Energy Management in an Insular Region with Renewable Energy Sources and Hydrogen: The Case of Graciosa, Azores

Insular regions face unique energy management challenges due to physical isolation. Graciosa (Azores) has high renewable energy sources (RES) potential, theoretically enabling a 100% green system. However, RES intermittency combined with the lack of energy storage solutions reduces renewable penetration and raises curtailment. This article studies the technical and economic feasibility of producing green hydrogen from curtailment energy in Graciosa through two distinct case studies. Case Study 1 targets maximum renewable penetration with green hydrogen serving as chemical storage, converted back to electricity via fuel cells during RES shortages. Case Study 2 focuses on maximum profitability, where produced gases are sold to monetize curtailment, without additional electricity production. Levelized Cost of Hydrogen (LCOH) values of €3.06/kgH2 and €2.68/kgH2, respectively, and Internal Rate of Return (IRR) values of 3.7% and 17.1% were obtained for Case Studies 1 and 2, with payback periods of 15.2 and 6.1 years. Hence, only Case Study 2 is economically viable, but it does not allow increasing the renewable share in the energy mix. Sensitivity analysis for Case Study 1 shows that overall efficiency and CAPEX are the main factors affecting viability, highlighting the need for technological advances and economies of scale, as well as the importance of public funding to promote projects like this.