The Hawai?i Natural Energy Institute (HNEI) is conducting research to assess the technical potential of using an electrolyzer-based hydrogen (H2) production and storage system as a grid demand response tool using battery data from a 200 MW grid to show the kind of response required. The hydrogen produced by the electrolyzer is used for transportation. A 65 kg/day hydrogen energy system (HES) consisting of a PEM electrolyzer, 35 bar buffer tank, 450 bar compressor, and associated chiller systems was purchased and installed at the Hawaii Natural Energy Laboratory Hawaii Authority (NELHA) to demonstrate long-term durability of the electrolyzer under cyclic operation required for frequency regulation on an island grid system. The excess hydrogen was stored for use by three fuel-cell buses to be operated at Hawai?i Volcanoes National Park (HAVO) and by the County of Hawai?i Mass Transit Agency (MTA). This paper describes the site selection and equipment commissioning, plus a comprehensive test plan that was developed to characterize the performance and durability of the electrolyzer under dynamic load conditions. The controls were modified for the operating envelope and dynamic limits of the electrolyzer. While the data showed these modifications significantly improved the system response time, it is not fast enough to match a BESS response time for grid frequency management. The electrolyzer can only be used for slower acting changes (1 to 0.5 Hz). A potential solution is to design an electrolyzer/BESS hybrid system and develop a modeling program to find the optimum mix of battery and electrolyzer to provide the maximum grid regulation services at minimum cost.