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.

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.

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.

Ammonia synthesis: the economics?

This data-file captures the economics of producing ammonia from inputs of hydrogen and nitrogen, using the Haber process. This matters as fertilizer production thus explains over 1% of global emissions.

Our model derives a marginal cost of $450/ton ammonia, with a CO2 intensity of 2.4 tons per ton, in a new facility fueled by natural gas heat and power. Emissions from coal-fired facilities will be higher.

The best decarbonization option is nature based solutions, as the data-file stress-tests other CO2 abatement options, such as cleaner hydrogen production and greater share of renewables and batteries in the grid.

Copper: the economics?

This data-file quantifies the economics of producing copper, across a typical mining operation and a typical smelting/refining operation, to yield 99.99% pure copper output.

Marginal cost is likely around $7,000/ton ($3.20/lb) for a high-quality future project, with an emissions intensity close to 4 kg of CO2 per kg of copper.

But it depends heavily on ore grade. We estimate that a 0.1% reduction in future copper ore grading increases marginal cost by around 9% and CO2 intensity by around 10%, which matters as copper demand is set to treble in the energy transition.

Moreover, each $100/ton of CO2 prices would increase marginal cost by another 7.5%.

It is not unimaginable that copper prices could reach $15,000/ton in an aggressive energy transition scenario, if you stress-test the model.

Lithium production: the economics?

This data-file quantifies the economics of producing lithium carbonate from spodumene in mined pegmatites, via the usual process of comminution, flotation, calcination and then acid-leaching.

We estimate a price of $12,500/ton lithium carbonate price is likely needed for a 10% IRR in today’s China-heavy value chain, which emits 50kg of CO2 per kg of lithium.

The data-file allows you to quantify how rising energy and CO2 prices would likely flow through to increase lithium costs, as well as other variables such as ore grades, capex and opex. Mass balances, useful data-points and notes follow in subsequent tabs.

Absorption chillers: the economics?

This data-file approximates the costs of absorption chillers, which perform the thermodynamic alchemy of converting waste heat (e.g., from a CHP turbine) into coldness.

Today the market is small, around $6bn per annum. But we think systems like these could be increasingly useful, as heatwaves stress increasingly renewables-heavy power grids (note here).

Passable economics. We estimate payback periods are likely around 8-years, with 10% IRRs at a $50/ton CO2 price. Notes, numbers, cost estimates and company comments are broken out in the data-file.

Turquoise hydrogen from methane pyrolysis: economics?

Turquoise hydrogen is produced by thermal decomposition of methane at high temperatures, from 600-1,200◦C.

The advantage of this process is that 3 kg of ‘carbon black’ are produced per kg of methane. This allows passable IRRs at lower costs than blue of green hydrogen.

The disadvantage is that methane decomposition is endothermic, thus an exterior energy source is required. If this energy source is natural gas, then around 2.6kg of CO2 will be produced by kg of hydrogen.

In turn, low-carbon turquoise hydrogen could be produced from low-carbon electricity (most likely a mixture of wind, solar, nuclear and hydro). Now the cost is more than blue hydrogen, but still very competitive versus green. This data-file quantifies the economics (above) and capex costs (below)

Remaining challenges are high capex costs at small scale, monetizing carbon black, the tendency of carbon ‘coking’ to clog up catalysts and reactors, the hunt for a reliable catalyst and ‘molten’ reactor design, and early technical readiness, as summarized in the final ‘notes’ tab of the model.