Navigating the Offtake Tension: A Decision Analytic Framework for Evaluating Green Hydrogen as a Strategic Route to Market for Offshore Wind

Seyed Mohammad Shojaei^a, Mohammad Reza Ghaani^a

^aTrinity College Dublin, College St, Dublin, 0, Ireland

Proceedings of The Future of Hydrogen: Science, Applications and Energy Transition (H2Future26)

Ibiza, Spain, 2026 April 27th - 30th

Organizer: Sophia Haussener

Contributed talk, Seyed Mohammad Shojaei, presentation 013
Publication date: 26th March 2026

The rapid expansion of offshore renewable energy (ORE) is critical for global decarbonization goals [1, 11]. However, increasing penetration of variable renewable energy is exposing severe onshore grid bottlenecks, rising curtailment, and wholesale price cannibalization [3, 12]. In response, dedicated green hydrogen production has emerged as a strategic, non-grid-limited alternative to bypass transmission constraints [8]. This dynamic creates a structural offtake tension for developers who must choose between the traditional, subsidized grid-connected Contract for Difference (CfD) route and a merchant green hydrogen pathway [6]. Despite this, existing literature, including techno-economic assessments, equilibrium formulations, and agent-based bidding models, predominantly assumes a single-route market, failing to endogenize hydrogen as a competing outside option in the developer's strategic decision-making process [6, 9, 16-20]. To address this opportunity-cost modeling gap, this study introduces a stochastic decision-analytic framework grounded in real-options-inspired threshold modeling. The methodology evaluates the discrete, mutually exclusive choice between a grid-connected CfD and an off-grid hydrogen facility under uncertainty. Utilizing a Monte Carlo ensemble, the model systematically propagates parametric uncertainty through the competing expected Net Present Value (NPV) functions of both routes. The framework evaluates the probability of dominance for the hydrogen route and maps exact indifference thresholds, identifying the specific levels of grid dispatch-down and market price cannibalization at which developers rationally forfeit grid protections. Furthermore, by equating the payoff functions, the study mathematically derives the developer’s reservation strike price, providing a quantitative mechanism to evaluate how the hydrogen outside option theoretically acts as a floor that shifts bidding behavior in centralized CfD auctions. Finally, variance-based global sensitivity analysis is employed to rigorously pinpoint the primary technical and economic drivers pushing the ORE market toward green hydrogen adoption.

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