A new study from the Fraunhofer Institute for Energy Economics and Energy System Technology IEE has analysed the economic effects on the European energy system of introducing offshore hydrogen production. The study considers the expansion of the German 70 GW buildout target of offshore wind and examines the economic effects by allowing offshore hydrogen production on two energy islands. The two islands are modelled to be connected with 10 GW offshore wind each and are compared to a scenario where all electricity from offshore wind farms is transported to shore and can be used within the German energy market without further restrictions.

The study concludes that Germany can achieve annual savings of up to 4.3 billion Euros by establishing offshore hydrogen production on two energy islands. The two energy islands have a limited connection to the power grid and are located around +150 kilometers from the shoreline in the German economic zone of the North Sea. The savings are primarily driven by reduced grid buildout costs, especially cables from the coastline to the center of Germany as well as higher utilization of the HVDC cables.

Further, the study concludes that producing hydrogen offshore is more efficient than producing hydrogen onshore, as hydrogen production closely located to the renewable energy source reduces energy loss while reducing the investments needed for electricity transmission.

Read more about Fraunhofer and the report here.