As the world races to reach net-zero carbon emissions, hydrogen has emerged as a buzzword in the clean energy space. But beyond the hype, how do we actually use hydrogen to produce power? And, more importantly, can it be profitable?
A new study published in the International Journal of Hydrogen Energy dives deep into a high-tech, high-ambition clean energy system that tries to answer both questions at once. It’s technical under the hood—but we’ve broken it down in plain economics terms so you don’t need an engineering degree to follow along.
⚙️ The Big Idea: Power-to-Hydrogen-to-Power (P2H2P)
Imagine this:
- Solar panels and wind turbines generate electricity.
- Any extra electricity is used to split water into hydrogen using a device called an electrolyzer.
- That hydrogen is stored underground in a salt cavern.
- Later, when the wind isn’t blowing and the sun isn’t shining, the stored hydrogen is burned in a gas turbine to produce electricity.
This cycle is called Power-to-Hydrogen-to-Power (P2H2P)—and it’s kind of like saving up renewable energy in a hydrogen “battery.”
🇦🇺 Case Study: Clean Energy in Queensland, Australia
The researchers modeled this system as if it were built in Gladstone, Queensland, a real industrial city with:
- Strong wind and solar potential,
- Available land and water,
- Underground salt formations for hydrogen storage,
- And refineries that could buy green hydrogen.
The goal? Build a system that can:
- Provide reliable electricity to the grid,
- Sell green hydrogen to a refinery,
- And make a profit while being clean.
🔍 What’s in the System?
This “integrated energy system” combines:
| Component | Purpose |
| Wind & solar farms | Generate renewable electricity |
| Electrolyzer | Turn electricity + water → hydrogen |
| Compressor | Pressurize hydrogen for storage |
| Salt cavern storage | Hold hydrogen until needed |
| Hydrogen gas turbine | Burn hydrogen to generate electricity on demand |
All this is optimized using a smart algorithm that calculates the best sizes (how big should the wind farm be?) and the best strategy (when to store vs. sell power/hydrogen?).
💸 The Economics: Can It Be Profitable?
Let’s cut to the chase.
- Capital costs: $793 million to build.
- Annual income: $47.6 million (from electricity + hydrogen sales).
- Net Present Value (NPV): −$234 million over 25 years.
That’s a loss.
Even though the system works technically—providing 100% clean, reliable power—it’s not profitable under current market conditions.
Here’s why:
- The hydrogen sales price ($5/kg) is too low to cover costs.
- Most electricity sales are at fixed, low prices.
- The system runs at a large scale, but the upfront investment is massive.
📊 Key Metrics
| Metric | Value |
| Levelized Cost of Electricity | $120/MWh |
| Levelized Cost of Hydrogen | $5.30/kg |
| Hydrogen sold annually | ~1,450 tonnes |
| Power produced annually | 656,000 MWh |
| Households powered per year | ~96,000 (based on avg use) |
| Land used | 47 km² |
| Water used | 169,000 m³/year |
💰 What Would Make It Work?
The study suggests two fixes to make this model viable:
- Government subsidies or grants (e.g., Australia’s Hydrogen Headstart Program).
- Higher hydrogen prices, or additional income from selling services like grid stabilization.
With a one-time subsidy of $234 million, the system would break even—meaning public support could help launch projects like this until the economics improve.
🌍 Why This Matters (for Economics Students)
This paper isn’t just about hydrogen or turbines. It’s a real-world example of:
- Capital budgeting (NPV, LCOE),
- Optimization under constraints (supply/demand balancing),
- Market design (PPAs, spot prices),
- Externalities and policy (CO₂ reduction, subsidies).
It shows how technical innovation and economic viability must align—and how energy systems can be both green and strategic if properly designed.
📌 Final Thoughts
Hydrogen isn’t a silver bullet—but it could be part of the clean energy solution. Studies like this are essential for understanding when, where, and how it makes economic sense.
For now, the tech works, but the business case needs help. That’s where economics, policy, and innovation come together.
References
- Wade, F., Roche, R., Chailan, A., Bertrand, V., & Paire, D. (2025). Optimal sizing and energy management of an integrated energy system coupling a hydrogen-fueled gas turbine with storage for Power-to-Power and hydrogen supply. International Journal of Hydrogen Energy, 135, 31–47. https://doi.org/10.1016/j.ijhydene.2025.04.123
- International Energy Agency (IEA). (2023). World Energy Investment 2023. Retrieved from https://www.iea.org/reports/world-energy-investment-2023
- European Commission. (2020). A hydrogen strategy for a climate-neutral Europe. Retrieved from https://ec.europa.eu/energy/sites/default/files/hydrogen_strategy.pdf
- Australian Government Department of Climate Change, Energy, the Environment and Water. (2022). Australia’s National Hydrogen Strategy. Retrieved from https://www.dcceew.gov.au/energy/hydrogen
- McPhy. (2024). McLyzer 3200 product datasheet. Retrieved from https://mcphy.com/en/products/electrolyzers/
- GE Vernova. (2024). LM6000 gas turbines and hydrogen capability. Retrieved from https://www.gevernova.com/gas-power/products/aeroderivative/lm6000
- Hydrogen Council. (2022). Hydrogen for Net Zero: A critical cost-effective pathway. Retrieved from https://hydrogencouncil.com/en/hydrogen-insights-2022/
- Australian Energy Market Operator (AEMO). (2023). Integrated System Plan (ISP). Retrieved from https://aemo.com.au/energy-systems/major-publications/integrated-system-plan-isp
- Energy.gov.au. (2024). Hydrogen Headstart Program. Retrieved from https://www.energy.gov.au/government-priorities/renewable-energy/hydrogen-headstart
- Parliament of Australia. (2024). Future Made in Australia Act: Overview and implications. Retrieved from https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library
