Markets, Policies, and Business Models for Green Fuels: PtX in Long-term Planning to Short-term Trading and Control, and from Demand to Supply

In Feb 2023, the European Commission (EC) published its Green Deal Industrial Plan [1] in response to the US
Inflation Reduction Act (IRA) [2]. To support the scale-up of EU manufacturing capacity for net-zero
technologies, the EU Innovation Fund, through competitive bids, will cover the funding gap with a fixed
premium for each kg of renewable hydrogen produced over a period of 10 years (similar to the IRA).
Subsequently, the EC published its Delegated Act on Renewable Hydrogen [3] (in the remainder called
Delegated Act) defining what is considered a renewable fuel of non-biological origin (RFNBO) for EU
production and imports (also called green hydrogen/fuels in the remainder). Combined with the need for
decarbonisation of the hard-to-abate sectors, this will facilitate the transition towards green fuels and enable
new business opportunities in the EU and beyond.
In this regard, the overall objective of this project is to assess the market potential for hydrogen and green
fuels and their implications for the European electricity market. As such, it will focus on both, the short-term
operations of PtX assets on different electricity markets (spot and balancing power), as well as the long-term
market design, and regulation of green hydrogen/fuels and biofuels to support the deployment of PtX serving
the industrial and transportation demands throughout Europe.
To address this overall goal, the project pursues the following sub-objectives:
• It will provide comprehensive organizational models for the market development of green hydrogen
and fuels to derive demand and supply upscaling policies for the sector.
• It will provide beyond state-of-the-art VRE generation profiles focusing on green fuel production
considering both sub-hourly variations and forecast error uncertainty.
• It will develop a holistic bidding strategy model for PtX assets accounting for the spot and all ancillary
service markets, while considering (i) physical details of the assets, (ii) constraints imposed by the
demand side, (iii) constraints imposed by energy-intensive ancillary services, and (iv)
constraints/opportunities raised by the Delegated Act.
• It will also evaluate market incentives or regulations needed to bridge the initial financing gap
between willingness to pay in the transport sector and profitable business models for the producers.
• It derives optimal allocation and dimensioning of PtX investments throughout Europe.