Comparative analysis of centralized and decentralized electrolysis in the Dutch North Sea

This study estimates the levelized cost of hydrogen (LCOH) of three hydrogen production configurations: onshore centralized electrolysis, offshore centralized electrolysis, and offshore decentralized electrolysis. Based on a wide range of projected cost and technology assumptions for key components beyond 2030, we estimate LCOH values ranging from 1.9 to 10.1 €/kg for onshore centralized electrolysis, from 1.7 to 10.8 €/kg for offshore centralized electrolysis, and from 1.5 to 10.4 €/kg for offshore decentralized electrolysis. This wide range reflects the current uncertainty on the evolution of the cost of key components. In our reference case, decentralized offshore electrolysis may be more cost-effective compared to centralized electrolysis due to higher efficiency assumptions, hence, reduced conversion losses (≈1% of the LCOH), minimized material requirements in wind turbines (≈1%), combined development processes (≈1-3%), decentralized brine disposal (≈0.2-0.6%), and minimized external electrical infrastructure (≈9-12%). Offshore decentralized electrolysis may present promising opportunities for large-scale hydrogen production from offshore wind, but the expected LCOH remains uncertain. Research and experimentation are required to assess whether the cost reductions and efficiency gains above can be realized.