Machiel Mulder to investigate the economic feasibility of sustainable hydrogen

In the Climate Agreement, hydrogen plays an important role in our efforts to make our 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 an ideal solution for mitigating the variability of electricity production from renewable sources such as wind turbines and solar panels. The extent to which hydrogen will be able to meet these high expectations in the future energy transition depends on various economic factors.

Prof. Machiel Mulder, Professor of Regulation of Energy Markets and director of the Centre for Energy Economics Research (CEER) at the University of Groningen, is going to investigate the economic feasibility of hydrogen.He was awarded a €435,000 grant from the Dutch Research Council (NWO) for his research into the economic feasibility of the large-scale production of hydrogen using electricity.This research will be carried out in cooperation with institutes from Denmark, Germany, Italy and Austria. In addition, Mulder received a €250,000 grant from GasTerra in collaboration with the New Energy Coalition (NEC) for research into the development of a market for hydrogen.

Source of flexible energy

The NWO grant will enable Mulder to fund a PhD student, a postdoc and a research assistant. Under his leadership, the trio will investigate the merits of hydrogen production in terms of creating greater flexibility to balance the energy market and prevent network congestion. Mulder will use the GasTerra/NEC grant to appoint another PhD student.

The future of hydrogen

‘These grants are important because we can now thoroughly investigate the future economic potential of hydrogen,’ says Professor Mulder. ‘After all, hydrogen’s role in the energy transition also depends on various economic factors, one of which is the price of other energy carriers, in particular electricity and gas. At the moment, it is still expensive to produce hydrogen from water using electrolysis, but these costs could potentially decrease if it becomes cheaper to produce electricity in the future.’ The researchers on Mulder’s team will therefore study, among other things, what will happen to the price of electricity in the future if electricity is increasingly generated from renewable sources (such as wind turbines and solar panels).

Alternative: hydrogen from natural gas

At a time when it is (still) too expensive to produce hydrogen using electrolysis, an alternative method is to produce hydrogen from natural gas, whereby the CO2 released is captured and stored. The costs of this method are very much dependent on the prices of natural gas and CO2. As such, the researchers will also investigate how these prices could develop in the future.

Pay more

As long as the costs of hydrogen are higher than those of conventional energy carriers such as electricity and natural gas, it is vital to know how much extra people and companies are prepared to pay. Mulder: ‘When this willingness to pay exceeds the additional costs of hydrogen, a key condition for a hydrogen market is met.’

Mulder’s team will not only be examining this willingness to pay, but also whether there are other obstacles that stand in the way of a market for hydrogen and how those obstacles could be overcome. ‘These include the role of transport and storage, how access to that should be organized and the importance of international integration when it comes to creating liquid marketplaces.’

Preventing congestion

Finally, the researchers will also study the impact that hydrogen production could have on preventing congestion in the electricity network. When a lot of renewable electricity is generated in some places, it is sometimes not possible to transport it all due to insufficient grid capacity. ‘This is already an issue in many places in the north,’ says Mulder. ‘To what extent is it economically efficient to convert this electricity into hydrogen and to transport it via existing gas pipelines? Or is it profitable, for example, to convert that hydrogen back into electricity later on? The answers to economic questions like these will help us to achieve the energy transition in the coming years.’

More information

Contact:

• Machiel Mulder, Professor of Regulation of Energy Markets, email: machiel.mulder@rug.nl, tel.: +31 (0) 6 31035729

Read more:

• CEER Policy Paper 5, Outlook for a Dutch hydrogen market. Economic conditions and scenarios
• Machiel Mulder’s blog: Hoe wordt waterstof écht groen en wat doen we in de tussentijd?
• Website of the Centre for Energy Economics Research