Optimized Bidding strategies for PtX systems in stochastic energy markets

Abstract:
The electricity market finds itself at a pivotal moment, confronting the dual challenge of meeting escalating energy demands while simultaneously reducing the carbon footprint linked to traditional fossil fuel-based power generation. The predominant reliance on fossil fuels has signi- ficantly contributed to greenhouse gas emissions, necessitating a fundamental transition towards cleaner and more sustainable alternatives. The incorporation of renewable energy sources offers a viable route towards decarbonization. However, the inherent volatility and intermittency of these sources pose challenges, resulting in grid instability and price cannibalization. The imperative for a flexible, intelligent grid capable of real-time supply-demand balancing becomes paramount. Addressing these challenges, Power-to-X (PtX) technology emerges as a promising solution. PtX involves converting surplus renewable electricity into diverse energy carriers, including hy- drogen, methane, and synthetic fuels like Ammonia. Hydrogen, especially when generated through electrolysis using renewable energy, emerges as a clean and efficient fuel for transportation, marking a crucial step towards achieving net-zero CO2 emissions. Ammonia, produced through nitrogen fixation and hydrogenation, finds applications in agriculture and transportation. Boasting a higher energy density than hydrogen, it presents an appealing fuel for internal combustion engines. Furthermore, transitioning ammonia production methods holds the potential to significantly reduce CO2 emissions in agriculture. Serving as a hydrogen carrier, ammonia addresses storage and distribution challenges, making it a preferable alternative, particularly for long-distance transport and storage. The focus of this PhD project is to investigate the optimization of production processes and profitability within PtX plants, with a consideration of the intricate challenges inherent in these facilities. PtX plants introduce complexities arising from several factors: • PtX plants possess the unique capability to concurrently participate in various commodi- ty markets, leading to a challenge in managing PtX systems. This includes uncertainties 1 such as determining optimal production timing and quantities for hydrogen, as well as devi- sing strategies for buying required electricity or selling different grid support and ancillary services. • Modeling the prices of PtX-produced products, such as Hydrogen or Ammonia, proves chal- lenging due to the limited availability of historical data and the nonexistence of dedicated exchanges for the green variants -i.e. produced using only energy from non-polluting sources - of these products which are principally over-the-counter (OTC) traded. Given the complexities outlined, assuming the role of a PtX plant operator presents significant challenges. This PhD project aims to address these challenges by conducting research to develop effective bidding strategies. These strategies aim to optimize energy procurement for PtX plants, ultimately contributing to their profitability.

Funding: Centrica Energy