[Paper Review] Green Hydrogen Plant: Optimal control strategies for integrated hydrogen storage and power generation with wind energy

Arjen T. Veenstra, Albert H. Schrotenboer+2 more|arXiv (Cornell University)|Aug 1, 2021

Hybrid Renewable Energy Systems36 references4 citations

TL;DR

This paper proposes optimal control strategies for green hydrogen plants integrating wind energy, hydrogen storage, and electricity market participation using Markov decision processes. It demonstrates that dynamic management of hydrogen storage and market interactions can increase annual revenues by up to 51%—equivalent to €126,000 per 4.5 MW turbine—especially when supported by strategic power purchase and hydrogen offtake agreements.

ABSTRACT

The intermittent nature of renewable energy resources such as wind and solar causes the energy supply to be less predictable leading to possible mismatches in the power network. To this end, hydrogen production and storage can provide a solution by increasing flexibility within the system. Stored hydrogen can either be converted back to electricity or it can be used as feed-stock for industry, heating for built environment, and as fuel for vehicles. This research examines the optimal strategies for operating integrated energy systems consisting of renewable energy production and hydrogen storage. Using Markov decision process theory, we construct optimal policies for day-to-day decisions on how much energy to store as hydrogen, or buy from or sell to the electricity market, and on how much hydrogen to sell for use as gas. We pay special emphasis to practical settings, such as contractually binding power purchase agreements, varying electricity prices, different distribution channels, green hydrogen offtake agreements, and hydrogen market price uncertainties. Extensive experiments and analysis are performed in the context of Northern Netherlands where Europe's first Hydrogen Valley is being formed. Results show that substantial gains in operational revenues of up to 51\% are possible by introducing hydrogen storage units and competitive hydrogen market-prices. This amounts to a \euro 126,000 increase in revenues per turbine per year for a 4.5 MW wind turbine. Moreover, our results indicate that hydrogen offtake agreements will be crucial in keeping the energy transition on track.

Motivation & Objective

• To develop optimal operational strategies for green hydrogen plants (GHPs) integrating wind energy, hydrogen storage, and electricity market participation.
• To address the challenge of intermittency in wind energy by leveraging hydrogen storage for long-term flexibility and revenue optimization.
• To analyze the impact of practical constraints such as power purchase agreements (PPAs), hydrogen offtake agreements, and market price uncertainty on GHP profitability.
• To evaluate how hydrogen distribution channels and seasonal storage agreements influence operational decisions and financial performance.
• To provide actionable insights for GHP operators on structuring PPAs and hydrogen contracts to maximize long-term profitability.

Proposed method

• Formulates the GHP operation as a Markov decision process (MDP) to model sequential, stochastic decisions on electricity storage, market trading, and hydrogen sales.
• Uses backward dynamic programming to solve the MDP optimally, determining the profit-maximizing policy under uncertainty.
• Incorporates real-world constraints: fixed PPA obligations, variable electricity prices, hydrogen market price uncertainty, and multiple hydrogen distribution channels.
• Employs Weibull-distributed wind speed data fitted per month to model realistic wind generation profiles in Northern Netherlands.
• Simulates the system under various market and contractual conditions, including different PPA timing structures and hydrogen offtake agreement terms.
• Evaluates the impact of seasonal storage and dynamic inventory management on cost reduction and revenue enhancement.

Experimental results

Research questions

• RQ1 How does integrating hydrogen energy storage with wind power and electricity market participation affect the operational profitability of a green hydrogen plant?
• RQ2 What is the optimal control policy for a GHP under uncertain electricity and hydrogen prices, PPA obligations, and hydrogen offtake agreements?
• RQ3 How do different PPA structures—particularly timing and volume of electricity deliveries—affect the plant’s long-term profitability?
• RQ4 What role do hydrogen offtake agreements play in improving the financial viability of green hydrogen plants under low conversion efficiency?
• RQ5 To what extent can seasonal hydrogen storage and dynamic inventory management increase system revenues?

Key findings

• Introducing hydrogen storage and active market participation increases GHP operational revenues by up to 51%, equivalent to €126,000 per 4.5 MW wind turbine annually.
• Even with low hydrogen conversion efficiency, profitability is achievable when hydrogen prices exceed electricity prices by €11–13 per MWh.
• Distributing PPA electricity deliveries over time rather than concentrating them at a single due date leads to higher profits, highlighting the value of flexible PPA design.
• Hydrogen offtake agreements are crucial for stabilizing revenue streams and enabling profitable operation, especially under price volatility.
• Seasonal storage agreements can reduce storage costs and improve annual revenue allocation, suggesting strategic benefits of long-term storage planning.
• The MDP-based optimal control policy outperforms static strategies by dynamically responding to electricity and hydrogen price fluctuations, maximizing long-term profitability.