Projects

Spot Market Simulation

The first spot market simulation study was conducted during 2023 in cooperation with TNO, Berenschot and many market parties. This project aimed to increase understanding of the hydrogen system and associated dynamics and volatility of marginal cost of production as an indicator of hydrogen pricing on a future hydrogen exchange.

Research Methods

Three simulation models were applied to evaluate the hydrogen trade expected in 2030 over the regional and national hydrogen backbone being developed by HyNetwork Services (HNS):

• I-ELGAS model (dispatch simulation): Evaluates dynamics of optimal market allocation based on marginal cost of operation with perfect foresight
• EYE model (market simulation): Assesses market dynamics accounting for bid behaviour in the face of uncertainty
• CEHIM model (imbalance simulation): Provides insight in technical and financial effects of imbalance electricity and hydrogen market coupling

Main Findings About Market Dynamics

Insights from this study help shape the development of the Dutch hydrogen market and the trading system specification for HyXchange.

1. Hourly Market Variations

The simulations show that variations of the simulated production volumes dispatch are hourly. In 2030, many hourly production variations are due to:

• Variable hydrogen output of electrolysers
• Underlying hourly variations of renewable power production
• Electricity spot price fluctuations
• Stabilizing effect of storage, line-pack, and gas-reforming units

2. Infrastructure Impact on System Dispatch

Hydrogen system dispatch is strongly affected by:

• Regional versus national infrastructure availability
• Availability of ammonia (green/blue) imports and cracking capacity
• Storage capacity in salt caverns

3. Grid Balancing Services

Flexible supply sources needed to balance the hydrogen grid:

• SMR/CCS and ATR/CCS: Provide dispatchable hydrogen from gas reforming
• Ammonia cracking: Offers flexible hydrogen cost-effectively for most of the year
• Salt cavern storage: Provides seasonal storage and price arbitrage opportunities

All flexibility-providing facilities are needed, with different emphasis depending on market conditions and import costs.

4. Day-ahead and Intra-day Variations

Generated by hourly varying renewable input (wind, solar) in electrolysers and balanced by:

• Import ammonia cracking
• Hydrogen storage
• Gas reforming (SMR/ATR)

The balancing need would always exceed the size of storage in salt caverns by 2030.

5. Electricity Market Balancing

Electrolysers can balance part of the electricity market with additional revenue streams through:

• Physical coupling of hydrogen and electricity markets
• Line-pack capacity utilization
• Response to imbalance volume opportunities

6. Green Certificate Premium

The value of green certificates is expected to be set at the difference between:

• Marginal production cost of blue ammonia
• Marginal production cost of green ammonia

This difference becomes more apparent towards 2030 and depends on green hydrogen targets set by various countries.

7. Early Market Conditions

Critical considerations for market start-up (2025 onward):

• Limited sources for balancing and liquidity
• Gradual infrastructure build-up
• Regional inequality in market access
• Strict EU mass balancing rules for green H2 certificates

Changed Circumstances Since Publication

Since the publication of this market simulation report (February 2024), several delays have occurred:

• National backbone delay: Earlier assumed ready before 2030, now planned for 2034
• Market development shifts: Main conclusions remain valid but timing shifts to 2035 instead of 2030
• New simulation planned: A renewed market simulation will be conducted to address the new hydrogen market situation