Techno-Economic Analysis on Implementing Hydrogen in a Combined Heat and Power Plant in Luxembourg to Reduce Carbon Emissions

In 2021, the global electricity and heat sector recorded the highest increase in carbon dioxide (CO2) emissions in comparison with the previous year, highlighting the ongoing challenges in reducing emissions within the sector. Therefore, combined heat and power (CHP) plants running on renewable fuels can play an important role in the energy transition by decarbonising a process, increasing the efficiency and capacity factor. Since 2003, Luxembourgish CHP plants have been transitioning from natural gas to biomass, mainly wood pellets. However, even though wood pellets are a renewable alternative, the market volatility in 2022 highlighted the vulnerability of a system reliant solely on one type of fuel. This study assesses the feasibility of using hydrogen to decarbonise a cogeneration plant powered by a natural gas-fuelled internal combustion engine. Although the technology to use hydrogen as a fuel for such systems already exists, a technical and economic analysis of implementing a hydrogen-ready plant is still lacking. Our results show that, from a technical perspective, retrofitting an existing power plant to operate with hydrogen is feasible, either by adapting or replacing the engine to accommodate hydrogen blends from 0 up to 100%. The costs of making the CHP plant hydrogen-ready vary depending on the scenario, ranging from a 20% increase for retrofitting to a 60% increase for engine replacement in the best-case scenarios. However, these values remain highly variable due to uncertainties associated with the ongoing technology development. From an economic standpoint, as of 2024, running the plant on hydrogen remains more expensive due to significant initial investments and higher fuel costs. Nevertheless, projections indicate that rising climate concerns, CO2 taxes, geopolitical factors, and the development of the hydrogen framework in the region—through projects such as MosaHYc and HY4Link—could accelerate the competitiveness of hydrogen, making it a more viable alternative to fossil-based solutions in the near future.