Economic Analysis of Sector Coupling Business Models: Application on Green Hydrogen Use Cases

Sector coupling will play a key role in the future energy system to realise greenhouse gas emission reductions. A major factor will be green hydrogen based on renewable energies to defossilise consumption sectors. Related business models of power to gas are not yet implemented on the market. However, given the urgency of the change, this is essential.

This paper investigates hydrogen business models under current market conditions of high power prices, no existing market for green hydrogen and the given regulatory framework with no levies for green hydrogen production in the German market. For this purpose, an open-source business model evaluation tool for sector coupling, which enables a simple and generic evaluation of sector coupling business models including production and possible transportation infrastructure, is developed and applied. Furthermore, the impact of changes of the input parameters like power prices and the influence of regulatory changes on profitability are assessed.

The results show that X-to-power business cases can be already profitable due to high power prices on the wholesale market. However, power-to-X business models like hydrogen production still have negative net present values and the net present value is worsened when infrastructure for hydrogen transportation is considered. Key parameters for the negative result are investment costs and low hydrogen prices. Nevertheless, it must be considered that higher hydrogen prices have a negative impact on the X-to-power business model. To allow for profitable business cases, the market conditions need to be adjusted to ensure sufficiently high prices for green hydrogen. Furthermore, subsidies on investment or operational and maintenance costs can support the integration of power-to-X into the market. Transportation infrastructure has a significant impact on profitability. Given these facts, it is necessary to create the required framework conditions to ensure the realisation of sector coupling.