Economic evaluation of a power-to-hydrogen system providing frequency regulation reserves: a case study of Denmark

Operating costs are dominant in the hydrogen production of a power-to-hydrogen system. An optimal operational strategy or bidding framework is effective in reducing these costs. However, it is still found that the production cost of hydrogen is high. As the electrolysis unit is characterized by high flexibility, providing ancillary service to the grid becomes a potential pathway for revenue stacking. Recent research has demonstrated the feasibility of providing such a service, but the related economics have not been well evaluated. In this work, we propose a comprehensive operation model to enable participation in the day-head, balancing and reserve markets. Three types of reserves are considered by using different operational constraints. Based on the proposed operation framework, we assess the economic performance of a power-to-hydrogen system in Denmark using plentiful actual market data. The results reveal that providing frequency containment reserve and automatic frequency restoration reserve efficiently raises the operational contribution margins. In parallel, by investing in the cash flows, net present value, and break-even hydrogen prices, we conclude that providing reserves makes the power-to-hydrogen project more profitable in the studied period and region.