Leveraging synergies for energy-flexible operated electrolysis: A techno-economic analysis of power purchase agreement procurement with battery energy storage systems for renewable hydrogen production

Abstract

To mitigate the increasingly adverse impact of climate change, policymakers foster the substitution of fossil energy sources with renewable hydrogen. However, considering market supply, procurement costs, and strict regulatory guidelines for renewable electricity sourcing to produce renewable hydrogen, electrolysis operators in the European Union (EU) encounter significant challenges. Intelligent design and operation of grid-connected energy-flexible operated renewable hydrogen electrolysis powered with renewable energy sources through Power Purchase Agreements (PPAs) with integrated Battery Energy Storage Systems (BESS) may be pivotal to overcome these challenges. To extend existing research literature, we evaluate the reciprocal effects of PPA procurement strategies and BESS configurations on the Levelized Cost Of Renewable Hydrogen (LCOH) in compliance with the EU regulatory framework. Our results from a single representative instance located in Germany show that BESS is beneficial in leveraging PPA electricity portfolios characterized by low costs and high volatility to minimize LCOH of renewable hydrogen electrolysis. Operators may profit from BESS integration if their electricity procurement strategy predominantly focuses on as-produced-PPAs for solar and wind. A sensitivity analysis of different BESS configurations reveals the relevance of adequately dimensioning the BESS to optimize economic results. Furthermore, we conclude that, based on a second sensitivity analysis of the investment costs of battery energy storage systems, complementing renewable hydrogen electrolysis systems may pose a viable business case for second-life batteries.