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Benchmarking costs for a clean fuel competition
JessicaYoon
Posts: 54 XPRIZE
We’d like to get as much input as possible from our valuable community of experts on how to evaluate an appropriate cost target for new clean fuels. Of the options below, what, in your opinion, is the best approach to account for green fuels to achieve desired levels of market penetration and accelerated adoption in the next 5 years?
Secondly, do you agree or disagree with our estimated pricing of each option? If not please explain or suggest other options on cost not considered below.
Approach 1: FULLY CONSIDERED COST OF OIL
Calculated Price: $4.478/kg*
Approach 2: TIPPING POINT COST OF HYDROGEN
Calculated Price: $2/kg
Approach 3: TIPPING POINT COMPETITIVE WITH LNGs
Calculated Price: $1 for production + up to $1.5 added in transfer
Approach 4: WHAT LNG COMPANIES WILL CONSIDER PROFITABLE
Calculated Price: $8-12 per million BTU
*Edit: the calculated price has been updated from original post.
Secondly, do you agree or disagree with our estimated pricing of each option? If not please explain or suggest other options on cost not considered below.
Approach 1: FULLY CONSIDERED COST OF OIL
Calculated Price: $4.478/kg*
- Includes full lifecycle cost (Total Cost Assessment) + carbon cost. Please note, this number is informed by independent reviews of “real cost.” For example, instead of the common carbon tax of $40-50/ton, we’ve used $417/ton;
- Sources for calculation: Litman, 2012 + Ricke et al., 2018 + BP Statistical Review of World Energy 2020
Approach 2: TIPPING POINT COST OF HYDROGEN
Calculated Price: $2/kg
- Based on Hydrogen council assessment 2021 for production at scale trajectory (2026-2030) to make green hydrogen and its derivative fuels competitive across multiple hard-to-abate sectors.
Approach 3: TIPPING POINT COMPETITIVE WITH LNGs
Calculated Price: $1 for production + up to $1.5 added in transfer
Approach 4: WHAT LNG COMPANIES WILL CONSIDER PROFITABLE
Calculated Price: $8-12 per million BTU
*Edit: the calculated price has been updated from original post.
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Comments
Those options seem reasonable approaches.
Thinking about the relevant infrastructure and devices for each new clean fuel type: is it compatible with existing infrastructure, manufacturing/refining plant, transport and end use devices; or if not what will the additional cost be to develop and deploy new infrastructure, plant, devices, etc? For a five year timescale we might want to consider such potential upfront capital costs, in addition to the usual operational costs per unit of energy.
Fuel types that are compatible with existing systems might have a lower upfront capital cost and promote rapid deployment.
Hydrogen is highly acidic, and the gas is so light it can find its way to escape through many metals, so it is unlikely that exisiting pipeline infrastructures can be utilised for green Hydrogen. The EU has recognised this and has decided that adding 20% Green hydrogen to existing gas supplies could enable current infrastructures to be utilised, but for how long has not been quantified..
Hydrogen derived from Natural Gas does not cure the emissions problems but simply reduces their volumns. Currently most Hydrogen productions use copious amounts of electricity so obtaining competitive pricing to today's fossil fuels is unlikely.
To achieve low cost production of hydrogen without using any electricity requires water being separated from it's constituent elements using only a Catalyst. As far as I am aware H2 Corp/ Gaia Projects is the only group to have achieved this. The projected cost of production are calculated to be sub $1.00 per KG.
With respect to the dangers of transporting the highly volatile Hydrogen gas, we decided to eliminate the danger and costs of delivering the gas by moving its production to where it is needed.
So we have planned standard container sized production units which can be initiated once they are at the point of consumption, be that on a gas station forecourt or where a company uses the gas in its manufacturing processes. This totally eliminates the gas transportation danger and insurance problems.
Welcome @rayw to the XPRIZE Community!
Thank you for sharing insights into low cost production of hydrogen.
Oil & Gas Futures make up 98% of the transactions in the market. Without a competitive dynamic demand for trading other fuels, it will be tough for them to take off without governmental push and support (such as a carbon tax).
Previous attempts like the California electricity future markets have failed. A creative business model will be of utmost importance beyond a technological solution.
Additional features for our H2 Gas production system. Seawater is virtually free except for transporting it to where we need it. Our primary mineral in our catalyst is a waste product from another industry which nobody wants so we could get paid to take it away. Our system qualifies to earn Carbon Credits which are currently muted to become $160 per tonne which is a great deal of money considering our catalyst cost will probably be $0.35 cents per 50 Kgs of gas produced.
Container based systems can be towed on barges and moored offshore to where the Gas can be easily piped to its storage tank for local use. Amortising our production system is which can easily last many years means each Kg premium will only be a few cents.
I wish to note a change to our original post -- the fully considered cost of oil is $4.478/kg or $16.93/gallon. The value of $64/kg initially offered as the fully considered cost of oil, is incorrect. Please accept our sincere apologies.
Thank you very much for your comments; they are all extremely helpful.
You all bring up a topic which we've been thinking hard about from rather a different angle, and I would appreciate any advice you can share about the following:
Regarding potential competitors in this field, we've been evaluating whether to include renewable carbon fuels (incl. Biofuels) in the competition? Here we were thinking of the additional infrastructure and/or modification to conversion technologies that may be needed for nitrogen-based fuels. Is it possible to include all options in the competition? And if so, how would you go about balancing sustainability, scale, and cost considerations?
** We intend to have strong sustainability measures for production and throughout the lifecycle, including LCA, cradle-to-grave, measuring of land, water use, and GWP.
It sounds reasonable to include renewable carbon fuels - provided the full life-cycle impact is evaluated [as you propose]. Fuels, including carbon fuels, have a high energy density and so they could well have a significant role to play [preferably in a fuel cell, instead of polluting combustion processes].
In terms of bio-fuels, it might be better to avoid using [agricultural] land for growing crops dedicated to bio-fuels. (Comments have been made about the potential mistake the EU made when it mandated a proportion of fuel should come from bio-fuel - because of the potential impact on agricultural land. Similarly, wood pellets used by a UK based electricity generator raise other concerns.) Agricultural land should probably be preserved for growing food, not bio-fuels. However, agricultural and food waste could be used to generate bio-fuel.
Thinking out of the box, if a potential solution were able to grow plants or organisms on non-arable land (e.g. in the desert), or in the sea, then these might be acceptable - as it has no impact on existing agricultural resources.
Approach 1: FULLY CONSIDERED COST OF OIL
Calculated Price: $4.478/kg*
The actual cost of OIL as detailed here ignores the world's population demands to eliminate it as a souce of Noxious Emissions that are seriously affecting the respiratory health of people and causing planetary weather disasters. Result: it should not be considered at all.
Approach 2: TIPPING POINT COST OF HYDROGEN
Calculated Price: $2/kg
The EU current cost of Green hydrogen per KG varies from $4.10 - $5.50 . Transportation costs and transit dangers are significant. Compression of Hydrogen Gas for transportation purposes are a significant cost as are on-arrival decompression costs which are frequently overlooked, or separately charged.
Our Container based systems are inert for transportation, containing only water and our Catalyst, which are not mixed until the system is installed on-site for the production of H2 gas.
Approach 3: TIPPING POINT COMPETITIVE WITH LNGs
Calculated Price: $1 for production + up to $1.5 added in transfer
This is a fair appraisal, especially if the gas is transferred as Gas to the user, or if converted to electricity which is then transhipped via the Electricity Grid. Capex Costs from well Head , processing, and transportation to the storage systems can also be extremely high.
H2 Corp's method of delivering a complete on-site Gas production system is available at sub $1.00 per Kg. If fuel cells are added to generate electricity the integration proces will probaby add $0.25 cents per KG. The hardware capex amortisation costs are likely to be a few cents per Kg as the equipment has a long life, estmated at 15 years.
Approach 4: WHAT LNG COMPANIES WILL CONSIDER PROFITABLE
Calculated Price: $8-12 per million BTU
See approach 1 above. The Fossil Fuel industry will significantly shrink by approximately 80% by 2050 but will still likely be needed for supplying machinery Oils, and for the few people still using Internal Combustion Engines in their vehicles.
My Additional Approach 5.
Wind and PV renewables only operate intermittently and are very expensive to install and generate much CO2 in ther manufacture. They also festoon the world with ugly equipment.
Biomass reduces the best CO2 absorber .. TREES.. and should be totally banned.
Ammonia based Hydrgen generates a lethal gas which draws-in oxygen when exposed to the air. Any person close to an ammonia based Gas leak has seconds to live. Frankly Green Hydrogen is the ONLY Gas to be deployed and if handled with care, due to its potential volatility, is the totally safe Gas to be on the market to protect our world and all peoples health.
Thank you Adam, absolutely agree re the resources. To the end, is the LCA's land size sufficient? or should we also consider the net impact of resource (e.g., carbon sequestration as an added value)? re carbon-based and nitrogen based fuels? are there any potential tradeoffs and risks in your view when it comes to present-day maturity and cost?
It should also be appreciated that very small hydrogen Gas sytems are available for individual use. Totally flexible systems are one of our key design objectives. Our pre-producion order book exceeds $670Million and the USA orders ccount for 66% of the demand.
In addition to land size, carbon sequestration is likely to feature in the environmental impact assessment: a negative carbon footprint would be advantageous (but not necessary). However, there's sometimes a price to pay in other aspects, and so sometimes the evaluator has to set relative priorities, or weightings for each impact.
Regarding Nitrogen based fuels, I share the concern @rayw highlighted regarding ammonia's hazardous properties. [Accidents do happen.]
Thank you @carlbozzuto, you raise very important points and indeed, it's challenging to determine what would be the fair comparison when considering competitive price vs. sustainability. Just to make sure I fully understand your recommendation -- Do you suggest going ahead with a fully considered price instead of tipping point price? and secondly, making this price more cost-competitive by including only the cost of carbon capture (instead of carbon impact as suggested in the full calculation and carbon tax schemes)? Many thanks.