featuredinsights alternativefuel final

8/21/2019 FeaturedInsights AlternativeFuel FINAL

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FEATURED INSIGHT

PRODUCTION COSTS

OF ALTERNATIVE

TRANSPORTATION FUELS

Influence of Crude Oil Priceand Technology Maturity

PIERPAOLOCAZZOLA, GEOFFMORRISON, HIROYUKIKANEKO,FRANOISCUENOT, ABBASGHANDIANDLEWISFULTON


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This paper reflects the views of the IEA Secretariat but does not necessarily reflect the views or policies of the IEAs individual

member countries. The paper does not constitute advice on any specific issue or situation. The IEA makes no representation or

warranty, express or implied, in respect of the papers content (including its completeness or accuracy) and shall not be responsiblefor any use of, or reliance on, the paper. Comments are welcome, directed to [email protected].

PRODUCTION COSTS

OF ALTERNATIVE

TRANSPORTATION FUELS

Influence of Crude Oil Priceand Technology Maturity

PIERPAOLOCAZZOLA, GEOFFMORRISON, HIROYUKIKANEKO,FRANOISCUENOT, ABBASGHANDIANDLEWISFULTON


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INTERNATIONAL ENERGY AGENCY

The International Energy Agency (IEA), an autonomous agency, was established in November 1974.Its primary mandate was and is two-fold: to promote energy security amongst its member

countries through collective response to physical disruptions in oil supply, and provide authoritative

research and analysis on ways to ensure reliable, affordable and clean energy for its 28 membercountries and beyond. The IEA carries out a comprehensive programme of energy co-operation amongits member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports.The Agencys aims include the following objectives:

n Secure member countries access to reliable and ample supplies of all forms of energy; in particular,through maintaining effective emergency response capabilities in case of oil supply disruptions.

n Promote sustainable energy policies that spur economic growth and environmental protectionin a global context particularly in terms of reducing greenhouse-gas emissions that contributeto climate change.

n Improve transparency of international markets through collection and analysis ofenergy data.

n Support global collaboration on energy technology to secure future energy supplies

and mitigate their environmental impact, including through improved energyefficiency and development and deployment of low-carbon technologies.

n Find solutions to global energy challenges through engagement anddialogue with non-member countries, industry, international

organisations and other stakeholders.IEA member countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea (Republic of)

Luxembourg

NetherlandsNew Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Turkey

United Kingdom

United States

The European Commission

also participates in

the work of the IEA.

OECD/IEA, 2013

International Energy Agency9 rue de la Fdration

75739 Paris Cedex 15, France

www.iea.org

Please note that this publicationis subject to specific restrictionsthat limit its use and distribution.

The terms and conditions are available online athttp://www.iea.org/termsandconditionsuseandcopyright/


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ProductionCostsofAlternativeTransportationFuels:OECD/IEA2013 InfluenceofCrudeOilPriceandTechnologyMaturity

Page|3

TableofContents

Acknowledgements................................................................................................................... 5

ExecutiveSummary................................................................................................................... 6

Introduction............................................................................................................................ 10

DescriptionofMainAnalysisandKeyAssumptions................................................................. 12

Inputstreamcosts...................................................................................................................12

DifferencesbetweentheCurrentTechnologyScenarioandtheMatureTechnologyScenario..............................................................................14

Capitalcosts,O&Mcosts,coproducts....................................................................................14

Fueltransport,distributionandrefuellinginfrastructurecosts..............................................17

Liquidfuels.......................................................................................................................18

Hydrogen..........................................................................................................................

18

NaturalgasandbioSNG..................................................................................................18

Electricity.........................................................................................................................19

Travelcostassumptions..........................................................................................................20

Results.................................................................................................................................... 22

SensitivityAnalysisandDiscussion.......................................................................................... 26

Conclusions............................................................................................................................. 29

Annexes.................................................................................................................................. 30

AnnexADescriptionofinputstreamcostmethods.............................................................30

PetroleumIntensityMethod...........................................................................................30

HistoricalTrendMethod..................................................................................................30

AnnexBCapitalcosts:keysourcesusedforthecharacterisationoftheenergypathways....35

AnnexCPlantsizeandscaling..............................................................................................36

AnnexDPlantefficiencies....................................................................................................37

AnnexEGaseousfuels:keysourcesandexplanationofthechoicesmadeforthecharacterisationofdifferentcases..............................................................................38

AnnexFElectricity:keysourcesandexplanationofthechoicesmadeforthecharacterisationofdifferentcases..............................................................................39

Acronyms,abbreviations

and

units

of

measure

.......................................................................

41

References.............................................................................................................................. 43

ListofFigures

Figure1 CostoffuelproductionversusoilpriceforselectfuelsinCurrentTechnologyScenario....6Figure2 CostoffuelforCurrentTechnologyScenarioversusMatureTechnologyScenario

forUSD60/bbl(top)andUSD150/bbl(bottom)...........................................................7Figure3 CostoffuelforPetroleumIntensityMethodandHistoricalTrendMethod

(USD150/bbl).................................................................................................................8

Figure

4

Energy

feedstock

commodities

and

oil

price,

2000

10

................................................

13

Figure5 RelationshipbetweendownstreamIHSCERAindexandhistoricalrealcrudeprice...16


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ProductionCostsofAlternativeTransportationFuels:InfluenceofCrudeOilPriceandTechnologyMaturity OECD/IEA2013

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Figure6 CostoffuelproductioninCurrentTechnologyScenario.............................................23Figure7 CostoffuelproductioninMatureTechnologyScenario.............................................24Figure8 SensitivityanalysisforselectedalternativefuelsevaluatedatUSD150/bbl

inCurrentTechnologyScenario...................................................................................26Figure9 Monthlycoalandnaturalgaspricesasafunctionoftheoilprice,January2000to

October2012

................................................................................................................

30

Figure10Monthlypricesofvegetableoilsasafunctionoftheoilprice,January2000toOctober2012................................................................................................................31

Figure11Monthlywheatandcornpricesasafunctionoftheoilprice,January1980toOctober2012................................................................................................................32

Figure12Monthlycanepriceasafunctionoftheoilprice,May2000toOctober2012 ..........33Figure13Monthlylogandsawnwoodpriceasafunctionoftheoilprice,January2000to

October2012................................................................................................................33

ListofTables

Table1 Energypathwaysconsidered........................................................................................11Table2 Directeffectsofpetroleumenergyused......................................................................12Table3 ComparisonbetweenPetroleumIntensityMethodandHistoricalTrendMethodfor

estimatinginputstreamcostsundervariableoilprices,CurrentTechnologyScenario...13Table4 Summaryofsizesofproductionfacilities(expressedasannualoutput)

forCurrentTechnologyScenarioandMatureTechnologyScenario............................15Table5 Investmentcostcomponentsfordifferentenergypathways(USD60/bbl).................16Table6 Investmentcostcomponentsfordifferentenergypathways(USD150/bbl)...............17Table7 Costoftransport,distributionandrefuellinginfrastructure

forenergypathways(USD60/bbl)................................................................................17Table8 Costoftransport,distributionandrefuellinginfrastructure

forenergypathways(USD150/bbl)..............................................................................18Table9 Assumptionsonthecharacteristicsofrecharginginfrastructureforpluginhybrid

electricvehicles(PHEVs)andEVs,andresultingcostestimates..................................20Table10FueleconomyassumptionsforCurrentTechnologyScenario

andMatureTechnologyScenariousedtoestimatetravelcost(USD/km)byfueloptions,forthetypicalfleetaveragepassengerlightdutyvehicle..................21

Table11DrivingcostsoffuelscalculatedforCurrentTechnologyScenarioandMatureTechnologyScenariowhencrudeoilisatUSD60/bblandUSD150/bbl....25

Table12Plantefficienciesassumedfordifferentlargescalepathways.....................................37


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Acknowledgements

The InternationalEnergyAgency (IEA)DirectorateofSustainableEnergyPolicyandTechnology(SPT)prepared thispublication. The reports authorswere PierpaoloCazzola,GeoffMorrison,HiroyukiKaneko,FranoisCuenot,AbbasGhandiand LewisFulton.Thepaperwouldnothavebeen completedwithout considerablehelp and guidance fromAlexander Krner. The authorsalsowishtothankJohnDulac,TaliTriggandSteveHeinenfortheirvaluableinput.

DidierHoussin,DirectorofSPT,BoDiczfalusy,formerDirectorofSPT,JeanFranoisGagne,Headof theEnergyTechnologyPolicy (ETP)Division,andCeciliaTeam,Headof theEnergyDemandTechnologyUnit, provided valuable guidance, in the compilationof this report. Thank you toSimonWatkinsonforeditingsupportandtheIEACommunicationandInformationOffice(CIO),inparticular, Muriel Custodio, Angela Gosmann and Cheryl Haines. A special thanks to AnnetteHardcastle, Hanneke Van Kleef and Katerina Rus for their support on the production of thisreport.


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ExecutiveSummary

Thisstudyexaminestheproductioncostsofarangeoftransportfuelsandenergycarriersundervaryingcrudeoilpriceassumptionsandtechnologymarketmaturationlevels.Itusesanengineeringbottomupapproachtoestimatetheeffectofboththeinputcostofoilandvarioustechnologicalassumptionsonthefinishedpriceofthesefuels. Intotal,theproductioncostsof20fuelswereexaminedforcrudeoilpricesbetweenUSD60perbarrelofoil(USD/bbl)andUSD150/bbl(USD60/bblwasthereferencepointasa longtermseriesofdatawere linkedto lowoilprices,whichonlyincreasedinthelastdecadeorso).

Thepaperuseddatafromarangeofsources,collectedaspartoftheInternationalEnergyAgency(IEA)MobilityModel(MoMo)project(Fulton,CazzolaandCuenot,2009).TheestimatespresentedhereconstituteoneofthesourcesthatfeedintoIEAanalyses,suchastheIEAEnergyTechnologyPerspectives 2012 (IEA,2012a), and are part of a wider range of inputs unrepresentative ofofficial IEA estimates. Thisworkingpaper is intendedboth to show the resultsof specific IEAanalysis,andsolicitcommentsonthemethodologyanddataused.Thefuelcostestimatestake

intoaccount

the

costs

of

feedstock

procurement

and

transportation;

feedstock

conversion

to

fuel;andfueltransportationanddistribution (includingcostsofconstructing infrastructureanddispensingstations).Specificattentionispaidtothetransmissionanddistribution(T&D)costsofhydrogen (H2),biosyntheticnaturalgas (bioSNG),andelectricity forelectricvehicles (EVs),asthesefuelsinfrastructuresaretheleastdevelopedofthepathwayscurrentlyconsidered.

Figure1CostoffuelproductionversusoilpriceforselectfuelsinCurrentTechnologyScenario

Note:BTL=biomasstoliquids;CTL=coaltoliquids;NG=naturalgas;USD2010/bbl=2010nominalUSDperbarrelofoil;USD2010/GJLHV=2010nominalUSDpergigajouleusinglowerheatingvalue.FuelproductioncostsinthisfigureareextrapolatedfromtheirUSD60/bblvalueusinganarithmeticalaverageofthetwomethods(PetroleumIntensityandHistoricTrend)arediscussedbelow(seeChapterResults).

Source:unlessotherwisestated,allmaterialinfiguresandtablesderivefromIEAdataandanalysis.

Forthefeedstockandprocurementstage,twoseparateprocedureswereusedtoestimatehowchanges inoilpricesaffect fuelproduction costs.The firstprocedure, thePetroleum IntensityMethod,estimatesthequantityofpetroleumusedtoproduceandtransporteachfeedstock.As

the

oil

price

increases,

feedstocks

with

the

highest

petroleum

intensity

incur

the

highest

rises

in

cost.Thesecondprocedure,theHistoricalTrendMethod,reliesonthehistoricalbivariaterelationship

0

20

40

60

80

100

60 70 80 90 100 110 120 130 140 150

CostperGJ(USD2010/GJLHV)

Costperbarrel(USD2010/bbl)

H fromNG(central)

Electricity(biomass)

Lignocellulosicethanol

BTL

Gasoline

Electricity(naturalgas)

Cornethanol

Sugarcaneethanol

CTL

Naturalgas


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Page|7

between the price of oil and the average global price of a given feedstock. As the oil priceincreases,thecostofagivenfeedstockchangesaccordingtothisrelationship.Resultsfrombothproceduresarepresented,andrepresentwhatisconsideredasthetwoextremesoftheinfluenceofoilpriceontransportationfuelcosts.

Fuelproduction

costs

are

estimated

for

todays

market

environment

(Current

Technology

Scenario)

in

whichemergingtechnologieshavenotfullybenefitedfromeconomiesofscaleorknowhow(Figure1).

Future fuel costsarealsoestimated fora situation inwhicha fullymature supplychainexistsindependentlyforeachfuelusingaMatureTechnologyScenario(Figure2).Forsomeemergingenergypathways,suchaselectricity(andelectrictransport),technologicalmaturitymaynotbeachievedbefore2020,andinafewcases(e.g.H2)itmaynotbeuntil2030orlater.However,themainpurposeofthisScenariosanalysisistofindasetofparametersthatenablecomparabilityofenergyfortransportationandquantificationoftheeffectofhighercrudeoilpricesontheproductioncostsoffuels.

Figure2CostoffuelforCurrentTechnologyScenarioversusMatureTechnologyScenario

forUSD60/bbl(top)andUSD150/bbl(bottom)

Note:USD/GJ=USDpergigajoule,etOH=ethanol.

0

20

40

60

80

100

USD/GJoffuel

USD60/bblCurrent USD60/bblMature

Gasoline

0

20

40

60

80

100

USD/GJoffuel

USD150/bblCurrent USD150/bblMature

Gasoline


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Page|8

Therearetwomethodsforestimatingfuelcosts:

linking the cost of production to the quantity of petroleum products used in production(PetroleumIntensityMethod);

linkingtheinputstoproductiontothehistoricalrelationshipsbetweeninputcommoditiesand

thefuel

of

interest

(Historical

Trend

Method).

The Petroleum IntensityMethod accounts fordirect effects anduses energy inputoutput coefficientsfromtheGreenhouseGases,RegulatedEmissions,andEnergyUseinTransportation(GREET)Model(Wang,2007).TheHistoricalTrendMethodaccountsforboththedirectandindirecteffects.WhenusingthetwomethodsformaturetechnologywithoilpricedatUSD150/bbl,theHistoricalTrendMethodyieldsslightlyhigherestimatedcoststhanthePetroleumIntensityMethod(Figure3).

Figure3CostoffuelforPetroleumIntensityMethodandHistoricalTrendMethod(USD150/bbl)

Thisreportwillbeusefultopolicymakersandpractitionersseekingtounderstandhowandwhytransportfuelsaresensitivetocrudeoilpricefluctuations,andhowthecostcompetitivenessofdifferentfuelsmaychangewiththesefluctuations. Italsoshouldbeofusetoenergyproviderswhoseektominimisetheirexposuretofutureoilpricevolatility.

Ninemainresultsandrecommendationsweredrawnfromthisanalysis:

Policymakers should not assume that in a futurewith higher oil prices, nonpetroleum

transportationfuels

will

be

economically

competitive.

Rather,

because

most

production

processesofalternative transportation fuels relyonpetroleum thesealternativeswill likelyfaceincreasingcostsasoilpricesincrease.

Feedstockpricesplayamajorroleinthefinal(untaxed)costsofalternativefuels.Sincefeedstockpricescanvaryconsiderably,theyshouldbecarefullyaccountedforinthecostbenefitanalysisofdifferentfueloptions.

Severalfuelscouldcompetewithgasolineifhighgasolinepricesarecomparedtoafuel

cost estimate that assumed low crude oil prices. This underscores the importance ofclearly stating the oil price assumptions in technoeconomic analyses, and using thisassumptionwhendevelopingcostassumptionsforotherfuels.

Alternative

transportation

fuels

vary

in

sensitivity

towards

oil

price

changes.

A

1%

increase

intheoilpriceleadstoa0.0%to0.68%increaseintheproductioncostoffuelsintheCurrent

0

20

40

60

80

100

USD/GJoffuel

USD150/bblPetroleumIntensity USD150/bblHistoricalTrend

Gasolineat

USD150/bbl


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Page|9

Technology Scenario. The fuels with production costs least sensitive to oil price changesincludebioSNG,sugarcaneethanolandH2fromcoalgasification.Ontheotherhand,cornorlignocellulosic ethanol, biodiesel, BTL, and gastoliquids (GTL) have the largest productioncostchangesastheoilpricefluctuates.Consideringtheimpactofchangingoilpricesonotherfeedstocks,firstandsecondgenerationbiofuelssuchascornethanol, lignocellulosicethanol

andBTL

tend

not

to

achieve

levels

of

cost

competitiveness

that

are

comparable

with

other

alternativeenergypathways.

Fuelswith thegreatest sensitivity to inputparameters includeH2pathways,electricity

fromsolarphotovoltaic(PV),andlignocellulosicethanol.ThefuelswiththeleastsensitivitytofuturecostsincludecornethanolandCTL.

Themostsensitive inputparametersusedtoestimateproductioncosts in thisanalysis

varybyfueltype.Theconversionefficiencyfromprimarytosecondaryenergy,thepriceofoil,andthe feedstockacquisitioncost (thatare linkedtotheoilprice,asassumed intheHistoricalTrendMethod),however,aregenerallythemostsensitiveparameters.

Refuellinginfrastructurecostscansignificantlyimpacttheintroductionofanumberofalternative

fuels,depending

on

their

specific

characteristics.

This

effect

is

much

stronger

in

immature

markets,wheretheratioofinfrastructuretotheamountoffuelsoldmayberelativelyhigh.

IntheCurrentTechnologyScenario,fewalternativefuelsarelikelytocompetewithoilbelow

USD90/bbl.Onanenergybasis,onlynaturalgasandCTLenjoy lowerproductioncosts.Fornaturalgas,thisresultisheavilydependentontherateofusageoftherefuellinginfrastructure.Onaperkilometrebasis,naturalgas,CTLandallelectricitypathwayshave lowerproductioncosts,thelatterthankstothemuchhigherefficiencyofelectricmotorscomparedtointernalcombustionengines.

ManyalternativefuelscancompetewithaUSD100/bblintheMatureTechnologyScenario.

Onlyfuelsthatcanbemixedwithoilwould immediatelyreducetheoveralldrivingcosts.Otherfuelsthatneedalternativepowertraintechnologies(suchasgaseousfuels,electricitythat

need

substantial

retrofits

and

ethanol

based

fuels

that

need

slight

retrofit

to

make

the

vehiclecompatiblewiththosefuels)willrequireimportantleadtimestohaveasignificantmarketshare.Theyalsoneedambitiousinfrastructuredeploymentprogrammesthatfocusonfuelcosts,whicharenotconsideredinthisanalysis.Ofthecheaperoptions,CTLisonlyreadilyavailablefortheexistingvehiclefleet.


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Introduction

Theestimationofproductioncostsfortransportationfuelshasbeenthesubjectofmajorresearch(NAS,2004;Parker,2004;Yousifetal.,2011;Fornell,BerntssonandAsblad,2012) inrecentyears.Suchestimationsareusedbyenergystakeholderstodeterminetheeconomicviabilityofaparticularfueltechnologyorconversionprocess.However,amissingcomponentinnearlyalltheseanalyseshasbeen thediscussion about theeffectofoilprice changesonproduction costs.Thispaperattempts to fill this research gap by evaluating global welltotank supply chain costs for20transportationenergypathways1atoilpricelevelsbetweenUSD60/bblandUSD150/bblincurrenttechnologicalconditions(CurrentTechnologyScenario),andaconditioninwhichafullydevelopedsupplychainexistsindependentlyforeachfuelalternative(MatureTechnologyScenario).

Workingonaglobalaverageisclearlytoosimplifiedandtheaimofthisanalysisisnottoaddressspecificregionalsituationsorbreakevenpriceswithcrudeoil.Itspurposeisrathertohighlightstructurallinkagesbetweenthecostofcrudeoilandtheproductioncostsofalternatives,andinvestigatewhetheranincreaseincrudeoilpricecouldpotentiallypreventvariousoptionsfrombecomingcostcompetitive.

Thecost

of

aparticular

fuel

or

energy

carrier

can

be

broken

into

three

general

categories:

The inputstreamcost,whichincludestheprocurementoftheprimaryenergyfeedstockandthe transportation of the feedstock to the conversion facility. Feedstock storage andpreparation(e.g.biomasspelletisation)costsarenotcoveredhere.

Theproductioncost,whichincludeslevellisedcapitalcostsandtheoperationandmaintenance(O&M)costsoftheconversionfacility.Thisincludesrefineries,gasprocessingunits,gasifiers,etc.

Thefueltransport/T&Dcosts,which includecapitalandinfrastructureneededtotransportthefuel/energycarrierfromtherefineryanddispenseittoendusers.Specificattentionisgiventothecostsoffuelswithextremelylowcurrentmarketpenetration(i.e.H2andelectricityfortransportation).

Alargetechnicalmanual isusedtoestimateeachofthesethreecostsforthe20transportationenergypathways.Allcostsaregivenin2010USD.UnitcostsaregiveninUSDpergigajouleusinglower heating value (USD/GJLHV),USD per litre of gasolineequivalent using low heating value(USD/lgeLHV),orUSDperkilometre travelled (USD/km).Thisanalysis considers relevantenergypathways (Table1). Though many potentially important emerging pathways are omitted, thebreadthofpathwaysacrossdifferentprimaryenergysourcesenablesanumberofconclusionstobedrawnabouttheeffectofoilpriceonproductioncosts.

Foreaseofpresentation,alldatatablesanddiscussioninthisreportconcernresultsatUSD60/bblandUSD150/bbl.Theaveragepriceof crudeoilwasUSD39.2/bbl from1985 to2010, in real2010USD,andanaverageofUSD72.2/bblfrom2005to2010.

TheIEAassumesthatoilpriceswillrisesteadily,reachingpricesofUSD145/bblandUSD125/bbl,

respectively,in

2035

(IEA,

2012b).

Only

in

the

450

parts

per

million

of

carbon

dioxide

scenario,

do

oil

pricesstaynearthe2011levelsofUSD100/bbl(IEA,2012b).Forthisanalysis,USD60andUSD150/bblhavebeenselectedasreasonablelowandhighoilpricestoreflectthewiderangeofpossibilities.

Asengineefficienciesdifferbetweendifferentenergytypes(i.e.electricmotorsaremoreefficientthansparkignitionengines),a furtheranalysis isconducted toestimate thecostperkilometretravelled for each energy pathway. This provides another perspective about the viability ofdifferentenergyoptions.

1Here,anenergypathway isdefinedasaparticular feedstockandconversionprocess.Anexampleenergypathway isBTLproductionusingwoodyforestresidueinafixedbedgasifier.Theanalysisstopsatthislevelofdetail(i.e.doesnotdiscussthespecific

type

of

farming

equipment,

biomass

pre

treatment

process,

etc.)

since

the

focus

is

to

identify

the

broad

relationship

betweenthecrudeoilpriceandproductioncosts.


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Table1Energypathwaysconsidered

Primary energy source Final energy type Process

Crude oilGasoline*

Diesel fuel**Oil refining

Natural gas

Middle distillates (GTL)Compressed natural gas

H2

Electricity

Gasification and Fischer-Tropsch conversionProcessing, compression

Reforming, compression

Gas turbine (50% efficiency assumed)

Coal

Middle distillates (CTL)

H2

Electricity

Gasification and Fischer-Tropsch conversion

Coal gasification

Integrated gasification combined cycle

Nuclear energyH2

Electricity

Water splitting

Fission

Oil-seed crops Biodiesel (rapeseed) Transesterification, hydrogenation

Grain crops Ethanol (corn) Biochemical conversion

Cane crops Ethanol (sugarcane) Fermentation

Biomass from cropsand/or waste products

Biodiesel (BTL)

Lignocellulosic ethanol

Bio-SNG

H2

Electricity

Gasification and Fischer-Tropsch conversion

Biochemical conversion

Biomass gasification

Electricity generation from power plants(co-firing and dedicated) and point-of-use electrolysis

Direct combustion (dedicated)

Solar energy Electricity PV cells

Hydroelectric energy Electricity Large hydroelectric turbines

*Referencefuel.

**Assumedthesamecostpergigajouleasgasoline.

Thecost

estimates

in

this

study

were

based

on

aset

of

technical

and

economic

parameters

such

asconversionefficiency,energydensityof feedstocks,scaling factors, lifetimeof infrastructureandconversionfacilities,interestrate,historicalcostmovementsandothersoutlinedbelow.Tounderstand the importance of each of these input parameters to the final cost estimate, asensitivityanalysiswasperformedforeachfuel.

Asisusualwiththistypeofstudy,anumberofcaveatsdeservemention.Thecostestimatesherereflecttheglobalaveragedeliverycosttoconsumerslocatedreasonablyclosetoconversionplants.Thesecostswillinevitablydifferfromestimationsatregionalorlocallevels,fromthoseconsideringparticularlylongtransportationdistancesfromthepointoffinalconsumption/distributionofthefuelsand/or fromestimationswithparticularly longtransportationdistances forthefeedstocks

in

each

pathway

(except

for

natural

gas),

where

transportation

costs

are

assumed

to

be

included

inthefeedstockprice).Globalstudieshavegonealongwaytocombinecostestimates.However,thespatialdesignofthesupplychain,theendowmentofresourceswithinaregion,thecostofaregionslabourforce,exchangerates,costsofthelongdistancetransportationofenergycarriersandtheirrequiredfeedstocks,aswellasdifferingregionalpoliciesimplemented,couldshiftsupplychaincostsawayfromtheestimatesgivenhere.Theaveragecosttoproducersalsodiffersfromthe consumerprice,which canvaryowing tomarketmediatedeffects.Another caveat is thattechnologicaladvancementisuncertainandwilllikelybeheterogeneousacrossenergypathways.Thisreportdetailsproductioncosts,notmarketprices(exceptforoilasan input).Additionally,thisanalysisdoesnotconsiderthetimelagbetweenoilpricechangesandchangestoproductioncosts.Rather,allestimationsassumethatenergy,capital,andlabourmarketshavereadjustedto

the

new

stable

oil

price.

Finally,

this

analysis

does

not

estimate

vehicle

costs,

which

will

likely

be

animportantfactorintheexpansionofemergingenergytechnologiesasmuchasfuelcosts.


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DescriptionofMainAnalysisandKeyAssumptions

This section describes the three main components of cost input streams, production, andtransportationanddistribution ingreaterdetail. Information about thedrivetrainefficiencyassumptionsusedtoestimatethecostperkilometreforeachfuelisuseful(Table10).Additionaldetailsarealsoofinterest(AnnexesAtoF).

Inputstreamcosts

Inputstreamsincludeallphysicalinputstotherefining/conversionprocessincludingtheprimaryfeedstock,chemicalsandelectricity.Inthisanalysis,inputstreamcostsalsoincludethetransportationfromthepointsofextraction/harvesttotheconversionfacility.Thecostsofthefeedstockrepresentoneofthelargestoverallcostsintheproductionoffuels(Yousifetal.,2011).Thelinkagebetweeninputstreamcostsandcrudeoilpricereflectsanumberofdirecteffectse.g.oilusedinfertiliserproduction,forfarmtractors,biomasstransport,etc.(Table2).The linkagebetweeninputstreamcostsandcrudeoilpricealsoreflectsindirecteffects(e.g.asoilpricesincrease,theattractivenessofnaturalgasorbiofueluseincreasesandplacesanupwardpressureonnaturalgasorbioenergyfeedstockprices)aremainlyrelatedtothemarketrelationshipsoffeedstockprices(Figure4).

Table2Directeffectsofpetroleumenergyused

Primary energy source Final energy type

Petroleum intensity of energy source(megajoule of oil/gigajoule of final energy)

Production Transportation

Natural gas

GTL

H2(central production)

Electricity

3.99

3.99

3.99

0.00

0.00

0.00

Coal

CTL

H2(gasification)

Electricity

11.3

11.3

11.3

19.4

19.4

19.4

Nuclear energyH2

Electricity

3.98

3.98

0.00

0.00

Oil-seed crops Biodiesel (rapeseed) 29.8 22.7

Grain crops Ethanol (corn) 20.1 25.7

Sugar crops Ethanol (sugarcane) 15.6 9.19


BTL (forest residues)

Lignocellulosic ethanol (corn stover)

Biogas (landfill)

H2(corn stover)Electricity (forest residues)

40.5

39.6

0.00

39.640.5

49.9

24.7

0.00

24.749.9

Solar energy Electricity (PV) 0.00 0.00

Hydroelectric energy Electricity 0.00 0.00

InthePetroleum IntensityMethod,using theGREETmodel, thequantityofpetroleumused inthe production of each commodity (i.e.only capturing the direct effects)was estimated. ThePetroleumIntensityMethod(theamountofmegajoulesofpetroleumusedtoproduce1gigajouleoffinalfuel)establishedabasepriceofUSD60/bbl.SubsequentchangesfromUSD60werebasedonthecommodityspetroleumintensity(seeAnnexAforasamplecalculation).InalltablesandfiguresshowingboththePetroleumIntensityMethodandHistoricalTrendMethod,thecostsof

productionat

USD

60/bbl

are

equal

for

the

two

methods.

As

oil

prices

exceed

USD

150/bbl,

the

twomethodsgiveslightlydifferentresults.Thereadermustdecidewhichmethodispreferable.


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Figure4Energyfeedstockcommoditiesandoilprice,200010

Note:USD2010/t=2010nominalUSDpertonne;FOB=freeonboard;US=UnitedStates.

Sources:IMF,2013;BLS,2012.

Table3ComparisonbetweenPetroleumIntensityMethodandHistoricalTrendMethod

forestimatinginputstreamcostsundervariableoilprices,CurrentTechnologyScenario

Primaryenergysource

Final energy type

Amortised input stream costs (USD/GJ)

Petroleum Intensity Method Historical Trend Method

USD 60/bbl USD 150/bbl USD 60/bbl USD 150/bbl

Natural gas

GTL

Gaseous (for CNG)


Electricity

10.97

5.42

9.15

10.84

9.94

4.82

8.32

9.65

10.97

5.42

9.15

10.84

24.71

13.39

20.21

26.77

Coal

CTL

H2(gasification)

Electricity

7.27

6.27

6.39

9.78

8.34

9.24

7.27

6.27

6.39

14.34

20.21

14.41

Nuclearenergy

H2

Electricity

1.62

2.38

1.62

2.38

1.62

2.38

1.62

2.38Oil-seed crops Biodiesel (rapeseed) 26.80 31.59 26.80 52.97

Grain crops Ethanol (corn) 19.58 21.02 19.58 41.56

Sugar crops Ethanol (sugarcane) 13.38 14.16 13.38 24.06

Biomassfrom cropsand/or wasteproducts



Biogas (landfill)

H2(agricultural residues)

Electricity (forest residues)

10.80

16.32

8.43

9.97

10.53

15.27

22.19

11.82

14.03

16.05

10.80

16.32

8.43

9.97

10.53

16.12

24.55

12.25

14.80

15.85

Solar energy Electricity (PV) 0.00 0.00 0.00 0.00

Hydroelectric

energy

Electricity 0.00 0.00 0.00 0.00

Note:Excludescarboncaptureandstoragetechnologies.

0

50

100

150

200

250

300

350

400

450

500

Commodityprice(USD2010

/t)

Oilprice(USD/bbl)

Maize(corn),USNo.2Yellow,FOBGulfofMexico

Wheat,No.1HardRedWinter,ordinaryprotein,FOBGulfofMexico


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Forestresidues,whichrequirealargequantityofpetroleumintheircollectionandtransportationtothebiorefinery,arethemostsensitivefeedstockcoststochangesinoilpriceinthispaper.Ontheotherhand, the leastoilpricesensitive feedstocksarebiogas from landfill,electricity fromsolar, and electricity from hydroelectric plantswhich, according to theGREETmodel, require0megajoulesofpetroleumtocollectandtransporttotheconversionfacility.

Theothermethodforestimating inputstreamcostsfordifferentcrudeoilprice levels istousetheHistoricalTrendMethod.Usingnominaldatafor2012fromboththeInternationalMonetaryFund (IMF)and the consumerprice index (CPI)of theUnitedStates from theBureauof LaborStatistics(BLS),realcornandwheatcommoditypricesfromMexicochangedsignificantlyinrelationto theoilprice from2000 to2010 (Figure4).Certainly, theoilprice isnot theonly importantdeterminantofhistoricalcommoditypricefluctuations.However,formostenergycommodities,theoilpricesexplanatorypowerisveryhighandprovidesastraightforwardapproachtomodellingcostchanges.AnnexAprovidesfurtherdetailsonthismethod.

The costsofproduction and transportationof feedstocks atUSD60/bbl are the same for thePetroleumIntensityMethodandtheHistoricTrendMethod(Table3).However,asoilpricesrise

fromUSD

60/bbl

to

USD

150/bbl,

the

Petroleum

Intensity

Method

cost

is

generally

lower

than

theHistoricalTrendMethodcost.

DifferencesbetweentheCurrentTechnologyScenarioandthe

MatureTechnologyScenario

Adjustments incostsfromtheCurrentTechnologyScenariototheMatureTechnologyScenarioaremadeusingassumptionsoncropyield increases, increasingefficienciesofconversionsandchangingtransportationdistancesfromthepointofextraction/harvesttotheconversionfacility.It should be noted that in alreadywelldeveloped pathways (e.g.corn ethanol), themarginalimprovementissmall(Figures2and3).

Capitalcosts,O&Mcosts,coproducts

Capitalcostsincludethecostofconstruction,interestpayments,insurance,licensing,contingencies,androyalties.O&Mcostsincludethelabourcostsforworkersandsupervisorsandthecostsforconductingroutinemaintenanceonthefacility.Lastly,someagriculturalfeedstocksgeneratecoproductrevenue.

For each energy pathway (e.g.woodwaste to BTL),multiple literature sourceswere used toestimate an average total capital cost of the fuel production facility.As some sources reportregarding levellisedcosts forbothsmallpilotplantsand largescaleplants,effortwas taken to

resizeplants

to

equal

sizes

using

the

equation

in

Annex

B.

See

also

Annex

C

for

details

on

the

assumptionsretainedfortheenergyefficiencyoftheplants.Thefuelproductionplantcapacitiesweredeterminedconsideringmedium tolargescaleproductionfacilities(Table4).TheincreaseinsizefromtheCurrentTechnologyScenariototheMatureTechnologyScenariodependsonthecurrentmaturityof the industryandhow largeaconversion facilitywillbecome following thecorresponding energy pathways successful largescale exploitation. The resulting assumptionalso includes the effectsofpathwayspecific limiting factors (such as the concentrated sparsenatureofthefeedstocks,whichleadstomuchlowerscalesforplantsusingbiomassfeedstocks,incomparisonwiththoserelyingonfossilfuelsornuclearenergy).

To estimate the effects of crude oil price on capital costs, a refinery cost index from IHSCambridgeEnergyResearchAssociates(CERA) isused.Thisindextracksthecostsofequipment,

facilities,materials,

and

personnel

used

in

the

construction

of

over

30

refining

and

petrochemical


17/51


Page|15

constructionprojects(IHS,2012)and,forpowergeneration,thecostsofbuildingcoal,gas,wind,

and nuclear power plants. It is similar to the CPI and aims to provide a clear benchmark for

trackinginvestmentcosts.Thisindexincreaseswithrisingoilprices(Figure5).Inthisanalysis,the

oilpricehasbeenassumedtobethedriverthatdetermineschangesoftheIHSCERAindicesover

theyears.Whilethisisclearlyasimplification,ithelpsgiveasenseofsmallchangesinthecapital

andO&M

costs

of

the

price

of

oil.2

As

with

other

studies,

the

O&M

costs

in

this

analysis

are

assumedtobe10%ofthelevellisedcapitalcosts.

Table4Summaryofsizesofproductionfacilities(expressedasannualoutput)forCurrentTechnologyScenarioandMatureTechnologyScenario

Primary energy source Final energy typeCurrent TechnologyScenario (GJLHV/yr)

Mature TechnologyScenario (GJLHV/yr)

Natural gas GTL


Electricity

57 000 000

28 000 000

5 200 000

140 000 000

50 000 000

9 400 000

Coal CTL

H2(gasification)

Electricity

57 000 000

22 000 000

9 400 000

140 000 000

33 500 000

17 000 000

Nuclear energy H2

Electricity

28 000 000

6 700 000

33 500 000

12 000 000

Oil-seed crops Biodiesel (rapeseed) 2 500 000 6 300 000

Grain crops Ethanol (corn) 2 500 000 6 300 000

Sugar crops Ethanol (sugarcane) 2 500 000 6 300 000




Biogas (landfill)

H2(biomass)

Electricity (forest residues)

2 500 000

2 500 000

2 500 000

4 000 000

1 100 000

6 300 000

6 300 000

6 300 000

24 000 000

2 000 000

Solar energy Electricity (PV) 2 500 000 4 000 000

Hydroelectric energy Electricity 17 000 000 17 000 000

Note:GJLHV/yr=gigajoulesusinglowerheatingvalueperyear.

Capital and O&M costs evaluated at USD60/bbl and USD150/bbl show a significant cost

reductionpotentialforallfuels(Tables5and6).Aninterestrateof10%andanaveragelifetime

of25yearsforproductionfacilitieswereassumedinthecalculations.

Forallenergypathways,exceptelectricity, theseestimates result fromthecombinationofthe

information collected from relevant literature on capital costs (see Annex B for a detailed

description

of

the

relevant

sources)

and

those

derived

from

the

normalised

IHS

CERA

Downstreamindex(IHS,2012).3Forpowergeneration,thisanalysisreliesontheIHSCERAPower

CapitalCostsIndexforNorthAmerica,withandwithoutnuclear(IHS,2012).

2Sincethemajorityofsourcesfoundinliteratureforinvestmentcostsrefertoaperiodwhereoilpriceswereintherangeof

USD40/bbltoUSD50/bbl,theinformationhasbeencorrectedusingtheIHSCERAindexestomatchtheoilpriceassumptions

selectedhere(USD60/bblandUSD150/bbl,dependingonthecase).Thisreassessmentwasmadewithoutapplyingafactor

totheoriginalcostinformationthatequalsthenormalisedIHSCERAdownstreamindexevaluatedattheaverageoilpricethat

correspondedtotherelevanttimeperiodfortheselectedliteraturesource(USD60/bblorUSD150/bbl,dependingonthecase).3 Since the IHS CERA index is associated with real prices, it has been normalised using the US CPI, published by the

Organisation forEconomicCooperationandDevelopment (OECD).Additionally, the IHSCERAdownstream index refers to

projectsthat

are

in

the

downstream

oil

sector

and

not

in

other

alternative

fuel

production

sectors.

Nevertheless,

it

was

appliedheretoallprocessesexceptforpowergeneration.


18/51


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Figure5RelationshipbetweendownstreamIHSCERAindexandhistoricalrealcrudeprice

Table5Investmentcostcomponentsfordifferentenergypathways(USD60/bbl)

Primary energysource

Final energytype

Amortised costs (USD2010/GJLHV)

Current Technology Scenario Mature Technology Scenario

Total fixedcosts

Capitalcosts

O&Mcosts

Total fixedcosts

Capitalcosts

O&Mcosts

Natural gas

GTL

H2

Electricity

7.18

2.78

3.08

6.60

2.44

2.76

0.58

0.34

0.33

5.70

1.59

2.64

5.24

1.34

2.36

0.46

0.25

0.28

Coal

CTL

H2

Electricity

4.03

3.70

8.26

3.70

3.19

7.38

0.33

0.51

0.87

2.91

1.51

7.71

2.67

1.31

6.89

0.24

0.21

0.82

Nuclear energyH2

Electricity

12.46

17.55

11.31

13.37

1.14

4.17

7.46

15.72

6.75

11.99

0.70

3.74

Oil-seed crops Biodiesel 2.31 2.12 0.19 1.61 1.48 0.13

Grain crops Ethanol 3.33 3.06 0.27 2.44 2.24 0.20

Sugar crops Ethanol 3.00 2.75 0.24 1.98 1.82 0.16

Biomass fromcrops and/orwaste products

BTL

Lignocellulosicethanol

Biogas

H2

Electricity

13.96

13.35

9.22

6.31

18.71

12.84

12.27

8.47

5.51

16.73

1.12

1.08

0.74

0.79

1.98

10.01

10.66

7.62

5.04

16.95

9.27

9.80

7.00

4.35

15.16

0.74

0.86

0.61

0.69

1.79

Solar energy Electricity 43.75 39.13 4.63 19.40 17.35 2.05

Hydroelectricenergy

Electricity 15.33 13.71 1.62 14.15 12.66 1.50

100

120

140

160

180

200

220

240

260

25 35 45 55 65 75 85 95 105

CERAindexes,correctedwithCPI

Oilprice(USD2010/bbl)CERADownstr eam CERAPower(includingnuclear) CERAPower(excludingnuclear)


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Table6Investmentcostcomponentsfordifferentenergypathways(USD150/bbl)

Primary energysource

Final energytype



Total fixed

costs

Capital

costs

O&M

costs

Total fixed

costs

Capital

costs

O&M

costs

Natural gas

GTL

H2

Electricity

11.463

3.796

4.677

10.883

3.457

4.351

0.580

0.339

0.326

9.090

2.456

4.009

8.630

2.209

3.729

0.460

0.247

0.279

Coal

CTL

H2

Electricity

6.432

5.767

12.528

6.098

5.262

11.655

0.334

0.505

0.873

4.633

2.357

11.693

4.393

2.151

10.878

0.240

0.207

0.815

Nuclear energyH2

Electricity

19.784

25.286

18.642

21.115

1.143

4.171

11.830

22.659

11.128

18.921

0.702

3.738

Oil-seed crops Biodiesel 3.683 3.497 0.186 2.576 2.446 0.130

Grain crops Ethanol 5.311 5.042 0.269 3.892 3.695 0.197

Sugar crops Ethanol 4.781 4.539 0.242 3.155 2.996 0.160

Biomass fromcrops and/orwaste products

BTL

Lignocellulosic.ethanol

Biogas

H2

Electricity

22.271

21.300

14.706

9.879

28.397

21.153

20.223

13.962

9.085

26.417

1.118

1.077

0.744

0.794

1.980

16.016

17.010

12.156

7.853

25.724

15.272

16.150

11.541

7.162

23.931

0.744

0.860

0.615

0.692

1.793

Solar energy Electricity 66.398 61.769 4.629 29.441 27.388 2.052

Hydroelectricenergy

Electricity 23.266 21.644 1.622 21.476 19.979 1.497

Fueltransport,

distribution

and

refuelling

infrastructure

costs

The costs for the various fuels transportation, distribution, and refuelling infrastructure giveeachfuelgroupspecificcharacteristics(Tables7and8).

Table7Costoftransport,distributionandrefuellinginfrastructureforenergypathways(USD60/bbl)

Energy carrier



Total costsTransport

costs

Storage andrefuelling

costsTotal costs

Transportcosts

Storage andrefuelling

costs

CTL, BTL, GTL 3.266 3.198 0.068 3.260 3.198 0.061Ethanol 3.522 3.412 0.110 3.511 3.412 0.099

Biodiesel 1.719 1.641 0.079 1.711 1.641 0.071

Natural gas, bio-SNG 7.675 3.152 4.523 2.687 1.367 1.320

Centralised H2 86.457 70.898 15.559 13.820 4.191 9.629

Electricity 13.168 2.173 10.996 8.440 1.965 6.475


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Table8Costoftransport,distributionandrefuellinginfrastructureforenergypathways(USD150/bbl)

Energy carrier



Total costs

Transport

costs

Storage and

refuellingcosts Total costs

Transport

costs

Storage and

refuellingcosts

CTL, BTL, GTL 3.609 3.534 0.075 3.602 3.534 0.068

Ethanol 3.892 3.771 0.121 3.880 3.771 0.109

Biodiesel 1.900 1.813 0.087 1.891 1.813 0.078

Natural gas, bio-SNG 7.675 3.152 4.523 2.687 1.367 1.320

Centralised H2 86.457 70.898 15.559 13.820 4.191 9.629

Electricity 13.643 2.648 10.996 8.867 2.392 6.475

Liquidfuels

Allcases

accounted

for

the

levellised

cost

of

liquid

fuel

transported,

distributed

and

dispatched

throughrefuellingstations.Asaresult,thesecostswerehigherforliquidfuelswithalowerenergydensity.Ethanoltransportandrefuellingcostsentailthetransportationcostsfromthebiorefineryto thedispensing station,aswellas thecostsofholding tanks,gasolineblending systems, railmodifications, contingencies and dispensing stations. Ethanol infrastructure requirements areconsiderablylessthanotheremergingtransportationfuels.Ethanolisprimarilyblendedwithgasoline,whichleadstorelativelylowfuelstorageandrefuellingstationcosts.Thecostoftransportingethanolfuel frombiorefineries todispensingstationscanbehigher thanother liquid fuels,particularlybecausebiorefineriesareoftenfarfromlargedemandcentres.DifferencesbetweentheCurrentTechnologyScenarioandtheMatureTechnologyScenarioethanolinfrastructurecostsaretakenfromastudy(Morrow,GriffinandMatthews,2006).

Hydrogen

H2canbetransmittedanddistributed inagaseouspipeline, liquidtruck,orgaseoustrucks.ForcentrallyproducedH2, the lowest costdeliverymethoddependson thedistancebetween theproductionfacilityanddistributionpointaswellasthedistancebetweenthedistributionpointtothe dispensing station (Yang andOgden,2008).Here,we combined themethod suggested inYangandOgden(2008)withvehicleandpopulationprojectionsfromtheIEAMoMoproject.

ThecostscharacterisingtheCurrentTechnologyScenariocorrespondtoasituationwithfewstations(mainly locatedinlargecitiesandmotorways),the lackofH2use intransportand inotherenduses,anda transmissionandyettobebuiltdistributionnetworks.Under thesecircumstances,

theestimated

cost

of

H2

transport

and

distribution

costs

from

centralised

production

facilities

is

so

highthatcentralisedH2productionismoreexpensivethandistributedproductionfromelectrolysis.This confirms the conclusions of one of a number of studies (IEA, 2005). The transport anddistributioncostsusedintheMatureTechnologyScenarioreflectarealitywithmanystations,averyhighnumberofcarsperstation,andestablishedT&Dnetworkswhoseexploitationissharedwithotherenduses.Inthiscontext,centralisedproductionofH2becomescheaperthandistributedproductionfromelectrolysis.MoreinformationonthecalculationofH2transportanddistributioncostsisincluded(AnnexE).

NaturalgasandbioSNG

Thecurrent infrastructurefornaturalgas,bioSNGT&D ismoredevelopedthan it isforH2,but

stillless

developed

than

it

is

for

transportation

fuels.

In

2009,

only

3%

of

transportation

fuel


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worldwideconsistedofnaturalgasand2.1%ofthiswasusedinfivecountries:Pakistan,Argentina,Iran,BrazilandIndia.Othersectorsusednaturalgasmoreubiquitously.Some40%ofresidentialhouseholdshadaccesstonaturalgasand21%ofelectricpowergenerationusesnaturalgasasthe primary energy feedstock (IEA,2011). Thus, natural gas T&D infrastructure exists inmostregionsforindustrybutitsuseinthetransportationsectorismorelimited.

In the Current Technology Scenario, fuel transport and distribution costs combine with fewvehicles and a limitednumberof stations located in large citiesandonmainmotorways.Theassumedwidespreaduseofmethaneinotherenduses(e.g.buildings),andasubsequentlywelldevelopedT&Dnetwork,assumesthattransportanddistributioncosts inthisScenarioarestillrelativelyhighwithafuelstationusagerateapproaching50%.

IntheMatureTechnologyScenario,manystationsaccommodateaveryhighnumberofvehiclesandhavemuch lower fuel transportanddistributioncostsalongwithahighlydevelopedT&Dpipelinenetwork.

Electricity

Twomaininfrastructurerequirementsarenecessaryformakingelectricityavailabletovehicles:

transmittingelectricityfromthegenerationfacilitytothevehiclerecharginglocation;

equipmentandsystemstocontrol,monitorandsafelytransferelectricitytothevehicle.

Accordingtosomeresearch,T&Dlossesin2007accountedforabout7%oftheelectricitygeneratedinOECDmember countries (IEA,2012c).Thisvaluehasbeenused throughout thisanalysis.4 Ifsmartmeteringisused,therecharginginfrastructurerequiresanadvancedsystemthatinteractswiththegridtocontrolchargingtimes,rates,etc.,andtoallowtheuseofvehiclesaselectricitystorageunitsforgridstabilisationpurposes.

Threemaintypesofrecharginginfrastructureareconsideredinthisanalysis:

slowresidential;

slowpublic(parkinglot/roadside);

fastpublicchargingdevices.

In the Current Technology Scenario, these costs are based on the current costs of availablecomponents,oftenatlowvolumes.IntheMatureTechnologyScenario,thesecostsareassumedtobe lessthantodayscostsowingtoeconomiesofscale.Theestimatesareassociatedwithagivensetofaveragechargerusagepatternsthatdependprimarilyonhomerecharging.ThepriceofcrudeoilisnotassumedtoaffectelectricityT&Dtotransportation.

Infrastructurecostsforchargingdependontheinvestmentrequiredforthechargingdevice(the

chargerand

the

control/safety

systems

associated

with

it)

and

the

amount

of

electricity

associated

withtherechargingoperationofagivencharger(becausethisisthebasisuponwhichthechargerscostswillbepaid).Thissecondcost,inturn,dependsonvehicleefficiency,energystoragecapacityanddailytravelpatterns.

Itdrawson informationcollected fromother researchand includesadifferentiatedestimationforusagepatternsandcosts thatcorrespond toan initialdeploymentphaseandtoasituationwhere themarket isalreadyestablished.Assumptionsof the costof theelectricity recharginginfrastructureperkilowatthour(USD0.04perkilowatthour[USD/kWh]pervehicleintheCurrent

4Thisaveragevaluemayresultinsomemisallocationsbecauseoftheignoredeffectsassociatedwithintermittentelectricitysources and decentralised production. Intermittent sources such as onshore or offshorewind are likely to need backupcapacity

or

the

coupling

with

energy

storage

units

(e.g.

with

hydroelectric

plants

capable

of

pumped

storage),

and

the

use

of

storageunitsleadstohigherlosses.


22/51


Page|20

Technology Scenario andUSD0.023/kWh in theMature Technology Scenario) and the annualcostsofcharginginfrastructurepervehicleorperunitenergythatareassociatedtoeachtypeofchargerarealsopresented(Table9).5

Table9Assumptionsonthecharacteristicsofrecharginginfrastructureforpluginhybridelectricvehicles

(PHEVs)and

EVs,

and

resulting

cost

estimates


Slowhome

Slowpublic

FastSlowhome

Slowpublic

Fast public

Maximum power of chargers (kW or kVA) 4.00 4.60 47.0 4.00 4.60 47.0

Investment cost (USD/plug) 650 6 600 33 000 460 5 500 24 000

Annualised cost (USD/plug) 85 870 4 300 60 720 3 200

Frequency of use (charges/yr) 312 52 52.0 312 52 52.0

Average refill time (minutes/charge) 104 107 10.0 104 107 10.0

Assumed charger occupancy rate (% of time) 6.00 54.0 27.0 7.00 77.0 33.0Charger ratio to vehicles (%) 100 2.00 0.40 83.0 1.40 0.30

Infrastructure: total costs per unitelectricity output (USD/kWh or USD/GJ)

0.04 or 11.1 0.02 or 6.57

Notes:kVA=kilovoltampere;kW=kilowatt;USD/plug=USDperrechargingplugforEVs/PHEVs;minutes/charge=minutesperfullchargeofvehicle;charges/yr=numberoffullvehiclechargesperyear.Otherassumptions include15000kilometres(km)travelledpervehicleperyear,150kmrangeperchargeand30kilowatthours(kWh)ofenergyatfullcharge.

Source:Kaneko,CazzolaandFulton,2011.

Inordertodeliverelectricityatthesamecostperkilowatthour,fastchargersrequireanoccupancyrateofroughly30%.Thisvalueincreasestoroughly50%to80%forslowpublicchargers.Lossesareassumedtorangefrom4%fordecentralisedproduction,to7%forcentralisedgenerationplants.

Travelcostassumptions

Inaddition toestimatingthecostof fuelproduction inunitsofUSD/GJ,anattempt ismadetoestimatedrivingcostsinUSDperkilometreforeachfuelafteraccountingfordifferencesinengineefficiency levels.Also, an attempt ismade to account forhow efficiencies improveover timebecauseofhybridisation,weightreductionsandgovernmentimposedfuelconsumptionstandards.FuelconsumptiondatasetsintheCurrentTechnologyScenarioandMatureTechnologyScenarioaretakenfromtheMoMo(Table10).TheCurrentTechnologyScenariocostsusethe2010fleetaveragefuelconsumptionwhilethelongtermcostsusethe2050fleetaveragefuelconsumption.

Severalengine

technologies

are

more

efficient

than

gasoline

engines.

In

particular,

electric

motorsandH2vehiclesvastlyoutperformgasolineengines.

5CostsinTable9reflecttheutilisationratesandelectricitythroughputattherechargingstationsdescribedinAnnexF.Thesame Annex contains a detailed description of the key sources of information used for this evaluation. If the recharginginfrastructure is used less often priceswould rise accordingly. For example, in a situationwheremany fast chargers areinstalled

around

acity

early

on,

but

are

rarely

used

in

the

first

few

years,

the

costs

could

be

considerably

higher.

If

they

were

usedonefifthofthetimesassumedhere,thecostperkWhwouldincreasefivefold,asalsoexplainedinAnnexF.


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Table10FueleconomyassumptionsforCurrentTechnologyScenarioandMatureTechnologyScenario

usedtoestimatetravelcost(USD/km)byfueloptions,forthetypicalfleetaveragepassengerlightdutyvehicle

Final energy typeFuel economy (lge/100 km)


GTL 9.63 6.85

Natural gas 8.84 7.16

H2(natural gas, central) 5.36 3.94

Electricity (natural gas) 1.84 1.51

CTL 9.63 6.85

H2(coal) 5.36 3.94

Electricity (coal) 1.84 1.51

H2(nuclear energy) 5.36 3.94

Electricity (nuclear energy) 1.84 3.94

Biodiesel (rapeseed) 8.95 6.18

Corn ethanol 9.63 6.85

Sugar cane ethanol 9.63 6.85

BTL 9.63 6.85

Lignocellulosic ethanol 9.63 6.85

Bio-SNG 8.84 7.16

H2(biomass) 5.36 3.94

Electricity (biomass) 1.84 1.51

Electricity (solar PV) 1.84 1.51

Electricity (hydroelectric energy) 1.84 1.51

Diesel* 8.95 6.18

Gasoline 9.63 6.85

*Dieselfuelisincludedtogiveanothercomparisontogasolinecosts(Table12).Intheresultssectionbelow,dieselisincludedinthecomparisonoftravelcosts.Afulltechnoeconomicanalysishasnotbeenconductedfordiesel.Itsproductioncost isassumedtobeequal togasoline inUSD/GJ.However,as shown in theresultssection,becausedieselvehicleefficienciesarehigher than thoseofgasoline,thecostperkilometreislowerfordiesel.

Notes:lge/100km=litresofgasolineequivalentper100kilometres.Boldmeansgasolineisthereferencefuel.

Source:IEA,2009.


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Results

The results sectionpresentscostestimatesatUSD60/bbl for theCurrentTechnologyScenarioandUSD150/bblfortheMatureTechnologyScenario.Fuelcostsper100kmtravelledarethenderivedforeachvehiclefuelcombination.Drivingcostisalwaysimperativeforthevehicleuser.

Disaggregated cost for the20energypathways compared to gasolineunderdifferentoilpriceassumptionsdoesnotalways leadtothesameconclusions intermsofcostcompetitivenessforthedifferentenergyproductionpathwaysconsidered.AtUSD60/bbl thecostof the referencefuelgasolineisUSD18.4/GJ,whileatUSD150/bblthecostofgasolineisUSD45.9/GJ.

Arisingoilpricetendstoresultinhigheralternativefuelproductioncoststhanthosecalculatedwhen oil price rises are not considered. For example, the production cost of BTLwith oil atUSD60/bbl(topBTLline)islessthantheestimatesobtainedwithoilatUSD150/bbl.Inthefirstcase, BTL is costcompetitive with petroleum fuels (whose price reference at USD150/bbl isrepresentedbytherightblackverticallineontheright),ifitscostisestimatedwithaconstantoilpriceofUSD60/bbl,butthis isnotthecaseforthecostestimatesobtainedwiththePetroleum

IntensityMethod

and

the

Historical

Trend

Method,

both

centred

on

USD

150/bbl.

Similar

results

are found for conventional biodiesel, lignocellulosic ethanol and a few electricity generationpathways.Inthefirsttwocases,thegapismainlyduetoincreasingfeedstockcosts,whileinthecaseofelectricityitdependsprimarilyonchangingcapitalcosts.AccordingtotheHistoricalTrendMethod, options like corn ethanol and GTL fuels are not costcompetitive with gasoline atUSD150/bbl,whiletheyremaincostcompetitiveaccordingtothePetroleumIntensityMethod.Asimilarprofilecharacterisesnaturalgas intheCurrentTechnologyScenario(Figure6).For liquidfuels, thedifference resultsmainly from larger increases in feedstock costs that are generallyassociatedwith theHistoricalTrendMethod.Fornaturalgas, thiseffect is combinedwith theestimatesstemmingfromtheassumptionscharacterisingfueltransport,distributionandrefuelling.Anumberof alternatives, includingall centralisedH2pathways and soleelectricitygeneration

technologies,are

always

more

expensive

in

terms

of

cost

per

unit

energy

of

the

energy

carrier

thanoilbased fuels(mainlybecauseofthetransportanddistributioncostsofH2asdetailed incertainresearch[IEA,2012a]).OptionslikeCTLfuelsandsugarcaneethanolremaincostcompetitivewithallthemethods,andinallthecircumstances,considered.

Inamaturemarket(MatureTechnologyScenario),fewoptions(CTLfuels,naturalgas,andsugarcaneethanol) are competitivewithpetroleum fuels atUSD60/bbl (Figure7). Theseoptions remaincostcompetitivewithliquidpetroleumfuelsunderallcircumstances.Fornaturalgas,thisispartlyduetothemoreoptimisticassumptionontransportandrefuellingcostsintheMatureTechnologyScenario.ThisisalsothecaseforcentralisedH2productionpathways,whichbecomemuchcheaperbutremainabovegasolinepricesoncetheyareevaluatedwithoilatUSD60/bbl.Estimatingthe

fuel

production

costs

with

the

Petroleum

Intensity

and

Historical

Trend

methods

highlights

that

a

growthintheoilprice(e.g.toUSD150/bbl)cancompromisethecostcompetitivenessofalternativefuels(suchasbiodieselfromvegetableoil, lignocellulosicethanol,BTLandbioSNG)thatwouldbecheaperthanpetroleumfuelsiftheircostisestimatedwithaconstantoilprice.TheHistoricalTrendMethodleadstosimilarconclusionsforcornethanolandGTLfuels,whichareunaffectedbyoilpriceincreaseswhenanalysedwiththePetroleumIntensityMethodbecauseofthelowoiluseinitsproduction,transport,distributionandrefuellingprocesses.

Usingtheengineefficiencyvalues(Table10)andtheproductioncostsoffuels(Figures6and7),costperkilometreofdrivingisderivedandexpressedinUSDper100km(USD/100km)(Table11).


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Page|23

Figure6CostoffuelproductioninCurrentTechnologyScenario

Notes: foreach fuel, three costestimatesare shown: the costatUSD60/bbl, the costatUSD150/bblwhenusing thePetroleumIntensityMethod forpredicting input prices and the cost atUSD150/bblwhenusing inputprices based on theHistorical Trend

Methodwith

oil

price.

The

black

vertical

lines

represent

the

gasoline

price

when

crude

oil

price

is

USD

60/bbl

(left

line)

and

USD150/bbl(rightline).Fuelswithcoproductsareshiftedlefttoreflectcostreductionswithcoproductcredits.

10 0 10 20 30 40 50 60 70 80 90 100 110

Electricity(hydroelectricenergy)

Electricity(solarPV)


Hydrogen(biomass)

BioSNG

LignocellulosicetOH

BTL

Sugarcaneethanol

Cornethanol

Biodiesel(vegetableoil)

Electricity(nuclear)

Hydrogen(nuclear)

Electricity

(coal)

Hydrogen(coal)

CTL


Hydrogen(NG,central)

Naturalgas

GTL

Gasoline

USD/GJ

Feedstockcost Inputstreams(nonfeedstock,nonelect.)

Inputstreams(energy) Electrictyinputcost

Capitalcosts O&Mcosts

Coproductgain Fueltransport

Fuelstorageandrefuelling Referencecost

USD150/bbl

USD60/bbl

USD60/bbl

USD150/bblPetroleumIntensityMethod

USD150/bblHistoricTrendMethod


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Page|24

Figure7CostoffuelproductioninMatureTechnologyScenario

IntheCurrentTechnologyScenario,pathwayswithlowercoststhanliquidpetroleumfuels(gasolineanddieselfuel)whenthecrudepriceisUSD60/bblincludeallelectricitygenerationoptions(mainly

becauseof

the

high

efficiency

of

electric

motors),

natural

gas,

CTL

fuels

and

sugarcane

cane

ethanol.

ForH2pathways,thebetterfuelefficiencyofvehiclesisnotenoughtocompensateforthehigh

10 0 10 20 30 40 50 60 70 80 90 100 110

Electricity(hydroelectricenergy)

Electricity(solarPV)


Hydrogen(biomass)

BioSNG

LignocellulosicetOH

BTL

Sugarcaneethanol

Cornethanol


Electricity(nuclear)

Hydrogen(nuclear)

Electricity(coal)

Hydrogen(coal)

CTL


Hydrogen(NG,central)

Naturalgas

GTL

Gasoline

USD/GJ

Feedstockcost Inputstreams(nonfeedstock,nonelect.)

Inputstreams(energy) Electrictyinputcost

Capitalcosts O&Mcosts

Coproductgain Fueltransport

Fuelstorageandrefuelling Referencecost

USD60/bbl

USD150/bbl

USD60/bbl

USD150/bblPetroleumIntensityMethod

USD150/bblHistoricTrendMethod


27/51


Page|25

costsperunitofenergyof fuel (including transport,distribution and refuelling resulting fromaforementionedassumptions).AtUSD150/bbl,optionssuchasGTL,cornethanolandconventionalbiodiesel,have lower costsperkilometre thanpetroleum fuels ifcostsareestimatedwith thePetroleumIntensityMethod,butnotwiththeHistoricalTrendMethod.Interestingly,bioSNGisaffectedthe leastbychanges intheestimationmethod,but it isalsoheavily influencedbythe

assumptionsmade

on

refuelling

costs

of

gaseous

fuels.

If

natural

gas

prices

remain

coupled

with

oilprices,GTLisunlikelytobecompetitive(HistoricalTrendMethod).IntheMatureTechnologyScenario,mostof thealternative fueloptionshavea lowercostperkilometre thanpetroleumfuelswhen crude price is atUSD60/bbl.H2 pathways, in particular,have farmore optimisticassumptionsfortransport,distributionandrefuellingcostsperunitofenergy.Significantexceptionsincludeconventionalbiodiesel,lignocellulosicethanol,BTLandbioSNG.Asmostfuelshavecostsper kilometre that are consistently lower or comparable with those of petroleum fuels, theresultsaresimilarwithoilatUSD150/bbl.Inthiscase,however,biofuelssuchas lignocellulosicethanol,BTL,conventionalbiodieselandbioSNGareamongthe leastcompetitiveoptionswithrespecttopetroleumfuels,whiletheperformanceofGTLfuelsdependsstronglyontheevolutionofnaturalgasandoilprices.

Table11DrivingcostsoffuelscalculatedforCurrentTechnologyScenarioandMatureTechnologyScenario

whencrudeoilisatUSD60/bblandUSD150/bbl

Final energy type

Driving costs (USD/100 km)


USD 60/bbl

USD 150/bbl(Petroleum

IntensityMethod)

USD 150/bbl(Historical

TrendMethod)

USD 60/bbl

USD 150/bbl(Petroleum

IntensityMethod)

USD 150/bbl(Historical

TrendMethod)

Gasoline 6.05 15.13 15.13 4.31 10.76 10.76

Diesel 5.63 14.06 14.06 3.88 9.71 9.71

GTL 7.75 15.61 13.38 4.56 7.41 8.44

Natural gas (natural gas) 4.04 5.35 6.50 2.03 1.88 4.02

H2(natural gas, central) 18.65 20.72 20.68 3.31 3.66 4.85

Electricity (natural gas) 1.67 2.61 2.86 1.05 1.27 1.95

CTL 5.44 12.12 8.20 3.21 5.42 5.40

H2(coal) 18.35 21.46 19.53 2.92 3.60 3.71

Electricity (coal) 1.72 3.59 2.55 1.11 2.08 1.72

H2(nuclear energy) 19.12 24.20 20.19 3.06 5.29 3.67

Electricity (nuclear energy) 2.09 4.36 2.59 3.58 7.65 4.53

Biodiesel (rapeseed) 10.40 21.49 16.95 5.54 7.27 10.62

Corn ethanol 9.78 17.75 14.73 4.45 6.12 9.34

Sugarcane ethanol 6.91 14.01 10.95 4.09 5.39 6.69

BTL 10.10 26.34 13.88 5.36 11.63 7.89

Lignocellulosic ethanol 11.82 29.43 14.51 5.50 12.41 7.96

Bio-SNG 8.45 18.75 10.69 4.51 9.44 6.50

H2(biomass) 19.66 25.13 20.80 3.67 5.60 4.60

Electricity (biomass) 2.73 6.59 3.72 1.84 3.94 2.58

Electricity (solar PV) 3.52 9.24 4.97 1.36 3.45 1.89

Electricity (hydroelectric energy) 1.77 3.78 2.28 1.15 2.67 1.53

Note:boldmeanscostsarelowerthangasoline.


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Page|26

SensitivityAnalysisandDiscussion

Inadditiontocrudeoilprices,otherparameterscansignificantlyaffectthetotalestimatedcostofafuel.Asensitivityanalysiswasundertakenusingasimplemethodologyinwhicheachparameterwasalteredintherangeof20%andtheresultingchangeintotalpricewasplottedontheYaxis(Figure8).

Figure8SensitivityanalysisforselectedalternativefuelsevaluatedatUSD150/bbl

inCurrentTechnologyScenario

Conclusionsfromthesensitivityanalysisarecategorisedbyfuelgroup.Forbiomassrelatedfuels,

the

most

sensitive

parameter

tends

to

be

plant

conversion

efficiency.

Bio

SNG

and

BTL

are

also

sensitivetocapitalcostassumptionsandgasolineprice.Inaddition,otherbiofuelsaresensitive

20%

15%

10%

5%

0%

5%

10%

15%

20%

80% 85% 90% 95% 100% 105% 110% 115% 120%

HydrogenfrombiomassCapitalcosts

O&Mpercentage

Quantityofcoproductproduced

Storageandrefuellingstationcost

Feedstockcost

Plantconversionefficiency

Discountrate

Biorefinergy liftetime

Plantloadfactor

20%

15%

10%

5%

0%

5%

10%

15%

20%

80% 90% 100% 110% 120%

BTL

20%

15%

10%

5%

0%

5%

10%

15%

20%

80% 85% 90% 95% 100% 105% 110% 115% 120%

CTL

20%

15%

10%

5%

0%

5%

10%

15%

20%

80% 85% 90% 95% 100% 105% 110% 115% 120%

Cellulosicethanol

20%

15%

10%

5%

0%

5%

10%

15%

20%

80% 85% 90% 95% 100% 105% 110% 115% 120%


Yaxis:percentage

change

in

production

cost

Xaxis:percentagechangeinparametervalue


29/51


Page|27

to feedstockprocurementcosts. It isnoteworthy thatCTLandGTLaresensitive toconversionefficiencies,gasolineprice,the IHSCERAIndexandcapitalcosts,whileCNG ismostsensitivetodistributioncosts,gasolinepriceandfeedstockcosts.H2pathwaystendtobemostsensitivetofueltransportationcosts(e.g.pipelinesandtrucks),gasolineprice,andconversionefficiencies.Electricitypathwaystendtobemostsensitivetocapitalcosts,theIHSCERAIndexandgasolineprices.

Themostsensitiveparameterstendtohaveelasticitiesbetween0.5and0.9(Figure8).Thismeansthata1%changeresultsina0.5%to0.9%changeintheproductioncostofthemostoilpricesensitivefuel.Amongallofthefuelsanalysed,thelargesteffectobservedwastheefficiencyofconversionforrapeseedoil,whichresultedina0.9%increaseincostforevery1%decreaseinefficiency.6Future research should focusonestimating rangesofproduction costsbasedon arangeoninputparameters.ThereisnolargedifferenceinthemagnitudeofsensitivitiesbetweentheCurrentTechnologyScenarioandMatureTechnologyScenario.

The 11 results in this research paper are mainly consistent with energy providers currentinvestmentchoices:

Considering

the

price

of

the

feedstock,

sugarcane

ethanol

is

cost

competitive

when

oil

is

at

USD150/bbl.The costcompetiveness at loweroilpricesdependsheavilyon the sugarcanepriceunderconsideration(canepriceaccountsforabout60%ofthefuelsproductioncost).InBrazil,sugarcaneandethanolmillshistorically relyon lowercanepricesandveryhighcaneyields,andtakeadvantageoflargerunitsizesthanthoseassumedhere(andthereforelowercostsperunitoffuel).

Cornethanol isnotas costcompetitivewithpetroleum fuelswhen theoilprice is close toUSD60/bbl.WithoilpricesclosetoUSD150/bbl,itscostcompetitivenessdependsoncornprices.

FewCTLplantsexisttoday.TheyareoftenlocatedincoalrichareassuchasSouthAfricaandChina.The increasingcostcompetitivenessofCTL foranoilpriceaboveUSD60/bbljustifiesrecentinterestinthetechnology,especiallyincoalrichareasoftheworld.Ontheotherhand,

CTLfuels

are

associated

with

extremely

high

greenhouse

gas

emissions,

making

investment

riskyunderpotentialfuturecarbonpricing.

Naturalgasiscurrentlypromotedinmanycountriesasatransportfuel.Theneartermhurdlesrelated to the costof installing refuelling stationsaregenerallyoffsetby subsidies, suchasdifferentiatedtaxation.Countriesthatpromotetheuseofnaturalgasasatransportfuelhavelargeresourcesofnaturalgas.Naturalgasisalsopromotedincountrieswithpoorairquality.Countrieshavinglimitedavailabilityofoilandmorerobustfueldiversificationpoliciesconstituteathirdgroup.

BioSNGcanbuildontheexperienceofbiogasplants,butitwouldneedtosurpassitscurrentstatetocompetewithgasolineprice. InitialapplicationsofbioSNGmaynotberelevant for

transport,

but

rather

for

power

generation.

If

the

introduction

of

natural

gas

as

a

transport

fuelprovessuccessfulandbioSNGcanexploitthenaturalgasT&DnetworkthenbioSNGwilllikelybesuitableforlargescaledeployment inthetransportsector.OnemajoradvantageofbioSNGasatransportfuelisitsrelativeimmunitytoincreasesinoilprice.

Secondgeneration liquidbiofuelsarecurrentlyfacingobstaclestoachievingcostparitywithgasoline,evenwiththeimplementationofpoliciesforrenewablefuelsandadditionaltechnologicalimprovementswillbeneededtoallowtheirlargescaleadoption.Undermaturemarketconditions,theycanachievecostcompetitivenesswithgasoline.Thismaynotbethecaseifmarketeffectsnotincludedinourrathersimplisticmodelcomeintoplay.

6As

efficiency

is

already

in

percentages,

a10%

decrease

in

efficiency

refers

to

the

percentage

as

awhole

and

not

percentage

points(e.g.10%of45%efficiencyis4.5%).


30/51


Page|28

Biodieselderivedfromvegetableoilrequiresrelativelylittlecapitalinvestmentanditsproductionisbasedonwellestablishedindustrialprocesses,withlimitedprocessrelatedcostreductionsahead.Nevertheless,asaderivativeofvegetableoil,conventionalbiodiesel ischaracterisedbyrelativelylowyieldsperunitoflandcomparedtootherbiofuels.Additionally,somebiodieselfeedstocks(e.g.palmoil)arecoupledwithenvironmentalproblemssuchasdeforestationandthe

subsequent

eutrophication

of

water

bodies.

These

issues

may

preclude

their

use

on

the

large scale. To date, the development of conventional biodiesel has been associatedwithmandatesorothersupportiveprogrammes,suchastaxincentives.Basedontheaboveresults,biodieselishighlysensitivetoincreasesinoilprice,evenunderafullymaturemarketcondition.

Underamaturemarket,centralisedH2productionpathwaysareexpectedtobecheaperthangasolineonaperkilometrebasis,butnotperunitofenergy.

Ifmeasured inUSD/GJ,electricityproductionoptions aremore expensive thanmostotherfuels.Themuchhigherefficiencyofelectricmotors(morethandouble)comparedtointernalcombustionengines,however,makesthecostofusingEVscomparativelylowerthanconventionalcars.Thechallengeofelectrifiedtransportexpansionprobablyliesinthevehiclecostgap.

Fortransport,

the

incremental

costs

associated

with

the

need

to

recharge

vehicles

using

ad

hoc

recharging infrastructure have been estimated to be close to USD0.04/kWh if the cost isentirely linked to theelectricityneeded to load thevehicles,andwellbelowUSD0.01/kWh(aboutonetenth as less) if the costof the recharging infrastructure is spreadover all theelectricitysales.


31/51


Page|29

Conclusions

Thisresearchquantifieshowshiftsinoilpricesaffecttheproductioncostsofalternativetransportfuels. One major finding of this report is that several fuels could be costcompetitive withgasoline ifthe impactofhighoilpricesonalternative fuelcosts isnottaken intoaccount.Thisfinding underscores the importance of clearly stating input assumptions in technoeconomicanalyses.Indeed,manybiofuelswouldbefullycostcompetitivewithgasolineathighoilpricesifthepriceoffeedstockcommoditiessuchascereals,sugarcaneandbiomasswasunaffectedbyanincrease in thepriceofoil.However, if risingoilprices affect feedstock costs, the anticipatedcompetitivegainforbiofuelsmaynotmaterialise.

While theoilprice isnot themostsensitive inputparameter for the fuels investigatedhere, itranksamongthetoptwoorthreemostimportant(outoftheonesexamined)parametersforallfuels.A1%increaseinthegasolinepriceleadsfromniltoa0.48%increaseinproductioncostacrossthe fuels examined. Transport fuels that use biomass as a feedstock, particularly petroleumintensivebiomass suchas forest residue,will likelybe themost sensitive to shifts in crudeoil

price.Fuels

such

as

nuclear

electricity,

hydro

electricity,

PV

electricity,

and

H2

from

coal

exhibit

the least sensitivity towards changes in crudepricebecause fewplaces in their supply chainsrequiretheuseofpetroleumandtheprimaryfeedstocksusedfortheseenergycarriersaremoredistantlyrelatedtocrudemarketsthanotherprimaryfeedstocks.

Thisanalysisshowsthatfewalternativefuelsarelikelytobecompetitiveonanenergybasiswithoilinthenearterm.Onlysugarcaneethanol,verylargeCTLplants,GTLandnaturalgasareclosetobeingfullycostcompetitivewithgasolineanddieseliftheoilpriceisatUSD60/bbl.

Inthe longerterm(or inestablishedmarketconditions,beyondaninitialdevelopment),severaloptionsmayachieveacompetitivepositiononanenergybasis,evenwithanoilpriceofUSD60/bbl.Astheoilprice increasesfromthislowerprice,morefuelsbecomecompetitive, includingsome

electricity

generation

pathways.

When

compared

on

a

per

kilometre

basis,

nearly

all

fuels

(with

the importantexceptionofsomebiofueloptions)have lowercoststhangasoline intheMatureScenariowhencrudeisatUSD150/bbl.

Refuellinginfrastructurecostscanalsohaveasignificantimpactontheintroductionofalternativefuels.Thisissuemeritsscrutinyinthecaseofelectricityandgaseousfuels(includingnaturalgasandH2),and this isextremely relevant in thedeploymentphaseof technologies. Inparticular,accountingforthecostsassociatedwiththe infrastructuredevelopmentwilllikelyaddacostofclosetoUSD0.04/kWhforelectricity,bothinamarketdevelopmentandmaturemarketphase.


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Annexes

AnnexADescriptionofinputstreamcostmethods

Thefollowing

sections

describe

the

reasoning

that

underpins

the

hypotheses

taken

on

the

variation

ofprimaryenergymarketpriceswithrespecttooilprices.

PetroleumIntensityMethodThismethodlinksthechangesininputstreamcostfromUSD60/bblusingthefollowingformula:

inputstreamcosti=Bi+(Pi*Cp*K)

Where Bi is the base cost of commodity i, at USD60/bbl in USD/GJ of feedstock (using theaverage real cost foroilofUSD60/bbl for theyears200010 [IMF,2013]).Pi is thepetroleum

intensityof

feedstock

expressed

in

megajoules

of

petroleum

per

gigajoule

of

feedstock

(using

GREET[Wang,2007].CpisthecostofpetroleuminUSDpermegajouleandKisthechangeinthepriceofoilawayfromUSD60/bbl(e.g.forUSD100/bbl,thevalueofKisUSD40).

HistoricalTrendMethodFossilfuels

Someofthe representativepricesofcoalandnaturalgashaveevolvedasa functionoftheoilprice(Figure9).

Figure9Monthlycoalandnaturalgaspricesasafunctionoftheoilprice,January2000toOctober2012

Note:Btu=Britishthermalunit.


0

100

200

300

400

500

600

700

Commodityprice(USD2010perunit)

Oilprice(USD/bbl)

Naturalgas,Russiannaturalgas

borderpriceinGermany,USD

perthousandcubicmetresof

gas

Naturalgas,Indonesian

liquefiednaturalgasinJapan,

USDpercubicmetreofliquid

Naturalgas,naturalgasspot

priceattheHenryHubterminalinLouisiana,USDperthousand

cubicmetresofgas

Coal,Australianthermalcoal,

12000Btuperpound, less

than1%sulphur,14%ash,FOB

Newcastle/PortKembla,USD

permetrictonne


33/51


Page|31

Coal

Inevitably,whenweassumealinkagebetweenthepriceofoilandthepriceofcoalwesimplifytheactualdynamicsofeachmarketconsidered.Adirectsubstitutebetweencoalandpetroleumcanonlybeachieved inthe longrun (i.e.enginesandboilerscannotgenerallyswitchbetween

coaland

oil

without

major

machinery

changes).

One

study

(Ellerman,

1995)

suggests

that

coal

is

now a globally traded commoditywhose longtermprice fluctuations are primarily causedbychangesinproductivityofenergy,labour,capitalandmaterials.

Historically,coalprices increasedby74%whenoilpricesdoubled.ThisfigurewasderivedfromthevariationofmonthlyoilspotpricesaveragedacrosstheyearandthecorrespondingAustraliancoalexportpricesfrom2000to2010(IMF,2013).

Naturalgas

Natural gas and oil prices used to be strongly linked, although the situation is changing fast,becauseoftheexploitationofshalegasinsomeregions.Regionaldifferencescanbeimportantin

thecase

of

the

gas

markets.

Asia,

for

example,

actually

pegs

natural

gas

prices

to

the

oil

market

whereasotherregionsestablishregionspecificmarkets.

Agriculturalcommodities

Wheat,corn,andvegetableoils

Someof the representativepricesofwheat,cornandvegetableoilhave changedwith theoilprice(Figures4and10).

Figure10Monthlypricesofvegetableoilsasafunctionoftheoilprice,January2000toOctober2012

Note:FFA=forwardfreightagreement.


Pricetrendsfrom2000to2012showthatrecentoilpriceincreaseshavebeenassociatedwitha

generalincrease

in

the

price

of

commodities

like

wheat,

corn,

palm

oil,

soybean

oil

and

sunflower

oil.

0

500

1000

1500

2000

2500

3000

Commodityprice(USD2010/t)

Oilprice(USD/bbl)

Palmoil,Malaysiapalmoil

futures(firstcontractforward)

4%to5%FFA

Rapeseedoil,crude,FOB

Rotterdam

Soybeanoil,Chicagosoybean

featuredinsights alternativefuel final

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