Cutting costs with synthetic biofuels · 2019-09-24 · Cutting costs with synthetic biofuels ......

Cutting costs with synthetic biofuels –commercialization pathway to markets

Ilkka Hannula andEsa Kurkela24/09/2019 VTT – beyond the obvious

24/09/2019 VTT – beyond the obvious

Consumer demand for sustainabletransport is on the rise


A ”portfolio” of decarbonization solutionsare under intense development

Cost of Li-ion battery packs in BEV in Nykvist and Nilsson (2015)


Projects awarded funding between 2012 – 2014 by NER300Project name Member state Project Sponsor Fuel output Funding

kton/a ktoe/a MW M€ €/MWhAjos BTL Finland Forest BtL Oy 150 150 229 88 17GoBiGas, phase 2 Sweden Göterborg Energi 50 57 87 59 20UPM Stracel BTL France UPM Kymmene 105 105 160 170 37Bio2G Sweden E.ON 115 131 200 204 37Woodspirit The Netherlands MCN 225 102 156 199 -

Synthetic biofuels have facedrepeated set-backs in scale-up


§ Sustainable fuels found competitive over long distances even as electric vehicles become cheaper

§ Electrofuels remain expensive in the near term and are difficult to scale up in the longer term.

§ Synthetic biofuels identified as being more competitive than electrofuels at the present time.

§ At this state, we need a wide portfolio where we focus on learning-by-doing and economies of scale.

Link to the paper: http://bit.ly/2mcUZsO

”Apples-to-apples” comparison of roadtransport decarbonisation options

http://bit.ly/2mcUZsO

Setting cost targets for carbon-neutral synthetic fuels§ At today’s battery cost:

• Short-range BEV < $105/bbl• Long-range BEV < $419/bbl

§ At 2022 DOE target cost:• Short-range BEV < $66/bbl• Long-range BEV < $262/bbl

See Hannula and Reiner (2019): http://bit.ly/2mcUZsO

http://bit.ly/2mcUZsO


§ Costs strongly affected by scale

Scale economics of synthetic biofuels



NER 300


”Initial cost effectivenessapproach to BTL”



NER 300

GoBiGas


152 M€



NER 300

GoBiGas

§ Costs strongly affected by scale§ However, scale benefits largely achieved

by 100 MWsynfuel scale

152 M€



GoBiGas

NER 300


by 100 MWsynfuel scale

152 M€



GoBiGas

NER 300


by 100 MWsynfuel scale§ GoBiGas ~7.6 €/Wfuel

§ Same plant• 50 MW à 5.5 €/Wfuel

• 75 MW à 4.8 €/Wfuel

• 100 MW à 4.4 €/Wfuel

152 M€



GoBiGas

NER 300




• 75 MW à 4.8 €/Wfuel

• 100 MW à 4.4 €/Wfuel

152 M€

2/3

1/3



GoBiGas

NER 300




• 75 MW à 4.8 €/Wfuel

• 100 MW à 4.4 €/Wfuel

152 M€



GoBiGas

NER 300

Commerciallyviable BTL?




• 75 MW à 4.8 €/Wfuel

• 100 MW à 4.4 €/Wfuel

152 M€

”NER300 approach” to BTL


Hydrocarbon liquids

OXYGEN GASIFIER

BELT DRYER

ASU

AUXILIARY BOILER

Air N2

O2

H2S

Steam Steam

Filter ash

Purge

Steam

Unconverted gas

Bypass

HOT-GAS FILTER

ATR POX REFORMER SOUR SHIFT SCRUBBER

COOLERCENTRIFUG.

COMPR.

WET CO2 REMOVAL

RECYCLEF-T

SYNTHESIS

CO2

Flue gas

Forestresidues

POWER GENERATION EQUIPMENT

WSAH2SO4

WET SULPHUR REMOVAL

RECOVERY&

UPGRADE

”NER300 approach” to BTL


Hydrocarbon liquids

OXYGEN GASIFIER

BELT DRYER

ASU

AUXILIARY BOILER

Air N2

O2

H2S

Steam Steam

Filter ash

Purge

Steam

Unconverted gas

Bypass

HOT-GAS FILTER

ATR POX REFORMER SOUR SHIFT SCRUBBER

COOLERCENTRIFUG.

COMPR.

WET CO2 REMOVAL

RECYCLEF-T

SYNTHESIS

RECOVERY&

UPGRADE

CO2

Flue gas

Forestresidues

POWER GENERATION EQUIPMENT

WSAH2SO4

WET SULPHUR REMOVAL

Give up oxygenplant: -10%

Eliminate separateWGS step: -2%

Rethink on-site steam generation: -5%

Simplify acid gas removal: -10%

Once-through FToptimised for plantoverall efficiency

Identified potentialfor CapEx savings:Oxygen plant 10%Sour shift (WGS) 2%Steam generation 5%Rectisol / WSA 10%à ~25% reduction


Steam

Forestresidues

RawFT product

Char

DFB GASIFIERDRYER(S)

DFB OXIDISER

Filter ash

Offgas

Air

HOT-GAS FILTER

ATR POXREFORMER

SCRUBBERCOOLER

SORBENT SULPHUR REMOVAL

ONCE THRUF-T

SYNTHESIS

PRODUCT RECOVERY

Flue gas STEAM/DH GENERATIONEQUIPMENT

CENTRIFUGAL COMPRESSOR

Air

”Low-CapEx” approach to BTL

Performance*- Efficiency to FTL: 49-55%- Efficiency to DH: 31-40%- Electricity deficit: 10-12%TCI for FOAK at 150 MWth scale:- Central est: 299 M€- Low est: 255 M€- High est: 352 M€

*Tuomi et al. (2019) and Kurkela et al. (2019)

Production cost estimate for a First-of-a-kindBTL plant at 150 MWbiom (~1000 bbl/d) scale


§ Total capital investment(TCI) estimate for FOAK plant is 299 M€ (255-352 M€) at 150 MWthscale.

§ The levelised cost of fuelsis calculated for threedifferent biomass prices

Financial parameters:- WACC: 8%- Economic life: 20 y

”Best guess”?

What will be the value of advanced biofuels?


Pöyry (Sipilä et al. 2018) studyconcluded, that

• The market for advanced biofuels will likely be supply limited and

• Prices will be largely governed bythe level of fines and taxexemptions

What will be the value of advanced biofuels?


§ Finnish law on promoting biofuels (March 2019)• Blending obligation will gradually increase to 30% by 2029 • For adv. biofuels obligation will gradually increase to 10% by 2028• Fine will be 0.03 €/MJ = 1284 €/tonne (~190 $/bbl).

§ In Sweden the fine is • for petrol 490 €/tCO2 = 1580 €/tonne (~200 $/bbl)• for diesel 390 €/tCO2 = 1281 €/tonne (~180 $/bbl)

Average selling price of Neste renewable diesel and the market price development in Sweden


As reported by NesteValue in Sweden

Production cost estimate for a First-of-a-kindBTL plant at 150 MWbiom (~1000 bbl/d) scale


§ Total capital investment(TCI) estimate for FOAK plant is 299 M€ (255-352 M€) at 150 MWthscale.

§ The levelised cost of fuels is calculated for three different biomassprices

Fine for advanced biodiesel in Finland and Sweden

Needed investment support for a FOAK plant to reach 1280 €/tonne LCOF


The needed FOAKinvestment support is calculated for § Three different

investment estimates, and

§ Three different biomassprices

NER300 awards: - GoBiGas 2 59 M€- Ajos BTL 88 M€- UPM Stracel BTL 170 M€- Bio2G 204 M€

Integration to existing process industry

§ Final refining of FT products into drop-in transportation liquids takes place in existing oil refineries• Benefits from economies of scale

24.9.2019 VTT – beyond the obvious 25

§ Primary conversion plants located close to biomass sources and integrated to local district heating networks or heat-consuming industries• Utilisation of by-product heat to

achieve > 75-80 % overall efficiency

26

COST EXPECTATIONS FOR NEW TECHNOLOGY – WHERE ARE THERMOCHEMICAL BIOFUELS ON THIS MOUNTAIN ?

($/output)

27

Nth plant

N-1th plant

N-2th plant

1st-of-its-kind($/output)

The ”Mountain of Fog”

COST EXPECTATIONS FOR NEW TECHNOLOGY – WHERE ARE THERMOCHEMICAL BIOFUELS ON THIS MOUNTAIN ?

VTT 2018

§ Three learning rates (LRs) • 11 % (electricity from biomass)1

• 20 % (Brazilian ethanol)2

• 26 % (organic chemicals)3

Production cost outlook for 10 000 bpd deployment

1Rubin et al. (2015)2van den Wall Bake, J. et al. (2008)3Merrow, E. (1989)

VTT 2018

§ Three learning rates (LRs) • 11 % (electricity from biomass)1

• 20 % (Brazilian ethanol)2

• 26 % (organic chemicals)3

§ 10 000 bpd equals roughly 0.5 Mt per year, or 8% of the RED II demand for advanced biofuels

§ However, we do not have a good understanding on the early phases of learning

Production cost outlook for 10 000 bpd deployment

1Rubin et al. (2015)2van den Wall Bake, J. et al. (2008)3Merrow, E. (1989)

Pöyry’s long-term estimatefor the value of HVO

VTT 2018

Grubler (2010) on the costs of the Frenchnuclear scale-up:

“The ambitious French PWR expansion program is legitimately considered the most successful scaling-up of a complex, large-scale technology in the recent history of industrialized countries.”

How to nurture learning by doing?

VTT 2018

Grubler (2010) on the costs of the Frenchnuclear scale-up:

“Reasons for this success lay in a unique institutional setting allowing

• centralized decision-making, • regulatory stability, • dedicated efforts for standardized reactor

designs, and • a powerful nationalized utility, ÉDF, whose

substantial in-house engineering resources enabled it to act as principal and agent of reactor construction simultaneously”

How to nurture learning by doing?

32VTT 2018

• A 14% target for renewable energy in transport in 2030

• Crop-based biofuels capped at member states' 2020 levels, but must not surpass 7%.

• Minimum target for advanced biofuels 3.5% in 2030.

• Multiplier for adv. biofuels: 2• Multiplier for renewable electricity: 4

*Half of the EU’s 6 billion euros ($7 billion) worth of palm oil imports are used for biodiesel, according to data from Copenhagen Economics.

RED II on transport

33VTT 2018






RED II on transport

34VTT 2018






RED II on transport

35VTT 2018


4

2





RED II on transport

36VTT 2018

What will the demand for advanced biofuels be?


• Food crops (read: palm oil) that result in high indirect land use change (ILUC) are capped to 2019 levels* until 2023, and phased out by 2030.

• Not a ban or even a restriction on palm oil imports, but regulates which biofuels can be calculated towards RE targets.

• No restrictions on used cooking oil (UCO) and wastes like animal fats

• There was also an agreement on the obligation for advanced biofuels with minimum targets set at

• 0.2% in 2022, • 1%in 2025 and • 3.5% in 2030.

• The final stage is for the agreement to be approved by the European Parliament and the European Council, which could take a few months.

37VTT 2018


Taking into account double counting, the actual demand for advanced biofuels will be• 300 ktoe from 2022• 1.5 Mtoe from 2025• 5.4 Mtoe from 2030

Number of ABF plants (à 100 ktoe~2000bpd) operating on other than palm oil• 0 plants until end of 2027• 4 plants from 2028• 10 plants from 2029• 54 plants from 2030• ? plants from 2031

What will the demand for advanced biofuels be?

VTT 2018

§ Sustainable fuels are likely to remain competitive in road transport even iflow battery prices are achieved

§ Thermochemical biofuels are currently risky and costly• However, technologies can and usually will get cheaper with increasing experience

§ Choosing the ”optimum” scale for a FOAK plant complicated.• Even medium-scale deployment pathways can quickly lead to reasonable BEOPs in

the medium-term if high learning rates can be realised.• Better understanding on the economics of scale, and early-stage learning needed.

§ Most policies in the past have promoted a “rapid scale-up” approach.• Problematic due to lack of investment appetite for large-scale high-risk bets.• Policy implication: Learning, not initial cost effectiveness ($/bbl of NER300), should

be an important goal of early-stage technology promotion.

Summarising…

VTT 2018

§ Grubler, A. The costs of the French nuclear scale-up: A case of negative learning by doing, Energy Policy, 38(9), 2010, pp. 5174-5188. DOI: 10.1016/j.enpol.2010.05.003.

§ Hannula and Reiner, Near-Term Potential of Biofuels, Electrofuels, and Battery Electric Vehicles in Decarbonizing Road Transport, Joule (2019), https://doi.org/10.1016/j.joule.2019.08.013

§ Kurkela, E., Kurkela, M., Tuomi, S., Frilund, C., & Hiltunen, I. (2019). Efficient use of biomass residues for combined production of transport fuels and heat. VTT Technical Research Centre of Finland. VTT Technology, No. 347 DOI: 10.32040/2242-122X.2019.T347

§ Merrow, E. An analysis of cost improvement in chemical process technologies. R-3357-DOE. RAND Corporation, Santa Monica, USA. 1989.

§ Nykvist, B., and Nilsson, M. (2015). Rapidly falling costs of battery packs for electric vehicles. Nat. Clim. Change 5, pp. 329–332.

Bibliography

https://doi.org/10.1016/j.joule.2019.08.013

VTT 2018

§ Rubin, E., Azevedo, I., Jaramillo, P. and Yeh, S. A review of learning rates for electricity supply technologies, Energy Policy, Volume 86, 2015, Pages 198 – 218.

§ Sipilä, E., Kiuru, H., Jokinen, J., Saarela, J., Tamminen, S., Laukkanen, M. and Palonen, P. (2018). Biopolttoaineiden kustannustehokkaat toteutuspolut vuoteen 2030. http://urn.fi/URN:ISBN:978-952-287-614-0

§ Tuomi, S., Kurkela, E., Hannula, I. and Berg, C.G. The impact of biomass drying on the efficiency of a gasification plant co-producing Fischer-Tropsch fuels and heat – A conceptual investigation, Biomass and Bioenergy, 127, 2019. https://doi.org/10.1016/j.biombioe.2019.105272

§ van den Wall Bake, J., Junginger, M., Faaij, A., Poot, T. and Walter, A. Explaining the experience curve: Cost reductions of Brazilian ethanol from sugarcane, Biomass and Bioenergy, Volume 33, Issue 4, 2009, Pages 644-658, ISSN 0961-9534

Bibliography

http://urn.fi/URN:ISBN:978-952-287-614-0

https://doi.org/10.1016/j.biombioe.2019.105272

Cutting costs with synthetic biofuels · 2019-09-24 · Cutting costs with synthetic biofuels ......

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