The Netherlands aims to have a carbon-neutral energy system by 2050. Hydrogen is seen as an important energy carrier that can contribute to this transition. Not only can hydrogen potentially decarbonise industry, transportation, and possibly agriculture and the built environment, but it can also be used to store electricity for longer periods. As more green hydrogen is produced over the years by electrolysis, the hydrogen demand and supply will increasingly diverge. Underground hydrogen storage can provide a solution for the imbalance between hydrogen demand and supply in both the short and long term.

For this study, a model has been constructed to simulate the Dutch electricity and hydrogen market in 2040. Four different energy systems have been modelled, differing mainly in the extent to which the Netherlands is self-sufficient in their electricity and hydrogen demand. The model is constructed in Linny-R: a graphical modelling tool specifically designed for the formulation of Mixed Integer Linear Programming (MILP) problems, particularly for Unit Commitment (UC) problems.

Firstly, using the model, the required underground hydrogen storage capacity in 2040 in the four different energy systems has been determined. The performance of different storage configurations, consisting of a certain number of short-cyclic salt caverns in addition to a certain policy for seasonal storage in gas fields, has been compared, and it has been concluded that only when a large installed capacity of solar and wind energy is placed in the Netherlands, the preference is for a mid-seasonal storage policy. In the other energy systems, the preference was for a low-seasonal storage policy.

The second part of the research focuses on the financial feasibility of underground hydrogen storage facilities. The average system costs and profits have been mapped out. For the most plausible energy system, it has been determined that the storage facilities in 2040, when they have to generate their income purely based on market prices, are not profitable. To recoup the investment in salt caverns, the government will need to subsidise 0.26 €/kg of hydrogen.

In addition to the insight that subsidisation will be needed to kickstart investments in underground hydrogen storage, some other important insights for policymakers have emerged. The installed capacity of hydrogen turbines has a significant effect on both the operational system costs of the entire energy system and the economic feasibility of the storage facilities. Furthermore, it has been found that in an energy system already dominated by green electricity and green hydrogen, adding additional storage facilities does not result in further CO2 reduction. As long as the carbon capture rate is limited to 90%, approximately 10,000 kton of CO2 will still be emitted annually. To become fully carbon-neutral, the Dutch government must therefore consider negative emission measures such as reforestation and ecosystem restoration.