cutting costs with synthetic biofuels · 2019-09-24 · cutting costs with synthetic biofuels ......
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Cutting costs with synthetic biofuels –commercialization pathway to markets
Ilkka Hannula andEsa Kurkela24/09/2019 VTT – beyond the obvious
24/09/2019 VTT – beyond the obvious
Consumer demand for sustainabletransport is on the rise
24/09/2019 VTT – beyond the obvious
A ”portfolio” of decarbonization solutionsare under intense development
Cost of Li-ion battery packs in BEV in Nykvist and Nilsson (2015)
24/09/2019 VTT – beyond the obvious
Projects awarded funding between 2012 – 2014 by NER300Project name Member state Project Sponsor Fuel output Funding
kton/a ktoe/a MW M€ €/MWhAjos BTL Finland Forest BtL Oy 150 150 229 88 17GoBiGas, phase 2 Sweden Göterborg Energi 50 57 87 59 20UPM Stracel BTL France UPM Kymmene 105 105 160 170 37Bio2G Sweden E.ON 115 131 200 204 37Woodspirit The Netherlands MCN 225 102 156 199 -
Synthetic biofuels have facedrepeated set-backs in scale-up
24/09/2019 VTT – beyond the obvious
§ Sustainable fuels found competitive over long distances even as electric vehicles become cheaper
§ Electrofuels remain expensive in the near term and are difficult to scale up in the longer term.
§ Synthetic biofuels identified as being more competitive than electrofuels at the present time.
§ At this state, we need a wide portfolio where we focus on learning-by-doing and economies of scale.
Link to the paper: http://bit.ly/2mcUZsO
”Apples-to-apples” comparison of roadtransport decarbonisation options
Setting cost targets for carbon-neutral synthetic fuels§ At today’s battery cost:
• Short-range BEV < $105/bbl• Long-range BEV < $419/bbl
§ At 2022 DOE target cost:• Short-range BEV < $66/bbl• Long-range BEV < $262/bbl
See Hannula and Reiner (2019): http://bit.ly/2mcUZsO
24/09/2019 VTT – beyond the obvious
§ Costs strongly affected by scale
Scale economics of synthetic biofuels
24/09/2019 VTT – beyond the obvious
Scale economics of synthetic biofuels
NER 300
§ Costs strongly affected by scale
”Initial cost effectivenessapproach to BTL”
24/09/2019 VTT – beyond the obvious
Scale economics of synthetic biofuels
NER 300
GoBiGas
§ Costs strongly affected by scale
152 M€
24/09/2019 VTT – beyond the obvious
Scale economics of synthetic biofuels
NER 300
GoBiGas
§ Costs strongly affected by scale§ However, scale benefits largely achieved
by 100 MWsynfuel scale
152 M€
24/09/2019 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
§ Costs strongly affected by scale§ However, scale benefits largely achieved
by 100 MWsynfuel scale
152 M€
24/09/2019 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
§ Costs strongly affected by scale§ However, scale benefits largely achieved
by 100 MWsynfuel scale§ GoBiGas ~7.6 €/Wfuel
§ Same plant• 50 MW à 5.5 €/Wfuel
• 75 MW à 4.8 €/Wfuel
• 100 MW à 4.4 €/Wfuel
152 M€
24/09/2019 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
§ Costs strongly affected by scale§ However, scale benefits largely achieved
by 100 MWsynfuel scale§ GoBiGas ~7.6 €/Wfuel
§ Same plant• 50 MW à 5.5 €/Wfuel
• 75 MW à 4.8 €/Wfuel
• 100 MW à 4.4 €/Wfuel
152 M€
2/3
1/3
24/09/2019 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
§ Costs strongly affected by scale§ However, scale benefits largely achieved
by 100 MWsynfuel scale§ GoBiGas ~7.6 €/Wfuel
§ Same plant• 50 MW à 5.5 €/Wfuel
• 75 MW à 4.8 €/Wfuel
• 100 MW à 4.4 €/Wfuel
152 M€
24/09/2019 VTT – beyond the obvious
Scale economics of synthetic biofuels
GoBiGas
NER 300
Commerciallyviable BTL?
§ Costs strongly affected by scale§ However, scale benefits largely achieved
by 100 MWsynfuel scale§ GoBiGas ~7.6 €/Wfuel
§ Same plant• 50 MW à 5.5 €/Wfuel
• 75 MW à 4.8 €/Wfuel
• 100 MW à 4.4 €/Wfuel
152 M€
”NER300 approach” to BTL
24/09/2019 VTT – beyond the obvious
Hydrocarbon liquids
OXYGEN GASIFIER
BELT DRYER
ASU
AUXILIARY BOILER
Air N2
O2
H2S
Steam Steam
Filter ash
Purge
Steam
Unconverted gas
Bypass
HOT-GAS FILTER
ATR POX REFORMER SOUR SHIFT SCRUBBER
COOLERCENTRIFUG.
COMPR.
WET CO2 REMOVAL
RECYCLEF-T
SYNTHESIS
CO2
Flue gas
Forestresidues
POWER GENERATION EQUIPMENT
WSAH2SO4
WET SULPHUR REMOVAL
RECOVERY&
UPGRADE
”NER300 approach” to BTL
24/09/2019 VTT – beyond the obvious
Hydrocarbon liquids
OXYGEN GASIFIER
BELT DRYER
ASU
AUXILIARY BOILER
Air N2
O2
H2S
Steam Steam
Filter ash
Purge
Steam
Unconverted gas
Bypass
HOT-GAS FILTER
ATR POX REFORMER SOUR SHIFT SCRUBBER
COOLERCENTRIFUG.
COMPR.
WET CO2 REMOVAL
RECYCLEF-T
SYNTHESIS
RECOVERY&
UPGRADE
CO2
Flue gas
Forestresidues
POWER GENERATION EQUIPMENT
WSAH2SO4
WET SULPHUR REMOVAL
Give up oxygenplant: -10%
Eliminate separateWGS step: -2%
Rethink on-site steam generation: -5%
Simplify acid gas removal: -10%
Once-through FToptimised for plantoverall efficiency
Identified potentialfor CapEx savings:Oxygen plant 10%Sour shift (WGS) 2%Steam generation 5%Rectisol / WSA 10%à ~25% reduction
24/09/2019 VTT – beyond the obvious
Steam
Forestresidues
RawFT product
Char
DFB GASIFIERDRYER(S)
DFB OXIDISER
Filter ash
Offgas
Air
HOT-GAS FILTER
ATR POXREFORMER
SCRUBBERCOOLER
SORBENT SULPHUR REMOVAL
ONCE THRUF-T
SYNTHESIS
PRODUCT RECOVERY
Flue gas STEAM/DH GENERATIONEQUIPMENT
CENTRIFUGAL COMPRESSOR
Air
”Low-CapEx” approach to BTL
Performance*- Efficiency to FTL: 49-55%- Efficiency to DH: 31-40%- Electricity deficit: 10-12%TCI for FOAK at 150 MWth scale:- Central est: 299 M€- Low est: 255 M€- High est: 352 M€
*Tuomi et al. (2019) and Kurkela et al. (2019)
Production cost estimate for a First-of-a-kindBTL plant at 150 MWbiom (~1000 bbl/d) scale
24/09/2019 VTT – beyond the obvious
§ Total capital investment(TCI) estimate for FOAK plant is 299 M€ (255-352 M€) at 150 MWthscale.
§ The levelised cost of fuelsis calculated for threedifferent biomass prices
Financial parameters:- WACC: 8%- Economic life: 20 y
”Best guess”?
What will be the value of advanced biofuels?
24/09/2019 VTT – beyond the obvious
Pöyry (Sipilä et al. 2018) studyconcluded, that
• The market for advanced biofuels will likely be supply limited and
• Prices will be largely governed bythe level of fines and taxexemptions
What will be the value of advanced biofuels?
24/09/2019 VTT – beyond the obvious
§ Finnish law on promoting biofuels (March 2019)• Blending obligation will gradually increase to 30% by 2029 • For adv. biofuels obligation will gradually increase to 10% by 2028• Fine will be 0.03 €/MJ = 1284 €/tonne (~190 $/bbl).
§ In Sweden the fine is • for petrol 490 €/tCO2 = 1580 €/tonne (~200 $/bbl)• for diesel 390 €/tCO2 = 1281 €/tonne (~180 $/bbl)
Average selling price of Neste renewable diesel and the market price development in Sweden
24/09/2019 VTT – beyond the obvious
As reported by NesteValue in Sweden
Production cost estimate for a First-of-a-kindBTL plant at 150 MWbiom (~1000 bbl/d) scale
24/09/2019 VTT – beyond the obvious
§ Total capital investment(TCI) estimate for FOAK plant is 299 M€ (255-352 M€) at 150 MWthscale.
§ The levelised cost of fuels is calculated for three different biomassprices
Fine for advanced biodiesel in Finland and Sweden
Needed investment support for a FOAK plant to reach 1280 €/tonne LCOF
24/09/2019 VTT – beyond the obvious
The needed FOAKinvestment support is calculated for § Three different
investment estimates, and
§ Three different biomassprices
NER300 awards: - GoBiGas 2 59 M€- Ajos BTL 88 M€- UPM Stracel BTL 170 M€- Bio2G 204 M€
Integration to existing process industry
§ Final refining of FT products into drop-in transportation liquids takes place in existing oil refineries• Benefits from economies of scale
24.9.2019 VTT – beyond the obvious 25
§ Primary conversion plants located close to biomass sources and integrated to local district heating networks or heat-consuming industries• Utilisation of by-product heat to
achieve > 75-80 % overall efficiency
26
COST EXPECTATIONS FOR NEW TECHNOLOGY – WHERE ARE THERMOCHEMICAL BIOFUELS ON THIS MOUNTAIN ?
($/output)
27
Nth plant
N-1th plant
N-2th plant
1st-of-its-kind($/output)
The ”Mountain of Fog”
COST EXPECTATIONS FOR NEW TECHNOLOGY – WHERE ARE THERMOCHEMICAL BIOFUELS ON THIS MOUNTAIN ?
VTT 2018
§ Three learning rates (LRs) • 11 % (electricity from biomass)1
• 20 % (Brazilian ethanol)2
• 26 % (organic chemicals)3
Production cost outlook for 10 000 bpd deployment
1Rubin et al. (2015)2van den Wall Bake, J. et al. (2008)3Merrow, E. (1989)
VTT 2018
§ Three learning rates (LRs) • 11 % (electricity from biomass)1
• 20 % (Brazilian ethanol)2
• 26 % (organic chemicals)3
§ 10 000 bpd equals roughly 0.5 Mt per year, or 8% of the RED II demand for advanced biofuels
§ However, we do not have a good understanding on the early phases of learning
Production cost outlook for 10 000 bpd deployment
1Rubin et al. (2015)2van den Wall Bake, J. et al. (2008)3Merrow, E. (1989)
Pöyry’s long-term estimatefor the value of HVO
VTT 2018
Grubler (2010) on the costs of the Frenchnuclear scale-up:
“The ambitious French PWR expansion program is legitimately considered the most successful scaling-up of a complex, large-scale technology in the recent history of industrialized countries.”
How to nurture learning by doing?
VTT 2018
Grubler (2010) on the costs of the Frenchnuclear scale-up:
“Reasons for this success lay in a unique institutional setting allowing
• centralized decision-making, • regulatory stability, • dedicated efforts for standardized reactor
designs, and • a powerful nationalized utility, ÉDF, whose
substantial in-house engineering resources enabled it to act as principal and agent of reactor construction simultaneously”
How to nurture learning by doing?
32VTT 2018
• A 14% target for renewable energy in transport in 2030
• Crop-based biofuels capped at member states' 2020 levels, but must not surpass 7%.
• Minimum target for advanced biofuels 3.5% in 2030.
• Multiplier for adv. biofuels: 2• Multiplier for renewable electricity: 4
*Half of the EU’s 6 billion euros ($7 billion) worth of palm oil imports are used for biodiesel, according to data from Copenhagen Economics.
RED II on transport
33VTT 2018
*Half of the EU’s 6 billion euros ($7 billion) worth of palm oil imports are used for biodiesel, according to data from Copenhagen Economics.
• A 14% target for renewable energy in transport in 2030
• Crop-based biofuels capped at member states' 2020 levels, but must not surpass 7%.
• Minimum target for advanced biofuels 3.5% in 2030.
• Multiplier for adv. biofuels: 2• Multiplier for renewable electricity: 4
RED II on transport
34VTT 2018
*Half of the EU’s 6 billion euros ($7 billion) worth of palm oil imports are used for biodiesel, according to data from Copenhagen Economics.
• A 14% target for renewable energy in transport in 2030
• Crop-based biofuels capped at member states' 2020 levels, but must not surpass 7%.
• Minimum target for advanced biofuels 3.5% in 2030.
• Multiplier for adv. biofuels: 2• Multiplier for renewable electricity: 4
RED II on transport
35VTT 2018
*Half of the EU’s 6 billion euros ($7 billion) worth of palm oil imports are used for biodiesel, according to data from Copenhagen Economics.
4
2
• A 14% target for renewable energy in transport in 2030
• Crop-based biofuels capped at member states' 2020 levels, but must not surpass 7%.
• Minimum target for advanced biofuels 3.5% in 2030.
• Multiplier for adv. biofuels: 2• Multiplier for renewable electricity: 4
RED II on transport
36VTT 2018
What will the demand for advanced biofuels be?
*Half of the EU’s 6 billion euros ($7 billion) worth of palm oil imports are used for biodiesel, according to data from Copenhagen Economics.
• Food crops (read: palm oil) that result in high indirect land use change (ILUC) are capped to 2019 levels* until 2023, and phased out by 2030.
• Not a ban or even a restriction on palm oil imports, but regulates which biofuels can be calculated towards RE targets.
• No restrictions on used cooking oil (UCO) and wastes like animal fats
• There was also an agreement on the obligation for advanced biofuels with minimum targets set at
• 0.2% in 2022, • 1%in 2025 and • 3.5% in 2030.
• The final stage is for the agreement to be approved by the European Parliament and the European Council, which could take a few months.
37VTT 2018
*Half of the EU’s 6 billion euros ($7 billion) worth of palm oil imports are used for biodiesel, according to data from Copenhagen Economics.
Taking into account double counting, the actual demand for advanced biofuels will be• 300 ktoe from 2022• 1.5 Mtoe from 2025• 5.4 Mtoe from 2030
Number of ABF plants (à 100 ktoe~2000bpd) operating on other than palm oil• 0 plants until end of 2027• 4 plants from 2028• 10 plants from 2029• 54 plants from 2030• ? plants from 2031
What will the demand for advanced biofuels be?
VTT 2018
§ Sustainable fuels are likely to remain competitive in road transport even iflow battery prices are achieved
§ Thermochemical biofuels are currently risky and costly• However, technologies can and usually will get cheaper with increasing experience
§ Choosing the ”optimum” scale for a FOAK plant complicated.• Even medium-scale deployment pathways can quickly lead to reasonable BEOPs in
the medium-term if high learning rates can be realised.• Better understanding on the economics of scale, and early-stage learning needed.
§ Most policies in the past have promoted a “rapid scale-up” approach.• Problematic due to lack of investment appetite for large-scale high-risk bets.• Policy implication: Learning, not initial cost effectiveness ($/bbl of NER300), should
be an important goal of early-stage technology promotion.
Summarising…
VTT 2018
§ Grubler, A. The costs of the French nuclear scale-up: A case of negative learning by doing, Energy Policy, 38(9), 2010, pp. 5174-5188. DOI: 10.1016/j.enpol.2010.05.003.
§ Hannula and Reiner, Near-Term Potential of Biofuels, Electrofuels, and Battery Electric Vehicles in Decarbonizing Road Transport, Joule (2019), https://doi.org/10.1016/j.joule.2019.08.013
§ Kurkela, E., Kurkela, M., Tuomi, S., Frilund, C., & Hiltunen, I. (2019). Efficient use of biomass residues for combined production of transport fuels and heat. VTT Technical Research Centre of Finland. VTT Technology, No. 347 DOI: 10.32040/2242-122X.2019.T347
§ Merrow, E. An analysis of cost improvement in chemical process technologies. R-3357-DOE. RAND Corporation, Santa Monica, USA. 1989.
§ Nykvist, B., and Nilsson, M. (2015). Rapidly falling costs of battery packs for electric vehicles. Nat. Clim. Change 5, pp. 329–332.
Bibliography
VTT 2018
§ Rubin, E., Azevedo, I., Jaramillo, P. and Yeh, S. A review of learning rates for electricity supply technologies, Energy Policy, Volume 86, 2015, Pages 198 – 218.
§ Sipilä, E., Kiuru, H., Jokinen, J., Saarela, J., Tamminen, S., Laukkanen, M. and Palonen, P. (2018). Biopolttoaineiden kustannustehokkaat toteutuspolut vuoteen 2030. http://urn.fi/URN:ISBN:978-952-287-614-0
§ Tuomi, S., Kurkela, E., Hannula, I. and Berg, C.G. The impact of biomass drying on the efficiency of a gasification plant co-producing Fischer-Tropsch fuels and heat – A conceptual investigation, Biomass and Bioenergy, 127, 2019. https://doi.org/10.1016/j.biombioe.2019.105272
§ van den Wall Bake, J., Junginger, M., Faaij, A., Poot, T. and Walter, A. Explaining the experience curve: Cost reductions of Brazilian ethanol from sugarcane, Biomass and Bioenergy, Volume 33, Issue 4, 2009, Pages 644-658, ISSN 0961-9534
Bibliography