EURO 2025 Leeds
Abstract Submission

2468. Investment decisions and market pricing in coupled energy markets under demand uncertainties

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. Julia Grübel
Department Liberal Arts and Social Sciences, University of Technology Nuremberg
2. Jonas Egerer
Department Liberal Arts and Social Sciences, University of Technology Nuremberg
3. Veronika Grimm
Department Liberal Arts and Social Sciences, University of Technology Nuremberg
4. Johannes Wirth
Department Liberal Arts and Social Sciences, University of Technology Nuremberg

Abstract

The transition to a climate-neutral energy system will depend primarily on low-carbon electricity and hydrogen-based fuels. Achieving this transition will require significant infrastructure investment in both sectors, particularly in renewable energy sources, storage technologies, and flexibility measures, including electricity-to-hydrogen conversion and reconversion. However, the future distribution of energy demand between the two sectors remains highly uncertain, influenced by R&D investments and the development of market designs and regulatory frameworks. This uncertainty poses a key challenge, as it increases investment risks and may delay the deployment of essential infrastructure. In this work, we model investment decisions in both sectors under this uncertainty. We account for market participants' expectations of future demand scenarios and the resulting expected profits from trading in the coupled electricity and hydrogen spot markets. We then apply our model to the German energy system, using different 2045 demand scenarios from the literature. Our results indicate that, regardless of the realized demand scenario, mixed expectations lead to only modest welfare losses. Furthermore, sector coupling technologies in particular can effectively hedge against demand uncertainties through portfolios that cover both directions of coupling.

Keywords

Status: accepted

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