From niche to market-an agent-based modeling approach for the economic uptake of electro-fuels (power-to-fuel) in the german energy system

The transition process towards renewable energy systems is facing challenges in both fluctuating electricity generation of photovoltaic and wind power as well as socio-economic disruptions. With regard to sector integration, solutions need to be developed, especially for the mobility and the industry sector, because their ad hoc electrification and decarbonization seem to be unfeasible. Power-to-fuel (P2F) technologies may contribute to bridge the gap, as renewable energy can be transferred into hydrogen and hydrocarbon-based synthetic fuels. However, the renewable fuels production is far from economically competitive with conventional fuels. With a newly developed agent-based model, potential developments in the German energy markets were simulated for a horizon of 20 years from 2016 to 2035. The model was constructed through a participatory modeling process with relevant actors and stakeholders in the field. Model findings suggest that adjusted regulatory framework conditions (e.g., exemptions from electricity surtaxes, accurate prices for CO2-certificates, strong start-up subsidies, and drastic emission reduction quotas) are key factors for economically feasible P2F installations and will contribute to its large-scale integration into the German energy system. While plant capacities do not exceed 0.042 GW in a business-as-usual scenarios, the above-mentioned adjustments lead to plant capacities of at least 3.25 GW in 2035 with concurrent reduction in product prices.