More than 97% of hydrogen projects with Final Investment Decision (FID) are located in countries that have explicit hydrogen funding policies, according to the Hydrogen Council. Recently, the third Innovation Fund auction (IF25) has opened – promoting the decarbonization of key industrial processes with a budget of up to EUR 1.3 billion. When considering applying for such auctions, one metric stands out as the cornerstone of project competitiveness: Levelized Cost of Hydrogen (LCOH). LCOH represents the all-in cost of producing hydrogen over the lifetime of a project, factoring in CAPEX, OPEX, financing, and operational realities. It’s the foundation for strategic decision-making. Learn why and how LCOH impacts your project – and how thyssenkrupp nucera can help.
Why LCOH Matters
In a pay-as-bid auction, your bid price is defined by the gap between your calculated LCOH and the expected offtake price. A high LCOH increases reliance on subsidy support. A lower LCOH gives you the flexibility to submit a stronger bid while maintaining project viability.1
Closing the Gap: From Calculation to Action
Calculating LCOH can be straightforward or highly detailed, but what really matters are the drivers that often get overlooked:
- Plant Size and Configuration
The optimal plant size isn’t just about maximizing output, it’s about matching production volumes to available power supply and grid connection. Oversized plants can increase CAPEX and reduce utilization, while undersized plants may miss economies of scale. - Financing Costs and Technical Risk
A bankable player with proven technology can help reduce financing and contingency costs. Lowering the cost of capital (WACC) by a mere percentage point can reduce LCOH by up to €0.20/kg. Technical risk is mitigated by robust warranties, a strong track record, and clear scope of supply. - Operational Range and Flexibility
Electrolyzers that operate at low minimum loads better adapt to volatile renewable power, increasing annual utilization and reducing curtailment losses. Fast ramping and dynamic response enable grid services and revenue stacking. - High Annual Availability
Quick maintenance and refurbishment cycles are essential. High availability above 95% is achieved through modular design, remote monitoring, and predictive maintenance. Every percentage point of uptime translates into significant LCOH savings. - High Current Density and Compact Design
Electrolyzers with high current density save floorspace and reduce construction costs. - Software Assistance and Load Balancing
Smart plant control software optimizes load balancing, improves efficiency, and reduces OPEX. Digital twins and AI-driven analytics are increasingly help maximize performance and minimize downtime. - Easy Integration into Outside Battery Limits (OSBL)
Seamless integration of water treatment, compression, and grid connection reduces EPC costs and project risk. Standardized, skid-mounted modules simplify installation and commissioning. - Fast Project Execution and Risk Minimization
Shorter construction timelines and streamlined EPC strategies reduce interest during construction and exposure to market volatility. - By-Product Synergies
Monetizing by-products such as oxygen can offset OPEX and improve project economics. Some projects have achieved around €0.10/kg in additional revenue through oxygen sales.
How thyssenkrupp nucera Can Help
At thyssenkrupp nucera, we bring all of the above to the table – thanks to a product portfolio that combines high-efficiency, modular alkaline water electrolysis (AWE) blocks with deep project experience to help you optimize every lever of LCOH.
Our engagement starts early: we work with you to model plant sizing, analyze PPAs, and design hybrid renewable strategies. We support you with advanced LCOH modeling tools, benchmarking against industry peers, and transparent scope definition.
Our technology is proven at scale, with over 3 GW delivered and a global service network that ensures reliable performance, supported by digital solutions at the core of our smart services. We don’t just deliver equipment – we partner with you from feasibility to long-term operation, helping you navigate every step of the IF25 auction process.
Why Realistic Project Economics Matter Most
Experience shows that projects aren’t developed just for the sake of funding. The most successful developers focus on making their overall concept as competitive as possible, using funding as a bridge for the last mile. While competition is fierce, many past projects were overly optimistic about their economics and timelines – and ultimately walked away from offered funding. The best approach is to ask for the fair value needed to make your project viable – ensuring you can deliver on your commitments and build a sustainable business. A lower and well-substantiated LCOH contributes to more realistic and robust project economics.
Ready for IF25? We’re Here to Support You.
As the IF25 Hydrogen Bank auction opens, we’re ready to support you with tailored advice, LCOH modeling, and a support letter for your application. Reach out to our team today – let’s make your project a success.
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1 Please note that the European Hydrogen Bank ranks projects solely on the basis of bid price. Any information provided on LCOH is for informational purposes only and does not influence the official evaluation or ranking criteria. LCOH will help you calculate the appropriate bid price.
