©Hans Hellsmark [email protected] 29 August, 2015 Chalmers University of Technology...

©Hans Hellsmark [email protected] April 2023

Chalmers University of Technology

Realizing the potential of gasified biomass in the EU

Hans HellsmarkStaffan Jacobsson

Energy and Environment/ESAChalmers Technical University

031 772 [email protected]

[email protected]

Policy challenges in shifting from pilot/demo plant phase to commercial phase



Outline

• Introduction and purpose

• Case studies

• Cost to absorb technical risk

• Financial magnitude of market risk

• Contextual factors and policy options



Introduction (1)

Strong push towards developing fossil and biomass based alternative liquid fuels to substitute conventional oil

1. Security of supply 2. Higher oil price3. Peak oil4. Incentives to reduce GHG emissions

(1)-(3) primarily benefit fossil alternatives, such as coal to liquids (CtL) with higher GHG emissions than oil

Gasification of biomass is the 2nd gen biofuel (..) and is a desirable process as 1. it has high resource utilization, 2. no or small contributions of GHG emissions3. does not directly compete with food production



With the EU directive 2003/30/EC a substantial market has been created for biofuels, 5.75% 2010, and with a suggestion of 10 % by 2020

The purposes of this project are to: 1. analyze the emergence of an industry with the capacity of realizing

gasified biomass in Sweden, Finland, Germany and Austria2. draw policy lessons from the historic development of the technology

field and 3. specify the current and future policy challenges for realizing the

technology on an industrial scale

Introduction (2)



Case studies

* Chemrec/Haldor Topsoe

* Värnamo -

* Stora Enso/Foster Wheeler/Neste Oil

*UPM/AndritzCarbona

* Choren/Shell/Daimler/VWFZK/Lurgi *

GE/Eon/Repotec * ~ Chalmers

*Repotec/GussingZSW/EVF *

CUTEC *

Black Liquor, HT-EF, DME

Forest residues LT-FB, FT-DieselForest residues,

LT-FICFB, BioSNG

Farm residues, LT-FB,FT-D/BioSNG

Forest Residues, LT-cross draft+HT-EF, FT-Diesel

Farm residues, LT pyrolysis+HT-EF, MtG

Forest Residues, LT-FICFB, BioSNG

Forest Residues, LT-FICFB,El, heat, BioSNG

Forest Residues, LT-FB, FT-wax /DME

StatusStart, March 2007Finish – June 20104 countriesInterviews: 70 of 80



Pilot Demo

Year Size Cost Year Size Cost

TU-Vienna/Repotec 1995 0,1MW ? 2001 8+1MW 10+?

Chalmers/Metso 2008 6MW 1,1 2008 6MW 1,1+?

Chemrec 2005 5MW 7 2010 5MW/1.5kt 28

Värnamo/Chrisgas X 18MW 45

Carbona/UPM 2005 6MW 10

FW/SE/Nesté 2007 5MW 40

Choren 1998 1MW NA 2009? 45MW/15kt 100

FZK/Lurgi 2005 0,1 2008 5MW/0,5thr 4

Pilot and demo: Cost to absorb technical risk

• Pilot phase completed

• Demonstration is under construction or ongoing and all projects but Värnamo are currently fully financed

• Cost>246M€ (200M€ is secured)



Instruments:1. Direct subsidies (losses are

reduced but risk remains)2. Soft loans 3. Bank guaranties

The instruments are there to absorb the technical risk but

a. how much are financing agencies ready to risk in one or two projects?

b. national or EU level funding?c. how much will be allowed by the

EU?

Commercial (demo): Cost to absorb technical risk

Pre-Commercial Demo Commercial size

Year Size Cost (M€) Year Size Cost

TU-Vienna/Repotec 2010 30MW 75

Chalmers/Metso 100 MW 150

Chemrec 2012/13 0,07Mt 140 2015~ 0,21Mt 400

Värnamo/Chrisgas ? 0,2Mt 400

Carbona/UPM 2011-12? 0,2Mt 400 2015~ 0,2Mt 500

FW/SE/Nesté 2011-12? 0,1Mt NA/est.400 2015~ 0,2Mt 500

Choren 2015~ 0,2Mt 800

FZK/Lurgi 2011 5MW NA/est. 70 2015~ 1Mt 520

Technical risk sharing :• Pre-commercial demo : >1085M€• Commercial demo: > 3270M€



Assessment of market risk for commercial size plants

The first seven commercial size plants >2015• 3270M€ investment• 2,1Mtons production capacity (need ~30Mt to reach 10% target (<1%))

150 plants required (0.2 Mt, 4-800M€) to realize 10% market share (60-120 000M€ in total investment cost)



Assessment of market risk for commercial size plants- Annual cost of realizing a BtL market (10% BtL fuels by 2030) (M$)

Oil price, average (76-08)- 29$/bbl

IEA ref price, 2030 - 62 $/bbl

EIA ref price 2030- 131 $/bbl

EIA high price 2030- 200 $/bbl



Contextual factors when designing an instrument for absorbing the market risk

• Time scale for transformation of the transport sector is short– Rapidly increasing emissions from the transport sector and limited time frame for

transforming the transport sector (peak by about 2015 and major reduction 2050)– Long time scale to go through pilot/demo to commercial plants for each trajectory– Long time scale to go from 7 to 150 plants (10% of market by 2030?)

=>all policies must be assessed with respect to their ability to deliver within a specified time frame (impossible to speak of efficiency without effectiveness)

• To be effective, several alternative technologies that vary in scale, cost, feed-stock, products need to be developed and coexist - Good policy is designed to create markets for renewable technologies that out-compete fossil alternatives and not each other

• Given large cost differences, a potential intra-EU trade in fuel may impact on policy choice and incentives to invest



Policy alternatives for 2nd generation (1)

• CO2 trade is not sufficient since income streams can not be calculated: price risk remains with respect to fossil fuel

• Quota induces expansion in 1st generation. • Proposed double counting of BtL is not enough since the price risk is

still there (price risk with respect to 1st generation)

=>Effectiveness criteria excludes CO2 trade and quota, at best it induces sequential development




BtL blending quotas• Will take the cheapest Btl (Finland) if trade is allowed• Price levels will equalize (and approach the most expensive)• But if suppliers pursue aggressive pricing strategies out compete

others – leads to sequential development• To be effective, there is not time for sequential development• May be resolved though a very high quota (but very high consumer

cost)

=>BTL blending quota possible but risky for variety, effectiveness and consumer costs




Feed-in with cost covering payment may lead to diversity and effectiveness• may need to adjust for feed-stock prices• may link policy to CO2 reduction performance (i.e. opens up for higher

prices for more costly but higher performance fuels)• scope for SNG! Biogas feed-in law easy to implement (many plants)

But, • Variety requires one tariff for each trajectory-manageable but need

experience with full size commercial plants to calculate costs?• The first seven commercial size plants around 2015 – feed-in for 7 plants

– is it meaningful especially when there is yet no competition in the capital goods sector within each trajectory?

=> BtL blending quota is more attractive



Possible solution for the first seven plants?

• Tax exemptions and guaranteed off-take price from public sector customer (Bonn, Berlin, Göteborg, Ministry of Defense) or trader or petrochemical firm

• Experience generated to base further policy on

©Hans Hellsmark [email protected] 29 August, 2015 Chalmers University of Technology...

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