TEA breakdown: green ammonia and synthetic methane

Shayle and his team at Energy Impact Partners (EIP) review a lot of climate-tech pitches. The best kind of pitch uses a solid techno-economic analysis (TEA) to model how a technology would compete in the real world. In a previous episode, we covered some of the ways startups get TEAs wrong — bad assumptions, false precision, focusing on parts instead of the system, etc. So what does a good TEA look like? In this episode, Shayle talks to his colleagues, Dr. Melissa Ball, EIP’s associate director of technology, and Dr. Greg Thiel, director of technology. They apply their TEA chops to two technology pathways — green ammonia and synthetic methane. EIP hasn’t invested in either area yet because both struggle with challenging economics. Shayle, Greg, and Melissa talk about what would have to change to make those economics work, covering topics like: The basics of ammonia and methane production The cost stack of ammonia production and the surprisingly large role transportation plays The challenges of integrating ammonia production with renewables, like buffering hydrogen Novel approaches to ammonia synthesis, including scaling down the existing process, lower temperature, and pressure Recommended resources U. S. Department of Energy: Clean Hydrogen Commercial Liftoff Catalyst: Ammonia: The beer of decarbonization Catalyst: Climate tech startups need strong techno-economic analysis Catalyst is brought to you by EnergyHub. EnergyHub is working with more than 70 utilities across North America to help scale VPP programs to manage load growth, maximize the value of renewables, and deliver flexibility at every level of the grid. To learn more about their Edge DERMS platform and services, go to energyhub.com. On December 3 in Washington, DC, Latitude Media is bringing together a range of experts for Transition-AI 2024, a one-day, in-person event addressing both sides of the AI-energy nexus: the challenges AI poses to the grid, and the opportunities. Our podcast listeners get a 10% discount on this year’s conference using the code LMPODS10. Register today here!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

  Latitude Media, podcast at the frontier of climate technology. I'm Shayle Khan and this is Catalyst.

• 0:13Speaker 01

  If we look at a TEA and we assume there's 50 kilowatt hours per kilogram of hydrogen that goes into that electrolyzer, and we assume even two cents a kilowatt hour for electricity, you're looking somewhere at the energy cost of about 26 a kilo of ammonia. And so that's already a pretty large allocation to your final budget. And so that really highlights why capital costs then would be incredibly important.

• 0:42Speaker 00

  This week, we dive deep into the techno-economic analysis that underpins how to produce green ammonia and synthetic methane.

• 0:58Speaker 02

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• 1:25Speaker 03

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• 2:30Shayle Kann?

  I'm Shayle Khan. I invest in revolutionary climate technologies at Energy Impact Partners. Welcome. Okay, so a while back, we did an episode, which we actually recently replayed, so you might have heard it recently, where I brought on two of my colleagues from EIP, Dr. Greg Teal and Dr. Melissa Ball. And we were talking about techno-economic analysis. And in that one, it was sort of a broad, here's how to do TEA right and wrong for new climate technologies. It was a big hit. We've heard from many of you about it and continue to. So we thought we would do a follow on, and in this case, doing a deep dive techno-economic breakdown of a couple of technologies, or technology pathways, I should say, that

• 3:13Shayle Kann?

  we've been hearing about a lot. In this case, talking about how to produce ammonia without emissions, and particularly the pathway of what people call green ammonia, and then how to produce methane without emissions, or in this case, synthetic methane, e-methane, people call it different things. Both of these have lots of different shots on goal right now. There are startups and incumbents who are working on different ways to do each of these things, but they're both challenging from a techno-economic perspective. We at EIP have not made an investment yet in either of these categories directly. You'll hear a little bit more about why. It's challenging from a techno-economic standpoint, but never say never. Something revolutionary could come along. And so part of what we wanted

• 3:57Shayle Kann?

  to do here is talk about what drives the techno-economics in both cases, and then what would have to be true for something to truly revolutionize the cost of production of either green ammonia or e-methane. What would a revolutionary technology have to look like? So this is an area where we, and Greg and Mel in particular, have gone quite deep. So we thought we would share it with you. So with no further ado, back on the pod, Dr. Greg Teal, Dr. Melissa Ball. Greg, Mel, welcome back.

• 4:29Speaker 01

  Thank you, Shayle. Good to be back.

• 4:30Shayle Kann?

  Glad to be here. All right. Excited to do a deep dive techno economic breakdown of a couple of technologies that we hear about a fair bit these days, one being green ammonia or e ammonia, depending on what you want to call it, and the other being e methane. We flipped a coin ahead of time and picked ammonia to start. So we're going to start there. I think listeners to this podcast probably understand what ammonia is, but just to recap, we use it for fertilizer production and explosives, actually, today. It's a huge source of global greenhouse gas emissions already. And so decarbonizing it in and of itself has its own value, but also then people are excited to use it for a bunch of other things, probably most notably

• 5:12Shayle Kann?

  as a potential shipping fuel, sort of in in battle between ammonia and methanol there. But also in in some parts of Asia, people are talking about firing power plants with ammonia, using it as an energy carrier. So there's been lots of activity in ammonia world. I also think probably listeners here are at least familiar with the term Haber Bosch and the fact that, you know, it's a Nobel Prize winning century old technology to produce ammonia. But let's start by describing in a little bit more detail what the Haber Bosch process actually is. And then we could talk about what would change if you're going to make green ammonia. So Mel, I'll, I'll hand it to you to kick us off here. Just like walk us through the process to the incumbent process today to produce ammonia.

• 5:56Speaker 01

  Yeah, sure. You know, as you said, it's a century old process. It really is fundamentally needs two inputs. So it needs a hydrogen source and a nitrogen source that are then fed into the, we would call the ammonia synthesis reactor. This reactor operates at pretty high temperature today, 400 to 500 C, and at high pressure around 100 to 200 bar. And so where we get that nitrogen and hydrogen is really important. So nitrogen, we get that from the air. So an air separation unit essentially can separate out the nitrogen from mainly oxygen. And then crucially, the hydrogen is, I would say where this is an important part is that today, about 75% of the

• 6:41Speaker 01

  Hydrogen that feeds the ammonia loop comes from a process called steam methane reforming. And so this takes methane and steam reacts it at high temperature, moderate pressure to produce carbon monoxide and hydrogen, which then can be followed by a river, sorry, a water gas shift reaction that can take that carbon monoxide and then essentially convert it to more hydrogen and also produce some CO2. And so that's really the motivation for these other pathways is that the steam methane reforming and the hydrogen production is responsible for around like 80% of the GHG emissions that come from ammonia because of this process.

• 7:22Shayle Kann?

  Right, okay, so the way you produce ammonia today is, first of all, you get the nitrogen from the air using an air separation unit, then you get the hydrogen generally from natural gas today using steam methane reforming. You combine those two in ammonia synthesis reactor, that gets you your ammonia at the end of the day. Okay, so maybe Greg will hand it to you. In a world where we want to decarbonize ammonia production, but not fundamentally change the process, what does quote "green ammonia" look like?

• 7:52Speaker 05

  Yeah, well, I think Mel alluded to it pretty clearly in the last few minutes here. The basic thing you have to do is replace that hydrogen input that goes into your ammonia synthesis from something that is carbon intensive to something that really doesn't use or create any carbon emissions. And so, you know, green ammonia typically refers to ammonia where the hydrogen comes from green hydrogen or electrolysis. You can imagine other ways of getting hydrogen without CO2 emissions as well, including if you sequestered the CO2 from the steam methane reforming process, in which case sometimes that's called blue ammonia.

• 8:33Shayle Kann?

  Right. Okay, so I guess the first point in ammonia world is there's a simple theoretical solution, which is just replace the hydrogen with clean hydrogen.

• 8:43Shayle Kann?

  Is there anything else that you would need to do to change the ammonia production process? If you are, I mean, the hydrogen is hydrogen, so you're not changing anything there. But it does potentially introduce some other changes, particularly if you're using green hydrogen, hydrogen produced via electrolysis, and you don't want to be operating that thing 24/7. Because as it stands right now, Haber-Bosch systems are operating 24/7. And that means steam methane reformers are operating 24/7, which means you don't have to buffer the hydrogen very much, right? So I guess one question is, in a world where you just wanted to replace the hydrogen source, and say you were going to be operating an electrolyzer at something less than 100% capacity, and so you did need to buffer that hydrogen.

• 9:28Shayle Kann?

  From a techno-economic standpoint, how big a deal is that? Like, how expensive would that be? Is it enough of a problem that it necessitates introducing entirely new technologies to replace Haber-Bosch?

• 9:41Speaker 01

  Yeah, that's a good question, Jill. High level, I think it would be pretty impactful to the levelized cost of ammonia if we need to account for hydrogen storage on-site in order to feed the ammonia synthesis loop continuously. So if we take data from a couple of sources, the levelized cost of hydrogen storage ranges from somewhere between 30 cents a kilo hydrogen to about a buck 20 a kilo hydrogen for compressed gas. So we put this in an ammonia basis. This is about 5 to 20 cents a kilo ammonia in hydrogen storage cost alone that accrues to the LCOA. And this is a pretty big chunk of your cost stack. And if we keep that same high-level target, the long-term average selling price of ammonia

• 10:26Speaker 01

  in the US between $500 to $600 a ton, you can see that this quickly can make a big impact. And I'm sure we're going to talk about this later, but one of the key drivers of decentralized Ammonia production is to eliminate or reduce the transportation cost of between where you produce ammonia and where you use ammonia. But if we need to buffer hydrogen, the value in reducing this transportation cost is perhaps eclipsed somewhat by hydrogen storage cost. It really points to either trying to develop ammonia synthesis reactors that can ramp with renewables, or looking at other technologies like batteries, but those will also have their own cost drivers.

• 11:11Shayle Kann?

  Well, that's a good segue to the other key point here, which is let's break down the cost stack of ammonia production. Because I think the question here ultimately is can you produce ammonia without emissions cost competitively? So as it stands today, and then if you were to just swap out the hydrogen source, like what, how much of the total levelized cost of ammonia comes from the CapEx? And within the CapEx, like what are the big drivers there? And how much of it comes from the OpEx, which is predominantly energy cost, I presume?

• 11:48Speaker 01

  Right. And let's actually start on the OpEx part, because I think that essentially gives a floor to the cost. And I think keeping in mind that $500 to $600 a ton target, if that's we're trying to produce at the same, well, we want to produce much lower in order to be able to sell at that cost target. And so if we, if we think about the hydrogen piece and think about the OpEx, and you're right, it is predominantly from the energy cost, then we have to think about what it would take in order to achieve a electricity consumption and cost that would feed into the ammonia price that would make it relatively cost competitive. And really, that comes down to electricity cost. And so we see this a lot in TEAs, and there's good reason.

• 12:33Speaker 01

  The thermodynamics of water electrolysis are what they are. We can't do better than the thermodynamics. And so in order to achieve a, an OpEx cost from energy that doesn't consume too much of your budget, so if we think Again, of that budget being much less than the $500 to $600 a ton if you want to be cost competitive. We really need to be operating our electrolyzers with electricity, with the energy consumption that is nearing the thermodynamic potential or thermodynamic limit for hydrogen. And so if we do that and we just have an assumption of where those costs are today. So if we look at a T E A and we assume there's 50 kilowatt hours per kilogram of hydrogen

• 13:16Speaker 01

  that goes into that electrolyzer and we assume something of, you know, even two cents a kilowatt hour for electricity, you're already from the hydrogen piece alone, you're looking somewhere at the energy cost of about 26 a kilo of ammonia. And so that's already a pretty large allocation to your final budget. And so that really highlights why capital costs then would be incredibly important.

• 13:42Shayle Kann?

  Wait, that doesn't sound that high to me. All things equal, $26 per kilo, where you're going to have a total selling cost of ammonia of $400 to $500? Oh, per ton. Ha, there it is.

• 13:54Speaker 01

  Yeah.

• 13:54Shayle Kann?

  So it's actually, it's actually $2,500, $2,600 per ton of hydrogen energy costs alone, right?

• 14:03Speaker 01

  So it would, so in the, in the example I just gave, so if you were saying two cent for energy cost and we were saying with 50 kilowatt hours per kilogram of hydrogen input, that's about 20 cents a kilo of ammonia or $210 per ton. So almost half your, your budget if we're just saying that budget is the selling cost of ammonia.

• 14:26Shayle Kann?

  Right. So, so under those conditions, which is cheap electricity, now 50

• 14:33Shayle Kann?

  kilowatt hours per kilogram of hydrogen, like there are electrolyzers that can beat that, but not by a ton. So, but with cheap electricity, so, you know, fairly aggressive assumptions there, right? You're already, you're spending half of your total budget, including all CapEx that's amortized and all the rest of the OpEx on just the electricity going into producing the hydrogen, which speaks to why it's such a challenge to get cost competitive green hydrogen with. With a traditional Haber-Bosch system. I guess the other question then is there are a bunch of companies that we've talked to and many others out there, I'm sure, that are introducing novel ammonia synthesis processes to replace Haber-Bosch.

• 15:14Shayle Kann?

  And generally, they're doing so saying, okay, this is a better solution for green ammonia production for one reason or another. I guess the first question is why? Like, what's the premise on which you could imagine doing better than this century-old technology that seems to work very well? And is it just generally that we could do better? Or is it that we could do better specifically if we want to pair with electrolysis to produce the hydrogen?

• 15:40Speaker 01

  Yeah, that's a good question. I think on the on the new technical pathways that we're seeing, the one that we were talking a lot about is like, if you think about air or nitrogen and your hydrogen as the input into these new reactors, we've seen a lot of different reactor types, so electrochemical, photochemical, thermochemical. And while they're all early, probably the most advanced we've seen is the thermochemical approach of this decentralized thermochemical processes to produce ammonia. Some are actually just scaling down typical Haber-Bosch, i.e. just still having high temperature, high pressure. And then others on the new novel reactor design, what they're what they're working

• 16:20Speaker 01

  on is having lower temperature, lower pressure Haber-Bosch or ammonia synthesis loop reactors. And so there's a couple of reasons why. And one is really the pairing with renewables. So we mentioned earlier that you need to be able to, if you want to have a green ammonia, you need to have green electrons. And so in order to pair with renewables, if you're a lower temperature pressure reactor, when the sun is shining or the wind is blowing, you can you could potentially ramp down your reactor and so you could follow the renewable cycle. And then the other more TEA reason why people are working on this type of technology, this lower temperature pressure reactors, really from a just first principles perspective,

• 17:04Speaker 01

  you potentially can have capital and operating cost advantages by not operating at such high pressures and temperatures.

• 17:15Speaker 02

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• 19:25Shayle Kann?

  Okay, so you mentioned decentralization, which is the other thread we should pull here a little bit. Greg, you're our scaling guru. I mean, so the reason why it's interesting in principle to scale down, Haber-Bosch reactors are huge, I should say, today, right? Like, there's like 300-some of them in the world, which is crazy because they produce all the ammonia for all the fertilizer in the entire universe. They're massive, massive plants. They clearly, you know, the trend has not been to scale down. The result of that, of course, is that then we ship ammonia all over the world, and there's a pretty big supply chain, and it's not cheap. And so the difference between the produced factory gate cost of ammonia and the delivered price to the farmer is large because of all this supply chain in between, all the transportation costs, and the fact that ammonia

• 20:10Shayle Kann?

  is not easy to transport, right? It's corrosive and dangerous, and so it requires special handling. So a lot, I think, of what we've seen is people are saying, "Okay, well, if you could decentralize it, if you could economically produce it at small scale, then you can cut out a lot of that supply chain." And importantly, the concept of economically producing at small scale, you know, the argument that these companies make is that you don't need to compete with the levelized cost of ammonia coming off of a traditional Haber-Bosch reactor. You need to compete a little bit closer to the delivered price that a farmer is seeing. Now, we could debate whether that's real or not, but it relaxes the cost constraint a little bit. So the idea is make these things small. But the question is, can you make them small

• 20:54Shayle Kann?

  in any reasonable economic fashion? So Greg, as we talk about the different components of the ammonia synthesis process, what do you think has the potential to scale down? And what is really challenging to scale down?

• 21:07Speaker 05

  So the classic chemical engineering way to think about this is something called the six-tenths rule. And the six-tenths rule is essentially... A rule that reflects economies of scale in that are inherent to many different types of chemical processes and related. And basically, what it says is the bigger you make your plant, the bigger the capacity of the plant or piece of equipment is, the cheaper it becomes on a unit basis. Mathematically, the rule has stated something like this. The ratio of the cost of some equipment or process at two different scales or two different capacities is equal to the ratio of those capacities, some measure of capacity, raised

• 21:52Speaker 05

  to the point six power. The size of your equipment, the capacity of your equipment doubles or 10x is the cost doesn't double or 10x, it goes up by two to the point six or 10 to the point six, right? And sometimes that value isn't point six, sometimes it's a little bit less, sometimes it's a little bit more. But this is an effect that is that is seen across many, many types of processes and pieces of equipment for various reasons. And there's really just an enormous amount of historical data and examples showing this this type of relationship again, again, and again.

• 22:32Speaker 05

  And so if you're trying to scale down, you're working against this six tenths rule, right? You're getting this six tenths rule in reverse. Half the capacity isn't half the cost, a tenth of the capacity isn't a tenth the cost. It's worse than that, right? But a lot of people will point to something like electrolysis that's a little bit more modular, at least the core cells and stacks and so forth, as something that maybe should shouldn't have so much of that economies of scale effect. So at the end of the day, if you're if you're trying to scale down a Green Haber-Bosch plant, maybe maybe you'll be able to do okay on the core parts of the electrolysis side of the equation here, the cells and stuff and so forth.

• 23:17Speaker 05

  But the ammonia synthesis loop and the other kind of more conventional chemical engineering type pieces of equipment, those bits will be tougher.

• 23:26Shayle Kann?

  What about the air separation unit? That's often like the it's like the forgotten part of this system often I find, like people, it's sort of like assumed, okay, so you got to get the nitrogen, so you're going to do an ASU. But as we've talked about before in a bunch of different contexts, ASUs are not things that scale down super economically either, right?

• 23:45Speaker 05

  Yep. Great point. You can get them at. Many, many different scales from small to world scale. And you see some big economies of scale effects there. So hard to scale down.

• 23:58Shayle Kann?

  Yeah. Okay, so I want to move on to e-methane in a second. But before we do, I guess here's the question at the end of the day. What would it take? What would have a new production process of one kind or another have to look like in order to change the world here? Right? Like, what would be revolutionary enough that you can imagine getting to getting green ammonia, clean ammonia, at commodity gray ammonia prices? Is it as simple as really, really cheap, clean hydrogen? Like, it may be just that simple. But is there anything else that you can imagine would be a game changer here?

• 24:39Speaker 01

  No, I've thought a lot about this question and really trying to think about one miracle that would make this happen. And I think where I am at is that, yes, I think the hydrogen is certainly a huge part of the levelized cost, I think, from a CapEx and also from an energy perspective. So I think you need both cheap energy and you need cheap CapEx. I think also what we were just saying with the nitrogen generation unit. If we're going to have these decentralized, smaller productions, the nitrogen generation is a sensitivity at small scale. And so, you know, if you said, what's like one big miracle? One thing I was thinking about was if you could have air as your input

• 25:24Speaker 01

  as opposed to actually eliminating the nitrogen generation completely, that coupled with the cheap electrons and also the cheap CapEx for the hydrogen electrolyzer could be game changer for ammonia.

• 25:40Shayle Kann?

  Okay, let's move on to e-methane. So sort of a different context here, right? But like, I think people can appreciate why if you so the idea here is to produce synthetic methane, right? And that has obvious massive benefits if you could do it economically and with with low embodied emissions, because we've got all of this infrastructure in the world that we have built up for natural gas. You know, if you could just use that infrastructure without making any changes whatsoever, you produce the same molecule, you ship it around, you use it in all the same end uses like you've solved so many of the problems that all zero carbon alternatives and low carbon alternatives to to things like natural gas face. So wouldn't it be amazing if we could do that? And in principle,

• 26:24Shayle Kann?

  we can do that, right? Methane is CH4, it's a carbon and four hydrogens. All we need is a source of carbon that is not dug up from underground. And then we need a source of clean hydrogen, we put them together somehow, which you're about to tell me how, and we get our methane. So feels really attractive. And indeed, there's a bunch of folks working on it. I think our question is like, what would that production process really have to look like? And and this is where the TA comes into play in a significant fashion. So first, Greg, walk me through how do you get synthetic methane?

• 26:58Speaker 05

  Right. So, you know, kind of like Haber-Bosch, the reactions here, the core reaction, the core chemistry has been known for over a century. And and the basic way that it works is you, if you want to make it from CO2, at least, you start with CO2, and you add about four, four molecules of hydrogen per one molecule of CO2, and you make one molecule of methane, a bunch of water, which is say, two molecules of water, and a bunch of heat. And so from a kind of whole whole of process perspective here, right, you need to get a source of CO2, which which might come from from some industrial source, it might come from a biogenic source, it might come from the air, and you have to go through some CO2 capture process to get that

• 27:40Speaker 05

  to be pure CO2. And then you want to get your hydrogen, which, you know, in this e-methane case would be coming from electrolysis. And so you take water and split that into hydrogen and oxygen. Again, combine those two in that kind of four to one ratio. And you get your methane, your water and a lot of heat. And, you know, I mean, like you said, the upside is just, is really attractive. If you could get all this to work out, because you've got that huge transportation, distribution network and storage too, right? I mean, the largest source by far of energy storage that we have today is in the form of gas storage.

• 28:17Shayle Kann?

  Yeah, so super attractive. And if you could do it economically, of course. And actually, from a technical standpoint, my understanding is the synthesis process is known and commercial already, basically, right?

• 28:31Speaker 05

  Yeah, that's right. I mean, you get pretty good conversion, which is to say you can convert all of, pretty much all of your CO2 into methane. You get great selectivity, which is to say all of your carbon from your CO2 goes to methane, not to some other thing that you don't necessarily want. And the reactor conditions are pretty mild, you know, hundreds of C and reasonable pressures, right? And in fact, this kind of methanation process, as you said, is used today, albeit with slightly different feedstocks in coal to gas processes, where you, you know, may be in areas of the world that don't have natural gas but need it, but have large coal supplies.

• 29:08Shayle Kann?

  Sounds great. What's the catch?

• 29:10Speaker 05

  The catch is the economics. And the biggest catch of all of the catches in the economics is the hydrogen. And so, you know, if you kind of stack up the costs for making methane according to the reactions that we just talked through, in the best case, you need something like half a kilo of hydrogen per kilo of methane. And so if we looked at a wonderful version of the future where we get to the kind of magic $1 per kilogram hydrogen mark that, you know, is on the DOE's roadmap and many

• 29:49Speaker 05

  others, just that hydrogen cost alone would be equal to $10 per mmVTU of gas. And so compare that, you know, at least again, in the US context to to something like the, you know, Henry Hub price, which in the last 10 years has been as low as a buck and a half per mm BTU and has spiked higher and, you know, gotten close to $10 per mm BTU. But still, you know, nominally in this kind of two to four, five dollar per mm BTU range, just the hydrogen alone is doubling to five Xing that that bench benchmark.

• 30:24Shayle Kann?

  And that's with dollar per kilogram hydrogen, which is, which is a long term goal, but but, you know, we're nowhere near that today in terms of clean hydrogen. So like, what would it look like if it was even $2 per kilogram hydrogen, then it's $20 per mm BTU, right? I assume it's linear in that way. And so now, you know, immediate and that's again, that's just the input cost of the hydrogen, not to mention the input cost of the CO2, the CapEx that you have to amortize. I mean, speaking of which, though, input costs of CO2, how much does that matter? Because you can imagine a wide range of costs there. You could do, as you said, you could get from point source. So say you're doing point source capture from an industrial facility or something and maybe you, you know, cite it there and you get your CO2 input for,

• 31:09Shayle Kann?

  I don't know, $50 a ton or something like that. Or on the other end of the spectrum, you could imagine you're doing direct air capture at today's direct air capture costs and you're paying $1,000 a ton or at least high hundreds of dollars a ton. Like, do those move the needle as much as hydrogen or not as much?

• 31:28Speaker 05

  Not as much, but like you say, there's a wide array of sources that you could get this CO2 from. And of course, from a carbon accounting perspective, where you get your CO2 matters, right? But but, you know, back to the kind of economic picture here, the, the, again, sort of best case from the chemistry is something like 2.75 kilograms of CO2 per kilogram of methane. So thinking back on a, on an mm BTU basis, you know, if you want to get the, the, the good sort of CO2 from the air and we hit all our, all our hopes and, and targets of getting to that magic $100 per ton of CO2 number.

• 32:09Speaker 05

  Best case scenario, perfect yields, $100 a ton CO2, that's $6 in MMBtu, right? So again, even the CO2 by itself is blowing your budget. So it's tough.

• 32:20Shayle Kann?

  So I guess the question again here then, so you can imagine how like with any reasonable set of assumptions with today's costs of hydrogen and today's costs of CO2, or even the next few years' costs of both, you know, it's hard to picture producing synthetic methane. Again, we haven't even talked about the capex here, but it's hard to imagine producing synthetic methane below something in the 20s of dollars per MMBtu, perhaps 30s of dollars per MMBtu. That's obviously like way, way higher than Henry Hub prices for natural gas generally. It's not necessarily that much higher than RNG prices though, which is an interesting

• 33:03Shayle Kann?

  thing. You know, renewable natural gas is a, we've talked about it before on this podcast a while ago, but it's kind of a weird market. It's not a tiny market. It's actually been pretty attractive. You know, there's been a bunch of M&A in that space and so on. There's some incentives that drive that. But you know, you do see selling prices for RNG, at least some types of RNG, really low CO2 embedded RNG that are in those $20 per MMBtu type of range. So, you know, I think you can squint and find a market for synthetic methane in that price range. But obviously the promised land of like making a big difference on a global basis, I think requires something substantially better. And so the question

• 33:43Shayle Kann?

  is, what if anything can you do to drive better economics for synthetic methane production? Is it, and again, does it come down to like in this case, super duper cheap hydrogen, super duper cheap CO2?

• 33:56Speaker 05

  Yeah. Well, I think, you know, one thing we haven't talked about a little bit here is, is, is the efficiency of this process. I mentioned that, you know, the, the, the core reaction produces a lot of heat, right? And so if you were to, you know, make one of these plants today with a, with a, with a good electrolyzer, you know, we mentioned this kind of $50, excuse me, 50 kilowatt hours per kilogram of hydrogen type. Type energy consumption for the electrolyzer. The if you used something like that and did this kind of fairly standard methylation process, the total efficiency of the process kind of comes in around 50% ballpark, right? And about half of those losses of the 50% of the energy that you lose are in the electrolysis and about half is in the methylation step.

• 34:42Speaker 05

  Because that methylation reaction, like I said, makes a lot of heat, right? And so, you know, there's, there's, there's a hint in that thermodynamics that tells you, well, maybe, you know, maybe there's something we can do here, right? And so, you know, to get back to your question, how do you get around this? Yeah, the first thing, first and foremost, is truly, truly low cost CO2 and hydrogen, you know, slash electricity, maybe, maybe that's geologic hydrogen, maybe it's high purity point source biogenic CO2, maybe it's doing biogas upgrading where you have the CO2 and the methane right there in a, in a, in a mix for you, right? But, but the other thing you can do here is, is go hard after the efficiency, right?

• 35:25Speaker 05

  And so can you, can you find ways to do, and folks are doing this, really, really tight heat recovery, use high temperature electrolyzers that maybe can use some of the heat that you give off in that methylation step. Push the efficiency of the electrolyzers higher and really find a way to integrate those processes very, very tightly so you can use all of the heat inside, inside the system.

• 35:47Shayle Kann?

  But the end of the day, I mean, is all that stuff kind of marginal compared to the just the thermodynamics you're describing before of like, look, your, your input cost of hydrogen and CO2 is going to make it such that unless you have a market that can stomach,

• 36:03Shayle Kann?

  you know, a, a price of synthetic methane in the tithes or twenties of dollars per MB to you, you just can't beat that, basically.

• 36:12Speaker 05

  It's really hard, right? If you're going to try to do kind of run-of-the-mill methination, power to gas, high-capacity factor, no special scenarios, no special markets, no edge cases. Yeah, it's really hard. And so I think, again, that challenge kind of comes down to finding these cases where you can push the envelope a little bit. I mean, one other thing that comes to mind here is flexible or really, really cheap CapEx that allows you to kind of minimize the penalty of intermittent operations. So if we know that dollar a kilogram hydrogen doesn't work and two-cent electricity is

• 36:50Speaker 05

  not enough, can we find scenarios where we have, and folks are doing this as well, machines that can do more than one thing, right? And take advantage of short periods of very low, zero, negatively priced electricity and make some methane out of it and get something out of that, but the rest of the time do something else with the CapEx, right? So you're looking for those kind of scenarios. But again, if you, like you say, if you're doing these really run-of-the-mill methination, high uptime, just make power to gas, boy, the server dynamics make it tough.

• 37:24Shayle Kann?

  All right. So having spent all of this time on the techno-economics of both ammonia production and synthetic methane production, I guess I'm curious for each of you what your key takeaways are at this point and kind of general outlook on both of these spaces. Mel, maybe I'll go to you first.

• 37:45Speaker 01

  Yeah, sure. You know, I think when we started looking at ammonia and doing our own research, our own techno-economic modeling, I think one of the surprises was really how much transportation was a part of the levelized cost and the contribution from transportation. So I know we talked about earlier the different modes of transport of ammonia. We do it today. There's many, and whether it's, the United States has a very large 2,000-mile pipeline that runs straight from Louisiana all the way to the Corn Belt. And I think from our analysis, what we what we realize is that, you know, again, that $500 to $600 a ton selling price, about maybe 20, 25% of that is transportation.

• 38:27Speaker 01

  So there is some budget even within the US for these decentralized approaches. I would say that's essentially whatever technology that they are developing, that would be your your allowed in budget for, you know, if you're sizing down your your CapEx in terms of, again, those economies of scale, losses, and then thinking about that in the context of that of that 25% of potentially eliminated transportation costs. I think that was a really big takeaway for myself. And then also outside the United States, a lot of what we said for ammonia certainly can be different because for Haber-Bosch, the the main sensitivity is is natural gas prices.

• 39:09Speaker 01

  So where natural gas prices are expensive, that will have a a effect on the ammonia price. And then also, it's not distribution across the world can also be much more expensive. And so I think that transportation cost is is certainly one that I as a value prop for decentralization, it it makes sense. But still with the what we've talked about earlier, the the hydrogen piece, it is really, and then I think cheap electrons, those two really are going to be part of the solution or part of the unlock for green ammonia. And then we also mentioned also, I think if you could design a reactor that potentially could handle oxygen and, you know, from either catalytic perspectives, this is where oxygen can be a concern.

• 39:53Speaker 01

  So catalystiling or corrosion in your in your sun loop, I think that that could also potentially have an effect or a positive effect on these more decentralized alternative approaches to Haber-Bosch.

• 40:07Shayle Kann?

  All right, Greg, your key takeaways?

• 40:09Speaker 05

  If you want to make a synthetic fuel, if it's going to be a hydrocarbon, you do need a source of carbon and and the source of that CO2, carbon CO2 matters from a carbon economy perspective. But from a cost perspective, the thing that matters is, number one, the hydrogen, number two, the hydrogen, and number three, the hydrogen.

• 40:30Shayle Kann?

  All right. That's a good takeaway. Let's find a way to make super cheap, super clean hydrogen. Many other things may, some of, some other things may fall into place, maybe insufficient in other places, but, but it sure would be a good unlock for some of this stuff. Dragon Mel, thank you so much for coming back on and doing this deep dive with me.

• 40:48Speaker 05

  Thanks for having us.

• 40:49Speaker 01

  Thanks for having us.

• 40:52Shayle Kann?

  Greg Teal is the Managing Director of Technology and Melissa Ball is the Associate Director of Technology, both at EIP with me. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. Prelude backs visionaries accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at preludeventures.com. This episode was produced by Daniel Waldorf, mixing by Roy Campinella and Sean Marquand, theme song by Sean Marquand. I'm Shayle Khan and this is Catalyst.