Flexible hydrogen production : a comprehensive study on optimizing cost-efficient combinations of production and storage capacity to exploit electricity price fluctuations

Abstract

Due to the high costs related to green hydrogen, most of the world’s hydrogen today is supplied from grey hydrogen, resulting in a substantial carbon footprint. However, with decreasing capital costs, and the possibility to exploit electricity price fluctuations to reduce production costs, green hydrogen could prove to become a competitive alternative. This thesis focuses on evaluating the potential to reduce the total cost of hydrogen production stemming from alkaline water electrolysis. The method is based on exploiting electricity price fluctuations through excess production capacity combined with hydrogen storage. A mathematical, multi-period decision model was developed to find the most cost-efficient, long-term production schedule for an on-site, grid-connected production plant. Model results stem from various scenarios representing different horizons and storage options to determine the optimally combined capacities for production and storage. Thus, the effects of plant cost reductions, increased electricity price fluctuations, innovative storage solutions, and improving efficiencies are explored in regard to hydrogen production. The main findings show that it is costly to exploit electricity price fluctuations to reduce hydrogen costs when obligated to satisfy a required demand. In most cases, the cost of additional production and storage equipment counteracts the benefit of producing in hours of low-cost electricity. However, under certain circumstances, mainly very volatile electricity prices and underground hydrogen storage, hydrogen costs can be reduced through investments in excess production capacity. Additionally, under a special cost structure for grid fees, capacity expansions became substantially more attractive, in which an optimal solution pushed the determined limit for production capacity. In a future scenario, a 36% increase in daily production capacity was observed to be the economically preferred option, which resulted in a production cost reduction of 8.86% and an overall decrease in the levelized cost of hydrogen.