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A new study from the Fraunhofer Institute for Energy Economics and Energy System Technology IEE has analysed the economic effects on the European energy system of introducing offshore hydrogen production. The study considers the expansion of the German 70 GW buildout target of offshore wind and examines the economic effects by allowing offshore hydrogen production on two energy islands connected with 10 GW offshore wind each, compared to a scenario where all electricity from offshore wind farms is transported to shore and can be used within the German energy market without further restrictions.
The study concludes that Germany can achieve annual savings of up to 4.3 billion Euros by establishing offshore hydrogen production on two energy islands. The two energy islands have a limited connection to the power grid and are located around +150 kilometers from shoreline in the German economic zone of the North Sea. The savings are primarily driven by reduced grid buildout costs, especially cables from the coastline to the center of Germany as well as higher utilization of the HVDC cables.
Further, the study concludes that producing hydrogen offshore is more efficient than producing hydrogen onshore. The reason is that hydrogen production closely located to the renewable energy source reduces energy loss and investments in long transportation routes of the electricity.
Background of the case study
The study commissioned by Copenhagen Energy Islands ApS examined two scenarios up against the 70 GW buildout of offshore wind: The first scenario includes only a hydrogen pipeline connection to the islands with no grid connection. This means that the entire energy produced from the 10 GW of offshore wind connected to each energy island will be used for hydrogen production transported to the mainland via a pipeline connection. The second scenario includes a limited grid connection to the energy islands in addition to the hydrogen pipeline connection. The limited grid connection is an AC connection between the energy islands and offshore converter platforms of other wind farms, allowing for export of electricity from the energy islands to the grid, when there is free capacity in the grid, or import of electricity to the energy islands.
There are substantial positive effects by connecting offshore hydrogen production to the grid via a limited grid connection. The solution allows for flexible use of the energy generated by wind farms, either to be used to produce green hydrogen offshore or to be transported to the mainland via HVDC cables. This creates significant efficiency gains for the energy system. In times of low prices and high supply of renewable electricity, the electricity from offshore wind will be fed into hydrogen production, whereas in times when renewable energy supply is low and prices tend to be higher, offshore electricity is used for supplying the electricity demand and hence directly fed into the German electricity grid. This increases flexibility of the overall energy system, creating positive system effects.
The study can be accessed here: https://doi.org/10.24406/publica-3645
https://www.iee.fraunhofer.de/en/presse-infothek/press-media/2024/case-study-off...
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