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Title: The market viability of nuclear hydrogen technologies.

Abstract

The Department of Energy Office of Nuclear Energy is supporting system studies to gain a better understanding of nuclear power's potential role in a hydrogen economy and what hydrogen production technologies show the most promise. This assessment includes identifying commercial hydrogen applications and their requirements, comparing the characteristics of nuclear hydrogen systems to those market requirements, evaluating nuclear hydrogen configuration options within a given market, and identifying the key drivers and thresholds for market viability of nuclear hydrogen options. One of the objectives of the current analysis phase is to determine how nuclear hydrogen technologies could evolve under a number of different futures. The outputs of our work will eventually be used in a larger hydrogen infrastructure and market analysis conducted for DOE-EE using a system-level market simulation tool now underway. This report expands on our previous work by moving beyond simple levelized cost calculations and looking at profitability, risk, and uncertainty from an investor's perspective. We analyze a number of technologies and quantify the value of certain technology and operating characteristics. Our model to assess the profitability of the above technologies is based on Real Options Theory and calculates the discounted profits from investing in each of the productionmore » facilities. We use Monte-Carlo simulations to represent the uncertainty in hydrogen and electricity prices. The model computes both the expected value and the distribution of discounted profits from a production plant. We also quantify the value of the option to switch between hydrogen and electricity production in order to maximize investor profits. Uncertainty in electricity and hydrogen prices can be represented with two different stochastic processes: Geometric Brownian Motion (GBM) and Mean Reversion (MR). Our analysis finds that the flexibility to switch between hydrogen and electricity leads to significantly different results in regards to the relative profitability of the different technologies and configurations. This is the case both with a deterministic and a stochastic analysis, as shown in the tables below. The flexibility in output products clearly adds substantial value to the HPE-ALWR and HTE-HTGR plants. In fact, under the GBM assumption for prices, the HTE-HTGR plant becomes more profitable than the SI-HTGR configuration, although SI-HTGR has a much lower levelized cost. For the HTE-HTGR plant it is also profitable to invest in additional electric turbine capacity (Case b) in order to fully utilize the heat from the nuclear reactor for electricity production when this is more profitable than producing hydrogen. The technologies are all at the research and development stage, so there are significant uncertainties regarding the technology cost and performance assumptions used in this analysis. As the technologies advance, the designers need to refine the cost and performance evaluation to provide a more reliable set of input for a more rigorous analysis. In addition, the durability of the catalytic activity of the materials at the hydrogen plant during repetitive price cycling is of prime importance concerning the flexibility of switching from hydrogen to electricity production. However, given the potential significant economic benefit that can be brought from cogeneration with the flexibility to quickly react to market signals, DOE should consider R&D efforts towards developing durable materials and processes that can enable this type of operation. Our future work will focus on analyzing a range of hydrogen production technologies associated with an extension of the financial analysis framework presented here. We are planning to address a variety of additional risks and options, such as the value of modular expansion in addition to the co-generation capability (i.e., a modular increase in the hydrogen production capacity of a plant in a given market with rising hydrogen demand), and contrast that with economies-of-scale of large-unit designs.« less

Authors:
; ; ;
Publication Date:
Research Org.:
Argonne National Lab. (ANL), Argonne, IL (United States)
Sponsoring Org.:
USDOE Office of Science (SC)
OSTI Identifier:
925341
Report Number(s):
ANL-07/13
TRN: US200809%%755
DOE Contract Number:
DE-AC02-06CH11357
Resource Type:
Technical Report
Country of Publication:
United States
Language:
ENGLISH
Subject:
08 HYDROGEN; 29 ENERGY PLANNING, POLICY AND ECONOMY; CAPACITY; COGENERATION; CONFIGURATION; ECONOMICS; ELECTRICITY; FLEXIBILITY; HYDROGEN; HYDROGEN PRODUCTION; MARKET; NUCLEAR ENERGY; PLANNING; PRICES; PROFITS; REACTORS; SIMULATION; STOCHASTIC PROCESSES; TURBINES; VIABILITY

Citation Formats

Botterud, A., Conzelmann, G., Petri, M. C., and Yildiz, B. The market viability of nuclear hydrogen technologies.. United States: N. p., 2007. Web. doi:10.2172/925341.
Botterud, A., Conzelmann, G., Petri, M. C., & Yildiz, B. The market viability of nuclear hydrogen technologies.. United States. doi:10.2172/925341.
Botterud, A., Conzelmann, G., Petri, M. C., and Yildiz, B. Fri . "The market viability of nuclear hydrogen technologies.". United States. doi:10.2172/925341. https://www.osti.gov/servlets/purl/925341.
@article{osti_925341,
title = {The market viability of nuclear hydrogen technologies.},
author = {Botterud, A. and Conzelmann, G. and Petri, M. C. and Yildiz, B.},
abstractNote = {The Department of Energy Office of Nuclear Energy is supporting system studies to gain a better understanding of nuclear power's potential role in a hydrogen economy and what hydrogen production technologies show the most promise. This assessment includes identifying commercial hydrogen applications and their requirements, comparing the characteristics of nuclear hydrogen systems to those market requirements, evaluating nuclear hydrogen configuration options within a given market, and identifying the key drivers and thresholds for market viability of nuclear hydrogen options. One of the objectives of the current analysis phase is to determine how nuclear hydrogen technologies could evolve under a number of different futures. The outputs of our work will eventually be used in a larger hydrogen infrastructure and market analysis conducted for DOE-EE using a system-level market simulation tool now underway. This report expands on our previous work by moving beyond simple levelized cost calculations and looking at profitability, risk, and uncertainty from an investor's perspective. We analyze a number of technologies and quantify the value of certain technology and operating characteristics. Our model to assess the profitability of the above technologies is based on Real Options Theory and calculates the discounted profits from investing in each of the production facilities. We use Monte-Carlo simulations to represent the uncertainty in hydrogen and electricity prices. The model computes both the expected value and the distribution of discounted profits from a production plant. We also quantify the value of the option to switch between hydrogen and electricity production in order to maximize investor profits. Uncertainty in electricity and hydrogen prices can be represented with two different stochastic processes: Geometric Brownian Motion (GBM) and Mean Reversion (MR). Our analysis finds that the flexibility to switch between hydrogen and electricity leads to significantly different results in regards to the relative profitability of the different technologies and configurations. This is the case both with a deterministic and a stochastic analysis, as shown in the tables below. The flexibility in output products clearly adds substantial value to the HPE-ALWR and HTE-HTGR plants. In fact, under the GBM assumption for prices, the HTE-HTGR plant becomes more profitable than the SI-HTGR configuration, although SI-HTGR has a much lower levelized cost. For the HTE-HTGR plant it is also profitable to invest in additional electric turbine capacity (Case b) in order to fully utilize the heat from the nuclear reactor for electricity production when this is more profitable than producing hydrogen. The technologies are all at the research and development stage, so there are significant uncertainties regarding the technology cost and performance assumptions used in this analysis. As the technologies advance, the designers need to refine the cost and performance evaluation to provide a more reliable set of input for a more rigorous analysis. In addition, the durability of the catalytic activity of the materials at the hydrogen plant during repetitive price cycling is of prime importance concerning the flexibility of switching from hydrogen to electricity production. However, given the potential significant economic benefit that can be brought from cogeneration with the flexibility to quickly react to market signals, DOE should consider R&D efforts towards developing durable materials and processes that can enable this type of operation. Our future work will focus on analyzing a range of hydrogen production technologies associated with an extension of the financial analysis framework presented here. We are planning to address a variety of additional risks and options, such as the value of modular expansion in addition to the co-generation capability (i.e., a modular increase in the hydrogen production capacity of a plant in a given market with rising hydrogen demand), and contrast that with economies-of-scale of large-unit designs.},
doi = {10.2172/925341},
journal = {},
number = ,
volume = ,
place = {United States},
year = {Fri Apr 06 00:00:00 EDT 2007},
month = {Fri Apr 06 00:00:00 EDT 2007}
}

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