BUSINESS CASE – Compare hydrogen storage option and battery storage options for 500 houses in a village.

Nowadays, to maintain the supply of our energy network, while having a forecast growth in electricity needs, we must decentralize the network. These decentralization needs will be shown in another case, but there is already quite abundant literature on this subject. There are multiple methodologies for decentralizing energy production, but 1 point is common. This is the need to store and recover stored energy. All storage methodologies have their advantages and disadvantages, here is a quick summary of the main energy storage systems:

Certainly, it is strange to see that diesel or LPG is an energy storage, but it is the case. And it’s also important because with certain methods, we could recreate methane gas from CO2, so that we can store energy. In our case, we want to compare hydrogen-based storage with battery-based storage. For the technology, we would use a metal hibride technology to store the hydrogen, which is the safest way to store hydrogen these days. This technology uses metal particles, which absorb hydrogen gas.

Swiss technology company, GRZ-technologies ( https://grz-technologies.com/ ) has developed a powerful methodology. They created a method, where via the absorption of hydrogen by the metallic hybrid, they can store in 6 bars, 1000 bars equivalent to hydrogen. It is a very safe and efficient way to store energy.

In the following case, we studied a scenario of setting up hydrogen storage in a village which has a mixed energy supply. We are studying the return on financial investment and the possible autonomy of a hydrogen-based system compared to a battery-based system.

1. Basic assumptions:

1. All residents of the village have a solar installation on the grid and they are ready to sell their access solar energy, we consider that on average, all households have a photovoltaic installation of 30 m2 on the roof. The average yield is 85% of the maximum solar potential in the Swiss plain around Lausanne. (this gives a good continental European average)
2. Investments are only taken into account for the installation of storage, no investments related to the network or distribution are taken into account (they must be made anyway, and will be taken care of by the network owner)
3. We took into account the cost of maintaining the system in the simulations.
4. Battery storage was considered without losses (for the simplicity of the model) while hydrogen has an efficiency of 60% considering the incoming solar energy compared to the energy recovered in electricity.
5. The distribution of hot water and home heating technologies is defined as follows:

I. Analysis:

Our analysis attempts to compare cost-equivalent options. The objective is not total independence from the electricity grid, but the financial evaluation of 2 storage philosophies and the increase of independence. Decentralized battery storage versus centralized hydrogen-based battery storage. The investment reached 10,000 CHF/house, which is still considered affordable in a small village budget. No state or EU incentives are taken into account.

We start from the price level of the current market situation. Currently, the purchase price of solar energy is considered to be 14 cents / Kwh and the sale price is 0.32 cents / Kwh. Then we increase the energy sales price by 10% at each stage up to +50%. We apply the opposite effect to the purchase price of solar solar energy. 10% reduction at each step up to minus 50%.

We are not considering any energy purchases from the grid, to keep the focus on the solar energy storage model, but this is a clear opportunity.

Option 1: if all solar installations on the network are equipped with local storage of 10 Kwh. This would increase energy independence.

Option 2: We consider no attached solar installation, but hydrogen storage would buy available energy from the village solar installations and resell it to the users when needed.

II. Conclusion:

We’ll look at it from a ROI perspective first, and then we’ll look at cash flow. For ROI, we simply divide the annual profits with the investment cost. We do not count on a reduced return on investment, we do not include any extraordinary maintenance costs. We analyze this later in the context of cash flow. The goal of ROI is to understand high-level ROI potential.

In general, we can say that the greater the difference between the market price of solar energy (purchase price) and the average selling price of energy, the shorter the return on investment. The Swiss market is slowly following the development of energy prices in Europe, but we can see that large economies already offer favorable ground for similar investment.

Let’s simplify the graph, and only examine the trend with the difference between the feed-in tariff and the price of electricity:

This shows that a price difference between the purchase price of solar energy and the sale price of energy has a difference of 0.2 cts/kWh, the return on investment is less than 10 years. Once this double return on investment falls to half, which is already the case in Germany and Italy. (Based on 2023 EU statistical data)

CASH-FLOW of 25 years

Looking at the situation from a cash flow perspective is very important, as a 10 year ROI may not show the impact of significant retransmission costs which may after the 10 year period. From this point of view, we assume that solar batteries need to be replaced every 9 years and, while for hydrogen, there is an ongoing maintenance cost.

This is where hydrogen is very interesting, it shows a strong positive cash flow on an initial investment of 5000 K CHF. Batteries are significantly worse as they require continuous refurbishment every 9 years in our model.

1. Opportunities

This model focused solely on purchasing off-the-shelf solar energy and compared hydrogen storage versus solar. Although there are many unstudied opportunities in the model that could be investigated in more detail:

1. Using a system to store not only solar energy, but also any excess energy available => this would improve the ROI for both scenarios.
2. Using hydrogen to produce hydrogen for mobility (cars, buses, tractors, etc.) => this would improve the return on investment of hydrogen
3. Using the waste heat from the hydrogen system to provide hot water or district heating, this would improve the energy recovery of the hydrogen system, but as the additional cost of the system would not provide any savings additional
4. Use hydrogen to mix with natural gas locally => up to 20% Hydrogen can be mixed with natural gas networks without any major burner adjustment being necessary. This could increase the use of green energy in general and improve the return on investment. Although in the model, natural gas was considered ~15% of the total energy mix.
5. Using hydrogen to sell it as a commodity. => would need more modules, but based on the open market for purchase, this could improve ROI.

Overall, it is clear that investments in hydrogen are the future, both for industry and for households, to increase the use of green energy in the energy mix. This study shows that there are multiple scenarios in Europe where the return on investment is attractive and the Swiss market will most likely follow this trend. For more questions or comments, do not hesitate to comment or contact the author of this study @ norbert.nemes@voltaswiss.ch. Voltaswiss (www.voltaswiss.ch) provides engineering and execution of solar and hydrogen projects in Switzerland, Europe or around the world.