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Article

Comparative Techno-Economic Analysis of Gray Hydrogen Production Costs: A Case Study

by
Azam Beigi Kheradmand
1,
Mahdi Heidari Soureshjani
2,
Mehdi Jahangiri
1 and
Bejan Hamawandi
3,*
1
Energy and Environment Research Center, Shahrekord Branch, Islamic Azad University, Shahrekord, Iran
2
Department of Chemical Engineering, Faculty of Technical Engineering, Shahrekord Branch, Islamic Azad University, Shahrekord, Iran
3
Department of Applied Physics, KTH Royal Institute of Technology, SE-106 91 Stockholm, Sweden
*
Author to whom correspondence should be addressed.
Sustainability 2025, 17(2), 547; https://doi.org/10.3390/su17020547
Submission received: 9 November 2024 / Revised: 31 December 2024 / Accepted: 6 January 2025 / Published: 12 January 2025
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Abstract

:
Despite Iran’s considerable renewable energy (RE) potential and excellent wind capacity and high solar radiation levels, these sources contribute only a small fraction of the country’s total energy production. This paper addresses the techno-economic viability of gray hydrogen production by these renewables, with a particular focus on solar energy. Given the considerable potential of solar energy and the strategic location of Shahrekord, it would be an optimal site for a hydrogen generation plant integrated with a solar field. HOMER Pro 3.18.3 software was utilized to model and optimize the levelized cost of hydrogen (LCOH) of steam reforming using different hydrocarbons in various scenarios. The results of this study indicate that natural gas (NG) reforming represents the most cost-effective method of gray hydrogen production in this city, with an LCOH of −0.423 USD/kg. Other hydrocarbons such as diesel, gasoline, propane, methanol, and ethanol have a price per kilogram of produced hydrogen as follows: USD −0.4, USD −0.293, USD 1.17, USD 1.48, and USD 2.15. In addition, integrating RE sources into hydrogen production was found to be viable. Moreover, by implementing RE technologies, CO2 emissions can be significantly reduced, and energy security can be achieved.

1. Introduction

Fossil fuels are crucial for the global energy system, but they significantly drive climate change, ocean acidification, and air pollution due to greenhouse gas emissions [1,2,3]. Emissions from the combustion and production stages harm respiratory health and increase mortality rates [4]. The depletion of non-renewable fossil fuel reserves and rising energy consumption due to urbanization make the current fossil-fuel-based economy unsustainable, potentially leading to future demand surpassing supply [5]. The extraction and refinement stages present significant environmental hazards, including fracking fluids, oil spills, and coal mining drainage [6,7,8]. Despite their convenience, fossil fuels’ non-renewable nature and negative environmental impact necessitate exploring alternative energy sources [9].
In the future energy system, RE sources capable of acting as energy carriers will assume a prime position and can be used on a larger scale [10]. Based on availability and cost, sources like biomass, wind, solar, geothermal, hydro, and ocean energies emerge as promising eco-friendly alternatives for replacing fossil fuel usage [11]. However, the unpredictable fluctuations in these energy sources make them unreliable [12]. Hydrogen, on the other hand, is expected to be a crucial energy carrier in future global energy systems. It can be used in several applications, from power plants to transportation [13,14,15]. A hydrogen-based economy is a promising solution for future energy security and sustainability [16]. In addition, the high energy content and low atomic weight of hydrogen make it an ideal candidate for mitigating the harmful effects of fossil fuel combustion on the environment, both as an energy source and an energy carrier [17].
Fuel cells (FCs) are electrochemical devices that generate power using fuel [18]. These devices have certain benefits, including zero emissions, silence, eco-friendliness, fuel flexibility, and high efficiency [19,20]. FCs are cost-effective and take less time to refuel than battery recharging, which is why they are suitable for heavy-duty and long-range driving [20,21]. They have applications in transportation, power plant installations, long-term energy storage for the grid, and fuel cell electric vehicles (FCEVs) [22,23]. In this respect, FCEVs generate their power from hydrogen FCs, which are designed to convert hydrogen gas into electricity for powering an electric motor [24]. According to Pierro et al., FCEVs have an efficiency of 50.2% to 61.1%, which exceeds that of conventional vehicles (12–30%) [25]. FCEVs can represent a viable solution for reducing energy consumption in the transportation sector compared to internal combustion engines or hybrid vehicles [26]. Therefore, hydrogen is a promising energy source for this sector, which consumes 30% of the world’s energy today [27].
According to the method, hydrogen production is divided into various types [28]:
-
Green hydrogen: Produced by water electrolysis using RE sources, which have no carbon emissions.
-
Blue hydrogen: Produced by steam methane reforming. In this method, the generated CO2 is captured and stored to prevent its release.
-
Gray hydrogen: Produced by steam methane reforming. CO2 is released into the atmosphere.
-
Black/brown hydrogen: Produced by the gasification of coal or oil. CO2 and other pollutants are emitted.
Steam reforming has been superior among various hydrogen production methods (Figure 1), due to its efficiency and fewer environmental concerns. Different feedstocks can be used in steam reforming. Natural gas, however, is often preferred due to its lower capital cost, as shown in Figure 2 [29,30]. From this gas, hydrogen is separated by a chemical process carried out in a reformer [31].
Several studies have examined the technical and economic feasibility of hydrogen production in Iran. For example, Dehshiri and Firoozabadi (2024) utilized HOMER software to perform the techno-economic and environmental assessment of an energy system comprising photovoltaic panels, electrolyzers, and FCs. The simulation results demonstrated the viability of using hydrogen technologies as an alternative option to reduce the consumption of fossil fuels, resulting in environmental benefits [32]. Similarly, Sadeghi Chamazkoti et al. (2024) optimized and assessed the feasibility of a hybrid system. The study results demonstrated that to supply the 10.28 MWh electrical requirements of the treatment plant, two 1.5 MW wind turbines, 1924 kW of solar panels, a 578 kW converter, a 500 kW biogas generator, and a 1270 kW electrolyzer have proven to be more economical than other hybrid energy system configurations tested for this purpose [33]. In another study, Rad et al. (2019) used HOMER to analyze a hybrid system, aiming to find the optimal configuration of the studied system to meet the electrical needs of Zavieh-Sofla, a small village in Iran, and minimize the cost and environmental impacts of this project. The findings of this study showed that RE sources, namely biogas, wind, and solar, are the most cost-effective methods of electricity generation, while adding FCs and a reformer improves flexibility and efficiency, respectively [34]. Aboutalebi et al. (2023) also employed HOMER software to analyze the hydrogen and electricity production potential of a grid-connected RE system utilizing solar energy. This study aimed to identify the optimal location of a 20 kW power plant while comparing different solar panel technologies. Various scenarios were investigated, and Masjed-e Soleyman city was determined to be the best location in terms of renewability, hydrogen and electricity production, and being the most economical, with a levelized cost of energy of USD 0.072 kWh/year. Additionally, the amorphous solar panels were the most economical, while the CdTe solar panels were superior considering factors such as energy production and CO2 emission reduction [35]. Finally, Kakavand et al. (2023), conducted technical and economic analysis on green hydrogen and ammonia production infrastructures to find the optimal location for this site. Several locations were chosen to be studied based on their solar and wind potential and proximity to the harbor. Furthermore, the final results showed the accurate cost of ready-to-export ammonia and green hydrogen in Iran [36].
To advance the goal of achieving a hydrogen economy, this study presents a first-time examination of utilizing different hydrocarbons in a hydrogen production facility. This study considers the electrical and hydrogen needs of the Chaharmahal and Bakhtiari province. HOMER simulation software modeled a grid-connected hybrid system consisting of PV panels, a reformer, and a converter. Each component’s specification and economic and operational parameters were inputted into HOMER, and a comprehensive techno-economic analysis was conducted to determine the most economical method of hydrogen production.
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Figure 1. Mature methods of hydrogen production and their assigned colors (based on information from Refs. [30,37,38,39,40]).
Figure 1. Mature methods of hydrogen production and their assigned colors (based on information from Refs. [30,37,38,39,40]).
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Figure 2. Share of fossil fuels in global hydrogen production (based on information from [41]).
Figure 2. Share of fossil fuels in global hydrogen production (based on information from [41]).
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2. Energy Resources

Despite its wind belt location with an estimated potential of 15 GW, Iran has installed a negligible wind capacity of about 300 MW compared to the world total (651 GW in 2021) [42,43]. As can be seen in Figure 3, the high solar radiation of Iran (1800–2200 kWh/m2 per year) exceeds the global average [44], with over 280 days of sunshine per year, covering more than 90% of its territory; the potential for the generation of solar energy in this country is very high, with specific photovoltaic power output between 3.31 and 5.48 kWh/kWp [45]. Compared to this potential, only 900 MW of Iran’s electricity demand in 2020 is generated by solar energy, which is well below the global average [46]. Therefore, the country’s emphasis on RE combined with its rich RE resources, especially wind and solar, holds significant prospects as a potential leader in the future for hydrogen production and meeting the increased electricity demand [47].
The renewable power potential and the range of options to produce clean hydrogen in Iran, where the vast reserves of NG within the country are estimated at 1201 trillion cubic feet [48], coupled with a comparatively low price of USD 0.001 per kWh [49], compared to other hydrocarbons like gasoline (USD 0.029/L) [50], ethanol (USD 0.36/kg) [51], and anthracite coal (USD 0.111/kg) [52], underline the cost-effectiveness of steam methane reforming. In addition, the government’s assured purchase tariff would decrease the country’s reliance on fossil fuels and encourage private sector companies to implement solar panels to contribute to the rest of the country’s development agenda [53]. Therefore, this paper explores the cost features of gray hydrogen production using solar energy.

3. The Studied Area

Shahrekord, the capital and largest city of Chaharmahal and Bakhtiari province, presents an optimal location for establishing a hydrogen generation plant integrated with a solar field. This strategic move offers numerous benefits, including energy independence and resilience [54], economic growth, job creation [55], access to clean and RE [56], and large-scale long-term energy storage [57]. Moreover, it contributes to reducing carbon emissions and providing clean energy solutions for the energy sector [41,58].
The optimal location for such a plant must be carefully considered in light of various factors, including geographical aspects such as low slope and the absence of protected ecosystems within or near the chosen location [59,60], solar energy potential, land cost, and the distance from main roads [61]. In particular, the selected site should be situated near grid transmission lines to reduce construction and development costs. Furthermore, it should be easily accessible from main roads to reduce the cost of road construction [62]. In addition, to maximize solar panel efficiency, the optimal solar panel angle according to the month of the year and the region’s latitude should be determined [63].
Constructing the plant near existing power lines or substations represents a cost-effective solution, as it circumvents the exorbitant expense of establishing new lines while also minimizing power loss in the transmission [64]. Therefore, the industrial park of Shahrekord was selected as the focus area for this study, with an estimated peak power output of 5.272 kWh/kWp, indicating a significant potential for solar energy production [45]. The area under consideration has been solely a case study, intending to identify the potential of this region. The selection was made due to the availability of climatic data and spatial information about the industrial area, as land for such projects is offered to applicants at very low prices. Additionally, all necessary infrastructure such as water, electricity, and gas are already in place, and companies located in these areas benefit from tax exemptions and other incentives.
Overall, the optimal location for a solar energy system exhibits high solar radiation levels, proximity to grid infrastructure, and low development and maintenance costs. The city of Shahrekord exemplifies such a location, offering a promising environment for the construction of a hydrogen generation plant integrated with a solar field.

4. Software Used

The detailed cost analysis that HOMER provides for solar and energy storage projects becomes vital while modeling and making decisions with accurate results as the grid is increasingly integrating RE sources [65]. It is arguably one of the most widely used and effective hybrid system optimization tools available today [66]. Developed by the National Renewable Energy Laboratory (NREL) in the United States, HOMER, which stands for Hybrid Optimization of Multiple Energy Resources, is a world leader in design optimization and feasibility assessment [67]. The software enables the optimization and analysis of hybrid systems [68] and addresses the complexities of integrating renewable resources into the energy mix [69]. HOMER makes it easier to design cheaper and more efficient hybrid microgrid and grid-connected systems that integrate traditional and renewable generation, storage, and load management, as depicted in Figure 4. The software has expansive power in optimization, feasibility, sensitivity analyses, and detailed cost analysis of energy systems [70,71,72]. HOMER offers advanced functionality for conducting comprehensive techno-economic and optimization analyses of grid-connected RE systems [73]. This includes forecasting and optimizing return on investment (ROI), maximizing electric vehicle (EV) charging revenues and energy savings, minimizing costs, increasing resiliency, reducing carbon emissions, exploring cogeneration, reducing uncertainty, accelerating decision-making, and making sales [70]. HOMER represents a package with comprehensive capabilities for designing and optimizing grid-tied distributed generation projects; therefore, it has emerged as an extremely indispensable tool in helping energy experts make very informed decisions.
After conducting simulations using the HOMER software, the program provides a list of possible configurations ranked from lowest to highest total NPC. In other words, the foundation of the simulations in the software is based on minimizing costs [74].
The HOMER software can estimate and assess the economic viability of hydrogen production in Iran, considering RE sources, storage solutions, and system optimization. Extensive research on hydrogen production was conducted by Iranian researchers between 2018 and 2021, the results of which are presented in the figure below. Recent research indicates that steam reforming has been the most extensively studied topic, whereas PV (photovoltaic) technologies have received the least attention in recent years [75].
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Figure 4. The workflow using HOMER (based on information from Refs. [76,77,78,79,80,81,82,83,84,85]).
Figure 4. The workflow using HOMER (based on information from Refs. [76,77,78,79,80,81,82,83,84,85]).
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5. The Required Data

The inputs of HOMER Pro 3.18.3 optimization software generally include the daily electricity or hydrogen needs, yearly solar radiation, wind speed, and meteorological data from reliable data sources, such as the National Aeronautics and Space Administration (NASA) or local weather stations [77].
The required data are critical in the computation for optimum sizing of the RE system and, hence, the sizing of the different components that make up a PV panel, wind turbines, batteries, and converters. These data are then optimized by the program for cost-effective engineering and the attainment of efficient solutions for off-grid and rural electrification projects. This study examines the required hydrogen gas to fuel the transport system in Chaharmahal and Bakhtiari. Considering one million liters of gasoline as the daily consumption of the automobile industry and 11 L per kilometer as domestic car consumption, the daily hydrogen needed would be 72,000 kg [86,87], taking into account that 0.8 kg of hydrogen is consumed per 100 km in hydrogen-driven cars, as stated in reference [88]. Moreover, the system should be capable of meeting the province’s daily electricity demand of 400 MW [89].
Given the increase in the number of vehicles in Iran [90], it is crucial to use zero-emission fuels instead of fossil fuels. This will help the country to minimize over-dependence on non-RE sources. For this purpose, these data were inputted into the HOMER Pro 3.18.3 software together with other specific parameters in Table 1 and Figure 5 for the optimization and system design of a hybrid RE system. The data included the following:
The HOMER Pro 3.18.3 software tested every scenario against technical and economic parameters to select the most cost-effective hydrocarbon and power source combination to satisfy a 400 MW electrical load and a 72,000 kg/d hydrogen load. The average hydrogen production rate, as illustrated in Figure 5, is estimated to be around 3000 kg/h with a peak as high as 5500 kg/h, in addition to the system’s operating hours of 8600.

5.1. Inflation Rate

The inflation rate of Iran is estimated to be 32.5% [102]. This high inflation rate directly impacts the capital investment and operating expenditure cost projections over the lifetime of the entire system. A high inflation rate may decrease the value of money, and this should be accounted for in the financial modeling to obtain close-to-reality estimation of costs.

5.2. The Photovoltaic System’s Specification and Solar Radiation Level

One major element in the setup for hydrogen production is the photovoltaic system, which benefits from the substantial direct normal irradiation of 2345.9 kWh/m2. This amount of solar radiation virtually guarantees high photovoltaic power production between 3.31 and 5.48 kWh/kWp [45]. The system is expected to have an 80% derating factor [94] for real inefficiencies: shading, temperature, and system losses.
The capital cost of the PV system is USD 440,000 for a 1000 kW installation, and the replacement cost is assumed to be equal to the initial capital expenditure. The operating and maintenance (O&M) cost is USD 7.70 per kW per year, and the system lifetime is estimated to be 27.5 years [91,92,93]. The parameters above point to a stable performance in long-term investment, notwithstanding the high initial costs with proper management.

5.3. Converter Efficiency and Costs

The converter system consists of an inverter with a rectifier where conversion from the DC power of the PV to AC power takes place, which is suitable for grid use and the reformer. The capital and replacement costs associated with the inverter are 15,000 with an efficiency rating of 98%, while those for the rectifier are 45,000 with an efficiency rating of 90%. The converter has an O&M cost of 0.05/WDC/year with a 12.5-year lifetime, necessitating one replacement in its lifetime of 20 years [93,95,96,97]. All these efficiencies guarantee minimum power losses and are crucial to maintaining economic viability.

5.4. Reformer Performance and Costs

The reformer, the essential part of a hydrogen production plant, has a high capital cost of USD 1,000,000; its replacement cost would be the same, while there is an O&M cost of USD 10,800 per year. The reformer has a yield efficiency of 79.5% and a rated capacity of 1350 kg of hydrogen per day. The system is assumed to last twenty years, aligned with the long-term perspectives of this hydrogen production installation and its significant capital investment [98,99,100,101].

5.5. Hydrogen Production and Load

The system is expected to sustain a daily electricity demand of 400 MWh. This significant load underscores the necessity for developing a reliable and efficient hydrogen production process. The reformer’s daily production capacity of 72,000 kg translates into an annual hydrogen production total of 26,280,000 kg, amounting to 525,600,000 kg over 20 years (see Figure 5).
As shown in Figure 6, the hydrogen production system integrates PV panels, grid electricity for reliability, a reformer producing hydrogen through steam methane reforming, and a converter to enable efficient electricity conversion. As can be seen in Figure 6, the system operates to supply the 400 MW/day of electricity required for the area under study through solar cells. If solar energy is insufficient, the national power grid, which serves as a backup, is utilized. Additionally, the hydrogen load required, which is 72,000 kg/day, is provided by the reformer, which uses various fuels for hydrogen production.
Initial data inputted into HOMER Pro 3.18.3 included solar irradiance profiles, grid electricity prices, hydrogen demand forecasts, and technical specifications for each component. HOMER Pro 3.18.3 simulated the system’s operation over 20 years, calculating the net present cost (NPC), ROI, and payback period. Optimization adjusted the size of components and operational strategies to help minimize costs while maximizing efficiency. This optimization step considers both capital and operational costs to ensure economic feasibility. Sensitivity analyses of some of the critical variables, such as electricity prices, solar irradiance, and hydrogen demand fluctuations, were performed to check the robustness of the system and further identify potential risks and mitigation strategies. An in-depth economic analysis established the financial viability of this hydrogen-producing system.
Regarding the assumptions made in the simulation, it can be noted that no power outages throughout the year have been considered, which will indeed occur in reality. Additionally, the fuel consumption of various vehicles has been assumed to be constant throughout the year, which is not the case in reality. Furthermore, the price of electricity from the national grid has been assumed to be uniform across different months of the year and different days, which is also not accurate in practice.

6. Results

Hydrogen energy can contribute to opening up the path toward a sustainable future. In this work, detailed simulation and optimization for a hydrogen production system were carried out to model the LCOH with HOMER Pro 3.18.3 using six different hydrocarbons—NG, methanol, ethanol, propane, diesel, and gasoline—considering two scenarios to take into account the variations in economic and technical conditions. Scenario 1 is a hybrid system composed of solar panels and the grid, while Scenario 2 is more dependent on non-renewable grid electricity. Figure 7 shows the summary of the LCOH from different sources.
The data represent hydrogen production costs in dollars per kilogram using different hydrocarbons under two scenarios. From the results of the simulations (Figure 8), among such kinds of hydrocarbons, the cheapest method of gray hydrogen production was represented by NG reforming, with an NPC of USD −532 M and USD 51 M in the first and second scenarios, respectively. Blue hydrogen can also be produced by integrating carbon capture into this system, aiding in achieving a carbon-neutral society, albeit with extra added costs to the whole project. The LCOH is, therefore, a measure of total lifecycle costs divided by total hydrogen production over the system’s lifetime. For an integrated cost of the first case of NG reforming at USD −532 million over a lifetime of 20 years, with an annual production of 26,280,000 kg of hydrogen, an LCOH of USD −0.423 per kilogram is obtained. This represents a very competitive value compared to traditional techniques for hydrogen production, particularly when considering future reductions in RE costs. Hence, the LCOH is very low relative to conventional hydrogen production methods, demonstrating the competitiveness of this system.
Natural gas offers the lowest LCOH in both scenarios, making it the most economically attractive option. However, the LCOH increases significantly in Scenario 2 (0.04 USD/kg), indicating sensitivity to changes in the electricity generation system. Methanol shows a moderate LCOH (1.48 USD/kg) that increases slightly in Scenario 2 (1.94 USD/kg), suggesting methanol’s cost stability under varying conditions, although it remains higher than NG. Ethanol presents the highest LCOH among the hydrocarbons analyzed (2.15 USD/kg), with a notable increase in Scenario 2 (2.61 USD/kg), highlighting ethanol’s economic disadvantage for hydrogen production. Propane’s LCOH is relatively high (1.17 USD/kg) but remains lower than methanol and ethanol, with an increase in Scenario 2 (1.63 USD/kg), suggesting some sensitivity to changing conditions.
Diesel shows a low LCOH similar to NG in Scenario 1 (−0.4 USD/kg) and Scenario 2 (0.061 USD/kg), indicating diesel’s cost-effectiveness under stable conditions but vulnerability to price fluctuations. Gasoline’s LCOH (−0293 USD/kg) is higher than that of NG and diesel but lower than that of methanol, ethanol, and propane, with the LCOH rise in Scenario 2 (0.171 USD/kg) reflecting its moderate sensitivity to changing conditions. The analysis shows that Scenario 2 consistently produces a higher LCOH across all hydrocarbons. This scenario represents the less favorable economic condition of relying on grid electricity compared to using PV panels. The sensitivity of each hydrocarbon to these changes varies, with NG and diesel showing the most significant cost increases.
Economic feasibility varies among the hydrocarbons. NG and diesel are economically feasible under favorable conditions but require careful management of input costs to maintain cost-effectiveness. Methanol and propane offer moderate feasibility, with stable costs but higher than NG and diesel. Ethanol is the least economically feasible due to having the highest LCOH, while gasoline offers a moderate cost but higher sensitivity to unfavorable conditions.
Technical performance ensured efficient and reliable system operation. The initial investment of the first scenario of NG reforming was estimated at approximately USD 564.3 million, including USD 528 million for PV panels, USD 16.3 million for the reformer, and USD 20 million for the converter. Maintenance costs were analyzed, with O&M costs of USD 7.70 per kW per year for PV and USD 10,800 per year for a 1350 kg/h reformer. The total O&M costs for a 5500 kg/h reformer and a 400 MW PV field were USD 441.8 million and USD 8.4 million, respectively. The capacity factor of the PV system, calculated at 18.3%, reflected the intermittent nature of solar power and the need for grid backup. The reformer’s capacity factor of 0.545% indicated the viability of producing and storing excess hydrogen, which could be sold domestically or exported. Figure 9 summarizes the cash flow of two scenarios in which hydrogen is produced by steam reforming of NG.
Throughout years 1 to 19, the expenses are solely O&M costs, which remain approximately constant. The O&M costs of solar panels and the grid (first scenario) are much higher than those of the grid alone (second scenario). However, since the cost scale of the years in the beginning and those at the end is significantly high, the difference between the first and the second scenarios in years in the middle seems negligible.
The environmental benefits are significant, particularly in CO2 emission reductions and RE utilization, resulting in an annual reduction in CO2. The percentage of RE utilized is crucial. In Scenario 1, the PV system generates 96.6% of the required electricity, reducing dependency on fossil fuels. This helps meet sustainability targets and enhances the system’s green credentials. Increasing the RE share significantly reduces the environmental footprint.
A comparative analysis of power sources optimizes the energy mix for cost-efficiency and reliability. PV electricity costs average USD −0.009 per kWh, compared to USD 0.003 per kWh for grid electricity. The analysis balances PV power intermittency with grid power reliability, leading to an optimal mix. In Scenario 1, 96.6% of electricity is generated by PV, with 3.4% from the grid. Selling 87.4% of PV-generated electricity back to the grid at USD 0.036 per kWh highlights the profitability of solar power in Iran. Scenario 2, relying solely on grid electricity, is less cost-effective. Annual grid electricity costs were about USD 67 million, compared to USD 1922 million in savings from PV-generated electricity, indicating solar power’s cost-effectiveness.
Evaluating the reliability and stability of each power source, integrating a hydrogen production system with solar fields showed significant benefits. Hybrid systems combining PV and grid power, as shown in Figure 10, offer cost–benefit advantages by utilizing PV power during peak sunlight and grid power during low sunlight, ensuring uninterrupted hydrogen production. The optimal energy mix maximizes cost savings and reliability, demonstrating the country’s solar energy production profitability.
This chart compares two scenarios of NG-based steam reforming and provides an assessment based on multiple criteria. Each criterion has been scored for both scenarios to show how the relative performance of each scenario compares regarding that criterion. The criteria used are renewability, NPC, LCOH, initial cost, and sale of electricity. A detailed analysis of each criterion and the overall performance of the scenarios is presented herein.

6.1. Renewability

The renewability under Scenario 1 is 96.6, indicating high dependence on RE sources or renewable methods for hydrogen production. Since this score is extremely high, it can be concluded that Scenario 1 is environmentally friendly and, therefore, is in line with this study’s sustainability goals. At the extreme opposite end is Scenario 2, scoring 0, which indicates complete dependence on non-RE sources. This non-renewability may result in environmental and regulatory hurdles, which makes Scenario 2 less attractive from a sustainability perspective.

6.2. NPC

The NPC is the total of a system’s present value cost. Scenario 1 achieves the highest mark of 100, representing the lowest NPC and thus making it the most economically efficient in the long run. This high score suggests that this scenario, considering the life cycle of the hydrogen production system, is indeed cost-effective. In contrast, Scenario 2 scored only 23, indicating far higher overall costs. This substantial difference in score demonstrates that Scenario 1 has an economic advantage over Scenario 2 due to its lower lifecycle costs, which provides economic viability.

6.3. LCOH

Another key economic indicator is the LCOH. Scenario 1 has an LCOH score of 100, representing the lowest LCOH and, therefore, the most economically viable hydrogen production. This lower cost per kilogram of hydrogen contributes to a higher economic attractiveness for Scenario 1 and makes it more competitive within the hydrogen market. On the other hand, the score for Scenario 2 was 22, representing a much higher LCOH, meaning a higher cost, therefore reducing its feasibility in economics and making Scenario 2 not as attractive as Scenario 1.

6.4. Initial Cost

The initial cost of the hydrogen production system is a critical factor for many stakeholders who are sensitive to upfront investment. Scenario 1 scored zero in this category, indicating a very high initial capital cost. While this may deter some investors, it must be weighed against the low NPC and LCOH, which represent long-term economic benefits. The initial investment in Scenario 2 is relatively low, scoring a perfect 100. Such a low initial investment will make it easier to access and, hence, deploy more stakeholders with limited capital—a potential distinct advantage for Scenario 2.

6.5. Sale of Electricity

The potential for electricity sales is another essential factor since this would provide an additional revenue stream. Scenario 1 scores 100 as it has a high potential for electricity sales, due to the system’s ability to generate excess electricity. This added revenue source significantly enhances the financial performance of the hydrogen production system. Scenario 2 scores zero, indicating no such potential sales of electricity. Therefore, the economic viability of Scenario 2 might be affected due to the lack of extra revenue opportunities.

7. Future Works

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Given the fact that the focus of this study is on fossil fuels and steam methane reforming, it is highly recommended that future studies examine green fuels such as biomass and other production methods, photocatalysis for example [103].
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Since no ranking has been conducted in this work, it is suggested that future research include an economic–energy–environmental comparison of the improved hydrogen production methods mentioned in references [104,105].
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The use of catalysts in hydrogen production is highly significant [106,107] and warrants further investigation in future research.

8. Conclusions

While several studies have analyzed hydrogen production in Iran, there is a significant gap in comprehensive comparisons of steam reforming of different fossil fuels. Given that the majority of hydrogen is produced through steam reforming of hydrocarbons and considering Iran’s vast fossil fuel resources, it is essential to determine the most promising energy carrier among these hydrocarbons. This determination is crucial for achieving a carbon-neutral society and a sustainable future. This pioneering study, therefore, examined the techno-economic feasibility of gray hydrogen production in Iran from different fossil fuel sources using the HOMER Pro 3.18.3 software.
In summary, Scenario 1 (PV–grid) emerges as the best option when either long-term sustainability or economic efficiency is considered. It scored highly in its renewability, NPC, and LCOH values with all criteria that justify aligning it to environmental goals and financial viability. Although the initial cost is high, it justifies the investment for a stakeholder to invest in this kind of process under these results in the long run, for sustainability and cost-effectiveness in hydrogen production. Scenario 2 (grid only), although more attractive because of its low initial cost, falls short in all other key areas. Non-renewability, high NPC, and high LCOH further reduce its economic viability in the long run. Furthermore, it offers no potential for electricity sales, which further reduces its value. While Scenario 2 may suffice for short-term cost savings, it compromises long-term benefits and sustainability. Scenario 1 thus remains more favorable to stakeholders focused on long-term sustainable energy solutions and economic performance. Conversely, while Scenario 2 is preferred because it has a low initial investment, it entails significant trade-offs in general economic and environment-related performance.

Author Contributions

Conceptualization, A.B.K. and M.J.; data curation, M.H.S.; formal analysis, M.H.S.; funding acquisition, B.H.; investigation, M.H.S. and B.H.; methodology, M.J.; project administration, M.J.; resources, A.B.K.; software, M.H.S.; validation, M.H.S.; writing—original draft, M.H.S.; writing—review and editing, A.B.K. and M.J. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The data presented in this study are available on request from the corresponding author.

Conflicts of Interest

The authors declare no conflict of interest.

References

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Figure 3. Photovoltaic power potential: (a) Global; (b) Shahrekord [45].
Figure 3. Photovoltaic power potential: (a) Global; (b) Shahrekord [45].
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Figure 5. The reformer’s simulation results.
Figure 5. The reformer’s simulation results.
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Figure 6. HOMER Pro 3.18.3 software simulation setup.
Figure 6. HOMER Pro 3.18.3 software simulation setup.
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Figure 7. The LCOH of different scenarios of steam reforming using various hydrocarbons.
Figure 7. The LCOH of different scenarios of steam reforming using various hydrocarbons.
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Figure 8. The NPC summary for each scenario.
Figure 8. The NPC summary for each scenario.
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Figure 9. The cashflow of NG reforming.
Figure 9. The cashflow of NG reforming.
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Figure 10. The overall score of each scenario of steam methane reforming considering different aspects of the scenarios.
Figure 10. The overall score of each scenario of steam methane reforming considering different aspects of the scenarios.
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Table 1. Economic and technical specification of the system’s components.
Table 1. Economic and technical specification of the system’s components.
EquipmentCostSizeOther Information
CapitalReplacementO&M
PV [91]USD 440,000.00USD 440,000.00USD 7.70 per kW [92]1000 (kW)Lifetime: 27.5 years [93]
Derating factor: 80% [94]
Converter
Inverter
Rectifier		USD 15,000.00 [95]
USD 45,000.00 [96]		USD 15,000.00
USD 45,000		USD 0.05 per WDC [97]1000 (kW)Efficiency: 98%, 90%
Lifetime: 12.5 years [93]
Reformer [98]USD 1,000,000.00USD 1,000,000.0010,800 USD/year [99]1350 kgYield efficiency: 79.5% [100]
Lifetime: 20 years [101]
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Beigi Kheradmand, A.; Heidari Soureshjani, M.; Jahangiri, M.; Hamawandi, B. Comparative Techno-Economic Analysis of Gray Hydrogen Production Costs: A Case Study. Sustainability 2025, 17, 547. https://doi.org/10.3390/su17020547

AMA Style

Beigi Kheradmand A, Heidari Soureshjani M, Jahangiri M, Hamawandi B. Comparative Techno-Economic Analysis of Gray Hydrogen Production Costs: A Case Study. Sustainability. 2025; 17(2):547. https://doi.org/10.3390/su17020547

Chicago/Turabian Style

Beigi Kheradmand, Azam, Mahdi Heidari Soureshjani, Mehdi Jahangiri, and Bejan Hamawandi. 2025. "Comparative Techno-Economic Analysis of Gray Hydrogen Production Costs: A Case Study" Sustainability 17, no. 2: 547. https://doi.org/10.3390/su17020547

APA Style

Beigi Kheradmand, A., Heidari Soureshjani, M., Jahangiri, M., & Hamawandi, B. (2025). Comparative Techno-Economic Analysis of Gray Hydrogen Production Costs: A Case Study. Sustainability, 17(2), 547. https://doi.org/10.3390/su17020547

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