Locating Hydrogen Production in Norway Under Uncertainty

Abstract

In this paper, we study a two-stage stochastic multi-period facility location and capacity expansion problem. The problem is motivated by the real-world problem of locating facilities for green hydrogen in Norway. We formulate a model with modular capacities. Investment in a facility and expansion costs represents long-term costs. For each capacity, we define a convex short-term production cost function which enables to capture economies of scale in investment as well as in production. The objective is to minimize the total expected investment, expansion, production and distribution costs while satisfying demand in each scenario. We solve the problem using sample average approximation. The results from solving the problem show that the stochastic problem leads to lower installed capacity in the opening decisions than the expected value problem.