Pricing electricity from blue hydrogen to mitigate the energy rebound effect: A case study in agriculture and livestock

Abstract

As the world's second largest producer of natural gas, Iran relies heavily on natural gas for 70% of its energy needs. There are, however, challenges associated with energy supply in remote regions attached to the gas pipeline network, particularly during the cold season when fuel oil is required for heating and energy provisioning. To address this issue, this research proposes the use of alternative energy sources, such as hydrogen, for non-residential energy consumption, including agriculture and livestock. A key objective of this study is to develop an optimization model for the generation of electricity from hydrogen resources, as well as formulate a robust strategy to assist electricity producers in maximizing their profits. Using this model, producers are able to set prices in accordance with their risk tolerance and present them to the market, thus mitigating price fluctuations. In the targeted sectors, the results indicate that appropriate pricing models can prevent rebound effects. Specifically, the implementation of this model can reduce natural gas consumption by up to 20% and fuel oil usage by 15% during peak seasons. Additionally, the optimal pricing strategy can lead to a 10% reduction in greenhouse gas emissions. The results of this research provide stable and reliable solutions to the energy supply challenges in these regions, thus making the energy market more resilient and environmentally friendly.