Presenter
Brandon Schwartz, Ph.D.
Assistant Research Professor
John and Willie Leone Family Dept. of Energy and Mineral Engineering
The Pennsylvania State University
Description
The intermittent nature of wind power generation creates mismatches between electricity supply and demand, limiting its penetration in modern electricity grids. We explore the impact of salt cavern storage of hydrogen gas produced using water electrolysis during periods of excess wind power generation on overall project finances for a hypothetical 1 GW electricity market. Rate of return (ROR) is used to quantify project outcomes for a 30-year project over a range of ten variables including cavern size, cavern installation costs, cost of hydrolysis, transmission costs, production tax credit, and compression costs. Our key finding is that salt cavern storage of hydrogen can enhance the capacity factor of a wind project without losing power generation capacity: the 1 GW wind farm is able to utilize an additional 41 GWh of energy in the form of hydrogen. While the ROR ranges from approximately 8% to 20% for non-storage scenarios, the rate of return ranges between 20% to 35% when including storage costs and benefits. The cost of hydrolysis is evaluated at $0 to $168M per year. We consider the case of hydrolysis having zero cost to correlate to the practice of pricing excess wind power generation at $0/kWh—if excess wind power has zero value, then using it to generate hydrogen via hydrolysis has zero cost. We find that the additional CAPEX and OPEX of salt cavern installation are far outweighed by the benefits of hydrogen storage as a large-scale renewable energy battery. Our results also suggest that subsidies for hydrogen storage generate higher RORs than the production tax credit, meaning that wind power penetration increase further with storage subsidies than with electricity generation subsidies.
