Negative redispatch power for green hydrogen production

Following years of controversial discussions about the risks of market-based redispatch, the German transmission network operators finally installed regional redispatch markets by the end of 2024. Since water electrolysers are eligible market participants, the otherwise downwards redispatched renewable energy can be used for green hydrogen production in compliance with European Union law. This article investigates whether and under which conditions the regional redispatch markets provide an economic incentive for electrolyser participation. We introduce a model of a green hydrogen production project sourcing electricity from different power purchase options in order to supply a green hydrogen off-taker. By using recreated historic redispatch time series, we evaluate various power purchase scenarios, taking different regulatory conditions, market price levels and production system configurations into account. Our results show that low redispatch price levels can lead to notable production cost reductions, potentially counteracting uncertainties in redispatch power availability and thus incentivising system-beneficial electrolyser siting and market participation. The magnitude of possible cost reductions depends mainly on project sizes, storage cost and off-taker flexibility. Besides providing an incentive for system-beneficial siting, the cost reductions could increase the competitiveness of German and European green hydrogen compared to fossil-based alternatives. In contrast, the possibility of high redispatch price levels can nullify possible cost reductions and discourage market participation.