Pricing Contracts Under Uncertainty in a Carbon Capture and Storage Framework

Carbon capture and storage (CCS) has been demonstrated as a viable option for reducing carbon emissions to the atmosphere. We consider a situation where a tax on emissions is imposed on carbon dioxide (CO₂) producers to encourage their participation in CCS. Operators of CO₂ transportation pipelines and storage sites enter into individual contracts with emissions producers to store CO₂. We study the problem of selecting the optimal price and volume of these contracts under both cost and emissions uncertainty to optimize the storage operator's expected profit.     

A new optimization approach to energy network modeling: anthropogenic CO2 capture coupled with enhanced oil recovery

To meet next generation energy needs such as wind‐ and solar‐generated electricity, enhanced oil recovery (EOR), CO₂ capture and storage (CCS), and biofuels, the US will have to construct tens to hundreds of thousands of kilometers of new transmission lines and pipelines. Energy network models are central to optimizing these energy resources, including how best to produce, transport, and deliver energy‐related products such as oil, natural gas, electricity, and CO₂. Consequently, understanding how to model new transmission lines and pipelines is central to this process. However, current energy models use simplifying assumptions for deploying pipelines and transmission lines, leading to the design of more costly and inefficient energy networks. In this paper, we introduce a two‐stage optimization approach for modeling CCS infrastructure. We show how CO₂ pipelines with discrete capacities can be ‘linearized’ without loss of information and accuracy, therefore allowing necessarily complex energy models to be solved. We demonstrate the new approach by designing a CCS network that collects large volumes of anthropogenic CO₂ (up to 45 million tonnes of CO₂ per year) from ethylene production facilities and delivers the CO₂ to depleted oil fields to stimulate recovery through EOR. Utilization of anthropogenic CO₂ has great potential to jumpstart commercial‐scale CCS while simultaneously reducing the carbon footprint of domestic oil production. Model outputs illustrate the engineering challenge and spatial extent of CCS infrastructure, as well as the costs (or profits) of deploying CCS technology. We show that the new linearized approach is able to offer insights that other network approaches cannot reveal and how the approach can change how we develop future energy systems including transporting massive volumes of shale gas and biofuels as well as electricity transmission for wind and solar energy. Published 2012. This article is a U.S. Government work and is in the public domain in the USA.     

Design and optimization of small-scale methanol production from sour natural gas by integrating reforming with hydrogenation

This paper presents the design and simulation-based optimization of a small-scale sour natural gas to methanol process from the view of maximizing the operating profit during operation. It fully integrates steam reforming and CO/CO₂ hydrogenation technologies, by which CH₄ and CO₂ in feeding gas are efficiently converted into methanol without considering CO/H₂ shift and CO₂ removal. In order to obtain the true performances and potential advantages, a simultaneous multi-variable optimization strategy with multi-start procedure is performed by using built-in sequential quadratic programming algorithm. Besides, four cases studies that correspond to distinct levels of CO₂ content are compared to investigate the effects of gas quality on the techno-economic performances. The optimization results show the proposed process has both economic and environmental benefits as it helps to achieve the valorization and carbon footprint reduction of CO₂-rich natural gas resources. In particular, the feeding gas with 20 mol% CO₂ concentration is beneficial for improving the operating profit of the process.     

A GIS-based assessment of coal-based hydrogen infrastructure deployment in the state of Ohio

Hydrogen infrastructure costs will vary by region as geographic characteristics and feedstocks differ. This paper proposes a method for optimizing regional hydrogen infrastructure deployment by combining detailed spatial data in a geographic information system (GIS) with a technoeconomic model of hydrogen infrastructure components. The method is applied to a case study in Ohio in which coal-based hydrogen infrastructure with carbon capture and storage (CCS) is modeled for two distribution modes at several steady-state hydrogen vehicle market penetration levels. The paper identifies the optimal infrastructure design at each market penetration as well as the costs, CO₂ emissions, and energy use associated with each infrastructure pathway. The results indicate that aggregating infrastructure at the regional-scale yields lower levelized costs of hydrogen than at the city-level at a given market penetration level, and centralized production with pipeline distribution is the favored pathway even at low market penetration. Based upon the hydrogen infrastructure designs evaluated in this paper, coal-based hydrogen production with CCS can significantly reduce transportation-related CO₂ emissions at a relatively low infrastructure cost and levelized fuel cost.     

Optimal integration of a biomass-based polygeneration system in an iron production plant for negative carbon emissions

The iron industry is an energy-intensive sector and a major contributor to global carbon dioxide emissions. With the projected increase in the demand for iron as raw material, the industry seeks ways to improve sustainability. The incorporation of a biomass-based polygeneration system (BBPS) is a sustainable approach to generate the needed utilities of the iron plant. Biomass can be converted thermochemically into fuel gas for use in the plant, while the resulting biochar can be utilized for carbon sequestration. A multiobjective optimization model using fuzzy linear programming (FLP) is developed to seamlessly integrate a BBPS in an iron plant while obtaining negative carbon emissions. The FLP model simultaneously satisfied the product demands while maximizing the annual profit and minimizing the carbon footprint of the iron manufacturing plant. A sensitivity study is performed to gauge the effects of uncertainties of the prices of product streams and capital costs together. The best configuration of the integrated BBPS and the iron production plant are determined using this approach, resulting in 2.7 million tons CO₂ y⁻¹ of negative carbon emission. The reduction of the carbon footprint upper threshold target by 80% has shown a 34.15% improvement on the negative carbon footprint and 1.81% enhancement on the annualized capital cost of the plant. The change in the biomass price had a significant effect on the Pareto frontier of the level of satisfaction compared with the change in the coal and iron ore prices. The varied capital cost of the gasification had a relatively significant influence to the annualized profit of the plant compared with the varied capital cost of the other polygeneration processes.     

Decarbonization synergies from joint planning of electricity and hydrogen production: A Texas case study

Hydrogen (H₂) shows promise as an energy carrier in contributing to emissions reductions from sectors which have been difficult to decarbonize, like industry and transportation. At the same time, flexible H₂ production via electrolysis can also support cost-effective integration of high shares of variable renewable energy (VRE) in the power system. In this work, we develop a least-cost investment planning model to co-optimize investments in electricity and H₂ infrastructure to serve electricity and H₂ demands under various low-carbon scenarios. Applying the model to a case study of Texas in 2050, we find that H₂ is produced in approximately equal amounts from electricity and natural gas under the least-cost expansion plan with a CO₂ price of $30–60/tonne. An increasing CO₂ price favors electrolysis, while increasing H₂ demand favors H₂ production from Steam Methane Reforming (SMR) of natural gas. H₂ production is found to be a cost effective solution to reduce emissions in the electric power system as it provides flexibility otherwise provided by natural gas power plants and enables high shares of VRE with less battery storage. Additionally, the availability of flexible electricity demand via electrolysis makes carbon capture and storage (CCS) deployment for SMR cost-effective at lower CO₂ prices ($90/tonne CO₂) than for power generation ($180/tonne CO₂). The total emissions attributable to H₂ production is found to be dependent on the H₂ demand. The marginal emissions from H₂ production increase with the H₂ demand for CO₂ prices less than $90/tonne CO₂, due to shift in supply from electrolysis to SMR. For a CO₂ price of $60/tonne we estimate the production weighted-average H₂ price to be between $1.30–1.66/kg across three H₂ demand scenarios. These findings indicate the importance of joint planning of electricity and H₂ infrastructure for cost-effective energy system decarbonization.     

Carbon capture and storage

Carbon capture and storage (CCS) covers a broad range of technologies that are being developed to allow carbon dioxide (CO₂) emissions from fossil fuel use at large point sources to be transported to safe geological storage, rather than being emitted to the atmosphere. Some key enabling contributions from technology development that could help to facilitate the widespread commercial deployment of CCS are expected to include cost reductions for CO₂ capture technology and improved techniques for monitoring stored CO₂. It is important, however, to realise that CCS will always require additional energy compared to projects without CCS, so will not be used unless project operators see an appropriate value for reducing CO₂ emissions from their operations or legislation is introduced that requires CCS to be used. Possible key advances for CO₂ capture technology over the next 50 years, which are expected to arise from an eventual adoption of CCS as standard practice for all large stationary fossil fuel installations, are also identified. These include continued incremental improvements (e.g. many potential solvent developments) as well as possible step-changes, such as ion transfer membranes for oxygen production for integrated gasifier combined cycle and oxyfuel plants.     

A techno-economic study for a hydrogen storage system in a microgrid located in baja California,Mexico. Levelized cost of energy for power to gas to power scenarios

In this work a techno economic feasibility study is carried out to implement a Hydrogen based Power to Gas to Power (P2G2P) in a Microgrid, located in a rural area in Baja California, Mexico. The study aims to define the feasibility to store energy throughout seasons with this novel alternative using an electrolyzer to produce green hydrogen from excess renewable energy in winter, to store it during months and re inject it to the grid as electricity by a fuel cell in the high energy demanding season. The Microgrid was modeled in Homer software and simulations of the P2G2P lead to Levelized Cost of Energy data to compare between the P2G2P scenarios and the current diesel-battery based solution to complete the high demand by the community. This study shows that using hydrogen and fuel cells to substitute diesel generators it is possible to reduce CO₂ emissions up to a 27% and that in order for the P2G2P to be cost competitive, the fuel cell should reduce its cost in 50%; confirming that, in the medium to long term, the hydrogen storage system is a coherent alternative towards decarbonization of the distributed energy generation.     

A framework for assessing economics of blue hydrogen production from steam methane reforming using carbon capture storage & utilisation

Hydrogen (H₂) generation using Steam Methane Reforming (SMR) is at present the most economical and preferred pathway for commercial H₂ generation. This process, however, emits a considerable amount of CO₂, ultimately negating the benefit of using H₂ as a clean industrial feedstock and energy carrier. That has prompted growing interest in enabling CO₂ capture from SMR for either storage or utilisation and producing zero-emission “blue H₂”. In this paper, we propose a spatial techno-economic framework for assessing blue hydrogen production SMR hubs with carbon capture, utilisation and storage (CCUS), using Australia as a case study. Australia offers a unique opportunity for developing such ‘blue H₂’ hubs given its extensive natural gas resources, availability of known carbon storage reservoirs and an ambitious government target to produce clean/zero-emission H₂ at the cost of <A$2 kg^?1 by 2030. Our results highlight that the H₂ production costs are unsurprisingly dominated by natural gas, with the additional capital requirement of carbon capture and storage (CCS) also playing a critical role. These outcomes are especially pertinent for eastern Australian states, as they are experiencing high natural gas costs and would generally require extensive CO₂ transport and storage infrastructure to tap potential storage reservoirs, ultimately resulting in a higher cost of producing H₂ (>A$2.7 kg_H2^?1). On the other hand, Western Australia offers lower gas pricing and relatively lesser storage costs, which would lead to more economically favourable hydrogen production (<A$2.2 kg_H2^?1). We further explore the possibility of utilising the emissions captured at blue SMR hubs by converting them into formic acid through CO₂ electroreduction, yielding revenue that will decrease the cost of blue H₂ and reduce the reliance on CO₂ storage. Our analysis reveals that formic acid production utilising a 10 MW CO₂ electrolyser can potentially reduce H₂ production costs by between 4 and 9%. Further cost reduction is possible by scaling the CO₂ electrolyser capacity to convert a larger portion of the emissions captured, albeit at the cost of higher capital investment, electricity consumption and saturating the market for formic acid. Thus, carbon utilisation for a range of products with high market demand represents a more promising approach to replacing the need for costly carbon storage. Overall, our modelling framework can be adapted for global application, particularly for regions interested in generating blue H₂ and extended to include other CO₂ utilisation opportunities and evaluate other hydrogen production technologies.     

Optimal operation of a photovoltaic generation-powered hydrogen production system at a hydrogen refueling station

As the popularity of fuel cell vehicles continues to rise in the global market, production and supply of low-carbon hydrogen are important to mitigate CO₂ emissions. We propose a design for a hydrogen refueling station with a proton exchange membrane electrolyzer (PEM-EL)-based electrolysis system (EL-System) and photovoltaic generation (PV) to supply low-carbon hydrogen. Hydrogen is produced by the EL-System using electricity from PV and the power grid. The system was formulated as a mixed integer linear programming (MILP) model to allow analysis of optimal operational strategies. Case studies with different objective functions, CO₂ emission targets, and capacity utilization of the EL-System were evaluated. Efficiency characteristics of the EL-System were obtained through measurements. The optimized operational strategies were evaluated with reference to three evaluation indices: CO₂ emissions, capacity utilization, and operational cost of the system. The results were as follows: 1) Regardless of the objective function, the EL-System generally operated in highest efficiency state, and optimal operation depended on the efficiency characteristics of the EL-System; 2) mitigation of CO₂ emissions and increase in capacity utilization of the EL-System required trade-offs; and 3) increased capacity utilization of the EL-System showed two opposing effects on hydrogen retail price.     

Techno-economic appraisal of fossil-fuelled power generation systems with carbon dioxide capture and storage

Carbon capture and storage (CCS) facilities coupled to power plants provide a climate change mitigation strategy that potentially permits the continued use of fossil fuels whilst reducing the carbon dioxide (CO₂) emissions. This process involves three basic stages: capture and compression of CO₂ from power stations, transport of CO₂, and storage away from the atmosphere for hundreds to thousands of years. Potential routes for the capture, transport and storage of CO₂ from United Kingdom (UK) power plants are examined. Six indicative options are evaluated, based on ‘Pulverised Coal’, ‘Natural Gas Combined Cycle’, and ‘Integrated (coal) Gasification Combined Cycle’ power stations. Chemical and physical CO₂ absorption capture techniques are employed with realistic transport possibilities to ‘Enhanced Oil Recovery’ sites or depleted gas fields in the North Sea. The selected options are quantitatively assessed against well-established economic and energy-related criteria. Results show that CO₂ capture can reduce emissions by over 90%. However, this will reduce the efficiency of the power plants concerned, incurring energy penalties between 14 and 30% compared to reference plants without capture. Costs of capture, transport and storage are concatenated to show that the whole CCS chain ‘cost of electricity’ (COE) rises by 27-142% depending on the option adopted. This is a significant cost increase, although calculations show that the average ‘cost of CO₂ captured’ is £15/tCO₂ in 2005 prices [the current base year for official UK producer price indices]. If potential governmental carbon penalties were introduced at this level, then the COE would equate to the same as the reference plant, and make CCS a viable option to help mitigate large-scale climate change.     

Integrating mid-temperature solar heat and post-combustion CO2-capture in a coal-fired power plant

This article proposed a hybrid power system combining mid-temperature solar heat and a coal-fired power plant for CO₂ capture. In this system, solar heat at around 300 °C replaces the high-quality steam extractions of the Rankine cycle to heat the feed water, so the steam that was to be extracted can expand efficiently in the high-pressure turbines. In this hybrid system, the CO₂ capture penalty is completely compensated for by the enhanced work output contributed by the solar heat. The annual solar field cost is reduced to 10.8 $/ton-CO₂, compared to 25.8 $/ton-CO₂ in a system with solar heat for direct solvent regeneration. Additionally, the mid-temperature solar heat is converted into work with an improved efficiency of 27%. Thus, this system offers a promising approach to reduce the CO₂ capture penalty in CCS with attractive cost-effective utilization of mid-temperature solar heat.     

Carbon dioxide capture from flue gases using microalgae: Engineering aspects and biorefinery concept

Carbon dioxide (CO₂) is one of the most important contributors for the increase of the greenhouse effect. CO₂ concentrations are increasing in the last decades mainly due to the increase of anthropogenic emissions. To reduce the effects caused by this environmental problem, several technologies were studied to capture CO₂ from large emission source points: (i) absorption; (ii) adsorption; (iii) gas-separation membranes; and (iv) cryogenic distillation. The resulting streams with high CO₂ concentrations are transported and stored in geological formations. However, these methodologies, known as carbon capture and storage (CCS) technologies, are considered as short-term solutions, as there are still concerns about the environmental sustainability of these processes.A promising technology is the biological capture of CO₂ using microalgae. These microorganisms can fix CO₂ using solar energy with efficiency ten times greater than terrestrial plants. Moreover, the capture process using microalgae has the following advantages: (i) being an environmental sustainable method; (ii) using directly the solar energy; and (iii) co-producing high added value materials based on biomass, such as human food, animal feed mainly for aquaculture, cosmetics, medical drugs, fertilizers, biomolecules for specific applications and biofuels. Approaches for making CO₂ fixation by microalgae economically competitive in comparison with CCS methodologies are discussed, which includes the type of bioreactors, the key process parameters, the gaseous effluents and wastewater treatment, the harvesting methods and the products extracted by microalgal biomass.     

Determinants of the costs of carbon capture and sequestration for expanding electricity generation capacity

This study models the costs of electricity generation with carbon capture and sequestration (CCS), from generation at the power plant to carbon injection at the reservoir, examining the economic factors that affect technology choice and CCS costs at the individual plant level. The results suggest that natural gas and coal prices have profound impacts on the carbon price needed to induce CCS. To extend previous analyses we develop a "cost region" graph that models technology choice as a function of carbon and fuel prices. Generally, the least-cost technology at low carbon prices is pulverized coal, while intermediate carbon prices favor natural gas technologies and high carbon prices favor coal gasification with capture. However, the specific carbon prices at which these transitions occur is largely determined by the price of natural gas. For instance, the CCS-justifying carbon price ranges from $27/t CO₂ at high natural gas prices to $54/t CO₂ at low natural gas prices. This result has important implications for potential climate change legislation. The capital costs of the generation and CO₂ capture plant are also highly important, while pipeline distance and criteria pollutant control are less significant.     

Scaling up carbon dioxide capture and storage: From megatons to gigatons

Carbon dioxide (CO₂) capture and storage (CCS) is the only technology that can reduce CO₂ emissions substantially while allowing fossil fuels to meet the world's pressing energy needs. Even though the technological components of CCS—separation of CO₂ from emissions, transport, and secure storage—are all in use somewhere in the economy, they do not currently function together in the manner required for large-scale CO₂ reduction. The challenge for CCS to be considered commercial is to integrate and scale up these components. Significant challenges remain in growing CCS from the megaton level where it is today to the gigaton level where it needs to be to help mitigate global climate change. These challenges, none of which are showstoppers, include lowering costs, developing needed infrastructure, reducing subsurface uncertainty, and addressing legal and regulatory issues. Progress will require a series of demonstration projects worldwide, an economically viable policy framework, and the evolution of a business model.     

Assessing the effects of CO2 price caps on electricity investments—A real options analysis

This paper uses real options modeling to assess the impact of different climate change policy instruments on investment, profits and cumulative emissions in the electricity sector. Even though CO₂ price caps or “safety valves” have been suggested as methods to limit uncertainty emanating from fluctuating prices of CO₂ permits that would hurt the industry's profit and thereby also energy security, our analysis shows that price caps set at a too low level are detrimental to the adoption of e.g. modern biomass-fired capacity as a replacement for existing coal-fired power plants. We therefore conduct a series of experiments with different policy scenarios to analyze under which regime emissions are most effectively reduced. With respect to CO₂ price uncertainty, it turns out that even for moderately rising CO₂ prices, fluctuations frequently lead to investment into carbon capture and storage (CCS), while investment is often not triggered in the face of deterministic CO₂ prices.     

A scalable infrastructure model for carbon capture and storage: SimCCS

In the carbon capture and storage (CCS) process, CO₂ sources and geologic reservoirs may be widely spatially dispersed and need to be connected through a dedicated CO₂ pipeline network. We introduce a scalable infrastructure model for CCS (simCCS) that generates a fully integrated, cost-minimizing CCS system. SimCCS determines where and how much CO₂ to capture and store, and where to build and connect pipelines of different sizes, in order to minimize the combined annualized costs of sequestering a given amount of CO₂. SimCCS is able to aggregate CO₂ flows between sources and reservoirs into trunk pipelines that take advantage of economies of scale. Pipeline construction costs take into account factors including topography and social impacts. SimCCS can be used to calculate the scale of CCS deployment (local, regional, national). SimCCS’ deployment of a realistic, capacitated pipeline network is a major advancement for planning CCS infrastructure. We demonstrate simCCS using a set of 37 CO₂ sources and 14 reservoirs for California. The results highlight the importance of systematic planning for CCS infrastructure by examining the sensitivity of CCS infrastructure, as optimized by simCCS, to varying CO₂ targets. We finish by identifying critical future research areas for CCS infrastructure.     

Design and simulation of the PV/PEM fuel cell based hybrid energy system using MATLAB/Simulink for greenhouse application

In this study, design and optimization of the hybrid renewable energy system consisting of Photovoltaic (PV)/Electrolyzer/Proton Exchange Membrane Fuel Cell (PEMFC) was investigated to provide electricity and heat for Greenhouse in ?anl?urfa (Turkey). The coupling of a photovoltaic system with PEMFC was preferred to supply continuous production of electric energy throughout the year. Additionally, produced heat from PEMFC was used to heating of the greenhouse by micro cogeneration application. The MATLAB/Simulink was applied to the design and optimization of the proposed hybrid system. In the designed system, solar energy was selected to produce the Hydrogen (H₂) required to run the electrolyzer. In cases where the solar energy is not sufficient and cannot meet the electricity requirement for the electrolyzer; the H₂ requirement for the operation of the PEMFC was met from the H₂ storage tanks and energy continuity was ensured. The electrolyzer was designed for H₂ demand of the 3 kW PEMFC which were met the greenhouse energy requirement. PEMFC based hybrid system has 48% electrical and 45% thermal efficiencies. According to optimization results obtained for the proposed hybrid system, the levelized cost of energy was found 0.117 $/kWh. The obtained results show the proposed PV/Electrolyzer/PEMFC hybrid power system provides an applicable option for powering stand-alone application in a self-sustainable expedient.     

There are hydrogen production pathways with better than green hydrogen economic and environmental costs

While the present hydrogen (H₂) is mostly grey, from steam reforming of methane (CH₄) with direct carbon dioxide (CO₂) emission, different pathways have been proposed to produce H₂ more environmentally friendly. Blue H₂, adopting carbon capture and storage (CCS), has no direct CO₂ emission, but the additional cost to capture and store the CO₂. Thus, green H₂, from the electrolysis of the water (H₂O) molecule, is becoming the preferential pathway for future H₂ production. Two additional pathways are proposed for reduced economic and environmental costs, both free of direct CO₂ emissions, based on the use of concentrated solar energy (CSE). White H₂ is produced from the catalytic solar thermochemical splitting of the H₂O molecule. Aquamarine H₂ is produced from solar thermochemical CH₄ pyrolysis with a carbon catalyst. Here we provide an estimation of costs by 2030 of white and aquamarine H₂ lower than the cost of not only green H₂ but also grey H₂ disregarding the CO₂ emission.     

Carbon prices and CCS investment: A comparative study between the European Union and China

Carbon Capture and Storage is considered as a key option for climate change mitigation; policy makers and investors need to know when CCS becomes economically attractive. Integrating CCS in a power plant adds significant costs which can be offset by a sufficient CO₂ price. However, most markets have failed: currently, the weak carbon price threatens CCS deployment in the European Union (EU). In China, a carbon regulation is appearing and CCS encounters a rising interest. This study investigates two questions: how much is the extra-cost of a CCS plant in the EU in comparison with China? Second, what is the CO₂ price beyond which CCS plants become more profitable than reference plants in the EU and in China? To address these issues, I conducted a literature review on public studies about CCS costs. To objectively assess the profitability of CCS plants, I constructed a net present value model to calculate the Levelised Cost of Electricity and the breakeven CO₂ price. CCS plants become the most profitable plant type beyond 115 €/tCO₂ in the EU vs. 45 €/tCO₂ in China (offshore transport and storage costs). I advise on the optimal plant type choice depending on the CO₂ price in both countries.