Green hydrogen production cost: key drivers of competitiveness and optimization strategies

The research uses a robust simulation model—over 4,000 iterations—to evaluate off-grid electrolyzer systems powered exclusively by renewables, aiming to determine optimal conditions for cost-competitive hydrogen generation.

The methodology centers on hybrid systems integrating solar photovoltaic (PV), wind energy, and Battery Energy Storage Systems (BESS). All scenarios fix the electrolyzer size at 100 MW and vary only the configuration of energy sources and storage. This controlled variable approach allows for direct comparability between different global locations, including sites in Spain, Romania, Chile, Australia, and the United States.

Key metrics such as gross and net available energy, curtailment losses, and effective electrolyzer performance were evaluated using hourly simulations. These simulations allowed a precise estimation of annual hydrogen output for each system configuration. The study defines two economic scenarios: one using uniform, standardized CAPEX and OPEX values across all locations, and another applying country-specific financial variables. This dual approach reveals how both resource availability and local economic conditions influence the final green hydrogen cost.

The analysis highlights that the lowest LCOH does not always result from the configuration with the highest hydrogen output. In locations with low Levelized Cost of Electricity (LCOE), it is often cost-effective to oversize renewable generation—even at the expense of some curtailment—to maximize the electrolyzer’s capacity factor. Conversely, in regions with high LCOE, minimizing curtailment and carefully sizing renewable inputs becomes essential for competitiveness. This makes energy storage solutions a strategic asset, enabling better management of surplus energy and enhancing system flexibility and cost-efficiency.

A core conclusion is that a high electrolyzer capacity factor, a low LCOE, and favorable local economic conditions together underpin a competitive green hydrogen production cost. The study shows that even in locations with less favorable renewable resources, the cost of green hydrogen can be reduced through smart system design, such as reinforcing the stronger energy source and eliminating underperforming components.

Financial conditions such as investment costs, inflation, and operational rates play a decisive role. In scenarios with variable pricing, locations with excellent solar or wind resources may still fall short in competitiveness if high green hydrogen plant cost elements like CAPEX or local financing terms are unfavorable.

Ultimately, the study confirms that achieving a low and competitive green hydrogen production cost requires a holistic strategy—one that balances technical performance, energy storage solutions, and local financial realities. The findings serve as a comprehensive guide for policymakers, developers, and investors aiming to scale green hydrogen deployment cost-effectively and sustainably.

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