Beyond green hydrogen: the role of low-carbon hydrogen in the optimal operation of electrolytic plants

Abstract

Renewable and low-carbon hydrogen are expected to play a central role in Europe’s transition toward climate neutrality. Understanding the economics of hydrogen production is essential to ensure its large-scale deployment.Most existing studies have focused on renewable hydrogen (known as RFNBO in EU jargon), showing that strict temporal-correlation limit operating hours reducing profitability. In contrast, the more flexible criteria defined for low-carbon hydrogen have received limited attention, although they could alter the economics of electrolytic production. Low-carbon hydrogen is defined as hydrogen that achieves at least a 70 emission reduction relative to a fossil benchmark, without requiring renewable electricity certification. Thus, electrolyzers can extend operating hours by partially relying on grid electricity. Using a novel mixed-integer linear programming (MILP) model, this paper explores optimal electrolyzer operation strategies when combining RFNBO and low-carbon production across different national electricity mixes. Results show that current EU legislation provides sufficient flexibility to enable near-continuous operation, albeit at the cost of higher production-related emissions. However, small variations in efficiency or grid emission intensity can determine whether a plant operates year-round or remains idle, revealing regulatory discontinuities. These discontinuities pose risks for grid-connected facilities, which can be mitigated through long-term PPAs or dedicated renewable assets. Finally, the analysis highlights that optimal operation also depends on hydrogen demand regulation: while some off-takers must meet RFNBO quota obligations, others comply with GHG-reduction targets. Consequently, there is no universal optimum, and strategies must adapt to both the plant’s electricity mix and the specific market incentives governing hydrogen use.