Exhibit 2 In 2022, the levelized cost of green hydrogen increased by approximately 25 percent. 2022 alkaline water electrolysis plant approximate LCOH¹ (1 GW), $ per kilogram of hydrogen Approximate change vs prior estimates, %
+25
5–6.5
Hydrogen plant operating expenditures2 Additional financing cost
4–5
+40
–17
Electricity costs
Hydrogen plant capital expenditures
+11
+40
Electrolyzer system
Prior estimates
Actual 2022
Note: Levelized cost of hydrogen 2022 estimates for a 1 GW alkaline water electrolysis plant in the United States. 1 Levelized cost of hydrogen. 2 Includes operations and maintenance, stack refurbishment, and water consumption. Source: Hydrogen Council; McKinsey analysis
McKinsey & Company
will come from experience, reducing costs— particularly for electrolyzer system improvements for power density and efficiency—and some will come as more projects are built and others are scaled. However, cost competitiveness won’t happen within the necessary time frame if industry players don’t approach things differently. With this in mind, the following decisions throughout the project life cycle can help facilitate the required timelines, costs, and levels of efficiency of green projects. Rethink the approach to project design Moving forward, players—particularly incumbents accustomed to large-scale capital projects with massive specifications and scale—can help make these projects economical by rethinking how they
respective growth potentials are high. Effective hyperscaling—that is, large-scale and repeatable new-asset development—would require project owners to increase their metabolism while rethinking the cost of project delivery. The “plant as a product” approach, which uses manufacturing methodology to help companies scale green capital expenditures quickly and make construction projects repeatable, can help owners and builders deliver these projects more efficiently and cheaply. Several projects currently underway could produce hydrogen at a cost of $6 to $8 per kilogram. For hydrogen to be economical, however, it will need to be produced at roughly $3 per kilogram for most applications.9 This means industry leaders need to fundamentally rethink capital costs for future projects. Some of the necessary efficiency
9 Yuanrong Zhou, “Can the Inflation Reduction Act unlock a green hydrogen economy?,” International Council on Clean Transportation, January 3, 2023.
Accelerating the journey to net zero
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