Energy experts accept that (1) a severe oil crunch with dire economic consequences is likely by 2014, (2) we are headed for serious climate change within a few decades if we don’t begin reducing CO₂ emissions dramatically, (3) wind energy (which is by far our cheapest renewable) cannot replace gas and coal power plants at a rate of more than 1.5%/yr in any region without either a solution to energy storage or causing major grid stability problems; (4) it will take Herculean efforts, beginning soon and continuing over the next five decades, to address these challenges. However, the true implications of responding with renewable energy have not yet been well appreciated by many.

We begin by listing five primary points that establish the economics of WindFuels, and then discuss some key issues in a little more detail.

1. At $10/MWhr (the real-time off-peak price seen in mid-2009 in high-wind regions), the cost of the energy needed to make a gasoline or jet fuel, at just 50% efficiency, would be under $0.75 per gallon.
2. The needed CO₂ will initially cost $0.70/gal of product, but its cost will steadily drop as climate regulations become more stringent.
3. Renewable fuel subsidies for Windfuels will exceed those for cellulosic ethanol – which will exceed those of corn ethanol, which are currently $1.00/gge.
4. The co-produced liquid oxygen will provide a revenue stream of $0.40-0.95 per gallon of fuels produced.
5. The cost of the RFTS plant will be less than the cost of cellulosic ethanol plants.

Off-peak Wind.
The price of off-peak grid energy in areas of high wind-energy penetration has plummeted because a practical solution to the energy storage problem is not yet available [1, 2]. The “peak” Real-Time (RT) prices shown in the figure below refer to 7AM-11PM on weekdays, and the “off-peak” prices average the remaining 88 hours per week. These prices were the average RT price at which energy was sold through the Minnesota Hub in the MISO exchange. (All of Minnesota, most of Iowa, North Dakota, South Dakota, Wisconsin, and a small portion of Montana and Nebraska all trade energy through the Minnesota hub). Granted, off-peak prices are not yet this low in most areas, but this figure illustrates the market in an area where about 6-8% of the grid energy is supplied by wind (or about 4 times the current national average). The trend shown there will continue as wind supplies an ever increasing fraction of grid energy. A more in-depth discussion of the off-peak wind market may be found here.

Renewable Fuel Subsidies.
The language of the proposed cap-and-trade legislation would have made the subsidy available for renewable fuels proportional to their life-cycle carbon offset, as determined by the best available science. That would mean the subsidy for WindFuels should be larger than that for cellulosic ethanol, which will be much larger than that for soybean biodiesel or corn ethanol – currently about $0.70/gal. However, we realize that the level of subsidies is a political issue, and it will be some time before WindFuels subsidies are greater than those for cellulosic ethanol, which is yet to be determined. Hence, we have chosen very conservative values for subsidies in Table 1 below.

Price of the Fuels Produced.
The mean price of fuel products is assumed in Table 1 to be about what has recently been seen for the bulk, pre-tax prices of gasoline, jet fuel, and diesel relative to the price of oil. The lowest price shown for oil ($60/bbl) will probably never be seen again. The plant will produce mixed streams that include the above fuels, liquefied petroleum gas (LPG), alcohols, and other high-value chemicals.

According to most analysts, oil is expected to stay above $150/bbl after 2015 (see our discussion on crude oil). Those with the best track record in predicting the oil market expect it will be over $250/bbl by 2018– partly because they appreciate how limited the contribution from biofuels, CTL, shale oil, and even tar sands will be as climate regulations become strict [3, 4]. The graph below gives a sense of where the price of oil is going.

The rise in the price of oil in 2009 and 2010 exceeded the predictions of most analysts. The same is true for coal, gas, and uranium prices, as seen below for 2010.

 

The Co-product LOX.
As explained in several of the technical papers [5, 6], the RFTS process will produce an enormous amount of liquid oxygen (at extremely low cost) as well as carbon-neutral fuels and chemicals. The current mean price for liquid oxygen is $100/ton. The local oxygen markets could see saturation effects after mupltiple RFTS plant comes on line in some regions, but enormous new markets for LOX are expected within six years from oxy-combustion coal power plants. Studies have shown that using pure oxygen (with CO₂ recirculation to limit combustion temperatures) will reduce the cost of CO₂ separation at coal power plants by a factor of two [7, 8]. This nearly infinite market for LOX is expected to set its floor price at over $60/ton, even as thousands of RFTS plants come on stream.

RFTS Plant Cost.
There are several factors that reduce the cost of the RFTS plant compared to a similarly sized plant for alcohols from biomass [9, 10]: (a) the inputs (reactants) are extremely clean, (b) the RFTS plant would benefit from mass production, and (c) the product upgrading process is simpler. The biggest cost component will be the electrolyzers – about 50% of the cost of the first 20 MW plant, but rapidly dropping on subsequent plants. The DOE has predicted the cost of electrolyzers will drop by a factor of six within a decade [11]. The highest price shown for the plant ($430M) is the expected cost of the first one. More information on costs of major plant components is available in pending patents [6, 12, 13].

The Grid’s Need for Energy Storage.
The inadequacy of current options for energy storage is widely recognized. Everyone is beginning to appreciate that a real energy-storage solution is needed to allow wind (which is the only renewable that competes with coal and gas) to expand much beyond a few percent of grid energy in the U.S.

The cost of storing energy in advanced lead-carbon-acid batteries with a 10-year lifetime is expected to be about $100/kWhr. We present some in-depth, objective analysis of Compressed Air Energy Storage (CAES) here, which shows that the cost of storing energy by CAES will be about $150/kWhr, and it will be only 60% as efficient as batteries.

Clean coal will exacerbate the renewable grid problem, as these plants take many hours to turn down, and their turn-down ratio is quite small. Nuclear power is even worse, as no U.S. nuclear power plants have any load-following capability, though perhaps such could become available in 10 years.

The daily output cycles from Concentrated Solar Power (CSP) and solar photovoltaic (PV) have a better match than wind to the typical grid demand curve, but that advantage is not enough in most areas. PV will not compete with wind anywhere in the wind corridor or along most coasts for at least the next two decades. Solar CSP and PV together are currently providing only 5% as much energy as wind.

Advocates for several technologies (including nuclear, geothermal, clean coal, wave energy, and space-based solar) have argued for more than a decade that there will be growing need for base-load generating capacity in the future. The recent trends in off-peak grid prices in areas of high wind penetration have shown those arguments to be flawed. As more wind energy is added, the dominant need will be for peaking, not base load, unless there is rapid development of low-cost energy storage. The only option on the horizon is WindFuels.

The tank-component cost of storing energy in stable liquid fuels is about $0.02/kWhr [5, 22]. Of course, there are other initial capital costs associated with the RFTS plant, but as we’ll see shortly, the profits will pay for the plants in 1-3 years. We return with more on energy storage later.

Future Off-peak Grid Prices.
Some have postulated that eventually there will be sufficient expansion of the grid to reduce the amount of off-peak grid energy that is available at very low prices in the wind corridor. A recently announced development that could have a significant impact is an AC-to-DC-to-AC interconnection between the three major grid networks (the Eastern Interconnection, the Western Interconnection and the Texas Interconnection) in Clovis, New Mexico http://www.tresamigasllc.com/ . This AC-DC-AC hub will make it possible to transfer and balance gigawatts of power between these three major grids much more effectively. (The use of short sections of high-temperature superconductor by AMSC is even planned, though that may only slow the project down.) Therefore, it is important to look at what could be expected 15 to 30 years from now.

The price of wind turbines in the U.S. has dropped 20% since early 2008. The mean levelized cost of energy (LCOE) at current U.S. turbine prices ($1300/kW) is about $36/MWhr (assuming a 4% discount rate); but installed turbines are already being quoted by major Chinese manufacturers at $800/kW in some parts of the world [14, 15, 16]. Thus, a reasonable projection is for the LCOE from wind energy throughout the wind corridor (and in some coastal areas) to be about $28/MWhr in 2025. Even assuming major grid expansion, the cost of peak power will not drop below $150 MWhr in the major urban areas because solar will not be able to produce energy cheaper than that (CSP is currently about $170/MWhr). [17]. As the grid expands, wind producers will be able to sell more energy during peak periods to distant urban centers at high prices, so they will make plenty of money during peak hours.

If the mean LCOE from wind in 2025 is $28/MWhr and the producers are able to sell a third of their energy at $100/MWhr during peak periods (because of rapid grid expansion), wind farms will proliferate to the level that off-peak prices will stay near zero (often even negative) throughout the wind corridor. Again, a more in-depth discussion of the off-peak wind market may be found here.

We at Doty Windfuels did not appreciate that this would be the likely scenario in many major markets when we began the WindFuels development, so enormous effort was focused on maximizing conversion efficiency and making the advances needed to allow the RFTS plants to be built at low cost. As a result of these advances, WindFuels will be competitive even with major adverse changes in the markets that could lead temporarily to low fuel prices and/or high off-peak grid energy prices. Eventually, WindFuels plants may be built fast enough to slowly drive the price of off-peak energy up, but the price of oil will rise even faster for at least the next 20 years.

Profit Scenarios.
Table 1 illustrates how the primary variables affect profitability in several scenarios for 20-MW plants, from best case to worst case. The “Ideal” column illustrates a long-range, ideal case, where the off-peak energy costs $5/MWhr, the plant costs have come down to $30M, oil is $200/bbl, subsidies for fully carbon-neutral fuels are $1.50/gal, and there is a very strong market for the LOX. In this case, the RFTS plant pays for itself in less than two years. (Eventually, plants at least to 80 MW would be built, and they would have better economics.)

The plant operating margins depend mostly on: (1) the price of oil (as that sets the selling price of the products); (2) the price of the input electrical energy; (3) the cost of the CO₂; (4) the market for the co-produced LOX; and (5) the amount of subsidy available for climate benefit. Water cost will always be negligible (even if it has to be piped 500 miles and desalinated). Both the energy content and the relative price of the fuel products depend on the product mix. Here, for example, we have assumed reactor conditions that yield a higher ethanol fraction than normally seen from the closest commercial process, the Sasol SAS reactor.

The cost associated with plant depreciation will be minor except for the first few plants, where the electrolyzers will still be expensive. However, as noted earlier, the DOE has predicted the cost of electrolyzers will drop by a factor of six within a decade [11]. The highest price shown for the plant ($35M) is the expected cost of the first one.

The “Fair” column in Table 1 shows that even with a moderate price for the off-peak energy ($15/MWhr), a high plant cost, a weak market for the LOX, no increase in renewable fuel subsidies, and oil at only $80/bbl, the plant would be profitable. (Other operating costs are included in the O&M row).

Going across the table from the “Ideal” case to the “poor” case, one finds that carbon-neutral fuels (gasoline, ethanol, jet fuel) would be produced in this rather small plant with almost no environmental impact at a cost (before subsidies) ranging from $0.71 to $1.85/gal. Cost per gallon would be lower in larger plants.

In the last column of Table 1, the cost of the products per gallon is a little higher than the selling price, but the plants are still profitable because of the subsidies. However, the conditions for this column seems highly improbable, as the price of oil is going up, and both the cost of CO₂ and the cost of off-peak energy in the wind corridor are trending down.

The highest cost for CO₂ shown in Table 1 is the current pipeline price ($75/ton), and its price will undoubtedly fall as emitters are forced to do something with it other than release it. A good indication of future trends in CO₂ emissions costs comes from a recent IEA study. They concluded it would take a CO₂ tax of $80/ton (or $300/ton-C) to achieve a 50% reduction in GHGs by 2050. The power plants could avoid carbon charges by selling the CO₂ to WindFuels plants.

Getting the Needed CO₂.
There is currently a large market for CO₂. 300 million tons (Mt) have been contracted for enhanced oil recovery (EOR), and the beverage market requires tens of millions of tons/year. Today, the price of 99.5% pure CO₂ (beverage quality) delivered through high-pressure pipeline is about $75/ton, and the CO₂ pipeline network is rapidly expanding. More information on the CO₂ market is available here.

As regulations to reduce CO₂ emissions are implemented, competition will drive the price down, as the only option other than selling the CO₂ will be to pay to exhaust it or pay to sequester it. It is possible that the pipeline price of CO₂ could drop to zero if climate change policy becomes very stringent, since the actual cost to separate and clean CO₂ from the exhaust of new power plants could drop below $25/ton within 8 years.

Scalability.
Chemical processes, unlike agricultural processes (including growing and harvesting of algae) are much more compatible with scale up [18]. To illustrate, the larger demonstrations of photosynthetic algal oil production to date (after two decades of strong support) have been at the scale of a few hundred gallons of fuel per year [19, 20], and costs thus far have all exceeded $2000/gal. (See our analysis of MicroAlgae for more details.) The largest cellulosic ethanol plant by 2012 will consume about 900 tons of feedstocks per day and produce ethanol at the rate of about 25 million gallons per year (25 Mgal/yr) [21]. Coal-to-liquids plants typically produce fuels at the rate of 1 billion gal/year [9]. The US market needs a supply of 200 Bgal/yr of sustainable, carbon-neutral fuels. Meeting even 4% of that need with cellulosic ethanol would require over 100 Mt/yr of feedstocks(two-thirds the current total hay production in the U.S.), which could drive the price of cellulosic feedstocks to $500/ton and put the price of cellulosic ethanol at $6.50/gal. See our discussion of biofuels for more support of this projection.

There is sufficient potential wind energy (60-90 TWhr/yr) and point-source CO₂ (4 Gt/yr) in the U.S. to easily produce twice the current domestic liquid fuel usage (0.7 Gt/yr) and all its other energy needs – industrial, domestic, commercial, and agricultural.

A 250 MW WindFuels plant will produce 36-50 Mgal/yr (depending on the product mix and efficiency), and the plant itself will ultimately be cheaper than a cellulosic ethanol plant of similar capacity. Most importantly, the operating margins on the WindFuels plants will be much better – the cost of the inputs will be much less per gallon of product, the products will be more valuable, and there will be no waste to deal with. More information on some of the WindFuels scalability issues are available here.

Flexibility in the Process.
The FTS process does not produce one specific chemical. Catalysts and conditions are chosen for a desired product emphasis, and the various products must then be separated. The mixture of products (all carbon neutral and of exceptionally high-purity) would normally include gasoline, jet fuel, diesel, ethanol, methanol, ethylene, propylene, butanol, propanol, hydrogen, cyclohexane, and many other hydrocarbons. The ratios depend on the catalysts and reactor operating conditions (temperature, pressure, H₂/CO feed mixture, and residence time).

While the limitations on selectivity mean that each plant must be outfitted with separation systems, it adds a unique advantage to WindFuels: the product mixture can be altered by changing the catalyst process conditions within the reactor – changes that are quick and cost very little. The separations systems are already in place, so the product yields can easily be changed to fit the market. Noting the extraordinary swings in relative prices for different fuels (such as the price of diesel relative to gasoline over the last 2 years), this could be a substantial benefit.

Initially, the product emphasis would be on gasoline and jet fuel, as catalysts for such are better developed. With some minor developments in improving catalysts for mid-alcohols (ethanol, propanol, and butanol) more of these higher value products can be produced, and that could substantially improve plant profitability.
Having multiple product streams makes it easier to get high efficiency and low cost in a mid-sized RFTS plant. Most of the products, especially from smaller plants, would go to regional chemical processing plants for further upgrading to commercial grades. However, some would be locally separated to commercial-grade specifications.

Solving Energy Storage.
Energy storage costs are dependent on the efficiency, the useful lifetime, and the scale of the implementation. Large-scale energy storage in lead-acid batteries costs about $250/kW at 80% efficiency plus about $60/kWhr of additional capital costs for a 5-year operating lifetime (with daily cycles). However, to get a 10-year lifetime the energy adder (using carbon-lead-acid) is about $100/kWhr.

Compressed-air-energy storage (CAES) has received a lot of attention, but the reality is very different from the hype. If there is a free cavern available for storing the compressed air, CAES can probably be implemented at 43% efficiency at a cost of $700/kW. If the cavern is very large, the capital cost of the energy storage may be under $80/kWhr, but the value of that energy storage is low because of the poor cycle efficiency. Higher efficiency (over 55%) is possible, but at much higher capital cost. If there is not a free cavern nearby and reasonable efficiency is desired, the capital cost of the energy storage is about $150/kWhr.

Large-scale energy storage in advanced batteries and (new) pumped hydro-storage range from $100 to $500/kWhr. Of course, that energy is still only worth $0.2/kWhr at peak rates, and it costs $0.01/kWhr to $0.1/kWhr (depending on off-peak rates and efficiency) to re-charge the storage system each time. Hence, 1000 to 10,000 charge-discharge cycles are needed for the energy storage to pay back the capital costs.

Large storage tanks for liquid fuels, on the other hand, cost under $0.70/gal, and a gallon of gasoline stores ~36 kWhr (131 MJ) of energy [22]. Hence, the tank-component of the cost of energy storage in stable liquid fuels is under $0.02/kWhr.

WindFuels will convert the off-peak energy into hydrogen (with millisecond responsiveness) and convert the hydrogen and CO₂ to liquid fuels (jet fuel, gasoline, ethanol...) at a fairly steady rate around the clock. An RFTS plant would store some hydrogen as compressed gas in steel tanks. Its hydrogen energy storage would usually be limited to the amount needed to maintain the FTS operations steadily (with nearly zero electrolyzer current) for about 18 hours. For the 250 MW RFTS plant, that would require ~90 kilotons (kT), and the cost of the hydrogen storage tanks would be about $32M – about 10% of the total plant cost.

Some negative-price off-peak grid energy should be available for at least the next 15 years. As storage tanks are cheap, some of the WindFuels produced when energy is abundant during the spring and fall might eventually be used for grid peaking in the summer and winter. However, for at least the next few decades, the carbon-neutral WindFuels produced would be worth much more as transportation fuels than as grid peaking fuel. Natural gas, coal, and existing hydro would continue to provide most grid peaking energy for many decades.

Since WindFuels would solve the grid stability challenges, the best way to increase low-carbon peak grid capacity will be to simply put up more wind farms. The extra, off-peak, energy will have a strong market for making carbon-neutral, transportation fuels, which will command a very high price.

Summary of the Competition.
It will soon become clear that cellulosic ethanol cannot sustainably provide more than a few percent of our fuel needs without doubling the price of hay and wood, and photosynthetic algae oil will not be able to be produced for under $60/gal. Moreover, we cannot expect significant growth in CTL or GTL (coal-to-liquids and gas-to-liquids). On this last point, there is no disagreement with the IEA. They too are projecting negligible contribution from CTL, GTL, and shale oil in 2030, as shown in the figure below.

The bottom line here is that oil prices for our “Mid-term” outlook (7 to 20 years from now) should be three times what is needed for WindFuels to be profitable, even if prices of off-peak grid energy recover to historical expectations.

The above, from the IEA World Energy Outlook 2008, shows very limited expectations for GTL, CTL, and shale oil (not even mentioned). The expectations for oil sands and off-shore appear quite excessive, largely for environmental reasons.

WindFuels are Forever.
Anthropogenic carbon emissions may soon be a little below what was expected a few years ago – mostly because of high prices for all fossil fuels, and because of increased incentives for improved efficiency. However, the positive feedbacks in the climate (especially from the melting of the Arctic) could offset this progress.

There is still no reason to think that hydrogen will ever work in the transportation sector. Compared to WindFuels, there is no emissions advantage and no efficiency advantage for hydrogen. There are only huge cost disadvantages. Next-generation internal combustion engines optimized for the 100+ octane alcohol mixture that could come from the WindFuels plant could be able to achieve 50% higher efficiency than yesterday’s engines optimized for 87-octane gasoline. And of course, the net carbon emissions from WindFuels will be essentially zero. We show in our discussion of Scalability why WindFuels will not experience the same type of hyperinflation seen over the past six years in biofuels, tar sands, CTL, nuclear, algae-oil, wood pellets, and shale-oil.

The public will slowly begin to appreciate that plug-in electric vehicles will not have a significant effect on carbon emissions for at least another three decades and that most biofuels are only 5% to 20% carbon-neutral. As a result, incentives and support for fully carbon-neutral WindFuels will steadily increase. Wind will still be providing most of the energy needed for Windfuels many decades from now, but an increasing fraction may come from advanced nuclear reactors and solar.

WindFuels will be over 85% carbon neutral, and they are completely sustainable. When the last coal power plants are shut down in 2090, the needed CO₂ will come from biofuels refineries, cement factories, ammonia production, steel mills, and the atmosphere.

References:

1. GN Doty, FD Doty, LL Holte, D McCree and S Shevgoor, “Securing Our Energy Future by Efficiently Recycling CO2 into Transportation Fuels – and Driving the Off-peak Wind Market”, Proc. WindPower 2009, #175, Chicago, 2009.

2. The Off-peak Wind Market

3. See http://wilderness.org/files/Oil-Shale-FS-global-warming.pdf .

4. Elizabeth Kolbert, “Unconventional Crude”, Annals of Ecology, Nov. 12, 2007.

5. FD Doty and S Shevgoor, “Securing our Transportation Future by Using Off-Peak Wind to Recycle CO₂ into Fuels”, ES2009-90182, ASME Joint Conferences, San Francisco, 2009. Copyright ©2009 by ASME - used by permission for reference only.

6. FD Doty, “Hydrocarbon and Alcohol Fuels from Variable, Renewable Energy...“, PCT WO 2008/115933,

7. G. Ramachandran, “Program on Technology Innovation: Integrated Generation Technology Options”, EPRI, Technical Update, Nov., 2008.

8. SM Cohen, GT Rochelle, J Fyffe, ME Webber, “The Effect of Fossil Fuel Prices on Flexible CO₂ Capture Operation”, ES2009-90308, ASME Joint Conferences, San Francisco, 2009.

9. AP Steynberg and ME Dry, eds. Studies in Surface Science and Catalysis 152, Fischer-Tropsch Technology, Elsevier, 2004.

10. S Phillips, A Aden, J Jechura, and D Dayton, “Thermochemical Ethanol via Indirect Gasification and Mixed Alcohol Synthesis of Lignocellulosic Biomass”, NREL/TP-510-41168, 2007.

11. K Harrison, G Martin, T Ramsden, G Saur, “Renewable Electrolysis Integrated System Development and Testing”, NREL PDP_17_Harrison, 2009, http://www.hydrogen.energy.gov/pdfs/review09/pdp_17_harrison.pdf .

12. FD Doty, “High-Temperature Dual-source Organic Rankine Cycle with Gas Separations”, PCT WO 2009/048479, 2009.

13. FD Doty, “Compact, High-Effectiveness, Gas-to-gas Compound Recuperator with Liquid Intermediary”, PCT WO-09082504.

14. See http://www.acorechina.org/uscp/upload/6-11-2009.pdf, Chinese wind turbine growth.

15. See http://www.rechargenews.com/energy/wind/article180724.ece, Chinese wind turbine prices.

16. See http://www.renewableenergyworld.com/rea/news/article/2009/06/wind-turbine-prices-move-down-says-new-price-index?cmpid=WNL-Wednesday-July1-2009 2009.

17. See http://www.grist.org/article/concentrated-solar-power-goes-mainstream/ , and http://social.csptoday.com/news/gerc-proposes-tarriff-solar-thermal-power , 2009.

18. K Weissermel, HJ Arpe, Industrial Organic Chemistry, 4th ed., Wiley, 2003.

19. HR BioPetroleum, http://www.hrbp.com/PDF/Huntley%20&%20Redalje%202006.pdf

20. Eric Wesoff, http://www.greentechmedia.com/articles/algae-biodiesel-its-33-a-gallon-5652.html 2009.

21. M Voith, “Cellulosic Scale-up”, C&EN 87 (17), pp10-13, Apr 27, 2009.

22. A 600,000 gallon tank was quoted by Brown Minneapolis Tank Company as costing about $420K, or under $0.02/kWhr for jet fuel.

 

 

 

 

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