Real Options Conference 2024

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Optimal Timing and Scale of Investment In Hydrogen Infrastructure: Is The Hydrogen Fuel Cell Truck A Better Option?

The transformation of current production and consumption patterns and energy supply to reduce greenhouse gas (GHG) emissions are priority sectors. In particular, the production of electricity can be decarbonized by using energy sources with low or no GHG emissions. Cleaner mobility by 2050 based on hydrogen technology takes on its full strategic value when political decision-makers and consumers anticipate a reversal in the evolution of the various parameters, upsetting the pre-established order in terms of economic performance. To describe this phenomenon, it is necessary to obtain information on the evolution of the prices of electricity, hydrogen, fuels used and long-term demand. Therefore, a more comprehensive analytical framework should simultaneously incorporate the short-term uncertainties associated with the operation of hydrogen and fuel cell technology, storage and the necessary infrastructure, and the associated long-term uncertainties such as market developments, investment in low-carbon assets and financing costs. In our paper, we use a real options approach and we assess the regulatory uncertainty in terms of subsidy and the speed of adoption of fuel cell trucks in France. With a continuous-time model and dynamic programming method we determine the optimal timing and scale of investments in hydrogen infrastructure, influenced by dynamic subsidy policies and adoption rates of fuel cell hydrogen trucks.

Oana Ionescu
Grenoble INP/GAEL

Alain Kibangou
UGA/Gipsa Lab


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