Electrolysers: Unit economics
Why cheap power and long running hours make cheap hydrogen
What this tab covers What it costs to move a unit of energy this way: capital and operating costs, tariffs, utilisation and how it compares with the alternatives.The cost of electrolytic hydrogen is mostly electricity plus the capital cost of the electrolyser spread over its running hours. Cheap power that is only available part of the time makes the capital cost per kg higher. In chlor-alkali and aluminium smelting, electricity is the largest single cost.
Key costs
| Measure | Value | Note |
|---|---|---|
| Installed water-electrolysis system, Chinese equipment in China | 500-1,100 USD/kW (2025)3 | IEA Global Hydrogen Review 2026, as reported by Argus |
| Installed system, equipment made outside China | 1,900-2,500 USD/kW (2025)3 | Could fall to 1,500-1,900 by 2030 |
| PEM uninstalled system cost | 1,000 (2022 status); targets 250 (2026), 150 ultimate USD/kW1 | Stack alone 450 in 2022 |
| Alkaline stack manufacturing cost | 45-65 at high factory use; 130-250 at about 10% use USD/kW (2023)5 | IEA Global Hydrogen Review 2024, as reported by H2 View |
| PEM hydrogen production cost | above 3 (2022 status); targets 2.00 (2026), 1.00 ultimate USD/kg H21 | DOE technical targets |
| Aluminium smelting electricity | 14.1 MWh per tonne Al12 | World average; plus 0.43 t of carbon anodes |
| Electricity share of chlorine production cost | about 70%% of production cost14 | Euro Chlor, European conditions |
Where the money goes
| Item | Share or amount |
|---|---|
| Stack | 40-60% of PEM system capital cost historically; 50-60% of uninstalled alkaline system cost at high factory use25 |
| Balance of plant and power electronics | The remaining 40-60%25 |
| Electricity | About 34% of hydrogen cost with Western equipment, about 58% with Chinese equipment in the worked example below (calculated)13 |
Worked example (calculated, illustrative). Take 55 kWh/kg (source 1), power at USD 30/MWh, 50% of hours running, 8% cost of capital and a 20-year life (capital recovery factor 0.102), with upkeep at 1.5% of capex a year (the IEA's assumption, source 18). One kW makes about 80 kg a year. Electricity costs 55 x 0.03 = USD 1.65/kg. At USD 2,200/kW installed (non-Chinese kit, source 3), capital adds about USD 2.80/kg and upkeep about USD 0.40, so hydrogen costs about USD 4.90/kg. At USD 800/kW (Chinese kit in China), capital falls to about USD 1.00 and upkeep to USD 0.15, giving about USD 2.80/kg. Stack replacement is not counted. Cheap equipment and high running hours matter as much as cheap power.
Sources
- Technical Targets for Proton Exchange Membrane Electrolysis US Department of Energy, Hydrogen and Fuel Cell Technologies Office, 2023
- DOE Hydrogen Program Record 22002: Historical Cost Reduction of PEM Electrolyzers US Department of Energy, 2022
- Green H2 electrolyser sector enters consolidation: IEA (reporting IEA Global Hydrogen Review 2026; cost figures not on the IEA's free web pages) Argus Media, 2026
- Underutilised electrolyser factories threaten hydrogen cost reductions, says IEA (reporting Global Hydrogen Review 2024) H2 View, 2024
- Factsheet: Aluminium smelting with use of low-carbon electricity GIZ, 2025
- Why Europe needs local production of chlorine Euro Chlor, 2026