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The decarbonization of industry, heating and transportation is a major challenge for many countries' energy transition. Hydrogen is a direct low-carbon fuel alternative to natural gas offering a higher flexibility in the range of possible applications, yet currently most hydrogen is produced using carbon-intensive steam methane reforming due to cost considerations. Therefore, this study explores the economics of a prominent low-carbon method of hydrogen production, comparing the cost of hydrogen generation from offshore wind farms with and without grid electricity imports to conventional hydrogen production methods. A novel techno-economic model for offshore electrolysis production costs is presented, which makes hydrogen production fully dispatchable, leveraging geological salt-cavern storage. This model determines the lifetime costs aportioned across the system components, as well as the Levelized Cost of Hydrogen (LCOH). Using the United Kingdom as a case study, LCOH from offshore wind power is calculated to be €8.68/kgH2 using alkaline electrolysis (AEL), €10.49/kgH2 using proton exchange membrane electrolysis (PEMEL), and €10.88/kgH2 with grid electricity to backup the offshore wind power. A stochastic Monte-Carlo model is used to asses the uncertainty on costs and identify the cost of capital, electrolyser and wind farm capital costs, and cost of electricity as the most important drivers of LCOH across the different scenarios. Reducing the capital cost to comparative levels observed on today's wind farms alone, could see AEL LCOH fall to €5.32/kgH2, near competitive with conventional generation methods.
Hill et al. (Sat,) studied this question.