Negative redispatch power for green hydrogen production: Game changer or lame duck? A German perspective

TL;DR

This paper analyzes how regional redispatch markets in Germany influence green hydrogen production costs and electrolyser market incentives, highlighting the impact of price levels on system benefits and market participation.

Contribution

It evaluates the effect of redispatch market price levels on green hydrogen production costs and electrolyser incentives using historic data and power purchase scenarios.

Findings

Low redispatch prices can reduce hydrogen production costs and encourage electrolyser siting.

High redispatch prices can negate cost advantages and discourage market participation.

Redispatch market design significantly impacts green hydrogen competitiveness in Germany.

Abstract

Following years of controversial discussions about the risks of market-based redispatch, the German transmission network operators finally installed regional redispatch markets by the end of 2024. Since water electrolysers are eligible market participants, the otherwise downwards redispatched renewable energy can be used for green hydrogen production in compliance with European law. To show how different price levels in regional redispatch markets affect green hydrogen production cost and thus the incentive for electrolyser market participation, we use historic redispatch time series and evaluate various power purchase scenarios. Our results show that low price levels can lead to notable production cost reductions, potentially counteracting uncertainties in redispatch power availability and thus incentivising system-beneficial electrolyser siting. In contrast, the possibility of high price levels can nullify an increase in the competitiveness of German and European green hydrogen through production cost reductions and discourage market participation.