Impacts of different hydrogen demand levels and climate policy scenarios on the Chilean integrated hydrogen-electricity network

Abstract

As countries continue to update their climate ambitions, they are seeking cost-effective solutions for decarbonizing energy use. In this context, low-carbon hydrogen production and use presents relevant opportunities for emissions reductions and economic development, and recent studies show important potential benefits from integrating electricity and hydrogen networks. Based on a novel mathematical optimization model, we conduct a case study for Chile in 2020-2050 to assess the least-cost evolution of the integrated hydrogen- electricity system, testing different carbon prices, 100% renewable mandates, and incorporating domestic and international hydrogen demand. By optimizing over various scenarios, we find that, due to the country’s significant renewable potential and the flexibility that electrolyzers can provide, adding hydrogen exports to domestic hydrogen use may enhance renewable integration, while not necessarily increasing average wholesale electricity prices for typical end-users (relative to our baseline scenario), but also make battery deployment unattractive. Further, we conclude that climate policies such as a high carbon price or a 100% renewable mandate may be crucial to achieve a fully renewable system by 2050 and reduce cumulative emissions, resulting in 3%-14% higher net present system costs. Finally, we discuss that various concerns such as water and land use must be addressed by policymakers.