Investment in flexible hydrogen production from local wind power: Optimising timing, capacity and plant operations of an investment under uncertainty
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Hydrogen produced from renewable energy can be used as an zero emission fuel. Whilehydrogen has applications across several industries its largest potential is seen as a fuel forhydrogen vehicles. Widespread adoption of hydrogen technologies therefore has the potentialto facilitate significant emission reductions and contribute towards climate changegoals. Most of the technologies are still in the early stages of commercialisation and highcosts have historically constrained the adoption. However, with technological developmentsand government support the demand for hydrogen is expected to grow substantially.In this thesis we consider a price taking Norwegian energy producer who considers tobecome a supplier of hydrogen in the future. The company holds the option to invest inhydrogen production from electrolysis by extending an existing wind farm. The hydrogenproduction is assumed to be flexible, and the investor needs to decide how to operatethe hydrogen plant optimally to maximise his profits. In order to find optimal timing,capacity and plant operation of the investment under uncertainty, we apply a real optionsapproach. We develop a multi-factor model using dynamic programming that is solvedusing least square Monte Carlo.