US shale gas: the economics?

This data-file breaks down the economics of US shale gas, in order to calculate the NPVs, IRRs and gas price breakevens of future drilling in major US shale basins (predominantly the Marcellus).

Underlying the analysis is a granular model of capex costs, broken down across 18 components. Our base case conclusion is that a $2/mcf hub pricing is required for a 10% IRR on a $7.2M shale gas well with 1.8kboed IP30 production.

Economics are sensitive. There is a perception the US has an infinite supply of gas at $2/mcf, but rising hurdle rates and regulatory risk may require higher prices.

Methanol production: the economics?

This model captures the economics and CO2 intensity of methanol production in different chemical pathways.

Different tabs of the model cover grey methanol production from gas reforming, blue methanol from blue hydrogen and industrially captured CO2, green methanol from green hydrogen and direct air capture CO2, and finally bio-methanol.

Inputs are taken from a wide survey of technical papers, cost breakdowns and energy intensity data. These are also broken down in the data-file.

Based on the analysis, we see interesting potential for bio-methanol and blue methanol as liquid fuels with lower carbon intensity than conventional oil products. You can stress-test input assumptions in the underlying model tabs.

CO2 electrolysis: the economics?

Carbon monoxide is an important chemical input for metals, materials and fuels. Could it be produced by capturing CO2 from the atmosphere or using the amine process, then electrolysing the CO2 into CO and oxygen?

This data-file models the economics of CO2 electrolysis, including recent advances from leading industrial gas companies, and by analogy to hydrogen electrolysis.

10% IRRs can be achieved at $800/ton carbon monoxide pricing, which can be competitive with conventional syngas production, and far more economic than small-scale distribution of CO containers.

The data-file contains input assumptions, detailed notes from half-a-dozen recent technical papers, and short summary of different companies’ initiatives, including Haldor Topsoe, Siemens, Covestro, Methanex and Carbon Recycling.

Electric vehicle charging: the economics?

This data-file models the economics of electric vehicle chargers. First, we disaggregate costs of different charger types across materials capex, labor capex, permitting, fees, opex and maintenance. Next we model what fees need to be charged by the charging stations (in c/kWh) in order to earn 10% IRRs.

Economics are most favorable where they can lead to incremental retail purchases and for larger, faster chargers.

Economics are least favorable around multi-family apartments, charging at work and for slower charging speeds.

Ground source heat pumps: the economics?

This data-file models the economics, costs, energy savings and potential CO2 savings of a ground source heat pump (GHP), compared to traditional home heating and cooling options.

A GHP approximately doubles the efficiency of conventional heating and cooling, through heat-exchange with the shallow earth, 30ft below the surface, which tends to remain at 10-15°C temperatures year-round.

The model can be stress-tested, flexing annual heating/cooling demands, coefficients of performance, as well as oil, gas, power and CO2 prices. Also included are a granular cost build-up for CHPs and our notes.

Geothermal power: the economics?

This data-file captures the economics of geothermal heat and power, built up as a function of drilling costs, pumping costs and power-cycle costs.

Our base case numbers are calculated both for geothermal hotspots and for the exciting, next-generation technology of deep geothermal power. You can stress test input assumptions in cells H6:H25 of each model.

Further industry data follow in the subsequent half-dozen tabs, including a breakdown of capacity by country and by supplier, patent filings, leading companies and our notes from technical papers.

US shale: the economics?

This data-model breaks down the economics of US shale, in order to calculate NPVs, IRRs and oil price break-evens of future drilling in major US basins (predominantly the Permian, but also Bakken and Eagle Ford).

Our base case conclusion is that a $40/bbl oil price is required for a 10% IRR on a $7.0M shale well with 1.0 kboed of IP30 production. Break-evens mostly vary within a range of $35-50/bbl. They are most sensitive to productivity, which can genuinely unlock triple-digit IRRs, even at $40/bbl.

Underlying the analysis is a granular model of capex costs, broken down across 18 components (chart below). Costs are calculated off of input variables such as rig rates, frac crew costs, diesel prices, sand prices, tubular steel prices, cement prices and other more niche services.

Stress-testing the model. You can flex input assumptions in the ‘NPV’ and ‘CostBuildUp’ tabs of the model, in order to assess economic consequences.


Biomass power and BECCS: the economics?

This data-file captures the economics of producing wood pellets, generating electricity from wood pellets or other biomass, and building a further carbon capture and storage facility to yield ‘carbon negative power’.

The data-file is substantiated by detailed industry on solid biomass fuels, historical capex costs from prior projects and detailed notes from half-a-dozen technical papers.

Data are also aggregated on the generation and efficiency of c340 woody-biomass power plants constructed to-date in the United States.

Turbo-charge gas turbines: the economics?

This data-file models the economics of turbo-charging gas turbines, which increases the mass flow of combustion air, in order to improve their power ratings c10-20%. This is especially important to counteract warm temperatures, which notoriously degrades power output (below, right).

Our model is derived from technical disclosures from PowerPhase, a leading private company that is commercializing the TurboPhase technology. We estimate base case IRRs of c13% in Europe and c20% in the US. Sensitivities can be flexed in Cells H7:17 of the model (below, left).

Turbo-charged gas turbines could be among the non-obvious technologies to gain greater share as grids become more saturated with renewables, in addition to CHPs, PCMs and fuel cells, per our prior research. All of these are much more economical than grid-scale batteries.

High voltage direct current power transmission: the economics?

This model captures the economics of transporting electricity (especially from renewable sources, such as wind and solar), over vast distances, using high voltage direct current power cables (HVDC).

Our numbers are based on technical papers, a dozen past projects and a granular bottom-up breakdown of costs (both capex and opex). Our notes from technical papers follow in the final tab as context.

Our base case estimate is that a 10c/kWh transportation spread is required to earn a 10% levered IRR on 1,000-mile cable. Please download the data-file to stress test power costs, power prices,  capex, opex, line losses, leverage levels and fiscal impacts.