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Power sector effects of green hydrogen production in Germany

Dana Kirchem, Wolf-Peter Schill

TL;DR

The paper addresses how green hydrogen production interacts with a power system characterized by high renewable shares, using the open-source DIETER capacity-expansion model to endogenize electrolyzer capacity and two hydrogen storage options. It compares Germany under an electric-island vs interconnected framework and under wind-constraint vs unconstrained wind, across three hydrogen supply chains. Key findings are that cavern storage provides substantial temporal flexibility and can reduce renewable curtailment, but overall power-sector costs rise with hydrogen, and results depend on wind expansion limits and cross-border balancing. Policy implications stress accelerating renewable capacity expansion, enabling large-scale flexible storage, and strengthening cross-border transmission to realize the system-wide benefits of green hydrogen while mitigating distributional impacts.

Abstract

The use of green hydrogen can support the decarbonization of sectors which are difficult to electrify, such as industry or heavy transport. Yet, the wider power sector effects of providing green hydrogen are not well understood so far. We use an open-source electricity sector model to investigate potential power sector interactions of three alternative supply chains for green hydrogen in Germany in the year 2030. We distinguish between model settings in which Germany is modeled as an electric island versus embedded in an interconnected system with its neighboring countries, as well as settings with and without technology-specific capacity bounds on wind energy. The findings suggest that large-scale hydrogen storage can provide valuable flexibility to the power system in settings with high renewable energy shares. These benefits are more pronounced in the absence of flexibility from geographical balancing. We further find that the effects of green hydrogen production on the optimal generation portfolio strongly depend on the model assumptions regarding capacity expansion potentials. We also identify a potential distributional effect of green hydrogen production at the expense of other electricity consumers, of which policy makers should be aware.

Power sector effects of green hydrogen production in Germany

TL;DR

The paper addresses how green hydrogen production interacts with a power system characterized by high renewable shares, using the open-source DIETER capacity-expansion model to endogenize electrolyzer capacity and two hydrogen storage options. It compares Germany under an electric-island vs interconnected framework and under wind-constraint vs unconstrained wind, across three hydrogen supply chains. Key findings are that cavern storage provides substantial temporal flexibility and can reduce renewable curtailment, but overall power-sector costs rise with hydrogen, and results depend on wind expansion limits and cross-border balancing. Policy implications stress accelerating renewable capacity expansion, enabling large-scale flexible storage, and strengthening cross-border transmission to realize the system-wide benefits of green hydrogen while mitigating distributional impacts.

Abstract

The use of green hydrogen can support the decarbonization of sectors which are difficult to electrify, such as industry or heavy transport. Yet, the wider power sector effects of providing green hydrogen are not well understood so far. We use an open-source electricity sector model to investigate potential power sector interactions of three alternative supply chains for green hydrogen in Germany in the year 2030. We distinguish between model settings in which Germany is modeled as an electric island versus embedded in an interconnected system with its neighboring countries, as well as settings with and without technology-specific capacity bounds on wind energy. The findings suggest that large-scale hydrogen storage can provide valuable flexibility to the power system in settings with high renewable energy shares. These benefits are more pronounced in the absence of flexibility from geographical balancing. We further find that the effects of green hydrogen production on the optimal generation portfolio strongly depend on the model assumptions regarding capacity expansion potentials. We also identify a potential distributional effect of green hydrogen production at the expense of other electricity consumers, of which policy makers should be aware.
Paper Structure (13 sections, 3 equations, 12 figures, 3 tables)

This paper contains 13 sections, 3 equations, 12 figures, 3 tables.

Table of Contents

  1. Introduction
  2. Literature
  3. Methods
  4. Data and scenarios
  5. Results
  6. Generation capacity investments and yearly dispatch
  7. Electrolysis capacity and hourly use
  8. Costs and electricity market prices
  9. Discussion
  10. Conclusions and policy implications
  11. Complementary model results
  12. electricity and hydrogen storage capacity
  13. Full-load hours of electrolyzers

Figures (12)

  • Figure 1: Hydrogen supply infrastructure in the different hydrogen settings
  • Figure 2: Generation capacity investments in 2030: absolute capacities in reference scenarios (left panel) and changes induced by green hydrogen
  • Figure 3: Yearly electricity generation in 2030: absolute values in reference scenarios (left panel) and changes induced by green hydrogen
  • Figure 4: Yearly renewable curtailment
  • Figure 5: Installed electrolyzer capacity
  • ...and 7 more figures