Thread by @hkeskiva

Here is the simple production cost math of electricity generated with #naturalgas.

In simplified terms (excluding required investments and operations), it consists of three parts:

(i) fuel cost
(ii) power plant (in)efficiency
(ii) cost to emit CO2

Quick look at each one.

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Natural gas is a widely traded commodity with different products for different time periods and geographical areas.

The Dutch TTF gas is currently priced at ~20 EUR/MWh¹

¹ theice.com/products/27996…

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The chemical energy of natural gas cannot be fully utilized - some energy is always lost in the process. Damn entropy!

Modern gas power plants operate at ~50% efficiency², hence fuel cost per generated energy unit is 20/50% = 40 EUR/MWh

² wartsila.com/energy/explore…

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Burning generates CO2, hence the cost to pollute needs to be added.

EU Emission Trading System (EU ETS) prices CO2 currently at ~32 EUR/tCO2³. One kWh of gas electricity emits ~400 gCO2/kWh⁴ adding +12.8 EUR (0.4 * 32).

³ theice.com/products/197/E…

⁴ eia.gov/tools/faqs/faq…

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In summary, the production cost of natural gas based electricity:

Fuel 20 EUR/MWh
+ inefficiencies 20 EUR/MWh
+ cost to emit CO2 12.8 EUR/MWh

= 52.8 EUR/MWh

5/

But renewables are cheaper? Yes they are, e.g. wind power is the cheapest new-build electricity capacity in Finland at around 30 EUR/MWh⁵.

The issue is the production profile. At the highest demand peak Jan 15, wind production had fallen by 90%.

⁵ st1.fi/tuuliwatti-rak…

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This was the simple production cost math of electricity generated with #naturalgas.

Energy systems are fascinating animals and this was simply one angle to few parts of it. As you made it this far, thanks for finding this interesting 🙂

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