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Analysing the Impact of a Renewable Hydrogen Quota on the European Electricity and Natural Gas Markets

Author

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  • Schlund, David

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

  • Schönfisch, Max

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

Abstract

We perform a model-based analysis of the impact of a renewable hydrogen quota on EU gas and electricity markets. By comparing a scenario in which a renewable hydrogen quota with tradable certificates is imposed on final gas consumption in the sectors of the economy outside the EU ETS with a reference scenario without a quota, we assess price, quantity and welfare effects. Our model simulations show that the hydrogen quota leads to a significant expansion in renewable energy sources (RES) capacity to produce renewable hydrogen and synthetic methane with Power-to-Gas (PtG) technologies. On the electricity market, the price increases substantially, rising by up to 12%—mostly due to increasing emission allowance prices—leading to a higher surplus for power producers. The quota’s primary beneficiaries in the power sector are renewable energy producers. On the gas market, the quota leads to a small decrease in prices (by a maximum of -3%) and gas producer surpluses. Quota obliged gas consumers, mainly households, commercial and small industrial consumers, carry the largest part of the burden associated with the obligation. Overall, the quota leads to the redistribution of welfare from these consumers to RES and PtG producers and a significant decline in total welfare.

Suggested Citation

  • Schlund, David & Schönfisch, Max, 2021. "Analysing the Impact of a Renewable Hydrogen Quota on the European Electricity and Natural Gas Markets," EWI Working Papers 2021-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    • Handle: RePEc:ris:ewikln:2021_003
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    Cited by:

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    2. Begoña Vivanco-Martín & Alfredo Iranzo, 2023. "Analysis of the European Strategy for Hydrogen: A Comprehensive Review," Energies, MDPI, vol. 16(9), pages 1-36, May.
    3. Wang, Tao & Liang, He & Luo, Zhenmin & Yu, Jianliang & Cheng, Fangming & Zhao, Jingyu & Su, Bin & Li, Ruikang & Wang, Xuqing & Feng, Zairong & Deng, Jun, 2023. "Thermal suppression effects of diluent gas on the deflagration behavior of H2–air mixtures," Energy, Elsevier, vol. 272(C).
    4. Roach, Martin & Meeus, Leonardo, 2023. "An energy system model to study the impact of combining carbon pricing with direct support for renewable gases," Ecological Economics, Elsevier, vol. 210(C).
    5. Schlund, David & Theile, Philipp, 2022. "Simultaneity of green energy and hydrogen production: Analysing the dispatch of a grid-connected electrolyser," Energy Policy, Elsevier, vol. 166(C).
    6. Liu, Ying & Feng, Chao, 2023. "Promoting renewable energy through national energy legislation," Energy Economics, Elsevier, vol. 118(C).

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    More about this item

    Keywords

    Hydrogen; power-to-gas; quota obligation; renewable energy support;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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