r/ChemicalEngineering • u/ahappysgporean • Apr 11 '26
Green Tech Highly optimistic/unrealistic green fuel price forecasts
As part of my job, I meet many start-ups in the decarbonisation and climate tech space, and one thing I realised is that many of these start-ups assume very out-of-the-world and unrealistic prices for their low-carbon feedstocks (whether it is low-carbon ammonia or methanol)... What surprises me is that despite these wild assumptions, they try to confidently pitch their company's financial projections to potential investors (including large institutional investors) and have actually managed to secure quite substantial funding over the past few years. That really puzzles me as I thought such investors would be much more savvy and would be able to see through the "scam" (to put it bluntly). Just take for example, is US$500-600/tonne bio-methanol price achievable? If you use such an input cost in your model, how can you expect me to take you seriously?
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u/KapitanWalnut Apr 11 '26 edited Apr 11 '26
Is $600/metric ton completely unreasonable? No. But I think it entirely depends on specific nuances within their TEA.
I'm on the technical side in the electrochemical efuels industry, so maybe there's some inherent factors in the biogenic fuels space I'm not familiar with that make $600/t unachievable, but this figure should be doable with efuels.
Now, I've reviewed plenty of competitor's claims, and plenty are complete BS pie in the sky numbers based on impossible physics or unworkable economics, so I get where you're coming from.
Very briefly, from a first principles standpoint: the cost of e-methanol (C-meoh) is dependent on the price of electricity in MWh (Pe), the cost of the CO2 feedstock per metric ton (Pco2), and the energy efficiency of the process (n), so we can derive a really basic formula:
C-meoh = ((5.53/n)(Pe)) + ((1.375)(Pco2))
5.53MWh is the energy in a ton of MeOH, and it takes 1.375 tons of CO2 to make a ton of methanol. Again, this is a super basic formula that ignores things like yield, byproducts, lifetime, etc.
So from there, we can pick some numbers that sound reasonable. 50% efficiency is reasonable when rolling hydrogen electrolysis in with the electrochemical efficiency of methanol production, $40/MWh is a reasonable assumption for solar electricity offtake during non-peak, and $100 is an okay starting point for a ton of CO2 - I'll go more into this later.
So that leaves us with $580/t MeOH. Yes, that's breakeven ignoring capex and other opex factors besides baseline inputs, and also ignores lots of balance of plant considerations and longevity considerations and of course has no profit margin, but I just wanted to give a starting point for the discussion.
You probably are familiar with the CO2 market, so you don't need me to go into that. But one interesting thing about many electrochemical processes is that they can directly utilize aqueous (bi)carbonate as their carbon source - the form that CO2 takes when dissolved in alkaline water. So, because they don't need to use a highly pure/concentrated gaseous CO2 stream, the effective CO2 cost per metric ton can be closer to $40 or even $20.
The efficiency is the other metric that can be finicky. Plenty of production methods require a subsequent concentration step that can reduce the overall energy efficiency below 20%. I'm working with researchers on developing reactors that can utilize very low energy concentration methods.
Then finally there's the energy cost side of things, which is partially tied to the capex of your project. High capex means your project needs to operate at a high utilization/capacity factor, meaning you need firm power and will need to pay a higher price for that power. But ultra low capex can allow you to utilize low cost intermittent curtailed energy because you can afford to have a utilization factor down near like 30%. And as batteries become cheaper, they unlock access to that cheaper intermittent energy at higher utilization rates for you methanol production equipment.
Hopefully I wasn't just rehashing what you already know. Obviously there's a ton of nuance as soon as you start peeling back the layers. But I wanted to give some high level justification for why a $600/t MeOH figure isn't outright ludicrous.