Techno-economic and climate finance assessment of a methanation plant with green hydrogen production and CO2 recycling in Italy

The power-to-methane (PtM) process is an innovative approach to producing natural gas from renewable energy sources, offering a promising solution to store renewable energy chemically. This study explores the feasibility of implementing a PtM plant in northern Italy, examining its technical, economic and climate impacts. The insights provided can guide stakeholders in making informed decisions about producing substitute natural gas (SNG) while aligning with climate finance goals and European Union (EU) directives.

The Context

The stability of fossil natural gas prices in Europe was disrupted in late 2021, exacerbated by geopolitical tensions such as the Russian invasion of Ukraine. This volatility underscores the urgent need for alternative energy solutions. PtM technology, which converts renewable energy into green natural gas, has gained renewed interest. This study aims to bridge this gap by integrating climate finance tools to enhance the economic viability of PtM plants.

Methodology

The study introduces a novel methodology that combines techno-economic analysis with climate finance criteria. Key technologies considered include wastewater treatment plants (WWTP) for water reuse, various renewable energy sources (RES), and electrolysis and carbon capture methods. The economic analysis focuses on capital expenditure (CAPEX), operational expenditure (OPEX), and the levelised cost of energy (LCOE). Additionally, the study evaluates the carbon footprint of SNG production and explores funding opportunities through EU climate finance initiatives.

Key Findings

Technological Choices:

• Electrolysis: Alkaline (ALK) technology was chosen for its maturity, reliability and lower CAPEX.
• Renewable Energy: Photovoltaic (PV) power was identified as a viable option in northern Italy, given its substantial installed capacity and favourable operating hours.
• Carbon Capture: Chemical absorption using amines was selected for its maturity and efficiency in capturing CO2 from industrial flue gases.
• Methanation: The Sabatier reaction, using fixed bed reactors, was chosen for its efficiency in converting CO2 and H2 into methane.

Economic and Climate Analysis:

• The basic scenario, using a power purchase agreement (PPA) for renewable energy, resulted in an LCOE of 110 €/MWh.
• Alternative scenarios explored included using grid electricity, eliminating the WWTP, implementing a PV plant, and recycling brine water from the electrolyser.
• The final scenario, which combined a 100 MW PV plant, brine water recycling and other optimisations, achieved an LCOE of 100 €/MWh and a significant reduction in carbon footprint.

Climate Finance Impact:

• The study demonstrated that e-methane produced through this methodology could be certified as a renewable fuel of non-biological origin (RFNBO), achieving more than 95 percent greenhouse gas (GHG) savings compared to standard fossil fuels.
• By leveraging EU Innovation Fund (IF) support, which can cover up to 60 percent of relevant costs, the LCOE could be reduced to 70 €/MWh, making it more competitive with fossil natural gas.
   

Future Prospects and Policy Implications

The study highlights the potential for further cost reductions through technological advancements, such as solid oxide (SO) electrolysis and tracking PV systems. Policy support, including contracts for difference and expanded climate finance mechanisms, is crucial to bridge the cost gap between green and fossil fuels.

The EU's commitment to climate finance, exemplified by the EU ETS and the Innovation Fund, plays a pivotal role in fostering the adoption of green technologies. The recent EU methane regulation and funding announcements at the COP28 Global Methane Pledge Summit further underscore the importance of substituting fossil methane with e-methane.

 

Conclusion

The LCOE still is far from the natural gas price for the reference period, but this study shows that if similar mechanisms for funding are deployed, they could help the spread of innovative and green technologies making them economically viable and comparable to the fossil alternatives.

The full article was published on the International Journal of Hydrogen Energy. Click here to read more.