Green hydrogen production at Igelsta CHP plant : A techno-economic assessment conducted at Söderenergi AB

Abstract: The energy transition taking place in various parts of the world will have many effects on the current energy systems as an increasing amount of intermittent power supply gets installed every year. In Sweden, just as many other countries, this will cause both challenges and opportunities for today´s energy producers. Challenges that may arise along with an increasingly fluctuating electricity production include both power deficits at certain times and regions but also hours of over-production which can cause electricity prices to drop significantly. Such challenges will have to be met by both dispatchable power generation and dynamic consumption. Conversely, actors prepared to adapt to the new climate by implementing new technologies or innovative business models could benefit from the transition towards a fully renewable energy system.  This thesis evaluates the techno-economic potential of green hydrogen production at a combined heat and power plant with the objective to provide decision support to a district heat and electricity producer in Sweden. It was in the company’s interest to investigate how hydrogen production could help reduce the production cost of district heat as well as contribute to the reduction of greenhouse gases.  In the project, two separate business models: Power-to-gas and Power-to-power were evaluated on the basis of technical and economic performance and environmental impact. To do this, a mathematical model of the CHP plant and the hydrogen systems was developed in Python which optimizes the operation based on costs. The business models were then simulated for two different years with each year representing a distinctly different electricity market situation.  The main conclusions of the study show that Power-to-gas could already be profitable at a hydrogen retail price of 40 SEK per kg, which is the projected retail price for the transportation sector. The demand today is however limited but is expected to grow fast in the near future, especially within heavy transportation. Another limiting factor for hydrogen production showed to be the availability of storage space, as hydrogen gas even at pressures up to 200 bar require large volumes.  Power-to-power for frequency regulation was found to not be economically justifiable as the revenue for providing grid services could not outweigh the high investment costs for any of the simulated years. This resulted in a high levelized cost of energy at over 3000 SEK per MWh which was mostly due to the low capacity factor of the power-to-power system.  Finally, green hydrogen has the potential of replacing fossil fuels in sectors that is difficult to reach with electricity, for example long-haul road transport or the shipping industry. Therefore, green hydrogen production in large scale could help decarbonize many of society’s fossil-heavy segments. By also serving as a grid-balancer, hydrogen production in a power-to-gas process has the potential of becoming an important part of a renewable energy system.