Ensure market design accounts for the integration of new demand and supply sources

Regulators should ensure market design accounts for the integration of new demand and supply sources. For example, policymakers can introduce financial incentives to promote deployment of hydrogen electrolyzers. These can soak up otherwise curtailed renewable generation, enabling a greater penetration of clean power. BNEF’s Net Zero Scenario finds that by 2050, 16,500 terawatt-hours – or almost one-fifth – of global electricity demand can be flexibly used to produce ‘green’ hydrogen, but only at times when electricity is available from renewable sources. Market design and regulation will be key in determining if and how curtailed renewables are utilized.

It will be important for policymakers to ensure that energy storage technologies ranging from electrochemical and mechanical to thermal storage are not penalized by the market set-up. Today, they are often hindered because grid operations are typically designed to treat supply and demand separately, but storage assets do both (in charging and discharging) as co-related functions. Without coordination of supply and demand to account for energy storage technologies, it may be overly cumbersome if not impossible to participate in a market.