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

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. •An optimization framework is proposed for the design of renewable-electrolysis system.•A case study on California investigates the most affordable systems to produce H2.•H2 production and storage cost is mostly affected by capital costs and tax credits.•The model can provide insights of economic H2 deployment in other geographic areas.