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Centre for Energy Economics Research

Faculty of Economics and Business
Centre for Energy Economics Research Research

Research on Economics of Hydrogen at CEER

Hydrogen

In the Climate Agreement, hydrogen plays an important role in the efforts to make the heat supply, transport and industrial processes more sustainable. After all, hydrogen is a clean source of energy that is also easy to store. This makes hydrogen potentially an ideal solution for mitigating the variability of electricity production from renewable sources such as wind turbines and solar panels. This is the so-called timing flexibility of hydrogen. In addition, hydrogen may also offer so-called end-use flexibility by enabling energy users, like the chemical industry, to replace fossil energy by hydrogen. Another type of flexibility of hydrogen is the so-called locational flexibility, which is that it enables green-electricity producers (e.g. wind turbines) to choose optimal production locations without taking into account the transport capacity of the electricity grid.

The technical feasibility of hydrogen has been researched thoroughly and creates high expectations, but the extent to which hydrogen will be able to meet these high expectations in the future energy transition also depends on various economic factors.

CEER is increasingly involved in the research in various economic factors that affect the economic potential of hydrogen. Our director, prof. Machiel Mulder, received various grants for research into the economic feasibility of the large-scale production of hydrogen using electricity and into the development of a hydrogen market. Furthermore, our centre is also closely involved in doing practical research together with external parties. This creates that the centre is now active in multiple research projects with various researchers. See the table below for a brief overview of our current research projects .

Current research projects on Economics of Hydrogen

Topic Researcher(s)
Hydrogen markets (PhD project) Lennard Rekker (supervised by Machiel Mulder & Michaela Kesina)
The economic value of Power-to-Gas as a source of flexibility to energy networks Oscar Gracia Piñ a (supervised by Machiel Mulder & Paul Elhorst)
Hydrogen as flexibility option for energy markets Xinyu Li
Low-carbon hydrogen supply in international perspective Peter Perey
Speeding up the hydrogen deployment: lessons learned from other industries Machiel Mulder & Peter Perey

Hydrogen markets

This research studies the economic conditions of creating a hydrogen market by analysing both the supply and the demand side, as well as the industrial structure, of the hydrogen sector. On the supply side, we analyse the interaction between the prices of electricity, natural gas, carbon and hydrogen for various types of hydrogen production technologies. On the demand side, we analyse the willingness-to-pay for hydrogen of households, as well as industrial firms. Regarding the industrial structure, we evaluate the experiences with vertical unbundling in the electricity and gas market.

The economic value of Power-to-Gas as a source of flexibility to energy networks

The transition to more small-scale renewable power generation will cause additional stress to transmission and distribution networks. Congestion problems might appear compromising the reliable and efficient supply of electricity. The simplest solution for network congestion is network expansion; however, network expansion is capital intensive and time-consuming, not making it the best solution to deal with congestion. In recent years Power-to-Gas has gained interest as a solution to supply flexibility in future electric systems. In this line, the proposed research intends to assess the potential of P2G as a source of flexibility to avoid network congestion in future energy systems.

Value of Power-to-Gas as a Flexibility Option in Electricity Markets

We investigate the value of power-to-gas as a flexibility option in electricity markets dominated by renewables. In a stylized model, we simulate the short-term equilibria of wholesale electricity, gas, and hydrogen markets coupled by power-to-gas. By comparing the market coupling case with the benchmark case of no power-to-gas, we assess how the variance in the price duration curve reduces due to power-to-gas, which is the market value of power-to-gas as a flexibility option. In addition, we investigate how the market value of power-to-gas changes with an increase of renewables.

Low-carbon hydrogen supply in international perspective

There are numerous activities in North-west Europe regarding research and innovation in low-carbon hydrogen. The combination of the national strategies and technical possibilities for hydrogen can lead to a steep increase in low-carbon hydrogen demand in North-west Europe. Currently, hydrogen produced with renewable electricity in North-west Europe is expensive compared to alternative energy carriers. However, this could change when the low-carbon hydrogen is produced at locations with higher capacityfactors and transported to end-users. We evaluate the production and import of hydrogen from locations with favourable conditions for renewable power generation, as well as hydrogen production based on natural gas with carbon capturing technologies to determine the potential supply routes of low-carbon hydrogen.

Speeding up the hydrogen deployment: lessons learned from other industries

With hydrogen taking a more prominent role in both European as national plans for the energy transition , the question arises what is needed for a large scale implementation of hydrogen. The creation and rapid development of a market, driven by a common societal objective or problem is not new. There are numerous examples of industries that have been created or helped to grow with interventions. In this project, we explore how the development of these industries have taken place and what actions were taken by public and private institutions. We then evaluate how effective these actions have been and finally reflect on the lessons learned from these industries and how these lessons can be applied to the hydrogen market.

More information

Contact:

If you are interested and would like more information about the current research or potential research opportunities, please contact us:

  • Machiel Mulder, Professor of Energy Markets, email: machiel.mulder rug.nl , tel.: +31 6 31035729
  • Peter Perey, Researcher at CEER, email: p.l.perey rug.nl , tel.: +31 6 34316686

Read some of our previous publications on hydrogen:

Press releases:

RUG

"Green hydrogen only profitable if gas prices are high and if a strict climate policy is in place"

GasTerra (Dutch)

"Tijd economisch nog niet rijp voor groene waterstof"

Financieel Dagblad (Dutch)

"Ondanks hoge verwachtingen gaat waterstof nog niet doorbreken"

Last modified:09 April 2020 3.46 p.m.