Green hydrogen production by water electrolysis using renewable electricity is considered essential for decarbonisation of certain sectors of the global economy, however development of the industry is lagging behind expectations due to the perceived financial risk for individual projects. This risk stems from a number of uncertainties, including future hydrogen demand, variable renewable energy sources, and volatile energy market prices. Using a 2-stage market-focused stochastic program with risk aversion, we are able to optimise equipment sizing decisions and energy hedging decisions to manage risk in different regulatory contexts and under different commercial offtake contracts (Hydrogen Purchase Agreements, or HPA’s). It is shown how overly simple project modelling can have perverse effects in project appraisal, making it difficult to attract investors and offtake customers.
Owen Palmer (2025) studied this question.