Demand response business model for on-grid hydrogen projects in a centralized operation of the electrical system

Abstract

As variable renewable energy grows, grid-connected electrolyzers offer a promising flexibility resource by functioning as controllable loads. This study analyzes how different electrolyzer technologies can be integrated into power system dispatch through a centralized demand response (DR) scheme aligned with hourly prices and side payments. A mixed-integer linear programming unit commitment model is used to optimize thermal and renewable generation, storage, and four electrolyzer types with distinct efficiencies and operating ranges. Results show coordinated operation reduces hydrogen production costs by up to 30% for highly flexible technologies. At the system level, the DR scheme slightly increases total generation costs, creating an economic surplus transfer from generators to hydrogen producers. Furthermore, sensitivity analysis highlights the strong influence of side payments on each technology’s competitiveness. Overall, centralized DR enhances hydrogen economics while improving renewable integration, offering actionable insights for regulators, operators, and developers.