Economic Assessment of Hydrogen Technologies Participating in California Electricity Markets

Joshua Eichman, Aaron Townsend, Marc Melaina

Research output: NRELTechnical Report


As the electric sector evolves and increasing amounts of variable renewable generation are installed on the system, there are greater needs for system flexibility and sufficient capacity, and greater concern for overgeneration from renewable sources not well matched in time with electric loads. Hydrogen systems have the potential to support the grid in each of these areas. However, limited information is available about the economic competitiveness of hydrogen system configurations. This paper quantifies the value for hydrogen energy storage and demand response systems to participate in select California wholesale electricity markets using 2012 data. For hydrogen systems and conventional storage systems (e.g., pumped hydro, batteries), the yearly revenues from energy, ancillary service, and capacity markets are compared to the yearly cost to establish economic competitiveness. Hydrogen systems can present a positive value proposition for current markets. Three main findings include: (1) For hydrogen systems participating in California electricity markets, producing and selling hydrogen was found to be much more valuable than producing and storing hydrogen to later produce electricity; therefore systems should focus on producing and selling hydrogen and opportunistically providing ancillary services and arbitrage. (2) Tighter integration with electricity markets generates greater revenues (i.e., systems that participate in multiple markets receive the highest revenue). (3) More storage capacity, in excess of what is required to provide diurnal shifting, does not increase competitiveness in current California wholesale energy markets. As more variable renewable generation is installed, the importance of long duration storage may become apparent in the energy price or through additional markets, but currently, there is not a sufficiently large price differential between days to generate enough revenue to offset the cost of additional storage. Future work will involve expanding to consider later year data and multiple regions to establish more generalized results.
Original languageAmerican English
Number of pages31
StatePublished - 2016

NREL Publication Number

  • NREL/TP-5400-65856


  • ancillary services
  • battery
  • demand management
  • demand response
  • electricity markets
  • electrochemicals
  • electrolysis
  • electrolyzers
  • energy storage
  • fuel cells
  • hydrogen
  • hydrogen analysis
  • operations optimization
  • power-to-gas
  • price-taker
  • pumped hydro
  • responsive load
  • steam methane reformer
  • storage


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