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Synergistic Value in Vertically Integrated Power‐to‐Gas Energy Systems

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  • Gunther Glenk
  • Stefan Reichelstein

Abstract

In vertically integrated energy systems, integration frequently entails operational gains that must be traded off against the requisite cost of capacity investments. In the context of the model analyzed in this study, the operational gains are subject to inherent volatility in both the price and the output of the intermediate product transferred within the vertically integrated structure. Our model framework provides necessary and sufficient conditions for the value (NPV) of an integrated system to exceed the sum of two optimized subsystems on their own. We then calibrate the model in Germany and Texas for systems that combine wind energy with Power‐to‐Gas (PtG) facilities that produce hydrogen. Depending on the prices for hydrogen in different market segments, we find that a synergistic investment value emerges in some settings. In the context of Texas, for instance, neither electricity generation from wind power nor hydrogen production from PtG is profitable on its own in the current market environment. Yet, provided both subsystems are sized optimally in relative terms, the attendant operational gains from vertical integration more than compensate for the stand‐alone losses of the two subsystems.

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  • Gunther Glenk & Stefan Reichelstein, 2020. "Synergistic Value in Vertically Integrated Power‐to‐Gas Energy Systems," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 526-546, March.
    • Handle: RePEc:bla:popmgt:v:29:y:2020:i:3:p:526-546
    DOI: 10.1111/poms.13116
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    1. Sgarbossa, Fabio & Arena, Simone & Tang, Ou & Peron, Mirco, 2022. "Reprint of: Renewable hydrogen supply chains: A planning matrix and an agenda for future research," International Journal of Production Economics, Elsevier, vol. 250(C).
    2. Charlotte Jarosch & Philipp Jahnke & Johannes Giehl & Jana Himmel, 2022. "Modelling Decentralized Hydrogen Systems: Lessons Learned and Challenges from German Regions," Energies, MDPI, vol. 15(4), pages 1-27, February.
    3. Comello, Stephen & Glenk, Gunther & Reichelstein, Stefan, 2021. "Transitioning to clean energy transportation services: Life-cycle cost analysis for vehicle fleets," Applied Energy, Elsevier, vol. 285(C).
    4. Gunther Glenk & Stefan Reichelstein, 2022. "Reversible Power-to-Gas systems for energy conversion and storage," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    5. Comello, Stephen & Glenk, Gunther & Reichelstein, Stefan, 2020. "Cost-efficient transition to clean energy transportation services," ZEW Discussion Papers 20-054, ZEW - Leibniz Centre for European Economic Research.
    6. Schlund, David & Theile, Philipp, 2021. "Simultaneity of green energy and hydrogen production: Analysing the dispatch of a grid-connected electrolyser," EWI Working Papers 2021-10, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    7. Sgarbossa, Fabio & Arena, Simone & Tang, Ou & Peron, Mirco, 2023. "Renewable hydrogen supply chains: A planning matrix and an agenda for future research," International Journal of Production Economics, Elsevier, vol. 255(C).
    8. Glenk, Gunther & Meier, Rebecca & Reichelstein, Stefan, 2021. "Cost dynamics of clean energy technologies," ZEW Discussion Papers 21-054, ZEW - Leibniz Centre for European Economic Research.
    9. Schlund, David & Theile, Philipp, 2022. "Simultaneity of green energy and hydrogen production: Analysing the dispatch of a grid-connected electrolyser," Energy Policy, Elsevier, vol. 166(C).

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