This presentation examines the economics of producing synthetic fuels from carbon dioxide (CO2) and water with renewable electricity based on current Finnish and German electricity price data.

1. Prospective economics for stand-alone
production of electrolytic hydrogen and
hydrocarbons
NeoCarbon Researchers’ seminar
Ilkka Hannula, Dec 2014
VTT Technical Research Centre of Finland

2. - Economic framework & methodology
- Electrolyser economics under Finnish electricity market conditions
- Hydrogen
- Electricity
- Synfuels
- Electrolyser economics under German electricity market conditions
- Hydrogen
- Electricity
- Synfuels
- AEC --> SOEC
- Costs
- Boundary conditions
- Comparison
- Time frames for deployment
- Summary
Content
5.1.20152

3. 5.1.2015
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Price
Operating expense

4. 5.1.2015
Price
Operating expense
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5. 5.1.2015
Price
Operating expense
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6. 5.1.2015
Price
”BAU economics”
Operating expense
h/a

7. Price
Negative electricity price
leads to negative OPEX
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8. Price
Negative electricity price
leads to negative OPEX
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9. Price
Negative electricity price
leads to negative OPEX
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10. Price
Negative electricity price
leads to negative OPEX
h/a

11. Price
Negative electricity price
leads to negative OPEX
h/a

12. Price
Possible future OPEX curve?
h/a

13. Price
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14. Price
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15. Price
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16. Price
Neo-Carbon
economics?
h/a

17. Finland 2013

18. 1805/01/2015 18
Hourly Elspot prices in 2013 (Finland’s area price)

19. 1905/01/2015 19
Average electricity price in Finland for selected amount
of cheapest hours in 2013

20. 2005/01/2015 20
Variable costs of electrolytic H2 production
(based on cheapest possible hours in Finland)
Based on following assumptions:
• Finnish elspot 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment
• Byproduct oxygen vented

21. 2105/01/2015 21
Variable + fixed costs of electrolytic H2 production
(based on cheapest possible hours in Finland)
Based on following assumptions:
• Finnish elspot 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment
• Byproduct oxygen vented

22. 2205/01/2015 22
Levelised cost of H2
(based on cheapest possible hours in Finland)
Based on following assumptions:
• Finnish elspot 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment
• Byproduct oxygen vented

23. 2305/01/2015 23
Levelised cost of H2
(based on cheapest possible hours in Finland)
Based on following assumptions:
• Finnish elspot 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment
• Byproduct oxygen vented
3.3 €/kg

24. 2405/01/2015 24
Integration to transportation in Finland
Electrolyser
Electricity H2
Synthesis
Fuel for transp.
CO2
= 54 % (LHV) = 83 % (LHV)
Based on following assumptions:
• Finnish elspot 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment.
• Fuel synthesis having 83 % cold
gas efficiency and 420 €/kW specific
investment.
• Revenue from byproduct oxygen
used to cover CO2 feedstock cost.
128 €/MWh

25. Germany 2013

26. 05/01/2015 26
Hourly electricity price in Germany in circa 2013

27. 05/01/2015 27
Finnish and German Price Duration Curves in circa 2013

28. 05/01/2015 28
Finnish and German Reverse Price Duration Curves
in circa 2013

29. 05/01/2015 29
Zooming on the cheapest hours of the year

30. 05/01/2015 30
Average electricity price for selected amount of
cheapest hours in 2013

31. 05/01/2015 31
Levelised cost of H2
(based on cheapest possible hours in GER2013)
Based on following assumptions:
• German electricity 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment
• Byproduct oxygen vented

32. 05/01/2015 32
Levelised cost of H2
(based on cheapest possible hours in GER2013)
Based on following assumptions:
• German electricity 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment
• Byproduct oxygen vented

33. 05/01/2015 33
Levelised cost of H2
(based on cheapest possible hours in GER2013)
Based on following assumptions:
• German electricity 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment
• Byproduct oxygen vented
2.8 €/kg

34. 05/01/2015 34
Integration to transportation in GER2013
Electrolyser
Electricity H2
Synthesis
Fuel for transp.
CO2
= 54 % (LHV) = 83 % (LHV)
Based on following assumptions:
• German electricity 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment.
• Fuel synthesis having 83 % cold
gas efficiency and 420 €/kW specific
investment.
• Revenue from byproduct oxygen
used to cover CO2 feedstock cost.
110 €/MWh

35. 05/01/2015 35
Audi e-gas plant visit
• Location: Werlte, GER
• Alkaline electrolysis (AEC):
• size: 6 MW
• net efficiency: 54 % (LHV)
• Annual operating hours: 4000 h
• Lev. cost of H2 (LCOH2): 250 €/MWh
• EEG Umlage for feedstock electricity
• 63 €/MWh
• contribution to LCOH2: 63/0.54
= 117 €/MWh
• LCOH2 w/o EEG: 133 €/MWh

36. 05/01/2015 36
Integration to transportation in GER2013
Electrolyser
Electricity H2
Synthesis
Fuel for transp.
CO2
= 54 % (LHV) = 83 % (LHV)
Based on following assumptions:
• German electricity 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment.
• Fuel synthesis having 83 % cold
gas efficiency and 420 €/kW specific
investment.
• Revenue from byproduct oxygen
used to cover CO2 feedstock cost.

37. Impact of electrolyser development potential

38. Breakdown of capital cost for 250-kW SOFC system (Fontell et al., 2004,
Conceptual study of a 250 kW planar SOFC system for CHP application)
Effect of production volume on estimated direct manufactured
cost ($/kW) for stacks with planar rectangular cells.
(DOE report: Conceptual study of a 250 kW planar
SOFC system for CHP application, 2007)
Estimated future cost of SOEC system:
200 / 0.31 * 2 = 1290 $/kW ~ 1000 €/kW
“It is expected
however, that the SOEC
stack (1/3 the cost)
needs to be replaced
every 5 years, whereas
most of the system
components (2/3 the
cost) will last for most
of the 20 years.“
(DTI report:
GreenSynFuels, 2011)

39. 05/01/2015 39
Comparison of hydrogen production costs
3.3 €/kg
2.8 €/kg
1.9 €/kg

40. 05/01/2015 40
Comparison of synfuel production costs
$145/bbl
$217/bbl
$254/bbl*
*Based on 1.578 MWh/bbl,
1 € = 1.33 $, 14.2 $/bbl refining margin

41. 05/01/2015 41
When to switch from AEC to SOEC?
Specific inv. cost lower than
this makes SOEC more
economic than AEC
Based on following assumptions:
• German electricity 2013 pricing
• Alkaline electrolysers having
54 % net efficiency (LHV) and
750 €/kW specific investment.
• Solid oxide electrolysers having
• 90 % net efficiency
• Revenue from byproduct oxygen
used to cover CO2 feedstock cost.

42. 05/01/2015 42
In 2013 the annual global production of photovoltaics (PV)
was 38 gigawatts and the cumulative global production
was 140 GW.
Installed PV power has grown exponentially
at a rate of 43 percent each year since 1996,
(almost doubling every two years).
It is the world’s fastest-growing energy source.
Data: BP Statistical Review of World Energy 2014
World cumulative installed photovoltaic (PV) power
43 % average annual
growth

43. 05/01/2015 43
Possible trajectories for installed SOEC capacity
based on different levels of exponential annual increase

44. 05/01/2015 44
Possible trajectories for installed SOEC capacity
based on different levels of exponential annual increase

45. Price
Required shape of this
curve?
h/a

46. Gasoline @ $100/bbl
Break-even OPEX curve

47. 05/01/2015 47
Average electricity price needed to produce
electrolytic synfuels at $100/bbl (SOEC @ 1000 €/kW)
-380 €/MWh

48. Take home messages
• Negative electricity pricing currently arriving to Finland
• In FIN energy markets (2013) lowest production cost achieved by
continuous operation
• Negative electricity prices in German about 50 h per year
• In GER energy markets (ca 2013) lowest production costs achieved
between 4000 to 8000 cheapest hours per year
• With an estimated future cost of SOEC system ~1000 €/kW:
• Minimum H2 production cost: 1.9 €/kg
• Minimum synfuels production cost: $145/bbl
• Electrolytic synfuels cheaper than gasoline ($100/bbl) when avg.
annual electricity cost 16 €/MWh (SOEC @ 1000 €/kW)
• SOEC based systems become more economic than AEC after
prices drop below 2500 €/kW
• Estimated time for annual production volume of SOEC systems to
reach 100 MW/a likely to take more than 13 years

49. NEO-CARBON ENERGY project is one of the Tekes’ strategic research openings.
The project is carried out in cooperation between VTT, Lappeenranta University of Technology and University of
Turku / Futures Research Centre.