Levelized Cost of Hydrogen (LCOH)

In plain terms

The levelized cost of hydrogen answers one question: what price per kilogram, held flat over the project's life, pays back every cost at the required return? It is the hydrogen equivalent of the levelized cost of electricity.

The standard LCOH calculation discounts both costs and output:

LCOH = Σ [ (CAPEX_t + OPEX_t + Energy_t) / (1 + r)^t ]
       ÷ Σ [ H₂ delivered_t / (1 + r)^t ]

where r is the discount rate, usually the project WACC. The NREL H2A models used by the US DOE apply the same logic as a full discounted cash flow, solving for the hydrogen price that earns a target rate of return.

Typical range

Published LCOHs vary widely because inputs vary. For context:

• IRENA (2020) identifies electricity as the largest cost component, with the electrolyzer second.
• The IEA (2025) puts installed electrolyzer cost in 2024 at $2,000–2,600/kW for non-Chinese systems outside China and $600–1,200/kW for Chinese systems in China.
• Sebbahi et al. (2026) report $3.18/kg for a modelled Dakhla hybrid PV-wind case at a capacity factor of 50.85 %. It is a site-specific study result under that paper's assumptions, not a market price.

Why it moves LCOH

Four inputs dominate: electricity price, capacity factor, CAPEX and cost of capital. Their weight changes by site. On a strong solar-wind site, utilisation and financing can matter as much as electrolyzer price.

Common mistake