The utilization of water electrolysis for hydrogen production is expected to increase significantly in the upcoming decades. Modular system design offers great advantages for emerging markets, whilst providing the necessary flexibility in capacity that intermittent renewable energy sources require. Literature research reveals little information regarding modular water electrolysis systems. However, their availability on the consumer market proves that there is demand for such systems. To facilitate the emerging hydrogen market, a modular engineering design approach is used to develop a containerized alkaline water electrolysis system. This containerized system achieves a high degree of modularity by utilizing multiple modular sections. Each section functions as a stand-alone hydrogen production station, containing all necessary components required for safe hydrogen production. These components include heat exchangers, gas-liquid separators, modular alkaline electrolyzers, and a novel component called flow panels. In conjunction with the Dutch company XINTC, the design of the modular sections and their components is presented. Significant capital expenditure reduction is achieved by operating at atmospheric pressure, allowing for cost-efficient material selection and their corresponding manufacturing methods; both of which are discussed. Thermal, hydrodynamic, and particle dynamic models from literature are presented and evaluated. The proposed hydrogen separator is expected to achieve a separation efficiency of over 99.8%. A thermal system analysis concludes that the system is capable of operating at maximum capacity for ambient temperatures of up to 35 C. Additionally, a hydrodynamic system analysis shows that the pressure drop inside the system is dominated by that of the heat exchanger, and is in conformity with the Pressure Equipment Directive.