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Economic Conditions for Developing Hydrogen Production Based on Coal Gasification with Carbon Capture and Storage in Poland

Author

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  • Radosław Kaplan

    (Faculty of Management, AGH University of Science and Technology, Gramatyka 10, 30-059 Krakow, Poland)

  • Michał Kopacz

    (Mineral and Energy Economy Research Institute, Polish Academy of Sciences, Wybickiego 7a, 31-261 Krakow, Poland)

Abstract

This study documents the results of economic assessment concerning four variants of coal gasification to hydrogen in a shell reactor. That assessment has been made using discounting methods (NPV: net present value, IRR: internal rate of return), as well as indicators based on a free cash flow to firm (FCFF) approach. Additionally, sensitivity analysis has been carried out, along with scenario analysis in current market conditions concerning prices of hard coal, lignite, hydrogen and CO 2 allowances, as well as capital expenditures and costs related to carbon capture and storage (CCS) systems. Based on NPV results, a negative economic assessment has been obtained for all the analyzed variants varying within the range of EUR −903 to −142 million, although the variants based on hard coal achieved a positive IRR (5.1–5.7%) but lower than the assumed discount rates. In Polish conditions, the gasification of lignite seems to be unprofitable, in the assumed scale of total investment outlays and the current price of coal feedstock. The sensitivity analyses indicate that at least a 20% increase of hydrogen price would be required, or a similar reduction of capital expenditures (CAPEX) and costs of operation, for the best variant to make NPV positive. Analyses have also indicated that on the economic basis, only the prices of CO 2 allowances exceeding EUR 40/Mg (EUR 52/Mg for lignite) would generate savings due to the availability of CCS systems.

Suggested Citation

  • Radosław Kaplan & Michał Kopacz, 2020. "Economic Conditions for Developing Hydrogen Production Based on Coal Gasification with Carbon Capture and Storage in Poland," Energies, MDPI, vol. 13(19), pages 1-20, September.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:19:p:5074-:d:420968
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    References listed on IDEAS

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