California Power-to-Gas and Power-to-Hydrogen Near-Term Business Case Evaluation

Joshua Eichman, Francisco Flores-Espino

Research output: NRELTechnical Report


Flexible operation of electrolysis systems represents an opportunity to reduce the cost of hydrogen for a variety of end-uses while also supporting grid operations and thereby enabling greater renewable penetration. California is an ideal location to realize that value on account of growing renewable capacity and markets for hydrogen as a fuel cell electric vehicle (FCEV) fuel, refineries, and other end-uses. Shifting the production of hydrogen to avoid high cost electricity and participation in utility and system operator markets along with installing renewable generation to avoid utility charges and increase revenue from the Low Carbon Fuel Standard (LCFS) program can result in around $2.5/kg (21%) reduction in the production and delivery cost of hydrogen from electrolysis. This reduction can be achieved without impacting the consumers of hydrogen. Additionally, future strategies for reducing hydrogen cost were explored and include lower cost of capital, participation in the Renewable Fuel Standard program, capital cost reduction, and increased LCFS value. Each must be achieved independently and could each contribute to further reductions. Using the assumptions in this study found a 29% reduction in cost if all future strategies are realized. Flexible hydrogen production can simultaneously improve the performance and decarbonize multiple energy sectors. The lessons learned from this study should be used to understand near-term cost drivers and to support longer-term research activities to further improve cost effectiveness of grid integrated electrolysis systems.
Original languageAmerican English
Number of pages87
StatePublished - 2016

NREL Publication Number

  • NREL/TP-5400-67384


  • California
  • demand response
  • electricity markets
  • electrolysis
  • electrolyzer
  • flexible operation
  • grid integration
  • hydrogen
  • near-term
  • optimization
  • renewable integration
  • responsive load


Dive into the research topics of 'California Power-to-Gas and Power-to-Hydrogen Near-Term Business Case Evaluation'. Together they form a unique fingerprint.

Cite this