Power-to-hydrogen in high-renewable isolated grids: market conditions, cost drivers and deployment pathways in Australia: A western Australia case study

Hard-to-abate industrial sectors represent a critical frontier for decarbonisation, and green hydrogen has emerged as a leading Power-to-X pathway for converting surplus renewable electricity into a storable, dispatchable energy carrier. Yet cost competitiveness remains elusive, and the conditions governing production economics in real electricity systems are poorly understood. This study presents a scenario-based techno-economic assessment of large-scale green hydrogen production in Australia, using Western Australia’s South West Interconnected System (SWIS) an isolated, high-renewable grid as a case study. Unlike most existing analyses, the framework integrates observed five-minute wholesale electricity prices and SCADA-based wind-solar generation profiles for 2024, capturing price volatility, curtailment, and electrolyser part-load effects that hourly or averaged-data studies cannot resolve; electricity costs are computed from the full distribution of five-minute prices within eligible operating intervals, though full interval-by-interval pairing of price and dispatch remains a direction for future refinement. Three production configurations are assessed: flexible price-triggered grid dispatch, fixed off-peak grid operation, and renewable-dedicated hybrid wind–solar supply under a long-term power purchase agreement representing the core Power-to-Hydrogen pathway. Proton exchange membrane (PEM) and alkaline electrolysers are evaluated at 5–100 MW, incorporating capital cost learning, policy incentives, and benchmarking against delivered industrial methane prices. Flexible grid-connected electrolysis achieves a levelised cost of hydrogen (LCOH) of 6.1 AUD kg – 1 at 100 MW by exploiting low- and negative-price renewable surplus intervals. Renewable-dedicated Power-to-Hydrogen supply yields 5.8–7.0 AUD kg – 1 at equivalent scale, remaining above industrial methane parity without sustained policy support; under this configuration, electrolyser utilisation declines with increasing size relative to a fixed renewable resource, contrary to simple scale-economy expectations. Analysis of Australia’s electrolyser project pipeline further reveals a persistent gap between announced and realised deployment, indicating that anticipated learning-based cost reductions have yet to materialise at scale. Results demonstrate that electricity market structure and electrolyser utilisation, not technology choice, are the primary determinants of LCOH, with direct implications for Power-to-X deployment strategy, market design, and policy development in high-renewable isolated grids globally.