Business models for power-to-gas: A real-options approach

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. On the other hand, P2G facilities are flexible consumers that may provide ancillary services or benefit from price fluctuations on the electricity spot market. We use a real options approach to assess the profitability of different operational concepts, given the uncertainties in future energy prices, exchange rates and investment costs.