Hydrogen Storage for Wind Parks: A Real Options Evaluation for an Optimal Investment in More Flexibility

FCN Working Paper No. 3/2013

47 Pages Posted: 14 Oct 2013

See all articles by Daniel Kroniger

Daniel Kroniger

RWTH Aachen University

Reinhard Madlener

RWTH Aachen University

Date Written: February 2013

Abstract

In this paper, we investigate the economic viability of hydrogen storage for excess electricity produced in wind power plants. To this end, we define two scenarios and use both Monte Carlo simulation and real options analysis. The use of hydrogen as a storage medium helps to increase capacity utilization of the wind parks; in the case of disconnection of the wind park (grid overload, grid stability considerations), the investor can also offer system-relevant services by producing reserve energy. It also allows temporal arbitrage, i.e. the purchasing of electrical energy at low spot market prices in order to generate hydrogen, and the selling of electricity that is generated from hydrogen at high spot market prices. Finally, system services can be offered in the form of minute reserve.

Keywords: Wind power, hydrogen storage, real options analysis, optimal investment decision-making

Suggested Citation

Kroniger, Daniel and Madlener, Reinhard, Hydrogen Storage for Wind Parks: A Real Options Evaluation for an Optimal Investment in More Flexibility (February 2013). FCN Working Paper No. 3/2013 . Available at SSRN: https://ssrn.com/abstract=2340107 or http://dx.doi.org/10.2139/ssrn.2340107

Daniel Kroniger

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

Reinhard Madlener (Contact Author)

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustraße 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

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