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Article
Techno-economic Analysis of Hydrogen
Electrolysis from Off-Grid Stand-Alone
Photovoltaics Incorporating Uncertainty
Analysis
Jonathon Yates, Rahman
Daiyan, Robert Patterson,
Renate Egan, Rose Amal, Anita
Ho-Baille, Nathan L. Chang

r.daiyan@unsw.edu.au (R.D.)
n.chang@unsw.edu.au (N.L.C.)

HIGHLIGHTS
Bottom-up model of stand-alone
PV-powered electrolysis,
including local weather data

Levelized cost of hydrogen

(LCOH) calculations for promising
locations worldwide

Keys to competitiveness:
reduction in PV cost, access to
sunny remote areas, larger scale

Yates et al. develop a framework for calculating the cost of hydrogen by water
electrolysis powered by stand-alone photovoltaics, suitable for deployment in
remote locations. Uncertainty analysis identifies site-specific requirements
together with technical performance and cost targets that may allow this
configuration to deliver competitively priced green hydrogen.

Yates et al., Cell Reports Physical Science 1,

100209
October 21, 2020 ª 2020 The Authors.
https://doi.org/10.1016/j.xcrp.2020.100209
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Article
Techno-economic Analysis of Hydrogen Electrolysis
from Off-Grid Stand-Alone Photovoltaics
Incorporating Uncertainty Analysis
Jonathon Yates,1 Rahman Daiyan,2,* Robert Patterson,1 Renate Egan,1 Rose Amal,2 Anita Ho-Baille,3
and Nathan L. Chang1,4,*

SUMMARY
Solar-driven electrolysis of water to generate hydrogen is emerging
as a viable strategy to decarbonize the global energy economy.
However, this direction is more expensive than traditional fossil
fuel generation of hydrogen, and effective pathways to lower this
cost need to be identified. Here, we report a Monte Carlo approach
to explore a wide range of input assumptions to identify key cost
drivers, targets, and localized conditions necessary for competitive
stand-alone dedicated PV powered hydrogen electrolysis. We
determine the levelized cost of hydrogen (LCOH), considering his-
torical weather data for specific locations to model our PV system,
and optimize its size compared to the electrolyzer. This analysis
and its methods show the potential for green hydrogen production
using off-grid PV, shows the merits of remote systems in areas of
high solar resource, and provides cost and performance targets
for electrolyzer technologies.

INTRODUCTION
Renewable energy, such as wind and solar power, are considered to be the key to the
decarbonization of the electricity sector. However, these renewable sources are
intermittent and often remotely located, thereby requiring a large investment in
storage and transmission at high penetrations.1 Converting such renewable energy
to hydrogen offers a unique solution to this problem, as this hydrogen can serve as
an energy carrier, as well as being used as feedstock for manufacturing (e.g., oil
refining, ammonia production, chemical manufacturing). One key advantage of
hydrogen (over other energy-storage systems such as battery and pumped hydro-
power) is its portability, as the fuel can be easily liquified and exported in a similar
manner to liquefied natural gas (LNG) or blended with natural gas to transport using
the existing distribution infrastructure.
1School of Photovoltaic and Renewable Energy
At present, the majority of hydrogen demand worldwide (estimated at 80 MT/year)2 Engineering, University of New South Wales,
Sydney, NSW 2052, Australia
is supplied by cheap hydrogen generated from fossil fuels (through steam methane 2Particlesand Catalysis Research Laboratory,
reforming [SMR] and coal gasification). However, in recent times, the imposition of School of Chemical Engineering, University of
stricter environmental policies such as a requirement for carbon capture and storage New South Wales, Sydney, NSW 2052, Australia
3Schoolof Physics and the University of Sydney
(CCS) and/or a carbon tax could shift these applications toward green hydrogen.
Nano Institute, The University of Sydney, Sydney,
Targets, strategies, and roadmaps for the hydrogen economy are being explored NSW 2006, Australia
across the world, with the European Union releasing the Hydrogen Roadmap Eu- 4Lead Contact
rope.3 In Australia, there is a renewed focus on clean (low carbon) hydrogen through *Correspondence: r.daiyan@unsw.edu.au (R.D.),
the National Hydrogen Strategy,4 which describes Australia as having great poten- n.chang@unsw.edu.au (N.L.C.)
tial to produce and export hydrogen, in particular to Japan and South Korea, which https://doi.org/10.1016/j.xcrp.2020.100209

Cell Reports Physical Science 1, 100209, October 21, 2020 ª 2020 The Authors. 1
This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
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rely heavily on energy imports. It recognizes clean hydrogen generation in Australia

from (1) coal gasification and SMR coupled with (CCS) and (2) water electrolysis using
renewable electricity. Given the difficulty and site limitations of CCS, the former op-
tion has not yet resulted in any large-scale demonstration projects. However, for the
latter, a number of development projects in hydrogen electrolysis have started in
Australia: Yara Pilbara Renewable Ammonia (Note S1); Hydrogen Park South
Australia, which aims to blend hydrogen into the natural gas grid5; and Port Lincoln
Hydrogen and Ammonia Supply Chain Demonstrator, which will include two
hydrogen gas-fired turbines.5 As more projects are planned, there is a need to
develop business models for electrolyzer-driven hydrogen generation to guide
the development of the industry.

Prior work in this space has focused on comparing electrolyzer technologies and
determining the levelized cost of hydrogen (LCOH) in specific regions around the
world. These economic evaluations consider electricity sourced from (1) grid elec-
tricity (which may be generated from traditional thermal, solar photovoltaics (PV),
biomass, or hydroelectricity), (2) dedicated PV, and (3) dedicated PV supplemented
by grid electricity.6–8 For example, the National Hydrogen Roadmap (NHR) in
Australia predicts an average LCOH of between $3.25 and $3.97/kg (all monetary
values in this article are given in US dollars [USD], see Note S2) with alkaline electro-
lyzer (AE) using electricity pricing that is reflective of premiums paid for renewable
energy, as well as a best-case hypothetical scenario LCOH of $1.89/kg.6 Similarly,
a recent investigation in Canada using grid electrolysis modeled a low LCOH of
$2.93–$3.22/kg in Ontario using AE.9 These reports highlight the attractiveness of
grid-powered hydrogen electrolysis as it allows the electrolyzers to operate at
high-capacity factors, and even take advantage of negative pricing in the event of
peak oversupply from high penetrations of PV. The studies that consider the case
of dedicated PV-driven electrolysis typically adopt simple assumptions of fixed arbi-
trary capacity factors, typically do not consider site-specific solar insolation data, and
many do not consider strategies to increase capacity factors of the electrolyzer
through suitable oversizing of the PV unit.10–12 For instance, Shaner et al.13 reported
an LCOH of $12.1/kg with PV-coupled electrolyzers, but at a low-capacity factor of
20% and with high electrolyzer CAPEX of $900/kW. A recent International Renew-
able Energy Agency (IRENA) report14 estimated an LCOH range between $3.77
and $4.34/kg at a 30% capacity factor in Australia. Overall, there is a wide range
of calculated LCOH values from the literature, based on different configurations
and different assumptions for key input parameters. In light of this knowledge
gap, it becomes imperative to develop an overarching framework to not only deter-
mine LCOH across the globe but also to explore and evaluate the impact of key cost
and performance drivers that will allow renewable hydrogen generation to compete
with fossil fuel-based hydrogen generation.

In this work, a detailed calculation of the LCOH has been performed for a stand-
alone PV-driven electrolyzer system that could be installed in remote locations
without a strong electricity grid connection. This mode of operation has a significant
disadvantage of limiting the capacity factor of the electrolyzer, but an advantage of
allowing large systems to be installed in remote locations that do not have a high-
power grid connection. This avoids the often-considerable expense of a grid
connection and exposure to the risk of delays in both the physical connection and
the approval process. Such delays have been a significant problem for some recent
Australian utility-scale PV systems and also for renewable projects in the Netherlands
(Note S3). To determine LCOH, we consider the real-world generation of electricity
from the PV system based on historical weather data (and potential future trends) for

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Figure 1. Model Flow Diagram

Flow diagram describing the technical and economical model of the Monte Carlo analysis. Calculations within the Monte Carlo section are done for
50,000 iterations and those outside are calculated only once.

specific locations and optimize the size of the PV installation (compared to the elec-
trolyzer) and resultant electrolyzer capacity factor. We establish a base model for
Townville (a port city in Australia), where we input a wide range of values for system
size, capital costs, and electrolyzer efficiency to explore key drivers in reducing the
LCOH. We further display the applicability of this model in a remote location of
Australia and a selection of international locations. Our results reveal that regions
with high solar resources such as Port Hedland (in remote Western Australia) and
Chile demonstrate the potential to produce hydrogen from PV electrolysis at signif-
icantly lower cost than other locations—in particular, Japan, which is anticipated
to express a great demand for clean hydrogen. Finally, an assessment is done
comparing proton exchange membrane (PEM) electrolysis and AE, which evaluates
the combined effect that the differences in electrolyzer capital cost and electrolyzer
efficiency have on the optimum technology choice.

Our results indicate that system size, capital costs, and electrolyzer efficiency are the
three most important drivers for LCOH. This parameter space is explored to identify
scenarios in which the LCOH can be competitive with fossil fuel processes such as
SMR ($2.5/kg14). Regions with high solar resource such as Port Hedland (in remote
western Australia) and Chile show potential to produce hydrogen from PV-electrol-
ysis at a significantly lower cost than other locations, in particular Japan, which is
anticipated to have a large demand for clean hydrogen. PEM electrolysis has the po-
tential to be competitive with AE only when improved electrolyzer efficiency and
costs are balanced within certain ranges identified in this work.

RESULTS AND DISCUSSION

Baseline LCOH Results
A model (Figure 1) was created to determine the discounted LCOH for a stand-alone
PV-driven electrolysis system from the capital and operating costs and the hydrogen

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Figure 2. Levelized Cost of Hydrogen (LCOH) Results

(A) LCOH histogram and breakdown for the base case of Townsville. Purple lines indicate the
estimated range for grid-connected electrolysis in the National Hydrogen Roadmap 6 (top).
(B) Bars in the breakdown graph represent the 10 th and 90 th percentiles for each component
(bottom).

production per year for a specific location. Townsville was chosen for the base case;
however, the model is applicable in any location internationally by using the appro-
priate weather data (discussed below). A total of 50,000 iterations were completed
for the Monte Carlo analysis to allow for a good representation of possible outcomes
without being too computationally intensive.

Figure 2 shows the results for the baseline location of Townsville, where the
median LCOH value is $3.72/kg and the 10th and 90th percentiles are $2.89/kg
and $4.67/kg, respectively. The range of costs obtained is very wide, reflecting
the large range of key input variables used in the Monte Carlo analysis. In particular,
this value is strongly dependent on the system size, as discussed in the next section.
This diversity in calculated values is reflected in the literature, since each study con-
siders different points in time, different locations, and so forth. The results from our
model are consistent with the other results in the literature (detailed in Note S4 and
Table S1), when we adjust the input parameters to match those assumed by these
other studies. For example, IRENA estimated an LCOH of $3.77–$4.34/kg14 for elec-
trolysis from low-cost PV in Australia (electrolyzer CAPEX: $840/kW, conversion ef-
ficiency: 61 kWh/kg, capacity factor: 24%, levelized cost of electricity from PV:
$29.8–$41.2/MWh). If we enter these parameters into our model, then we obtain a
similar range ($3.64–$4.25/kg), with the slight variation attributed to our strategy
of oversizing the PV (increasing the electrolyzer capacity factor to 34%).

In an Australian setting, the results highlight the potential feasibility of stand-

alone PV electrolysis to meet target LCOH values from the Australian NHR between
$3.26/kg and $3.98/kg6 (pink dashed lines in Figure 2). A further important compar-
ison to note is that our calculated LCOH is higher than that reported for hydrogen

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generated using fossil fuels ($2.50/kg14). However, some countries have set targets
for the import of green hydrogen (5–10 million tonnes of zero carbon hydrogen by
2050 estimated by Japan15), so the market for green hydrogen may allow a higher
price. Assuming that these targets represent real market demand, the costs esti-
mated in this study may be low enough to justify demonstration plants in 2020 to
support the growth of a green hydrogen industry. Once started, the costs would
be expected to be reduced further through economies of scale and technological
developments,16 further increasing the market opportunity. This idea of building a
hydrogen export pathway is already being explored in some countries such as
Australia, with their National Hydrogen Strategy,4 Germany’s National Hydrogen
Strategy,17 and Japan’s Basic Hydrogen Strategy.18 If distributed hydrogen produc-
tion can compete with its grid-connected counterpart, then it allows for both pro-
duction nearer to the point of use or export and for implementation in areas with
ideal energy resources that may not have a suitable grid connection for a hydrogen
production facility. The development of this model to quickly determine the LCOH
from real weather data will also help show whether a site is economically feasible for
distributed hydrogen generation.

We further examine the major contributors to the LCOH (Figure 2B), and we reveal that
the capital costs of both the electrolyzer and the PV are the most significant, with the PV
component being higher due to it being oversized compared to the electrolyzer. There
is significant variation in the capital cost contributions to the LCOH due to its sensitivity
to economies of scale arising from system size (discussed below). This high dependence
on capital cost is not surprising, as capital cost has been a significant market barrier to
renewable energies.19 As in many other studies,13 it is seen here that the water cost is
insignificant, despite the potential scarcity and large cost range used to include desali-
nation. However, this does not mean that water use can be neglected, as water still
needs to be available for the location, even if this is as desalinated seawater.20

Key Drivers to LCOH Reduction

Further to the LCOH breakdown, the Monte Carlo method used in this model helps
further identify which parameters have the most significant impact on the final
LCOH.21 In this work, each input parameter of the model is randomly varied based
on the values given in Table 3, and the output LCOH is determined for each iteration.
Regression analysis is then completed for all input variables to determine which fac-
tor has the most influence on the LCOH, the results of which can be seen in Table 1.

Our results reveal that the electrolyzer system size (the correlation is calculated with the
logarithm due to the scaling factor model described in the Experimental Procedures) is
the greatest contributor to the variation in the calculated LCOH, with a variance (r2 value)
of 46%. The scatterplot in Figure S1A shows this strong negative correlation, suggesting
that as nominal power scales up by a factor of 10, there is a significant decrease of

$0.3/kg in the corresponding LCOH (as estimated from the linear fit). This concept
of economies of scale is well supported by the literature, for both PV and electrolyz-
ers.2,22 For instance, Bruce et al.6 estimated that a 1,000% increase in scale (equivalent
to 3.0 absolute change in the log of nominal power) could reduce the levelized cost by
>$1.0/kg. As such, policy efforts enabling the demonstration of larger PV-hydrogen pro-
jects, on the order of hundreds of megawatts, could assist in bringing down the LCOH as
they encourage manufacturing companies to scale up.23

The range of possible electrolyzer efficiencies explored in the model also influences
the LCOH (Figure S1B). This is to be expected, as an improvement in efficiency re-
sults in more hydrogen production per year for the same capital cost, and hence a

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Table 1. Variance Contribution for the Top 5 Impacts on the LCOH

Parameter Unit Input Range (10th–90th percentile) Variance (%)
Log of electrolyzer system size 2–5 (100 kW–100 MW) 46
Electrolyzer efficiency kWh/kg H2 50–58 19
PV CAPEX (1 MW) $/kW 682–886 15
HElec CAPEX (1 MW) $/kW 682–886 6
PV OPEX $/kW/year 6.82–13.6 3
Electrolyzer OPEX $/kW/year 13.6–20.5 1

The variance is calculated as the r2 value for the correlation.

reduction in the LCOH. As such, this is a key area for research to improve with not
only alkaline electrolysis but also PEM and high-temperature electrolysis, which
are reported to have higher theoretical efficiencies,24 albeit at higher CAPEX.2

The ranges of PV and the electrolyzer capital costs explored in this model have a
smaller impact on the final LCOH (Figures S1C and S1D). However, by combining
these two factors into a total capital cost parameter (total capital cost at 1 MW shown
in Figure S1E), this new parameter is responsible for 20% of the variation in LCOH,
exceeding the correlation due to the electrolyzer efficiency. Note that there is an
expectation that the total CAPEX can be reduced significantly in the future. PV costs
have been reducing quite rapidly as the scale of manufacturing has increased, and in
line with learning rate models (price reductions with every doubling of cumulative
production). Module prices have reduced >60% from January 2014 to January
2020, and with recent learning rate estimates of 23.2%,25 the price of PV is expected
to drop further as it continues to be installed in Australia and around the globe.

It is expected that the cost of electrolyzers will also follow a learning rate model,26
with a learning rate of 18% being estimated with various uncertainties.27,28 If this
learning rate were to continue, we could expect a large reduction in the capital
cost of electrolyzers as the industry grows and larger-scale projects are imple-
mented.6 Although not directly included in the model, in Note S5, we discuss and
quantify the impact of such learning rate cost decreases on the LCOH.

One important parameter that was not varied in the Monte Carlo analysis was the
input weather data, due to short-term year-to-year fluctuations or long-term climate
change. The yearly insolation in Townsville over the past 30 years has a standard de-
viation of 4.1% and shows no long-term trend.29 If this pattern continues, then using
typical meteorological year (TMY) data for every year in a 20-year LCOH model will
give a representative average LCOH value, since the years of higher and lower PV
electricity production will largely cancel out. This is not true, however, if climate
change leads to changes in average insolation. To obtain an indication of how
such variation may affect the overall results, a parallel analysis was done comparing
the LCOH values calculated using different weather profiles (Table S2; Note S6) from
similar latitudes as Townsville (19.3 south) keeping all other variables fixed at their
nominal values. The results of this analysis reveal that different levels of annual irra-
diance change the electrolyzer capacity factor and subsequently LCOH (Figure S2).
For instance, Antananarivo, Madagascar (18.9 south) has greater rainfall and expe-
riences 10.4% less global horizontal irradiance (GHI) than Townsville, and as a result
had a 21% higher LCOH. While Broome, Australia (18.0 south) is drier, it experi-
ences 12.0% more GHI and returned an LCOH that was 12% lower when compared
to Townsville. More important, while this variation is significant, we would expect

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that climate change to this extent would take a long time to occur, and would thus
mainly affect the later years of operation. Nevertheless, this result does give some
indication of how a changing climate could affect the LCOH.

To understand the interaction between the three most significant parameters (iden-
tified in Table 1 and Figure S1), a fit was created for the log of nominal power, con-
version efficiency, and the sum of the two capital cost variables (Figure 3). In this
figure, the contours represent the fitted LCOH at the given capital cost (x axis), sys-
tem size (y axis), and electrolyzer efficiency (four subplots). An alternative figure
showing the scaled PV (x axis) and the scaled electrolyzer (y axis) capital costs at
various efficiencies is also presented in Figure S3.

Using Figure 3, we can identify current and future scenarios and estimate their
LCOH. Here, we identify a current 1 MW scenario, with 54 kWh/kg electrolyzer en-
ergy consumption and a 1-MW combined capital cost value of $1,550/kW, with an
estimated LCOH of $3.80/kg. Note that this current 1 MW scenario may underesti-
mate system sizes, and larger system sizes are quite likely; for example, the Austra-
lian Renewable Energy Agency (ARENA) has, at the time of this writing, a call for
hydrogen electrolysis projects ranging from 5 to 10 MW.30 The impact of an
increased system size on the calculated LCOH can be read from the figure. Our re-
sults have also highlighted that another route to lowering LCOH is through efficiency
improvement of the electrolyzers. If larger system size can be combined with higher
efficiency electrolyzers (52 kWh/kg H2), then the high-efficiency 10 MW scenario can
achieve an LCOH as low as $3.3/kg (assuming capital costs remain at current values).
This high-efficiency value may be achievable, as some electrolyzer manufacturers
(Note S7) are quoting efficiencies %4.5 kWh/Nm3 (50.1 kg/kWh H2), although in
these cases, it was stack efficiency, which considers only the electrolytic process
rather than system efficiency, which includes energy lost to the balance of system
components, that was specified.

Another cost reduction trend is a reduction in both PV and electrolyzer capital cost.
For example, we can see the impact on LCOH if the combined capital costs fall by
10% to <$1,400/kW at a 1-MW scale. To achieve this value by electrolyzer cost sav-
ings alone, the electrolyzer costs would need to decrease from the current estimate
of $886/kW to
$600/kW, which is a reasonable expectation of some experts at the
current rate of research, development, and deployment.26 Combining this future low
cost together with high electrolyzer efficiency and very large plant sizes, a low-cost,
high-efficiency 1 GW proposed scenario has an estimated LCOH of $2.70/kg, ap-
proaching the $2.50/kg price point at which IRENA estimates that electrolysis can
start to become competitive with fossil fuel hydrogen production.14 In line with
this idea, the concept of large-scale hydrogen generation hubs is recognized as a
key strategy in Australia.4

Comparison to Grid-Connected Electrolysis

The results of this analysis have shown the potential for the stand-alone electrolysis
configuration to achieve low LCOH, similar in value to other studies that assume a
grid-connected configuration. However, this does not by itself show that the
stand-alone configuration can ever be lower cost than grid connected. The optimum
configuration for any one situation will depend on the circumstances that are specific
to that case. For example, our work shows that lowering electrolyzer CAPEX will
reduce LCOH, but this would also reduce the LCOH of a grid-connected system.
However, if a project was able to access very-low-cost grid electricity, then this
would only reduce the LCOH of the grid-connected configuration. It is not the focus

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A B

C D

Figure 3. Contour Plot of the Key Variables

Impact of the economies of scale and the capital costs on the LCOH at various electrolyzer
efficiencies.
(A) 50 kWh/kg H2 .
(B) 52 kWh/kg H 2 .
(C) 54 kWh/kg H 2 .
(D) 56 kWh/kg-H2 .

of this work to determine the exact conditions when the stand-alone configuration is
better or worse than grid connected, but a preliminary comparison is included in
Note S8. For that comparison, we consider only the simplified case of a grid-only-
connected electrolysis system running at a high-capacity factor. For each of the
50,000 iterations of our standard model, we added a grid-connected configuration
that was assumed to be built to the same scale and have access to the same electro-
lyzer CAPEX and operating costs as the stand-alone configuration. We explored
ranges of parameters for the grid-connection charges, average electricity price dur-
ing operation, and capacity factor (Table S3). For each iteration, we compared LCOH
of the stand-alone configuration to the LCOH of the grid-connected configuration
and identified the key parameters that determined the optimum choice. This reflects
the type of decision-making process faced when deciding which configuration is
best for a particular circumstance.

This analysis identified the conditions in which a stand-alone PV system is preferable:

in cases of larger system sizes, lower PV capital costs, and high grid electricity prices.
Since these parameters dominated the comparison, the relationship between these
three parameters and the optimum configuration choice can be shown (Figure S4).
For example, a 1-MW dedicated PV system-powered electrolyzer (assuming
current PV capital costs) would achieve a lower LCOH compared to a grid-connected
system under conditions in which the available average grid electricity price was
>$0.055/kWh. Figures S5 and S6 provide the LCOH outputs of our model for a range
of key input parameters, which we use to compare the expected conditions and con-
clusions of two previous studies that found grid-connected electrolysis to be much
cheaper than stand-alone PV. For Shaner et al.,13 the PV capital costs of that time

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Table 2. Mean and SD of the LCOH for the Chosen Locations

Location Mean LCOH ($/kg) SD ($/kg)
Townsville, Australia 3.93 0.52
Port Hedland, Australia 3.38 0.45
Palm Springs, CA, USA 3.71 0.50
Fukushima, Japan 4.72 0.61
Calama, Chile 3.60 0.48
Caceres, Spain 4.07 0.54

(2016,
$1,400/kW) were nearly twice that of recent values (we estimate $700/kW),
combined with an electricity price of $70/MWh (US industrial prices). Our compari-
son model agrees that under these conditions, a grid-connected system is prefer-
able. The work of Bruce et al.6 is more recent, and their system has much lower PV
capital costs ($750/kW); but since it assumes lower electricity prices of $40/MWh
(assuming competitive power purchase agreement [PPA] prices), it also concludes
that grid connected is lower cost than stand-alone PV, with which our model also
agrees. Our model can be used to assess other possible situations. For example,
our model predicts that if recent lower capital cost PV prices can be accessed in a
location exposed to the electricity prices estimated by Shaner et al.,13 then the
stand-alone PV configuration would be preferred. This reinforces our finding that
the best system choice for any particular location is highly dependent on the circum-
stances of that location—in particular, the average cost of electricity—and that a
stand-alone system can have an advantage under the right conditions. As electricity
prices vary significantly by country, location within a country and over time as regu-
lations and generation mix change, there is the potential to find and deploy stand-
alone electrolysis where these conditions are well suited.

Location Comparison—Worldwide/International
To demonstrate the applicability of the model in a global framework and to compare
the feasibility of stand-alone PV hydrogen electrolysis in Australia to other locations,
a comparative analysis of hydrogen generation was completed for other regions
including ‘‘energy giants’’ such as the United States and Europe, potential hydrogen
economies such as Japan, and areas having large renewable energy resources (Chile
and Australia). Specific locations were selected on the basis of hydrogen or solar ac-
tivity in that region (Note S9). The locations of Palm Springs, California (USA) and Fu-
kushima, Japan were chosen due to proposed megawatt-scale green hydrogen
electrolysis projects in those areas. The Extremadura region around Caceres, Spain
is the location of a proposed 590-MW solar farm. In a study of hydrogen production
from stand-alone renewable energy, Calama was found to be the best region for PV-
powered hydrogen production in Chile.31 An additional Australian location, Port
Hedland, in the Pilbara region, was chosen due to it being a proposed large export
region.4 As the solar profiles are different for each location, the PV oversize ratio was
optimized in each case. The optimized oversize ratio and all of the other input data
used for this comparison are shown in Table S4.

The estimated LCOH for each location is presented in Table 2 (and Figures S7 and
S8). Our results reveal that some locations had clear advantages over others,
with Port Hedland having the most promising mean LCOH of $3.38/kg, followed
by Calama, Chile. The primary reason for this is that Port Hedland had the highest
yearly average insolation of 2,402 kWh/m2/year, followed by Calama, with
2,376 kWh/m2/year. This considerably lower LCOH makes a strong argument for

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Table 3. Parameter Values Used in the Monte Carlo Analysisvalues used in the Monte-Carlo
analysis.
Parameter Unit Nominal Low High
Electrolyzer parameters
Nominal power kW 1,000 100 50,000
Capital cost at 1,000 kW $/kWAC 784 682 886
Capital cost scaling factor Per 10-fold size increase 0.9 0.8 1.0
Operating costs $/kW/year 17.0 13.6 20.5
Water cost $/kL 1.44 1.02 6.82
Water usage L/kg H2 10 9 11
Efficiency kWh/kg H2 54 50 58
Yearly degradation %/year 0.30 0.10 0.50
Stack lifetime h 80,000 70,000 90,000
Stack replacement cost % of capital cost 40 35 45
PV Parameters
PV to electrolyzer ratio 1.5
Capital cost at 1,000 kW $/kWAC 818 682 886
Capital cost scaling factor Per 10-fold size increase 0.9 0.85 0.95
Operating costs $/kW/year 9.82 6.82 13.6
Yearly degradation %/year 0.50 0.20 0.75
General parameters
Operation years Year 20 – –
Discount rate % 5.75 – –

Nominal values reflect the current values from the literature and industry, and the low and high values
reflect uncertainty and possible future values. The low and high values were used as 10th and 90th percen-
tile values, respectively, to generate distributions in the Monte Carlo analysis. Those without high or low
values are fixed parameters.

the development of distributed hydrogen from PV in areas with high solar insolation.
An additional benefit of remote hydrogen generation is that the hydrogen could be
used in the local power system, since the LCOH required for hydrogen in this appli-
cation is
$3.07–$3.75/kg.6 As such, the possibility of the use of hydrogen in remote
areas with good solar resources is extremely promising.

In contrast, Japan returned the highest LCOH of $4.72/kg, and the cost difference
between the best location in Australia and Japan averaged $1.34/kg. This indicates
that there could be the potential for export to Japan if compression and transport
costs could be reduced to below this value. According to the NHR, Australia’s cur-
rent liquefaction and transport costs are >$2.73/kg, with the possibility of reducing
this to
$1.7/kg (assuming a transportation distance of 8,000 km to Japan),6 which is
still higher than this cost differential. However, if much larger PV + electrolyzer sys-
tems can be installed in Australia, then economies of scale will widen the cost differ-
ence, making the Australian case cost-effective. There are reasons to believe that the
system size will be limited in Japan because of land availability, and that Japan
would still need to import hydrogen, even if it has significant production of lower-
cost local green hydrogen, since it is a heavy energy importer,32 and it may not be
practical to produce local green hydrogen to supply all of its energy needs.

Looking at the other locations that were modeled, Chile may be able to compete
with Australia as a hydrogen exporter and is considered a ‘‘hidden champion’’

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Figure 4. Comparison between AE and PEM Technologies

LCOH difference between AE and PEM, depending on the difference in capital cost and energy
consumption.

by the World Energy Council.20 Chile also has a very high insolation of
2,376 kWh/m2/year, and it is also known to have strong wind resources,14 which
may allow for a hybrid wind-solar-hydrogen system with even higher capacity factors
and a lower LCOH.

Technology Comparison—Alkaline Electrolysis versus Proton Exchange

Membrane
The use of AE has been assumed so far in this study; however, other electrolyzer
technologies such as PEM and solid oxide electrolysis cell (SOEC) are emerging.
SOEC is still largely considered not yet ready for commercialization due to high costs
and current limited lifetimes.26 However, PEM electrolyzers are reaching develop-
ment on a large scale, with a 6-MW demonstration already operational in Ger-
many,33 and companies are starting to release commercial PEM electrolyzers
(Note S7). While the current capital cost of PEM is reported to be higher than
AE,12 this gap is decreasing with time (and research), and there are estimates that
the cost of PEM may eventually become even lower than AE.6 In addition, PEM is
thought to have advantages in efficiency22 and also load flexibility, which could be
better suited to operation with variable renewable energy.16 Therefore, it is impor-
tant to consider how the use of PEM over AE may affect the LCOH.

To model the two electrolyzer technologies, a Monte Carlo analysis was done for
both, with the same input uncertainty ranges except for the parameters detailed
in Table S5. The simulation returned the cost histograms seen in Figure S9. While
in the large majority of iterations, AE has a lower LCOH, Figure S10 shows that in
some, PEM is cheaper than AE.

To determine the parameters that most affect the cost difference between PEM and
AE, an uncertainty analysis (similar to the Key Drivers to LCOH Reduction section
above) was completed for the differing variables. This showed that the two most
important parameters were the capital cost difference and the energy consumption
difference. Figure 4 shows a fitted plot of the LCOH difference to AE at varying cap-
ital cost (x axis) and energy consumption (y axis) differences. Many studies predict
that PEM technology will have a lower specific energy consumption than AE, with
an improved electricity usage of up to 3–4 kWh/kg H2.6,12 As shown in Figure 4, at

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the more optimistic efficiency improvement of 4 kWh/kg H2, if the capital cost of the
PEM electrolyzer is at least $100/kW greater than for AE, then there is no benefit in
LCOH. Fiftieth percentile estimates from experts in 2017 predicted that PEM capital
costs would be at least $110/kW (V100/kW) greater than those for AE,26 which this
modeling suggests would mean no advantage in LCOH. Alternatively, other predic-
tions expect the cost of PEM to be on par with or slightly cheaper than AE6,14; in this
case, the reduction in energy consumption has the potential to result in a savings of
LCOH by $0.20/kg in favor of PEM. This result provides guidance on the required ef-
ficiency and cost improvements required for the PEM technology to become
competitive with AE.

This article reports the first use of a multifactor uncertainty analysis applied to a
techno-economic analysis of stand-alone renewable hydrogen generation, giving
business and researchers a tool to find strategies to make stand-alone PV-driven
electrolysis profitable. By exploring a wide range of values for the various cost-input
values, it provides a quantitative analysis of how changes in key variables such as sys-
tem size, energy consumption, and capital costs may affect the LCOH. In comparing
PEM to AE, we are able to put values to how much the capital cost and efficiency of
PEM would need to improve to become competitive within current and forecasted
market conditions. Furthermore, this model can also be easily applied in any location
by taking real local weather data, and it has many other applications such as assess-
ing whether a refueling station could self-supply its hydrogen or whether hydrogen
could be embedded into a remote energy power system. Finally, the analysis en-
ables the evaluation of export opportunities for renewable hydrogen, reflecting
the price differential between production in countries with good insolation, such
as Australia and Chile, and countries such as Japan that rely on energy imports.

EXPERIMENTAL PROCEDURES
Resource Availability
Lead Contact
Further information and requests for resources should be directed to the Lead Con-
tact, Dr. Nathan L Chang (n.chang@unsw.edu.au).

Materials Availability
This study did not generate new unique reagents.

Data and Code Availability

The authors declare that input data and algorithms are detailed within the article, the
Supplemental Information, and the referenced papers. Any data not included are
available from the Lead Contact upon reasonable request.

PV Electricity Generation and Electrolyzer Operation

Our model determines the levelized cost of hydrogen from inputs of process, capi-
tal, and operation costs for a plant powered only by photovoltaics. Figure 1 outlines
the system considered and some of the important variables. Electrolyzer costs
include up-front capital costs, operating costs (also referred to as fixed operating
costs in other literature), consumable costs (water), and stack replacement costs.
PV costs similarly include up-front capital cost and operating costs.

Real weather data for a typical meteorological year is taken from an Energy Plus
Weather (EPW) file, a common file format with data available for many locations
across the globe (http://climate.onebuilding.org/). Townsville is used for the base
case due to a good solar resource, access to a shipping port, connection to the

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National Electricity Market and a government interest in producing hydrogen in the

area (Note S9). Hourly irradiance, temperature, and wind speed data for 1 full year
are used in the calculation.

For the PV system, horizontal single-axis tracking (SAT) with a north-south axis is
assumed, as this is typically used in large-scale systems.34 Temperature derating is
done using the nominal operating cell temperature method with a temperature co-
efficient of 0.4%/ C, and an operating temperature of 45 C and the output are
assumed to degrade at a yearly linear rate. The size of the PV system in relation to
the electrolyzer is optimized for each location by searching for the minimum
LCOH when varying only this oversize ratio. The impact of the oversize ratio on
the capacity factor of the PV system compared to the electrolyzer system are dis-
cussed in Note S10. In that discussion, the plot of the ratio against the LCOH for
Townsville can be seen in Figure S11.

After the calculation of PV electricity generated each hour, the hydrogen output of
the electrolyzer is determined. The electrolyzer is assumed to match the output of
the PV system, providing it is between its minimum capacity (10% of rated power)
and rated power. The two systems are connected via an alternating current (AC)
connection (large PV and electrolyzer systems are almost exclusively designed for
AC grid integration), and the loss between the output of the PV system and the input
of the electrolyzer system is assumed to be negligible. As per manufacturer data, the
ramp rate of the electrolyzer is assumed to be sufficient to match the variable nature
of a solar array (Note S7). Any electricity that is not used by the electrolyzer (i.e.,
when the PV is producing more than the electrolyzer’s capacity or less than the min-
imum capacity) is considered lost, as this model represents a stand-alone system
without a connection to a larger grid.

Hydrogen gas is produced proportional to the power output of the solar array as
defined by the system efficiency (given in kilowatt hours per kilogram of hydrogen).
We also consider degradation of the electrolyzer stack by requiring an increased
voltage for the same hydrogen output (percent increase per year) until it needs to
be replaced.

LCOH
The cost of hydrogen can be derived from the capital cost and operating cost of the
PV-electrolyzer system, together with the amount of hydrogen generated each year.
The LCOH was calculated by determining the ratio of the total discounted costs for
the life of the system to the total discounted hydrogen production, as shown in
Equation 1. In that equation, Y is the number of operational years, Sn is the system
cost in year n (which includes capital costs in year 0 and operational costs [mainte-
nance, water, stack replacement] from all operational years), Pn is the production
of hydrogen in year n, and r is the discount rate.

This LCOH calculation does not include additional factors that are region and appli-
cation specific, such as (1) the costs of storage, compression, and transmission,
which are needed if the hydrogen is not self-consumed; (2) taxation on the entity
operating the plant, which is region specific and dependent on the business model
(e.g., sale of hydrogen versus self-use); and (3) debt leverage instead of a single dis-
count rate on all cash flows represents a simplification of the cost of debt and/or eq-
uity capital. These simplifications mean that the cost estimates are more general-
ized, but can be further adapted if necessary to consider more specific cases, as

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has been done in this work in the section Location Comparison—Worldwide/Interna-

tional. A spreadsheet implementation of the LCOH model is provided in Data S1.
PY
Sn ,ð1  rÞn
LCOH = PYn = 0 n
: (Equation 1)
n = 0 Pn ,ð1  rÞ

Input Assumptions and Monte Carlo Uncertainty Model

As there are significant uncertainties in the actual value of many of the input param-
eters for the LCOH model, uncertainty ranges were estimated for each and included
in the Monte Carlo analysis to capture the impact of these uncertainties on the model
outcomes. These uncertainty values can be viewed in Table 3.

Two critical assumptions were not varied: the operation period of 20 years13,16 and
the discount rate of 5.75%, which is based on the average discount rate for Australian
renewable energy projects in 2018 (Note S11).

The median capital costs for the PV and electrolyzer are both set at
$800/kW at
1-MW scale, as per the recent Australian literature.6,35 However, a wide range of cap-
ital costs is assumed by other studies, and over the course of time, costs would be
expected to decrease. To ensure that our model results are relevant for a longer
period of time, we use a range of costs and explore the sensitivity of the LCOH to
these values. To do this, we capture two additional sources of uncertainty. First,
the range of cost of a 1-MW system is varied (between $682 and $886/kW for
both the electrolyzer and the PV, based on ranges in the source material). Second,
because there is an impact of economies of scale for both PV36 and electrolyzers,22
we define an uncertain scaling factor (defined the cost multiplier for a 10-fold in-
crease in size) to use for systems other than 1 MW, so that the cost of PV-electrolyzer
systems of sizes ranging from 10 kW to 1 GW scale could be estimated. This scaling
factor is varied within the Monte Carlo analysis between (1) 0.8 and 1.0 for the elec-
trolyzer, reflecting a large uncertainty of economies of scale, since very few large
electrolyzer systems have been built, and (2) 0.85 and 0.95 for the PV capital cost,
reflecting the better known scale factors. Since increasing system size will reduce
the capital cost (per kilowatt) of both the electrolyzer and the PV sub-systems, the
calculated LCOH will be sensitive to the assumed system size. Again, rather than
simply selecting a single system size, we have included this as a variable for explo-
ration in our model, with a low value of 100 kW and a high value of 50 MW. For
our median system size, we chose 1 MW, which is 10 times smaller than the largest
electrolyzer system in the world (Note S12).

This range of capital costs explored in our model is quite wide, as shown in Fig-
ure S12, which shows the electrolyzer nominal size compared to the electrolyzer cap-
ital cost assumption (in US dollars per kilowatt). As we have 50,000 iterations, this
figure shows 50,000 points. Also shown is the electrolyzer size and electrolyzer cap-
ital costs assumed in other studies. If a study did not specify the system size, then it
was plotted as a horizontal line. Most of the assumptions from these studies fall
within the cloud that was considered in our model. In Note S13, some more detailed
discussion of this figure is given, together with the corresponding figure and discus-
sion for PV CAPEX values (Figure S13).

Electrolyzer efficiency has been identified as a key issue in many other studies,13,37
with current values between 50 and 58 kWh/kg H2—still well off the theoretical value
of 39.4 kWh/kg H2.6 We explore here a wide range of electrolyzer efficiencies to un-
derstand its influence on LCOH.

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A large range is used for water costs, given the variability and unknown prices for
large water users. In addition, it is extended to include the cost of desalination
(Note S11) if fresh water was not available for electrolysis. In a similar way, uncer-
tainty ranges were defined for other variables, such as annual operating cost, degra-
dation, stack lifetime, and stack replacement cost.

The LCOH calculation was completed using a Monte Carlo analysis with 50,000
iterations. This method was originally developed to analyze the bottom-up
manufacturing cost of alternative PV module technologies,21 but it has been
adapted here to analyze the LCOH and to identify parameters that have the
most significant impact. Each parameter was varied using a two-half-lognormal
distribution, chosen to get close to a normal distribution without having negative
values, between their nominal (50th percentile), low (10th percentile), and high
(90th percentile) values. A regression analysis was then completed between the
resulting LCOH and the input parameters to determine which parameters have
the most significant impact on the cost of hydrogen. Some benefits of the Monte
Carlo approach compared to a more standard baseline model + sensitivity anal-
ysis are (1) that complex interactions between variables can be accounted for
that may be missed in a one-by-one sensitivity analysis; (2) there is no need to
select which parameters are tested for sensitivity, since the impact of every
parameter can be simultaneously assessed; (3) there is a fine-grained approach
to uncertainty, in which every input parameter can be given an uncertainty range
specific to it, rather than the fixed deviation (e.g., a G 10%) typically used in
sensitivity analysis. One significant disadvantage of this approach is the compu-
tational expense of calculating a large number of iterations. However, for this
work, a full run could be easily carried out overnight using a personal computer.
For more intensive models, other related global sensitivity approaches can be
used that provide similar results with less computational expense, such as
quasi-Monte Carlo methods and the Fourier amplitude sensitivity test (FAST),
as summarized by Iooss and Lemaı̂tre.38

Location Comparison
For the comparison across different locations, the same method was applied to each
different location. The parameters in each location were the same except for PV cap-
ital cost, PV operating cost, discount rate, and weather file (see Table S4). PV costs
and discount rate were taken from Rodrı́guez-Gallegos et al.,39 except that the PV
capital cost was adjusted based on the current PV module price indices in both
Europe and Singapore (Note S14), which resulted in a 35% module price reduction
since the time of the study. To validate the accuracy of these parameters, the prices
were then compared with the current estimates of PV price in Australia35 and the
United States.40 The uncertainty in this part was set to G10% for each parameter
to explore its effect on the LCOH.

Alkaline versus PEM Electrolysis

When comparing alternate electrolyzer technologies, parameters were used as seen
in Table S5, which includes capital cost, efficiency, and stack lifetime. The ranges
applied for these variables are extended to include potential future price reductions
and improvements, which resulted in capital costs of $600–$900/kW and $600–
$1,700/kW for AE and PEM, respectively, and efficiencies of 49–59 kWh/kg and
45–59 kWh/kg.6,12,22 After calculation, a regression analysis was completed to
compare the difference between PEM and AE LCOH values to the difference in
the electrolyzer input parameters.

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SUPPLEMENTAL INFORMATION
Supplemental Information can be found online at https://doi.org/10.1016/j.xcrp.
2020.100209.

ACKNOWLEDGMENTS
This work has been supported by the Australian Government through the Australian
Renewable Energy Agency (ARENA), the Australian Centre for Advanced Photovol-
taics (ACAP), and the Australian Research Council (ARC) through the ARC Research
Hub on Integrated Energy Storage Solutions. R.D. and R.A. acknowledge support
from the University of New South Wales (UNSW) Digital Grid Futures Institute,
UNSW Sydney, under a cross-disciplinary fund scheme. J.Y. is supported by a
UNSW Faculty of Engineering Taste of Research Scholarship.

AUTHOR CONTRIBUTIONS
Conceptualization, Methodology, and Writing – Original Draft, J.Y., R.D., and
N.L.C.; Software & Visualization, J.Y. and N.L.C.; Writing – Review & Editing, R.E.,
R.P., A.H.-B., and R.A.

DECLARATION OF INTERESTS
The authors declare no competing interests.

Received: February 10, 2020

Revised: August 7, 2020
Accepted: August 27, 2020
Published: September 30, 2020

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