Sustainable Power Generation Expansion in Island Systems with Extensive RES and Energy Storage

Insular networks constitute ideal fields for investment in renewables and storage due to their excellent wind and solar potential, as well the high generation cost of thermal generators in such networks. Nevertheless, in order to ensure the stability of insular networks, network operators impose strict restrictions on the expansion of renewables. Storage systems render ideal solutions for overcoming the aforementioned restrictions, unlocking additional renewable capacity. Among storage technologies, hybrid battery-hydrogen demonstrates beneficial characteristics thanks to the complementary features that battery and hydrogen exhibit regarding efficiency, self-discharge, cost, etc. This paper investigates the economic feasibility of a private investment in renewables and hybrid hydrogen-battery storage, realized on the interconnected island of Crete, Greece. Specifically, an optimization formulation is proposed to optimize the capacity of renewables and hybrid battery-hydrogen storage in order to maximize the profit of investment, while simultaneously reaching a minimum renewable penetration of 80%, in accordance with Greek decarbonization goals. The numerical results presented in this study demonstrate that hybrid hydrogen-battery storage can significantly reduce electricity production costs in Crete, potentially reaching as low as 64 EUR/MWh. From an investor’s perspective, even with moderate compensation tariffs, the energy transition remains profitable due to Crete’s abundant wind and solar resources. For instance, with a 40% subsidy and an 80 EUR/MWh compensation tariff, the net present value can reach EUR 400 million. Furthermore, the projected cost reductions for electrolyzers and fuel cells by 2030 are expected to enhance the profitability of hybrid renewable-battery-hydrogen projects. In summary, this research underscores the sustainable and economically favorable prospects of hybrid hydrogen-battery storage systems in facilitating Crete’s energy transition, with promising implications for investors and the wider renewable energy sector.