The potential of ‘green’ hydrogen to play a role in the ‘just transition’ of Aotearoa New Zealand to a net zero carbon economy by 2050 has been much debated. Nevertheless, research initiatives are under way to make this energy vector more affordable, with the announcement of a GNS Science-led research programme boosted through the Government's Advanced Energy Technology Platform .
Most of these initiatives focus on the large-scale use of hydrogen to generate electricity (as an energy storage option), power transport (especially the heavy parts of the system), provide heat and other industrial applications, and produce fertiliser—each with wide, and vocal, proponents and opponents.
Much less attention is given to small-scale applications and the potential opportunities to (em)power communities.
The increased focus on smart, microgrid systems, to improve the sustainability and resilience of communities, has also received much attention. Hydrogen may offer an additional integration option to improve these systems and make energy more accessible and affordable to communities. What does such a system look like?
The system is mainly driven by onsite renewable resources (for example, solar photovoltaics, wind turbines, micro-hydro power and biomass power) and is equipped with three complementary energy storage media (namely, super capacitators, battery packs and a hydrogen-based energy storage system). The hydrogen can be used to generate electricity, or can be used as a transportation fuel in the community. It also uses the main grid as the auxiliary storage system with the option for energy exports—if that is an option in a specific context.
The associated main components are available off the shelf and the hydrogen-related components have been in demonstration on Matiu/Somes Island in Wellington Harbour for some time.
To reap the full benefits of customers’ flexibility potential in an equitable manner and level the playing field for all actors, one also needs an intelligent demand side management-oriented market design—a micro-market.
That would include the microgrid operator that monitors, dispatches and directs the flow of energy across the microgrid that integrates the various Distributed Energy Resources and intermediary Demand Response Aggregators, which, in turn, interact and manage the different customers in the micro-market through separate load-reduction incentives.
All this requires state-of-the-art communication protocols and technologies—again, commercially available. So, it is technically feasible. But does it make economic sense? That requires an innovative optimisation approach in the design of the system, which is made possible with artificial intelligence (AI).
To demonstrate the techno-economic feasibility of an optimised system, the town of Ohakune near Mt Ruapehu is an interesting case. As of 2019, it has a permanent population of around 1,000 inhabitants, which swells to 7,000 to 10,000 people during the winter ski season. As a result of this, and the fact a substantial part of the electrical demand on its distribution network is for low-temperature heating purposes, the load power on the town’s distribution network is subject to a considerable degree of seasonality.
The electricity demand is supplied through a distribution network, the power input to which is entirely supplied by the national grid. However, the residential community in the town has consistently suffered from excessive bills in the wintertime, which is induced by the capacity deficit of the transmission line/transformer connecting the local distribution network to the national grid due to congestion.
In response, the microgrid concept may offer a resilient yet affordable energy system that can provide democratic energy independence, while protecting the natural environmental resources of the region.
The town is rich in renewable energy resources, both dispatchable and non-dispatchable (weather-dependent): it has vast and unexploited solar potential with a total average of about 1,400 kWh/m2-year, large untapped resources of wind (with a yearly average wind speed of around 6 m/s at a height of 10 m) and micro-hydro power from the Mangawhero River (which has a yearly average streamflow of 2.9 m3/s), as well as good reserves of high-quality biomass (coming not only from discarded carrot crop, but also from indigenous forests in the form of foliage and woody biomass).
The energy tariffs can be assumed to be fixed in that, first, electricity is sold to the customers at a flat rate of $0.22/kWh (in compliance with the existing average retail domestic electricity price); secondly, hydrogen is sold to the refilling stations’ customers at a flat rate of $8.00/kg-H2 (which is approximately the same as the retail cost of large-scale green hydrogen production schemes); and finally, electricity is exported back to the grid at a flat-rate feed-in-tariff of $0.08/kWh). However, through the micro-market, the end-consumers are also offered financial incentives for reducing their energy use during the critical coincident peak time-steps – where the net load on the microgrid is positive and wholesale prices are high.
Targeting customers with pro-social preferences additionally provides a platform to drive the aforementioned flat retail price further down for lower-income customers, apart from compensating them for participating in incentivised load reduction programmes.
Using a non-cooperative game theory approach to model the behaviours of the various actors in the micro-market over a representative year, with an AI optimisation technique to design the system, provides some insights into the economics.
Well-established financial appraisal metrics show that the investment is expected to reach the break-even point and move to a positive cash flow position in just over seven years of service. Accordingly, the implemented microgrid system may well realise savings of up to 62 percent, in terms of the community’s energy costs, if financed as a community-owned energy project.
The project is also readily able to secure third-party investment due to surpassing retail grid parity to a substantial extent. Furthermore, the associated potential power purchase and lease agreements can benefit the community in terms of creating a hedge against energy price inflation. It all means a more sustainable and resilient community with reliable energy access.
So, using available technology, methods and mechanisms makes hydrogen a good option at the small-scale, community level, which should not be ignored.
Professor Alan Brent is Chair in Sustainable Energy Systems in Te Kura Mātai Pūkaha, Pūrorohiko—School of Engineering and Computer Science at Te Herenga Waka—Victoria University of Wellington and Soheil Mohseni is a PhD candidate in the programme.
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