ECONOMICS OF GLOBAL LNG TRADING BASED ON HYBRID PV-WIND POWER PLANTS

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2 ECONOMICS OF GLOBAL LNG TRADING BASED ON HYBRID PV-WIND POWER PLANTS Mahdi Fasihi, Dmitrii Bogdanov and Christian Breyer Neo-Carbon Energy 4 th Researchers Seminar October 19-20, 2015

3 Agenda Motivation Methodology and Data Results Further Study Summary 3

4 Motivation Power-to-Gas, a mature technology Large and growing LNG markets Limited areas with good enough FLh RE-LNG a non-diminishing resource costs stable or declining No costs for harmful emissions (CO 2, etc.) LNG infrastructure available a step toward fuel security Cost competitive in 2030? Natural Gas proved reserves 2013 * 4 source: BP2015_Energy security and Europe *source: BP Statistical Review June 2014

5 Agenda Motivation Methodology and Data Results Further Study Summary 5

6 Methodology RE-PtG-LNG Value Chain Hybrid PV-Wind & Battery Power-to-Gas SNG Liquefaction LNG Shipping LNG Regasification Key insights: Substitution of the fossil hydrocarbon value chain by a RE basis Utilization of downstream fossil infrastructure Integrated heating system Water recycling 6

7 Methodology Two Approaches Annual Basis Model Hybrid PV-Wind Plants with fixed capacity (5 GW each) Annual output SNG as a function of inputs power (installed capacities and FLh) Only PV 1-axis tracking and Wind are installed Hourly basis Model Optimized configuration of PV 1-axis tracking, Wind and Battery based on an hourly potential in limited area for fixed annual SNG production (10 GWh) for least cost constraint Inputs (installed PV, Wind and battery capacity) as a function of FLh and annual output with least cost 7

8 Data Plants Location 1) Patagonia, Argentina: Hybrid PV-Wind Power Plant PtG Plant Liquefaction Plant 2) Japan: Regasification Plant Marine distance Patagonia Japan: 17,500 km 8

9 Data Hybrid PV-Wind Power Plant Key Specification (Annual Basis Model) PV 1-axis tracking Plants Irradiation: 2410 kwh/(m 2 a) Performance Ratio: 0.83 FLh: 2000 h Lifetime: 35 y Capex: 550 /kw Opex: 1.5% of capex per annum Installed capacity: 5 GWp LCOE: 25.4 /MWh Wind Plant FLh: 5200 h Lifetime: 25 y Capex: 1000 /kw Opex: 2% of capex per annum Installed capacity: 5 GWp LCOE: 20.3 /MWh Battery Hybrid PV-Wind Plant PV & Wind overlap: 5% FLh: 6840 h Installed capacity: 5 GWp Capex: 7.8 bn LCOE net : 22.9 /MWh Lifetime: 15 y Capex: 150 /kwh el Opex: 6% of capex per annum Cycle efficiency: 90% 9

10 Data Power-to-Gas Key Specification Electrolysis & Methanation CO 2 Capture Plant RO Seawater Desalination AE* PtH 2 eff. : 86.3% (HHV) AE PtQ** eff.: 8% Methan. H 2 tsng eff.: 77.9% Methan. H 2 tq eff.: 14% Lifetime: 30 y Capex: 500 /kw el Opex: 3% of capex per annum Overall eff.: 67.2% (HHV) Lifetime: 30 y Electricity dem.: 225 kwh el /t CO2 Heat demand: 1500 kwh th /t CO2 Capex: 228 /(t CO2 a) Opex: 4% of capex per annum Lifetime: 30 y Electricity demand: 3 kwh/m 3 Water eff.: 45% Capex 2.23 /(m 3 a) Opex: 1.5% of capex per annum Water Storage Lifetime: 30 y Capex: /(m 3 a) Opex: 1.5% of capex per annum 10 photo: * Alkaline Electrolyzer ** Heat

11 Data LNG Value Chain Liquefaction Cooling SNG to -162 ºC 600 times decreases in volume SNG vs. NG No gas treating Up to 12% lower in cost Up to 20% higher efficiency LNG shipping Marine distance: 17,500 km Capacity: 138,000 m 3 LNG Speed: 20 knots Time on sea, 1-way: 20 days Boil-off gas as marine fuel Regasification Heating LNG by sea water Cold energy Efficiency: 92% Lifetime: 25 y Capex: 0.2 m /(m 3 a) SNG Opex: 3.5% of capex per annum Boil-off gas: 0.1% /day Lifetime: 25 y Capex: 150 m /unit Opex: 3.5% of capex per annum Efficiency: 98.5% Lifetime: 30 y Capex: 0.07 m /(m 3 a) SNG Opex: 3.5% of capex per annum 11 photos: seaspout.wordpress.com

12 Agenda Motivation Methodology and Data Results Further Study Summary 12

13 Reminder! RE-PtG-LNG Value Chain Hybrid PV-Wind & Battery Power-to-Gas SNG Liquefaction LNG Shipping LNG Regasification How would the energy and mass balance of this system be? 13

14 Results RE-PtG-LNG Value Chain Energy & Mass Balance (Sankey Diagram) System integration benefits: 87% of energy needed for CO 2 capture plant is coming from excess heat 48% of electrolyzer s water demand coming out of methanation Heat exchanger eff.: 90% LNG value chain eff.: 89% Electrolyzer, the main electricity consumer Oxygen available for potential market Overall efficiency: 58% 14 *LT: low temperature **HT: high temperature

15 Results Cost Distribution in RE-LNG Value Chain 80 Costs in RE-LNG Value Chain (WACC 0.07) RE-SNG Cost Distribution [% share of total] Cost [ /MWhth] Water CO2 Energy Loss Plant Hyb. PV-Wind Elec.&Meth. Liquefaction Shipping ARG-JPN Regasification RE-SNG Japan Hyb. PV-Wind Liquefaction Regasification Elec.&Meth. Shipping ARG-JPN LCOG (7% WACC): 65.6 /MWh th 25.7 USD/MMBtu USD/bbl LCOG (5% WACC): 56.1 /MWh th 22 USD/MMBtu USD/bbl USD/ =

16 Results Capital expenditures for the RE-SNG-LNG value chain Capital Expenditures of Project (WACC 0.07) [bn ] Wind Farm PV Power Plant Desalination Plant CO2 Capture Plant Power-to-Gas Plant Liquefaction Plant LNG Carrier Regasification Plant Total main capex parts are the hybrid PV-Wind and the PtG plant capex of 12.4 bn, generate annually 1.9 bn m 3 SNG available in Japan PtG stands for only 30% of capital expenditures, but 46% of final production cost. 16

17 Results Final Cost and Market Potential Cost [USD/MMBtu] Regasified RE-LNG cost and NG price NG price (no CO2 emission cost) NG price (+ 25 /t CO2 emission cost) NG price (+ 50 /t CO2 emission cost) RE-SNG cost (7% WACC + no O2 benefit) RE-SNG cost (7% WACC + 10 /to2 benefit) RE-SNG cost (7% WACC + 20 /to2 benefit) RE-SNG cost (5% WACC + no O2 benefit) RE-SNG cost (5% WACC + 10 /to2 benefit) RE-SNG cost (5% WACC + 20 /to2 benefit) Crude oil price [USD/bbl] CO 2 emission cost: NG CO 2 emission: 56 t CO2 /TJ 0-50 /t CO USD/bbl O 2 profit: O 2 market price: up to 80 /t O2 Our most optimistic scenario: 20 /t O2 LNG price in Japan: 102.3% of OECD crude oil price. Regasification cost has been added The first breakeven can be expected for produced RE-SNG with a WACC of 5% and O 2 benefit of 20 /t CO2 and NG price with CO 2 emission cost of 50 /t CO2 and a crude oil price of 87 USD/bbl. A realistic breakeven can happen for the crude oil prices between USD/bbl. 17

18 Results Hourly Basis Analysis: full load hours Wind FLh are much higher than PV FLh due to 24h harvesting high FLh of hybrid PV-Wind plants result in cheaper downstream processes such as PtG sites of high hybrid PV-Wind FLh are distributed across the world 18

19 Results Hourly Basis Analysis: LCOE and LCOG Top sites in the world reach hybrid PV-Wind LCOE of /MWh Patagonia shows one of the best configurations in the world SNG cost, as a function of hybrid PV-Wind FLh, availability of clear water and low overlap 19

20 Results Hourly Basis Analysis: ratio of PV and Wind, excess generation (cost optimized) balance between Wind and PV in most regions PV is the dominating part in Atacama desert and West Tibet Wind is the dominating part in Patagonia very low excess in Patagonia higher excess in other areas can be reduced in a full energy system integration 20

21 Results Hourly Basis Analysis: generation potential hybrid system potential is the sum of wind and PV generation potential generation potential of about 120,000 TWh el indicates a high RE-SNG supply potential 21

22 Results Hourly Basis Analysis: optimized hybrid PV-Wind configuration least cost combination of PV and Wind for hybrid PV-Wind assumed maximum 10% of the land can be used for each PV and Wind Wind is the dominating part in most regions, as it reaches to the 10% limit faster cost optimized system generation potential is 25% of generation potential production sites in most cases near coast, thus optimized logistics global natural gas production in 2014 of 36,000 TWh,gas 22

23 Results Hourly Basis Analysis: industrial cost curves about 1,000 TWh gas potential for cost less than 65 /MWh gas (25.4 USD/MMBtu) potential of 16,000 TWh gas for cost less then 100 /MWh,gas (39 USD/MMBtu) thus, potential of 25,600 TWh el RE generation RE-SNG production cost between /MWh gas RE-SNG may set an upper limit for fossil fuel prices WACC 7% 23

24 Agenda Motivation Methodology and Data Results Further Study Summary 24

25 Further Study Gas to Liquids (GtL) GtL is a refinery process to convert natural gas or other gaseous hydrocarbons into longer-chain hydrocarbons. Benefits: Diverse products More compatible with current infrastructure Mature technology for all steps 25

26 Further Study Power to Liquids (PtL) The idea is to transform water and CO 2 directly to high-purity synthetic fuels (gasoline, diesel, kerosene) with the aid of renewable electricity in an integrated system. 26

27 Agenda Motivation Methodology and Data Results Further Study Summary 27

28 Summary The idea is to use hybrid PV-Wind power plants power to produce RE-SNG. LNG downstream value chain is needed for delivering RE-SNG to far-off regions. RE-SNG is a non-diminishing fossil CO 2 free fuel, which will insure both fuel security and environmental issues. The cost of delivered RE-SNG in Japan is equivalent to 87 to 145 USD/bbl (15 25 USD/MMBtu), depending on assumptions for WACC, CO 2 cost and O 2 benefit. For Brent crude oil price more than 87 USD/bbl and CO 2 emission cost of 50 /t CO2,andO 2 benefit of 20 /t O2 RE-SNG is competitive to fossil NG price in Japan. This would be an upper limit for the fossil LNG price in the long-term. Substitution of fossil fuels by hybrid PV-Wind power plants could create a PV-wind market potential in the order of 9.5 TWp. 28

29 Thank you for your attention! NEO-CARBON Energy project is one of the Tekes strategy research openings and the project is carried out in cooperation with Technical Research Centre of Finland VTT Ltd, Lappeenranta University of Technology (LUT) and University of Turku, Finland Futures Research Centre. Please check next slides for an overview of all data, assumptions and references.

30 Results Backup: Plants' Annual Production & Consumption Plants' Annual Production & Consumption Unit Amount hyb PV-Wind, generation [TWh,el] hyb PV-Wind, used [TWh,el] Clean water production [mio m 3 ] 3.50 CO 2 production & consumption [mio ton] 4 SNG production [GWh,gas] SNG production [mio m 3 ] SNG production [mio ton] 1.45 O 2 production [mio ton] 6.51 O 2 production [tpd] Liquefaction capacity [mio m 3 SNG] 2243 LNG production [mio m 3 ] 3.27 LNG production [mio ton] 1.53 Delivered SNG at destination [mio m 3 ]

31 References [1] Breyer Ch., Rieke S., Sterner M., Schmid J., Hybrid PV-Wind-Renewable Power Methane Plants An Economic Outlook, 6th IRES, Berlin, Nov [2] Lochner S. and Bothe D., The development of natural gas supply costs to Europe, the United States and Japan in a globalizing gas market Model-based analysis until 2030, Energy Policy, 37, [3] Castillo L., Dorao C.A., Influence of the plot area in an economical analysis for selecting small scale LNG technologies for remote gas production, Journal of Natural Gas Science and Engineering, 2, [4] Kotzot H., Durr Ch., Coyle D., Caswell, Ch LNG liquefaction not all plants are created equal, 15th International Conference & Exhibition on Liquefied Natural Gas (LNG 15), Barcelona, April [5] Breyer Ch., projections on current Tier1 PV industry cost, cost roadmaps and learning curve impact [6] Maxwell D. and Zhu Z., Natural gas prices, LNG transport costs, and the dynamics of LNG imports, Energy Economics, 33, [7] Bahadori A., Natural Gas Processing - Technology and Engineering Design, Gulf Professional Publishing, Oxford, pp [8] Khalilpour R. and Karimi I.A., Evaluation of utilization alternatives for stranded natural gas, Energy, 40, [9] Neto C. and Sauer I., LNG as a strategy to establish developing countries gas markets: The Brazilian case, Energy Policy, 34, [10] [11] Vanem E., Antãob P., Ivan Østvikc I., Comas F., Analysing the risk of LNG carrier operations, Reliability Engineering and System Safety, 93,