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Hydrogen Storage for Wind Parks - A Real Options Evaluation for an Optimal Investment in More Flexibility

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  • Kroniger, Daniel

    () (RWTH Aachen University)

  • Madlener, Reinhard

    () (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

Abstract

In this paper, we investigate the economic viability of hydrogen storage for excess electricity produced in wind power plants. To this end, we define two scenarios and use both Monte Carlo simulation and real options analysis. The use of hydrogen as a storage medium helps to increase capacity utilization of the wind parks; in the case of disconnection of the wind park (grid overload, grid stability considerations), the investor can also offer system-relevant services by producing reserve energy. It also allows temporal arbitrage, i.e. the purchasing of electrical energy at low spot market prices in order to generate hydrogen, and the selling of electricity that is generated from hydrogen at high spot market prices. Finally, system services can be offered in the form of minute reserve.

Suggested Citation

  • Kroniger, Daniel & Madlener, Reinhard, 2013. "Hydrogen Storage for Wind Parks - A Real Options Evaluation for an Optimal Investment in More Flexibility," FCN Working Papers 3/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  • Handle: RePEc:ris:fcnwpa:2013_003
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    2. Li, Jinghua & Fang, Jiakun & Zeng, Qing & Chen, Zhe, 2016. "Optimal operation of the integrated electrical and heating systems to accommodate the intermittent renewable sources," Applied Energy, Elsevier, vol. 167(C), pages 244-254.
    3. Petrollese, Mario & Valverde, Luis & Cocco, Daniele & Cau, Giorgio & Guerra, José, 2016. "Real-time integration of optimal generation scheduling with MPC for the energy management of a renewable hydrogen-based microgrid," Applied Energy, Elsevier, vol. 166(C), pages 96-106.
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    5. Kitzing, Lena & Juul, Nina & Drud, Michael & Boomsma, Trine Krogh, 2017. "A real options approach to analyse wind energy investments under different support schemes," Applied Energy, Elsevier, vol. 188(C), pages 83-96.
    6. Eypasch, Martin & Schimpe, Michael & Kanwar, Aastha & Hartmann, Tobias & Herzog, Simon & Frank, Torsten & Hamacher, Thomas, 2017. "Model-based techno-economic evaluation of an electricity storage system based on Liquid Organic Hydrogen Carriers," Applied Energy, Elsevier, vol. 185(P1), pages 320-330.
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    8. Qadrdan, Meysam & Ameli, Hossein & Strbac, Goran & Jenkins, Nicholas, 2017. "Efficacy of options to address balancing challenges: Integrated gas and electricity perspectives," Applied Energy, Elsevier, vol. 190(C), pages 181-190.
    9. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "An Evaluation of Attribute Anchoring Bias in a Choice Experimental Setting," FCN Working Papers 6/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    10. Lu, Di & Wang, Bende & Wang, Yaodong & Zhou, Huicheng & Liang, Qiuhua & Peng, Yong & Roskilly, Tony, 2015. "Optimal operation of cascade hydropower stations using hydrogen as storage medium," Applied Energy, Elsevier, vol. 137(C), pages 56-63.
    11. Ghandehariun, S. & Wang, Z. & Naterer, G.F. & Rosen, M.A., 2015. "Experimental investigation of molten salt droplet quenching and solidification processes of heat recovery in thermochemical hydrogen production," Applied Energy, Elsevier, vol. 157(C), pages 267-275.
    12. Díaz, Guzmán & Moreno, Blanca & Coto, José & Gómez-Aleixandre, Javier, 2015. "Valuation of wind power distributed generation by using Longstaff–Schwartz option pricing method," Applied Energy, Elsevier, vol. 145(C), pages 223-233.
    13. Bhogilla, Satya Sekhar & Ito, Hiroshi & Kato, Atsushi & Nakano, Akihiro, 2016. "Experimental study on a laboratory scale Totalized Hydrogen Energy Utilization System for solar photovoltaic application," Applied Energy, Elsevier, vol. 177(C), pages 309-322.
    14. Locatelli, Giorgio & Palerma, Emanuele & Mancini, Mauro, 2015. "Assessing the economics of large Energy Storage Plants with an optimisation methodology," Energy, Elsevier, vol. 83(C), pages 15-28.
    15. Nistor, Silviu & Dave, Saraansh & Fan, Zhong & Sooriyabandara, Mahesh, 2016. "Technical and economic analysis of hydrogen refuelling," Applied Energy, Elsevier, vol. 167(C), pages 211-220.
    16. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Challenges in the Evaluation of Ultra-Long-Lived Projects: Risk Premia for Projects with Eternal Returns or Costs," FCN Working Papers 13/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    17. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "The Impact of Green Framing on Consumers’ Valuations of Energy-Saving Measures," FCN Working Papers 7/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    18. Grueger, Fabian & Möhrke, Fabian & Robinius, Martin & Stolten, Detlef, 2017. "Early power to gas applications: Reducing wind farm forecast errors and providing secondary control reserve," Applied Energy, Elsevier, vol. 192(C), pages 551-562.
    19. Davide Astiaso Garcia & Federica Barbanera & Fabrizio Cumo & Umberto Di Matteo & Benedetto Nastasi, 2016. "Expert Opinion Analysis on Renewable Hydrogen Storage Systems Potential in Europe," Energies, MDPI, Open Access Journal, vol. 9(11), pages 1-22, November.
    20. Xian, Hui & Karali, Berna & Colson, Gregory & Wetzstein, Michael E., 2015. "Diesel or compressed natural gas? A real options evaluation of the U.S. natural gas boom on fuel choice for trucking fleets," Energy, Elsevier, vol. 90(P2), pages 1342-1348.
    21. Locatelli, Giorgio & Invernizzi, Diletta Colette & Mancini, Mauro, 2016. "Investment and risk appraisal in energy storage systems: A real options approach," Energy, Elsevier, vol. 104(C), pages 114-131.
    22. Gao, Cuixia & Sun, Mei & Geng, Yong & Wu, Rui & Chen, Wei, 2016. "A bibliometric analysis based review on wind power price," Applied Energy, Elsevier, vol. 182(C), pages 602-612.

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    Keywords

    Wind power; hydrogen storage; real options analysis; optimal investment decision-making;

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