Decarbonisation Technology - February 2024 Issue

Fuel cost (Base: 30.5 $/MWh)

150

CO cost (Base: 100 $/t)

PSA H recovery (Base: 67%)

150

Electr. cost (Base: 106 $/MWh)

0.00

0.50

Carbon intensity electr. (Base: 0.23 t/MWh)

0.10

0.25

Cl fuel (Base: 0.20 t/MWh)

Benet (min $/y)

Figure 4 Sensitivity analysis

determined by the level of that credit at which a specified financial performance is achieved, such as a positive net present value (NPV) at a set internal rate of return (IRR). • Applying a simpler approach annualises capital costs:

transportation infrastructure, technological readiness level (TRL), and unanticipated cross-project or cross-site. • Economic : Accurately estimating investment costs, feed and hydrogen costs, product value, inflation, taxation, and infrastructure projects such as power grids, H2 /CO 2 headers, and district heating. • Commercial and legislative : Market demand, land availability, and obtaining permits. These factors need to be compiled to assess the risks related to the different emission reduction initiatives. This can be done using methodologies such as sensitivity studies or Monte Carlo Analysis. Figure 4 is a Tornado Diagram that shows how sensitive a project’s cash flow is to certain independent input variables. Depending on the outcome, the priority of implementation may change, or further analysis may be required. These methods are useful but require an assessment or assumption of risk distribution themselves. Therefore, first performing preparatory investigations into the risk factors, such as those listed in the Identifying decarbonisation contributors section, are as important as the risk assessment itself. Capital requirements may render some projects hard to implement. As a result, the project may have to be either discarded or phased back. However, collaboration with neighbouring sites may substantially reduce the financial needs and risk. The best examples in the decarbonisation sphere probably involve implementing CCS hubs. This collaboration materialises due to distributing technical and financial burdens across all stakeholders.

Annualised capital cost = Capital spent *

where i = cost of capital n = duration / project life

The CAC will be the CO 2 credit at which the cash flow equals the annualised capital cost. This simplified approach will slightly underestimate the carbon cost compared to the detailed method that accounts for construction time, possible low initial utilisation rate after project completion, turnarounds, taxation, and other factors. However, the simplified approach fits a high-level screening study with multiple decarbonisation projects where the goal is to establish ranking rather than estimate an accurate abatement cost. The CAC is a powerful tool that presents projects in an order that can be directly translated into a trajectory. However, risk and capital cost must be weighed as well. Risk and capital cost When ranking carbon abatement projects, the following technical, economic, commercial, and legal constraints or uncertainties represent a risk and, therefore, will need to be considered: • Technical : The availability of green electricity and hydrogen, CO2 storage capacity and