Using Hydrogen Electrolyzers to Reduce Renewable Energy Curtailment

One of the benefits of green hydrogen is that it can be produced from surplus renewable electricity. Periods of excess production and low or negative pricing are becoming more common as renewable energy gains an increasing share of the electricity mix. Under these conditions, hydrogen electrolyzers can act both as a flexible load source and a long-term storage option, preventing wind and solar curtailment.

Electrolyzers Need Frequent Operation

However, producing hydrogen in this way presents a challenge at the current levels of renewable energy deployment. Because green hydrogen is still a nascent technology, electrolyzers require high CAPEX (approximately $700/kW of capacity installed). High CAPEX mean that electrolyzers need to be operated frequently to recoup upfront costs, even though surplus renewable electricity is only available for short periods throughout the year.

To put this imbalance in perspective, Hydrogen Europe estimates that the ideal operational profile for a grid-connected electrolyzer in the European Union is just under 11 hours per day. That amount of utilization would allow a facility to maximize its output while avoiding exposure to higher electricity prices at peak hours. By comparison, over the first 9 months of 2020, negative prices in European day-ahead electricity markets occurred only 0.8% of the time (which was well above the yearly average).

Low levels of negative pricing in most markets show that existing flexibility options are well-suited to dealing with variability at present levels of renewable energy deployment. These flexibility options include new technologies such as battery storage and more conventional approaches to grid balancing such as reducing output from fossil fuel generators.

The Role of Grid-Connected Electrolyzers Is Evolving

Although grid-connected electrolyzers are unlikely to operate solely using surplus renewable electricity in the near term, they can still be used to provide valuable grid services. For instance, shifting some share of electricity generation to hydrogen production can help relieve structural congestion in locations with high renewable energy deployments, provided that electrolyzers are sited strategically. Moreover, an attractive emissions profile can be ensured by operating electrolyzers during periods when the grid remains below a predetermined carbon intensity threshold or by acquiring a power purchase agreement that secures access to an equivalent amount of renewable energy generation.

Over the long term, opportunities to operate electrolyzers in a truly flexible manner are set to increase. This partly reflects falling project costs. Electrolyzer CAPEX are expected to fall by more than 50% over the coming decade, which would reduce the necessity for facilities to operate at high utilization rates and make green hydrogen competitive for a wider range of end uses.

Greater flexibility can also be enabled by changes in the power sector. An increasing share of variable renewable generation, particularly wind, will likely mean more frequent periods of low or negative prices during which grid-connected electrolyzers can ramp up production.

Access to sufficient storage infrastructure will likely be a key enabling factor in the future. Guidehouse Insights' recent Hydrogen Storage Technologies Market report anticipates that 1,159.1 TWh of gaseous hydrogen storage capacity will be available globally by 2030, primarily as salt caverns and repurposed natural gas storage assets. Over time, these long-term trends in deployment and resource availability are expected to enable grid-connected electrolyzers to fulfill their potential as an important resource for electricity grids governed by renewables.