Electricity grids need to be carefully balanced, with too low levels of electricity leading to blackouts and too high levels causing damage to grids. Due to the intermittent nature of renewable energy sources such as solar and wind, it is possible for specific regions (e.g. the north of Germany) to have an excess of electricity, while the power lines do not have enough capacity to transport it to higher demand regions such as cities and industrial areas. This is known as a grid bottleneck. To keep the grid running properly, operators redispatch electricity by reducing renewable feed-in in oversupplied areas and increasing generation elsewhere. However, this leads to renewable energy being wasted, and because producers are still compensated and generation increase on demand is costly, it is financially inefficient.

In 2024, Germany created regional redispatch markets so that renewable electricity that would otherwise be curtailed can instead be sold locally. This is particularly useful for hydrogen producers because they do not require a continuous supply of electricity. Because they can operate flexibly, turning on and off depending on electricity availability, they can take advantage of very low-priced electricity. In this work, the researchers ask whether using this electricity source makes producing green hydrogen cheaper and how market prices for otherwise curtailed renewable electricity affect this.

They found that using only redispatch electricity is not cost-effective because of its unreliability. However, combining it with different renewable energy sources does reduce costs. Depending on hydrogen storage costs, using redispatch electricity can reduce hydrogen production costs by €0.9 – €1.96 per kg, if the redispatch electricity is available for 0 €/MWh, compared to typical costs of around €6-8 per kg without redispatch electricity.

Increased redispatch prices reduce the potential for production cost reductions, which, combined with the unreliability of redispatch availability, lowers the incentive for
system beneficial electrolyser siting within the regional market areas. Therefore, the success of these markets depends heavily on keeping prices low, which might necessitate effective price capping but could increase green hydrogen competitiveness and simultaneously decrease renewable energy curtailment.

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Metrics for assessing the economic impacts of power sector climate and clean electricity policies John Bistline (2021)