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Integrating hydrogen in single-price electricity systems: The effects of spatial economic signals

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  • vom Scheidt, Frederik
  • Qu, Jingyi
  • Staudt, Philipp
  • Mallapragada, Dharik S.
  • Weinhardt, Christof
Abstract
Hydrogen can contribute substantially to the reduction of carbon emissions in industry and transportation. However, the production of hydrogen through electrolysis creates interdependencies between hydrogen supply chains and electricity systems. Therefore, as governments worldwide are planning considerable financial subsidies and new regulation to promote hydrogen infrastructure investments in the next years, energy policy research is needed to guide such policies with holistic analyses. In this study, we link an electrolytic hydrogen supply chain model with an electricity system dispatch model. We use this methodology for a cross-sectoral case study of Germany in 2030. We find that hydrogen infrastructure investments and their effects on the electricity system are strongly influenced by electricity prices. Given current uniform single-prices in Germany, hydrogen production increases congestion costs in the electricity grid by 17%. In contrast, passing spatially resolved electricity price signals leads to electrolyzers being placed at low-cost grid nodes and further away from consumption centers. This causes lower end-use costs for hydrogen. Moreover, congestion management costs decrease substantially, by up to 20% compared to the benchmark case without hydrogen. These savings could be transferred into according subsidies for hydrogen production. Thus, our study demonstrates the benefits of differentiating economic signals for hydrogen production based on spatial criteria.

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  • vom Scheidt, Frederik & Qu, Jingyi & Staudt, Philipp & Mallapragada, Dharik S. & Weinhardt, Christof, 2022. "Integrating hydrogen in single-price electricity systems: The effects of spatial economic signals," Energy Policy, Elsevier, vol. 161(C).
    • Handle: RePEc:eee:enepol:v:161:y:2022:i:c:s0301421521005930
    DOI: 10.1016/j.enpol.2021.112727
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    6. Karsten Neuhoff & Jörn C. Richstein & Mats Kröger, 2023. "Reacting to Changing Paradigms: How and Why to Reform Electricity Markets," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 127, number pbk189.
    7. Hobbie, Hannes & Lieberwirth, Martin, 2024. "Compounding or Curative? Investigating the impact of electrolyzer deployment on congestion management in the German power grid," Energy Policy, Elsevier, vol. 185(C).
    8. Maulén, Lucas & Castro, Margarita & Lorca, Álvaro & Negrete-Pincetic, Matías, 2023. "Optimization-based expansion planning for power and hydrogen systems with feedback from a unit commitment model," Applied Energy, Elsevier, vol. 343(C).
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    10. Jorquera-Copier, Javier & Lorca, Álvaro & Sauma, Enzo & Lorenczik, Stefan & Negrete-Pincetic, Matías, 2024. "Impacts of different hydrogen demand levels and climate policy scenarios on the Chilean integrated hydrogen–electricity network," Energy Policy, Elsevier, vol. 184(C).
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    13. Marco Sebastian Breder & Felix Meurer & Michael Bucksteeg & Christoph Weber, 2022. "Spatial Incentives for Power-to-hydrogen through Market Splitting," EWL Working Papers 2203, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Jul 2022.
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