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A Methodology for Firm Capacity Planning, Including the Economic Feasibility Assessment of a Hydrogen Storage–Based Generation Project

Daniel Llarens ORCID
GME
Independent Researcher, Buenos Aires C1010AAH, Argentina

Received: 26 July 2025; Revised: 7 September 2025; Accepted: 17 October 2025; Published: 6 November 2025

Abstract

A high penetration of wind and solar generation within the generation mix will result in an increased supply risk due to the random variations inherent in renewable generation. This document proposes a new methodology for calculating system marginal costs as part of generation fleet expansion planning that accounts for the impact of these random variations. This new methodology incorporates an additional cost into the marginal cost calculation, reflecting the risk of supply deficits during periods of scarcity. This allows for the inclusion in the planning process of generation units that contribute to the electricity system firm capacity, thereby enhancing the security of supply to meet demand. As an example, this document analyzes the economic feasibility of a generation project that utilizes hydrogen (H2) as fuel. The project combines H2 production for industrial use, powered by renewable generation (the GH2 project), with the provision of firm capacity supplied by a gas turbine (TG) generator fueled by H2 (the hybrid project). The economic feasibility of this hybrid project stems from two key factors: i) intra-annual energy arbitrage—purchasing energy from the electricity market during periods of the year characterized by low marginal costs, and selling energy during periods of scarcity with high marginal costs; and ii) maximizing the electrolyzer's capacity factor by purchasing energy in the market during hours when the electrolyzer possesses residual capacity (i.e., capacity not currently utilized by the GH2 project). The project incorporates H2 storage within salt domes.

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