Afforesting deserts: energy economics?

We model the economics of afforesting deserts by desalinating and distributing sufficient water for trees to grow. This could increase the global land available for new forest growth by a factor of 5x.

The best case economics are achievable in the Permian, where 10% IRRs are achievable at $30/ton CO2 prices, total costs are 60% lower than current produced water disposal costs, and the CO2 savings could be sufficient to make entire upstream operations to ‘Net Zero’.

Economics are more challenging for desalinating sea-water and distributing it inland. If 50T of water are required by T of CO2 capture in forests, equivalent to adding 100mm of annual rainall, then costs may be passable. But to grow forests in the Sahara would likely require well over 300T of water per T of CO2 and the energy economics become impossible.

The data-file also contains useful workings from our recent research report, Green deserts: a final frontier for forest carbon?

Hydrogen storage: the economics?

This model captures the costs of storing hydrogen, which appear to be much higher than storing natural gas.

We estimate a $2.50/kg storage spread may be needed to earn a 10% IRR on a $500/kg storage facility, while costs could be deflated to $0.5/kg if nearby salt caverns are available and projects are large and efficient. Please download the data-file to stress test the economics.

The model hinges on costs of tanks and compressors, where costs are bounded based on technical papers and online sources. Detailed notes and input data are tabulated in backup tabs behind the model.

Pipelines: the energy economics?

This model captures the energy economics of a pipeline carrying oil or water. Specifically, we have modelled energy requirements using simple fluid mechanics, and modelled costs using past projects and technical papers, which are tabulated in the data-file.

Our conclusions show the requisite costs, energy and CO2 intensities of different pipelines (below).

You can stress test the economics directly in the model, by varying pipeline tariffs, capex costs, energy costs, CO2 prices, maintenance costs, pipeline diameter, pipeline distance, pipeline elevation, pipeline materials, fluid viscosity and compressor efficiencies.

Desalination by reverse osmosis: the economics?

35bn tons of desalinated water are produced each year, absorbing 250 TWH of energy, or 0.4% of total global energy consumption.

These numbers have already doubled since 2005 and could rise sharply in the future: water use per capita remains 50-90% lower in the emerging world than in the United States, populations are growing and aquifers depleting.

Hence, this model quantifies the energy economics of desalination via reverse osmosis, which requires 3.6kWh of energy per m3 of desalinated sea-water. A cost of $1.0/m3 is necessary for a passable IRR.

Impacts can be stress-tested from varying energy prices, CO2 prices, capex costs, opex costs and energy efficiency. Our own base case estimates are derived from past projects and technical papers.

Waste heat recovery: the economics?

Industrial heat comprises around 20% of global CO2 emissions, but around half of all the heat generated may ultimately be wasted.

Hence, this model simplifies the economics of using a heat exchanger to recover waste heat from an industrial facility, based on the engineering equations of heat exchange and recent technical papers.

Our base case IRR is 6%, in the US, due to low, $3/mcf gas prices. This is uplifted to above 20%, either if we assume European gas prices (around $6/mcf) or a $50/ton CO2 price. IRRs can reach 40% if we assume both.

High IRRs may be necessary to unlock waste heat recovery. First, each project is complex, with large amounts of engineering, and implementation disrupts operations at a plant. Second, although IRRs are high, NPVs are low, as many projects will be small-scale. For example, the NPV10 may be less than $1M on a single, small heat exchanger project, even if it achieves a 40% IRR.

Flare gas capture: the economics?

c150bcm of gas was flared globally in 2019, including 15bcm in the United States, which emitted 30MT of CO2-equivalents. This data-file simplifies the economics of capturing flare gas, by gathering the gas, cleaning the gas, and compressing the gas into a regional pipeline.

Generally, double-digit returns are achievable at a large new shale pad, by capturing and commercialising associated gas rather than flaring it. Economics are more challenging at smaller pads, remote pads and for wet or contaminated gas. Economics are highly variable, site-by-site, as can be stress-tested in the model.

Carbon prices would dramatically improve the economics of flare gas capture. A c$40/ton CO2 price would incentivize capturing gas from the majority of remote pads, while it would unlock c40-50% IRRs on flare gas capture from large pads, a very expensive opportunity cost for any operator to ignore. As a rough estimate, a $100/ton CO2 price could eliminate flaring in the US, subject to pipeline availability.

 

Renewable diesel: the economics?

This data-file models the economics of a new renewable diesel plant, converting waste oils into green diesel. It is based on technical papers and cost estimates from past projects.

A strong, c25% IRR is attainable if renewable diesel maintains a $1.0/gallon pricing premium to conventional diesel, as has been historically supported by the blenders tax credit.

The IRR is obliterated and falls to zero if this premium is lost, for example, due to emerging competition from carbon offsets. Please download the model to flex our input assumptions and stress test the economics.

Coal-to-gas switching: the economics?

Switching coal- to gas-fired power generation is the single largest line-item in our models taking the energy system to net zero emissions and keeping atmospheric CO2 to below 450ppm. This model illustrates the economics.

Mathematically, the analysis works by deducting a model of a new coal-fired power plant from a model of a new gas-fired power plant, so you can easily stress-test the relative impacts of different coal prices, gas prices, CO2 prices, capex costs and efficiency factors.

CO2 prices accelerate coal-to-gas switching, under our base case, long-term pricing assumptions. For brownfield plants, which are already standing, a $10/ton CO2 price is required in the US, c$25/ton in Europe and c$40/ton in Emerging Markets. For greenfield plants, the US and Europe are already set to switch from coal to gas, due to relative capex costs, but in the emerging world, again a c$40/ton CO2 price is required.

Electric Rail Energy Economics?

This data-file models the energy economics of constructing new electric rail lines, to displace automobile traffic and accelerate the energy transition.

Under our base case forecasts, a mid-sized electric rail project would struggle economically, without tax-support, while saving around 1kT of CO2 per track-mile per year.

The economics depend heavily upon prices, costs and passenger numbers. Double-digit returns are achievable outside the United States, based on >75% lower apparent capex costs, especially for lines carrying c10,000 passengers per day.

CO2 prices do not materially change the picture, only adding around c1.5pp to our base case IRRs, even at a CO2 price of $500/ton, near the top of our cost-curve.

 

District heating: the economics?

District heating supplies residential or commercial consumers with centrally generated heat, waste heat from power generation (combined heat and power) or from other industrial processes. Capturing waste heat lowers CO2-intensity.

This data-file models generalized economics, based on the capital costs to pipe heat to each household, gas prices, heat consumption and efficiency factors. You can flex these variables in the model.

The economics are highly variable, with prior project costs varying by a factor of 10x, and most sensitive to heat consumption per household. Our base case estimate is for a 10% IRR at 10c/kWh retail heating price.