MELY: Market Model for Water Electrolysis – Electrolysis’ Economic Potential given its Technological Feasibility

Power-to-Gas (PtG) is a technology that has the potential to be a system solution to the fluctuating energy production that arises due to the increasing share of renewable energies. Despite the fact that the technology is mature, it has not penetrated the market, yet. Financial resources are, among others, often blamed for. To investigate the economics behind the first step of PtG, Power-to-Hydrogen (PtH2), we derive a microeconomic partial equilibrium Market model for water ELectrolYsis, MELY, with a temporal horizon up to 2040. The model accounts for multiple electricity markets and various hydrogen usage paths. Each combination of these represents a subsector of the model. Utilising surpluses from renewable energies in order to produce hydrogen for the mobility sector appears to be the most profitable subsector, yielding positive unit profits in 2027. Subsectors consuming electricity from other markets and serving the mobility sector will follow this lead. A one-factor-at-a-time (OFAT) sensitivity analysis reveals that the hydrogen price and parameters influencing the effectiveness of the factor input capital are most sensitive.