Gunther Glenk

Risks and Opportunities of Corporate Decarbonization

With the effects of climate change becoming more tangible, the world's economies have intensified their efforts for a transition away from fossil fuels. It remains an open question, however, whether greenhouse gas emissions will be curtailed sufficiently fast to avert a climate disaster. Professor Glenk studies the cost and speed of corporate decarbonization. Topics include the accounting and economics of corporate emissions, cost-efficient decarbonization pathways, and incentives for accelerated climate action. Recent projects cover carbon-intensive sectors of the economy, including power generation, mobility, and industrial manufacturing.

Journal Publications

Advances in Power-to-Gas Technologies: Cost and Conversion Efficiency

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.

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Reversible Power-to-Gas Systems for Energy Conversion and Storage

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.

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The Economic Dynamics of Competing Power Generation Sources

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.

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Cost Dynamics of Clean Energy Technologies

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.

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Transitioning to Clean Energy Transportation Services:
Life-cycle Cost Analysis for Vehicle Fleets

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.

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Synergistic Value in Vertically Integrated Power-to-Gas Energy Systems

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.

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Economics of Converting Renewable Power to Hydrogen

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.

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Working Papers

Decision-Useful Carbon Information

Working Paper, 2024

Current carbon accounting practices often obscure firms' actual emissions and abatement progress. This paper builds on financial accounting standards to propose how to characterize the quality of reported emissions and how companies should account for their emissions to achieve a certain reporting quality. In particular, I first propose that the objective of corporate carbon reporting is to provide carbon information about the reporting firm that is useful to managers, investors, and other stakeholders in making decisions related to the firm. Carbon information qualifies as decision-useful if and only if it satisfies a comprehensive system of qualitative characteristics adapted from generally accepted financial accounting principles. I then develop procedures for accounting for corporate emissions and show that firms adhering to these procedures will produce outcome variables that are relevant and faithfully represent the actual emissions embodied in their economic activities. Overall, the paper shows how standard-setters could revise recent carbon disclosure regulations to improve the quality of reported emissions.

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Assessing the Costs of Industrial Decarbonization

Working Paper, 2024
with Rebecca Meier and Stefan Reichelstein

Companies in various industries are under growing pressure to assess the costs of decarbonizing their operations. This paper develops a generic abatement cost concept to identify the cost-efficient combination of technological and operational changes firms would need to implement to drastically reduce greenhouse gas emissions from current production processes. The abatement cost curves resulting from our framework further serve as a decision tool for managers to determine the optimal abatement levels in the presence of environmental regulations, such as carbon pricing. We calibrate our model in the context of European cement producers that must obtain emission permits under the European Emission Trading System (EU ETS). We find that a price of €85 per ton of carbon dioxide (CO2), as observed on average in 2023 under the EU ETS, incentivizes firms to reduce their annual direct emissions by about one-third relative to the status quo. Yet, this willingness to abate emissions increases sharply if carbon prices were to rise above the €100 per ton of CO2 benchmark.

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Risks and Opportunities of Corporate Decarbonization

Journal Publications

Advances in Power-to-Gas Technologies: Cost and Conversion Efficiency

Reversible Power-to-Gas Systems for Energy Conversion and Storage

The Economic Dynamics of Competing Power Generation Sources

Cost Dynamics of Clean Energy Technologies

Transitioning to Clean Energy Transportation Services: Life-cycle Cost Analysis for Vehicle Fleets

Synergistic Value in Vertically Integrated Power-to-Gas Energy Systems

Economics of Converting Renewable Power to Hydrogen

Working Papers

Decision-Useful Carbon Information

Assessing the Costs of Industrial Decarbonization

Transitioning to Clean Energy Transportation Services:
Life-cycle Cost Analysis for Vehicle Fleets