Some of the needs for energy storage may best be met with higher efficient battery and other conventional storage technologies (pumped hydro, compressed air, etc.). However, the cost of battery energy storage is orders of magnitude higher than the cost of creating and storing the energy as fuels. Battery storage is more efficient than creating and storing hydrogen and directly contributes new reliable capacity to a power grid, but the cost of battery storage is largely proportional to the quantity of storage capacity. As a result, the costs become prohibitive for storing energy for more than a few hours at a time.

Conversely, most of the cost of creating fuels with electricity are based on cost of the machinery to convert electricity to hydrogen. For example, the cost of one kilowatt-hour of battery storage is targeted to get down to $100. At that point, the cost of storing 2 kilowatt-hours will be $200, 3 Kilowatt-hours will cost $300, etc. Storing large quantities of electricity to absorb or supply power over long periods rapidly becomes prohibitive.

On the other hand today’s installed cost of electrolysis is perhaps $1,500 per kilowatt (not kilowatt-hour). Making one kilowatt-hour of hydrogen would cost about $2,000 (taking account of the efficiency loss), but could be accomplished in one hour. Storing 2 Kilowatt-hours would cost the same, just running the device for an extra hour. This device could produce almost 9,000 kilowatt-hours in a year, which would take nearly $900,000 of batteries (at $100/kWh), 450 times as much as the electrolyzer.

For storing large amounts of electric energy needed for seasonal energy storage, making fuels is hundreds of times less expensive than battery storage, albeit less efficient.