Gaseous H2 Now Cost Effective in US - Stop Investing in Liquid H2
New gaseous drop-and-swap systems can provide hydrogen distribution at 1/5 the price of new-build liquid
Nearly seven years ago as a newly minted head of hydrogen strategy, I presented to Shell a path to eliminate the need for liquid hydrogen as H2 scales. They ran my model against their $1M/seat-month logistics model and came up with similar results. It was supposed to be a two year development path to get this equipment - which succeeded in the EU and was stymied in the US by certification processes. After seven years we finally have access to the nice toys that I projected would change the game in H2.
Gaseous hydrogen local production and distribution is now the lowest cost way of doing hydrogen end uses of less than a few tons a day. The obsession with liquid hydrogen in the US needs to end – it is a dead-end with too high a cost of delivered hydrogen. Just ask Plug Power how their foray into liquid hydrogen is going - I wrote about how it is likely the thing that will drive them to bankruptcy.
These changes are necessary to get delivered hydrogen prices down for new use cases. In California with their sky-high fuel prices, break even fuel cost for heavy duty vehicles is about 1.5x the cost of diesel – IE for $5/gallon diesel the max price to break-even on H2 costs at the pump would be $7.5/kg[1]. Liquid hydrogen can’t deliver at these prices. Liquefiers will add $4/kg in CapEx alone to the delivered cost of H2 before even buying a single molecule of H2. OpEx will add another $2/kg. Boiloff losses will add another $1. And gaseous? More like $0.50/kg CapEx, no boiloff, $0.50/kg for every 100 miles driven. And here we have our reason why our liquid H2 deliveries in the US cost $20/kg-$50/kg whereas the EU does gaseous and pays $6/kg-$8/kg (and dropping). Here are the detailed numbers as to why liquefied hydrogen is so expensive - and commercially not viable:
The first column is where we were before the new tube trailers came out in the US this year - moving gaseous hydrogen in heavy steel tubes at low pressure. These could hold 1/6 the amount of hydrogen - so truck and driver costs are immense. The second column is what changes when the new “Type IV” tubes (rubber liner, composite carbon shell) are available. and old inefficient compressors are replaced with new fit-for-purpose compressors The third column is a realistic scenario of building a new liquefier using current and any planned technology. The fourth column is the perfect liquid scenario for the liquefaction provider, but terrible for the end customer,
This “perfect scenario” for liquid doesn’t mean perfect for the industry. It means that the liquefier owner waits until the liquefier is fully subscribed until they build the liquefier – and at 30 tons per day that means 900 H2 buses or 40,000 H2 cars (more than exist in the entire world) are waiting for fuel. This means failed projects that never get off the ground. There is no way to make this “perfect scenario” work. And this is why any project looking for LH2 going forward will either fail or will be egregiously expensive.
This is only the distribution costs. It does not include the H2 production equipment CapEx and Opex, nor does it include any hardware needed at the end use site. It also includes no profit. Compare this to our break-even fueling costs for trucks and buses in California of $7.50/kg and you can see that liquid is a problem. There is no real way to get the costs of liquid hydrogen low enough to be cost competitive.
Moral of the story: end users need to stop asking for liquid hydrogen, everyone needs to stop investing in anything liquid hydrogen if it isn’t required (IE rockets need LH2). Don’t invest in companies that are aiming to build or use liquid hydrogen.
Three caveats:
The largest caveat is that these gaseous prices are for drop-and-swap trailers that use most of a trailer a day (I modeled 70%). End uses that use less than a trailer a day will have tens of cents per kg higher costs from not pushing as many kg/year through a trailer. Use
The costs above are for gray hydrogen - being produced 24/7 from natural gas. For gaseous, 4x the compression CapEx if its using variable renewables - add $0.75/kg to the cost stack. It’s the same for liquid hydrogen, however - liquefiers cannot turn off
Gaseous hydrogen takes up more space than liquid hydrogen. This 53’ and 40’ drop-and-swap systems are not appropriate for urban fueling. 20’ systems will still work - but will add $0.50/kg once they eventually come out. It will still be less expensive than liquid by several dollars.
Why are projects using liquid hydrogen now?
Only a very small fraction of hydrogen uses liquid hydrogen. The vast majority of hydrogen is used in co-located production facilities - IE the H2 is produced on-site. Some recent use cases are using liquid only because efficient gaseous distribution systems were not available until now. And because many offtakers keep doing the same thing that has been done, many will keep spending ridiculous amounts of money to use liquid until someone better and faster demonstrates how cost effective the new gaseous systems are.
Or, you know, until they look at the successful deployment of gaseous systems in the EU and realize this equipment has been demonstrated already.
Some use cases will always use liquid hydrogen. Rockets, for example, require their hydrogen to be liquid. In most other use cases the added expense will not make sense.
What has changed for Gaseous H2 in the past year?
I posted in more detail about this three weeks ago. Fundamentally, now that the US has access to carbon fiber trailers to move H2, everything has changed.
The EU has been enjoying the use of Type IV tube trailers[2] for five years now, but the US DOT refused to permit any of them for US use. Now Hydria has one available, and others are following. The reliable new compressors to work with these trailers are already deployed in the EU (Maximator) and are moving to the US (Maximator and Burckhardt).
Where does this new gaseous H2 not work?
Specific sectors:
rocket fuel - which is an absolutely massive H2 market that dwarves anything we’ll have in other mobility for the next decade
semiconductors where 99.999% hydrogen is an absolute must and they are willing to pay a lot for that guarantee - liquid hydrogen is pretty much guaranteed to be pure since everything else is removed in the liquefaction
Two location based reasons
end use sites like existing urban refueling stations with limited space (GH2 takes a lot more space than LH2)
and very long distance driving
Very long distance deliveries of over 600 miles - limited more by the legal driving time for a truck driver of 9 hours per day than by other reasons (liquid trailers can haul so much H2 that team drivers make sense). Gaseous OpEx is now on the order of $0.25/kg higher than liquid for every 100 miles driven, but it has $5/kg buffer. Before carbon tube trailers that number was $2/kg for every 100 miles. That means in the US in 2023 a distribution line of 200 miles was much more cost effective with liquid than with gas. In 2025 that number is now 2000 miles. Given that liquid hydrogen is sometimes delivered from the gulf coast or even east coast to California, there will be cases where it still makes sense. These cases are very few and will soon go to zero as local production springs up across California.
“But the end use is so much less expensive with liquid”
This is a refrain I have heard all the time from potential hydrogen offtakers. High-pressure End-use costs with gaseous – IE refueling - require more power for gaseous compressors and stationary storage cost more gaseous H2 than for liquid H2. Those extra costs are around $0.50/kg to $1/kg, much lower than the $5/kg marginal cost that buying that H2 as liquid will add.
Major implications for how H2 is produced and moved – and big investment opportunities
Distributed hydrogen production is now an option. Currently liquefiers are limited to 30 tons per day minimum – indicating production in one area and then moving it widely. Cost effective gaseous H2 systems scale down to 1-2 tons a day effectively.
To spell it out, a 5mw wind site that isn’t grid connected is now an option for hydrogen production – just build a dirt road for truck access (dirt roads are $50,000 per mile, power lines are $600,000 per mile). Even with the extra storage needed for reliable delivery from renewables (just buy more tube trailers), gaseous hydrogen now has a cost-effective path to providing locally produced hydrogen to end users.
“Gaseous hydrogen isn’t scalable like liquid”
A common refrain is that gaseous H2 delivery is not scalable – that a bus depot will need many deliveries per day. About 3x. If the bus depot has a choice of $5/kg delivered H2 from gaseous or $10/kg for delivered liquid, they will probably realize that two deliveries a day vs one is a fair trade-off. Most other use cases won’t even need to have daily deliveries – and liquid hydrogen would boil off making it less useful.
A notable exception may be on-highway refueling stations. A theoretical replacement for an on-highway heavy duty refueling station would take 8000kg of H2 per day. That could be two liquid hydrogen trailers or six gaseous hydrogen trailers. Or it could be an H2 pipeline or onsite production – both of which would be much lower cost and gaseous.
In other words, gaseous truck deliveries can scale to gaseous onsite production or pipeline deliveries at a much lower cost than liquid will ever achieve.
So compressed gaseous H2 does everything?
Not a chance. Looking at the cost that most end uses for H2 are willing to pay there is no place for anything but co-located H2 production or H2 pipelines. Compressed gas H2 and liquid H2 are meant for use cases that are replacing high-cost fuels or are needed for chemical processes at volumes significantly lower than the current main use cases.
Compressed gaseous deliveries will never work for refining, ammonia production, fertilizer production, or power. They will only work for use cases that have a higher willingness to pay- that pretty much means replacement of liquid hydrocarbons.
What could change this and make LH2 work?
Lower CapEx for liquefiers, and transfer systems that don’t vent hydrogen. Liquefiers need to have about 1/3 the current cost to compete against the new gaseous systems.
Ultimately – the end game would be a hydrogen distribution grid – parallel to but much smaller than our natural gas grid
Moving hydrogen in a pipeline is much less expensive than moving it as a gas or liquid or on a tanker truck. Expect regional common-carrier pipelines (IE somewhat open access) to spring up around major new use areas. Like ports. As these expand, the much lower cost of delivered H2 will spur new offtake, further lowering the cost of those end uses as the hardware moves down the cost learning curve. We don’t get there with LH2 – it’s just too expensive. Start with gaseous hardware, then transition to pipeline delivery.
Pipelines can move hydrogen about 1000 miles for 20-30 cents per kg.
Appendix
Assumptions:
In both models:
7% cost of capital - this is very generous and assumes a lot of debt as opposed to equity/balance sheet
100 miles to delivery
using diesel delivery trucks (H2 ones don’t exist and the electric ones are too heavy to haul these loads legally) with standard driver costs and maintenance costs
70% average utilization of equipment – starting at 30-50% and moving towards 90% within a few years as offtake expands
350 operational days per year with 15 days maintenance per year
8 cent power at the production site (this number realistically will be much lower only for certain types of production with gaseous systems. For liquid systems it will always be about this much)
Gaseous:
Drop-and-swap system - not the current cascade fill
$5M for a 10 ton per day compressor - $4M plus 25% tariff
$700k-$1M for a 53’ tube trailer that holds 1.3 tons
1.5kwh/kg to pressurize (the new compressors are 90% efficient)
$1.5M for a 4.3 ton tube trailer that effectively holds 3.5 tons after 2x stops of 1.5 tons each with 1.5 2 kwh/kg to compress to 300 bar (coming from PEM at 30 bar)
10% of CapEx is is annual maintenance - compressors have lots of moving parts and seals that need replacing
Trailers going back 20% full on average - IE drop and swap means the end user will not always use all the H2
$1M for an automated trailer filling system (gaseous trailers are often currently filled manually by someone turning valves - which is expensive and less safe than automated systems)
2x trailers compared to station storage - no just-in-time delivery - there is double the storage needs built in. IE for every trailer at a station, there would be a trailer parked at the production site filled or waiting to be filled
Liquid:
$250M for 30 ton per day liquefier (this facility included a 30 ton per day methane reformer, but it was in 2018 dollars and costs – everything has escalated a lot since then)
Tariffs not yet priced in - this could be a serious problem for these
$1.5M for a 53’ liquid tanker that holds 4.2 tons (I’ve been told they are actually $2M now - vacuum jacketed systems are hard to make- but I haven’t verified this so $1.5M it is)
11kwh/kg liquefy
15% multiplier vs CapEx because of liquid hydrogen losses – liquid deliveries lose about 15% of their hydrogen from cooling the receiving tank and from venting before driving
I should have done this for OpEx, too, but I didn’t. The end result is that LH2 looks even worse.
“perfect situation” only - drop and swap liquid to eliminate vent and cooling losses
3% of CapEx is fixed OpEx (a lot of the CapEx is construction and won’t count to maintenance)
[1] This is better for passenger vehicles owing to these having less efficient combustion engines overall – the multiplier for cars is about 2x, so break even would be $15/kg.
[2] This is pretty much a rubber interior to prevent the H2 from escaping and a thick hard shell of literally bullet-proof outer walls to contain the pressure. As of 2023 the best systems available in the US were aluminum tanks with composite overwraps – they were too heavy to move much H2
