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A new study from the Fraunhofer Institute for Energy Economics and Energy System Technology IEE has analyzed 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 connected with 10 GW offshore wind each, 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. The reason is that hydrogen production closely located to the renewable energy source reduces energy loss and investments in long transportation routes of the electricity.

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