No abstract

We thank, without implicating, Carlos Batlle, Richard Schmalensee, Paul Joskow, and Bentley Clinton for their support and insights. We thank Dave Kolata and Jeff Zethmayr for their support in accessing the data used in this study. The usual disclaimer applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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 a 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 zonal prices, hydrogen production increases congestion costs in the electricity grid by 11%. 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 24% 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 subsidies for hydrogen production based on spatial criteria.

No abstract

We thank, without implicating, Carlos Batlle, Richard Schmalensee, Paul Joskow, and Bentley Clinton for their support and insights. We thank Dave Kolata and Jeff Zethmayr for their support in accessing the data used in this study. The usual disclaimer applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.