Exploring the scale-up of a green hydrogen industry: An agent-based modeling approach

Given the significant investments needed to build a green hydrogen industry, energy modeling must move beyond techno-economic optimization to include stakeholders as active drivers of the transition. This paper uses agent-based modeling to analyze investment dynamics in the coupled electricity, hydrogen, and electrolyzer markets of Germany. The model incorporates heterogeneous investors with varying expectations about future market conditions. We examine how different investment strategies and willingness to pay for green hydrogen affect the development of electrolyzer manufacturing and green hydrogen supply. Results show that deep levels of power sector decarbonization and 40 GW of installed electrolyzer capacity by 2050 are possible, but require strategic, short-term loss-incurring investment decisions and a substantial premium for green hydrogen over grey hydrogen. However, even in our best-case scenario, Germany's 2030 electrolyzer targets remain out of reach, as decarbonization is confined to the power sector during the 2020s. • Novel agent-based model of investments in green power, green hydrogen and electrolyzer manufacturing. • Insufficient excess power limits electrolyzer capacity expansion until early 2030s. • A German green hydrogen industry is contingent on green hydrogen premiums. • Strategic investment can accelerate the scale-up. • LCOH can drop to €3 per kg and electrolyzer cost to ∼ €1000 per kW.