Abstract: Hydrogen produced from water electrolysis powered by renewable energy can help de-carbonize certain hard-to-abate sectors and promote synergy between different sectors and energy networks. As a matter of fact, the optimization of system configuration and operation scheme is vital to reduce the cost of hydrogen production and boost its economy competitiveness. In this paper, a planning optimization and production simulation model of water electrolysis system powered by renewable energy is proposed. The effects of critical components and related key factors, such as the wind power/photovoltaic-electrolyzer ratio, the electrochemical energy storage-electrolyzer ratio and electricity prices, on the levelized cost of hydrogen is analyzed in depth based on the typical configuration of hydrogen production system. Furthermore, two case studies representing typical areas in northwestern and southeastern China are carried out. The results show that the expense of electricity consumption is the major contributor affecting the economy of green hydrogen, which will drive these projects to be relocated to those places with plentiful renewable resources where the levelized cost of hydrogen is dropped to nearly 20 RMB/kg. In the future, the operation of green hydrogen projects will transit from in-grid mode to off-grid mode as system reserve backup if the electricity prices are roughly the same as that now. The research conclusions could provide theoretical guidance and important reference for the planning and construction of green hydrogen projects.