Energy Conversion and Storage: The Value of Reversible Power-to-Gas Systems

Abstract

Power-to-Gas technology has recently experienced lower acquisition costs and lower conversion efficiency losses. At the same time, wholesale power markets have seen increasing volatility with significant amounts of surplus electricity at select hours of the year. Here we examine the economic potential of reversible Power-to-Gas systems that can convert electricity to hydrogen or operate in the reverse direction to deliver electricity during times of high power prices. Our model framework is applied to the current market environment in both Germany and Texas. We find that the reversibility feature of solid oxide fuel cells makes such systems already competitive at current hydrogen prices, provided the fluctuations in electricity prices are as pronounced as currently observed in Texas. We project that the flexibility inherent in reversible fuel cells would leave investments in such systems economically viable in the future even at substantially lower hydrogen prices, provided recent technological improvements continue over the coming decade.

Cost Dynamics of Clean Energy Technologies

“…In direct analogy to the LCOE concept, we finally examine the dynamics of the life-cycle cost of hydrogen (LCOH) production, when the hydrogen is produced through water electrolysis. The LCOH is defined as the critical dollar value per kg of hydrogen that allows an investor to break even in terms of discounted after-tax cash flows over the useful life of the electrolyzer (Glenk and Reichelstein 2021b). Aside from the initial equipment cost, applicable fixed operating costs include maintenance and spare part replacements.…”

“…Our analysis also estimates a learning curve for the life-cycle cost of producing hydrogen via electrolysis where electricity splits water into its constituent atoms of hydrogen and oxygen. The corresponding cost measure here is the levelized cost of hydrogen (LCOH) (Glenk and Reichelstein 2021b). We find that for hydrogen the cost improvements over time are again compounded by the interaction between a numerator effect reflecting the declining prices for electrolyzers and a denominator effect corresponding to a lower cost of capital.…”