Economic potential of water electrolysis within future electricity markets

Abstract

With increasing shares of Renewable Energy Sources (RES) in Europe and especially in Germany, new technologies are required that may provide flexibility. A potential technology to use excess electricity is alkaline water electrolysis. One goal of the Horizon 2020 project ELYntegration is to analyze the profitability of electrolysers in these new market surroundings. For current and future scenarios with high RES shares, potential contribution margins are analyzed. This includes the classical business model of cross-commodity arbitrage trading as well as the provision of flexibility at control reserve markets. The assessment is based on future spot market and reserve market price calculations. The analysis shows increasing contribution margins in the future. The participation in control reserve markets however does not contribute to revenues significantly because high spreads between the spot market and hydrogen market are harnessed in the most efficient and flexible way with cross-commodity arbitrage trading.