Economic Analysis of a Hydrogen Power Plant in the Portuguese Electricity Market

Abstract

Hydrogen is regarded as a flexible energy carrier with multiple applications across several sectors. For instance, it can be used in industrial processes, transports, heating, and electrical power generation. Green hydrogen, produced from renewable sources, can have a crucial role in the pathway towards global decarbonization. However, the success of green hydrogen production ultimately depends on its economic sustainability. In this context, this work evaluates the economic performance of a hydrogen power plant participating in the electricity market and supplying multiple hydrogen consumers. The analysis includes technical and economical details of the main components of the hydrogen power plant. Its operation is simulated using six different scenarios, which admit the production of either grey or green hydrogen. The scenarios used for the analysis include data from the Iberian electricity market for the Portuguese hub. An important conclusion is that the combination of multiple services in a hydrogen power plant has a positive effect on its economic performance. However, as of today, consumers who would wish to acquire green hydrogen would have to be willing to pay higher prices to compensate for the shorter periods of operation of hydrogen power plants and for their intrinsic losses. Nonetheless, an increase in green hydrogen demand based on a greater environmental awareness can lead to the need to not only build more of these facilities, but also to integrate more services into them. This could promote the investment in hydrogen-related technologies and result in changes in capital and operating costs of key components of these plants, which are necessary to bring down production costs.