Underground hydrogen storage is a critical component of the hydrogen value chain, offering large-scale, long-duration storage solutions essential for balancing supply and demand. The economics of such storage depend on geological formations, primarily salt caverns and aquifers, each with distinct cost structures and operational considerations.

Salt caverns are artificial cavities created by solution mining in salt domes or bedded salt formations. They are the most established and cost-effective option for underground hydrogen storage due to their low permeability, high mechanical stability, and minimal hydrogen loss. Capital costs for salt cavern storage include site exploration, permitting, drilling, leaching, and surface infrastructure. Leaching, the process of dissolving salt to create the cavern, is a significant cost driver, requiring substantial water and energy inputs. Operational costs involve compression, injection, withdrawal, and monitoring.

Aquifers, naturally occurring porous rock formations saturated with water, are another option but present higher technical challenges. Capital costs include exploration, well drilling, conditioning (e.g., removing residual gases), and surface facilities. Operational costs are influenced by the need for continuous monitoring to prevent hydrogen contamination and microbial activity. Aquifers generally require higher cushion gas volumes—hydrogen left in the reservoir to maintain pressure—compared to salt caverns, increasing costs.

Depth and location significantly impact costs. Deeper storage sites require higher compression energy, increasing operational expenses. Proximity to hydrogen production or demand centers reduces transportation costs. For example, salt caverns in the U.S. Gulf Coast benefit from existing infrastructure and favorable geology, lowering costs compared to regions without such advantages.

Scalability varies between the two options. Salt caverns are modular; additional caverns can be leached as needed, making expansion straightforward. Aquifers offer larger storage volumes but require extensive characterization to ensure compatibility with hydrogen, limiting rapid scalability.

Real-world projects illustrate cost variations. The HyStock project in the Netherlands utilizes salt caverns with estimated capital costs of $50–$100 million per cavern, depending on size and depth. The U.S. Department of Energy’s Advanced Clean Energy Storage project in Utah targets salt cavern storage with a projected cost of $1 billion for two caverns, including compression and pipeline infrastructure. In contrast, aquifer storage projects, such as those explored in Germany, face higher uncertainties, with costs ranging 20–50% above salt caverns due to additional conditioning and monitoring requirements.

Financing models for underground hydrogen storage include public-private partnerships, government grants, and private investment. Revenue streams come from capacity leasing, hydrogen price arbitrage, and grid balancing services. Return on investment (ROI) timelines depend on utilization rates and market conditions. Salt cavern projects typically achieve ROI in 10–15 years under moderate demand growth, while aquifer projects may require longer due to higher upfront costs.

Market demand plays a crucial role in storage viability. Regions with strong hydrogen policies, such as the EU and Japan, see faster adoption, improving storage economics. In contrast, areas with nascent hydrogen markets face longer payback periods. Seasonal demand fluctuations also influence storage profitability; high winter demand in Europe, for instance, increases the value of long-duration storage.

Regional cost variations are notable. North America benefits from extensive salt formations and existing oil and gas expertise, reducing costs. Europe faces higher expenses due to stringent regulations and limited optimal geological sites. Asia-Pacific, with growing hydrogen demand, is investing in both salt cavern and aquifer storage but encounters higher costs due to less developed infrastructure.

In summary, underground hydrogen storage economics are shaped by geological factors, infrastructure, and market dynamics. Salt caverns offer lower costs and faster ROI, while aquifers provide larger capacities at higher expenses. Financing relies on policy support and market demand, with regional disparities influencing investment attractiveness. As hydrogen markets mature, underground storage will play a pivotal role in enabling a reliable and scalable energy transition.