Optimal sizing of electrolysis systems in regions with renewable energy and limited transmission capacity: a case study of the Lolland-Falster islands, Denmark

Regional hydrogen production via electrolysis, particularly on islands with abundant renewable energy capacity and constrained transmission infrastructure, provides a complementary pathway to convert excess electricity into hydrogen. This study focuses on the Lolland-Falster islands in Denmark, where the projected renewable energy capacity will include 957 MW of solar photovoltaic, 127 MW of onshore wind, and 1186 MW of offshore wind. The transmission capacity is expected to be limited to 625 MW by 2026-7, with a potential increase to 1000 MW in subsequent years. The results highlight that the hydrogen sales price is the primary determinant of economic viability. Higher hydrogen sales prices can justify the use of more expensive grid electricity for production. While this increases the levelized cost of hydrogen, it also improves overall production, advancing economic feasibility. Assuming a hydrogen sales price of 3.5 €/kg, the optimal threshold grid electricity price for converting electricity to hydrogen is determined to be 70 €/MWh and the optimal electrolyzer capacity is calculated to be 1300 MW for a transmission capacity of 625 MW and 1700 MW for a transmission capacity of 1000 MW. Under these conditions, the annual benefits are estimated to be 156 million euros and 125 million euros, respectively, excluding grid expansion costs.