The role of contracts on a joint Cournot equilibrium for hydrogen and electricity markets modeling

Abstract

Volatility in gas and electricity prices and the aim of the European Commission for decarbonizing the economy have led to a reform in the European electricity market and boosting hydrogen production. As it is well known, hydrogen and electricity have a symbiotic relationship. On the one hand, hydrogen from electrolysis relies on electricity, while hydrogen production offers flexibility to the electrical system by harnessing the renewable energy surplus. In this context, stakeholders and policymakers need tools to analyze this European reform considering the abovementioned dynamic relationships. This research aims to contribute to understanding them in the context of electricity and hydrogen markets, providing a practical tool for the agents to assess market signals in the energy transition. It presents a joint electricity and hydrogen market model based on the Cournot game theory, including contracts for both goods. The model resolution is based on a convex reformulation approach, substantially easing the output computation and its implementation. Real-size Iberian system cases are presented to analyze the impact of the represented contracts.