Economic analysis of hydrogen production in context of a microgrid

Abstract

Hydrogen is considered a viable option for replacing fossil fuels not only because it can reduce the emissions but it also can be used as a storage option to balance the electricity grid. Current research aims the economic analysis of hydrogen production in context of a microgrid which includes 3 levels of supply, conversion and storage and primary end user. The economic feasibility of hydrogen production is investigated in two scenarios of using grid electricity and using wind power to produce hydrogen. The levelized cost of hydrogen produced by grid electricity is calculated to be 3.82 $/kg and 17.65 $/kg for hydrogen produced by wind power using a carbon price of 30$/ton implemented only on carbon emitted from electricity generation. The payback period of investing in hydrogen production infrastructure was also found out to be 7.76 years and 15.58 years for using grid electricity and wind power, respectively. The NPV was found out to be 800000 dollars and 5.5 million dollars in respective scenarios. In both cases hydrogen selling price was assumed to be 5$/kg and wind power selling price of 16 Cents/kWh for the second scenario. It was also found out that both levelized cost and NPV measures are more sensitive to carbon price and hydrogen selling price in the grid only scenario compared to the wind only scenario.