Financial Feasibility of Power-to-Hydrogen-to-Power Energy Storage Based on Gas Turbines: Case for Spain

Abstract This paper investigates the technical feasibility of a hydrogen-based power-to-power energy storage facility within the Spanish electricity market. The proposed facility draws electricity from the grid when market prices are low, such as during periods when excess renewable energy generation and/or reduced demand force curtailments. This electricity is used to operate a set of electrolysers, converting electrical energy into chemical energy in the form of hydrogen, which is then stored as a high-pressure gas. When electricity prices increase, the hydrogen stored is combusted in an industrial gas turbine — operating either in open cycle or combined cycle configuration — to produce electricity that is exported to the grid. Such system would enable seasonal energy storage by producing hydrogen for use in gas turbines during high demand and low renewable generation, while alleviating grid congestion and enabling new renewable plants without grid connection. Additionally, the turbines could provide essential grid services like reactive power, inertia, and short-circuit strength, ensuring system stability. The analysis is based on real specifications of major equipment provided by one of the main OEMs in the market, including electrolysers, hydrogen compressors, high-pressure cylinders for energy storage, and gas turbines. Additionally, for the combined-cycle gas turbine configuration, a comprehensive on- and off-design performance model of the gas-to-power module was created using the Thermoflex simulation environment, following the industry’s best practices for power generation. The aforedescribed technical model was then complemented with a trading algorithm incorporating hourly price patterns in the day-ahead electricity market. This algorithm incorporates detailed economic and financial models of the plant, accounting for capital and operational costs and also grid-related fixed and variable expenses linked to the operation of the electrolysers. With this information, the trading algorithm is able to optimise the operational schedule and to make informed decisions to purchase electricity and or to produce and sell electric power, thereby establishing the optimal daily operational pattern for the facility that yields maximum annual benefits. The paper presents an in-depth analysis of the economic and financial characteristics of such storage facilities, when operated in the current market of electricity in Spain (FY2023). To this aim, a comprehensive financial model was integrated into the technical simulation tools to assess how key technical factors affect financial indicators, such as the Levelised Cost of Energy (LCoE) and the subsidy required to break even (i.e., produce a Net Present Value NPV = 0). The results suggest that the current market in Spain is not ready to take large-scale, long-duration energy storage technologies, since these do not represent attractive investment opportunities currently. Nevertheless, their economic feasibility could improve significantly with the implementation of the new market designs currently under development in the European Union and worldwide, in particular given the stronger need for balancing services provision and emission reductions by peaking generation systems.