(385f) Risk Management On the Design and Planning of a Hydrogen Supply Chain for Vehicle Use Under Uncertainty in Production Prices: A Case Study of Spain.

In last decades we have started to face the problem of natural resource depletion. The current energy system is fed mainly from crude oil to meet its growing needs. Easily accessible oil reservoirs have started to disappear and nowadays are concentrated in certain few areas of the planet. Meanwhile, the extraction of oil from deeper deposits brings increasingly energy and technological barriers.

Given this situation, the current energy market has faced continuous fluctuations in the price of petroleum products, being the fuel price the one having the greatest impact because of its influence in economy. These facts have increased the concern about security and continuity of energy supply, mostly in countries totally dependent on external supplies. During this year, the supply of natural gas from Russia to South East Europe (Bulgaria, Turkey, Greece, Croatia and Macedonia) was completely disrupted due to a dispute over the price of this product, named by the press ' the gas war '.

On the other hand the need to reduce greenhouse gas (GHG) emissions has also fostered the research for an energy and transport model more sustainable. Globally, the transportation sector accounts for 17% of carbon dioxide global emissions and 18% of primary energy use. This explains why nowadays the major critical issues addressed by policy makers around the world in this sector include the reduction of GHG emissions, local air pollution, and energy supply security [1].

Within this context, hydrogen seems specially promising as alternative fuel and energy carrier since it can be produced safely and locally, has the potential to be environmentally friendly and shows a wide range of applications. Not in vain, several books and information sources have been devoted to explain the opportunities and challenges of a future hydrogen economy [See 1-3]. In particular, the use of hydrogen for powering fuel cell vehicles has received increasing attention because of its possibilities to become the driving vector for hydrogen transition start-up into the global energy marketplace.

As social and economic sectors become more sensible to environmental and energy supply security aspects, directives in transportation sector become more restrictive to the use of fossil fuels. The pathway for switching from conventional fossil fuel system to a more sustainable energy system is now closer to the so-called hydrogen economy, and thereby to the transition period that these changes will entail.

Recent views suggest that the transition to the hydrogen economy will depend on two factors that must be developed in parallel: the construction of a hydrogen infrastructure has to be accompanied by policies promoting market for fuel cell technologies. In this sense, some of the energy alternatives seem to be in a technology competition, especially hydrogen and electricity. While the challenges for batteries to penetrate the market are technical and economic in nature, for fuel cells are rather economic [1].

Therefore, the development of an efficient infrastructure for producing and delivering hydrogen is a key factor to achieve the hydrogen transition [2]. Currently only 15% of the hydrogen produced is considered as ?merchant? and delivered elsewhere as a liquid or gas by truck or pipeline [3]. Thus, the projection of economically viable hydrogen Supply Chain (SC) could play an important and decisive roll on the final market introduction and success of hydrogen as an alternative fuel and energy carrier. This is not a trivial task, since it requires the understanding of the complex interactions between the different nodes embedded in the network (i.e., production, storage and final markets) along with the associated distribution channels.

The design and planning of a hydrogen SC becomes further complicated by the high degree of uncertainty brought about by the several parameters involved on (i.e., prices, cost, demand, resource availability, etc). Specifically, the energy price variability to which the actual financial market is exposed has reached historic levels, mainly because of the dependence on fossil fuels. Unfortunately, despite the interest raised by this topic, supply chain modelling approaches developed are mainly deterministic ?thus, assuming that all parameters are known- largely due to the wide computational requirements of stochastic models [See 4-7].

Stochastic models typically optimize the expected economic performance of the system, and do not provide any control on its variability in the uncertain space. This approach provides a risk neutral picture of the problem. Nevertheless, in practice, decision makers may have different attitudes towards the financial risk associated with the investment on a project. In practice, many decision-makers tend to be risk averse, that is to say, they aim to avoid unfavourable situations thus showing a clear preference for solutions with lower variability for a given budget. The idea underlying risk management is the incorporation of the trade-off between risk and cost within the decision making process. This leads to a multi-objective optimization problem in which the expected performance and a specific risk measure are the objectives considered. In this way, the concept of SCM coupled with risk management tools offers the opportunity of reducing the impact of unexpected events through an integrated multi-objective management of the network.

Several mathematical programming models have been proposed for hydrogen supply chain design [8-13], but only a few have dealt with the associated uncertainty [9, 13]. Furthermore, none of them has applied risk management techniques in this context. This limitation of the current approaches may lead to solutions that perform well on average but perform poorly under other circumstances. Therefore, there is no guarantee that the process will show good performance at a certain level considering the whole uncertain parameters space.

The aim of this work is to provide a mathematical programming framework where financial risk management is considered in connection to the long-term design and planning of hydrogen supply chains for vehicle use under uncertainty in production prices. Given a set of available technologies to produce, store and deliver hydrogen, the objective is to determine the optimal design of the production-distribution network capable of fulfilling a predefined hydrogen demand pattern. Our approach is based on a novel multi-scenario mixed integer linear problem (MILP) that accounts for the uncertainty associated with the coefficients of the objective function. The financial risk is explicitly measured via the worst case, which is appended to the objective function as an additional criterion to be optimised. The resulting large scale bi-criterion MILP tends to be computationally prohibitive as the number of time periods, alternatives included in the superstructure, potential locations and scenarios increase. Hence, our modelling framework is complemented by an efficient decomposition method that expedites the search of the Pareto solutions of the model by exploiting its mathematical structure. The capabilities of the proposed modelling framework and solution strategy are illustrated through its application to a real case study based on Spain, for which valuable insights are obtained.

References

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