Strategy to Reduce Production Cost of Carbon-Free Hydrogen Using Positive Imbalances of Renewable Power Plants

Towards achieving carbon neutrality, it is important to produce carbon-free hydrogen from renewables at an acceptable cost. At the same time, power retailers that own renewables must manage their imbalances between planned and actual generation. This paper proposes an economically viable carbon-free hydrogen method for such retailers, utilizing both positive imbalances of renewables and electricity from the market with non-fossil certificates. The proposed method enables geographically flexible hydrogen production through the power grid while utilizing renewable imbalances within actual power business operations. This paper develops solutions to an optimization problem that minimizes the hydrogen variable cost and offsets the imbalances using an electrolyzer and a battery while accounting for imbalance uncertainty. The case study in Tokyo, Japan demonstrates that imbalance compensation reduces the hydrogen variable cost by 30%. The minimum levelized cost of hydrogen (LCOH) is approximately 60 JPY/Nm3 when the electrolyzer operates at a 40% capacity factor. Furthermore, sensitivity analysis of market prices indicates that the LCOH can decline to 50 JPY/Nm3 under lower price conditions. The results suggest that market-independent cost components, such as wheeling and renewable energy charges and non-fossil certificates, remain major obstacles to further reducing hydrogen costs.