Hydrogen as Short-Term Flexibility and Seasonal Storage in a Sector-Coupled Electricity Market
Christoph Loschan (loschan@eeg.tuwien.ac.at),
Daniel Schwabeneder,
Matthias Maldet,
Georg Lettner and
Hans Auer
Additional contact information
Christoph Loschan: Energy Economics Group, Technische Universität Wien, 1040 Vienna, Austria
Daniel Schwabeneder: Energy Economics Group, Technische Universität Wien, 1040 Vienna, Austria
Matthias Maldet: Energy Economics Group, Technische Universität Wien, 1040 Vienna, Austria
Georg Lettner: Energy Economics Group, Technische Universität Wien, 1040 Vienna, Austria
Hans Auer: Energy Economics Group, Technische Universität Wien, 1040 Vienna, Austria
Energies, 2023, vol. 16, issue 14, 1-35
Abstract:
The rapid expansion of renewable energies has the potential to decarbonize the electricity supply. This is more challenging in difficult-to-electrify sectors. The use of hydrogen provides a massive potential for this issue. However, expanding hydrogen production increases electricity demand while providing additional flexibility to the electricity market. This paper mainly aims to analyze the economic effects of this sector coupling between the European electricity and national hydrogen markets. The developed energy market model jointly considers both markets to reach an overall welfare optimum. A novel modeling approach allows the interaction of these markets without the need for several iterative optimization runs. This allows for a detailed analysis of various market participants’ changes in consumer and producer surpluses. The optimization is conducted in 13 connected Central European countries to account for various power plant fleets, generation mixes, and electricity prices. Results show an overall welfare increase of EUR 4 to 28 billion in 2030 and an EUR 5 to 158 billion increase in 2040. However, there is a surplus shift from consumers to producers. The consumer surplus is reduced by up to EUR 44 billion in 2030 and EUR 60 billion while producers benefit to achieve the overall welfare benefits. The reduction of consumer surplus changes if significant price peaks occur. Fuel cell applications can avoid these price peaks, resulting in a surplus shift from thermal power plants to consumers. Hence, consumer surplus can increase by up to EUR 146 billion in the respective 2040 scenarios. Pink hydrogen accounts for a sizable portion of total hydrogen production, up to 58 percent in 2030 and up to 30 percent in 2040. As a result, nuclear power plants that are nearly entirely allocated in France stand to benefit greatly from this sector coupling. Additional efforts could be made to address the link between hydrogen and natural gas prices. Furthermore, the potential for cross-border hydrogen trade and the implementation of national legal and regulatory frameworks could be assessed.
Keywords: European electricity market model; sector coupling; hydrogen; economic welfare; seasonal storage (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jeners:v:16:y:2023:i:14:p:5333-:d:1192521
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