CO2 price signals more effective than H2 promotion

18.03.2026

Source: E & M powernews

A study shows: H2-ready gas-fired power plants reduce system costs and curtailment, but only partially replace fossil capacities. The authors are critical of hydrogen support measures.

H2-ready gas-fired power plants can support the transformation of the German electricity system cost-effectively by providing flexibility and reducing the need to expand other technologies, but remain dependent on political framework conditions in the long term. This is the conclusion of a study entitled "Hydrogen-ready power plants: Optimizing pathways to a decarbonized energy system in Germany" published in the magazine "Applied Energy".

The study examined various transformation paths for the German electricity system based on a capacity expansion model. The focus was on H2-ready gas and steam power plants (CCGT), which are initially to be operated with natural gas and converted to green hydrogen by 2040 at the latest. The aim of the study was to quantify their impact on costs, emissions and infrastructure requirements.

A key result is the systemic flexibility contribution of these plants. H2-ready power plants can reduce the curtailment of renewable energies by more than 35 percent. At the same time, they reduce the need for additional renewable generation capacity and flexibility options such as storage or alternative controllable power plants. This reduces the overall system costs compared to scenarios without a corresponding power plant option.

The study also shows that H2-ready plants significantly influence investment decisions in the electricity system. Their use shifts the optimal technology mix, as they can cover peak loads and dark doldrums. Without this option, higher investments in short-term storage and additional renewable capacities would be required to ensure security of supply.

High influence of CO2 price signals

At the same time, however, the analysis puts the role of hydrogen in power plant operation into perspective. Due to its low availability, the economic use of hydrogen can only take place in later phases of decarbonization or under specific subsidy conditions. In the modeled scenarios, fossil fuels therefore remain in the system for a longer period of time. H2-ready power plants thus function primarily as a transitional technology with optional fuel switching, not as a short-term replacement for fossil generation.

Another focus of the study is on the evaluation of policy instruments. The results show that CO2 price signals have a stronger influence on a cost-efficient transformation than direct support measures for hydrogen. While subsidy programs can support the market ramp-up of hydrogen, they sometimes lead to higher overall costs in the model. In contrast, rising CO2 prices provide more targeted incentives for low-emission technologies and accelerate the fuel switch.

Overall, the study comes to the conclusion that H2-ready gas-fired power plants can play an important role in an electricity system dominated by renewable energies, in particular to secure supply and reduce system costs. However, their climate impact depends largely on the availability and cost-effectiveness of green hydrogen and the design of the energy policy framework.

The study "Hydrogen-ready power plants: Optimizing pathways to a decarbonized energy system in Germany" is available in the scientific database Science Direct.

Author: Katia Meyer-Tien