ECONOMICS OF GLOBAL GAS-TO-LIQUIDS (GTL) FUELS TRADING BASED ON HYBRID PV-WIND POWER PLANTS

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2 ECONOMICS OF GLOBAL GAS-TO-LIQUIDS (GTL) FUELS TRADING BASED ON HYBRID PV-WIND POWER PLANTS Mahdi Fasihi, Dmitrii Bogdanov and Christian Breyer Neo-Carbon Energy 5 th Researchers Seminar February 15-16, 2016

3 Agenda Motivation Methodology and Data Results Summary 3

4 Motivation Fossil fuels increasing demand diminishing resources emissions RE available, but energy system transformation is challenging fluctuating RE and energy storage 100% electrification impossible for mobility sector Power-to-Gas & Gas-to-Liquids are technologies introduced to markets RE-diesel a non-diminishing resource costs stable or declining no costs for harmful emissions (CO2, etc.) available infrastructure energy storage a step towards fuel security Cost competitive in 2030? Usage almost impossible aviation shipping Usage necessary electric lighting UBA Mahdi Fasihi mahdi.fasihi@lut.fi

5 Agenda Motivation Methodology and Data Results Summary 5

6 Methodology RE-PtG-GtL Value Chain Key insights: substitution of the fossil hydrocarbon value chain by a RE basis utilization of downstream fossil infrastructure integrated heating system water recycling Hybrid PV-Wind & Battery Power-to-Gas Gas-to-Liquids Shipping 6

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

8 Data Plants Location (case study) 1) Patagonia, Argentina: Hybrid PV-Wind Power Plant PtG Plant GtL Plant 2) Rotterdam, the Netherlands: Marine distance Patagonia Rotterdam: 13,500 km 8

9 Data Hybrid PV-Wind Power Plant Key Specification (Annual Basis Model) PV single-axis tracking Plants Wind Plant Hybrid PV-Wind Plant Irradiation: 2410 kwh/(m 2 a) Performance Ratio: 0.83 FLh: 2000 h Lifetime: 35 y Capex: 550 /kw Opex: 1.5% of capex p.a. Installed capacity: 5 GWp LCOE: 25.4 /MWh FLh: 5200 h Lifetime: 25 y Capex: 1000 /kw Opex: 2% of capex p.a. Installed capacity: 5 GWp LCOE: 20.3 /MWh Battery 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 p.a. Cycle efficiency: 90% 9

10 Data Power-to-Gas Key Specification Electrolysis & Methanation 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 p.a. Overall eff.: 67.2% (HHV) CO 2 Capture Plant 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 p.a. RO Seawater Desalination Lifetime: 30 y Electricity demand: 3 kwh/m 3 Water eff.: 45% Capex: 2.23 /(m 3 a) Opex: 1.5% of capex p.a. Water Storage Lifetime: 30 y Capex: /(m 3 a) Opex: 1.5% of capex p.a. * Alkaline Electrolyzer ** Heat photo: 10

11 Data Gas-to-Liquids: Key Specification Syngas production CPO: 2n CH 4 + n O 2 2n CO + 4n H 2 Side reaction: CH O 2 CO H 2 O Carbon efficiency: 94% (Shell technology) No gas treating (halved opex) No ASU (up to 8% lower in capital cost) Fischer-Tropsch Synthesis FTS: n CO + 2n H 2 (-CH 2 -) n + n H 2 O Side reaction: CO + H 2 O CO 2 + H 2 Heat loss: 22% of inlet SNG Products upgrading (-CH 2 -) n + H 2 C n H 2n+2 1 barrel of GtL products (vol%) Naphtha; 15% Jet fuel/kerosene; 25% Diesel; 60% GtL overall Capex: 68 k /bbl Opex: 3.5% of capex p.a. Efficiency: 65% Lifetime: 30 y Shipping Marine distance: 13,500 km Ship DW: 100,000 ton Speed: 14 knots 11

12 Agenda Motivation Methodology and Data Results Summary 12

13 Reminder! RE-PtG-GtL Value Chain How would the energy and mass balance of this system be? 13

14 Results RE-PtG-LNG Value Chain Energy & Mass Balance (Sankey Diagram) Heat exchanger eff.: 90% PtG eff.: 65.4% GtL eff.: 65% Heat loss: 14% *LT: low temperature **HT: high temperature Electrolyzer, the main electricity consumer Oxygen available for GtL plant and potential market Overall efficiency: 42.5% System integration benefits: 100% of oxygen demand supplied by electrolyzer (elimination of Air Separation Unit) 87% of energy demand for CO2 capture plant supplied by excess heat 70% of electrolyzer s water demand supplied by methanation and FT process output 14 Mahdi Fasihi mahdi.fasihi@lut.fi

15 Results Cost Distribution in RE-PtG-GtL Value Chain LCOG (7% WACC): LCOG (5% WACC): LCOF (7% WACC): LCOF (5% WACC): USD/ = /MWh th 20.9 USD/MMBtu 45.5 /MWh th 17.8 USD/MMBtu 100 /MWh th 39.1 USD/MMBtu 85.9 /MWh th 33.6 USD/MMBtu 121 USD/bbl 103 USD/bbl 227 USD/bbl 195 USD/bbl 0.97 /l FT-diesel 0.83 /l FT-diesel 15

16 Results Capital expenditures for the RE-SNG-LNG value chain main capex parts are the hybrid PV-Wind, PtG and the GtL plant capex of 13.3 bn, generate annually 9.6 million barrel GtL products available in EU PtG and GtL stand for only 18 and 14% of capital expenditures, but 30.4 and 45.6% of final production cost, respectively. 16

17 Results Final Cost and Market Potential RE-diesel cost and conventional diesel price in the European Union Conventional diesel price (no CO2 emission cost) Conventional diesel price (+ 25 /t CO2 emission cost) Conventional diesel price (+ 50 /t CO2 emission cost) Cost [ /MWhth] RE-diesel cost (7% WACC + no O2 benefit) RE-diesel cost (7% WACC + 15 /t O2 benefit) RE-diesel cost (7% WACC + 30 /t O2 benefit) RE-diesel cost (5% WACC + no O2 benefit) RE-diesel cost (5% WACC + 15 /t O2 benefit) RE-diesel cost (5% WACC + 30 /t O2 benefit) Crude oil price [USD/bbl] The first breakeven can be expected for a produced RE-diesel with a WACC of 5% and an O 2 benefit of 30 /t CO2 and a conventional diesel price with CO 2 emission cost of 50 /t CO2 and a crude oil price of 121 USD/bbl. A realistic breakeven is expected for the crude oil prices between USD/bbl. CO 2 emission cost: Diesel CO 2 emission: 74 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: 30 /t O2 Diesel cost in EU: 119% of Brent crude oil price 17

18 Results Sensitivity Analysis Geographical changes Economic changes Relative cost of RE-diesel (%) hyb PV-Wind FLh overlap Change in input Relative cost of RE-diesel (%) hyb PV-Wind capex elect.+methan capex CO2 capex GTL capex WACC Lifetime Change in input Relative cost of RE-diesel (%) Plants' energy efficiency GtL eff. electrolyzer eff Change in input The four most relevant RE-diesel LCOF influencing factors are: Hybrid PV-Wind FLh Electrolyzer efficiency WACC Hybrid PV-Wind capex The RE-PtG-GtL value chain needs to be located at the best complementary solar and wind sites in the world, combined with a de-risking strategy and a special focus on mid to long term electrolyzer efficiency improvements. 18

19 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 19

20 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 clean water and low overlap 20

21 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 21

22 Results Hourly Basis Analysis: RE-SNG 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% 22

23 Results Hourly Basis Analysis: RE-PtG-GtL industrial cost curves about 1,000 TWh fuel potential for cost less than 120 /MWh fuel (47 USD/MMBtu, or 1.16 /l of diesel) potential of 10,000 TWh fuel for cost less then 170 /MWh fuel (66.5 USD/MMBtu, or 1.64 /l of diesel) RE-fuels production cost between /MWh fuel RE-fuels may set an upper limit for fossil fuel prices WACC 7% 23 Potential of 6,000 TWh diesel (diesel represents 60% of GtL products), equal to of global diesel demand in 2030

24 Agenda Motivation Methodology and Data Results Summary 24

25 Summary The idea is to use hybrid PV-Wind power plants power to produce RE-SNG and then RE-diesel. Refinery products downstream value chain can be used. RE-diesel is a non-diminishing fossil CO 2 environmental issues. free fuel, which will insure both fuel security and The cost of delivered RE-diesel in Rotterdam is equivalent to 121 to 191 USD/bbl ( USD/MMBtu, /l conv. diesel, depending on assumptions for WACC, CO 2 cost and O 2 benefit. For a Brent crude oil price more than 121 USD/bbl and CO 2 emission cost of 50 /t CO2,andO 2 benefit of 30 /t O2 RE-diesel is competitive to fossil diesel price in EU. This would be an upper limit for the fossil diesel price in the long-term. The by-products of the RE-PtG-GtL value chain can play a significant role in some regional cases Excess heat utilization can significantly increase the overall efficiency and would decrease the costs Substitution of fossil fuels by hybrid PV-Wind power plants could create a PV-wind market potential in the order of terawatts. Thank you for your attention! 25

26 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.

27 Supplementary material 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 ] 1.96 CO 2 production & consumption [mio ton] 3.98 SNG production & consumption [GWh,gas] SNG production & consumption [mio m 3 ] SNG production & consumption [mio ton] 1.45 O 2 production [mio ton] 5.79 O 2 consumption [mio ton] 1.45 Diesel production [bbl] Jet fuel/ Kerosene production [bbl] Naphtha production [bbl]

28 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 28

29 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 29