Perspective under uncertainty and risk in green hydrogen investments: A stochastic approach using Monte Carlo simulation

Author(s)

de Andrade, Jorge Vleberton Bessa ; da Costa, Vinicius Braga Ferreira ; Bonatto, Benedito Donizeti ; Aquila, Giancarlo ; Pamplona, Edson de Oliveira ; Bhandari, Ramchandra

• Document type: Journal article
• Source: INTERNATIONAL JOURNAL OF HYDROGEN ENERGY; v. 49, p. 20-pg., 2023-12-07.

Abstract

This paper presents a new approach to calculating the levelized cost of hydrogen (LCOH) using a stochastic model under an uncertainty and risk perspective. The research problem is associated with how to integrate the concept of financial risk to assess investments in small-scale green hydrogen production for more robust results, resolving issues related to underlying economic and technical factors, often overlooked, that may impact the pro-duction of green hydrogen in Brazil and Germany. The approach is applied to an invest-ment project at two localities: Itajuba ⠁, Brazil, and Cologne, Germany, to investigate the underlying economic and technical factors that may impact the production of green hydrogen. In this stochastic approach, the Value at Risk (VaR) is calculated with a confi-dence level of 95% for 5000 LCOH values for each city, generated by the Monte Carlo Simulation (MCS). MCS results show that a correlation between assumptions (un-certainties) significantly affects LCOH with more favorable conditions to produce green hydrogen in Cologne. The risk analysis results show a significant difference concerning the deterministic approach when implementing the risk measure with VaR-LCOH of US$8.39 for Itajuba ⠁ and VaR-LCOH of US$8.21 for Cologne.(c) 2023 Hydrogen Energy Publications LLC. Published by Elsevier Ltd. All rights reserved. (AU)

• FAPESP's process: 21/11380-5 - CPTEn - São Paulo Center for the Study of Energy Transition
• Grantee: Luiz Carlos Pereira da Silva
• Support Opportunities: Research Grants - Science Centers for Development