Hydrogen is increasingly seen as a key energy carrier to realize the transition from fossil-energy based systems to zero-carbon energy systems. The economics of hydrogen supply is, however, still subject of debate. The costs of this supply are relatively high compared to the market prices of hydrogen, making that investments in electrolysers still need financial support in order tobecome profitable. The question, however, is to what extent such support remains required in the future when the economic circumstances have changed.

A new policy paper by Arjen Veenstra and professor Machiel Mulder from the Centre for Energy Economics Research at the University of Groningen analyzes all the various factors affecting the business case of hydrogen production in an integrated manner. The objective of this analysis is to provide more insight in the conditions behind the profitability of investments in electrolysis plants. This insight is given by determining the required subsidies needed to make such investments break even. This analysis is conducted by constructing and using a computer model of integrated electricity and hydrogen markets for various scenarios regarding the future development in renewables, installed hydrogen capacity and demand for hydrogen.

Read the full report.