One of the most critical challenges in green hydrogen production is ensuring a consistent 24/7 supply, especially when supplying industrial processes like green steel manufacturing that require uninterrupted hydrogen flow.
Green hydrogen production often depends on renewable energy sources, which are inherently variable. This variability poses a challenge when a constant hydrogen supply is necessary. Understanding how to navigate this challenge is essential for ensuring both efficiency and profitability in green hydrogen projects.
Read or listen: Southern Lights Podcast #2: What you need for a successful green hydrogen project
Our Approach: Simulating a Green Hydrogen Plant
Video: Felipe Gallardo (CEO of Southern Lights) demonstrates how to optimize green hydrogen plants for continuous supply, focusing on a green steel industry case study.
Using our comprehensive software platform at Southern Lights, we recently simulated a green hydrogen plant designed to meet the needs of a green steel factory consuming approximately 3,000 kilos of hydrogen per hour. The plant was powered by an 800 MW wind farm located in northern Sweden, feeding into an electrolyzer system, with integrated storage to ensure hydrogen availability at all times.
Key Findings: The Importance of Right-Sizing
Our initial simulation utilized a 350 MW electrolyzer to minimize the Levelized Cost of Hydrogen (LCOH). However, despite this cost optimization, the project initially showed a negative Net Present Value (NPV), indicating it wasn’t financially viable.
Recognizing this, we re-optimized the size of the electrolyzer. The results were illuminating: a 300 MW electrolyzer, although slightly higher in LCOH, actually maximized the project's profitability. This optimization was critical because the fixed hydrogen demand of the green steel plant meant that producing excess hydrogen would not improve financial outcomes. On the contrary, a larger electrolyzer would have increased costs without adding value.
Read more: Green Ammonia Production in Patagonia: A Prefeasibility Study
The Outcome: Breaking Even and Beyond
By adjusting to a 300 MW electrolyzer, the project reached a breakeven point by year 20, with equity investors beginning to see returns by year 11. This finding underscores a vital lesson— optimizing for profitability involves more than just minimizing costs; it requires aligning production capacity with actual demand.
This exercise highlights the importance of detailed analysis and strategic planning in green hydrogen projects. At Southern Lights, we are dedicated to helping our clients navigate these complexities with our advanced simulation tools and insights. If you’re working on similar projects and are interested in learning more about our findings, we would be pleased to share detailed data and automated reports tailored to your needs.
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