ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
Wind and solar energy are often expected to fall victim to their own success: the higher their share in electricity production, the more their revenue on electricity markets (their “market value”) declines. While in conventional power systems, the market value may converge to zero, this study demonstrates that “green” hydrogen production, through adding electricity demand in low-price hours, can effectively and permanently halt the decline. With an analytical derivation, a Monte Carlo simulation, and a numerical electricity market model, I find that – due to flexible hydrogen production alone – market values across Europe likely converge above €19 ± 9 per MWh for solar energy and above €27 ± 8 per MWh for wind energy in 2050 (annual mean estimate ± standard deviation). This lower boundary is in the range of the projected levelized costs of renewables and has profound implications. Market-based renewables may hence be within reach.
Renewable energy Hydrogen electrolysis Electricity market Electricity economics Integrated energy systems Flexible electricity demand
Q4 Q40 Q41 Q42
Please cite as: Ruhnau, Oliver (2021): “How flexible electricity demand stabilizes wind and solar market values: The case of hydrogen electrolyzers”, Applied Energy, https://doi.org/10.1016/j.apenergy.2021.118194