Hydrogen from offshore wind: Investor perspective on the profitability of a hybrid system including for curtailment

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dc.check.date2022-03-22
dc.check.infoAccess to this article is restricted until 24 months after publication by request of the publisher.en
dc.contributor.authorMcDonagh, Shane
dc.contributor.authorAhmed, Shorif
dc.contributor.authorDesmond, Cian
dc.contributor.authorMurphy, Jerry D.
dc.contributor.funderScience Foundation Irelanden
dc.contributor.funderEuropean Regional Development Funden
dc.contributor.funderInterregen
dc.contributor.funderGas Networks Irelanden
dc.date.accessioned2020-04-27T15:55:33Z
dc.date.available2020-04-27T15:55:33Z
dc.date.issued2020-03-20
dc.date.updated2020-04-27T15:41:35Z
dc.description.abstractAccommodating renewables on the electricity grid may hinder development opportunities for offshore wind farms (OWFs) as they begin to experience significant curtailment or constraint. However, there is potential to combine investment in OWFs with Power-to-Gas (PtG), converting electricity to hydrogen via electrolysis for an alternative/complementary revenue. Using historic wind speed and simulated system marginal costs data this work models the electricity generated and potential revenues of a 504 MW OWF. Three configurations are analysed; (1) all electricity is sold to the grid, (2) all electricity is converted to hydrogen and sold, and (3) a hybrid system where power is converted to hydrogen when curtailment occurs and/or when the system marginal cost is low, with the effect of curtailment analysed in each scenario. These represent the status quo, a potential future configuration, and an innovative business model respectively. The willingness of an investor to build PtG are determined by changes to the net present value (NPV) of a project. Results suggest that configuration (1) is most profitable and that curtailment mitigation alone is not sufficient to secure investment in PtG. By acting as an artificial floor in the electricity price, a hybrid configuration (3) is promising and increases NPV for all hydrogen values greater than €4.2/kgH2. Hybrid system attractiveness increases with curtailment only if the hydrogen value is significantly above the levelised cost of €3.77/kgH2. In order for an investor to choose to pursue configuration (2), the offshore wind farm would have to anticipate 8.5% curtailment and be able to receive €4.5/kgH2, or 25% curtailment and receive €4/kgH2. The capital costs and discount rates are the most sensitive parameters and ambitious combinations of technology improvements could produce a levelised cost of €3/kgH2.en
dc.description.sponsorshipScience Foundation (12/RC/2302 and16/SP/3829) Gas Networks Ireland (GNI through the Gas Innovation Group and by ERVIA, Ireland); European Regional Development Fund ((ERDF) INTERREG Atlantic Area Project ARCWIND)en
dc.description.statusPeer revieweden
dc.description.versionAccepted Versionen
dc.format.mimetypeapplication/pdfen
dc.identifier.articleid114732en
dc.identifier.citationMcDonagh, S., Ahmed, S., Desmond, C. and Murphy, J. D. (2020) 'Hydrogen from offshore wind: Investor perspective on the profitability of a hybrid system including for curtailment', Applied Energy, 265, 114732, (14 pp). doi: 10.1016/j.apenergy.2020.114732en
dc.identifier.doi10.1016/j.apenergy.2020.114732en
dc.identifier.endpage14en
dc.identifier.issn0306-2619
dc.identifier.journaltitleApplied Energyen
dc.identifier.startpage1en
dc.identifier.urihttps://hdl.handle.net/10468/9874
dc.identifier.volume265en
dc.language.isoenen
dc.publisherElsevieren
dc.relation.projectinfo:eu-repo/grantAgreement/SFI/SFI Research Centres/12/RC/2302/IE/Marine Renewable Energy Ireland (MaREI) - The SFI Centre for Marine Renewable Energy Research/en
dc.relation.urihttp://www.sciencedirect.com/science/article/pii/S0306261920302440
dc.rights© 2020 Elsevier Ltd. All rights reserved. This manuscript version is made available under the CC BY-NC-ND 4.0 license.en
dc.rights.urihttps://creativecommons.org/licenses/by-nc-nd/4.0/en
dc.subjectOffshore winden
dc.subjectHydrogenen
dc.subjectPower-to-Gasen
dc.subjectEnergystorageen
dc.subjectLifecycle costen
dc.subjectFinancial analysisen
dc.titleHydrogen from offshore wind: Investor perspective on the profitability of a hybrid system including for curtailmenten
dc.typeArticle (peer-reviewed)en
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