Energy & Environmental Science, Volume 16, pp. 6058-6070, 2023
with Philip Holler and Stefan Reichelstein

Widespread adoption of hydrogen as an energy carrier is widely believed to require continued advances in Power-to-Gas (PtG) technologies. Here we provide a comprehensive assessment of the dynamics of system prices and conversion efficiency for three currently prevalent PtG technologies: alkaline, polymer electrolyte membrane, and solid oxide cell electrolysis. We analyze global data points for system prices, energy consumption, and the cumulative installed capacity for each technology. Our regression results establish that, over the past two decades, every doubling of cumulative installed capacity resulted in system prices coming down by 14-17%, while the energy required for electrolysis was reduced by 2%. On the basis of multiple forecasts of future deployment growth, as well as policy and industry targets, our calculations project that all three technologies will become substantially cheaper and more energy-efficient in the coming decade. Specifically, the life-cycle cost of electrolytic hydrogen production is projected to fall in the range of $1.6-1.9/kg by 2030, thereby approaching but not reaching the $1.0/kg cost target set by the U.S. Department of Energy.

Nature Communications, Volume 13, pp. 1-10, 2022
with Stefan Reichelstein

In the transition to decarbonized energy systems, Power-to-Gas (PtG) processes have the potential to connect the existing markets for electricity and hydrogen. Specifically, reversible PtG systems can convert electricity to hydrogen at times of ample power supply, yet they can also operate in the reverse direction to deliver electricity during times when power is relatively scarce. Here we develop a model for determining when reversible PtG systems are economically viable. We apply the model to the current market environment in both Germany and Texas and find that the reversibility feature of unitized regenerative fuel cells (solid oxide) makes them already cost-competitive at current hydrogen prices, provided the fluctuations in electricity prices are as pronounced as currently observed in Texas. We further project that, due to their inherent flexibility, reversible PtG systems would remain economically viable at substantially lower hydrogen prices in the future, provided recent technological trends continue over the coming decade.

Renewable and Sustainable Energy Reviews, Volume 168, 112758, 2022
with Stefan Reichelstein

Competing power generation sources have experienced considerable shifts in both their revenue potential and their costs in recent years. Here we introduce the concept of Levelized Profit Margins (LPM) to capture the changing unit economics of both intermittent and dispatchable generation technologies. We apply this framework in the context of the California and Texas wholesale power markets. Our LPM estimates indicate that solar photovoltaic and wind power have both substantially improved their competitive position during the years 2012–2019, primarily due to falling life-cycle costs of production. In California, these gains far outweigh an emerging “cannibalization” effect that results from substantial additions of solar power having made energy less valuable in the middle of the day. As such, intermittent renewables in both states have been approaching or exceeding the break-even value of zero for the estimated LPMs. We also find the competitiveness of natural gas power plants to have either improved in Texas or held steady at negative LPMs in California. For these plants, declining capacity utilization rates have effectively been counterbalanced by a “dispatchability price premium” that reflects the growing market share of intermittent renewables.

Schmalenbach Journal of Business Research, Volume 73, pp. 179-206, 2021
with Rebecca Meier and Stefan Reichelstein (solicited)

The pace of the global decarbonization process is widely believed to hinge on the rate of cost improvements for clean energy technologies, in particular renewable power and energy storage. This paper adopts the classical learning-by-doing framework of Wright (1936), which predicts that cost will fall as a function of the cumulative volume of past deployments. We first examine the learning curves for solar photovoltaic modules, wind turbines and electrolyzers. These estimates then become the basis for estimating the dynamics of the life-cycle cost of generating the corresponding clean energy, i.e., electricity from solar and wind power as well as hydrogen. Our calculations point to significant and sustained learning curves, which, in some contexts, predict a much more rapid cost decline than suggested by the traditional 80% learning curve. Finally, we argue that the observed learning curves for individual clean energy technologies reinforce each other in advancing the transition to a decarbonized energy economy.

Applied Energy, Volume 285, 116408, 2021
with Stephen Comello and Stefan Reichelstein

Comprehensive global decarbonization requires that transportation services cease to rely on fossil fuels for power generation. This paper develops a generic, time-driven life-cycle cost model for mobility services to address two closely related questions central to the emergence of clean energy transportation services: (i) the utilization rates (hours of operation) that determine how alternative drivetrains rank in terms of their cost, and (ii) the cost-efficient share of clean energy drivetrains in a vehicle fleet composed of competing drivetrains. The model compares alternative drivetrains with different environmental and economic characteristics in terms of their life-cycle cost for any given duty cycle. The critical utilization rate that equates any two drivetrains in terms of their life-cycle cost is shown to also provide the optimization criterion for the efficient mix of vehicles in a fleet. This model framework is then calibrated in the context of urban transit buses, on the basis of actual cost- and operational data for an entire bus fleet. In particular, our analysis highlights how the economic comparison between diesel and battery-electric transit buses depends on the specifics of the duty cycle (route) to be served. While electric buses entail substantially higher upfront acquisition costs, the results show that they obtain lower life-cycle costs once utilization rates exceed only 20% of the annual hours, even for less favorable duty cycles. At the same time, the current economics of the service profile examined in our study still calls for the overall fleet to have a one-third share of diesel drivetrains.

Production and Operations Management, Volume 29(3), pp. 526-546, 2020
with Stefan Reichelstein

In vertically integrated energy systems, integration frequently entails operational gains that must be traded off against the requisite cost of capacity investments. In the context of the model analyzed in this study, the operational gains are subject to inherent volatility in both the price and the output of the intermediate product transferred within the vertically integrated structure. Our model framework provides necessary and sufficient conditions for the value (NPV) of an integrated system to exceed the sum of two optimized subsystems on their own. We then calibrate the model in Germany and Texas for systems that combine wind energy with Power-to-Gas (PtG) facilities that produce hydrogen. Depending on the prices for hydrogen in different market segments, we find that a synergistic investment value emerges in some settings. In the context of Texas, for instance, neither electricity generation from wind power nor hydrogen production from PtG is profitable on its own in the current market environment. Yet, provided both subsystems are sized optimally in relative terms, the attendant operational gains from vertical integration more than compensate for the stand-alone losses of the two subsystems.

Nature Energy, Volume 4, pp. 216-222, 2019
with Stefan Reichelstein

The recent sharp decline in the cost of renewable energy suggests that the production of hydrogen from renewable power through a power-to-gas process might become more economical. Here we examine this alternative from the perspective of an investor who considers a hybrid energy system that combines renewable power with an efficiently sized power-to-gas facility. The available capacity can be optimized in real time to take advantage of fluctuations in electricity prices and intermittent renewable power generation. We apply our model to the current environment in both Germany and Texas and find that renewable hydrogen is already cost competitive in niche applications (€3.23/kg), although not yet for industrial-scale supply. This conclusion, however, is projected to change within a decade (€2.50/kg) provided recent market trends continue in the coming years.

Working Paper, 2023
with Rebecca Meier, Anton Kelnhofer, and Stefan Reichelstein

Accounting for nearly 8% of global annual carbon dioxide (CO2) emissions, the cement industry is considered difficult to decarbonize. While a sizeable number of abatement levers for Portland cement production is becoming technologically ready for deployment, many are still viewed as prohibitively expensive. Here we develop a generic abatement cost framework for identifying cost-efficient pathways toward substantial emission reductions. We calibrate our model with new industry data in the context of European cement plants that must obtain emission permits under the European Emissions Trading System. We find that a price of €81 per ton of CO2, as observed on average in 2022, incentivizes firms to reduce their annual direct emissions by about one-third relative to the status quo. Yet, these incentives increase sharply at a carbon price of €126 per ton. If cement producers were to expect such carbon price levels to persist in the future, they would have incentives to reduce emissions by almost 80% relative to current emission levels.

Working Paper, 2023

Companies are increasingly viewed as crucial drivers for timely decarbonization. Current accounting practices for greenhouse gas (GHG) emissions, however, often leave corporate carbon disclosures and abatement obscured. Here I introduce a taxonomy for assuring the quality of corporate carbon information. Analog to financial accounting standards, information on a firm's GHG emissions is to be decision-useful to stakeholders. That is, it is relevant and faithfully represents the actual changes in atmospheric GHGs associated with a firm's economic activity. Applying the taxonomy, I show that information prepared under the widely used Greenhouse Gas Protocol generally fails to represent a firm's GHG emissions faithfully. Yet, if firms complying with the GHG Protocol adopted the taxonomy, they could directly improve their disclosures by faithfully representing some of their emissions. My findings highlight the need to revise the GHG Protocol, as well as recently proposed carbon disclosure mandates that seek to produce decision-useful information but have also adopted the GHG Protocol.

Working Paper, 2023

Companies around the world are pledging to significantly reduce their carbon emissions. But current accounting practices often result in disclosures that obscure actual emissions and reduction efforts. This paper builds on financial accounting standards to propose a framework that enables companies to faithfully represent their emissions. Each company adhering to the framework would thus provide a verifiable, neutral, and complete depiction of the actual changes in atmospheric greenhouse gases embodied in its economic activity during a reporting period. Performance measures defined in the framework will allow managers, analysts, and the general public to assess a company's progress on its decarbonization path over time. Recently announced mandates for corporate carbon disclosure seek to ensure that companies faithfully represent their emissions but have also adopted most of the current accounting practices. This paper shows how these mandates could be expanded to ensure that compliant companies would indeed faithfully represent their emissions.