LIFE CYCLE COSTING AND MODELING for hydrogen.pptx

Modeling for life cycle cost estimation made in the presentation

1. LIFE CYCLE COSTING – CONCEPT & MODELING FOR HYDROGEN VALUE CHAIN

2. BACKGROUND At the start of any project, it is important to understand the costs involved Traditional methods simply look at start up costs, cash flow and profit or loss, focusing primarily on the manufacturing stage of product life cycle Life cycle costing is defined as the total cost throughout its life including planning, design, acquisition & support costs & any other costs directly attributable to owning / using the asset. Category of LCC Capital assets : Initial costs Operating costs Disposal costs

3. LIFE CYCLE COSTING

4. LIFE CYCLE COSTING

5. ADVANTAGES OF LCC Improve forecasting - T he application of LCC technique allows the full cost associated with a procurement to be estimated more accurately. Improved awareness - Provide with an improved awareness of the factors that drive cost and the resources required by the purchase. Performance trade-off against cost - LCC technique not only focus on cost but also consider other factors like quality of the goods and level of service to be provided.

6. IMPLICATIONS OF LIFE-CYCLE COSTING Pricing- Knowing life cycles ensures appropriate price of the products. Performance Management - Highlights the cost consequences of developing and making a product. To identify areas in which cost reduction efforts are likely to be most effective. Decision Making - Provides premises for decision-making regarding product introduction, product mix, discontinuation of products.

7. LIFE-CYCLE COSTING OF HYDROGEN FOR EV - ACKNOWLEDGEMENT Input taken from the Case “ A Step towards the Hydrogen Economy—A Life Cycle Cost Analysis of A Hydrogen Refueling Station ” by Ludvik Viktorsson , Jukka Taneli Heinonen , Jon Bjorn Skulason and Runar Unnthorsson , published in 2017 Input taken from the Case “A Step towards the Hydrogen Economy—A Life Cycle Cost Analysis of A Hydrogen Refueling Station” by Ludvik Viktorsson , Jukka Taneli Heinonen , Jon Bjorn Skulason and Runar Unnthorsson , published in 2017

8. LIFE-CYCLE COSTING OF HYDROGEN FOR EV - STURCTURE The viability of the hydrogen technology as alternative fuel for transportation applications depends on several factors: process efficiency, capacity and availability factor and hydrogen storage methods. Hydrogen supply includes mode of transportation, dispensing components and supply capacity. The hydrogen utilization cost depends on the vehicle type and system. Several cost estimations techniques are used, such as the bench marking technique, the parametric approach (statistical estimation), and estimating costs from first principles (calculating project specific cost)

9. LIFE-CYCLE COSTING OF HYDROGEN FOR EV - STURCTURE LCC is an important method to evaluate the total cost of a product or a system over its given lifetime. The models includes energy flows and environmental assessment criteria. There is no global approach of LCC that fits all situations. Different methods are adopted. However, the main steps are as similar: Define the cost elements; Define the cost structure; Establish cost estimating relationships; Establish the method of LCC formulation

10. A Life Cycle Cost Analysis of A Hydrogen Refueling Station

11. LIFE-CYCLE COSTING MODELING The aim of this study was to evaluate the well-to-tank (WTT) LCOH of a hydrogen refueling station (HRS) located in Halle, Belgium, compare the cost-level to previous benchmarks, and identify the most critical cost factors. In addition, a sensitivity analysis for different uncertain components is provided to evaluate further under which conditions certain target cost levels could be met. The first phase, analyzed in this paper, was the evaluation of an existing hydrogen refueling station based on an alkaline water electrolyzer (WE), diaphragm compressor (450 bar) and steel hydrogen storage (50 kg).

12. LEVELIZED COST OF HYDROGEN (LCOH) The definition of the LCOE by IRENA (International Renewable Energy Agency) is depicted in Equation (1) as: where In is the initial investment cost for year n, Mn is the maintenance cost in year n, Fn is the fuel cost in year n, En is the energy generation in year n, i is the discount rate and N is the lifetime.

13. LIFE-CYCLE COSTING MODELING The LCC framework modified by incorporating GHG abetment cost as Where is the investment cost, is the cost of water electrolyzer , is the cost of installation, is the cost connected to financial cost, depreciation and statutory costs, is the salvage cost is the life cycle cost of reduction of greenhouse gases. C c is the cost of the compressor, C s is the cost of the storage unit, C d is the cost of dispenser.  

14. LIFE-CYCLE COSTING MODELING The investment cost is further annualized by a factor called capital recovery factor (CRF) expressed as : where i is the nominal discount rate and n is the economic lifetime of the installation. Note: A capital recovery factor is the ratio of a constant annuity to the present value of receiving that annuity for a given length of time Example With an interest rate of i = 10%, and n = 10 years, the CRF = 0.163. This means that a loan of $1,000 $ at 10% interest will be paid back with 10 annual payments of $163.[2] Same result can be expressed as the net present value of 10 annual payments of $163 at 10% discount rate is $1,000.  

15. LIFE-CYCLE COSTING MODELING Therefore, the annualized investment cost can be expressed as The operational and maintenance costs are expressed as The variable cost The variable cost Where , and are the annual maintenance cost of water electrolyzer , compressor and storage vessels. is the interest on working capital, , , and are water cost, chemical cost, energy cost for electrolyzer and compressor storage.  

16. LIFE-CYCLE COSTING MODELING Annualized Life cycle cost of hydrogen can be expressed as (ALCCH)= Annualized Life cycle cost of Storage can be expressed as (ALCCS)= The levelized cost of hydrogen can be expressed as The levelized cost of storage can be expressed as Where is the hydrogen produced on annual basis. Finally levelized cost of hydrogen is LCOHE= LCOH + LCOS  

17. CASE DESCRIPTION The system under investigation is a hydrogen refueling station located in Halle, Belgium, on the site of Colruyt, one of the largest retail companies in Belgium (see Figure 2). The logistic center comprises a warehouse which is operated 24 h a day, 7 days a week with numerous material handling vehicles on site. The warehouse is powered by three approximately 1.5 MW wind turbines, an approximately 1MWsolar PV system and the Belgium grid. The station is connected to the warehouse and therefore hydrogen can be produced from any of these sources. In addition, the renewables can inject electricity into the Belgium grid when needed. It consists of an alkaline WE (30 N m3/h), a diaphragm compressor (450 bar), a 50 kg (450 bar) hydrogen storage and a (350 bar) dispenser. It had provided around 2,200 kg of hydrogen through approximately 2500 refuelings , maintaining over 95% (~8322 h) annual availability.

18. LIFE-CYCLE COSTING SCOPE OF THE STUDY The focus was set for the customer’s perspective and includes the WTT boundary. The life cycle phases considered were the acquisition and operational phases. A graphical representation of the boundary is depicted in figure: The acquisition phase included the main component, installation, and license costs while the operational phase included the O&M costs which were divided between fixed and variable costs. As Figure 1 indicates, the system is connected to the internal electricity grid at Colruyt.

19. DATA The lifetime of individual components differs and is often dependent on operational hours and quality of maintenance. Therefore, the assumption was made that each component has a lifetime of 20 years and salvage value was neglected. The initial capital expenses are depicted in Table 1 and do not include value added tax (VAT). The annual costs associated with the operational phase were divided between fixed and variable costs. The fixed costs comprised a service contract cost, maintenance and replacement cost for the alkaline WE, and maintenance cost for the diaphragm compressor (see Table 2 for fixed O&M values).

20. DATA The variable expanses includes electricity and water cost. The electricity cost is usually the largest cost factor of the LCOH, though uncertain how it will extend into the future, which makes it largest cost factor of the LCOH, though uncertain how it will extend into the future, which makes it an extremely important parameter. Detailed information regarding hourly availability of the renewables and the cost of each kWh at Colruyt during the data collection period remained unknown to the authors. This uncertainty was overcome by setting the initial price for electricity to the average Belgium grid price for mid-size companies according to Eurostat during the period 2005 to 2016 The water cost represents the actual water cost before entering the system and gives a realistic view of the cost. Table 3 depicts the values of the electricity and water costs used in this study

21. FIELD DATA Figure 4 shows the monthly values of the total electricity consumption. Similarly, the water consumption, in terms of (m 3 ) was collected and represents the gross consumption before the water filtration system and does not represent the real consumption of the WE. The total monthly values for the base year 2014 are depicted in Figure 5.

22. FIELD DATA The output of the station was based on produced hydrogen, in terms of the functional unit kg. Due to a lack of a flow meter the hydrogen output was calculated by team members based on the electrical consumption of the alkaline WE. The results represented the theoretical maximum production of the AWE. The total monthly values from 2014 are depicted in Fig 6. The field data described above was assembled and are summarized in Table 4. The values in Table 4 were used to assess the LCOH. The assumption was made that the station would be run 80% of the time, which is considered a realistic scenario for a decentralized HRS and results in approximately 18,896 kg H2 per year.

23. DATA & RESULT The main LCC results are summarized in Table 6 where different lifetimes of 10, 15 and 20 years have been assumed. The variable lifetime was selected to demonstrate the effect time has on the LCOH in case of a short-lived demonstration project or a long-term investment. As seen in Table 6 the LCOH is lowest for the 20 years’ lifetime. Table 5 summarizes the costs for the main design variables at the selected utilization factor.

24. RESULT The share of the main components in terms of annualized costs for 20 years of lifetime ( /kg) is presented in Figure The electricity cost has the largest share of 6.4  /kg, the investment costs second largest with a value of 4.5  /kg, the fixed O&M for the WE and compressor with a value of 2.3  /kg, cell stack replacement cost with a value of 0.6  /kg and water cost with a near negligible value of 0.1  /kg. It is evident that the electricity cost is the main cost factor, having an approximately 40% larger share of the LCOH than the investment expenses, the second largest cost factor.

25. SENSITIVITY ANALYSIS Based on the results the main cost factors were identified and the effects of changes analyzed in terms of the LCOH. The main factors considered were the electricity cost, electrical consumption, investment expenses and discount rate. A sensitivity star is presented in Fig 8, where those factors were subject to a change of ∓ 60% from their base values, which was estimated as the maximum plausible change over the assessment period, as explained As seen in Figure 8 changes the price of electricity and electrical consumption have the same impact on the LCOH due to their linear relationship.

26. RESULT To demonstrate in more detail how the LCOH changes with respect to individual cost factors, Figure 9 is presented based on the following arguments: Base electricity cost assumed at 0.04  /kWh Discount rate interval from 3% to 9% was selected investment expenses of 20% and a decrease of (-)80%, were selected. Based on pure assumptions the changes in replacement costs of electrolizer were selected as ∓ 50%.

27. AN INDIAN SCENARIO WITH SOLAR ELECTRICITY

28. LIFE-CYCLE COSTING OF HYDROGEN FOR ENERGY - RESULT

29. LIFE-CYCLE COSTING OF HYDROGEN FOR ENERGY - RESULT Assumptions: Capital cost 134004936 Generation of h2 yearly   42000   CUF 0.19 O&M Dep int on loan Variable O&M 5591250 Solar PV MW scale 0.014 0.95 0.0995 Depreciation 0.036 loan 107203949 Interest 9.950% (10 + 1) yr. 0.0995 Dt:Eq. 80 &20 Equity 26800987.2 O & M 1.4.% with 5.72 % escl. ROE (pre tax) 4706253.35 Insurance 0.35 % of net asset value Insurance (1st Yr) 469017.276 Residual value 0.1 Insurance (2nd Yr) 453821.116 ROE 0.1 Int on loan (1st Yr0 7504276.42 Life of Plant 25 Yr.       Int on loan (3rd Yr) 9440111.72                                       Aux.consump. O&M Exp (1st Yr) 1876069.1 subsequent year the interest rate is escaleted by 5.72% over previous year W.Cap. O&M 1m +Receivables 2m. Depreciation(95%) 4582968.81 Inst. On W.Cap. 0.1095 Principle to pay in 10 yrs 10720394.9 per year reduction in principle 10720395 Discount rate 0.0875 Discount factor 1/(1+DR)^(n-1) Gross Hyd. Gen 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 42000 Years 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ROE 2680098.72 2680098.72 2680098.7 2680098.7 2680098.7 2680098.7 2680098.72 2680098.7 2680098.72 2680098.7 2680098.7 2680098.7 2680099 2680098.7 2680099 2680099 2680099 2680099 2680099 2680099 2680099 2680099 2680099 2680099 2680099 Depreciation 4341759.926 4582968.81 4582968.8 4582968.8 4582968.8 4582968.8 4582968.81 4582968.8 4582968.81 4582968.8 4582968.8 4582968.8 4582969 4582968.8 4582969 4582969 4582969 4582969 4582969 4582969 4582969 4582969 4582969 4582969 4582969 Insurance cost 469017 452977 436936 420896 404856 388815 372775 356735 340694 324654 308613 292573 276533 260492 244452 228411 212371 196331 180290 164250 148209 132169 116129 100088 84048 Interest on Loan 7504276.416 10666792.9 9600113.6 8533434.3 7466755 6400075.7 5333396.45 4266717.2 3200037.87 2133358.6 1066679.3 O&M int rate 1.4 1.48008 1.5647406 1.6542437 1.7488665 1.8489016 1.95465882 2.0664653 2.18466711 2.3096301 2.4417409 2.5814085 2.729065 2.8851676 3.050199 3.224671 3.409122 3.604123 3.810279 4.028227 4.258642 4.502236 4.759764 5.032023 5.319854 O & M 1876069 1983380 2096830 2216768 2343567 2477619 2619339 2769166 2927562 3095018 3272053 3459215 3657082 3866267 4087417 4321218 4568391 4829703 5105962 5398023 5706790 6033219 6378319 6743159 7128867 Variable O&M cost 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 5591250 IOWC 17119 18098 19134 20228 21385 22608 23901 25269 26714 28242 29857 31565 33371 35280 37298 39431 41687 44071 46592 49257 52074 55053 58202 61531 65051 Total 22479591 25975566 25007331 24045644 23090881 22143436 21203730 20272203 19349325 18435590 17531521 16637671 16821303 17016356 17223484 17443378 17676766 17924423 18187162 18465848 18761392 19074759 19406967 19759096 20132284 Per Kg cost 535.23 618.47 595.41 572.52 549.78 527.22 504.85 482.67 460.70 438.94 417.42 396.14 400.51 405.15 410.08 415.32 420.88 426.77 433.03 439.66 446.70 454.16 462.07 470.45 479.34 IOWC O & M (01 month) 156339 165282 174736 184731 195297 206468 218278 230764 243963 257918 272671 288268 304757 322189 340618 360101 380699 402475 425497 449835 475566 502768 531527 561930 594072 Receivables (02 months)   Total 156339 165282 174736 184731 195297 206468 218278 230764 243963 257918 272671 288268 304757 322189 340618 360101 380699 402475 425497 449835 475566 502768 531527 561930 594072 IOWC 17119 18098 19134 20228 21385 22608 23901 25269 26714 28242 29857 31565 33371 35280 37298 39431 41687 44071 46592 49257 52074 55053 58202 61531 65051 Discount Factor 1.00 0.92 0.85 0.78 0.71 0.66 0.60 0.56 0.51 0.47 0.43 0.40 0.37 0.34 0.31 0.28 0.26 0.24 0.22 0.20 0.19 0.17 0.16 0.15 0.13 10.90 Present Value 535.23 568.70 503.45 445.14 393.07 346.62 305.20 268.32 235.50 206.32 180.42 157.44 146.37 136.16 126.72 118.02 109.97 102.54 95.67 89.32 83.45 78.02 72.99 68.34 64.02 5437.01 Levelised cost of h2/Kg 498.7124656 4.3427526 498.712 tot-pv/tot-df(25 years) Totalx DF 22479590.57 23885577.9 21145054 18695997 16509101 14557899 12818484 11269278 9890806.41 8665500.6 7577517.4 6612574.8 6147640 5718552.6 5322446 4956688 4618858 4306730 4018261 3751571 3504933 3276759 3065588 2870080 2688999 Total GenxDF 42000 38620.6897 35513.278 32655.888 30028.402 27612.324 25390.6428 23347.718 21469.1656 19741.761 18153.344 16692.73 15349.64 14114.609 12978.95 11934.67 10974.41 10091.41 9279.456 8532.833 7846.283 7214.973 6634.458 6100.651 5609.794

30. LIFE-CYCLE COSTING OF HYDROGEN FOR ENERGY - RESULT

31. THANK YOU

32. LIFE-CYCLE COSTING OF HYDROGEN FOR EV - ACKNOWLEDGEMENT Inputs taken from the Case “ Life Cycle Costing Analysis: Tools and Applications for Determining Hydrogen Production Cost for Fuel Cell Vehicle Technology ”, by Martin Khzouz , Evangelos I. Gkanas , Jia Shao, Farooq Sher, Dmytro Beherskyi , Ahmad El- Kharouf and Mansour Al Qubeissi published in 2020. Input taken from the Case “ A Step towards the Hydrogen Economy—A Life Cycle Cost Analysis of A Hydrogen Refueling Station ” by Ludvik Viktorsson , Jukka Taneli Heinonen , Jon Bjorn Skulason and Runar Unnthorsson , published in 2017 Input taken from the project “ Hydrogen A Strategic roadmap for Energy Transformation towards decarbonization into company of future ” by Ms. Kirti Khanna at NSB

33. LIFE-CYCLE COSTING OF HYDROGEN FOR EV - STURCTURE Figure 2 presents the proposed life cycle costing model structure and strategy for hydrogen fuel costing analysis. The framework includes sensitivity analysis of feedstock price, vehicle cost, change on demand and capacity of hydrogen production. Both technical and economical parameters are included during the life cycle costs analysis. Figure 2.

34. LIFE-CYCLE COSTING OF HYDROGEN FOR EV - STURCTURE Figure 3 presents the cost categories taken into account in the current work, in terms of hydrogen production, hydrogen distribution and usage. The capital costs consist of construction, preparation and cost for equipment. The running costs include: raw and other materials, primary energy usage, utilities, labour and other variable operating costs. The disposal costs consist of wastewater and CO2 treatment. Finally, other costs take into account any costs not included in the previously mentioned cost categories that can have potential effects on the analysis. The technical data that are used to perform the life cycle analysis are presented in Table 2.

35. LIFE-CYCLE COSTING OF HYDROGEN FOR EV - STURCTURE The technical data that are used to perform the life cycle analysis are presented below: Table 2. Technical data and parameters for life cycle analysis for economic data identifications

36. Economic analysis equations used for life cycle analysis.

37. Economic analysis equations used for life cycle analysis.

38. Economic analysis equations used for life cycle analysis.

39. DATA

40. DATA

41. CASE STUDY The proposed model is based on hydrogen that is produced from natural gas steam reforming and water electrolysis. Hydrogen can be produced by following two paths: large-scale centralised production plants (centralized generation) or small-scale distributed production plants (decentralized generation). The outcome of the life cycle model presents a minimum rate of return of investment. Table 4 shows that centralized methane reforming achieved the lowest hydrogen costs through the life cycle span (0.90 USD/kg). The most expensive process on the life cycle analysis for hydrogen production and storage was found to be the decentralized electrolysis with a value of 4.30 USD/kg. The major cost parameters contributing to the life cycle results are: the feed cost, the cost for raw materials and the capital costs.

42. LIFE-CYCLE COSTING OF HYDROGEN FOR ENERGY - RESULT

43. CASE STUDY The life cycle model for the hydrogen transportation and dispensing applied for both the cases of centralised methane reforming and centralised electrolysis showed that the case of centralized methane reforming had lower minimum rate of return of investment compared to the case of centralized electrolysis production as presented in Table 5. The major cost contributor in the hydrogen transportation model is the cost of the fuel required for the transportation, where for both the examined cases the contribution is equivalent. For the case of the centralised electrolysis, the capital costs and the raw material cost are also contributing towards the final cost. In addition, the dispensing cost of high-pressure hydrogen gas for the methane reforming production contributed towards lowering the cost of energy required for dispensing process compared to the case of hydrogen production via centralised electrolysis.