The absence of a liquid market for renewable hydrogen causes uncertainty in the revenue stream for early water electrolysis facilities in the Netherlands, and a highly volatile day-ahead market causes uncertainty in production costs.

The EU is promoting renewable hydrogen projects to engage in bilateral contracts to mitigate these uncertainties. Hydrogen Purchase Agreements (HPA) can be used to secure an offtaker and a price, reducing demand and price uncertainty. While a Power Purchase Agreement (PPA) secures a renewable power supply and mitigates price uncertainty, the inherent volume uncertainty of renewable energy sources (RES) remains a significant challenge.

This challenge is exacerbated by the requirement of most offtakers to be supplied with a consistent baseload volume. The hydrogen producer is thus tasked with creating a consistent supply of hydrogen out of an intermittent supply of renewable power and takes on the volume risk of renewable power. It is not yet clear how this and other offtake requirements affect the production cost of hydrogen.

The main question of this thesis was: "How are the hydrogen production costs under a long-term hydrogen purchase agreement affected by the offtake volume, offtake profile, the availability of hydrogen storage, and the type and size of the RES portfolio?"

This thesis utilizes mathematical optimization to quantify the impact of these offtake requirements on the levelized cost of hydrogen (LCOH). The dispatch of the electrolyzer and the operation of the storage is the central decision in the model. Through a case study, the sensitivity of the LCOH with respect to the offtake volume, the size of the RES portfolio, and the size of the storage is determined.

The results show that the LCOH increases by 11–28% if a baseload profile is required and no hydrogen storage is available. Access to an optimal amount of hydrogen storage reduces the extra costs to 2–8%. To achieve the maximum benefit from hydrogen storage, the outflow capacity should be larger than the baseload volume so that the storage can accommodate the entire demand at times when power prices are high. Our results also show that with the current investment costs, the utilization factor plays a significant role in the final LCOH, with a utilization factor of 90% leading to the lowest overall LCOH, even though the average power price at this point is much higher than at lower utilization factors.

Future research could explore different project ownership structures for electrolyzer facilities and quantify the difference in costs. Alternatively, a complete risk analysis using Monte Carlo simulations could be performed. The addition of a more dynamic market model would also enhance the value of the analysis, as would the inclusion of more markets, such as intraday and balancing. Future studies could also assess the impact of linepack flexibility services in hydrogen pipelines on the need for storage.