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Assessment of carbon-abatement pricing to maximize the value of electrolytic hydrogen in emissions-intensive power sectors

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  • Ayodeji Okunlola

    (University of Alberta)

  • Matthew Davis

    (University of Alberta)

  • Amit Kumar

    (University of Alberta)

Abstract

Electrolytic hydrogen can support the decarbonization of the power sector. Achieving cost-effective power-to-gas-to-power (PGP) integration through targeted emissions pricing can accelerate the adoption of electrolytic hydrogen in greenhouse gas-intensive power sectors. This study develops a framework for assessing the economic viability of electrolytic hydrogen-based PGP systems in fossil fuel-dependent grids, while considering the competing objectives of the electricity system operator, a risk-averse investor, and the government. Here we show that, given the risk-averse investor’s inherent pursuit of profit maximization, a break-even carbon abatement cost of at least 57 Canadian Dollars per tonne of CO₂ by 2030 from the government, with a shift in electricity market dispatch rules from sole system marginal price-reduction to system-wide emissions reduction, is essential to stimulate price discovery for low-cost hydrogen production and contingency reserve provision by the PGP system. This work can help policymakers capture and incentivize the role of electrolytic hydrogen in low-carbon power sector planning.

Suggested Citation

  • Ayodeji Okunlola & Matthew Davis & Amit Kumar, 2025. "Assessment of carbon-abatement pricing to maximize the value of electrolytic hydrogen in emissions-intensive power sectors," Nature Communications, Nature, vol. 16(1), pages 1-15, December.
    • Handle: RePEc:nat:natcom:v:16:y:2025:i:1:d:10.1038_s41467-025-62952-y
    DOI: 10.1038/s41467-025-62952-y
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