Energy economics: an overview?

This data-file provides an overview of 70 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, transportation 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.

CO2 liquefaction: the economics?

The purpose of this data-file is to model the economics of liquefying CO2 for transportation in a ship, rail car or truck, in order to facilitate the rise of CCS, especially at smaller scales.

Our baseline is a cost of $15/ton, using c100kWh of energy per ton of CO2, which is approximately equivalent to a c3% energy penalty on the combustion process that generated the original CO2. There is scope for optimization, including from demand shifting.

Our calculations are based on a literature review of technical papers, and aggregating data into the energy costs of CO2 liquefaction, across different pressures and temperatures.

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.

Variable frequency drives: the economics?

This data-file aims to capture the economics of variable frequency drives, which precisely adjust the operating speeds of electric motors.

We reviewed 10 case studies and found an average energy saving of 34%, and 15 past projects with an average cost around $250/kW.

Our modelling calculates a 15% IRR installing a VFD at a typical industrial motor. Sensitivity analysis shows how the returns and payback periods vary with power prices and CO2 prices.

Overall, we think economics are excellent and VFD installations will likely accelerate.

Synchronous condensers: the economics?

This data-file captures the costs and the economics of installing a synchronous condenser, downstream of a renewable power facility, in order to emulate some of the inertia, reactive power and short circuit power from more traditional, conventional generators.

Based on ten recent examples, which are reviewed in the ‘costs’ tab’, we find that an additional 1.0 – 2.5 c/kWh of costs may be added to the power supplies flowing out of the SC. Although the numbers and relative sizings are debatable.

Notes from technical papers are included in a backup tab. Leading providers of synchronous condensers include the usual suspects of capital goods companies, such as ABB, GE, Siemens, Eaton.

Mine trucks: transport economics?

There are around 50,000 giant mining trucks in operation globally. The largest examples are around 16m long, 10m wide, 8m high, can carry around 350-450 tons and reach top speeds of 40mph.

This data-file captures the economics of a mine haul truck. A 10% IRR requires a charge of $10/ton of material, if it is transported 100-miles from the mine to processing facility. Assumptions can be stress-tested overleaf.

Fuel consumption is large, around 40bpd, or 0.3mpg, comprising around 30% of total mine truck costs at c$1.5-2/gal diesel prices. Some lower carbon fuels are c5x more expensive, and would  thus inflate mined commodity costs.

High utilization rates are also crucial to economics, to defray fixed costs, which are c50% of total costs, as our numbers assume each truck will cover an average of 500 miles per day for c20-25 years.

LNG transport: shipping economics?

The purpose of this data-file is to model the economics of shipping large cryogenic cargoes, such as LNG or liquefied CO2 in larger tankers. In each case, we break down the costs and day-rates needed to earn 10% IRRs, including capex, opex, fuel, maintenance and port fees.

Shipping an LNG cargo costs $1-3/mcf, while the most important input variable is the distance from source to destination.

Shipping a CO2 cargo costs $5-50/ton, while again the most important input variable is transport distance. Although in the CO2 case, using a low-carbon e-fuel (e.g,. ammonia, green methanol) approximately doubles total cost.

Input variables and assumptions are broken down on the backup tabs (e.g., below). Please download the data-file to stress test these inputs.

Commercial aviation: air travel economics?

This data-file estimates the economics of a commercial airliner, over the course of its life: i.e., what ticket price must be charged to earn a 10% IRR after covering the capex costs of the plane, fuel costs, crew, maintenance and airport and air traffic charges.

We conclude that the single largest determinants of economics are the utilization and load factor of the plane. Fuel and maintenance are likely to be joint second.

The IEA’s proposal for a $250/ton CO2 price in the developed world would likely increase average ticket prices by 30%. But this would most likely end up as an outright tax on travel, as 2-4x higher CO2 prices again would berequired to incentivize the use of alternative, low carbon aviation fuels.

Container freight: shipping economics?

This data-file models the total costs of shipping a container c10,000 nautical miles from China to the West.

Specifically, we calculate what freight rate is required to earn a 10% IRR on constructing a new 20,000 TEU container ship, based on the capital costs, fuel costs and other operating costs.

New emerging fuels can lower the CO2 intensity of shipping from their baseline of 0.15kg/TEU-mile by 60-90%, however this may come at the cost of re-inflating freight costs by 30%-3x.

Economics can be stress-tested in the data-file, varying vessel size, route length, fuel economy, utilization and other cost lines.

Carbon fiber: energy economics?

This data-file captures the economics of producing carbon fiber. We estimate a marginal cost of $25/kg for a 10% IRR at a new world-scale carbon fiber plant, however the production process will likely emit 30 tons of CO2 per ton of carbon fiber if powered by a mixture of gas and electricity.

The data-file also contains technical data across the entire value chain leading up to carbon fibers (e.g., polyacrylonitrate), tensile strength versus weight properties, and our detailed notes from technical papers.

A screen of leading companies in the carbon fiber industry is also provided,  reviewing production volumes and market positioning (below).

Please download the data-file to stress test input assumptions such as capex costs, electricity costs, gas prices and CO2 costs.