Modelling of a power-to-gas system to predict the levelised cost of energy of an advanced renewable gaseous transport fuel

Power to gas (P2G) has been mooted as a means of producing advanced renewable gaseous transport fuel, whilst providing ancillary services to the electricity grid through decentralised small scale (10 MW) energy storage. This study uses a discounted cash flow model to determine the levelised cost of energy (LCOE) of the gaseous fuel from non-biological origin in the form of renewable methane for various cost scenarios in 2020, 2030, and 2040. The composition and sensitivity of these costs are investigated as well as the effects of incentives and supplementary incomes. The LCOE was found to be €107-143/MWh (base value €124) in 2020, €89-121/MWh (base value €105) in 2030, and €81-103/MWh (base value €93) in 2040. The costs were found to be dominated by electricity charges in all scenarios (56%), with the total capital expenditure the next largest contributor (33%). Electricity costs and capacity factor were the most sensitive parameters followed by total capital expenditure, project discount rate, and fixed operation and maintenance. For the 2020 base scenario should electricity be available at zero cost the LCOE would fall from €124/MWh to €55/MWh. Valorisation of the produced oxygen (€0.1/Nm3 profit) would generate an LCOE of €105/MWh. A payment for ancillary services to the electricity grid of €15/MWe for 8500 h p.a would lower the LCOE to €87/MWh. Price parity with diesel, exclusive of sales tax, is achieved with an incentive of €19/MWh.