the cost per unit of production. The committee finds it plausible that electrolyzer capital costs can fall by a factor of 8—from $1000 per kW in the near term to $125 per kW over the next 15 to 20 years, contingent on similar cost reductions occurring in fuel cells. This reduction seems attainable when considered against the claims by fuel cell developers that they can bring the cost of fuel cells to $50/kW from today’s nearly $5000/kW prices.

Advanced Future Electrolysis Technologies

The committee was presented with the view that technologies beyond PEM may offer higher overall efficiency by going to significantly higher temperatures and design concepts. Solid oxide fuel cell technology operates at much higher temperatures than PEM technology does, and so it may be a source of advanced electrolyzer performance going forward. Efficiencies moving toward 95 percent may be possible with solid oxide. But solid oxide systems operating at 500°C to 1000°C are probably at least 5 and perhaps 10 years in the future.

Solid oxide systems, because of their thermal management needs, may be confined to systems of significantly larger scale than PEM systems. Solid oxide electrolyzers may be scalable down to gas station duty, but that remains to be proven. Clearly, PEM systems can scale appropriately for distributed refueling duty.

Electrolysis/Oxidation Hybrids Still further advances in electrolysis technology, such as have been conceived at Lawrence Livermore National Laboratory, involve solid oxide electrolyzer/hydrocarbon hybrids. The hybrid concept involves enhancing the efficiency of the already-high-temperature electrolysis process by using the oxidation of natural gas as a means of intensifying the migration of oxygen ions through the electrolyte and thereby reducing the effective amount of electric energy required to transport the oxygen ion. The concept appears to offer the potential for significantly improved net electrochemical efficiency. However, the concept relies on a number of technical breakthroughs in harnessing solid oxide technology and ultimately requires a separate stream of methane or another combustible fuel supply in addition to water and electricity.

Future Electrolytic Hydrogen Fuel Costs

The committee’s assessment of electrolysis improvements focused on PEM-based technologies rather than on advanced concepts. The effect is to offer a view of futures that are based on today’s technology and do not rely on new technological breakthroughs that, should they occur, would only enhance the cost and performance picture.

Overall, improvements in electrolyzer performance will come from three advancements: (1) improved electrochemical efficiency—efficiency gains from 63.5 percent system efficiency to 75 percent system efficiency (LHV) could be attainable; (2) system costs—as stated above, the system capital costs may be reduced by a factor of 8, from $1000/ kW to $125/kW, driven largely by the same cost factors that must be addressed by fuel cell developers if there is to be any meaningful penetration by fuel cells into the transportation marketplace; and (3) compressor performance and cost are seen to be improving as a result of a variety of emerging hydrogen energy alternatives, all of which depend on taking hydrogen to significantly higher energy densities than can today be attained with only hydrogen compression.

The resulting impact of technology development on the future cost of hydrogen from electrolysis is summarized in Table G-7. Variable costs (electricity) fall as a result of improved electrochemical efficiency. The biggest change comes from the large drop in capital costs, which translates directly into lower capital cost per unit of production. This, along with lower compression costs, results in reduced all-inclusive costs of hydrogen from $6.58/kg using current technology to $3.94/kg as a result of future improvements.

Sensitivity to Electricity Costs

Figure G-10 illustrates the considerable sensitivity of the cost of hydrogen from electrolysis to the price of input electricity. Each 1 cent reduction in the price of electricity reduces the cost of electrolytic hydrogen fuel by 53 cents/kg, or more than 8 percent per penny. Effective utilization of electrolysis as a fueling option will involve the cooperation of utilities and rate-making bodies.

Environmental Impacts of Electrolysis

The environmental impact of the use of electrolysis to produce hydrogen depends on the source of electricity. The

TABLE G-7 Cost of Hydrogen from Future Electrolysis Fueling Technology

Capital Cost

Unit Cost ($)

Cost per Station ($ million)
















Total capital (with a 1.1 siting factor)






Nonfuel variable cost






Fixed operating costs



Capital charges






NOTE: See Table E-38 in Appendix E in this report.

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