A few of my previous articles directly or indirectly discussed problems with the economics of green hydrogen. But so far, they’ve all talked about the issue in high-level terms, never getting into specifics.

I haven’t yet answered the central question: what exactly is the problem with green hydrogen electrolysis? This is the focus of this post.

Green hydrogen projects are floundering

The zero-interest rate fever dreams of the early 2020s led to widespread hype for green hydrogen. Pure-play hydrogen companies received billion-dollar valuations. Massive waves of investment poured into the sector, and multiple gigawatt-scale electrolyzer projects were announced.

Abundance requires deflation.

At a fundamental level, raising the standard of living means making goods and services more affordable to everyone. Lest the economists get upset, it’s not just any form of deflation, to be precise: it’s technological deflation, which is prolonged and sustained, and arises from increased productivity or better products. The path to prosperity comes from understanding how goods become cheap.

A common refrain is that cost reduction comes from economies of scale and learning effects. For every doubling of cumulative capacity, the unit costs drop by a certain percentage. That percentage value is called the learning rate, and it varies by industry and by product. This phenomenon is sometimes called “Wright’s law” and has been observed in virtually every industry¹.

The hot word in the power grid these days is ‘dispatchability’. The ability to adjust power output, or on the other end, adjust power consumption on demand is vital to balancing the grid¹. Dispatchable generation and dispatchable loads will become increasingly valuable with heavier penetration of non-dispatchable renewable generation, such as wind and solar.

The favorable economics of renewables and zero marginal cost of production mean that in many cases, it will make economic sense to overbuild generation capacity and simply curtail production when it isn’t needed. An even more economically sensible option is for large consumers with load flexibility to perform demand response, turning up their consumption when electricity is plentiful and turning down or even idling when generation is low.

To a rough approximation, the process of humanity’s material enrichment is the large-scale solution of separation problems. A disproportionate amount of a substance’s usefulness is derived from the absence of other substances. Water, to take an obvious example, would be a virtually inexhaustible and abundant resource if we didn’t care about the presence of salt in it.

Mastering the separation of a substance—removing undesirable impurities or extracting it from some larger amalgam—is a necessary first step towards commoditization: the process by which production is massively scaled up and costs plummet. It is commoditization that ultimately allows for materials—and the downstream products that require them—to become accessible to the masses.

Anyone who’s somewhat interested in mass transportation systems is bound to have looked into the Hyperloop concept at one point or another. One of the things that came up during my research was something called the ‘Kantrowitz limit’.

What is the Kantrowitz limit? I admittedly had never heard of it before, but it seemed like something very important that fortunately had technological solutions. Yet there was something unsatisfying about all the popular resources I could find about it. They all seemed to be very surface level, and when I started looking into it the rabbit hole ended up going a lot deeper than I expected, so I am writing this in the hopes that it might be useful to someone else one day.