Where to place the electrolyzers? System-service-oriented location criteria for electrolyzers

The location of the electrolyzer plays a crucial role in enabling large-scale hydrogen production and facilitating a more efficient grid expansion for various reasons. By selecting suitable electrolysis sites, bottlenecks in the power grid can be avoided, thus reducing the need for grid expansion. This would address a significant obstacle to the energy transition.

The relief of the power grid through electrolyzers is also addressed in the draft for the continuation of the National Hydrogen Strategy. It states that a large portion of the electrolyzers to be installed by 2030 should be located and operated in a manner that benefits the system, with the main objective being to minimize the expansion of the power grid. However, when considering the overall system, there are additional factors to consider when choosing the location of an electrolyzer. These factors include proximity to renewable energy generation facilities and connection to a future hydrogen network for transporting hydrogen to consumption centers.

A study conducted by Gasunie, Thyssen Gas, and Tennet in 2021 primarily identified the regions of Schleswig-Holstein and northwestern Lower Saxony as potential regions based on a comprehensive system analysis. Hydrogen production in coastal areas with a high potential for renewable energy is economically efficient, as the utilization of renewable energy sources near the production sites alleviates the strain on the power grid, thus avoiding further grid expansion. Additionally, the region is home to cavern storage facilities, enabling temporal decoupling of volatile hydrogen production and utilization. Moreover, the region boasts good connectivity to the gas infrastructure, providing a foundation for a future hydrogen core network. By integrating with the gas infrastructure, hydrogen can be transported to future consumption centers, thereby resolving the local separation of hydrogen production and consumption.

However, apart from isolated approaches, a coherent legal framework that guides the location of electrolyzers in an energy system-friendly manner is currently lacking. It is worth mentioning the newly introduced §96 paragraph 9 of the WindSeeG, which authorizes the Federal Ministry for Economic Affairs and Energy (BMWi) to tender system-relevant electrolysis projects with an annual installed capacity of 500 megawatts from 2023 to 2028. System relevance is also considered in Article 27 of the Delegated Act of the European Union, which contains binding criteria for the electricity supply in the production of green hydrogen. For example, to avoid grid bottlenecks, it is envisaged that the electrolyzer and the power generation facility must be located in the same bidding zone.

The absence of corresponding framework conditions poses the risk of "misplacements" particularly during the ramp-up phase. The consequences would be higher socioeconomic costs due to the resulting need for grid expansion. To prevent this, legal instruments must be developed to ensure the coherent and sensible siting of electrolyzers by 2030. Within the regulatory community that spans across hydrogen flagship projects, a group of authors is currently conducting a brief analysis on the available legal and regulatory instruments for securing electrolysis sites that are systemically meaningful. The three hydrogen flagship projects (H2Mare, H2Giga, and TransHyDE) are a central contribution of the Federal Ministry of Education and Research (BMBF) to the implementation of the National Hydrogen Strategy. While the individual project alliances focus on the techno-economic aspects of each hydrogen value chain stage, the regulatory community addresses the legal and regulatory framework conditions for scaling up green hydrogen production. It also prepares brief analyses on relevant and current topics in the green hydrogen industry. The planned brief analysis on system-relevant electrolysis sites aims to examine not only the abstract consideration of potential incentive instruments but also the legal framework regarding specific and particularly suitable sites, and if necessary, make optimization proposals. Initial results are expected by autumn.

The author: Cäcilia Gätsch, Regulatory Expert at cruh21


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