Welcome back to the final post in Hitachi Energy’s Market Management for Renewable Energy blog series, where we explore the market management side of renewable energy use and projects.
Recently, we discussed investing in energy markets in the blog “New risks on the horizon for renewable energy aggregation, trading, and selling in North America.”
Then, we focused on new, more effective ways to manage energy procurement in “How to navigate Power Purchase Agreements (PPAs): from modelling to mitigation to management.”
Finally, we’re turning to green hydrogen, defined simply as utilizing renewable power sources, such as wind or solar, to produce hydrogen via electrolysis.
As growth in the green hydrogen space accelerates, understanding market dynamics and geospatial locational data is critical to the success of green hydrogen project development. Access to market intelligence, such as interconnection queues, infrastructure locations, historical price dynamics, and price projections, is becoming even more important following the recent announcement by the U.S. Department of Energy of $7 billion in grants to fund seven hydrogen hubs in the U.S.
Because hydrogen production requires electricity, understanding power pricing and sourcing is crucial in estimating project costs. Project site proximity to existing or planned wind and solar farms (see Figure 1) is of particular importance, especially if hydrogen developers partner with these plants for direct renewable power supply.
Green hydrogen can reduce fluctuations in solar output by ramping electrolyzer activities. It is imperative to understand renewable plant locations and capacities, owner, holding companies, online dates, development milestones, interconnection queue status, and any reported power purchase agreement (PPA) information.
Figure 1
Data from FERC’s Electric Quarterly Reports (EQR) is also helpful in understanding bilateral contract pricing trends between entities and in specific delivery balancing areas. This can be a valuable data point for pricing benchmarking if project owners are considering bilateral agreements for sourcing power.
When pulling power directly from the grid, identifying locations of lower prices is advantageous. Utilizing historical pricing data over specific periods – monthly or annually – or granularly down to the hour, day, peak time, congestion price type, or spreads can help shape the picture of pricing trends to aid in project site selection (see Figure 2).
Understanding grid bottlenecks, curtailment, and congestion patterns is helpful in project siting decisions while also potentially improving reliability and grid stability.
Figure 2
Beyond historical pricing, understanding power price projections multiple years into the future will inform hydrogen players about expected future cost profiles.
Developers may also want to know if prices will vary over the hour, day, or year at different sites and specifics surrounding green hydrogen cost projections. Unbiased and trusted third-party price projections based on supply and demand fundamentals, such as those delivered via Hitachi Energy’s Power Reference Case, are vital to project development and financing timelines.
Furthermore, advisors can help customers comprehend how the seven recently announced hydrogen hubs will impact the market. Map layers and information about the Inflation Reduction Act are also helpful in these analyses.
Generation mix data will help to inform developers of the composition of clean energy resources in the power grid supply (see Figure 3). Analyzing supply sources, generation patterns, and capacity factors - as well as load data - provides valuable intelligence into the dynamics of specific grid operations.
Figure 3
Developers may also need to understand the location of nearby infrastructure, such as existing natural gas and hydrogen pipelines, flow points, processing facilities, transmission lines, substations, highways, railroads, or industrial facilities (see Figure 4). This geospatial data can be important for homing in on locational siting and identifying possible blending opportunities, transportation options, and end-user customers.
Figure 4
Hitachi Energy’s Energy Market Intelligence tools, including Velocity Suite and Power Reference Case, provide clients with the above functionalities and much more. Our end-to-end solutions help project developers and financers make confident decisions through each timeline step.
Explore our Energy Market Intelligence tools.