Optimal design of solar-driven electrolytic hydrogen production systems within electricity markets

Abstract Hydrogen has the potential to be a key contributor toward a low-carbon economy. Generating hydrogen by electrolysis using renewable energy is one way to support a decarbonized economy; however, its cost is not typically competitive with the carbon-emitting incumbent technology, steam methane reforming. The ability of electrolysis to integrate with electricity markets presents a unique cost reduction opportunity due to the perceived future availability of low and zero-marginal cost renewable energy sources. Additionally, as renewables, and particularly, photovoltaics are installed on the grid, they have a value deflation effect. This work evaluates solar-electrolysis configurations using a mathematical programming framework to maximize system net present value. The framework has been tested with specific weather conditions and financial mechanisms in California. Our findings indicate that a spectrum of potential cost competitive solutions is available for systems that (i) have market configurations resembling hybrid retail/wholesale, resulting in a hydrogen production cost range of US$6.2 kg−1–US$6.6 kg−1, or full wholesale market participation, reducing production cost to US$2.6 kg−1–US$3.1 kg−1, and (ii) achieve projected future cost reductions.