Mitigating business risks from renewable PPA power sourcing uncertainties for European green hydrogen production: Robust system design, regulatory adjustments and offtake flexibility

Abstract

As energy prices surge for the second time in recent years driven by the ongoing crisis in the Middle East, the European Union's continuing reliance on fossil energy imports is becoming increasingly apparent. However, despite offering an intriguing prospect of improved energy resilience, the ramp-up of local green hydrogen production lags far behind the officially stated ambitions set after the 2022 energy crisis. A prominent reason for the widening implementation gap between announced and realised production projects is overly strict rules on renewable power sourcing, prompting Member states' ministries and the European Commission to propose advancing a planned rules review from 2028 to 2026. To contribute to a successful review and rule adjustments, we address an important gap in understanding the effects of power purchase rules on green hydrogen production. By taking the perspective of European electrolyser operators, we show how the criterion of additionality and its interaction with required temporal correlation can jeopardise the fulfilment of green hydrogen offtake agreements and affect green hydrogen production costs across different European bidding zones. Applying different design paradigms to a green hydrogen production system reveals that electrolyser operator measures, such as PPA and storage upsizing, can help to mitigate the business risks posed by the additionality criterion but come with increased costs. Alternatively, relaxed temporal correlation and increased offtake flexibility both increase production system robustness and reduce production costs simultaneously. Whereby relaxing temporal correlation rules does not result in exceeded emission intensity thresholds, underlining the potential of extended transitional rules to support the ramp-up of European green hydrogen production.