Gas dehydration costs might run to $0.02/mcf, with an energy penalty of 0.03%, to remove around 90% of the water from a wellhead gas stream using a TEG absorption unit, and satisfy downstream requirements for 4-7lb/mmcf maximum water content. This data-file captures the economics of gas dehydration, to earn a 10% IRR off $25,000/mmcfd capex.
Wellhead gas might have up to 0.2% water entrained within it (100lb/mmcf). This should ideally be reduced by 90-95%, to below 7 lb/mmcf, sometimes below 4lb/mmcf.
The main reasons for reducing the water content of natural gas are to avoid issues in downstream equipment and pipelines, such as plugging or hydrate formation. For example, as an LNG plant cools the gas stream to -160C, any water is clearly going to freeze out.
Dehydration is also necessary for other gas streams. For example, some of the recent projects that have crossed our desk are aimed at dehydrating CO2 in CCS projects, so that it does not form carbonic acid and dissolve disposal pipelines. Hydrogen may also require dehydration, downstream of a reforming unit or some electrolysis plants.
Gas dehydration most commonly takes place by absorbing the water in tri-ethylene glycol (TEG). TEG acts as a solvent for water at ambient temperatures in an absorber unit. Then the water can be stripped from the TEG solution by heating to 200ºC in a reboiler unit. Many readers will note this is effectively the same plant configuration as for post-combustion CCS using amines.
The global TEG market is worth around $800M per year, implying c500kTpa of production at $1.5-2.0/kg. TEG is made via the step-wise oligomerization of ethylene oxide.
In our base case model, gas dehydration costs $0.02/mcf to earn a c10% IRR while covering the capex of the TEG unit, using up 0.03% of the energy in the gas itself (i.e., a 0.03% energy penalty) and adding 0.03 kg/mcf to the CO2 intensity of gas.
This data-file allows for stress-testing of TEG unit capex (chart below), maintenance, electricity use, heat consumption, CO2 prices, TEG make-up costs and other opex costs.
TEG dehydration units are under increasing scrutiny due to methane emissions, including from pneumatically powered components.
Alternatives to TEG dehydration units include solid sorbents and molecular sieves. For an overview, see our note into swing adsorption.
But we think the most interesting read across from our gas dehydration model is for CCS/DAC. Using this fully mature technology, for which over 200,000 units have been installed to-date, we think the costs “per ton of water removal” still equate to $450/ton and the capex costs equate to around $5,000/Tpa. Details in the data-file.
Global production of hydrogen is around 110MTpa in 2023, of which c30% is for ammonia, 25% is for refining, c20% for methanol and c25% for other metals and materials. This data-file estimates global hydrogen supply and demand, by use, by region, and over time, with projections through 2050.
Many commentators also see a growing role for hydrogen meeting global energy demand. Although we have been more cautious over the costs, practicalities and other competition for high-quality clean energy. Especially in a world that is substantially short of primary energy to make hydrogen through 2030.
Global hydrogen production most likely emits 1.3GTpa of CO2 today, with an average CO2 intensity of 12 tons/ton, comprising 85MTpa of grey hydrogen emitting 9 tons/ton of CO2 and 25MTpa of black hydrogen emitting 25 tons/ton of CO2.
The purpose of this global hydrogen supply model is to project out global hydrogen supply demand through 2050, as a function of our outlooks for refineries, basic chemicals, other metals and materials, energy and global decarbonization.
From this, we can calculate how much disruption lies ahead for the industrial gases industry? For blue hydrogen (or turquoise hydrogen), what volume of input natural gas is required in bcfd, and how much CO2 must be disposed of by the midstream industry?
For green hydrogen, how much electricity will be used to produce green hydrogen, and other e-fuels, by region, and over time?
To build up our forecasts, the data-file captures hydrogen production by region in the US, Europe, Canada, Japan, Australia, LatAm, China, India, Other Asia and Africa. All estimated from 1990 to 2050.
The outlook is uncertain which means it can be useful to compare different scenarios, via a model. Assumptions in this data-file can be stress-tested by adjusting the cells marked in yellow. Including the share of black, grey, blue and green hydrogen in the future energy mix, by region.
Origen Carbon Solutions is developing a novel DAC technology, producing CaO sorbent via the oxy-fuelled calcining of limestone with no net CO2 emissions. It is similar to the NET Power cycle, but adapted for a limestone kiln. The concept is very interesting. Our base case costs are $200-300/ton of CO2. This data-file contains our Origen DAC technology review.
Origen Carbon Solutions was spun-out from the University of Oxford in 2013, now has around c50 employees and is privately owned, with recent capital from HBM Holdings, Elemental Exelerator and Frontier (i.e., Stripe, Google, Meta).
The ZerCal process, being piloted by Origen in 2023, aims to decompose limestone (CaCO3) using an oxy-fired flash calcining process which emits no net CO2. The CaO can then be used as a DAC sorbent, reacting with atmospheric CO2 to form CaCO3 solids.
Oxy-combustion is an alternative approach that avoids introducing air/nitrogen into the combustion process, instead re-circulating exhaust gases, and then adding pure oxygen from an air separation unit or swing adsorption plant.
Hence the post-combustion reaction products are limited to CO2 and water (i.e., there is no nitrogen). CO2 and H2O can easily be separated. In the power sector, a similar approach is famously being taken by NET Power to produce very low-carbon gas power.
Oxy-combustion in limestone kilns is covered in Origen’s patents (schematic below). Note that this is different from other DAC designs. It is not an L-DAC design, nor an S-DAC design, nor an E-DAC design, but an oxy-fired combustion design.
DAC costs of $200-300/ton may be achievable based on simple, back-of-the-envelope calculations, using Origen’s patent disclosures. Please download the data-file to stress-test capex costs, gas prices, oxygen costs, limestone costs, and other opex.
CaO is an interesting DAC sorbent because it will slowly react with ambient CO2 without having to incur the high energy costs of fans and blowers. It could work well in petroleum basins with stranded gas that might otherwise be flared.
Another advantage that is cited in the patents is that the oxygen plant and excess heat from the oxy-fuelled calcining reaction can demand shift to help backstop (increasingly volatile) power grids (i.e., a ‘smooth operator‘), including amidst the build out of renewables.
Another particularly interesting patent adapts the process to oil shale that contains over c20% organic material and over c30% carbonate. It is noted that oxy-fired combustion of this low-grade resource could generate heat and electricity, its own CO2 could be captured directly from the plant, while the ‘waste product’ of CaO could be used as a DAC sorbent (see row 8 of the Patents tab for some mind-blowing numbers!).
Our Origen DAC technology review draws out details from these disclosures, excitement over the concept, and key question marks that remain for de-risking commercialization.
Mitsui Chemicals traces its origins back to 1912, employs 19,000 people globally, and is listed in Tokyo. The company has featured in our work before, as 15-20% of revenues are derived from polyurethanes, where we think the rise of electric vehicles could free up cheap feedstocks and raise polyurethane margins.
Another view in our recent research is that new energies are entering an age of materials, where there is less running room to achieve deflation via ‘scaling up to mass manufacturing’. Materials are increasingly important. Solar and battery manufacturers will increasingly be willing to pay premia for advanced materials that improve efficiency.
Consistent with this thesis, Mitsui Chemicals is restructuring its films business in 2023-24, spinning out a packaging films business, and concentrating upon films and industrial films, combined into a new, wholly owned subsidiary called Mitsui Chemicals ICT Materials Inc, which is envisaged to become a “third pillar of earnings” across the company.
Solar encapsulants. The role of 300-500μm thick encapsulant layers is to encase solar cells, protect them from humidity, dirt/dust, damaging UV, electrically insulate them and ‘cushion’ them from damage or vibration against the rigid overlying glass and rigid underlying back-sheet. However, typical encapsulants only transmit 90% of the light through the solar module, and they are prone to degradation and delamination.
Ethylene vinyl acetate has historically dominated the solar encapsulant market, and retains a >50% market share in 2023. However, polyolefin encapsulants (POE) and mixed EVA-POE-EVA encapsulants (EPE) have been gaining share, as they protect better against degradation. Reasons are explained in the data-file.
Based on the patent library, Mitsui Chemicals’ solar encapsulant offering is clearly focused on alpha-olefin co-polymer encapsulants, plus additives to improve their processibility, longevity and ultimately the performance of solar modules.
Please download the data-file for our conclusions into Mitsui Chemicals solar encapsulants (and the market more broadly), based on reviewing relevant patents, to assess whether the company has a growing moat in this space, as well as more broadly, in the new age of materials.
A new wave of DAC companies has been emerging rapidly since 2019, targeting 50-90% lower costs and energy penalties than incumbent S-DAC and L-DAC, potentially reaching $100/ton and 500kWh/ton in the 2030s. Five opportunities excite us and warrant partial de-risking in this 19-page report. Could DAC even beat batteries and hydrogen in smoothing renewable-heavy grids?
The Boltzmann constant, denoted as kB, or 1.381 x 10^-23 J/K, is the most important number in thermodynamics. It denotes the rate at which a single particle will gain thermal energy (in Joules) as its absolute temperature rises (in Kelvin). It underpins the Boltzmann distribution and the Maxwell-Boltzmann distributions, which matter in modelling gases, energy flows, efficiency, chemical processes and semiconductors.
The Boltzmann constant, denoted as kB, or 1.381 x 10^-23 J/K, is the most important number in all of thermodynamics. It denotes the rate at which a single particle will gain thermal energy (in Joules) as its absolute temperature rises above absolute zero (in Kelvin).
Universal gas laws? In an idealized gas, pressure (in Pascals) x volume (in m3) = number of molecules x absolute temperature (in Kelvin) x the Boltzmann constant (in Joules/Kelvin).
The Boltzmann expression? Maths using the Boltzmann constant often feature the expression exp(-E/kB.T). Here, exp denotes the natural exponent (e to the power x), E is the energy level, kB is the Boltzmann constant and T is absolute temperature. To give a sense, this expression is plotted below. As energy increases, exp(-E/kB.T) decreases. Or in other words, in a hotter system, some particles have dramatically more energy.
Chemical reactions are governed by the Boltzmann expression. The Arrhenius Equation states that reaction rates are a constant function of exp(-Ea/kB.T), where Ea is the activation energy (in kJ/mol). The left hand chart below shows that chemical reactions proceed exponentially faster when temperatures are higher, which is why industrial heating is over 25% of all global energy use. Faster reactions will tend to occur in hotter thermodynamic systems.
Carbon removal applications?Nature based solutions are low-cost and help nature, but they are also slow. CCS and DAC are much faster at absorbing CO2, but the very reason they work faster is that more energy is being injected into these reactions. If we want to accelerate CO2 removals, we need more nature and/or to cure energy shortages.
Boltzmann distributions maximize entropy?
Boltzmann distributions. The reason that higher temperature accelerates chemical reactions exponentially is that particles in a system will tend to have different energy levels. These energy levels fall on a statistical distribution. And as temperatures rise, dramatically more particles will have energy levels above the activation energy. Let us unpack some of this in the following paragraphs.
How are the energy levels of particles distributed in a thermodynamic system? Answer: in the configuration that maximizes the overall entropy of the system, thereby honoring the Second Law of Thermodynamics (entropy increases in a closed system).
What distribution of energies maximizes system entropy? If you started out with N particles in a 3D space (X, Y, Z), each with the exact same energy level of ‘E’, then over time, the particles would begin bumping into each other, exchanging momentum at each collision (some particles gain energy, some particles lose energy). Ultimately the system would ‘settle’ along a distribution of energy across X, Y, Z that maximized the overall entropy. You can model this in a computer simulation. Or you can do some fiendish calculus involving Lagrange multipliers. But the statistical distribution you will end up with is the Boltzmann Distribution.
The Boltzmann distribution is the distribution of energy levels of particles across a 3D system (X, Y, Z) that maximizes the total entropy of the system. Its Probability Density Function (PDF) contains our old friend, exp(-E/kB.T), as shown in the chart below.
When temperature increases, more particles can occupy higher energy levels. For example, note that when temperature increases from 300K to 400K, the average particle has 40% more energy, but the number of particles with >2 x 10^-20 Joules of energy rises by 3.5x. This is why higher temperatures increase reaction rates exponentially.
Maxwell-Boltzmann Distribution of Velocity?
Another variant is the Maxwell-Boltzmann distribution shown below. Here, the maths have been adjusted, in two main ways. First, the x-axis shows the velocity of particles, rather than their energy levels (they are related though, as Kinetic Energy = 0.5 x mass x velocity^2). Second, the equation no longer cares about the locations of particles in space (X, Y, Z), but rather, looks across the overall system.
The Maxwell-Boltzmann distribution shows the most likely (i.e., entropy-maximizing) distribution of particle velocities across an entire system. Again, higher temperatures will dramatically increase the number of particles at high velocities and energy levels.
The real world, new energies and beyond?
Why does water evaporate below its boiling point? Water boils at 100C (overview here). Yet a puddle will evaporate without ever rising above its ambient temperature. Again this can be explained by Boltzmann equations. In order to evaporate, a single liquid particle must reach a critical ‘escape velocity’, or in other words, its energy level must surpass the latent heat of vaporization for water, which is 40.7 kJ/mol (or 6.8 x 10^-20 per water molecule). This same principle is also used in manufacturing lithium ion batteries, where solvents (such as NMP) must be evaporated below their boiling point, because their boiling points are high enough to degrade binders/additives in the electrodes.
Maxwell-Boltzmann equations in practice. Modelling the rate of water evaporation or other real-world systems becomes annoyingly complex, because these systems are ‘degenerate’. In the chart above, we plotted Argon, which is a mono-atomic inert gas. Below, along similar lines, we can plot helium, neon and krypton, noting that more massive particles hold more of their momentum in mass, less in velocity. But we cannot simply plot di-atomic gases or more complex molecules. In addition to holding energy as kinetic energy, each bond in these gases can rotate, expand/contract and vibrate. In other words, at any given particle velocity, there are multiple energy levels available to the particle, which is known as degeneracy, and makes the maths more complicated.
Finally, in semiconductors, such as solar cells, Boltzmann’s constant feeds into the Fermi-Dirac distribution, which gives the probability of a possible energy level above (or below) the bandgap being occupied by an electron (or hole). This probability rises with temperature, and gets multiplied by the degeneracy of that energy level to yield the density of charge carriers. The formula for conductivity is the density of charge carriers x the charge per charge carrier x the mobility of charge carriers in the material. You can probably tell from the previous sentences that the maths here are somewhat complicated.
The purpose of this data-file is simply to give some worked examples of the Boltzmann distribution, Maxwell-Boltzmann distribution and the Arrhenius equations, applying these different probability distributions in practice. Please download the data-file to explore the maths.
Polysilicon is a highly pure, crystalline silicon material, used predominantly for photovoltaic solar, and also for ‘chips’ in the electronics industry. Global polysilicon capacity is estimated to reach 1.65MTpa in 2023, and global polysilicon production surpasses 1MTpa in 2023. China now dominates the industry, approaching 90% of all global capacity.
Polysilicon is a highly pure form of silicon material (over 99.999%), often formed via the Siemens process, converting 98-99% pure metallurgical grade silicon into silane gases, then vapor depositing pure silicon crystals out of the silane gas, at 10-20nm per minute, at 600-1,100â—¦C temperatures, for 80-110 hours. Polysilicon is then further purified and crystallized into mono-crystalline polysilicon via the Czochralski method, for use in photovoltaic solar and other semiconductor chips (over here, model here).
Global polysilicon production capacity likely reaches 1.65MTpa in 2023 and global polysilicon production reaches 1MTpa. For context, production of the key input material, silicon metal, is around 8.5MTpa (per the USGS), and production of the key raw material, silica, is around 350 MTpa (per our silica screen).
This data-file aggregates polysilicon production by facility, by company, by region, by country and over time. China now controls almost 90% of the world’s polysilicon production capacity, with six large Chinese companies comprising over 80% of capacity.
Aggregating polysilicon production data is opaque. Some large Chinese producers publish surprisingly little data. Others have mysteriously deconsolidated production facilities, especially in Xinjiang, after international groups criticized their use of Uyghur labor. Another issue is that some facilities have appeared to operate well above nameplate capacity, raising questions about what their ‘capacity’ really is.
Global polysilicon production by company is estimated in one tab of this data-file, simply taking the best public data-points we can find, triangulating between different sources, and settling on the most sensible estimates that we can find.
Although gross solar additions have risen by 65x in the past 15-years, growing at a CAGR over 30% per annum, surpassing +200GW YoY in 2022, this has not been entirely propitious for polysilicon incumbents. The materials balance of a solar module has seen thinner wafers reducing polysilicon intensity by two-thirds since 2005 (chart below-left), while rapid capacity expansion in China has seen utilization fall from around 85% on average around 2010 to 60% in 2022-23 (chart below-right). This may be an important lesson for other value chains with large growth ahead in the energy transition.
This data-file reviews Verdox DAC technology, optimizing polyanthraquinones and polynaphthoquinones, then depositing them on porous carbon nanotube scaffolds, using similar methods to lithium ion batteries. These quinones are shown to selectively adsorb CO2 when a voltage is applied, then desorb them when a reverse voltage is applied, unlocking 70% lower energy penalties than incumbent L-DAC and S-DAC?
Verdox is a spin-out from MIT, founded in 2019, which raised $80M in February-2022, to develop an electro-chemical DAC system. In February-2022, Aluminium-producer, Hydro, also invested a further $20M in Verdox (as the off-gas from aluminium smelters has 1% CO2).
Electrochemical DAC allows gas to flow through an electrochemical cell with low resistance, adsorbs CO2 by applying a voltage, then later releases the CO2 by applying a reverse voltage. Our recent DAC review sees potential in this approach, including via a rising number of next-generation DAC companies.
The Verdox patents that we reviewed used quinones, mostly naphthoquinones, anthraquinones (images below) and polymers of these quinones such as polyanthraquinones (cited in press articles) as electrochemically active sorbents.
When a voltage is applied, quinones can reduce (gain one electron per C=O group). The reduced naphthoquinones can selectively react with CO2.
Different R-groups in positions (*1 through *8 of the images below) and different additives on the carbon scaffold alter the electron donating properties of the naphthoquinones to C=O groups, and in turn, alter the tendency to adsorb and desorb CO2.
Carbon scaffold. In a functioning electrochemical DAC system, polyanthraquinones and polynaphthoquinones will be deposited on scaffolds of porous carbon nanotubes. The patents contain excellent details. Interestingly, the manufacturing process is quite similar to today’s battery cathode manufacturing. And some of the patents specifically name-check Huntsman’s MIRALON nano-carbon as an input.
Please download the data-file for our conclusions into Verdox DAC technology, how much we can de-risk from the patents, and other specific details (performance, cost, other cell materials, likely manufacturing details).
Over the past decade, costs have deflated by 85% for lithium ion batteries, 75% for solar and 25% for onshore wind. Now new energies are entering a new era. Future costs are mainly determined by materials. Bottlenecks matter. Deflation is slower. Even higher-grade materials are needed to raise efficiency. This 14-page note explores the new age of materials, how much new energies deflation is left, and who benefits?
Solar costs have deflated by 75% in the past decade to around $1,000/kW. 60% has been the scale-up to mass manufacturing, and 40% has been rising efficiency of solar modules. Materials costs now look likely to dominate future costs and their trajectory. And advanced materials can help double efficiency again from here? Who benefits?
60% of solar cost deflation in the past decade has come from the scale-up to mass manufacturing: as solar installations scaled up by 7x to well over 200GW per year, manufacturing fell from 50% to 18% of the total installed costs of a utility-scale project.
Efficiency gains drove the other 40% of the deflation, as the average solar panel in 2022 produces 2.5x more power than in 2012, with efficiency rising from 15% to 23% and module size rising from 1.7m2 to 2.7m2.
Efficiency gains are the best form of deflation, because they lower the per kW costs of all fixed cost line items, from permitting to installation. Including materials costs. When a similar amount of material per module — sometimes even less material per module — delivers more kW of power, this reduces the cost of materials in $/kW terms.
Our analysis into changing solar cells suggests that higher grade materials and manufacturing processes can potentially double solar efficiency again from here, and we wonder if this creates large opportunities for advanced materials and manufacturing technologies (research note here).
The data-file also aggregates similar breakdowns of materials, manufacturing and installation costs for other new energies, such as wind and batteries, in order to draw some useful comparisons and contrasts.
Solar costs over time are also disaggregated across 45 lines in the data-file, including input variables that can be flexed, to stress-test different scenarios for future solar costs.
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