Costs of hydrogen from coal gasification?

Costs of hydrogen from coal gasification

What are the costs of hydrogen from coal gasification? This model breaks down the economics, line-by-line, across different plant configurations, backed up with data from half-a-dozen technical papers. We think black hydrogen costs $1-2/kg, but CO2 intensity is very high, as much as 25 tons/ton. It can possibly be decarbonized resulting in semi-clean hydrogen costing c$2.5/kg.

SynGas is a mixture of hydrogen, carbon monoxide and CO2 that is produced by heating coal to around 1,400ºC in an oxygen-limited reactor. The process goes back to 1792, where it was used to produce ‘town gas’. Today, there are over 500 coal gasifiers operating in the world, largely in China and South Africa.

In our base case model, we think that a typical syngas plant must charge around $500/ton, in order to generate a 10% IRR. The syngas can then be used in making chemicals (c50% of the syngas market, e.g., ammonia, methanol), for fuels (c30%), or combusted in a power plant (c20%).

However, CO2 intensity is very high, as much as 0.6 kg/kWh-th, 3x more than natural gas CO2, 1.5x more than average coal grades. Making syngas is only c70-80% efficient at harvesting the energy from coal, which is why the CO2 intensity of syngas is higher than coal itself. Moreover, the product is already partly oxidized (it contains CO), so it releases less energy when it is combusted.

Pure hydrogen can also be separated out from the syngas, by promoting the water-gas-shift reaction, then removing all of the impurities and acid gases. This is referred to as ‘black hydrogen’. We think a 10% IRR requires a hydrogen price of $1-2/kg. But again, CO2 intensity can be astronomically high, as much as 25 tons of CO2 per ton of hydrogen (i.e., 25 tons/ton). This is 3x more than generating hydrogen from steam methane reforming of natural gas (grey hydrogen). Please see our overview of hydrogen technologies.

As part of the energy transition, preserving a future for clean coal, it is feasible to purify and dispose of >90% of this CO2 from producing black-brown hydrogen. The result is a low-carbon hydrogen resource, maybe around 0.06kg/kWh-th. It is possible. But there is a lot of CO2 to dispose of, amplifying costs. The process could be economical at around $2.5/kg hydrogen, we estimate ($22/mcf-equivalent). Details are in the model. But we still prefer blue hydrogen and turquoise hydrogen as leading options.

The costs of syngas and the costs of hydrogen from coal gasification depend on input variables. Capex costs are usually around $1,000/kWth of syngas. Other inputs are coal prices, efficiency factors, chemicals costs, labor costs and other variables. These can be stress-tested in different tabs of the data-file. Data from technical papers are tabulated in half-a-dozen back-up tabs.

Coal grades: what CO2 intensity?

CO2 intensity of coal

What is the CO2 intensity of coal? To answer this question, we have aggregated data on twenty five coal samples, across different countries, grades and technical papers. Sampled countries include China, Indonesia, Mongolia, Germany, Poland, the US, Canada, Australia, Japan and Korea.

The coal grades in the data file span across petcoke, anthracite, bituminous coal, sub-bituminous coal and lignite. All of these are classified as “coal”. Although their chemical and physical properties vary vastly.

The average coal grade in our data-file consists of 63% carbon, 30% volatile components that will gas out when coal is heated, 12% moisture (i.e., water) and 12% ash. (Note that the numbers do not add to 100% because some of the volatile components include hydrocarbons, including methane, which in turn contain carbon). Again these properties vary widely, from anthracites with >5% moisture to lignites and peats with over 50%.

The average energy content is 6,250 kWh/ton, within a range of 3,000 kWh/ton to 9,000 kWh/ton. This is mostly determined by the amount of carbon in the coal grade, which in turn will determine its CO2 emissions. CO2 intensity can then be calculated by dividing CO2 emissions (in kg) by energy content (in kWh).

The typical CO2 intensity of burning coal is estimated at 0.37 kg/kWh, looking across these twenty-five examples, with a straight line average. The range is approximately 0.3 – 0.5 kg/kWh. This is consistent with the CO2 intensity range given by the IPCC, which comes out around 0.35 kg/kWh.

The CO2 intensity of coal depends mostly upon the mineral composition of the coal sample, and appears to vary, sample by sample, with little underlying pattern. Strictly, for a full-cycle CO2 intensity calculation, we should also add in the CO2 intensity of producing, processing and distributing coal, i.e., Scope 1-2 CO2 intensity. And then we must also adjust for different fuel’s efficiency factors.

The data support the conclusion that coal is approximately 2x more CO2 intensive per unit of thermal energy than natural gas, where CO2 intensity is around 0.19kg/kWh. This is consistent with our analysis of bond enthalpies and energy units and conversions.

Bio-coke: energy economics?

Bio-coke energy economics

Bio-coke is a source of carbon and energy for steel-making, and other smelting operations where metal oxides need to be reduced to pure metals.

Bio-coke differs from conventional coal-coke or petcoke in that it is derived from biomass, ideally waste biomass, which would otherwise have decomposed. This lowers emissions.

Specifically, input materials are treated at high temperatures and pressure (sometimes around 1,000ºC) to drive off non-carbon materials as gases and ashes.

Bio-coke energy economics. Costs of bio-coke production will most likely run at $450/ton, in order to earn a 10% IRR on a greenfield facility, per the calculations in this model. This is c50% more than the typical price of $300/ton for coal-coke, in normal times. But the higher cost may be economically justified…

Total CO2 intensity of producing bio-coke is calculated at 1 – 1.5 tons/ton, as quantified from technical papers and our own estimates in this data-file. Hence it would save around 2 – 3 tons/ton of CO2 compared with coal-coke. CO2 abatement costs are therefore implied to run at $70/ton, which is competitive on our roadmap to net zero.

However, bio-cokes are not directly comparable with coal-cokes. For example, bio-cokes might have an energy density above 5,000 kWh/ton and “fixed carbon” of 25-85%, a broad range depending on processing parameters. By contrast, traditional coke is closer to 7,000-8,000 kWh/ton, and always above 80% carbon. In addition, bio-cokes can be 50-75% softer and more reactive in some furnace designs than traditional coke. This requires plant modifications, additives and binders, which are still being de-risked.

There are also challenges for scaling. Near-term bio-coke production facilities are likely operating with scales of tens of kTpa. One of the larger operations today, situated in Brazil, makes 600kTpa of ‘zero carbon’ steel, which itself requires 50,000 hectares of planted eucalyptus. However, the total global steel industry produces 2GTpa of output, and replacing all of its coal and coke with biomass could require 2GTpa of biomass inputs, equivalent to the world’s total global timber harvest.

Overall, we conclude that there are good opportunities for bio-coke to contribute to decarbonization of metals and materials, as one out of many concurrent opportunities. Although we might still prefer adjacent opportunities in biochar. You can stress test broad-ranging input variables for bio-coke energy economics in this model.

All the coal in China: our top ten charts?

China's coal industry

Chinese coal provides 15% of the world’s energy, equivalent to 4 Saudi Arabia’s worth of oil. Global energy markets may become 10% under-supplied if this output plateaus per our ‘net zero’ scenario. Alternatively, might China ramp its coal to cure energy shortages, especially as Europe bids harder for renewables and LNG post-Russia? Today’s note presents our ‘top ten’ charts on China’s opaque coal industry.

Coal miners: a screen of Western companies?

In normal times, thermal coal producers have debatable ESG credentials, owing to being the highest carbon fossil fuel, and 2-3x higher CO2 intensity per MWH of useful energy than natural gas.

However, in 2022-25, we could be in a market where deployment of important energy transition technologies is being held back by energy shortages, which pull on the demand for thermal coal; and also metals shortages, which in turn pull on the demand for metallurgical coal. We might not go so far as to call coal an ESG investment.

Nevertheless, this data-file aims to screen 15 Western coal producers. This group produces around 500MTpa of thermal coal and 100MTpa of metallurgical coal from the US, Canada, Europe and Australia. Most companies have been cutting capacity and phasing back activity. In turn, this creates potential to ramp back c100MTpa of production amidst very deep energy shortages, equivalent to c400TWH of useful energy.

The screen highlights each company, its size, concentrated to coal, its asset base and other details around its longer-term strategy.

Energy return on energy invested?

Energy return on energy invested

Energy return on energy invested is a horrible metric: calculated differently in almost every study on the topic, and fairly difficult to delimit conceptually.

Despite this, we have made an attempt to quantify EROEI, apples-to-apples, across our own different models, calculating the energy that can be derived, over a 30-year time horizon, per unit of full-cycle energy inputs, on a net basis after efficiency losses.

Global average EROEI is around 30x. Sources with EROEI above average are hydro, nuclear, natural gas and coal. Sources with middling EROEIs of 10-20x are solar, wind and LNG. Sources with weaker EROEIs are oil products, green hydrogen and some biofuels.

European Natural Gas Demand Model

European gas supply demand

This European gas supply demand model assesses the balances in European gas markets from 1990 to 2030, reflecting all of our research and views on the energy transition. Supply-demand balances are broken down as a function of a dozen key input assumptions, which you can flex.

As of mid-2022, we think Europe’s 45bcfd gas market is at risk of suffering from a 3-10 bcfd gas shortage in 2022-25, depending on Russian supplies, which are quantified in the file.

Over time, gas shortages will be assuaged by adding 2bcfd-eqivalent of wind/solar each year and ramping LNG from 75MTpa in 2019 and 160MTpa in 2030.

Amidst the shortages, however, it is harder to phase out coal and nuclear, harder to ramp electric vehicles and hydrogen (they must be powered) and it is going to become necessary to re-prioritize domestic production.

Our pricing outlook worries about price spikes continuing in 2023, and until demand is forcibly lowered, perhaps even via rationing.

Variables that can be flexed in the model, for stress-testing purposes, include the growth rates of renewables (wind and solar), the rise of electric vehicles, the rise of heat pumps, the phase out of coal and nuclear, industrial activity, efficiency gains, LNG and hydrogen.

Our European gas supply demand model also contains granular data, decomposing gas demand across 8 major categories, plus 13 industrial segments, going back to 1990 (albeit some of the latest data-points are lagged); as well as 15 different supply sources, with monthly data going back a decade (chart below).

Data through 2021 are shown below, including a depressing 5% reduction in indigenous gas production, which has almost trebled Europe’s reliance upon Russian gas imports. The data-file was last updated in September-2022, containing data through 1H22, although some data-points in back-up tabs remain lagged as they have not been released yet by sources such as Eurostat.

European gas supply demand

Please download the model to run your own scenarios. The buttons below allow you to select the 2021 version of the model, prior to Russia’s invasion of Ukraine, and our updated 2022 model, which envisages various changes, as discussed in our latest outlook for European natural gas.

Global energy market model for the energy transition?

Global useful energy demand ramps from 70,000 TWH in 2019 to 120,000 TWH by 2050, wind and solar provide 25%, while 85Mbpd of oil and 300 TCF pa of gas are still needed in the energy transition

This data-file is a global energy market model for the energy transition. It contains long-term energy supply-demand forecasts by energy source; based on a dozen core input assumptions. Total useful energy consumed by human civilization rises from 70,000 TWH pa to 120,000 TWH pa by 2050. 25% of demand is met by wind and solar. Another 10% is nuclear and hydro. The remaining 65% must come from decarbonized fossil fuels, which means phasing our coal, 300 TCF pa of natural gas, and 85Mbpd of oil, combined with CCS and nature-based CO2 removals, as part of the roadmap to net zero.

Global useful energy use stood above 70,000 TWH in 2021, having risen at 2.5% per year in the past decade. It will continue rising to above 120,000 TWH pa by 2050, per our breakdown of global energy demand by region. Improving the availability of useful energy has been a remarkable driver of human progress since the Industrial Revolution.

Long term energy demand per person per year in MWH pp pa rises from 9 MWH to 12 MWH by 2050
Useful energy demand per global person rises from 9 MWH pp pa in 2019 to over 12 MWH pp pa in 2050, although this still leaves 4bn people in the emerging world with 60-80% less useful energy per capita than today’s top 1bn in the OECD.

Wind and solar comprised 10% of all global electricity by 2021, of which two-thirds is wind, one-third is solar; making up 13.5% of OECD electricity and 8% of non-OECD electricity.

Ramp renewables first. By moving Heaven and Earth, if will be possible to overcome renewables bottlenecks and accelerate renewables to provide 30,000 TWH of useful energy in 2050, or 25% of all global energy. An incredible ramp-up.

Another 10% of 2050’s energy can come from nuclear and hydro. We see an outright ‘nuclear renaissance‘ underpinning 2.5x growth from nuclear through 2050.

What about the other 65%? It is simple arithmetic. Almost 10bn people on Planet Earth will collectively be consuming 120,000 TWH pa of useful energy by 2050. 25% can come wind and solar. 10% from other renewables. But the remaining 65% must come from somewhere, or the result will be devastating energy shortages.

(What about efficiency gains, e.g., ramping electric vehicles? Our numbers above are already being quoted on a ‘net useful energy’ basis, after deducting efficiency losses from primary energy suppliers. I.e., they are already net of efficiency factors. Interestingly, gross numbers for primary energy supplies per capita already peaked in 2019 at around 21 MWH in 2019, which is seen slipping back to 20 MWH pp pa by 2050).

Primary energy demand per global person has alraedy peaked at 21 MWH pp pa in 2019 and likely falls back to 20 MWH pp pa by 2050
Primary energy demand per global person has alraedy peaked at 21 MWH pp pa in 2019, and likely falls back to 20 MWH pp pa by 2050, as part of our modelling.

Phasing out coal. Given the need for fossil fuels in the world’s future energy system, we should clearly prefer the cleanest and lowest carbon fuels possible, which are inherently easier to decarbonize via CCS and nature-based solutions. This means phasing out coal by 2050, with a CO2 intensity of 0.37 kg/kWh-th.

Natural gas is the crucial fuel for the energy transition. Natural gas is the lowest carbon fossil fuel, with 54% of its combustion energy coming from hydrogen in the methane molecule (CH4). Hence gas ramps by 2.2x to 300 TCF per annum in our model.

Oil demand move sideways, rising gently to a peak of 104Mbpd in 2030, which is driven by the emerging world, then slowly declining back to 85Mbpd in 2050.

Electricity comprises 40% of the world’s total useful energy, with 28,000 TWH generated in 2021, and the remaining non-electric energy is used for heat, motion, materials. Our numbers require electrification to accelerate to 60% of 2050 energy.

This scenario is compatible with reaching “net zero” and limiting global warming to 2C. However, the fantasy of “perfect energy” must not de-rail implementation onf sound energy policies. Delivering this roadmap above requires pragmatism, progress and the willingness to deploy large amounts of capital.

Total global investment in energy steps up from around $900bn pa in 2019 to over $4trn pa by 2050. A 5x step-up in the capital investment into wind and solar is required, and by 2040, these two energy sources must themselves attract over $1.5trn pa of spending. Capex requirements are modeled out in the data-file.

Total primary and new energies capex steps up in the energy transition from around $1trn pa to $4trn pa, across wind,  solar, oil, gas, power networkds and CCS

You can also ‘flex’ different assumptions, to see how it will affect future oil, coal and gas demand, as well as global carbon emissions. For analysts that enjoy sensitivity analysis, future energy scenarios, and stress-testing models.

Other inputs include our modelling of wind and solar capacity additions, a long-term oil demand model, gas market models, coal supply forecasts and an increasingly favorable outlook on nuclear.

Annual data are provided back to 1750 to contextualize the energy transition relative to prior transitions in history (chart below).

A fully decarbonized energy market is possible by 2050, achieved via game-changing technologies that feature in our research. To stress test different energy supply scenarios, please download our global energy market model.

Power plants: cold starts and ramp rates?

ramp-up rates of power sources

The purpose of this data-file is to aggregate the ramp-up rates of conventional power generation sources: both as they start up from “cold”, and then as they ramp up (in percent per minute, or MW per minute).

Hydro power and simple cycle gas turbines offer the best short-term performance, ramping immediately and rapidly. Next come combined cycle gas plants, then coal, then nuclear.

Nuclear is nuanced. It might take a day to cold-start up a nuclear plant. But the average facility is 1.1GW. So even a 1% ramp rate is equivalent to adding 10MW per minute, similar in size to the average utility-scale solar plant.

Coal mining: the economics?

This data-file aims to approximate the economics of a new coal mine, using simple rules of thumb and data from past projects, capex (in $/Tpa) and opex (in $/ton).

Coal is ridiculously cheap, providing thermal energy at around 1c/kWh while also generating a 10% IRR on the new investment. 1 MWH pa of new energy can be produced for an up-front investment of around $10.

A high CO2 intensity of 0.55kg/kWh is also quantified in the data-file, including combustion emissions, methane leaks, diesel fuel and electricity usage at the mine.

Please download the data-file to stress test the economics and sensitivity to coal prices in $/ton.

Copyright: Thunder Said Energy, 2022.