SOPHIAA

How much does green hydrogen cost today and in the future?
How does this change when the regulatory framework is adjusted, for example when the criteria for green hydrogen (RFNBO criteria) are relaxed or electrolyzers have to pay grid fees?
And what does the optimal operation and optimal electricity procurement for electrolyzers look like?

Hydrogen production costs are a suitable metric for the economic viability of hydrogen projects. The EWI calculates them with its in-house optimization model SOPHIAA (Stochastic Optimization for Producing Hydrogen and Investment in Associated Assets), which assesses the production of green hydrogen from a business perspective. SOPHIAA can also calculate optimal PPA (Power Purchase Agreement) portfolios for different regulatory requirements and account for the interaction with the day-ahead electricity market.

Figure 1: Hydrogen production costs and optimal PPA portfolios under different variants of the RFNBO criteria

SOPHIAA for Consulting and Research

The model can hedge strategic investment decisions under uncertainty and assess regulatory risks. Locations outside Germany can also be analyzed, and possible assets can be added to the model individually.

Modell in Practice:

Economic analysis: assess electrolysis projects and optimize the levelized cost of hydrogen (LCOH)
Asset sizing: determine optimal capacities for storage (battery/H2)
PPA strategies: design robust procurement portfolios, taking regional diversification into account through high-resolution weather time series
Optimal site selection: provide data-based support through high-resolution weather and price time series
Regulatory effects: how regulatory requirements affect the production costs of hydrogen

SOPHIAA in Detail

SOPHIAA is a stochastic linear optimization model that minimizes the levelized cost of hydrogen (LCOH) by optimizing the sizing and operation of the central system components, including electrolyzers, storage (batteries and hydrogen), and portfolios of Power Purchase Agreements (PPAs). The model considers regionally high-resolution PPAs from PV and wind energy (onshore and offshore) as well as battery and hydrogen storage capacities (above-ground, cavern, and pore storage).

A particular focus lies on the integration of complex regulatory frameworks. SOPHIAA represents the current RFNBO criteria of the EU (Renewable Fuel of Non-Biological Origin). The model analyzes how the different requirements (in particular additionality, temporal and geographic correlation) affect the optimal portfolio structure and project profitability. The interaction with the day-ahead electricity market (sale of surplus energy and procurement for hydrogen production) is also optimized.

Schematic Representation of the Model

The operation of all components is optimized in the model on an hourly basis over a full calendar year. In SOPHIAA, stochasticity is represented via historical weather time series, so that the system is optimally designed to be robust against weather-related uncertainties. The model uses time series for PV and wind energy at 38 German sites from 45 historical weather years. This makes it possible to stochastically simulate the availability of PPA electricity from PV and wind energy at 38 German sites. For each historical weather year, SOPHIAA generates a synthetic, hourly electricity price time series for the German bidding zone based on the hourly residual load and further parameters. Alternatively, historical price time series can be used.