Optimisation of green hydrogen production for hard-to-abate industries: An Italian case study considering national incentives

Green hydrogen has emerged as a promising energy vector for the decarbonisation of heavy industry. The EU and national governments have recently introduced incentives to address the high costs of green hydrogen production and accelerate the economic development of hydrogen. This study investigates the local production of green hydrogen to decarbonise the high-temperature process heat demand of a heavy industry located in Italy. The hydrogen generation is powered by PV electricity and from the electric grid. We have optimised the sizes of the energy system components, including battery storage and hydrogen tanks. The Levelised Cost of Hydrogen (LCOH) was found to be 7.7 EUR/kg in the unincentivised base scenario, but this amount significantly reduced to 3.3 EUR/kg when incentives on hydrogen production in abandoned industrial areas were considered. Thanks to such incentives, the greenhouse gas emissions decreased by as much as 85 %, with respect to the non-incentivised base case. Our results show that the effect of the incentives on the design and economics of the system is comparable with the expected reductions in equipment costs over the next decade. Importantly, our findings reveal a linear relationship between Capital Costs and LCOH, thereby enabling precise cost estimations to be made for the considered location without any further simulations. A side effect of the size optimisation in the presence of incentives is an increase of the plant footprint. However, the limited availability of land could lead to non-optimal configurations with important impacts on emission intensity and LCOH. • Incentives for hydrogen production in abandoned industrial areas significantly reduce the LCOH down to 3.3 €/kg. • The incentives reduce the emission intensity by up to 85 %. • A linear relation between the LCOH and the CAPEX of the electrolyser and PV is observed. • The land availability is a strong influencing factor on the LCOH and emission intensity.