Platts to make several changes to its hydrogen methodology

After a period of open consultation, S&P Global Platts will make several changes to its hydrogen assessments that will refine its treatment of capital expenses, as well as adjust some operational parameters of the various production pathways.

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

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

Electrolysis Capital Costs ($/KW)
Current
Proposed
Alberta Hydrogen PEM Electrolysis Capital Cost
$1,367
$1,589
Appalachia Hydrogen PEM Electrolysis Capital Cost
$951
$1,460
Midcontinent Hydrogen PEM Electrolysis Capital Cost
$923
$1,417
Northeast Hydrogen PEM Electrolysis Capital Cost
$978

$1,502

Northern California Hydrogen PEM Electrolysis Capital Cost
$1,066
$1,637
Northwest Hydrogen PEM Electrolysis Capital Cost
$969
$1,488
Rockies Hydrogen PEM Electrolysis Capital Cost
$937
$1,439
Southeast Hydrogen PEM Electrolysis Capital Cost
$924
$1,419
Southern California Hydrogen PEM Electrolysis Capital Cost
$1,044
$1,603
Upper Midwest Hydrogen PEM Electrolysis Capital Cost
$980
$1,505
Japan Hydrogen PEM Electrolysis Capital Cost
$1,800
$2,073
Alberta Hydrogen Alkaline Electrolysis Capital Cost
$1,066
$1,025
Appalachia Hydrogen Alkaline Electrolysis Capital Cost
$742

$941
Midcontinent Hydrogen Alkaline Electrolysis Capital Cost
$720
$914
Northeast Hydrogen Alkaline Electrolysis Capital Cost
$763
$968
Northern California Hydrogen Alkaline Electrolysis Capital Cost
$832
$1,056
Northwest Hydrogen Alkaline Electrolysis Capital Cost
$756
$959
Rockies Hydrogen Alkaline Electrolysis Capital Cost
$731
$928
Southeast Hydrogen Alkaline Electrolysis Capital Cost
$721
$915
Southern California Hydrogen Alkaline Electrolysis Capital Cost
$815
$1,034
Upper Midwest Hydrogen Alkaline Electrolysis Capital Cost
$764
$970
Japan Hydrogen Alkaline Electrolysis Capital Cost
$1,404
$1,336

Other 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 will also 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 will also 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 will 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 will adjust the cadence of its methodology review from quarterly to annual, to accommodate the annual release of the US National Renewable Energy Laboratorys Annual Technology Baseline report, which contains a number of the financial assumptions used in the revised hydrogen methodology as proposed.

The changes will take effect on 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.