Polygeneration energy systems (PES) have the potential to provide a flexible, high-efficiency, and low-emissions alternative for power generation and chemical synthesis from fossil fuels. This study aims to assess the economic value of fossil-fuel PES which rely on hydrogen as an intermediate product. Our analysis focuses on a representative PES configuration that uses coal as the primary energy input and produces electricity and fertilizer as end-products. We derive a series of propositions that assess the cost competitiveness of the modeled PES under both static and flexible operation modes. The result is a set of metrics that quantify the levelized cost of hydrogen, the unit profit-margin of PES, and the real-option values of ‘diversification’ and ‘flexibility’ embedded in PES. These metrics are subsequently applied to assess the economics of Hydrogen Energy California (HECA), a PES currently under development in California. Under our technical and economic assumptions, HECA’s levelized cost of hydrogen is estimated at 1.373 $/kgh. The profitability of HECA as a static PES increases in the share of hydrogen converted to fertilizer rather than electricity. However, when configured as a flexible PES, HECA almost breaks even on a pre-tax basis. Diversification and flexibility are valuable for HECA when polygeneration is compared to static monogeneration of electricity, but these two real options have no value when comparing polygeneration to static monogeneration of fertilizers.