This Annex describes the methods and input data used for the estimation of the Levelised Cost of Hydrogen (LCOH) that was presented in Chapter 2. LCOH corresponds to the overall production cost of the hydrogen produced over the lifespan of the investment which depends on CAPEX and OPEX.
Implementing the OECD Framework for Industry’s Net‑Zero Transition in Egypt
Accelerating Green Hydrogen Development
Green hydrogen
For the green hydrogen production system, the model is structured within an optimisation framework that determines the optimal sizes of system components and their operation schedule, aiming to minimise the LCOH while ensuring a constant hourly hydrogen output throughout the year. This objective is formulated as a mixed-integer linear programming (MILP) optimisation problem. A cost-optimisation algorithm is implemented in MATLAB and solved using the Gurobi™ solver.
The model simulates system operations over an entire year with hourly time resolution. Hourly PV and wind electricity generation profiles are based on historical data for the selected plant location, representing a typical year. For each hourly time step, the equations governing the behaviour of each system component are solved, determining the energy flows entering and exiting each component. The full set of techno‑economic assumptions is detailed in Tables A A.1., A A.2. and A A.3.
Specific technological assumptions were discussed in Chapter 2 to produce 100 kt H2 per year with a constant hourly demand all year round (11 414 t H2/h). Regarding storage, both Li-ion BESS and hydrogen storage in pressurised vessels are considered for short-duration balancing to minimise the oversizing of the renewable power generation plant. The storage system sizes are determined by the optimisation algorithm to minimise the LCOH while ensuring the hourly hydrogen demand is met. Given the seasonal stability of renewable power generation Figure A A.1), seasonal hydrogen storage in salt caverns is not considered. For both storage systems, non-negative annual balances are imposed to ensure that the stored amount at the end of the simulated year matches the initial amount, enabling identical performance in subsequent years and ensuring multi-year plant operation.
Source: (Ninja Renewables, 2025[1]).
Blue hydrogen
For blue hydrogen production, two technologies (SMR and ATR) are evaluated by developing models using Aspen Plus process simulation software to work under steady state conditions. A third technological option for blue hydrogen production would be the SMR with a CO2 separation section from the syngas flow. This is more complex to be implemented as a retrofit solution and yields lower overall carbon capture reduction (in the range 60-70% of the total inlet C). Hence, this configuration is not further discussed.
The calculation of the LCOH needs input data as following: (i) economic data about technology investment and operation costs; (ii) cost of commodities; (iii) technical data about performances of technologies (i.e. efficiencies, lifetime); (iv) location-specific availability of the renewable sources (wind and solar).
Economic and technical data
Economic data including capital investment and O&M costs for the components of the hydrogen production systems were obtained from the relevant sources recently published. Fixed O&M for each component is considered as a percentage of the original investment cost. Natural gas, desalinated water and grid electricity costs are considered constant values equivalent to the current prices in Egypt. A 10% discount rate is assumed for the analysis.
Investment and fixed O&M costs are expected to decrease over time due to greater technology adoption and economies of scale. To account for this, two cost scenarios are considered for LCOH estimation: the base case, which reflects current technology costs, and the future scenario, which incorporates projected cost reductions. To address uncertainties in battery storage and ammonia cracking costs, two CAPEX values are used. For BESS, a low estimate of USD 200/kWhel and a high estimate of USD 400/kWhel are considered. For the ammonia cracking plant, CAPEX values of USD 1.42 M /MWNH3nom and USD 2.24M / MWNH3nom are based on recent studies.
The renewable energy efficiencies are embedded in hourly generation profiles. Battery storage has a charge/discharge efficiency of 90% (81% round-trip efficiency) and a 4-hour energy-to-power ratio. Electrolyser efficiency is based on recent studies (UNIDO, 2023[2]). Hydrogen storage assumes no leakage in pressurised tanks. Electricity transmission losses are 3.5% per 1 000 km for HVDC cables and 1.5% for AC/DC and DC/AC conversions. Hydrogen transport pipelines assume a 0.1% loss per 1 000 km and an energy use of 0.027 kWhe/km/kg H2.
For the blue hydrogen simulations, the economic analysis follows a bottom-up approach, where capital costs for each installed component are estimated using cost functions. All costs are adjusted to the reference year 2023 using the Chemical Engineering Plant Cost Index (CEPCI), with a 2023 index value of 797.6.
The values used in the herein presented work are summarised in Table A A.1, Table A A.2 and Table A A.3. References for the selected values are included in each table.
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