Discussion

        A hydrogen peak power plant system was envisaged, and a tool was created to assess the plant’s financial viability under various scenarios.
        The output from application of the tool, has found that for many scenarios, the annual income from the sale of electricity, and availability payments, are not sufficient to cover annual running costs.  This is the case for all scenarios in current circumstances.  This is not unexpected, as an immature technology, for which there is not currently a market, is likely to be prohibitively expensive. 
        However, some future scenarios were devised with different circumstances.  In some scenarios, the plant had an annual surplus, i.e. its income from sale of electricity and availability payments, more than covered running costs.  

        Further investigation of these results compared the capital which could have been raised, based on projected annual surplus and standard financial parameters.  In most cases, the annual surplus was not sufficient to pay the necessary loan to buy the equipment in the first place.  However, some scenarios were identified in which the plant could raise enough money annually to pay for the necessary loan.

        These were scenarios representing a potential future: 
  • Sale price of electricity:                   £  350/MWh
  • Purchase price of electricity:          £  0-£4/MWh
  • Capital cost of equipment:              £  2M-£7M
  • Government support:                       £  0

        Most viable scenarios (see Results - H3P page):

“A20” – Aggressive demand pattern – calls on 3 consecutive days every week, electrolyser and compressor of capacity to refill hydrogen store in 20 hours.

“M20” – Moderate demand pattern – calls on 3 days per week, over a day apart, every week, electrolyser and compressor of capacity to refill hydrogen store in 20 hours.

Effects of different parameters

  • Effects of demand pattern: light, moderate, aggressive
        In the current scenarios, there was not a great difference between the performance of the different demand patterns. However, in the futuristic scenarios, the “light demand” scenario had significantly worse performance than the other two.

  • Effects of fill rate (electrolyser and compressor size)
        Interestingly, there was a strong effect on the capacity of the electrolyser and compressor, described as “fill rate”.  (The shorter fill rates require much larger, more powerful electrolyser and compressor, and longer refill rates require smaller equipment.)  In all scenarios, both current and future, the faster refill times were much less profitable, and the slower fill rate were the only ones which proved profitable in any circumstances.
       This is slightly surprising, as a faster refill rate allows purchase of the cheapest electricity. However, the additional capital and running costs associated with more powerful equipment more than outweighed any price advantage.
        Should capital costs fall very significantly, this pattern could change in the future.

  • Effects of capital and running cost
        The capital cost of equipment is a key parameter. In the scenarios identified as potentially viable, the capital cost of equipment would need to fall significantly, to around one third of current estimated value. In this model it is assumed there would be a comparable reduction in annual operation and maintenance costs.

  • Effects of differential between sale and purchase price of electricity
        The difference between the purchase and sale price of electricity is another key parameter. In this model, scenarios identified as viable enjoyed a large increase in the sale price of electricity, from £150/MWh (at present), to £350/MWh (future scenario) and a reduction of the purchase price from £40/MWh (current scenario) to £4/MWh (future scenario).

  • Effects of increased round trip efficiency
        The model was surprisingly insensitive to changes in efficiency, in fact, no improvements were needed for the very similar scenarios to be viable.

Comments on likelihood of various scenarios

  • Major reduction and capital and running costs
        At present, the capital and running costs of the plant are very significant. There is currently no established market for such equipment: plant in the MW range hit the headlines [1, 2].  It is not surprising that costs are very high. If such equipment was to be mass-produced in the future, costs would be expected to fall dramatically. Dramatic drops in the price for other mass produced equipment, such as televisions, computers, phones, has been seen. If such equipment was to become widely used, it is expected that maintenance costs would also fall. 
        Thus, a three-fold or greater fall in the price of capital equipment is not considered unlikely over coming years, if this type of equipment becomes widely used.

  • Major increase in price difference between sale and purchase of electricity
        The price difference identified in the scenario above is a very large one, very different from any differences that were seen in 2015 [3]. However, the penetration of renewables into the generation mix is increasing, and includes considerable wind generation which is particularly intermittent and prone to weather events [4]. It can be expected there will be more frequent and sustained periods of high generation with low demand, during which electricity price would be expected to be low (even negative, as happened occasionally in 2015 [3]), and conversely, low generation at times of high demand for electricity, at which times high electricity prices would be expected.  It is reasonable to expect increasing electricity price differentials in the future.
        However, it is less clear if the price differences will reach those in the above scenario: such evaluation is beyond the scope of this project.

  • Increase of round trip efficiency
        Further improvements in all components of this system is expected to continue. However, gains in efficiency are expected to be incremental. Some authors concentrate on projected improvements in capacity rather than efficiency [5]. While current performance of equipment is still some way from thermodynamic limits, the potential for improvement is far more limited than, say, changes in economic circumstances.
        However, as the financial performance is fairly insensitive to efficiencies, particularly if the electricity is purchased very cheaply, this is not an important factor in future viability of this plant.

  • Future government support
        It is possible that Government policy measures may change in the future, and could make such a system more financially viable. There are many advantages to the nation in stabilising the electricity grid.  Increased storage has an important role to play, and would bring economic benefits, such as potentially avoiding or deferring the need to build further generation and other upgrades to the network [6]. Thus, it would not be surprising if energy policy evolves to increase payments for storage and Peak Power Plants. 
        It has been suggested that emerging storage technologies would have been better placed in the Contracts for Difference part of the Electricity Market Reform, where, along with emerging renewable generation technologies, they could benefit from financial support. [6]
        For comparison, the most immature renewable generation technologies, wave and tidal, have enjoyed a strike price of £300/MWh under CfD [7]. If such a strike price was agreed, in the future, for immature storage technologies, that would provide the major part of the required high sale price of electricity.  

        Another scenario would be for more modest support, such as £70-£100/MWh which have been applied to wind generation [7].  If our plant was supplied from renewables which might otherwise be curtailed, a future policy may allow financial support via a strike price for the actual generation which supplies the plant. Alternatively, some kind of grant may be awarded towards capital costs (currently >£10M, in the future, these may reduce to a few £million), or annual running surplus (of the order of £300k in several cases). 
        In short, without attempting to predict future Government energy policy, it would not be surprising if some form of financial support, possibly significant, becomes available in the future.

  • Overall likelihood of conditions for viable scenarios to occur

Other factors

        Other applications of the H3P plant, such as in transport as described in another section, could significantly add to its financial viability.  Further electrification and or use of hydrogen in transport may help UK Government (and others) meet international targets on air quality and decarbonisation, and may also contribute to reduced reliance on imported liquid fuels.   Support for, and greater uptake of these technologies, is not unexpected. Other niche applications for this type of plant may also add to markets.

        Furthermore, the viability of this plant may not be decided on its raw financial performance alone. 

        Practical considerations may become important, as the grid infrastructure needs to respond to the challenges posed by the closure of older power stations alongside increasing demand. This type of small modular energy storage plant could be relatively quick and simple to build, if the technology becomes established, and it would not be expected to need complex the planning and permitting permissions of large thermal plant.

        The plant’s environmental credentials (real or perceived), and its acceptability to the public, may also become increasingly important.   For example, there is a large protest movement against “fracking” in the UK at present, which is hindering the easy rapid deployment of shale gas extraction UK wide [8]. An hydrogen peak power plant will need to maintain an impeccable safety record, and may need to make its “environmental case” clear, to enjoy public approval.
[1]            Solvay. (2012). Solvay has successfully commissioned the largest PEM fuel cell in the world at ColVin's Antwerp plant.
Available: http://www.solvay.com/en/media/press_releases/20120206-fuelcell.html
[2]            Siemens. (7 July 2015). World's largest hydrogen electrolysis facility. Available: http://www.siemens.com/innovation/en/home/pictures-of-the-future/energy-and-efficiency/smart-grids-and-energy-storage-largest-hydrogen-electrolysis-facility.html
[3]            APX power spot exchange. (2015). UKPX RPD historical data  -  Reference price data HH 2H 4HB 2015.xls.
Available: http://www.apxgroup.com/market-results/apx-power-uk/ukpx-rpd-historical-data/Available: ftp://ftp.apxgroup.com/
[4]            DECCC / DUKES. (2015). Digest of UK Energy Statisitics 2014/2015.  Chapter 6: Renewable sources of energy.
Available: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/450298/DUKES_2015_Chapter_6.pdf
[5]            P. Millet, PEM water electrolysis. In: "Hydrogen production by electrolysis" ed. Godula-Jopek, A. Weinheim, Germany: Wiley, VCH, 2015.
[6]            House of Lords Science and Technology Select Committee. (2015). The Resilience of the UK Electricity System.
Available: http://www.publications.parliament.uk/pa/ld201415/ldselect/ldsctech/121/12104.htm#a8
[7]            DECC. (2015). Electricity Market Reform: Contracts for Difference.
Available: https://www.gov.uk/government/collections/electricity-market-reform-contracts-for-difference
[8]            Frack off: extreme energy action network. (2015). Available: http://frack-off.org.uk/locations/