bine capital cost of $500/kW, total capital costs of $745/kW, and a capacity factor of 40 percent.20 The expectation is that wind turbine design will be refined and economies of scale will accrue. While these values can be considered optimistic (e.g., by the EIA), others predict even lower values, given successful technology advancement and supportive policy conditions (Bailie et al., 2003; Corey et al., 1999; WEA, 2000). In the future, cost reduction can occur with multiple advancements: further improvements in turbine design and optimization of rotor blades, more-efficient power controls and drive trains, and improvements in materials. The improvements in materials are expected to facilitate increased turbine height, leading to better access to the higher-energy wind resources available at these greater heights. The desire of new U.S. vendors to participate in wind energy markets will increase competition, leading to an overall optimization and lower cost of the wind turbine system.
Wind technology does not have fuel requirements as do coal, gas, and petroleum generating technologies. However, both the equipment costs and the costs of accommodating special characteristics such as intermittence, resource variability, competing demands for land use, and transmission and distribution availability can add substantially to the costs of generating electricity from wind. For wind resources to be useful for electricity generation and/or hydrogen production, the site must (1) have sufficiently powerful winds, (2) be located near existing distribution networks, and (3) be economically competitive with respect to alternative energy sources. While the technical potential of wind power to fulfill the need for energy services is substantial, the economic potential of wind energy will remain dependent on the cost of wind turbine systems as well as the economics of alternative options.
Hydrogen production from wind power and electrolysis is a particularly interesting proposition since, as just discussed, among renewable sources, wind power is economically the most competitive, with electricity prices at 4 to 5 cents/kWh at the best wind sites (without subsidies). This means that wind power can generate hydrogen at lower costs than those for any of the other renewable options available today.
In the committee’s analysis, it considered wind deployed on a distributed scale, thus bypassing the extra costs and requirements of hydrogen distribution. Since hydrogen from wind energy can be produced close to where it will be used, there is a clear role for it to play in the early years of hydrogen infrastructure development, especially as the committee believes that a hydrogen economy is most likely, at least initially, to develop in a distributed manner.
For distributed wind-electrolysis-hydrogen generation systems, it is estimated that by using today’s technologies hydrogen can be produced at good wind sites (class 4 and above) without a production tax credit for approximately $6.64/kg H2, using grid electricity as backup for when the wind is not blowing. The committee’s analysis considers a system that uses the grid as backup to alleviate the capital underutilization of the electrolyzer with a wind capacity factor of 30 percent. It assumes an average cost of electricity generated by wind of 6 cents/kWh (including transmission costs), while the cost of grid electricity is pegged at 7 cents/kWh, a typical commercial rate. This hybrid hydrogen production system has pros and cons. It reduces the cost of producing the hydrogen, which without grid backup would otherwise be $10.69/kg H2, but it also incurs CO2 emissions from what would otherwise be an emission-free hydrogen production system. The CO2 emissions are a product of using grid electricity; they are 3.35 kg C per kilogram of hydrogen.
In the future the wind-electrolysis-hydrogen system could be substantially optimized. The wind turbine technology could improve, reducing the cost of electricity to 4 cents/kWh with an increased capacity factor of 40 percent, as discussed previously, and the electrolyzer could also come down substantially in cost and could increase in efficiency (see the discussion in the section “Hydrogen from Electrolysis”). The combination of the increase in capacity factor and the reduction in the capital cost of the electrolyzer and cost of wind-generated electricity results in eliminating the need for using grid electricity (price still pegged at 7 cents/kWh) as a backup. The wind machines and the electrolyzer are assumed to be made large enough that sufficient hydrogen can be generated during the 40 percent of the time that the wind turbines are assumed to provide electricity. Due to the assumed reductions in the cost of the electrolyzer and the cost of wind-turbine-generated electricity, this option is now less costly than using a smaller electrolyzer and purchasing grid-supplied electricity when the wind turbine is not generating electricity. Hydrogen produced in this manner from wind with no grid backup is estimated to cost $2.85/kg H2, while for the alternative system with grid backup it is $3.38/kg H2. Furthermore, there is now the added advantage of a hydrogen production system that is CO2-emission free. The results of the committee’s analysis are summarized in Table G-8.
Wind-electrolysis-hydrogen production systems are currently far from optimized. For example, the design of wind turbines has to date been geared toward electricity production, not hydrogen. To optimize for better hydrogen production, integrated power control systems between the wind turbine and electrolyzer need to be analyzed, as should hydrogen storage tailored to the wind turbine design. Furthermore, there is the potential to design a system that can coproduce electricity and hydrogen from wind. Under the right circumstances this could be more cost-effective and