Dynamic dispatch optimization of green hydrogen electrolyzers under price volatility: A real options approach

Abstract

Green hydrogen is increasingly recognized as a cornerstone of the energy transition, offering a low-carbon alternative for decarbonizing hard-to-abate sectors such as steel, cement, and heavy transport. Its dual role as a clean fuel and energy carrier makes it especially valuable in electricity systems with high renewable penetration. However, most economic evaluations of green hydrogen infrastructure rely on static assumptions, overlooking the ability of modern electrolyzers to respond dynamically to volatile electricity prices. This paper proposes a novel real options framework for dynamic dispatch optimization in hydrogen production, quantifying the economic value of operational flexibility in green hydrogen production and identifies the optimal switching threshold between production and standby modes. Electricity prices are modeled stochastically, while auxiliary energy demands such as desalination and compression are included for realism, but the emphasis is on dispatch decisions under uncertainty. Results show that operational flexibility increases project value by 9.71 %, with the greatest gains observed when electricity prices are close to the switching threshold. This added value reflects the benefit of dynamic responsiveness, allowing operators to suspend hydrogen production during high-price intervals and resume it when conditions improve. The findings highlight that dynamic dispatch optimization can monetize flexibility as a discrete asset, offering a benchmark for investments in technologies that enable frequent cycling or mitigate degradation from load variability. By explicitly valuing adaptability, the proposed framework improves investment accuracy and supports the design of more resilient and competitive green hydrogen systems in liberalized electricity markets.