Platts proposes several changes to its hydrogen methodology

S&P Global Platts is proposing several changes to its hydrogen assessments that would refine its treatment of capital expenses, as well as adjust some operational parameters of the various production pathways.

These proposed changes stem from Platts quarterly methodology review of its hydrogen assessments, as well as industry feedback and a review of the assessment methodology by an independent energy consultant.

Chief among these proposed changes is the adoption of a fixed charge rate for the calculation of capital expenses, which is the product of a capital recovery factor and a project finance factor. This change will more accurately incorporate inflation, depreciation, return on equity, debt service, insurance as well as income and property taxes.

In addition, the capital costs ($/KW) for the electrolysis production pathways -- proton exchange membrane (PEM) electrolysis and alkaline electrolysis -- would be increased, from $900/KW for PEM electrolysis to $1,382/KW; and from $702/KW for alkaline electrolysis to $891/KW. These changes would more closely align with the technology-specific capital costs listed in the International Energy Agency's 2019 Future of Hydrogen report (IEA FoH).

This proposed change would directly affect the Netherlands and US Gulf Coast electrolysis assessments, and indirectly affect the Japan and the remainder of the North American electrolysis assessments, whose capital costs would change as follows:

Alberta Hydrogen PEM Electrolysis Capital Cost, from $1,367 to $1,589;

Appalachia Hydrogen PEM Electrolysis Capital Cost, from $951 to $1,460;

Midcontinent Hydrogen PEM Electrolysis Capital Cost, from $923 to $1,417;

Northeast Hydrogen PEM Electrolysis Capital Cost, from $978 to $1,502;

Northern California Hydrogen PEM Electrolysis Capital Cost, from $1,066 to $1,637;

Northwest Hydrogen PEM Electrolysis Capital Cost, from $969 to $1,488;

Rockies Hydrogen PEM Electrolysis Capital Cost. from $937 to $1,439;

Southeast Hydrogen PEM Electrolysis Capital Cost, from $924 to $1,419;

Southern California Hydrogen PEM Electrolysis Capital Cost, from $1,044 to $1,603;

Upper Midwest Hydrogen PEM Electrolysis Capital Cost, from $980 to $1,505;

Japan Hydrogen PEM Electrolysis Capital Cost, from $1,800 to $2,073;

Alberta Hydrogen Alkaline Electrolysis Capital Cost, from $1,066 to $1,025;

Appalachia Hydrogen Alkaline Electrolysis Capital Cost, from $742 to $941;

Midcontinent Hydrogen Alkaline Electrolysis Capital Cost, from $720 to $914;

Northeast Hydrogen Alkaline Electrolysis Capital Cost, from $763 to $968;

Northern California Hydrogen Alkaline Electrolysis Capital Cost, from $832 to $1,056;

Northwest Hydrogen Alkaline Electrolysis Capital Cost, from $756 to $959;

Rockies Hydrogen Alkaline Electrolysis Capital Cost, from $731 to $928;

Southeast Hydrogen Alkaline Electrolysis Capital Cost, from $721 to $915;

Southern California Hydrogen Alkaline Electrolysis Capital Cost, from $815 to $1,034;

Upper Midwest Hydrogen Alkaline Electrolysis Capital Cost, from $764 to $970;

Japan Hydrogen Alkaline Electrolysis Capital Cost, from $1,404 to $1,336.

Other proposed changes include an adjustment for plant efficiencies, based on technology specific assumptions listed in the IEA FoH report, as follows: steam methane reforming (SMR), from 70% to 76%; SMR with carbon capture (CCS), from 63% to 69%; and alkaline electrolysis, from 65% to 66.5%.

The cost of stack refurbishment as a percent of capital cost is also proposed to be increased from 15% to 35% for PEM electrolysis, and from 15% to 45% for alkaline electrolysis, based on technology-specific production costs cited in the IEA FoH report.

Platts is also proposing to adjust the percentage of Dutch peak and base electricity prices used in the Netherlands hydrogen assessments from the current 80% base and 20% peak, to 50% peak and 50% base.

In addition, Platts is proposing to change its method for calculating carbon dioxide emissions, with relevance to the Netherlands (SMR, and SMR w CCS) and California (SMR) assessments, by using the emission factor of 8.9 kg CO2/kg H2, as listed in the IEA FoH report.

Finally, Platts is also proposing to adjust the cadence of its methodology review from quarterly to annual, to accommodate the annual release of the US National Renewable Energy Laboratory's Annual Technology Baseline report, which contains a number of the financial assumptions used in the revised hydrogen methodology as proposed.

The proposed changes would take effect April 1, 2021.

Please send any comments to hydrogenassessments@spglobal.com and pricegroup@spglobal.com.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.