Engineering Options Analysis of Dual Hydrogen - Natural Gas Fueling: A Texas Power Plant under Carbon Price

Abstract

Natural gas power plants are a crucial player in the energy transition to decarbonize power systems. They can complement renewable generation by providing uninterrupted energy and reducing emissions by replacing coal until affordable energy storage is available. However, future climate change regulations, together with uncertainties in fuel and electricity prices, may affect their profitability. Due to this uncertain future, the need for flexibility in design and operation in natural gas power plants is expected to increase.

This thesis presents a model to value the investment of decarbonizing natural gas power plants in an uncertain future by identifying and quantifying the flexible design option of dual hydrogen fueling. The approach uses the real options analysis, the Net Present Value method (NPV), and the Monte Carlo simulation together with the novel system scale SESAME tool. A 438MW natural gas power plant located in West Texas, USA, is taken as a case study to illustrate this approach. Different scenarios for electricity, fuel, and carbon prices are analyzed.

Results from this study indicate that the value of the hydrogen option does not significantly impact the NPV of the analyzed case. Consequently, a trade space analysis is conducted to explore the model inputs that promise viable solutions. Within the identified space, the flexible design delivers more value to the stakeholders, but the underlying NPV is negative because of the assumed carbon pricing conditions of the model. This gap can be filled using technology incentives, increasing electricity prices, or redesigning the electrical market in which the plant operates.