Power-to-gas for the mobility sector

Power-to-gas (P2G) is a technology that converts electrical power to gas fuels like methane, which can be stored and distributed via the natural gas grid. However, at present time the technology suffers from high specific investment costs, low efficiency and grid fees that must be paid if electricity is obtained from the power grid. We use a real options approach to assess the profitability of different operational concepts. As P2G facilities are flexible consumers, they can benefit from short-term price fluctuations on the electricity spot market. In order to estimate the value of this flexibility, we use a regress-later Monte Carlo approach to determine the optimal dispatch taking into account various operational constraints. This allows evaluating the future revenues for simulated scenarios of power and gas prices. Then the real options approach determines the project value and the optimal timing of the project start, given the uncertainties in future energy prices, exchange rates and investment costs.