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Economic Evaluation of a Power-to-hydrogen System Providing Frequency Regulation Reserves: A Case Study of Denmark

Abstract

Operating costs are dominant in the hydrogen production of a power-to-hydrogen system. An optimal operational strategy or bidding framework is effective in reducing these costs. However, it is still found that the production cost of hydrogen is high. As the electrolysis unit is characterized by high flexibility, providing ancillary service to the grid becomes a potential pathway for revenue stacking. Recent research has demonstrated the feasibility of providing such a service, but the related economics have not been well evaluated. In this work, we propose a comprehensive operation model to enable participation in the day-head, balancing and reserve markets. Three types of reserves are considered by using different operational constraints. Based on the proposed operation framework, we assess the economic performance of a power-to-hydrogen system in Denmark using plentiful actual market data. The results reveal that providing frequency containment reserve and automatic frequency restoration reserve efficiently raises the operational contribution margins. In parallel, by investing in the cash flows, net present value, and break-even hydrogen prices, we conclude that providing reserves makes the power-to-hydrogen project more profitable in the studied period and region.

Funding source: The authors would like to acknowledge financial support from “Synergies Utilising renewable Power Regionally by means of Power To Gas project”, which received funding in the framework of the joint programming initiative ERA-Net Smart Energy Systems' focus initiative Integrated, Regional Energy Systems, with support from the European Union's Horizon 2020 research and innovation programme under grant agreement No 775970. In addition, the PhD student, Chunjun Huang, is jointly supported by the China Scholarship Council and Technical University of Denmark.
Related subjects: Applications & Pathways
Countries: Denmark
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/content/journal4618
2023-03-16
2024-02-26
http://instance.metastore.ingenta.com/content/journal4618
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