EURO 2025 Leeds
Abstract Submission

2463. Green Hydrogen Subsidies and Certification: Interactions with Electricity and Emissions Trading

Invited abstract in session TD-44: Interactions between electricity, hydrogen and carbon markets, stream Energy Economics & Management.

Tuesday, 14:30-16:00
Room: Newlyn 1.01

Authors (first author is the speaker)

1. Alexander Hoogsteyn
Applied Mechanics and Energy Conversion Section, KU Leuven
2. Jelle Meus
Departement if Mechanical Engineering, KU Leuven
3. Kenneth Bruninx
TU Delft
4. Erik Delarue
Applied Mechanics and Energy Conversion Section, KU Leuven

Abstract

Our research delves into various policies that support renewable hydrogen production, examining their interactions with energy markets and cap-and-trade systems like the EU emission trading scheme. We explore different certification rules applied globally that determine if hydrogen is considered renewable. We develop and deploy a state-of-the-art equilibrium model to analyze the impact of hydrogen support policies on the dynamics between hydrogen, electricity, and emission markets. Our model optimizes the profits of hydrogen and electricity production operations, which are interconnected through an electricity, hydrogen, and emission market. We utilize ADMM to determine the equilibrium prices.
Our analysis reveals that mechanisms compensating hydrogen production can distort spot prices of electricity and hydrogen more profoundly than mechanisms that reward hydrogen production capacity. Moreover, hydrogen support mechanisms encourage renewable electricity generation and discourage investment in conventional generation facilities. A case study conducted in an emission-constrained region, inspired by the European Union, demonstrates that the operational distortions associated with production-based mechanisms tend to lead to higher costs compared to the investment distortions associated with capacity-based mechanisms.

Keywords

Status: accepted

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