Hydrogen Integration in Future Local Energy Markets

Local energy markets (LEMs) are increasingly promoted as coordinated market frameworks for distributed electricity resources in low-carbon-level energy systems. In parallel, green hydrogen is emerging as an energy carrier used for long-duration storage and sector coupling. Yet hydrogen is typically treated as a technological extension of the existing flexibility options rather than as a separate market participant. This paper argues that such a perspective is conceptually insufficient for future LEM design. It is proposed that hydrogen should be understood as a hybrid market participant in LEMs, rather than as a special case for load, storage or generation. Hydrogen can simultaneously be used to meet a flexible electricity demand, be stored for a long duration, and act as a dispatchable electricity supply. These combined roles violate the core assumptions embedded in electricity-only LEMs, including one-direction energy flow, short-term time prospects, symmetric storage behavior and there being an electricity-only supply option. Particular attention is given to small-to-medium-scale electrolyzers, which are likely to dominate hydrogen participation in local contexts. Rather than proposing a specific market mechanism or numerical model, this paper suggests market design considerations for future local energy markets and highlights open challenges for electricity–hydrogen market coordination.