Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301868 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
Würzburg Economic Papers No. 111
Publisher: 
University of Würzburg, Department of Economics, Würzburg
Abstract: 
A lot of countries have recently published updated hydrogen strategies, often including more ambitious targets for hydrogen production. In parallel, accompanying ramp-up mechanisms are increasingly coming into focus with the first ones already being released. However, these proposals usually translate mechanisms from renewable energy (RE) policy without considering the specific uncertainties, spillovers, and externalities of integrating hydrogen electrolysis into electricity grids. This article details how different aspects of a policy can address the specific issues, namely funding, risk-mitigation, and the complex relation with electricity markets. It shows that, compared to RE policy, subsidies need to emphasize the input side more strongly as price risks and intermittency from electricity markets are more prominent than from hydrogen markets. Also, it proposes a targeted mechanism to capture the positive externality of mitigating excess electricity in the grid while keeping investment security high. Economic policy should consider such approaches before massively scaling support and avoid the design shortcomings experienced with early RE policy.
Subjects: 
hydrogen policy
renewable energy policy
support mechanisms
contracts for difference
JEL: 
O25
O38
Q42
Q48
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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