infonet-economy

Power-to-gas (P2G) is a technology that converts electrical power to gas fuels like methane for storage in the natural gas grid. Due to the low efficiency, the production of synthetic methane is only profitable if electricity is sufficiently cheap. However, P2G facilities are flexible consumers and can benefit from short-term price fluctuations on the electricity spot market. We use a real option approach to assess the profitability of an investment in a P2G facility, taking into account the uncertainty of power prices, gas prices and future investment costs.