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Facts at Your Fingertips-201007-Conservation Economics Carbon Pricing Impacts

This document discusses how carbon pricing impacts the economics of energy efficiency projects. It provides examples of how incorporating the cost of greenhouse gas emissions can improve the attractiveness of energy projects that may not have been economically viable before. Specifically, it analyzes how carbon pricing affects the internal rate of return of potential efficiency projects like upgrading heat exchangers or installing steam ejectors at a hypothetical 150,000 barrel per day refinery. The examples show that projects with low returns based only on fuel savings may become much more economically attractive as greenhouse gas prices increase.

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190 views1 page

Facts at Your Fingertips-201007-Conservation Economics Carbon Pricing Impacts

This document discusses how carbon pricing impacts the economics of energy efficiency projects. It provides examples of how incorporating the cost of greenhouse gas emissions can improve the attractiveness of energy projects that may not have been economically viable before. Specifically, it analyzes how carbon pricing affects the internal rate of return of potential efficiency projects like upgrading heat exchangers or installing steam ejectors at a hypothetical 150,000 barrel per day refinery. The examples show that projects with low returns based only on fuel savings may become much more economically attractive as greenhouse gas prices increase.

Uploaded by

onizuka-t2263
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Conservation eco-

nomics: Carbon
Department Editor: Scott Jenkins pricing impacts

R
eduction of greenhouse gas (GHG) emissions
continues to be a major issue in national and Energy efficiency projects economics
international public policy, as well as a major focus
for companies in the chemical process industries (CPI). Crude heater revamp Vacuum tower steam ejectors
Many countries are considering systems that place a Hot feed for steam generation Power recovery
price on GHG emissions through a carbon cap-and-
trade system, for example. 100
In an environment where GHG emissions have a given

Internal rate of return,


80
price, certain energy conservation measures that may

150,000 bbl/d*
have provided a small or negligible internal rate of return 60
(IRR) based on fuel savings alone will be much more at-
tractive economically as GHG emissions prices increase. 40

Returns from efficiency projects 20


Example calculations that illustrate the impact of GHG
0
emissions prices on the economics of energy efficiency
projects are those for calculating the IRRs of several en- 0 20 40 60 80 100
ergy-efficiency projects at a hypothetical 150,000-bbl/d Greenhouse gases price, $/metric ton
petroleum refinery with a range of GHG prices ($0 to *bbl/d = Barrels-per-stream-day
$100/metric ton (m.t.) CO2 equivalent). In general,
results demonstrate that incorporating the cost of GHG Figure 1. Various energy efficiency projects with costs of GHG emissions
emissions into project economics can improve the attrac- included are illustrated here
tiveness of previously marginal energy projects.
IRRs for the following projects are shown at GHG price
levels from $0 to 100/m.t. in Figure 1:
Air preheat economics – revamp
• Revamp crude-preheat exchanger train to increase the
45
crude-heater inlet temperature
• Replace the vacuum tower steam ejectors with a liquid
ring compressor (LRVP) 40
• Utilize diesel hydrodesulfurization (HDS) unit hot feed
for additional steam generation
35
• Recover power from fluid catalytic cracking (FCC)-
Internal rate of return (IRR)

regenerator hot fluegas.


30
If these four projects were combined, they would result
in a 9.5% reduction in GHG emissions for the hypotheti-
cal refinery. 25

Example: Air pre-heat


An example of an energy efficiency improvement project 20
to consider is using combustion air preheat for fired heat-
ers. For this study, it was assumed that a heater without 15
this feature would have an overall thermal efficiency of
82%. The addition of air preheat will increase the heater $100 $40
efficiency to approximately 92%. IRRs for the project at 10 $90 $30
$80 $25
various GHG emissions prices are shown in Figure 2. $70 $20
Heaters with an absorbed duty of just over 150 million 5 $60 $15
Btu/h would achieve a 20% IRR with GHG emissions $50 $0
valued at $15/m.t. and natural gas priced at $5.50/mil-
lion Btu. If natural gas is priced at $6.50/million Btu, the 0
20% IRR can be achieved with an absorbed duty of 100 50.0 100.0 150.0 200.0 250.0
million Btu/h.
Process absorbed duty, million Btu/h
Considerations
• Care must be taken to evaluate all energy usage; not Figure 2. Revamp heater air-preheat economics are shown with GHG emis-
sions costs included
only in the process unit of interest, but also changes in
net energy usage in the entire facility
• A thorough review is needed to ensure that all appro-
priate costs are included Reference
• A facility-wide audit is recommended to identify all potential 1. U.S. Energy Information Administration (EIA). “Emissions of Greenhouse
energy conservation opportunities Gases in the United States 2008,” U.S. Department of Energy, December
• An energy-saving project not evaluated here, but worth further 2009.
Note: Material for this “Facts at Your Fingertips” was supplied by I.M. Glas-
study is improved heat exchanger duties with welded plate gow, S. Polcar, E. Davis, T. Nguyen, J. Price, C. Stuecheli and R.E. Palmer
exchangers, twisted tubes, tube inserts and/or helical baffles at Mustang Engineering LP, Houston.

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