Optimizing Electrolytic Hydrogen Production Costs

Abstract

The Levelized Cost of Hydrogen (LCOH) is commonly used to evaluate the economic performance of electrolytic hydrogen production. In many studies, electricity costs are represented by static average prices, while assuming simplified operating profiles. This simplification neglects the temporal variability of electricity prices in liberalized power markets and limits the representation of flexible electrolyzer operation.

This thesis develops a techno-economic LCOH framework that incorporates hourly electricity prices, renewable generation profiles, and operational constraints of an alkaline electrolyzer. A bottom-up modeling approach is applied, aggregating hourly operating decisions into discounted lifetime costs. A daily dispatch optimization algorithm is introduced to determine the operation of the electrolyzer based on electricity prices, expected hydrogen revenues, and solar availability, while accounting for start-up penalties, efficiency degradation, and stack replacement.

The framework is applied to a case study of a 1.2 MW alkaline electrolyzer coupled with a large solar field in the Netherlands using historical market data. The results indicate that price-responsive operation can reduce LCOH relative to continuous operation, primarily by avoiding periods of high electricity prices, although this leads to lower overall hydrogen production volumes. Compared with purely solar-following operation, cost reductions are achieved at the expense of higher carbon emissions as a result of increased reliance on grid electricity.

Overall, the study shows that incorporating electricity price dynamics and operational constraints can materially affect LCOH estimates and provides a more transparent basis for evaluating grid-connected electrolytic hydrogen production under volatile electricity markets.