Energy economics: an overview?

This data-file provides an overview of 60 different economic models constructed by Thunder Said Energy, in order to help you put numbers in context.

Specifically, the model provides summary economic ratios from our different models across conventional power, renewables, conventional fuels, lower-carbon fuels, manufacturing processes, infrastructure and nature-based solutions.

For example, EBIT margins range from 3-70%, cash margins range from 4-85% and net margins range from 2-50%, hence you can use the data-file to ballpark what constitutes a “good” margin, sub-sector by sub-sector.

Likewise capital intensity ranges from $300-9,000kWe, $5-7,500/Tpa and $4-125M/kboed. So again, if you are trying to ballpark a cost estimate you can compare it with the estimated costs of other processes.

Landfill gas: the economics?

The purpose of this data-file is to model the typical costs of producing raw landfill gas (a mixture of CH4, CO2 and other impurities) at a solid waste landfilling facility.

Our capex and opex cost build-ups are derived from EPA guidance and our gas evolution equations are derived from a line-by-line breakdown of landfill products (below). Note this is prior to gas cleaning and upgrading.

We estimate that a typical landfill facility may be able to capture and abate 70% of its methane leaks for a CO2-equivalent cost of $5/ton. Other landfill gas pathways get more complex and expensive.

Photovoltaic silicon: the economics?

The purpose of this model is to break down the most likely contribution of photovoltaic silicon to overall solar panel costs. The model starts from quartz, which is smelted into silicon metal, purified into polysilicon, upgraded into mono-crystalline poly-silicon and ultimately used in solar cells.

We estimate silicon explains $0.1/W of the cost of a $0.3/W panel. There is no way silicon producers are making economic returns below $12.5/kg mono-crystalline polysilicon prices.

If environmental costs are reflected as well, then PV-silicon price could double. Specifically, the average kg of PV silicon in a solar panel is most likely associated with 140kg of direct CO2 emissions.

Battery recycling: the economics?

This data-file models the economics of recycling spent lithium ion batteries, taking in waste cells at end-of-life, and recovering materials such as cobalt, nickel, manganese, copper, aluminium, lithium and steel.

It currently looks challenging to generate acceptable IRRs without charging a disposal fee in the range of $1,700-2,000/ton. Although this could change through improved chemistries and more highly automated processes.

Inputs are based on patents and technical papers. Please download the data-file to stress test costs and other economic variables.

Polymers and higher olefins: the economics?

This data-file captures the economics of polymerizing or oligomerizing unsaturated feedstocks (such as ethylene), in order to make plastics and higher olefins.

Our base case for producing high density polyethylene (HDPE) from ethylene requires pricing of $1,250/ton for a 10% IRR on a new greenfield plant.

CO2 intensity runs at 0.3 tons of CO2 per ton of product, and can be c80-90% lower than than the prior step of ethane cracking.

However conditions can vary vastly, from 50-300C and 50-25,000 psi, for different polymers and processes. Different options can be stress-tested in the model, backed up by technical data, past projects and our notes.

Ethanol-to-ethylene: the economics?

This data-file captures the economics of producing bio-ethylene by dehydration of ethanol, backed up by half-a-dozen technical papers.

We estimate an ethylene price of $1,600/Tpa is required for a 10% IRR, which is almost 2x higher than a conventional ethane cracker.

In a best case scenario, costs could fall below $1,000/ton, but it requires the ability to halve capex costs and source sufficient ethanol below $1/gallon.

Be careful of lowball estimates for facility capex, as we find a very wide range of inputs across different technical papers.

Please download the data-file to stress-test our input assumptions. It is also interesting to compare the numbers with conventional ethane cracking.

Ethanol from corn: the economics?

This data-file captures the economics of producing ethanol from corn in the United States,  based on technical papers and industry data-points.

Our base case calculations suggest a price of $1.6/gallon of ethanol is needed for a 10% IRR on a new greenfield plant, equivalent to $2.4/gallon gasoline.

This is higher than 2020 ethanol pricing, which was enough to break even on a cash basis, but not for economic returns. Corn prices are the crucial input.

Finally, recent industry data are tabulated, showing how the US diverts c40% of its corn crop into biofuels rather than food and feed (below).

Aluminium production: energy economics?

This data-file captures the energy economics of aluminium production via the electrolysis of alumina, breaking down the costs line-by-line. The overall process is energy intensive, emitting 10kg of CO2 per kg of aluminium.

It is possible to generate a 10% IRR on a new aluminium plant, at recent aluminium prices of $2.3/kg. production. However, this is only possible under lower power prices, no landfill taxes, no CO2 prices and reasonable opex.

A more challenging set of environmental standards can literally double the requisite aluminium price. This illustrates a key challenge for policy formulation in heavy industry. Fifty years ago, the US and Europe produced two-thirds of the world’s aluminium, while today, their combined share is less than 10%.

Power-to-liquids: the economics?

The data-file models the economics of converting renewable electricity (wind or solar) into low-carbon liquid fuels, by electrolysing water into hydrogen, electrolysing CO2 into CO, then re-combining the products into longer chain hydrocarbons, e.g., using Fischer Tropsch or other methods.

Our base case estimates are for costs between $400-600/bbl ($10-14/gallon). The thermodynamics are somewhat crazy. Input assumptions are based on our other models and can be flexed to stress-test the economics.

It seems very challenging for this power-to-liquids technology to ever reach cost-parity with conventional hydrocarbons, or below $3/gallon. However, if money were no object, they could yield effectively zero carbon transport fuels for hard-to-abate sectors such as trucking or aviation.

Gas-to-liquids: the economics?

This data-file captures the economics of gas-to-liquids, including the formation of syngas in an auto-thermal reformer, then the subsequent upgrading into liquids via the Fischer-Tropsch reaction.

Our base case is that $100/bbl realizations are required for a 10% IRR. You can stress-test the economics as a function of gas prices, capex costs, thermal efficiencies, carbon intensity, CO2 prices and other operating costs.

Our inputs for each of the categories above are substantiated by collating data-points from past projects and technical papers. Finally, our notes and review of GTL patents are outlined in the final tabs.