Renewable hydrogen production through electrolysis: An analysis of the cost gap for its economic competitiveness in Italy

Abstract

With global policies targeting greenhouse gas emission reduction, renewable hydrogen produced by water electrolysis powered with renewable electricity appears a promising alternative to fossil fuels. However, still high capital costs, reliance on intermittent renewable electricity sources, and high electricity cost hinder the economic viability of electrolyzers. This work develops a comprehensive analysis for assessing the need of an incentive to make renewable hydrogen economically viable, identifying different archetypes of electrolysis plant representative of a wide range of applications. A techno-economic optimization model is set up that minimize the average hydrogen production cost and compute the cost gap that makes hydrogen economically competitive with the fossil alternative, defining the optimal size and operation of the plant components while satisfying the hydrogen demand. The model is applied to the Italian case study. Sensitivity analyses investigate the impact of economy of scales, renewable electricity availability and introduction of the emission trading system. Cost gaps ranging between 8.1 €/kg and 29.9 €/kg highlights the need of an incentive to allow the deployment of this technology, thus meeting the hydrogen penetration targets.