A Commercial Feasibility Study of Renewable Methanol Production from Biomass Gasification in Iceland

Jón Örn Jónsson

MSc in Sustainable Energy and Business

Supervisors: Kristján Vigfússon Guðrún Sævarsdóttir K.C. Tran

Reykjavík University School of Business/REYST

January 2010

A Commercial Feasibility Study of Renewable Methanol Production from Biomass

Gasification in Iceland

30 ECTS thesis submitted in partial fulfilment of a Master of Science degree in Sustainable

Energy and Business

Copyright © 2010

All rights reserved

School of Business/REYST

Reykjavík University

Menntavegur 1

IS-101 Reykjavik

Iceland

Telephone: (354) 599-6200

Bibliographic information:

Jón Örn Jónsson, 2010, A Commercial Feasibility Study of Renewable Methanol Production

from Biomass Gasification in Iceland., Master thesis, Reykjavik Energy Graduate School of

Sustainable Systems, Reykjavik University & University of Iceland.

ISBN XX

Printing: ver. 1

Reykjavik, Iceland, 28 January 2010

Abstract

This feasibility study is made to evaluate the potential of building biomass gasification to

methanol fuel plant in Iceland. Biomass gasification and methanol production consists of

three steps: hydrogen production, biomass gasification and methanol synthesis. The

process is known as liquid phase methanol synthesis or Fisher-Tropsch synthesis and

consists of a catalyst reposition and combining carbons and hydrogen to form methanol.

The intention is to use off-peak renewable electricity produced from Icelandic hydro or

geothermal plants in the electrolysis of water producing renewable hydrogen and oxygen.

The relatively reasonable price of renewable electric power in Iceland makes Iceland an

ideal location for the production of liquid fuels through gasification. Gasification

technology consists of a gasifier that turns hydrocarbon feedstock into gas by adding heat

and pressure carefully monitoring the amount of oxygen entering makes the difference

between a combustor and a gasifier. Gasification with the use of oxygen in is one of the

most effective ways to harness the energy of the sun stored within biomass. Catalysts

operate by rearranging the atoms of the gas into alkenes or alcohols. The biomass

feedstock addressed in this feasibility study is black liquor, wood and MSW. Two sets of

models have been constructed a mole balance model to simulate the biomass gasification

and financial model. The conclusion of this study is that MSW gasification to liquid fuel

production is feasible, but the import of biomass is not feasible unless the total cost of the

biomass imported is below € 193 per ton.

Dedication

Dedicated to my unborn daughter.

xi

Table of contents:

List of Figures .................................................................................................................... xii

List of Tables ..................................................................................................................... xiii

List of equations ................................................................................................................ xiv

Abbreviations ..................................................................................................................... xv

Acknowledgements ........................................................................................................... xvi

1 Introduction ................................................................................................................... 17

2 The Process .................................................................................................................... 18 2.1 Electrolysers ........................................................................................................... 19 2.2 Gasification ............................................................................................................ 22 2.3 Gasifiers ................................................................................................................. 25 2.4 Synthesis ................................................................................................................ 31

2.4.1 Liquid Phase Methanol synthesis (LPMeOH) ............................................ 32 2.4.2 Fischer-Tropsch synthesis ............................................................................ 33

3 Biomass feedstock ......................................................................................................... 33 3.1 Black liquor ............................................................................................................ 35 3.2 Timber .................................................................................................................... 41

3.2.1 Icelandic timber ........................................................................................... 41 3.2.2 International timber ...................................................................................... 42

3.3 Municipal Solid Waste ........................................................................................... 44

4 Biomass import. ............................................................................................................ 48 4.1 Taxes on biomass imports in Iceland. .................................................................... 48

5 Fuel Markets ................................................................................................................. 50 5.1 Fuel taxes in Iceland. ............................................................................................. 50 5.2 Methanol fuel potential in Iceland ......................................................................... 53

6 Economic evaluation ..................................................................................................... 55 6.1 Other assumptions .................................................................................................. 59 6.2 Investment calculations .......................................................................................... 59

7 Further considerations ................................................................................................. 67

8 Results & Conclusion .................................................................................................... 69

References........................................................................................................................... 73

xii

List of Figures

Figure 1 - The role of electrolysis and gasification. ............................................................ 19

Figure 2 – Hydrogen production with the use of electrolyser. ............................................ 20

Figure 3- Flow diagram of gasification of biomass feedstock to liquid Methanol. ............ 24

Figure 4 - Fixed bed direct gasifiers . .................................................................................. 26

Figure 5 - Fluidised bed gasifiers ....................................................................................... 27

Figure 6 – Entrained flow gasifier ....................................................................................... 28

Figure 7 - Different types of biomass. ................................................................................. 34

Figure 8 - Biomass to liquid fuel cost. ................................................................................ 35

Figure 9 - Flow diagram of chemical recovery in kraft pulping process ........................... 36

Figure 10 - Black liquor gasification and fuel production ................................................. 37

Figure 11 - A combined-cycle generating system. ............................................................. 38

Figure 12 - Lignin price compared to electric price ............................................................ 40

Figure 13 - Potential wood slash in the next 90 years, ........................................................ 41

Figure 14 – MSW treatment facilities in Iceland ................................................................ 44

Figure 15 - Icelandic mixed household waste composition from 1999-2003 ..................... 46

Figure 16 – MSW cost analysis........................................................................................... 60

Figure 17 – MSW debt service coverage ............................................................................ 61

Figure 18 - MSW net present value. ................................................................................... 62

Figure 19 – WACC ............................................................................................................. 62

Figure 20 – ROE, ROIC and Current ratio .......................................................................... 63

Figure 21 - Sensitivity of investment according to discount rate ........................................ 64

Figure 22 – Sensitivity of investment to the nominal interest rate of loan. ........................ 65

Figure 23 - Sensitivity of investment according to price of sold methanol ........................ 65

Figure 24 - Sensitivity of investment according to variable cost ........................................ 66

Figure 25 - Cost composition of biomass feedstock ........................................................... 70

xiii

List of Tables

Table 1 - Total hydrogen needed in kg. ............................................................................... 20

Table 2 - Example of cost Break down of GtL ................................................................... 29

Table 3 - Scaling down GtL units to apropriate size ........................................................... 30

Table 4 - Estimated price of a 300 Adt/day GtL fuel unit in million €-euro ....................... 31

Table 5 - The largest production countries of black liquor in the world ............................. 38

Table 6 - Black liquor gas composition ............................................................................... 40

Table 7 - Average price of tradable biomass within EU-15 ............................................... 42

Table 8 - Gas composition of sawdust, organic matter and wood. ..................................... 43

Table 9 - Price of wood based biomass. .............................................................................. 43

Table 10 – Potential waste feedstock .................................................................................. 45

Table 11 - MSW cost estimate. ........................................................................................... 47

Table 12 - MSW gas composition and mol weight. ............................................................ 47

Table 13 - Domestic taxes ISK on gasoline ........................................................................ 51

Table 14 – Domestic taxes in ISK on Diesel ....................................................................... 52

Table 15 - Carbon dioxide per liter ..................................................................................... 53

Table 16 - Gas compostion and mol weight of selected biomass from the P-EFG-O2. ..... 55

Table 17 - Waste gas composition in precentage and in kilo mols. .................................... 56

Table 18 - Total methanol produced in liters. ..................................................................... 57

Table 19 - Variable cost break down. .................................................................................. 57

Table 20 – 3Point PERT analysis ........................................................................................ 58

Table 21 - Value of investment ........................................................................................... 60

xiv

List of equations

Equation 1 - Balancing carbons and hydrogen in the production of methanol. .................. 17

Equation 2 - Water separation ............................................................................................. 19

Equation 3 - Hydrogen gas formation ................................................................................. 19

Equation 4 - Oxygen gas formation .................................................................................... 20

Equation 5 - Average energy conversion efficiency ........................................................... 23

Equation 6 - Methane steam-reforming reaction ................................................................. 25

Equation 7 - Scaling equation ............................................................................................. 30

Equation 8 - Hydrogenation ................................................................................................ 32

Equation 9 - Methanol dehydration & water gas shift reaction .......................................... 32

Equation 10 - Fischer-Tropsch process ............................................................................... 33

xv

Abbreviations

Adt Air Dry Tonne

ASU Air Separation Unit

ATM Atmosphere

BFW Boiler Feed Water

CAPM Capital Asset Pricing Model

CF Cash Flow

DME Di-Methyl Ether

DOE U.S. Department of Energy

EUR Euro

FC Fixed Capital

FFV Flexible Fuel Vehicle

FTD Fischer-Tropsch Diesel

FX Foreign Exchange Market

GHG Green House Gases

GtL Gasification to Liquid

HRSG Heat Recovery Steam Generator

ICC Icelandic Container Company

LHV Low Heating Value

LP Liquid Phase

LPG Liquid Petroleum Gas

MSW Municipal Solid Waste

NPV Net Present Value

NREL National Renewable Energy Laboratory

P-EFG-O2 Pressurized Oxygen Blown Direct Entrained Flow Gasifier

ROE Return on Equity

ROIC Return on Investment Capital

SI Spark Ignition

SRU Sulphur Recovery Unit

USD US Dollar

VC Variable Cost

WACC Weighted Average Cost of Capital

WTW Well-To-Wheel

xvi

Acknowledgements

I wish to thank my family for their love, devotion and endurance. Edda Lilja Sveinsdóttir

and Reykjavík Energy for their support, Kristján Vigfússon, Guðrún Sævarsdóttir and K.C

Tran for their mentoring.

17

1 Introduction

Gasification is a well-known Process where carbon based feedstock is partially burned,

producing a gaseous mixture that may be used either directly as a fuel, or as feedstock in

another process e.g. synthetic fuel production. The production of gas through gasification

used in vehicles has been known since the beginning of 1900. Actions against the German

army led to large shortages of petroleum in the first and second world wars, which lead to

the development of gas driven vehicles. Also as a response to the fuel shortage, processes

for synthetic fuel production were developed, most notably the Fisher Tropsch process

through which Germany produced volumes of fuel during the Second World War.

Gasification is the first step of the Fisher Tropsch process, as coal is gasified to form a

synthesis gas, which is a feedstock for the process. The gasification process is therefore an

established method that offers a wide range of utilization. Gasification of a biomass

feedstock is the process of an incomplete exothermic combustion of biomass with oxygen

leading to the production of a gas that manly contains carbon monoxide (CO), carbon

dioxide (CO2), hydrogen (H2) and methane (CH4). This gas known as producer gas is

today used in many countries both developed and undeveloped as a direct source of house

heating or by powering gas turbines in the production of electricity.

Another option is to use the gas produced in the process to form different liquid

hydrocarbons. The process is known as liquid phase methanol synthesis or Fisher-Tropsch

synthesis and consists typically of a catalyst reposition and combining carbons and

hydrogen at a certain pressure and a certain temperature to form e.g. methanol (CH3OH).

This can also be done to form other chemical reactions such as ethanol (CH3CH2OH) or

glycerol (C3H5 (OH)3). In this process there is a need for additional hydrogen in order to

balance the equations such as shown in Equation 1.

Equation 1 - Balancing carbons and hydrogen in the production of methanol.

CO2H2 CH3OH

CO23H2 CH3OHH2O

The use of stranded or off-peak renewable electricity produced from Icelandic hydro plants

in the electrolysis of water producing renewable hydrogen and oxygen is a viable solution

18

in the production of additional hydrogen. Relatively reasonable price of renewable electric

power in Iceland makes Iceland an ideal location for the production of liquid fuels through

gasification.

This M.Sc. thesis evaluates the feasibility of building an Icelandic gasification plant with

pre-treatment, gas cleaning unit and synthesis island with the intention of producing and

selling a renewable liquid fuel in Iceland.

2 The Process

The process consists of three major steps: hydrogen production, biomass gasification and

combining step one and two in step three the methanol synthesis, also shown in Figure 1.

The hydrogen production is in this case done through conventional electrolysis of water.

Even though cheaper methods of hydrogen production exists e.g. with chemical reactions

from methane, the need for pure oxygen in the gasification process also exists thus both

products from the electrolysis are being used. Adding to this the access to reasonable

renewable electricity is also a large contributor to the use of electrolysers. After the

production of hydrogen and oxygen the next step is the gasification of biomass. The

gasification in this case is done with an entrained flow gasifier due to the fuel flexibility

and high scaling factor of the gasifier. The entrained flow gasifier is also one of the most

commonly applied gasifier designs due to reliability and long continuous operations

without failure. The last step is the synthesis of gases produced in the previous step into

liquid fuel. This is done with a catalyst of Copper (Cu), Zinc Oxide (ZnO) and Aluminium

oxide (Al2O3) where carbon monoxide and carbon dioxide are connected with hydrogen to

form a liquid fuel. Another method is the well-known Fisher-Tropsch synthesis that uses

mainly Cobalt and Iron catalysts. Both methods can be applied here depending on the

product that one wishes to produce.

19

Figure 1 - The role of electrolysis and gasification.

2.1 Electrolysers

An Electrolyser uses DC electricity to convert pure water into hydrogen and oxygen gases.

This process is well known and the efficiency is close to 90%. The negative charge of the

cathode pushes the electrons into the water. At the anode side the positive charge tries to

absorb the electrons. Since the conductivity of water is low the water molecules are

separated into positively charged hydrogen ion, H+ and a negative hydroxide ion, OH

- as

shown in Equation 2.

Equation 2 - Water separation

H2OH OH

In Equation 3 the positively charged hydrogen picks up a negatively charged electron e-

and neutralizes as H. The hydrogen atom combines with another hydrogen atom to form a

hydrogen gas molecule H2.

Equation 3 - Hydrogen gas formation

2H 2e H HH2

20

The negatively charged hydroxide ion is attracted to the positive anode. There the anode

removes the negative electron and the hydroxide connects with three other hydroxides to

form one molecule of oxygen and two molecules of water this is shown in Equation 4.

Equation 4 - Oxygen gas formation

4OH O2 2H2O 4e

The whole process of hydrogen production is shown in Figure 2.

Figure 2 – Hydrogen production with the use of electrolyser.

The electrolysers of today are not produced in volume and each electrolyser is practically

hand made by order. The cost per electrolyser is therefore still quite high even though the

technology for producing electrolysers has been well known for quite a time. The expected

price of a Proton-Exchange Membrane (PEM) electrolyser producing from 30 m3 to

almost 300 m3 of hydrogen per day is expected to be around 600 $/kW to 1000 $/kW

(Smith & Newborough, 2004). The challenge of today’s research and development is to

achieve the same high efficiency but at much lower cost. Many goals have been set and it

is estimated that there will be a dramatic cut in cost as the production increases. Goals have

been set both by the European Hydrogen and Fuel Cell programme and also in the US,

were the unit cost of electrolyser is estimated to drop below 300 $ per kW by the end of

year 2010.(Smith & Newborough, 2004). The down side of this is that few things today are

acting as stimulants to the hydrogen economy. The hydrogen economy that few years back

was thought to be the backbone of the alternative fuel economy has hit many hurdles and

there still seems to be a long way to go for a hydrogen economy. Therefore it is hard to

21

predict the size of the future hydrogen markets and the price of electrolysers will still

remain somewhat unclear. For this case a three-point estimate was used to determine the

price of the electrolysers. These estimates were based on both literature sources and

research the highest in the three point estimate was €4000 per Nm3 or close to €950 per

kW given by Raymond Schmid at Hydrogenics (www.hydrogenics.com) a company

specialising in the production of electrolysers. The two other values used where close to

€690 per kW and where found through literature research €691 per kW from an article by

Smith and Newborough: Low-cost polymer electrolysers and electrolyser implementation

scenarios for carbon abatement(Smith & Newborough, 2004) and the lowest price was

NREL: Hydrogen supply: Cost estimate fro Hydrogen pathways – Scoping

analysis(Simbeck & Chang, 2002). The energy consumption is the largest factor of the

operating cost of an electrolyser. The cost of electricity ranges from 80-90% of total

operating cost thus Iceland being a prime location for the operation of electrolysers due to

the low cost of renewable electricity. Reduction in energy consumption is therefore a vital

factor in the competitiveness of the electrolyser against other methods of hydrogen

production. In this case the energy consumption has been estimated to be 4.2 kWh per

Nm3 based on report from Hydrogen Technologies a subsidiary of Statoil Hydro the

Norwegian energy company (Hydrogen, 2008). Due to energy losses and differences in

efficiency it is fair to estimate the energy consumption from 4.1-5.0 kWh per Nm3. The

capacity range is practically unlimited determined only by the number of cells employed.

The maximum size of modern electrolysers is around 230 cells in one single electrolyser

having an output of 485 Nm3 of hydrogen per hr and at the same time 242,5 Nm3 of

oxygen. Each cell produces 2,11 Nm3 per hr and therefore one can determine the size of

the plant by dividing 2,11 with the amount of hydrogen needed and again with 230 to find

the amount of units. In this case the assumption is made that 1 kg of hydrogen equals 11,13

Nm3 of hydrogen and depending on the feedstock different quantity of hydrogen is needed

as shown in Table 1. The amount of electrolyser units needed for this case assuming a

maximum need of 17.200 tons of hydrogen per year are approximately 50 units or 11.500

cells with the total cost of around € 82.21 million.

22

Table 1 - Total hydrogen needed in kg.

The objective is to utilize stranded renewable energy available in the Icelandic electric grid

and potentially in the future other more unstable sources of renewable energy such as

wind, wave and tidal in the production of hydrogen and oxygen as previously mentioned

using the oxygen in the process of gasification of biomass in the production of synthetic

fuels.

2.2 Gasification

The process of producing synthesis gas through gasification is in itself a simple process.

The reaction of a hydrocarbon feedstock up to temperatures over >700°C with oxygen will

produce a synthesis gas. The process is an exothermic reaction with no need for external

source of energy and no additional fluid e.g. water. Gasification is applicable to almost all

hydrocarbons providing the user with a variety of alternative feedstock. Today millions of

homes are energy self-sufficient utilizing homemade gas as their only source of energy.

Even though the gasification technology as the electrolysis technology has been known for

a long time great advances have been taking place in the last decades, maximising the

efficiency with modern technology. The gasification technology consists of a gasifier that

turns hydrocarbon feedstock into gas by adding heat and pressure. The ability of carefully

monitoring the amount of oxygen entering makes the difference between a combustor and

a gasifier. While the combustor burns its feedstock completely the gasifier burns its

feedstock only partially performing an act called “partial oxidation”. Gasification can be

defined as thermal degradation in the presence of an externally supplied oxidizing (oxygen

containing) agent e.g. air, steam, oxygen (Kavalov & Peteves, 2005)

High temperature and plasma gasification are methods that could in the future have huge

impact on the recycling of carbons. The ability of being able to tear atoms from each other

forming a gas and then to rearrange them into liquid fuels in multiple options gives us a

23

highly effective tool in the fight against anthropogenic greenhouse gas emissions. With

traditional gasification better efficiencies are achieved, this is done by recovering the

chemicals in the gas. When a biomass feedstock is incinerated the only product is heat.

Better use of the feedstock can be gained with the partial combustion at temperatures

above >1200°C by converting the biomass feedstock into synthesis gas the energy

contained within the biomass will be utilized in a more efficient way and less polluting.

This high temperature gasification is already widely used in the Nordic countries, though

in particular in Sweden where 25% of all energy produced comes from biomass.

The average energy conversion efficiency of a wood gasifier is about 60-70% and is

defined as shown in Equation 5.

Equation 5 - Average energy conversion efficiency

Gas 2,5(m3) 5,4(MJ /m3)

19,80(MJ /kg) 1(kg) 68%

Where on average 1 kg of biomass produces about 2,5m3 of producer gas consuming 1,5m

3

of air. Average calorific value of 1kg of wood is 5,4 MJ/m3. Average calorific value of

wood (dry) is 19,8 MJ/kg (Rajvanshi, 1986). A simplified schematic flow diagram of

gasification could look somewhat like illustration in Figure 3. Into the gasifier there are

two inflows one of biomass and the other the oxidant that in this case is 99,5% pure

oxygen produced through the electrolysis of water.

24

Figure 3- Flow diagram of gasification of biomass feedstock to liquid Methanol.

The ratio in this case is assumed 0,4 kg of oxygen for every kg of feedstock. Before

entering the gasifier the feedstock is run through a drying system, which reduces the

humidity of the feedstock and increases the efficiency by raising the LHV of the feedstock.

More humidity in the feedstock means more energy needed for gasification of the

feedstock and higher decomposition of the biomass reduces the amount of undesirable

hydrocarbon formation. The drying system operates as a heat exchanger and can as a

source of heat utilize e.g. steam, hot water, gas or waste heat from the system. Grinding

system cuts the feedstock down to less than <1mm particles before entering the gasifier. At

last the feeder makes sure that an even amount of feedstock is entering the gasifier. The

gasifier is in this case assumed to be an entrained-flow gasifier due to its high input

capacity of 3000 air dried tons per day but mainly due to its high operating heat of the

gasification which is assumed to be around 1300-1400 °C. The high temperature is very

positive due to the secondary cracking of tars reducing the production of tars (Jinsong, et

al., 2009). The high temperature makes it possible to shorten the residence time of the

biomass as well as preventing the formation of undesirable chemical reactions. Due to the

short residence time the biomass should be pre-treated and almost in dust particle size less

than 1mm. (Kavalov & Peteves, 2005)

25

These stable parameters were used in order to know the ratios of carbon monoxide, carbon

dioxide, hydrogen, methane and other lesser materials in the gas produced from the

hydrocarbon feedstock selected. The gas produced is then led through a gas-cleaning unit,

sulphur handling and processing on to the synthesis island. Sulphur affects the work of the

catalyst and must therefore be thoroughly cleaned from the gas. Carbon monoxide, carbon

dioxide and hydrogen are then led through the catalyst for the production of methanol.

Methane can be directly reformed to methanol by the addition of oxygen converted to

carbon monoxide and hydrogen via the steam-reforming reaction as shown in Equation 6.

Equation 6 - Methane steam-reforming reaction

CH4 H2OCO 3H2

The carbon monoxide and hydrogen car subsequently be used as synthesis gas for further

processing.

2.3 Gasifiers

Many gasification methods are available for synthesis gas production. Gasifiers

(Hamelinck & Faaij, 2001) can be divided into three categories: fixed bed, fluidised bed

and entrained flow. Fixed bed can further be divided into two groups updraft or downdraft.

Depending on whether the gas exits the gasifier at the bottom or from the top. The

fluidised bed can also be further divided into two groups the bubbling or the circulating.

The fixed bed and fluidised bed operate at atmospheric pressure are therefore mostly

suitable for energy production. Figure 4 shows fixed bed gasifiers were the left side

gasifier is an updraft gasifier and the right side gasifier is a downdraft. The main

constraints to the use of both fixed bed and fluidised bed gasifiers are due to low scaling of

up to 10 MW for the updraft fixed bed and low temperatures from 800-1000°C for the

fluidised bed. In addition to this there is low flexibility of fuel usage where the properties

of the fuels have to be well defined. Figure 5 shows the two types of fluidised bed gasifiers

the bubbling on the left and the circulating on the right.

Setting up the gasification model for the study presented in this thesis, the pressurized

oxygen-blown direct entrained flow gasifier was chosen. Studies from Jinsong Zhou et. al.,

Kavalov & Peteves and Van der Drift, Boerrigter, Coda, Cieplik, & Hemmes all support

26

that the pressurised oxygen-blown direct entrained flow gasifier appears to be most

appropriate for gasification in the production of synthesis gas used in the biomass to liquid

fuel process. The pressurized oxygen-blown direct entrained flow gasifier is not restricted

due to scaling as other gasifiers, where the production capacity can be of hundreds of MW.

Figure 4 - Fixed bed direct gasifiers (Belgiorno, De Feo, Della Rocca, & Napoli, 2002).

27

Figure 5 - Fluidised bed gasifiers (Belgiorno, De Feo, Della Rocca, & Napoli, 2002)

The technology has been used in the gasification of coal for some time and is considered

mature even though the gasification of biomass is new. The pressurized oxygen-blown

direct entrained flow gasifier operates with a pressure of 10 - 60 bar (Kavalov & Peteves,

2005) and at higher temperatures resulting in much shorter residence time for whatever

fuel used in the process.

The biomass fuel is injected together with preheated oxygen and in some cases steam into

the pressurized cabinet. The oxygen, which in this case stems from the electrolysis of

water, uses more energy in the production than a regular air-separating unit (ASU), which

is more commonly used. But the use of pure oxygen as an oxidizing agent for methanol

production is preferred even though the cost is higher than using air. This is due to the high

cost and energy intensity of cleaning the raw gas (Kavalov & Peteves, 2005). The

preheated oxygen together with the pulverized biomass feedstock forms a thick cloud of

particles and it is here the reaction takes place. The high operating temperatures are one of

the entrained flow gasifier strengths but also one of its downsides due to the high

temperature of the gas when it exits the gas outlet energy is wasted in cooling the gas down

before cleaning, this energy can be harnessed with the use of a steam turbine. The basic

idea is that in temperatures above 1250-1300 °C, sodium carbonate will not form because

28

it decomposes into sodium oxide and sodium fumes leading to the complete gasification of

the biomass feedstock to CO, H2, CO2. The high temperature reduces the amount of

methane (CH4) too, increases the efficiency of carbon conversion and as mentioned before

cracks secondary tar, which is therefore not found in the raw gas exiting the gasifier. The

entrained flow gasifier has a substantially higher need for oxygen than other gasifiers.

Granulated slag exits from the bottom and is removed and can be used a fertilizer.

The pressurized oxygen-blown direct entrained flow gasifier can effectively be used on a

wide variety of fuels such as biomass, fossils, wastes and even animal carcasses. This wide

variety of fuels can be grinded and fed into the gasifier increasing the value of the gasifier

through the diversity of fuel usage. One of the materials that this study covers is municipal

solid waste (MSW). The pressurized oxygen-blown direct entrained flow gasifier seems

therefore to be a perfect fit for this case. Figure 5 shows a pressurized oxygen-blown direct

entrained flow gasifier.

Figure 6 – Entrained flow gasifier

The qualities of the pressurized oxygen-blown direct entrained flow gasifier in the

production of synthesis gas are:

29

Versatile fuel usage.

Endurance.

Oxygen for a cleaner synthesis gas.

High temperatures.

Elevated pressure for shorter residence time of feedstock.

Highest efficiency (feedstock particles smaller than 1mm).

Table 2, shows one of the gasification to liquid (GtL) unit cost breakdowns used as input

into the financial model and base for the three point cost estimate.

Table 2 - Example of cost Break down of GtL (Hamelinck & Faaij, 2001)

30

In this feasibility study, focus is set on the downdraft entrained flow gasifier with grinded

pulverized solid biomass as feedstock even though the gasifier is well adoptable to a liquid

fuel or slurry. The versatility of the gasifier is in this case the single most important

attribute while deciding upon what type of gasifier to be chosen. Since the object of the

case is to evaluate different types of feedstock. Table 3 shows the scaling of three different

gasification plants that were used as reference in the cost estimate from 2000 air-dried tons

per day down to the assumed size of plant of 300 air-dried tons per day.

Table 3 - Scaling down GtL units to apropriate size

When scaling down the gasification to liquid units the synergies of a larger plant where

accounted for by using a scaling equation shown as Equation 7 that assumes that the

relation of capital cost and the size of the plant would not be linear.

Equation 7 - Scaling equation

I = Cost for a specific plant size P.

Ik = Cost for the same plant size Pk.

x = Relation between plant with size Pk and plant of size P. (Nilsson, 2008)

The single largest investment lies in the cost of the GtL unit of the total investment cost.

Table 4 shows the total cost estimate for a scaled down 300 air-dried tons per day

gasification unit assumed in the building of the plant all numbers are in millions of 2008

EUR. The estimated cost of a GtL unit assumed in this study is € 83.05 millions.

31

Table 4 - Estimated price of a 300 Adt/day GtL fuel unit in million €-euro

The size of 300 air-dried tons per day was determined by two factors. The potential size of

the Icelandic methanol fuel market is assumed to be around 10% of the total fuel market

and the potential yearly availability of a domestic biomass or waste of around 100.000

tons. 300 air-dried tons (Adt) per day with 95% operational efficiency gives a yearly

production of 100.000 tons. The Icelandic average usage of oil per year is around 34 PJ

converted over to methanol that would be around 2 billion litre of methanol assuming the

energy density of 17.9 MJ per litre. Assuming the availability of 100.000 tons of domestic

biomass or waste leads to around 8% total market supply or 152 million litre of methanol

or 137.000 ton of methanol with energy density of methanol assumed being 19.9 MJ per

kg.

The most important of building a gasifier in Iceland is the access to reasonably priced

renewable energy. The quality of the biomass feedstock entering the gasifier has a

substantial impact on the overall efficiency of the gasifier and thus the access to cheap

electricity largely affects the cost of the pre-treatment of grinding and drying the feedstock

as well as the production of hydrogen and oxygen. The pre-treatment has a direct effect on

the quality of the synthesis gas delivered to the synthesis island

2.4 Synthesis

After the gasification the gas cleaning, processing and synthesis take place. Synthesis of

biomass was first discovered in the beginning of the 19th

century when hydrogen and

carbon monoxide was passed through an Iron, Cobalt and Nickel catalyst in the attempt to

produce methane. The synthesis island is where the raw gases are led together with

hydrogen to form the desired synthetic fuel. Catalysis of Copper and Zinc Oxide are used

in the production of methanol where the CO2 and CO is mixed with hydrogen at pressure

and temperatures from above 100 °C. The gasification process shows that the ratio of

oxygen / biomass feedstock should be around 0,4 to get the highest concentration of CO

from the biomass. Different from generating power, the calorific value of the raw gas is not

32

of importance. Rather the amount of carbon monoxide and hydrogen are the most

important factors, the higher amounts the better (Kavalov & Peteves, 2005).

2.4.1 Liquid Phase Methanol synthesis (LPMeOH)

The liquid phase methanol synthesis was first discovered in the 1970s. Where methanol is

produced by the addition of hydrogen to carbon monoxide and carbon dioxide in contact

with a suitable catalyst also known as hydrogenation, as shown in Equation 8.

Equation 8 - Hydrogenation

CO2H2CH3OH

CO2 3H2CH3OH H2O

During the production heat is formed and has to be removed in order of prolonging the life

of the catalyst and to optimize the reaction rate. Due to this heat loss (exothermic reaction)

a reduction in molar volume exists and equilibrium is reached with a higher pressure and

lower temperature (Lee & Sardesai, 2005). The liquid phase methanol synthesis is based

on a single reaction, as shown in Equation 9, but with a three-step synthesis the potential is

to produce both methanol and Di-Methyl Ether (DME). With alterations to the

hydrogenation synthesis catalyst (Cu/ZnO/Al2O3) to a methanol dehydration catalyst (c-

Al2O3) there is an option of producing any ratio of methanol/DME ranging from 5% to

95%. The three-step synthesis is shown in Equation 9.

Equation 9 - Methanol dehydration & water gas shift reaction

2H2 COCH3OH

2CH3OHCH3OCH3 H2O

COH2OCO2 H2

The three-step process is based on dual-catalytic synthesis in a single reactor stage, where

the methanol synthesis and water gas shift reactions takes place over catalysts methanol

dehydration reaction takes place over c-Al2O3 catalyst. The co-production of DME and

methanol can increase the single-stage reactor productivity by as much as 80%. High

conversions leads to less need of auxiliary equipment such as a recycle loop and thus lower

cost in energy. One of the incentives for using liquid phase methanol synthesis is that

investment cost is projected to be up to 25% (Hamelinck & Faaij, 2001) cheaper than for

33

the gas phase process and further more the operating cost is lower. This can be directly

linked to cost of electricity again supporting the Icelandic location.

2.4.2 Fischer-Tropsch synthesis

The Fischer-Tropsch process is a well-known process that has operated since before World

War II. In 1923 Fischer and Tropsch used alkalized iron in the production of a liquid

hydrocarbon. After this discovery the process of producing liquid hydrocarbons with a

metal catalyst is called the Fischer-Tropsch synthesis (Spath & Dayton, 2003). To day the

Fischer-Tropsch process is mostly used on natural gas resources in South Africa. The

reaction of CO and hydrogen are done through an Iron or Cobalt catalyst in the process of

producing a synthetic fuel or synthetic oil. The Fischer-Tropsch chemical reaction is

explained in Equation 10.

Equation 10 - Fischer-Tropsch process

nCO (2n 1)H2 CnH(2n2) nH2O

The catalyst works with rearranging the atoms of the carbons into hydrocarbons with

2,6,10 or 18 carbon atoms into alkenes or alcohols. The simplest alkenes rearranged are

e.g. Methane (CH4), Ethane (C2H6) and Butane (C4H10) and the simplest alcohols would

then be Methanol (CH3OH), Ethanol (C2H5OH) and Butanol (C4H9OH). Where the

original carbon monoxide and hydrogen is in this case produced through the gasification of

biomass. The Fischer-Tropsch reaction operates at temperatures of 150-300°C and at

pressure from 1 atm. to several tens of atm. (Speight, 2008). There is a direct link between

higher temperature and pressure and the velocity of reactions and level of conversion rate.

In this study the focus will be on the liquid phase methanol synthesis. The specific cost of

the gas cleaning, processing and LP methanol synthesis is based on the three GtL unit

examples is assumed 40% of the GtL process cost or € 33.22 million.

3 Biomass feedstock

The use of biomass in the generation of heat is one of the oldest forms of energy

production. It has from the dawn of mankind fuelled the progress of man. Biomass is in the

34

simplest sense a way of storing solar energy that man has today managed to turn into heat,

electricity or fuel. The solar energy is through photosynthesis stored in the chemical bond

of biomass and is unleashed through fermentation, gasification or combined heat and

power generation. Gasification with the use of oxygen in is one of the most effective ways

to harness the energy stored within biomass. Today the European Union is a world leader

in the use of biomass while US is increasing its effort in providing a better environment for

the biomass industry. Wood pellets in the US are manly used residentially where as in the

EU wood pellets are also used in for industrial use. The major economic incentive for the

use of biomass is the price of oil and gas. Interest for biomass is directly linked with the

rise and fall of oil and gas prices but due to government intervention that seems to be a

changing ground. Federal support as EU has done for decades is needed to bridge the

industrial and commercial cap in the US.

Figure 7 - Different types of biomass.

Biomass can come in different forms as shown in Figure 7. In this chapter an evaluation of

three types of biomass feedstock with the intention of producing synthesis gas will be

done. The biomass feedstock is black liquor an industrial residue, timber a forest residue

and municipal solid waste (MSW). Biomass feedstock is either primary or secondary,

where the secondary feedstock is a by-product from a primary feedstock such as timber

being primary feedstock and sawdust being secondary. In the pulp and paper industry black

liquor is a secondary feedstock, whereas municipal waste can be considered a secondary

biomass since its primary use as a commodity has been fulfilled.

35

Here the accessibility, price along with quality of the feedstock will be assessed. In the

case of biomass some of the factors that have to be assessed are:

Land quality,

Risk of crop,

Harvesting,

Field transport,

Road transport,

The cost associated with biomass is separated into three main phases as shown in Figure 8.

The first phase has to do with work in the field where the planting, harvesting and

accumulation of biomass at one common site. The second phase is the transportation of

biomass from the field to the storage site; this includes all transportation cost such as field

transport, road transport, storage, collecting, cargo, shipping and storage while

transporting. Third phase is where the pre-treatment of drying and chipping of the biomass

takes place and the actual conversion of biomass over to liquid. Average cost of phase 1

and 2 is 5 euro per GJ of biomass and according to the same article the price of Biomass to

liquid is 16.1 Euro per GJ (Müller-Langer, Vogel, & Brauer, 2008)

Figure 8 - Biomass to liquid fuel cost.

3.1 Black liquor

In the kraft pulping process, wood is converted into a wood pulp. By cooking the wood in

a solution of sodium hydroxide or sodium sulphide a solution that is usually called white

liquor, lignin is separated from the cellulose. The cellulose is then removed as pulp and

used to produce cardboard and paper, while the remaining liquid known as weak black

liquor, containing lignin and carbohydrates is concentrated to 65-80% solid. The strong

36

black liquor is then burned in a recovery boiler generating heat for the production of high-

pressure steam. The steam is used in a turbine to produce electricity through a conventional

steam-turbine process. The smelt that comes from the recovery boiler is dissolved in water

forming liquid called green liquor. The green liquor is then through chemical reactions

turned into white liquor saving the pulp mill the purchase of expensive chemicals and

closing the loop as shown in Figure 9.

Figure 9 - Flow diagram of chemical recovery in kraft pulping process (Ekbom, Lindblom, Berglin, &

Ahlvik, 2003)

Black liquor has until recently only been burned in recovery boilers. These recovery

boilers recover both the energy and the chemicals from black liquor. However the thermal

efficiency of recovery boilers is relatively low but the amount of recovered chemicals such

as green liquor, which is of great value for the pulp mills, is relatively high. Other solutions

with higher thermal efficiency, such as gasification instead of recovery boilers, have been

in development for a long time. The focus has thus over recent years shifted from recovery

boilers to gasification in combination with synthetic fuel production, as shown in Figure 10

or to drive a steam turbine in a combined-cycle plant for power production as shown in

Figure 11. Due to corrosion issues the pulp and paper industry have rather relied on the

simplicity and robustness of the recovery boiler instead of investing in the gasification

alternative.

37

Figure 10 - Black liquor gasification and fuel production (Ekbom, Lindblom, Berglin, & Ahlvik, 2003)

Since black liquor contains around half of the energy content of the wood used in the kraft

pulping process the energy that black liquor produces is around half of the energy the

adjoined paper mill needs. Energy is also recovered from other wood residuals that are not

used in the kraft pulping process but are just burned for the energy, such as bark and other

wood residues. In addition to this in the US the alternative fuel tax credit allows the paper

mills to mix black liquor with diesel oil used to generate the other half of the energy

needed thus claiming that they use an alternative fuel and this way receiving a tax credit,

which amounts to about $150 - $200 per ton of pulp, as a result there is no trading with

black liquor and little accessibility to black liquor. Where there is no market, there is no

price and after an extensive search through both interviews and literature no reference to a

current price of black liquor was found. This is probably due to the fact that the only

suppliers of black liquor are the pulp and paper industry and there is not real incentive for

the pulp and paper industry to produce a surplus of black liquor.

38

Figure 11 - A combined-cycle generating system. (Ekbom, Lindblom, Berglin, & Ahlvik, 2003)

Table 5 shows that the largest countries in black liquor production are USA, Canada,

Sweden and Finland. The middle column shows the amount of black liquor produced in

each country. Together these countries produce over 128 million tonnes of black liquor.

The column on the right shows the potential amount of methanol that could be produce

from the black liquor. The net heating value of black liquor after the reduction of energy

used to transform the sulphate to sulphide in green liquor is 12.29 MJ/kg dry solid.

(Ekbom, Lindblom, Berglin, & Ahlvik, 2003)

Table 5 - The largest production countries of black liquor in the world

The increase in oil and gas prices over the resent years has made the option of producing

synthetic fuel through black liquor gasification an interesting alternative. The estimated

cost of synthetic fuels from black liquor gasification is at the same level as petrol and

diesel when the oil price is 35 dollars per barrel. The price will be even more competitive

when the oil price is higher. The total amount of synthetic fuel that can be made at the pulp

39

mills in Sweden corresponds to about 25% of the Swedish consumption of diesel and

petrol.(Ekbom, Lindblom, Berglin, & Ahlvik, 2003)

The price of black liquor could be estimated by other means. If we assume that that salts

are recovered and recycled back to the pulping unit then; a price calculation of the Black

liquor could perhaps be based on the value of the heat evolved for generation of steam and

electric power or simply if the black liquor energy is withdrawn for other production, the

withdrawn energy has to be replaced by burning other biomass fuels. Therefore the

assumption could be made that the cost of black liquor might be the equivalent to the price

the mill would have to pay for the amount of lost electric energy and heat production that

other wise would be produced. Another alternative to price black liquor is to assume the

difference in profitability between two alternatives, that is to say the profitability of selling

the lignin produced from black liquor or the cost of electricity purchased to supplement the

loss of energy lost by selling lignin, this depends on the electricity price and the lignin

price added the cost of CO2 for delignification. When lignin is priced to around 15

€/MW·h, increased electric production is more profitable at high electricity prices but at

low electricity prices selling lignin could generate higher profits than electric generation.

(Olsson, Axelsson, & Berntsson, 2008) Profitability of lignin is considerably lower than

for electric production at high electricity prices. If lignin is valued at a price above 25

€/MW·h, lignin is competitive with electric generation at high electricity prices. The price

ratio of lignin versus added electric generation has to be below 1.9-2.3 as shown in Figure

12 such that selling lignin is more profitable than electric generation. The price of lignin

has to be substantially more expensive than the biomass used in electric production if it is

to be profitable. (Olsson, Axelsson, & Berntsson, 2008) The assumption can therefore be

made that both the poor accessibility and the lack of current price makes black liquor not a

suitable biomass in the production of bio fuels. Other problems that have to be dealt with

are e.g. storage and transportation since the storage and transportation of 65-80% solid

black liquor has to be kept at a certain temperature. Transporting weaker black liquor could

solve the transport problem. That would on the other hand result in transportation cost that

are 4-5 times more expensive since weak black liquor would contain less solids.

40

Figure 12 - Lignin price compared to electric price(Olsson, Axelsson, & Berntsson, 2008)

The price for black liquor that is used in the financial model is based on the lignin price

provided by Marcus Olsson giving a range from 10-25 €/MW·h. Assuming that lignin has

the heating value of 23.7 MJ/kg (6.57 MW·h/tonne), the price become 66 - 164 €/ton. The

price of black liquor has been calculated by using the three point method with the

optimistic price being 66 €/ton, pessimistic 164 €/ton and the most likely 98 €/ton these

number have been divided by 2 since the net heating value of black liquor is around 12 or

half of that of lignin. This gives black liquor the price of 65.52 /ton which has been used in

the financial model. The gas composition (Kavalov & Peteves, 2005) of black liquor after

being gasified and used in the production simulation model can be seen in Figure 6.

Table 6 - Black liquor gas composition

41

3.2 Timber

3.2.1 Icelandic timber

The Icelandic market for timber is not large and subsequently the price of timber residues

is high or ISK 8,000 - 12,000 (€ 63-94) per m3. This price is an absolute minimum for the

Icelandic forest company can cover its expenses. The price depends on how easily the trees

can be taken from the site. This again depends on the position of the site as well as weather

conditions and terrain and distance from road. In addition to this is the transport from

forest site to production site. The transportation is assumed to range between ISK 1,500-

5,000 per m3 of timber depending on the distance. One square meter of Icelandic timber

weighs around 700-900 kg depending on tree species and season of the year. Here the

average wet weight of 800 kg/m3 is used. The weight of dry timber grown in Iceland is on

average from 300 – 600 kg/m3 and depends as well on the type of tree species. The amount

Icelandic forests could provide, as a source of fuel for gasification is not more than 5,000

m3 per year or around 4,000 tons. This figure is estimated to have grown up to 100,000 m

3

by 2050 or around 80,000 tons. Figure 13 shows the highest potential wood production that

can be sustainably harnessed from the Icelandic woods till the end of this century.

Figure 13 - Potential wood slash in the next 90 years, Source: Ólafur Eggertson and Arnór Snorrason

from Mógilsá.

42

Here the X-axis represents years and the Y-axis amount in metric cubes (m3) of

sustainably harnessed timber. The reality is probably lower all depending on the price of

timber. The numbers on the Y-axis are numbers in m3, the more volatile line is showing

yearly numbers while the more stable line shows an 5 year accumulated average. The jump

around year 2080 shows when the first farmers plantings are due in tree felling. High price

and low supply rule out the use of Icelandic timber as a potential feedstock for the

gasification. It is therefore evident that Icelandic forestry residues will not in the near

future be able to support even a small-scale gasifier as suggested in this study.

3.2.2 International timber

Timber has at the present time a large potential in being a good feedstock for the

production of a bio fuel and therefore the import of timber as a feedstock will be

considered. Timber comes in various sizes and shapes and has been through the years one

of the most stable sources of feedstock available for energy production. The International

Energy Agency has set up a database of different compositions of wood and wood residues

that are used as fuels today. There is almost unlimited availability of international wood

based fuel, which is the opposite to black liquor, the market is active providing good

information about the price of wood in €/GJ. In this study information made available by

the European Biomass Industry Association (EUBIA) as shown in Table 7 is used for price

comparison.

Table 7 - Average price of tradable biomass within EU-15 (EUBIA, 2007)

Table 7 shows the prices € per GJ of wood fuels (4.3 €/GJ) and dry agricultural residues (3

€/GJ), these prices are used to represent the prices of sawdust and organic matter used in

the financial model. In order to establish the heating value of sawdust and organic matter

the International Energy Agency biomass database was used and here the median of the

gross calorific value was used. For sawdust the database gives the median gross calorific

value of 19,271 kJ/Kg. For organic matter a fuel type called “mixed sample” was used with

43

the median gross calorific value of 17,260 kJ/Kg. It is then assumed that the moisture

content of sawdust is 20% and that the mixed sample is green wood with a 50% moisture

content, which lowers the gross calorific value by 20% and 50%. This results in the price

of sawdust being most likely 66.29 €/ton and organic matter 25.89 €/ton.

Using timber as biomass feedstock has many good qualities such as great accessibility, low

price and an established transportation system. No substantial obstacles have been seen in

the use of international timber as a feedstock for synthesis fuel production in Iceland. The

only problems one could encounter are import barriers, which will be addressed in chapter

4. The gas composition of sawdust, (Jinsong, et al., 2009) organic matter (Kavalov &

Peteves, 2005) and wood (Gunnarsson, 1998) that was used in the production simulation is

shown in Table 8. These gas compositions along with the cost estimates shown in Table 9

where the basis for the production and feasibility calculations for sawdust, organic matter

and domestic timber in the financial report.

Table 8 - Gas composition of sawdust, organic matter and wood.

Table 9 - Price of wood based biomass.

44

3.3 Municipal Solid Waste

In Iceland much of the MSW is sorted and exported in large quantities abroad. Recyclable

waste such as plastic bottles and aluminium cans are mostly shipped to the Netherlands and

to North America. Birgir Kristjánsson, manager of The environment department of the

Icelandic Container Company (ICC) claims that it is a fair estimate that waste from

households in Iceland is around 210-230 kg per inhabitant per year and that the total

amount of MSW including waste from commercial, industrial and institutional sources

amounts to 1000 kg per inhabitant per year. According The Environment and Food Agency

of Iceland (UST) 2005 the total amount of MSW that was land filled in the year 2002 was

150.000 tons or 525 kg/capita(Kamsma & Meyles, 2005). The population of Iceland has

since 2002 surpassed 300.000 and it is therefore fair to say that the amount landfill today is

close to 160.000 tons. The price of MSW is as of today subsidized with € 110 per ton.

Companies are being paid for the removal and disposal of waste. Therefore one can

assume that the price of MSW used as feedstock for gasification lies in the cost of the pre-

treatment and the sorting of the waste into different feedstock e.g. papers, plastics, metals,

glass and so on. According to The Environment Agency of Iceland there are today 45

places in all parts of Iceland that collect MSW and either incinerate or use landfills as a

way of disposing MSW as shown in Figure 14.

Figure 14 – MSW treatment facilities in Iceland(Kamsma & Meyles, 2005)

45

The disposal of MSW is a global waste problem. Landfills pose a threat to the nature and

the inhabitants of the surrounding areas with groundwater contamination and methane gas

pollution. Around the world millions of tons of MSW are being landfilled per year

providing communal long-term problems. Instead of landfilling the production of heat

from MSW could provide electricity through steam turbines or directly as house heating. A

rough assumption can be made that 6 tons of MSW equals 4 MW·h (Halldórsdóttir, 2006)

of electricity made from a conventional MSW incineration this means that if we would

only take what is used for land fill in Iceland 160/6= 26.7 x 4 = 106.8 MW·h of electricity

could be saved. This has partly been done in the Westman Islands and in the region of

Húsavík in the North East part of Iceland. MSW is not the only waste that can be used as

fuel, other examples of waste feedstock that can also be used to fuel the process are shown

in Table 10. This variety of waste can be used as carbon feedstock in gasification and thus

help solving existing environmental problems by producing valuable energy resources and

providing a cost efficient way of waste disposal. The pre-treatment of waste will result in a

homogeneous carbon based feedstock that can be further processed into raw gas.

Table 10 – Potential waste feedstock

Using waste as feedstock does not only provide the community with a local solution for

waste management, it is also an alternative step towards the fulfilment of EU directive

1999/31/EC which Iceland is compelled to enforce. The directive focuses on the negative

impact of landfill of waste and formulates a standard procedure for the mitigation of effects

on the environment. In the directive it states that all landfill must be categorized in three

groups of chemically inactive, non-hazardous and hazardous waste. The directive also

states that all waste shall be treated before landfill. The directive gives the opportunity to

further categorize and process MSW e.g. with gasification. (The council of the European

Union, 1999)

46

SORPA has over the years kept yearly record of the composition of mixed household

waste Figure 15 shows the composition of the household waste over a 4 year period from

1999-2003, it shows that over half of the waste from Icelandic households is either garden,

food, wood, paper or cardboard. This can easily be used as a feedstock without substantial

sorting to produce a quality raw gas.

Figure 15 - Icelandic mixed household waste composition from 1999-2003(Kamsma & Meyles, 2005)

The raw gas that is created in the gasifier from MSW can be burned without further

processing. However the amounts of contaminants are high and therefore the producer gas

would need to be cleaned before burning. Since these contaminants already need to be

cleaned it is assumed that it would add more value to the process if the raw gas would be

converted to FT liquids or diesel. The use of MSW as fuel for gasification is well known

and a matured technology. The amount that can be gasified ranges from 2 tons per day up

to over 2500 tons and is therefore well adjustable to the size of the feedstock available in

Iceland. Icelandic municipalities use a considerable amount of their tax income in paying

for the disposal of waste through private or public companies. These companies then sort

and dispose the MSW with the use of landfill or incineration as previously shown in figure

14. The cost estimate for MSW used in the financial model is therefore based on the

assumption that waste is an expense for municipalities. Estimates were plugged into a three

point estimate where the most likely value was zero - 0 €/ton the most optimistic was 7.85

€/ton and the pessimistic value was 1.96 €/ton this resulted in a price per ton estimate of

47

1.71 €/ton of MSW that was used in the financial model as shown in Table 11 - MSW cost

estimate. The gas composition of MSW in this case is as shown in Table 12 - MSW gas

composition and mol weight.

Table 11 - MSW cost estimate.

Table 12 - MSW gas composition and mol weight.

48

4 Biomass import.

4.1 Taxes on biomass imports in Iceland.

When importing biomass of any kind into Iceland an import tax has to be paid. The

Directorate of Customs has thoroughly divided all goods into 21 sections with numerous

subchapters. After examining these sections and chapters the most likely chapter that

applies to the import of black liquor would be section VI, chapter 38, sub chapter 04

(3804.0000) addressing the import of residual lye from the manufacture of wood pulp.

Addressing timber section IX does this and chapter 44 and subchapter 03.20 (4403.2000)

go even further. Addressing unprocessed wood or roughly beheaded. Since the import of

biomass into Iceland as a feedstock has never been done before, the only thing available

for comparison are plant import such as trees or other plants that have been imported to

Iceland over the years. Each and every product is register under a certain tax number thus

determining the category of tax the product falls in and the taxes that will be demanded. A

24.5% VAT is demanded on timber, sawdust and black liquor. MSW is domestic and

therefore it is assumed that no VAT is charged.

There is also the issue of import restrictions due to plant disease prevention and no

biomass can be imported unless thoroughly examined for diseases and carrying a bill of

health. There is always the risk of plant diseases in the imported biomass that can be of

danger to existing Icelandic plants and animals. Protocol nr 416/2002 covers about

precautions against the import of infected plants and animals where it states a ban against

the import of hay, grass, root mass, fertilizers for animals and turf (paragraph 3, section G).

Even though there is not a direct ban on the import of black liquor it can be assumed that

the temperatures which black liquor is produced at and the chemicals used in the process

have effectively disinfected the black liquor and therefore it is safe to import. There is

however a restriction in the import of green liquor as it is categorized according to

paragraph 184/2002 as hazardous waste from the production of paper or paper mass. This

means that black liquor could be categorized along with the green liquor as hazardous

waste. This would complicate severely the import since very strict rules apply for the

import of hazardous waste. ( The Icelandic Ministry for the Environment, 2002)

49

Plant biomass such as imports of trees and dry agricultural residues might be submitted to

some restrictions. According to protocol nr 189/1990 on the import and export of plants

and plant products it is stated that a ban to the import of soil, composted soil, unprocessed

or cut tree bark and farm animal fertilizers (paragraph 4) as well as in the appendix III it

further states a ban to the import of living plants with bark such as Populous (Populous),

Birch (Betula), Willow (Salix), Pine (Pinus), and other coniferous or softwood trees.

Sawdust however and other bark free products are already being imported for stables and

therefore should not pose a problem. In the case of importing biomass such as grass and

hey that has been in contact with farm animals the approval of the Icelandic Food and

Veterinary Authority (MAST) is needed. A bill of health is therefore needed in the import

of all imported biomass with the exception of bark free wood, whether the intention is to

further cultivation or just for Christmas decoration. The assumption can therefore be made

that the import of biomass with the exception of bark free wood in any form will have to be

accompanied by a bill of health even though the sole purpose of the import is gasification.

50

5 Fuel Markets

The Icelandic fuel market consist today of five fuel types, gasoline, diesel, electricity,

methane and hydrogen. Due to high fossil fuel prices, alternative fuels have been entering

the Icelandic markets over the last years. These alternative fuels all have in common that

they are today being produced from domestic resources, the electricity as well as the

hydrogen comes from Icelandic hydro and geothermal plants. The methane comes from

extracted natural gases from the SORPA landfills just out side Reykjavik. To day the

alternative fuel market in Iceland is rather limited this is manly due to few filling stations

and the lack of government support in import of alternative or flexible fuel vehicles. Since

both electric cars and gas cars are not based on a liquid fuel their energy storage and

energy utilization are somewhat different from the regular SI motors. Synthetic fuels like

methanol is different to the other alternative fuels offered to the Icelandic market due to the

ability of utilizing the existing fossil fuel infrastructure. The highest value of produced

liquid methanol fuel is assumed to be for domestic use. Therefore a more detailed look will

be taken into the domestic market.

5.1 Fuel taxes in Iceland.

The government taxes on fuels have often been criticized for being to high in Iceland

compared to our fellow Nordic countries. On each litre of lead free gasoline there is a

government tax that amounts to 42,23 ISK. This amount has been unchanged since 2003

but is at percent up for revision where as the implementation of a carbon tax is being

discussed. The amount of 42,23 is divided into two sections where the larger part or 32,95

is earmarked The Icelandic Road Administration (ICERA) and the rest runs directly to the

government as a tax. (Finance, 2008) In Table 13 and Table 14 the price from pump of

both unleaded gasoline and diesel have been illustrated with the addition of the proposed

carbon tax. The pump price is the pump price of both unleaded gasoline and diesel on the

day that the calculations where made plus the additional carbon tax. The price of unleaded

gasoline being 185,6 ISK that day, then adding the carbon tax of 2,60 ISK results in a

pump price of 188,2.

51

Table 13 - Domestic taxes ISK on gasoline

Further calculation have been made to strip the gasoline of its taxes in order to find a

realistic price in EUR that might give a view on what the price for domestic sale of

renewable methanol to the retailer might look like. This is done by calculating the price per

mega joule (MJ) in one litre of gasoline and then multiplying the price with the amount of

MJ per kg of methanol. This is done because all calculations in the financial model are

based on weight in grams and also to compare the domestic selling price of the renewable

methanol with the price of exported renewable methanol. The average exchange rate of

2008 ISK/EUR 127.46 has been used to convert over to Euros and adjusted for inflation

resulting in a price of EUR 459.4 per ton renewable methanol. This means that even

though the calculations in the financial model are based on a renewable methanol price of

EUR 350.64 per ton the price for domestic sales of renewable methanol could go as high as

EUR 459.4 per ton.

52

Table 14 – Domestic taxes in ISK on Diesel

The taxation on fuels today as mentioned before is based on taxes for ICERA and the

Icelandic government. They are not based on environmental issues and therefore we are

bound to see some changes in taxes as more and more vehicles use alternative fuels. As of

today alternative fuels are not taxed in Iceland and therefore the assumption can be made

that even higher earnings can be received per ton on the domestic market. The price used

in the financial model is a price to the retailer and not to the consumer and therefore price

before taxation is assumed.

By adding the resent carbon tax of 2,6 ISK on gasoline and 2,9 (The Icelandic Parlament,

2009)on oil such as diesel Iceland is following the lead of the other Nordic countries that

have already implemented carbon taxation. In Table 13 and Table 15 the tax share is quite

similar in the Nordic countries apart from Iceland but the then again the prices less all

taxes is much higher as well. The carbon tax comes in the form of an environmental tax

much in the same spirit as the other Nordic countries and would only is subjected to the

carbon content of fossil fuels. The price of the tax will have a strong relation to the trading

price of CO2 emissions. As shown in Table 15, CO2 emissions per litre of diesel are higher

than of motor gasoline, explaining the reasons for the tax being higher on diesel.

53

According to Table 15 there is a 12,68% higher amount of CO2 per litre of diesel fuel that

is not in relation with the difference of 10,34% between the gasoline tax of ISK 2,6 and the

diesel tax of ISK 2,9. However if the energy content of the fuels is taken into account the

difference is only 10,6%. The carbon tax does cover fuels for ships and airplanes and

rightfully should since it is estimated that two thirds of the CO2 emissions from transport

come from these two industries.

Table 15 - Carbon dioxide per liter

5.2 Methanol fuel potential in Iceland

The Icelandic potential in methanol production is yet to be discovered and could in the

future need better mapping. But methanol has great potential in Iceland in becoming one of

the alternative energy resources, why methanol? Methanol is also known as wood fuel, it is

colourless and tasteless but has a sweet smell and is extremely poisonous where only 10 ml

can blind a person and 100 ml is lethal when digested. A three-year research done by Dr.

Kurian Pan, Chinese academy of sciences concluded that methanol is safer than petrol. Not

only has methanol been proven safer but also the public perception towards methanol is

better that towards e.g. hydrogen. The benefit lies furthermore in the reduction of CO2,

and lowering the import of oil, supporting both the Icelandic economy and domestic

production of methanol right now without large changes to the fuel infrastructure. The

average Icelandic consumption of oil between the years 2001 and to a predicted

consumption of year 2050 is 812 thousand tones per year. This makes out 33.98 PJ. This is

the total consumption of airplanes, cars, trucks, fishing vessels and transportation vessels.

According to predictions from the Icelandic energy council the amount of oil used for cars

and trucks is around 300 thousand tons.

Methanol is the simplest alcohol containing only 1 carbon atom with an octane rating of

106. Methanol, if blended into gasoline it will not only improve the fuel economy and

acceleration but also decrease carbon emissions through improved combustion

characteristics of the fuel blend. As a result of technological advances, most vehicles

currently in circulation in the European union are capable of using a low bio-fuel blend

54

without any problem. The most recent technological developments make it possible to use

higher percentages of bio-fuel in the blend. Some countries are already using bio-fuel

blends of 10% and higher. Blending domestically produced methanol into fuel has large

potential in Iceland; flex-fuel vehicles are able to run on any range of methanol and

gasoline providing a cleaner burn. Most of the known methanol fuels are M-5, M-10 and

M-85 giving the proportions of methanol that has been added into the gasoline respectively

5%, 10% and 85%.

The price of biomass fuels is subject to domestic political decisions regarding

environmental or preferential taxes, subsidies, or trade with emissions quotas. For example

in Sweden, where a tax of fossil carbon dioxide was introduced in the early nineties, which

lead to a rapid increase in the use of wood pellets as a fuel. Sweden also has a system

based on green electrical certificates, which give the producer of electricity from

renewable fuels, a green certificate for every produced MW·h of energy. These certificates

can later be sold on the market and the price has fluctuated around 20 EUR/certificate for

the last five years. (Nilsson, 2008)

The low price of oil has until recently; set a barrier for the production of alternative cars. In

the last few years increasing prices of gasoline and oil have made research for other

alternative fuels more feasible from the economic point of view. The recent fall of the

Icelandic krona supports the potential Icelandic methanol fuel economy and the current

trade balance.

55

6 Economic evaluation

When working on the economic evaluation two sets of models have been constructed. The

first is a mole balance model and it is constructed in order to of simulate the biomass

gasification process for the production of methanol, and get an overview of the material

streams within the process, feedstock and products. First the gas composition is estimated

on the basis of literature. The gas composition of sawdust is based on Biomass–oxygen

gasification in a high-temperature entrained-flow gasifier (Jinsong, et al., 2009), black

liquor and organic matter is based on from Status and perspectives of biomass-to-liquid

fuels in the European Union (Kavalov & Peteves, 2005). The composition of gasified

waste is from Characteristics of oxygen-blown gasification for combustible waste in a

fixed-bed gasifier (Na, Park, Kim, Lee, & Kim, 2003) and wood is from the use of domestic

energy sources in the production of liquid fuel (Gunnarsson, 1998). All Gas compositions

are shown in Table 16 where the molar mass has been calculated from the percentage of

the gas composition. In the case of the waste, to take an example, the gas composition is

16% Hydrogen, 43% Carbon monoxide, 29% Carbon dioxide and 12% Methane.

Table 16 - Gas compostion and mol weight of selected biomass from the P-EFG-O2.

Multiplying these percentages with the molar mass of H2 (2.016 g), CO (28.010 g), CO2

(44.010 g), CH4 (16.043 g) gives the weight of one gas mol for each feedstock, for waste

27.055 grams per mol. The mol weight is then divided into the total amount of feedstock in

this simulation the total amount of feedstock is 147.000.000 kg where 105.000.000 kg are

biomass feedstock and 42.000.000 kg are oxygen feedstock. The mol weight of e.g. waste

being 27.055 grams per mol and divided into the total feedstock, with the composition as

earlier stated resulting in a categorization as shown in Table 17 presented in Kilo mol or

thousands of moles. This was also done with the other biomass feedstock, sawdust, black

liquor, timber and organic matter.

56

Table 17 - Waste gas composition in precentage and in kilo mols.

The amount of produced carbon monoxide, carbon dioxide and hydrogen is now known

and from each biomass feedstock the amount of methanol produced can be calculated

given the assumption that the ratio of carbon monoxide and hydrogen was 1/2 and the ratio

of carbon dioxide and hydrogen was 1/3. Table 16 shows us the total methanol production

in kilos, joules and in litres. The total production for each feedstock is close to 150.000.000

litres as shown in Table 18, therefore the assumption has been made in the financial model

to use 150.000.000 as starting production the first two years followed by an assumed 25%

increase in year 3 and an assumed 20% increase in year 4 reaching 250.000.000 litres and

staying constant for the rest of the financial model, which is around 175.000 tons of

biomass gasified.

57

Table 18 - Total methanol produced in liters.

Knowing the production of carbon monoxide, carbon dioxide and hydrogen level from the

gasification gives the opportunity to calculate how much additional hydrogen is needed to

balance the methanol production. This additional hydrogen shows us how much water and

electricity is needed in order to produce the additional hydrogen and the cost that is

associated with this production. Table 19 shows the variable cost breakdown of the price

per ton of different feedstock as mentioned in specified chapters and the costs for the

feedstock that is imported but as well for the national transportation cost of the domestic

feedstock. The cost of energy and the cost of water of base production and the additional

cost resulting in a total estimated variable cost per feedstock e.g. MSW with a total cost

estimation of €182.76 per ton.

Table 19 - Variable cost break down.

The cost of producing methanol is calculated by the total annual cost of the investment

divided by the amount of methanol produced in tons. The annual cost of the investment

consists of:

58

O&M,

The price of feedstock,

The price of delivery

The price of electricity,

The price of water supplied.

The total annual cost of investment is calculated by an estimation, based on knowledge of

the cost of major items of equipment as found in literature. The uncertainty range is

therefore considerable but with the use of 3point PERT analysis shown in Table 20 of

such estimates the effort was made to keep the estimates close to the actual cost. The

installed investment costs for the separate GtL units are added up to one sum. The same

has been done with the investment costs for electrolysis unit as well as cost of land and

design. The unit investments depend on the size of the components by scaling from known

scales in literature (see Table 3), using Equation 7 - Scaling equation.

Table 20 – 3Point PERT analysis

According to the first model the production is simulated based on the assumption that

oxygen and biomass are fed in to the gasifier at a certain ratio producing 150.000.000 litres

of methanol. The second model is a financial model used to evaluate the profitability of

the investment based on the results of the production model. This model consists of cost

analysis of the installation of gasification to liquid fuel system, but also the cost of

electrolysers to be installed and other costs such as land, design and insurance. As

mentioned in chapter 2.1 cost estimates from three different gasification units based on

literature were used as a base for the cost analysis. All cost were and converted to Euros

59

2008 and then scaled down to 300 air dried ton (Adt/d), this cost was the added into three

point estimate in order to get the most accurate cost assumptions.

6.1 Other assumptions

Other financial assumptions have been made to the base case financial model and have

been presented in previous chapters, they are. The investment cost of electrolyser € 82.21

million, gasification to liquid fuel system € 83.05 million and other costs € 2.77 million.

Working capital was assumed 20% of investment cost. Since the investment is long-term it

is financed with 20% equity and 80% FX loan, which is according to Árni Magnússon,

director of sustainable energy at Íslandsbanki, reasonable in normal capital market

conditions. However, the current capital market condition would probably demand for a

higher equity ratio of 30/70 or even 40/60. The lifetime of the loan stretches over 20 years,

bearing 10% nominal interests and a 15% return on equity. The tax rate has been decided

18% and the weighted average cost of capital (WACC) is therefore 9.56% and is used as

discount rate. The sales price has a reference to the European market price and has been

assumed € 350.64 per ton based on a 3 point calculation from a median price from

Methanex of € 321.17 per ton (http://www.methanex.com/products/ methanolprice.html)

plus an assumed subsidy in the form of government certificates and tax reductions. The

sales price increases between years with 2%, which is assumed inflation in the EU, and

Iceland. The variable cost depends on the feedstock used as mentioned earlier in table 16

and does not increase with inflation due to assumed better production efficiencies between

years. Other assumptions that have been made in this simulation are that there is a

possibility of scaling down the gasifier and that the gases produced are homogenous and do

not deflect from the composition presented.

6.2 Investment calculations

When using the above-mentioned assumptions for income that is the sales price of 350.64

and cost with the different variable costs based on sole production of methanol for the

Icelandic market Scenario 1 was created as shown in Table 21. It shows that municipal

solid waste (MSW) is the case winner and gives the highest NPV or € 16.04 million.

Domestic timber and imported sawdust, organic matter and black liquor show all negative

NPV but organic matter shows a small 3% internal rate of return. Thus Sawdust, black

60

liquor, organic matter and timber will not be discussed any further and the emphasis will

be on dismantling the MSW.

Table 21 - Value of investment

Looking closer at the MSW we see that the variable cost is the largest cost factor with 49%

of the total cost. Followed by the company cash and operations & maintenance cost this is

shown in Figure 16. It can be assumed that the variable costs are mostly paid in ISK while

the paid dividend, repayment of loan, paid interests and O&M cost are mostly costs mostly

paid in foreign currency. The assumption can therefore be made that the investment is

naturally well hedged against currency fluctuations.

Figure 16 – MSW cost analysis.

The MSW debt service coverage in Figure 17 shows that it takes around 3 years for the

investment to meet its debt obligations. After these three years and if there is no other debt

the investment has the strength to service its debts. This ratio also tells us that the

61

investment is generating enough cash to support higher debt ratio and that the investment

should be able to get good access to capital.

Figure 17 – MSW debt service coverage

Figure 18 shows the value of the investment. The NPV of total CF breaks zero after 27

years where it has repaid the initial investment and ends as earlier mentioned with a

positive NPV of € 16 million. The positive NVP is an indication that the investment is

feasible and that it is an investment worth continuing. The NVP consist of future cash

flows that have been discounted back to present time and is therefore a good indication of

the value of the investment and an indication of a selling price.

62

Figure 18 - MSW net present value.

For this investment there is a discount rate of 9.56 based on a calculated weighted average

cost of capital as shown in Figure 19.

Figure 19 – WACC

Figure 20 shows ROE, the return on shareholders equity shows how well the investment

generates profit from the equity put into the investment. The general trend is that capital-

intensive investments have low ROE. The ROIC shows the efficient allocation of the

company funds in cash flow generating investments this along with the current ratio, which

shows the company ability to meet its short-term debt is a good way of evaluating the

quality and the liquidity of the investment.

63

Figure 20 – ROE, ROIC and Current ratio

In Figure 21 the sensitivity of the investment has been calculated as if the discount rate had

either dropped by 50% or been raised by 50%. It shows that the investment with all other

parameters unchanged can with stand increases in the discount rate up by 20% to 11.5%. It

also shows that if the discount rate would drop by 50% down to 4.6% the value of the

investment would grow to € 84.8 million. It also shows that there is an exponential

function between the discount rate and the NPV.

64

Figure 21 - Sensitivity of investment according to discount rate

In Figure 22 the sensitivity of the investment has been calculated as if the nominal interest

rate of the loan has been lowered by 50% or been raised by 50%. It shows that the

investment with all other parameters unchanged is vulnerable towards an increase in

interest rates. A 10% nominal interest as assumed in the financial model, this is on the

other hand quite high. It can therefore be assumed that interests are likely to drop resulting

in a more positive NVP as shown. A 1% lower nominal interest rate the value of the

investment would grow to € 31.6 million.

65

Figure 22 – Sensitivity of investment to the nominal interest rate of loan.

Figure 23 shows the sensitivity of the investment towards price and it is clear that the

sensitivity is very high. A 10% lower sales price to € 316 per ton methanol will result in a

negative NVP of € -45.3 million. An increase to the price of 10% to € 386 per ton

methanol will increase the value of the investment by almost € 60 million to € 75.9 million.

It is clear that the highest sensitivity is towards the sales price of the methanol and

therefore holding the largest risk factor in the project.

Figure 23 - Sensitivity of investment according to price of sold methanol

66

Figure 24 shows that a 10% higher variable cost will result in a negative NVP of € -13.8

million. It is therefore fair to assume that the additional cost of exporting the fuel to the EU

would not be profitable in this case assuming the sales price of around € 350 per ton

renewable methanol. It also shows that there is no investment opportunity where VC is €

193 per ton, meaning that with all other assumptions kept unchanged the biomass cost

indifferent to what kind of biomass or if it is domestic or imported can not surpass the cost

of € 193 per ton in order for the investment to stay profitable with a sales price of € 350

per ton renewable methanol.

Figure 24 - Sensitivity of investment according to variable cost

67

7 Further considerations

The future does not lie in the sole use of fossil fuels for public transportation. The use of

alternative fuels is gaining ground and to day there are around 100 cars on Icelandic roads

using methane and over 20 cars using hydrogen.

In this research different biomass feedstock have been evaluated with the intention of

analyzing their financial feasibility. This biomass source can come from other organic

matter, waste, coal or biogas just to name a few. Further studies could be done on what

would be the most appropriate biomass for the Icelandic market. Even though the ultimate

goal is to have a nation that is driving on 100% renewable fuel the path toward this will be

taken in steps. One of the steps that can be taken towards CO2 reduction is to blend

methanol with existing gasoline thus no swift changes need to be made to the Icelandic car

fleet. Further studies will be needed into how we are to meet the targets set by the EU.

Selling electric energy through cable to the Faroe Islands or even all the way to Scotland.

The Nor-Ned project done by the Norwegian and Dutch electric companies connecting

Norway and The Netherland with a 700 MW electric cable has given some hope that in the

future Iceland can be a net exporter of energy to Europe. To day the Icelandic government

has been very keen on making deals with aluminium companies selling the electricity for a

low price stating that this way we are able to export the surplus Icelandic energy without

building cables. Alumina is simply imported to Iceland and aluminium is exported. This

large production of aluminium has given Iceland bad publicity and a lot of heated debates

have sprung between in favour of aluminium smelters and those how support heavy

industry and those against. Further studies need to be made on the feasibility of exporting

energy as liquid hydrogen or methanol. This would not only give a positive environmental

image of the Icelandic people but might be a step towards fuel independency.

Methanol has already proven that it can be one of the floras of alternative fuels offered to

the consumer. The need for alternative fuels is greater than the potential competition

between the electric car and the methanol fuel. Methanol might be a better substitute than

electricity to the long distance transport, boats or airplanes but electricity a better fuel

substitute than methanol to the short distance inner city transportation. The future will most

certainly not rely on one dominant fuel but the utilization of different fuel all depending on

68

the purpose. Adding to the gasification to liquid fuel process the value of an alternative

waste management has not been done. Further work can be done into the assessment of the

actual value of using MSW as feedstock for gasification.

Plasma gasification has not been mentioned here for the simple reason that the focus of this

thesis was to provide a viable solution with established technology and well-known

methods. Further considerations are to analyse in greater detail the real cost of biomass

import, and if it is feasible to import biomass for gasification in the co-production of

methanol with CRI geothermal CO2 sequestration and methanol production. Other options

could be to look into the feasibility of biomass gasification without synthetic fuel

production. The largest costs are in the electrolysis and raw gas cleaning and processing.

Would it be more profitable to just produce LPG from the raw gas? These are

considerations that are open to more research in the area of gasification in Iceland. My

conclusion is that building of a small gasifier here in Iceland is of great interest both in the

field of waste management, fuel production and potentially a very good investment.

69

8 Results & Conclusion

Gasification is a well-mastered technology to day, which offers multiple options in energy

production both through heat and through the production of synthetic fuels. The recycling

of carbon, hydrogen and methane into fuels to drive our vehicles is another way of

harnessing the energy of the sun. Combining carbons from gasification with renewable

hydrogen in the production of liquid methanol is also a way of energy storage. Better use

of the harnessed energy from the Icelandic renewable resources can be done with better use

of the stranded or off peak energy. Even though the cities go to sleep, the river still flows,

heat keeps boiling underneath our feet, and the steam still blows. This stranded energy can

be used in the production of renewable hydrogen. Even though the use of hydrogen has not

come as far as other alternative vehicle fuels the need for hydrogen in the gasification to

liquid process is still viable as an option to off peak energy storage.

This feasibility study was initially targeted to find an alternative use of the electric energy

produced from the vast renewable energy resources Iceland possesses. An alternative that

could provide a renewable utilization to the energy that is today sold at a relatively

reasonable price to industries such as the aluminium smelters. The first idea was initially

based on the same financial concept as the aluminium smelters that is the import of a good

in this case biomass instead of Alumina and the use of the low cost electric energy to add

further value to the production of biomass to fuel. Much like the Alumina is turned into

Aluminium with electrolysis the intention was to use water electrolysis to produce oxygen

and hydrogen for use in the gasification of biomass in the production of a liquid fuel. The

conclusion of this feasibility study now shows that it can be feasible to utilize the low price

of electric energy that is ready and available in Iceland in the production of renewable

methanol. As shown in Figure 25 around 40-80% of the biomass to methanol process

expenses in this feasibility study is in the electrolysis of water in the production of oxygen

and hydrogen. These numbers do not include the energy needed in the pre-treatment of the

biomass such as the drying and grinding. The feasibility study shows that with an

investment of almost € 170 million and a sales price of € 350 per ton the biomass variable

cost may not surpass € 193 per ton to make the venture feasible. Adding the assumed cost

of import/export of € 37 per ton to the biomass variable cost the renewable methanol sales

price would have to be over € 420 per ton in order for the investment to be profitable. If the

price of MSW would be subsidized with municipal taxes of € 110 per ton such as it is in

70

Iceland with MSW, reducing the variable cost to € 109 the renewable methanol sales price

would have to be over € 272 for the investment to be profitable.

Figure 25 - Cost composition of biomass feedstock

Can the use of stranded or off-peak renewable electricity produced from Icelandic hydro

plants lead to a feasible investment in the biomass gasification to liquid fuel production

process in Iceland? The answer is positive, with the substantial need of electrolysis of

water producing renewable hydrogen and oxygen in the production makes Iceland an

attractive option.

The results show that from the five biomass feedstock options that were used in this

feasibility study, that it is only feasible to use domestic MSW as biomass feedstock in the

production of methanol. This is manly due to the low variable cost of the MSW but also du

to lower transport cost and no VAT. Not only will the use of MSW provides us with a

domestic fuel production but also adds an additional solution to the problem of waste

management. However this is not a short-term investment and even though the invest does

show a small profit after 5 years it does not have a positive NPV until after 27 operating

years. The conclusion of this study is that MSW gasification to liquid fuel production is

feasible in Iceland but the import of biomass such as black liquor or sawdust to Iceland

71

with the intention of GtL is not feasible unless the total cost of the biomass imported is

below € 193 per ton. In addition a higher price could possibly be obtained if the methanol

produced would not be exported but sold in the domestic fuel market. An investment of

almost € 200 million is a long-term investment that would need government subsidies to be

more attractive as an investment. Relatively reasonable price of renewable electric power

in Iceland makes Iceland an ideal location for the production of energy intensive products

such hydrogen much needed in the liquid fuels through gasification process.

This M.Sc. thesis has evaluated the feasibility of building an Icelandic gasification plant

with pre-treatment, gas cleaning unit and synthesis island with the intention of producing

and selling a renewable liquid fuel in Iceland.

72

73

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