Seasonal hydrogen storage decisions under constrained electricity distribution capacity

We consider a profit-maximizing renewable energy producer operating in a rural area with limited electricity distribution capacity to the grid. While maximizing profits, the energy producer is responsible for the electricity supply of a local community that aims to be self-sufficient. Energy storage is required to deal with the energy productions' uncertain and intermittent character. A promising, new solution is to use strategic hydrogen reserves. This provides a long-term storage option to deal with seasonal mismatches in energy production and the local community's demand. Using a Markov decision process, we provide a model that determines optimal daily decisions on how much energy to store as hydrogen and buy or sell from the power grid. We explicitly consider the seasonality and uncertainty of production, demand, and electricity prices. We show that ignoring seasonal demand and production patterns is suboptimal and that introducing hydrogen storage transforms loss-making operations into profitable ones. Extensive numerical experiments show that the distribution capacity should not be too small to prevent local grid congestion. A higher storage capacity increases the number of buying actions from the grid, thereby causing more congestion, which is problematic for the grid operator. We conclude that a profit-maximizing hydrogen storage operation alone is not an alternative to grid expansion to solve congestion, which is essential knowledge for policy-makers and grid operators.