Exploring the acceleration of green hydrogen diffusion

Abstract

Hydrogen is more and more recognized as an essential component for a sustainable future. Because of its versatility, hydrogen is a promising energy carrier for decarbonization of various sectors. However, to realize the promising sustainable characteristics of hydrogen as a carbon-free energy carrier, hydrogen production through zero-carbon means is a prerequisite. The current rate of diffusion of green hydrogen is sluggish, caused by a number of impeding barriers. To enable green hydrogen to play a role in a sustainable future, acceleration of diffusion through the implementation of policy instruments is required. This research applies a System Dynamics modeling approach to simulate the diffusion of green hydrogen over time and assess the impact of policy levers from 2010 to 2050 in Germany. For two scenarios, the impact of a diverse range of individual policies and policy combinations has been examined, with policy settings varying in strength and timing. In the reference scenario without policies, the incumbent situation was corroborated, with green hydrogen diffusion initiating very late with a marginal rate, leaving the green hydrogen targets of the German government out of sight. From the policy exploration, is has become apparent that discounting electricity levies and carbon contracts for difference are the most effective policies for supporting green hydrogen production and hydrogen demand. Nevertheless, the policy analysis showed that the implementation of unconventional policies such as a ban on carbon capture and storage, is required to reach a sufficient rate of diffusion and achieve national targets. It was also demonstrated that the simultaneous implementation of supply- and demand side policies is a primary condition for the diffusion of green hydrogen. Finally, it was found that the timing of policies might have a counter-intuitive influence on the policy effectiveness. These results confirm the urgency and necessity of policy implementation to stimulate green hydrogen diffusion and provide preliminary insights in the complex dynamics of diffusion. From the modeling outcomes, several policy recommendations about the type, timing, and strength of policy measures have been formulated.