A model of strategic electrolysis firms in energy, ancillary services and hydrogen markets

Highlights

• Strategic hydrogen firms modelled in an energy market.
   
• Stackelberg equilibrium found via diagonalisation.
   
• Hydrogen providing reserves boosts hydrogen usage.
   
• Ancillary services shift from SMR to electrolysis.
   

Abstract

This work analyses the trading of strategic merchant hydrogen technologies in energy and ancillary services markets. The hydrogen firms trade in two markets: (1) a joint hydrogen and energy/reserves day-ahead market and (2) the balancing settlements market. We contrast the co-optimised markets with trading in an energy-only market. Trading both energy and ancillary services leads hydrogen firms to produce and use more hydrogen, leading to less reliance on fossil fuels and an increase in the revenue streams of the electrolysis-based firms. The problem is formulated as a stochastic multi-leader-multi-follower model. Each leader firm solves a bi-level Stackelberg problem. The upper-level is the Nash game among strategic firms. The lower-level is an instance of a Generalised Nash Equilibrium of the followers.