Assessing Green Hydrogen Support Mechanisms in Coupled Electricity and Hydrogen Markets

Abstract

Green hydrogen is a promising alternative to decarbonizing hard-to-abate sectors, but its development faces regulatory, economic, and operational challenges. In the EU, strict criteria on additionality, temporal, and geographical correlation, constrain producers and complicate hydrogen integration with electricity markets. Support mechanisms, such as subsidies, premiums, or quotas, aim to bridge cost gaps, but their impact is still poorly explored. Under this context, this paper complements a previously developed joint electricity and hydrogen Cournot model with the constraints imposed by several green hydrogen production support schemes. The new models are reformulated as equivalent quadratic optimization problems to ease the resolution and applied to real-size Iberian case studies. Results show how the different support schemes affect market prices, production, emissions, and social welfare. The findings provide insights into designing effective and balanced support policies that promote green hydrogen while minimizing market distortions. This work contributes new models to assess regulatory and economic interactions in emerging hydrogen markets.