Optimal Investment Planning and Bidding Strategies for Integrated RES–Electrolyzer Systems in Electricity Markets

Environmental policies and intermittent renewable energy (RE) drive large-scale hydrogen production towards hybrid supply configurations, combining collocated RE units and the electricity market (EM). This links the power and hydrogen sectors through EM/hydrogen prices, dispatch, and hydrogen demand profiles. In a hybrid configuration, the strategic role of RE in the EM enhances these links by creating profit opportunities. This work develops a bi-level model, optimizing electrolyzer size and location, operational decisions and RES bidding strategies, while explicitly modeling EM clearing. In the upper-level, an EM player, owning strategically bidding RE assets, evaluates expanding into the use of electrolyzers that act as price-takers. The lower-level problem clears the EM. The proposed framework is applied to an IEEE 24-node test system. The results show how EM conditions determine investments for different hydrogen price cases. It is revealed that differentiated electricity sourcing across electrolyzers and efficiency-preserving dispatch impact operational decisions, leading to revenue improvements. Moreover, renewable capacity withholding is used to avoid zero EM prices and mitigate the economic impact of unmet hydrogen demand when RE availability is limited and electrolyzer participation in the EM is restricted. Time-window-constrained hydrogen demand mitigates unutilized RE by 39% compared to that for hourly demand.