The Value of Product Flexibility in Nuclear Hydrogen Technologies

Economic studies of nuclear hydrogen technologies tend to focus on levelized hydrogen costs without accounting for risks and uncertainties faced by potential investors. To address some of these risks and uncertainties, we develop a financial model based on real options theory to assess the profitability of three nuclear hydrogen production technologies in evolving electricity and hydrogen markets. The model uses Monte-Carlo simulations to represent uncertainty in future hydrogen and electricity prices. It computes both the expected value and the distribution of discounted profits from a production plant. It also quantifies the value of the option to switch between hydrogen and electricity production, depending on what is more profitable to sell. Under these assumptions, we conclude that investors will find significant value in the flexibility to switch plant output between electricity and hydrogen.