Electricity procurement and asset configuration for hydrogen baseload supply: a stochastic optimization and exploration of the near-optimal solution space

Felix B. Schäfer and David Wohlleben
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Felix B. Schäfer: Institute of Energy Economics at the University of Cologne (EWI)
David Wohlleben: Institute of Energy Economics at the University of Cologne (EWI)

No 2026-04, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

Abstract: In the EU, hydrogen production must meet additionality and temporal correlation requirements to qualify as a renewable fuel of non-biological origin (RFNBO), which puts renewable power purchase agreements (PPAs) into focus. We first derive hypotheses on how RFNBO criteria, renewable electricity support schemes, and the default risk of hydrogen suppliers jointly affect hydrogen supply costs. We then model the supplier’s electricity procurement and asset configuration problem as a stochastic optimization under weather-year uncertainty, incorporating risk preferences. Further, we approximate the near-optimal solution space by exploiting the problem’s convexity. Finally, we test the hypotheses in a case study for Germany: We find RFNBO criteria to raise hydrogen supply costs by 14–41 EUR/MWhH2 , with additionality, default risk, and hourly matching being the main cost drivers. The interaction of renewable electricity support schemes with the additionality criterion further shapes the technological and regional composition of the optimal PPA portfolio. Tighter temporal correlation enlarges the optimal PPA portfolio and makes surplus electricity sales a key cost-reduction channel. Annual supply costs vary by 4–20 EUR/MWhH2 between the most and least favorable weather years, with the largest variations under hourly matching. A risk-averse supplier weighs expected costs against interannual costs variability, though the trade-off appears small. The near-optimal solution space contains PPA portfolios of different compositions. However, its size and thus the hydrogen supplier’s flexibility in technology choice shrink with stricter RFNBO criteria, especially when accounting for the hydrogen supplier’s default risk. We discuss that hydrogen suppliers’ default risk is especially relevant during the market ramp-up phase, and that introducing the additionality criterion and tight temporal matching regimes without de-risking instruments could further slow down market ramp-up dynamics.

Keywords: RFNBO; Power purchase agreement (PPA); Renewable energy support schemes; Levelized cost of hydrogen (LCOH); Near-optimal solutions; Environmental policy (search for similar items in EconPapers)
JEL-codes: C61 D81 Q42 Q48 (search for similar items in EconPapers)
Pages: 70
Date: 2026-09-01
New Economics Papers: this item is included in nep-eur
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