Comprehensive Optimization-based Techno-economic Assessment of Hybrid Renewable Electricity-hydrogen Virtual Power Plants
James Naughton, Shariq Riaz, Michael Cantoni, Xiaoping Zhang, Pierluigi Mancarella
Abstract
Hydrogen is being considered as an important option to contribute to energy system decarbonization. However, currently its production from renewables is expensive compared with the methods that utilize fossil fuels. This paper proposes a comprehensive optimization-based techno-economic assessment of a hybrid renewable electricity-hydrogen virtual power plant (VPP) that boosts its business case by co-optimizing across multiple markets and contractual services to maximize its profits and eventually deliver hydrogen at a lower net cost. Additionally, multiple possible investment options are considered. Case studies of VPP placement in a renewable-rich, congested area of the Australian network and based on real market data and relevant sensitivities show that multi-market participation can significantly boost the business case for cleaner hydrogen. This highlights the importance of value stacking for driving down the cost of cleaner hydrogen. Due to the participation in multiple markets, all VPP configurations considered are found to be economically viable for a hydrogen price of 3 AUD $/kg (2.25 USD $/kg), which has been identified as a threshold value for Australia to export hydrogen at a competitive price. Additionally, if the high price volatility that has been seen in gas prices in 2022 (and by extension electricity prices) continues, the flexibility of hybrid VPPs will further improve their business cases.