Presentation Description: Increasing penetrations of variable renewable energy (VRE) can affect wholesale electricity price patterns and make them meaningfully different from past, traditional price patterns. Detailed hourly electricity market simulations for multiple regions of the U.S. for low and high VRE futures reveal a general decrease in average annual hourly wholesale energy prices with more VRE penetration, increased price volatility and frequency of very low-priced hours, and changing diurnal price patterns. This provides opportunities for energy-intensive industries such as hydrogen producers or other Power-to-X players that can make use of abundant electricity. We find that hydrogen production costs can fall by 13-40% (below $2/kg) at wind and solar penetrations of 40%, suggesting electrolysis may be economical for a variety of end-uses like synthetic fuels, ammonia, and metals. In addition to declining costs, VRE growth causes a change in the composition of cost factors. This effect is most visible in CAISO, where operating costs make up 90% of total cost at low VRE penetrations and only 33% in the high solar future, aided by strategically running the unit during periods with low-cost electricity. As a result, electrolyzer capital costs increase in relative importance and may be a prime target for future R&D investments.
List how larger shares of wind and solar in the power system will change wholesale electricity price dynamics and describe what opportunities arise for energy-intensive industries.
Demonstrate how optimizing operational strategies can reduce levelized production costs of industries such as hydrogen manufacturers (e.g. lowering asset utilization rates to limit power usage to the cheapest hours).
Describe how production cost factors of hydrogen will shift from operational to up-front capital expenditures and why operational flexibility improvements and capital cost reductions are particularly promising.