Hydrogen production based on wind power can already be commercially viable today. Until now, it was generally assumed that this environmentally friendly power-to-gas technology could not be implemented profitably. Economists at the Technical University of Munich (TUM), the University of Mannheim and Stanford University have now described, based on the market situations in Germany and Texas, how flexible production facilities could make this technology a key component in the transition of the energy system.
From fertilizer production, as a coolant for power stations or in fuel cells for cars: Hydrogen is a highly versatile gas. Today, most hydrogen for industrial applications is produced using fossil fuels, above all with natural gas and coal. In an environmentally friendly energy system, however, hydrogen could play a different role: as an important storage medium and a means of balancing power distribution networks: excess wind and solar energy can be used to produce hydrogen through water electrolysis. This process is known as power-to-gas. The hydrogen can recover the energy later, for example by generating power and heat in fuel cells, blending hydrogen into the natural gas pipeline network or converted into synthesis gas.
"Should I sell the energy or convert it?"
However, power-to-gas technology has always been seen as non-competitive. Gunther Glenk of the Chair of Management Accounting at TUM and Prof. Stefan Reichelstein, a researcher at the University of Mannheim and Stanford University, have now completed an analysis demonstrating the feasibility of zero-emission and profitable hydrogen production. Their study, published in the renowned journal Nature Energy, shows that one factor is essential in the current market environments in Germany and Texas:
The concept requires facilities that can be used both to feed power into the grid and to produce hydrogen. These combined systems, which are not yet in common use, must respond optimally to the wide fluctuations in wind power output and prices in power markets. "The operator can decide at any time: should I sell the energy or convert it," explains Stefan Reichelstein.
Production in some industries would already be profitable
In Germany and Texas, up to certain production output levels, such facilities could already produce hydrogen at costs competitive with facilities using fossil fuels. In Germany, however, the price granted by the government would have to be paid for the generation of electric power instead for feeding it into the grid.
"For medium and small-scale production, these facilities would already be profitable now," says Reichelstein. Production on that scale is appropriate for the metal and electronics industries, for example – or for powering a fleet of forklift trucks on a factory site. The economists predict that the process will also be competitive in large-scale production by 2030, for example for refineries, ammonia production, assuming that wind power and electrolyte costs maintain the downward trajectory seen in recent years. “The use in fuel cells for trucks and ships is also conceivable”, says Glenk.
Energy sources for intelligent infrastructure
The economists' model offers a planning blueprint for industry and energy policy. It can take into account many other factors, such as charges for carbon emissions, and calculate optimal sizing of the two sub-systems. It is also applicable to other countries and regions.
"Power-to-gas offers new business models for companies in various industries," says Glenk. "Power utilities can become hydrogen suppliers for industry. Manufacturers, meanwhile, can get involved in the decentralized power generation business with their own combined facilities. In that way, we can develop a climate-friendly and intelligent infrastructure that optimally links power generation, production and transport."
G. Glenk, S. Reichelstein: Economics of converting renewable power to hydrogen. Nature Energy, 2019. DOI: 10.1038/s41560-019-0326-1
Gunther Glenk conducts research at the Center for Energy Markets of the TUM School of Management. The study was supported by the Hanns-Seidel-Stiftung with funding from the Federal Ministry of Education and Research.