i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1

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Economic evaluation with sensitivity and

profitability analysis for hydrogen production from
water electrolysis in Korea

Boreum Lee a, Heetae Chae a, Nak Heon Choi b, Changhwan Moon b,

Sangbong Moon b,*, Hankwon Lim a,**
a
Department of Advanced Materials and Chemical Engineering, Catholic University of Daegu, 13-13 Hayang-ro,
Hayang-eup, Gyeongsan, Gyeongbuk 38430, Republic of Korea
b
Elchemtech Co. Ltd, World Meridian Venture Center 2Cha 611, Gasan-dong, Geumchun-gu, Seoul 08505, Republic
of Korea

article info abstract

Article history: Economic evaluation for water electrolysis compared to steam methane reforming has
Received 10 October 2016 been carried out in terms of unit hydrogen production cost analysis, sensitivity analysis,
Received in revised form and profitability analysis to assess current status of water electrolysis in Korea. For a
28 December 2016 hydrogen production capacity of 30 Nm3 h
1, the unit hydrogen production cost was 17.99,
Accepted 30 December 2016 16.54, and 20.18 $ kg H
1
2 for alkaline water electrolysis (AWE), PEM water electrolysis (PWE),

Available online 8 February 2017 and steam methane reforming (SMR), respectively with 11.24, 10.66, and 11.80 for
100 Nm3 h
1 and 8.12, 7.72, and 7.59 $ kg H
1 3
1
2 for 300 Nm h . With sensitivity analysis (SA),

Keywords: the most influential factors on the unit hydrogen production cost depending on the
Economic evaluation hydrogen production capacity were determined. Lastly, profitability analysis (PA) pre-
Water electrolysis sented a discounted payback period (DPBP), net present value (NPV), and present value
Cost estimation ratio (PVR) for a different discount rate ranging from 2 to 14% and it was found that a
Sensitivity analysis discounted cash flow rate of return (DCFROR) was 14.01% from a cash flow diagram ob-
Profitability analysis tained for a hydrogen production capacity of 30 Nm3 h
1.
Steam methane reforming © 2017 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved.

requires the use of H2 as a reactant to chemically convert CO2

Introduction
Hydrogen has been extensively used in conventional indus-
trial sectors such as petroleum, petrochemical, chemicals,
and fertilizer [1e3] to name a few and recent advancements in
fuel cell electric vehicles (FCEVs) with CO2-free emissions
have initiated a significant increase of hydrogen demand.
Moreover, a newly emerging technology like CO2 utilization
into useful chemicals such as a synthetic natural gas (SNG)
[4,5] and methanol [6,7]. Hydrogen is an energy carrier that
should be produced from various sources [8] and numerous
methods have been used for hydrogen production such as
steam reforming, partial oxidation, water-gas-shift reaction,
pyrolysis, plasma reforming, biomass gasification, and water
electrolysis (WE) [9e18]. Currently, steam methane reforming
(SMR) as shown in Equation (1) is considered as one of the

* Corresponding author.
** Corresponding author.
E-mail addresses: sbmoon@elchemtech.com (S. Moon), hklim@cu.ac.kr (H. Lim).
http://dx.doi.org/10.1016/j.ijhydene.2016.12.153
0360-3199/© 2017 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved.
 i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1
most economical processes for hydrogen production and this
technology accounts for about 48% of global hydrogen pro-
duction [19,20].
CH4 þ 2H2O / CO þ 3H2
However, because this SMR uses methane or fossil fuels as
reactants and produces CO2 contributing to global warming,
more environmentally friendly hydrogen production methods
are being sought to meet an increasing hydrogen demand and
environmental standards simultaneously. Among many al-
ternatives, WE is considered as the most practical method for
the production of hydrogen with no fossil fuels used and no
CO2 produced [8].
In WE, hydrogen is produced from water by splitting water
into hydrogen and oxygen via applied electricity (Equations
(2)e(4)) and this process is environmentally-friendly with no
additional hydrogen purification unit required [21]. Among
various WE techniques, alkaline [22e30] and polymer elec-
trolyte membrane (PEM) WE [31e41] are considered as two
primary types of WE currently being developed for near-term
commercialization.
Cathode (
): 2Hþ þ 2e
/ H2.
Anode (þ): 2H2O / O2 þ 4Hþ þ 4e
.
Overall reaction: 2H2O / 2H2 þ O2.
One of the most promising areas for H2 produced from WE
is a H2 fueling station for FCEVs. Fig. 1 shows a process flow
diagram for a H2 fueling station using alkaline water elec-
trolysis (AWE), high pressure PEM water electrolysis (PWE),
and SMR. Basically, a produced H2 from WE is stored and then
dispensed to FCEVs while the one from SMR should be purified
using pressure swing adsorption (PSA) to meet strict re-
quirements for FCEVs before being sent for storage and
dispenser. Contrary to AWE and SMR requiring a compressor
to pressurize the produced H2 for dispenser, no compressor is
necessary for high pressure PWE due to the production of
pressurized H2 enough for a dispenser. Zeng and Zhang [22]
reported a comprehensive review for AWE examining the
current status of the technology and identifying the R&D areas
to be addressed for the commercialization of AWE. In addi-
tion, future research directions focusing on electrode mate-
rials, electrolyte additives, and bubble management, etc. were
extensively discussed. A lot of works have been focused on the
development of efficient electro-catalysts for hydrogen evo-
lution reaction or oxygen evolution reaction [24,26,28]. More-
over, Egelund et al. [30] demonstrated a low cost method for
electrode manufacturing and reported a metallic composite
electrode material to improve oxygen evolution reaction at
high temperature in commercial AWE. For PWE, Carmo et al.
[37] presented a state-of-the-art PWE technology showing
higher current density and better partial load range compared
6463
to AWE. At the same time, some challenges still existing for
PWE such as cross-permeation phenomenon, thicker mem-
branes, and expensive materials and components were iden-
tified in order to provide future research directions. Clarke
et al. [32] constructed a stand-alone PWE system operating at
(1) up to ~4 kW input and the system was self-pressurizing and
fail-safe. Millet et al. [33] also reported their recent advances in
PWE technology including electro-catalyst, membrane elec-
trode assemblies, cell efficiency, safety, stack design and
optimization, etc. for electrolyzers with a hydrogen produc-
tion capacity of 5 Nm3 h
1. Grigoriev et al. [35] investigated the
possible safety issues related with high pressure PWE oper-
ating at pressure up to 130 bar and pointed out that hydrogen
concentration in the oxygen gas and vice versa were the most
influential risks. They also proposed possible solutions to
reduce contamination levels such as the use of thicker
membranes, membranes with low gas permeability, and
external catalytic gas combiners. Rahim et al. [39] developed
mass transport model suitable for PWE and discussed several
issues encountered in PWE model.
In addition to technical reports mentioned above, eco-
nomic analysis for WE at various capacities has been reported.
Genovese et al. [42] performed a comprehensive economic
analysis for both AWE and PWE based on state-of-the-art
technology of WE in the US and estimated a base-case H2
(2) production cost in 2009 of 5.20 $ kg H
1 2 for a forecourt refu-
eling station with a H2 capacity of 1500 kg H2 d
1 and
3.00 $ kg H
12 for a central production facility with a H2 capacity
(3)
of 50,000 kg H2 d
1. For PWE, Ainscough et al. [43] estimated
respective H2 production costs of 5.14 $ kg H
1 2 and
5.12 $ kg H
1
1
2 in 2013 for a forecourt (1500 kg H2 d ) and a
(4)
centralized production (50,000 kg H2 d
1) of H2 based on
Hydrogen Analysis version 3 (H2A v3) in the US. They also
projected reduced H2 production costs of 4.23 $ kg H
1 2 and
4.20 $ kg H
1 2 in 2025 for a forecourt and centralized produc-
tion, respectively. Parthasarathy and Narayanan [44] sum-
marized H2 production costs of 0.75 $ kg H
1 2 for SMR,
0.92 $ kg H
1 2 for coal gasification, 1.21e2.42 $ kg H
1 2 for
biomass gasification, 2.56e2.97 $ kg H
1 2 for electrolysis, and
4.98 $ kg H
12 for a photocatalytic process from various sources
based on several studies. In addition, Gim and Yoon [45] per-
formed comparative economic analysis for on-site hydrogen
refueling stations in Korea using AWE and SMR. For a H2
production capacity of 30, 100, and 300 Nm3 h
1, they reported
a unit hydrogen production cost in 2012 of 14.6, 10.0, and
7.8 $ kg H
1 2 (AWE) and 17.2, 10.7, and 7.1 $ kg H
1 2 (SMR),
respectively. Their results showed that AWE is more
economical for a H2 production capacity 100 Nm3 h
1 while
SMR is more feasible for a H2 production capacity
300 Nm3 h
1 based on economy of scale.
With growing interests in WE worldwide including Korea
as a practical and environmental-friendly method to meet
increasing hydrogen demand, it is a timely approach to
investigate the economic feasibility of WE while reflecting its
current status in Korea. To assess an economic status of WE in
Korea, an economic analysis targeting hydrogen production
capacity of 30, 100, and 300 Nm3 h
1 was carried out through
unit hydrogen production cost calculations based on cost data
obtained from a commercial supplier (EM Korea) and
6464 i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1
Fig. 1 e H2 fueling station using (a) alkaline water electrolysis (AWE), (b) high pressure PEM water electrolysis (PWE), and (c)
steam methane reforming (SMR).
comparison studies with SMR were also performed. In addi-
tion, various economic analysis methods like sensitivity
analysis (SA) and profitability analysis (PA) in terms of cash
flow diagram of a proposed project using a 30 Nm3 h
1 PWE
have been carried out with an aim to examine the feasibility of
the project [46,47].
Methods
Cost estimation
Total cost is defined as the sum of capital costs and operating
costs in cost estimation, where capital costs include hydrogen
production equipment, storage, compressor, pump,
dispenser, construction, and supplement while operating
costs consist of electricity, labor, maintenance, other oper-
ating cost, water, land rent, and natural gas. In this work, cost
estimation methods proposed by Turton et al. [46] and Sinnott
and Towler [48] were extensively used and a chemical engi-
neering plant cost index (CEPCI) of 562.9 as of May 2015 was
used for cost calculations to reflect the most recent cost data
[48e50]. With cost estimation, a unit hydrogen production
cost for AWE, PWE, and SMR in Korea with hydrogen pro-
duction capacities of 30, 100, and 300 Nm3 h
1 was calculated
and reported with an average currency exchange rate of
$1 ¼ 1200 won in 2015.
Capital cost
Purchase costs obtained from EM Korea, a Korean company
selling a wide range of WE equipment, were used for this
study with ones for SMR in Korea from a previous literature
[45]. Based on capital costs, itemized annual capital costs were
obtained by applying capital recovery factor (CRF) defined in
Equation (5).
N
i ð1 þ iÞ
CRF ¼ N
; (5)
ð1 þ iÞ
1
where i is a discount rate (a conservative value of 8% in Korea
used in this paper [45]) and N is economic analysis period,
which is normally 10 or 20 years. Supplementary costs were
assumed to be 20% of total equipment costs. In addition,
following assumptions were made when converted into
annual capital cost.
(1) There is no salvage value.
(2) For AWE and PWE, CRF is 0.1490 (n ¼ 10 years, discount
rate ¼ 8%) with 0.1019 for SMR (n ¼ 20 years, discount
rate ¼ 8%).
(3) A stream factor (SF) of a proposed project is 0.7.
 i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1
Operating cost
Operating costs are composed of electricity, labor, mainte-
nance, other operating cost, water, land rent, and natural gas.
The annual electricity and water costs for WE were obtained
directly from EM Korea. The annual costs for land rent and
natural gas were calculated based on the previously reported
data [45]. In calculating the rest of operating costs, following
assumptions were made.
(1) The annual labor cost of full-time and part-time
workers in Korea is $34,167 and $16,667, respectively.
(2) Electricity price reflecting seasonal variations is used.
(3) The maintenance cost is 2% of the total capital invest-
ment (TCI) and other operating cost is 1% of the TCI.
Cost exponent (n)
Costs for different capacities are well estimated based on a
general relationship between cost and capacity with a cost
exponent as shown in Equation (6) [46,48].

n
Ca Aa
¼ ;
Cb Ab
where C is purchase cost, A is equipment capacity, and n is
cost exponent.
In this paper, a good approximation of a six-tenth rule
(n ¼ 0.6) was frequently used when no cost data with different
capacities are available [46,48,51] while actual cost exponent
was used when cost data were available.
Sensitivity analysis (SA)
For identification of key parameters in cost estimation,
sensitivity analysis is widely used. The effect of a specific
parameter on a unit hydrogen production cost was investi-
gated by varying its value (±20% as a preliminary study) while
all others fixed [46,47,50,52,53]. The parameters studied in this
paper were natural gas, land rent, water, other cost, mainte-
nance, labor, electricity, supplement, construction, dispenser,
compressor and pump, storage, and hydrogen production
equipment.
Profitability analysis (PA)
To investigate the feasibility of a proposed project, a cumu-
lative cash flow diagram (CCFD) was constructed to under-
stand the relationship between capital investment and
expected profits. The following assumptions were made to
assess economic feasibility of a hydrogen fueling station with
a capacity of 30 Nm3 h
1 [54e56].
1) Construction period is 2 years.
2) Working capital investment (WCI) is 15% of the total capital
investment (TCI).
3) Taxation rate is 30%.
4) A modified accelerated cost recovery system (MACRS)
combining double declining balance (DDB, Equation (7))
and straight line (SL, Equation (8)) is used to calculate
depreciation.
6465
2 3
2 4 X
j¼k
1
dDDB
k ¼ FCI
dj 5 (7)
n j¼0
½FCI
S
k ¼
dSL (8)
n
5) A project life is 10 years.
6) Annual revenue of $572,162 obtained from EM Korea is
used for a hydrogen production capacity of 30 Nm3 h
1.
7) A unit hydrogen production cost including VAT is
29.43 $ kg H
12 and the average number of cars per day is
14.4.
8) A range of a discount rate from 2 to 14% is used.
Results and discussion
Unit hydrogen production cost
(6)
Cost estimation was carried out targeting hydrogen fueling
stations with hydrogen production capacities of 30, 100, and
300 Nm3 h
1. Their respective itemized cost estimation and
unit hydrogen production costs for alkaline water electrolysis
(AWE), PEM water electrolysis (PWE), and steam methane
reforming (SMR) are presented in Tables 1e3. In estimating
capital costs, both AWE and PWE sold by EM Korea were
chosen for this study and high pressure PWE with no addi-
tional compressor required was used while a compressor was
still necessary for AWE. As for SMR, cost data based on a
previous literature [45] coupled with CEPCI to reflect cost data
in 2015 were used for comparative studies with WE in Korea.
Total costs are the sum of capital and operating costs and both
itemized and total unit hydrogen production costs are pre-
sented for comparative studies. Unit hydrogen production
costs were calculated by dividing total annual costs by the
amount of hydrogen produced. For the hydrogen production
of 30 Nm3 h
1 suitable for small scale applications, unit
hydrogen production costs of 17.99, 16.54, and 20.18 $ kg H
1 2
were obtained for AWE, PWE, and SMR, respectively as shown
in Table 1. In this case, the order of unit hydrogen production
cost was SMR > AWE > PWE. Same analysis has been done for
the hydrogen production capacity of 100 Nm3 h
1 suitable for
medium scale applications and respective unit hydrogen
production costs were 11.24, 10.66, and 11.80 $ kg H
1
2 for AWE,
PWE, and SMR. These values are lower than the ones obtained
for 30 Nm3 h
1 for all equipment and the order of
SMR > AWE > PWE was obtained still showing the advantage
of WE. However, respective unit hydrogen production costs of
8.12, 7.72, and 7.59 $ kg H
12 were obtained from AWE, PWE,
and SMR for the hydrogen production capacity of 300 Nm3 h
1
suitable for large scale applications with a new order of
AWE > PWE > SMR. These results confirm the benefit of
employing SMR for large scale hydrogen production.
The percentage distribution of capital and operating costs
to unit hydrogen production cost for hydrogen production
capacities of 30, 100, and 300 Nm3 h
1 is shown in Fig. 2.
Apparently, unit hydrogen production costs decreased with
6466 i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1

Table 1 e Itemized cost estimation for a hydrogen production capacity of 30 Nm3 h¡1.
Items AWEa/$ y
1 Hydrogen PWEa/$ y
1 Hydrogen SMRb/$ y
1 Hydrogen
production production production
cost (AWE)/$ kg H
1
2 cost (PWE)/$ kg H
1
2 cost (SMR)/ $ kg H
1
2

1. Capital cost 154,924 9.33 123,814 7.46 168,833 10.17

H2 production 49,676 2.99 44,709 2.69 58,647 3.53
equipment
Storage 4244 0.26 4244 0.26 4244 0.26
Compressor, Pump 21,219 1.28 e e 21,219 1.28
Dispenser 21,219 1.28 21,219 1.28 21,219 1.28
Construction 42,438 2.56 42,438 2.56 42,438 2.56
Supplement 16,127 0.97 11,204 0.68 21,066 1.27
2. Operating cost 143,878 8.66 150,818 9.08 166,309 10.01
Electricity 50,142 3.02 64,332 3.87 8596 0.52
Labor 50,833 3.06 50,833 3.06 50,833 3.06
Maintenancec 15,833 0.95 11,000 0.66 30,812 1.86
Other operating costd 7917 0.48 5500 0.33 18,295 1.10
Water 433 0.03 433 0.03 e e
Land rent 18,720 1.13 18,720 1.13 e e
Natural gas e e e e 57,773 3.48
3. Total cost 298,802 17.99 274,632 16.54 335,142 20.18
a
Cost data obtained from EM Korea currently selling water electrolyzer in Korea.
b
Cost data based on a previous report by Gim and Yoon [45].
c
2% of total capital investment (TCI).
d
1% of TCI.

Table 2 e Itemized cost estimation for a hydrogen production capacity of 100 Nm3 h¡1.
Items AWEa/$ y
1 Hydrogen PWEa/$ y
1 Hydrogen SMRb/$ y
1 Hydrogen
production production production
cost (AWE)/$ kg H
1
2 cost (PWE)/$ kg H
1
2 cost (SMR)/$ kg H
1
2

1. Capital cost 314,089 5.66 254,975 4.60 297,678 5.37

H2 production 136,574 2.46 92,071 1.66 115,692 2.09
equipment
Storage 8739 0.16 8739 0.16 8739 0.16
Compressor, Pump 37,760 0.68 e e 37,760 0.68
Dispenser 39,666 0.72 43,697 0.79 39,666 0.72
Construction 55,449 1.00 87,395 1.58 55,449 1.00
Supplement 35,901 0.65 23,072 0.42 40,372 0.73
2. Operating cost 309,630 5.58 336,143 6.06 356,964 6.43
Electricity 160,455 2.89 205,861 3.71 15,043 0.27
Labor 67,500 1.22 67,500 1.22 67,500 1.22
Maintenancec 35,248 0.64 22,653 0.41 62,587 1.13
Other operating costd 17,624 0.32 11,326 0.20 33,701 0.61
Water 1443 0.03 1443 0.03 e e
Land rent 27,360 0.49 27,360 0.49 e e
Natural gas e e e e 178,133 3.21
3. Total cost 623,719 11.24 591,118 10.66 654,641 11.80
a
Cost data obtained from EM Korea currently selling water electrolyzer in Korea.
b
Cost data based on a previous report by Gim and Yoon [45].
c
2% of total capital investment (TCI).
d
1% of TCI.

increased hydrogen capacity and it results from the reduction
in the contribution of capital costs with hydrogen capacity due
to economy of scale [45,46]. The US DOE reported a unit
hydrogen production cost of 4.90e5.70 $ kg H
1 2 in 2009 for a
forecourt fueling station [42] with a hydrogen production ca-
pacity of 1500 kg d
1 (approximately 700 Nm3 h
1) and this is
equivalent to 5.28 and 6.15 $ kg H
1 2 in 2015 when converted
using CEPCI. Based on our estimated data for hydrogen ca-
pacities of 30, 100, and 300 Nm3 h
1 coupled with a non-
regression method and a currency exchange rate of
$1 ¼ 1200 won, expected unit hydrogen production costs of
5.77 and 5.63 $ kg H
12 were obtained for AWE and PWE,
respectively with a hydrogen production capacity of
700 Nm3 h
1. For a case of a currency exchange rate of
 i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1 6467

Table 3 e Itemized cost estimation for a hydrogen production capacity of 300 Nm3 h¡1.
Items AWEa/$ y
1 Hydrogen PWEa/$ y
1 Hydrogen SMRb/$ y
1 Hydrogen
production production production
cost (AWE)/$ kg H
1
2 cost (PWE)/$ kg H
1
2 cost (SMR)/$ kg H
1
2

1. Capital cost 642,605 3.87 492,913 2.97 510,014 3.07

H2 production 343,677 2.07 177,989 1.07 215,052 1.30
equipment
Storage 16,895 0.10 16,895 0.10 16,895 0.10
Compressor, 63,889 0.39 e e 63,889 0.39
Pump
Dispenser 70,199 0.42 84,475 0.51 70,199 0.42
Construction 70,772 0.43 168,950 1.02 70,772 0.43
Supplement 77,173 0.47 44,603 0.27 73,207 0.44
2. Operating cost 705,188 4.25 789,387 4.75 751,152 4.52
Electricity 467,037 2.81 599,202 3.61 65,185 0.39
Labor 84,167 0.51 84,167 0.51 84,167 0.51
Maintenancec 75,770 0.46 43,792 0.26 111,694 0.67
Other operating costd 37,885 0.23 21,896 0.13 68,365 0.41
Water 4330 0.03 4330 0.03 e e
Land rent 36,000 0.22 36,000 0.22 e e
Natural gas e e e e 421,742 2.54
3. Total cost 1,347,794 8.12 1,282,299 7.72 1,261,166 7.59
a
Cost data obtained from EM Korea currently selling water electrolyzer in Korea.
b
Cost data based on a previous report by Gim and Yoon [45].
c
2% of total capital investment (TCI).
d
1% of TCI.

Fig. 2 e Percentage distribution of capital and operating costs to unit H2 production cost.

$1 ¼ 1000 accounting for its fluctuation, these values increase
to 6.93 and 6.76 $ kg H
1
2 , respectively. Therefore, even though
direct comparison is not possible between US and Korea due
to several factors such as natural gas price, electricity price,
labor, exchange rate, etc., it can be concluded that a reason-
able range of unit hydrogen production cost for WE in Korea is
obtained when compared to one in the US. Furthermore, it is
very meaningful to have the most up-to-date economic
analysis data for WE based on cost data from a company (EM
Korea) currently selling commercial electrolyzer in Korea.
Sensitivity analysis (SA)
Sensitivity analysis is frequently employed in cost estima-
tion to identify key factors to affect unit hydrogen produc-
tion cost, for example, and to understand their correlation.
6468 i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1

Fig. 3 e Sensitivity analysis for different H2 production capacities.

In this study, effect of all itemized factors presented in
Tables 1e3 on the unit hydrogen production cost was stud-
ied thoroughly by varying the factors (±20%) and SA results
for a hydrogen production capacity of 30, 100 and
300 Nm3 h
1 are shown in Fig. 3 with the most influential
factor marked with the symbol (*). For 30 Nm3 h
1, H2 pro-
duction equipment for AWE, electricity for PWE, and natural
gas for SMR were the most influential factors on unit
hydrogen production cost. The next ones were labor and
electricity for AWE while H2 production equipment for PWE
and SMR. For an increased H2 production capacity to
100 Nm3 h
1, a similar trend was observed, however, elec-
tricity and H2 production equipment became more dominant
for AWE and electricity was more influential for PWE. For
SMR, natural gas and H2 production equipment were still key
factors, but effect of natural gas was less dominant with H2
production equipment more influential compared to
30 Nm3 h
1. Lastly, for a hydrogen production capacity of
300 Nm3 h
1, for both AWE and PWE, electricity became
more influential on the unit hydrogen production cost while
labor, an important factor for 30 and 100 Nm3 h
1, became
less significant. For SMR, natural gas was still the most
important factor, but less influential for a large scale
hydrogen production (300 Nm3 h
1) compared to small or
medium scale hydrogen production (30 and 100 Nm3 h
1).
One interesting thing to note is that the effect of H2 pro-
duction equipment on the unit hydrogen production cost for
AWE and SMR became significant from 30 to 100 Nm3 h
1
while it was less compelling with increased H2 production
capacity from 100 to 300 Nm3 h
1. For AWE, PWE, and SMR,
the effect of labor on the unit hydrogen production cost
became minor as H2 production capacity increased.
 i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1 6469

Conclusions

To assess the current economic status of water electrolysis

Fig. 4 e Cash flow diagram (CFD) for a small scale hydrogen
fueling station (30 Nm3 h¡1) with different discount rates.
In summary, different key factors to affect the unit
hydrogen production cost were identified for different
hydrogen production capacities based on SA and this can be
used as a useful tool to understand the relationship between
cost variables and unit hydrogen production cost.
Profitability analysis (PA): cumulative cash flow diagram
(CCFD)
(WE) in Korea, various analysis methods such as cost esti-
mation, sensitivity analysis, and profitability analysis have
been tried for alkaline water electrolysis (AWE), high pressure
PEM water electrolysis (PWE), and steam methane reforming
(SMR) with a hydrogen production capacity ranging from 30 to
300 Nm3 h
1. Based on cost estimation, it was found that the
order of unit hydrogen production cost was SMR
(20.18 $ kg H
1
1
1
2 ) > AWE (17.99 $ kg H2 ) > PWE (16.54 $ kg H2 )
3
1
1
for 30 Nm h while AWE (8.12 $ kg H2 ) > PWE
(7.72 $ kg H
1
1 3
1
2 ) > SMR (7.59 $ kg H2 ) for 300 Nm h indicating
that small scale applications favor WE contrary to large scale
applications favoring SMR. Through sensitivity analysis (SA),
the effect of key factors on the unit hydrogen production cost
was investigated and different key factors depending on a
hydrogen production capacity such as H2 production equip-
ment, electricity, natural gas, etc. were determined. Finally,
the profitability analysis (PA) for a 10-year project with a
hydrogen production capacity of 30 Nm3 h
1 coupled with
cash flow diagrams for different discount rates from 2 to 14%
provided a discounted payback period (DPBP), net present
value (NPV), and present value ratio (PVR) for each discount
rate with a discounted cash flow rate of return (DCFROR) of
14.01%.

As a profitability analysis, a cumulative cash flow diagram for

a 10-year project with initial a construction period of 2 years
and variations of discount rates from 2 to 14% for a hydrogen Acknowledgements
production capacity of 30 Nm3 h
1 was constructed (Fig. 4).
Clearly, different discounted cash flow patterns were obtained This work was supported by the New & Renewable Energy
depending on discount rates. The highest discounted cumu- Core Technology Program of the Korea Institute of Energy
lative cash position, also known as a net present value (NPV), Technology Evaluation and Planning (KETEP), granted finan-
of $1,042,000 was obtained with a discount rate of 2% while cial resource from the Ministry of Trade, Industry & Energy,
$34,000 with a discount rate of 14%. In addition, a discounted Republic of Korea (No. 20153010041750).
cash flow rate of return (DCFROR), a maximum discount rate
to guarantee a net present value of at least zero at the end of
Nomenclature
the project period, was found to be 14.01% for this project.
Finally, a discounted payback period (DPBP), NPV, and present
FCEVs Fuel cell electric vehicles
value ratio (PVR), defined as the ratio of all positive cash flows
SNG Synthetic natural gas
and all negative cash flows, for different discount rates [46]
WE Water electrolysis
were calculated based on PA as shown in Table 4. From this
SMR Steam methane reforming
analysis, a general trend of higher DPBP, lower NPV, lower PVR
PEM Polymer electrolyte membrane/proton exchange
for higher discount rate was obtained clearly showing the
membrane
effect of a discount rate in the PA.
AWE Alkaline water electrolysis
PWE PEM water electrolysis
PSA Pressure swing adsorption
Table 4 e Analysis from cumulative cash flow diagram for US United States
a hydrogen production capacity of 30 Nm3 h¡1. SA Sensitivity analysis
Discount rate/% PA Profitability analysis
CEPCI Chemical engineering plant cost index
2 6 8 10 14
CRF Capital recovery factor
a
DPBP /year 6.1 6.8 7.0 7.5 9.5 SF Stream factor
NPVb/1000$ 1042 572 397 253 34
TCI Total capital investment
PVRc 1.87 1.50 1.36 1.24 1.03
CCFD Cumulative cash flow diagram
a
DPBP (discounted payback period). WCI Working capital investment
b
NPV (net present value).
c MACRs Modified accelerated cost recovery system
PVR (present value ratio).
DDB Double declining balance
6470 i n t e r n a t i o n a l j o u r n a l o f h y d r o g e n e n e r g y 4 2 ( 2 0 1 7 ) 6 4 6 2 e6 4 7 1
SL Straight line
VAT Value added tax
DOE Department of Energy
NPV Net present value
DCFROR Discounted cash flow rate of return
DPBP Discounted payback period
PVR Present value ratio
KETEP Korea Institute of Energy Technology Evaluation and
Planning
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