonisation of energy-intensive industries. According to a study by the Energy Economics Institute (EWI 2022), demand for green hydrogen and hydrogen downstream products are expected to rise in the coming decades. By 2030, it is expected to rise to around 60 TWh and even to around 460 TWh by 2045. The industry is looking for sustainable alternatives to fossil fuels. Green hydrogen can replace fossil fuels in steel production, the chemical industry and other industrial processes, thereby helping to reduce CO2 emissions.

The main challenges in the production of green hydrogen are the availability of technical solutions and the economic and business costs associated with providing enough competitive hydrogen. One example of such a challenge is the steel industry. Green hydrogen is set to play a decisive role in the transformation of this energy-intensive sector. To reduce emissions of greenhouse gases, large-scale green electricity from renewable energy is required for electrolysis as well as an infrastructure that provides hydrogen at the production site (Simic and Schönfeld, 2022).

The variable and fixed operating costs (OPEX) play an important role in the production of hydrogen - in addition to the required investments (CAPEX). OPEX consists of the energy costs for the electricity required for electrolysis, the water costs for the procurement and treatment of pure water, as well as the costs for the maintenance and operation of the plants, including personnel and administration. These cost factors have a significant influence on the profitability of hydrogen production and make up a significant proportion of the total costs (see figure).

Production costs for green hydrogen; Case 1 = island solution (without connection to the public electricity grid / CASE 2 = with connection (H2BW 2022: 36)

Subsidies as a boost and the importance of the technical design of the system
According to H2BW, variable costs for electricity and water will account for around 58% of the total costs for hydrogen production in 2025. However, these costs will fall in the future due to falling electricity prices. At the same time, technological advances will lead to lower investments, which will reduce capital and fixed costs. All of this contributes to the fact that the production costs for hydrogen will fall significantly overall.

In the acceleration phase of hydrogen production, however, subsidies and limited OPEX subsidies are necessary to offset the cost disadvantages of green hydrogen. By partially subsidising capital costs and temporarily offsetting increased operating costs, including through contracts for difference (CfD), these financial burdens can be reduced and made sustainable for companies. The Energy Economics Institute (EWI) sees OPEX subsidies as an important funding option. Subsidies for operating and maintenance costs can be realised, for example, through tax breaks, exemptions from grid charges, subsidies for the price of electricity or for the production and use of hydrogen. Ernst & Young (EY) emphasises on its website that support for operating costs (OPEX) is essential for industry when switching to climate-neutral processes, as considerable investments are required, and a financing gap arises. This gap cannot be closed by simply subsidising investment costs.

In addition to government grants and subsidies, the technical design of the systems is crucial on the private sector side. Efficient water treatment can achieve water savings of over €50,000 per year for a 50 MW system by increasing the yield (85-90% instead of the conservative 75%). It is therefore important to develop customised solutions with suitable suppliers as early as the basic engineering phase and to draw up comparative calculations. In this way, an amortisation period of less than 3 years can be achieved through process engineering adjustments.

This integrated approach of technological progress and financial support is crucial on the way to a sustainable and cost-efficient hydrogen production.



EWI (2022). H2- Förderkompass - Kriterien und Instrumente zur Förderung von Wasserstoffanwendungen für den Markthochlauf. Energiewirtschaftliches Institut an der Universität zu Köln.
EY (2021). Wie Wasserstoff zum neuen Favoriten der Klimabewegung wird. (abgerufen am 15.05.2024).
H2BW (2022). Analyse der aktuellen Situation des H2-Bedarfs und -Erzeugungspotenzials in Baden-Württemberg. Hrsg. e-mobil BW GmbH – Landesagentur für neue  
Mobilitätslösungen und Automotive Baden-Württemberg.
Küster Simic, A. und Janek Schönfeldt, J. (2022). H2-Transformation der Stahlindustrie und des Energieanlagenbaus. Hans-Böckler-Stiftung. Working Paper Nr. 260.

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