A Commercial Feasibility Study of Renewable Methanol Production from Biomass Gasification in Iceland

A Commercial Feasibility Study of Renewable Methanol Production from Biomass Gasification in Iceland

Jón Örn Jónsson MSc in Sustainable Energy and Business

Supervisors: Kristján Vigfússon Guðrún Sævarsdóttir K.C. Tran

Reykjavík University School of Business/REYST January 2010

A Commercial Feasibility Study of Renewable Methanol Production from Biomass Gasification in Iceland 30 ECTS thesis submitted in partial fulfilment of a  Master of Science degree in Sustainable Energy and Business Copyright © 2010 All rights reserved School of Business/REYST Reykjavík University Menntavegur 1 IS-101 Reykjavik Iceland Telephone: (354) 599-6200

Bibliographic information: Jón Örn Jónsson, 2010, A Commercial Feasibility Feasibili ty Study of Renewable Methanol Production from Biomass Gasification in Iceland., Master Maste r thesis, Reykjavik Energy Graduate School of  Sustainable Systems, Reykjavik University & University of Iceland. ISBN XX Printing: ver. 1 Reykjavik, Iceland, 28 January 2010

Abstract This feasibility study is made to evaluate the potential of building biomass gasification to methanol fuel plant in Iceland. Biomass gasification and methanol production consists of  three steps: hydrogen production, biomass gasification and methanol synthesis. The process is known as liquid phase methanol synthesis or Fisher-Tropsch synthesis and consists of a catalyst reposition and combining carbons and hydrogen to form methanol. The intention is to use off-peak renewable electricity produced from Icelandic hydro or geothermal plants in the electrolysis of water producing renewable hydrogen and oxygen. The relatively reasonable price of renewable electric power in Iceland makes Iceland an ideal location for the production of liquid fuels through gasification. Gasification technology consists of a gasifier that turns hydrocarbon feedstock into gas by adding heat and pressure carefully monitoring the amount of oxygen entering makes the difference between a combustor and a gasifier. Gasification with the use of oxygen in is one of the most effective ways to harness the energy of the sun stored within biomass. Catalysts operate by rearranging the atoms of the gas into alkenes or alcohols. The biomass feedstock addressed in this feasibility study is black liquor, wood and MSW. Two sets of  models have been constructed a mole balance model to simulate the biomass gasification and financial model. The conclusion of this study is that MSW gasification to liquid fuel production is feasible, but the import of biomass is not feasible unless the total cost of the biomass imported is below € 193 per ton.

 Dedication  Dedicated to my unborn daughter.

Table of contents: List of Figures .......................................................... ................................................................................ ............................................. .................................... ............. xii List of Tables .............................. ..................................................... ............................................. ............................................ .......................................... .................... xiii List of equations............................................ .................................................................. ............................................ ............................................. ......................... xiv Abbreviations ............................................ ................................................................... ............................................. ............................................. ............................ ..... xv Acknowledgements Acknowledgements ........................................... ................................................................. ............................................ .......................................... .................... xvi 1 Introduction.......................................... ................................................................. ............................................. ............................................. ............................ ..... 17 2 The Process ................................................... ......................................................................... ............................................ ........................................... ..................... 18 2.1 Electrolysers...................... Electrolysers............................................. .............................................. ............................................. ....................................... ................. 19 2.2 Gasification ........................................... ................................................................. ............................................ ........................................... ..................... 22 2.3 Gasifiers ............................................ .................................................................. ............................................ ............................................. ........................... 25 2.4 Synthesis ........................................... ................................................................. ............................................ ............................................. ........................... 31 2.4.1 Liquid Phase Methanol synthesis (LPMeOH) .......................................... .............................................. 32 2.4.2 Fischer-Tropsch synthesis ..................................... ........................................................... ....................................... ................. 33 3 Biomass feedstock ........................................... .................................................................. ............................................. ....................................... ................. 33 3.1 Black liquor ............................... ...................................................... ............................................. ............................................. ................................ ......... 35 3.2 Timber........................................... .................................................................. ............................................. ............................................. ............................ ..... 41 3.2.1 Icelandic timber ............................................ .................................................................. ............................................ ......................... ... 41 3.2.2 International timber .................................... .......................................................... ............................................ ............................ ...... 42 3.3 Municipal Solid Waste............................................ .................................................................. ............................................ ......................... ... 44 4 Biomass import. ........................................... ................................................................. ............................................ ........................................... ..................... 48 4.1 Taxes on biomass imports in Iceland............................................ .................................................................. ........................... 48 5 Fuel Markets ............................................ .................................................................. ............................................ ............................................. ........................... 50 5.1 Fuel taxes in Iceland. .............................................. .................................................................... ............................................ ......................... ... 50 5.2 Methanol fuel potential in Iceland .......................... ................................................ ............................................. ........................... 53 6 Economic evaluation ....................................... ............................................................. ............................................. ........................................ ................. 55 6.1 Other assumptions ............................. ................................................... ............................................ ............................................ ......................... ... 59 6.2 Investment calculations ................................ ...................................................... ............................................ .................................... .............. 59 7 Further considerations ........................................... ................................................................. ............................................ ................................ .......... 67 8 Results & Conclusion.......................................... ................................................................ ............................................ .................................... .............. 69 References........................... References.................................................. .............................................. ............................................. ............................................ ............................ ...... 73

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List of Figures Figure 1 - The role of electrolysis elect rolysis and gasification. ............................................ ............................................................ ................ 19 Figure 2 – Hydrogen production with the use of electrolyser. ............................................ ............................................ 20 Figure 3- Flow diagram of gasification of biomass feedstock to liquid Methanol. ............ 24 Figure 4 - Fixed bed direct gasifiers ............................................. .................................................................. ...................................... ................ 26 Figure 5 - Fluidised bed gasifiers .......................................... ................................................................ ............................................ ........................ 27 Figure 6 – Entrained flow gasifier.......................................... ................................................................ ............................................ ........................ 28 Figure 7 - Different types of biomass............................................ ................................................................. ...................................... ................ 34 Figure 8 - Biomass to liquid fuel cost. ................................... ......................................................... ............................................. ....................... 35 Figure 9 - Flow diagram of chemical recovery in kraft pulping process ........................... ........................... 36 Figure 10 - Black liquor gasification and fuel production ............................................ ................................................. ..... 37 Figure 11 - A combined-cycle generating system. ......................................... ............................................................. .................... 38 Figure 12 - Lignin price compared to electric e lectric price ............................................ ............................................................ ................ 40 Figure 13 - Potential wood slash in the next 90 years, ............................................ ........................................................ ............ 41 Figure 14 – MSW treatment facilities in Iceland ............................. .................................................... ................................... ............ 44 Figure 15 - Icelandic mixed household waste composition from 1999-2003 ..................... ..................... 46 Figure 16 – MSW cost analysis..................................................... analysis........................................................................... ...................................... ................ 60 Figure 17 – MSW debt service coverage .......................................... ................................................................. .................................. ........... 61 Figure 18 - MSW net present value. ......................................... ............................................................... .......................................... .................... 62 Figure 19 – WACC ............................................. ................................................................... ............................................ .......................................... .................... 62 Figure 20 – ROE, ROIC and Current ratio........................................... .................................................................. ............................... ........ 63 Figure 21 - Sensitivity of investment according to t o discount rate ........................................ ........................................ 64 Figure 22 – Sensitivity of investment to the nominal interest rate of loan. ........................ 65 Figure 23 - Sensitivity of investment according to price of sold methanol ........................ ........................ 65 Figure 24 - Sensitivity Sensit ivity of investment according to variable cost ........................................ ........................................ 66 Figure 25 - Cost composition of biomass feedstock ................................ ...................................................... ........................... ..... 70

xii

List of Tables Table 1 - Total hydrogen needed in kg. ........................................... .................................................................. .................................... ............. 20 Table 2 - Example of cost Break down of GtL Gt L ..................................................... ................................................................... .............. 29 Table 3 - Scaling down GtL units to apropriate size ............................... ..................................................... ............................ ...... 30 Table 4 - Estimated price of a 300 Adt/day GtL fuel unit in million € -euro ....................... ....................... 31 Table 5 - The largest production countries of black liquor in the world ............................. ............................. 38 Table 6 - Black liquor gas composition........................................... .................................................................. .................................... ............. 40 Table 7 - Average price of tradable biomass within EU-15 ............................................. ................................................. 42 Table 8 - Gas composition of sawdust, organic or ganic matter and wood. ..................................... ..................................... 43 Table 9 - Price Pri ce of wood based biomass. ........................ .............................................. ............................................. ................................ ......... 43 Table 10 – Potential waste feedstock ........................................... .................................................................. ....................................... ................ 45 Table 11 - MSW cost estimate. ............................................................... ..................................................................................... ............................ ...... 47 Table 12 - MSW gas composition and mol weight. ........................ .............................................. .................................... .............. 47 Table 13 - Domestic taxes ISK on gasoline ............................................ ................................................................... ............................ ..... 51 Table 14 – Domestic taxes in ISK on Diesel ........................................... .................................................................. ............................ ..... 52 Table 15 - Carbon dioxide per liter ............................................................ ................................................................................... ........................... 53 Table 16 - Gas compostion and mol weight of selected biomass from the P-EFG-O2. ..... 55 Table 17 - Waste gas composition in precentage and in kilo mols. .................................. ...................................... 56 Table 18 - Total methanol produced in liters. ........................................................... ..................................................................... .......... 57 Table 19 - Variable cost break down............................................ .................................................................. ....................................... ................ 57 Table 20 – 3Point PERT analysis ............................................. ................................................................... ........................................... ..................... 58 Table 21 - Value of investment invest ment ............................................ .................................................................. ............................................ ......................... ... 60

xiii

List of equations Equation 1 - Balancing carbons and hydrogen in the production of methanol. .................. 17 Equation 2 - Water separation ......................... ............................................... ............................................. ............................................. ........................ 19 Equation 3 - Hydrogen gas formation ........................ ............................................... ............................................. .................................. ............ 19 Equation 4 - Oxygen gas formation .......................................... ................................................................ .......................................... .................... 20 Equation 5 - Average energy conversion efficiency efficienc y ........................................... ........................................................... ................ 23 Equation 6 - Methane steam-reforming reaction.......................................... ................................................................. ....................... 25 Equation 7 - Scaling equation ............................................ .................................................................. ............................................ ........................... ..... 30 Equation 8 - Hydrogenation ................................ ...................................................... ............................................ .......................................... .................... 32 Equation 9 - Methanol dehydration & water gas shift reaction .......................................... .......................................... 32 Equation 10 - Fischer-Tropsch process ............................................. .................................................................... .................................. ........... 33

xiv

Abbreviations Adt ASU ATM BFW CAPM CF DME DOE EUR FC FFV FTD FX GHG GtL HRSG ICC LHV LP LPG MSW NPV NREL P-EFG-O2 ROE ROIC SI SRU USD VC WACC WTW

Air Dry Tonne Air Separation Unit Atmosphere Boiler Feed Water Capital Asset Pricing Model Cash Flow Di-Methyl Ether U.S. Department of Energy Euro Fixed Capital Flexible Fuel Vehicle Fischer-Tropsch Diesel Foreign Exchange Market Green House Gases Gasification to Liquid Heat Recovery Steam Generator Icelandic Container Company Low Heating Value Liquid Phase Liquid Petroleum Gas Municipal Solid Waste Net Present Value National Renewable Energy Laboratory Pressurized Oxygen Blown Direct Entrained Flow Flow Gasifier Return on Equity Return on Investment Capital Spark Ignition Sulphur Recovery Unit US Dollar Variable Cost Weighted Average Cost of Capital Well-To-Wheel

xv

Acknowledgements I wish to thank my family for their love, devotion and endurance. Edda Lilja Sveinsdóttir and Reykjavík Energy for their support, Kristján Vigfússon, Guðrún Sævarsdóttir and K.C Tran for their mentoring.

xvi

1 Introduction Gasification is a well-known Process where carbon based feedstock is partially burned, producing a gaseous mixture that may be used either directly as a fuel, or as feedstock in another process e.g. synthetic fuel production. The production of gas through gasification used in vehicles has been known since the beginning of 1900. Actions against the German army led to large shortages of petroleum in the first and second world wars, which lead to the development of gas driven vehicles. Also as a response to the fuel shortage, processes for synthetic fuel production were developed, most notably the Fisher Tropsch process through which Germany produced volumes of fuel during the Second World War. Gasification is the first step of the Fisher Tropsch process, as coal is gasified to form a synthesis gas, which is a feedstock for the process. The gasification process is therefore an established method that offers a wide range of utilization. Gasification of a biomass feedstock is the process of an incomplete exothermic combustion of biomass with oxygen leading to the production of a gas that manly contains carbon monoxide (CO), carbon dioxide (CO2), hydrogen (H2) and methane (CH4). This gas known as producer gas is today used in many countries both developed and undeveloped as a direct source of house heating or by powering gas turbines in the production of electricity. Another option is to use the gas produced in the process to form different liquid hydrocarbons. The process is known as liquid phase methanol synthesis or Fisher-Tropsch synthesis and consists typically of a catalyst reposition and combining carbons and hydrogen at a certain pressure and a certain temperature to form e.g. methanol (CH 3OH). This can also be done to form other chemical reactions such as ethanol (CH 3CH2OH) or glycerol (C3H5 (OH)3). In this process process there is a need for additional hydrogen hydrogen in order to balance the equations such as shown in Equation 1. Equation 1 - Balancing carbons and hydrogen in the production of methanol. CO  2 H 2 CO2 3 H 2

CH 3OH 



CH 3OH  H 2O



The use of stranded or off-peak renewable electricity produced from Icelandic hydro plants in the electrolysis of water producing renewable hydrogen and oxygen is a viable solution

17

in the production of additional hydrogen. Relatively reasonable price of renewable electric power in Iceland makes Iceland an ideal location for the production of liquid fuels through gasification. This M.Sc. thesis evaluates the feasibility of building an Icelandic gasification plant with pre-treatment, gas cleaning unit and synthesis island with the intention of producing and selling a renewable liquid fuel in Iceland.

2 The Process The process consists of three major steps: hydrogen production, biomass gasification and combining step one and two in step three the methanol synthesis, also shown in Figure 1. The hydrogen production is in this case done through conventional electrolysis of water. Even though cheaper methods of hydrogen production exists e.g. with chemical reactions from methane, the need for pure oxygen in the gasification process also exists thus both products from the electrolysis are being used. Adding to this the access to reasonable renewable electricity is also a large contributor to the use of electrolysers. After the production of hydrogen and oxygen the next step is the gasification of biomass. The gasification in this case is done with an entrained flow gasifier due to the fuel flexibility and high scaling factor of the gasifier. The entrained flow gasifier is also one of the most commonly applied gasifier designs due to reliability and long continuous operations without failure. The last step is the synthesis of gases produced in the previous step into liquid fuel. This is done with a catalyst of Copper (Cu), Zinc Oxide (ZnO) and Aluminium oxide (Al2O3) where carbon monoxide and carbon dioxide are connected with hydrogen to form a liquid fuel. Another method is the well-known Fisher-Tropsch synthesis that uses mainly Cobalt and Iron catalysts. Both methods can be applied here depending on the product that one wishes to produce.

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Figure 1 - The role of electrolysis and gasification.

2.1Electrolysers 2.1Electrolysers An Electrolyser uses DC electricity to convert pure water into hydrogen and oxygen gases. This process is well known and the efficiency is close to 90%. The negative charge of the cathode pushes the electrons into the water. At the anode side the positive charge tries to absorb the electrons. Since the conductivity of water is low the water molecules are separated into positively charged hydrogen ion, H + and a negative hydroxide ion, OH - as shown in Equation 2. Equation 2 - Water separation 

 H 2O  H 





OH 

In Equation 3 the positively charged hydrogen picks up a negatively charged electron e and neutralizes as H. The hydrogen atom combines with another hydrogen atom to form a hydrogen gas molecule H 2. Equation 3 - Hydrogen gas formation 

2 H 



2e



 H  H   H 2



19

The negatively charged hydroxide ion is attracted to the positive anode. There the anode removes the negative electron and the hydroxide connects with three other hydroxides to form one molecule of oxygen and two molecules of water this is shown in Equation 4. Equation 4 - Oxygen gas formation 

4OH 



O2  2 H 2O  4e



The whole process of hydrogen h ydrogen production is shown in Figure 2.

Figure 2 – Hydrogen production with the use of electrolyser.

The electrolysers of today are not produced in volume and each electrolyser is practically hand made by order. The cost per electrolyser is therefore still quite high even though the technology for producing electrolysers has been well known for quite a time. The expected price of a Proton-Exchange Membrane (PEM) electrolyser producing from 30 m3 to almost 300 m3 of hydrogen per day is expected to be around 600 $/kW to 1000 $/kW (Smith & Newborough, 2004). The ch allenge of today’s research and development is to achieve the same high efficiency but at much lower cost. Many goals have been set and it is estimated that there will be a dramatic cut in cost as the production increases. Goals have been set both by the European Hydrogen and Fuel Cell programme and also in the US, were the unit cost of electrolyser is estimated to drop below 300 $ per kW by the end of  year 2010.(Smith & Newborough, 2004). The down side of this is that t hat few things today are acting as stimulants to the hydrogen economy. The hydrogen economy that few years back was thought to be the backbone of the alternative fuel economy has hit many hurdles and there still seems to be a long way to go for a hydrogen economy. Therefore it is hard to

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predict the size of the future hydrogen markets and the price of electrolysers will still remain somewhat unclear. For this case a three-point estimate was used to determine the price of the electrolysers. These estimates were based on both literature sources and research the highest in the three point estimate was €4000 per Nm3 or close to €950 per 

kW given by Raymond Schmid at Hydrogenics (www.hydrogenics.com) a company specialising in the production of electrolysers. The two other values used where close to  €690 per kW and where found through literature research €691 per kW from an article by

Smith and Newborough: Low-cost polymer electrolysers and electrolyser implementation scenarios for carbon abatement(Smith & Newborough, 2004) and the lowest price was NREL: Hydrogen supply: Cost estimate fro Hydrogen pathways  –  Scoping analysis(Simbeck & Chang, 2002). 2002). The energy consumption is the largest factor of of the operating cost of an electrolyser. The cost of electricity ranges from 80-90% of total operating cost thus Iceland being a prime location for the operation of electrolysers due to the low cost of renewable electricity. Reduction in energy consumption consumption is therefore a vital factor in the competitiveness of the electrolyser against other methods of hydrogen production. In this case the energy consumption has been estimated to be 4.2 kWh per Nm3 based on report from Hydrogen Technologies a subsidiary of Statoil Hydro the Norwegian energy company (Hydrogen, 2008). Due to energy losses and differences in efficiency it is fair to estimate the energy consumption from 4.1-5.0 kWh per Nm3. The capacity range is practically unlimited determined only by the number of cells employed. The maximum size of modern electrolysers is around 230 cells in one single electrolyser having an output of 485 Nm3 of hydrogen per hr and at the same time 242,5 Nm3 of  oxygen. Each cell produces 2,11 Nm3 per hr and therefore one can determine the size of  the plant by dividing 2,11 with the amount of hydrogen needed and again with 230 to find the amount of units. In this case the assumption is made that 1 kg of hydrogen equals 11,13 Nm3 of hydrogen and depending on the feedstock different quantity of hydrogen is needed as shown in Table 1. The amount of electrolyser units needed for this case assuming a maximum need of 17.200 tons of hydrogen per year are approximately 50 units or 11.500 cells with the total cost of around € 82.21 million.

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Table 1 - Total hydrogen needed in kg.

The objective is to utilize stranded renewable energy available in the Icelandic electric grid and potentially in the future other more unstable sources of renewable energy such as wind, wave and tidal in the production of hydrogen and oxygen as previously mentioned using the oxygen in the process of gasification of biomass in the production of synthetic fuels.

2.2 Gasification The process of producing synthesis gas through gasification is in itself a simple process. The reaction of a hydrocarbon feedstock up to temperatures over >700°C with oxygen will produce a synthesis gas. The process is an exothermic reaction with no need for external source of energy and no additional fluid e.g. water. Gasification is applicable to almost all hydrocarbons providing the user with a variety of alternative feedstock. Today millions of  homes are energy self-sufficient utilizing homemade gas as their only source of energy. Even though the gasification technology as the electrolysis technology has been known for a long time great advances have been taking place in the last decades, maximising the efficiency with modern technology. The gasification technology consists of a gasifier that turns hydrocarbon feedstock into gas by adding heat and pressure. The ability of carefully monitoring the amount of oxygen entering makes the difference between a combustor and a gasifier. While the combustor burns its feedstock completely the gasifier burns its feedstock only partially performing an act called “partial oxidation”. Gasification

can be

defined as thermal degradation in the presence of an externally supplied oxidizing (oxygen containing) agent e.g. air, steam, oxygen (Kavalov & Peteves, 2005) High temperature and plasma gasification are methods that could in the future have huge impact on the recycling of carbons. The ability of being able to tear atoms from each other forming a gas and then to rearrange them into liquid fuels in multiple options gives us a

22

highly effective tool in the fight against anthropogenic greenhouse gas emissions. With traditional gasification better efficiencies are achieved, this is done by recovering the chemicals in the gas. When a biomass feedstock is incinerated the only product is heat. Better use of the feedstock can be gained with the partial combustion at temperatures above >1200°C by converting the biomass feedstock into synthesis gas the energy contained within the biomass will be utilized in a more efficient way and less polluting. This high temperature gasification is already widely used in the Nordic countries, though in particular in Sweden where 25% of all energy produced comes from biomass. biomass . The average energy conversion efficiency of a wood gasifier is about 60-70% and is defined as shown in Equation 5. Equation 5 - Average energy conversion efficiency

 Gas Gas 

2,5(m 3 )  5,4( MJ / m 3 ) 19,80( MJ / kg )  1(kg )



68%

Where on average 1 kg of biomass produces about 2,5m 3 of producer gas consuming c onsuming 1,5m3 of air. Average calorific value of 1kg of wood is 5,4 MJ/m 3. Average calorific value of  wood (dry) is 19,8 MJ/kg (Rajvanshi, 1986). A simplified schematic flow diagram of  gasification could look somewhat like illustration in Figure 3. Into the gasifier there are two inflows one of biomass and the other the oxidant that in this case is 99,5% pure oxygen produced through the electrolysis of water.

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Figure 3- Flow diagram of gasification of biomass feedstock to liquid Methanol.

The ratio in this case is assumed 0,4 kg of oxygen for every kg of feedstock. Before entering the gasifier the feedstock is run through a drying system, which reduces the humidity of the feedstock and increases the efficiency by raising the LHV of the feedstock. More humidity in the feedstock means more energy needed for gasification of the feedstock and higher decomposition of the biomass reduces the amount of undesirable hydrocarbon formation. The drying system operates as a heat exchanger and can as a source of heat utilize e.g. steam, hot water, gas or waste heat from the system. Grinding system cuts the feedstock down to less than