Green Ammonia Production in Stochastic Power Markets

Ezio Lauro (), Amélie Têtu and Hélyette Geman
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Ezio Lauro: School of Computing and Mathematical Sciences, Birkbeck, University of London, London WC1E 7HX, UK
Amélie Têtu: Centrica Energy, Skelagervej 1, 9000 Aalborg, Denmark
Hélyette Geman: Department of Applied Mathematics and Statistics, Johns Hopkins University, Baltimore, MD 21218, USA

Commodities, 2024, vol. 3, issue 1, 1-17

Abstract: Real assets in the energy market are subject to ecological uncertainty due to the penetration of renewables. We illustrate this point by analyzing electrolyzers, a class of assets that recently became the subject of large interest, as they lead to the production of the desirable green hydrogen and green ammonia. The latter has the advantage of being easily stored and has huge potential in decarbonizing both the fertilizer and shipping industries. We consider the optimization of green ammonia production with different types of electricity procurement in the context of stochastic power and ammonia markets, a necessary assumption to translate the features of renewable, hence intermittent, electricity. We emphasize the importance of using stochastic prices to model the volatile nature of the price dynamics effectively, illustrating the project risks that hedging activities can mitigate. This study shows the pivotal role of flexibility when dealing with fluctuating renewable production and volatile electricity prices to maximize profits and better manage risks.

Keywords: stochastic electricity prices; PPAs; electrolysis; green ammonia; green fertilizers; renewable energy (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2024
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