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Appendix D: Cost Analysis Methods
Pages 146-177

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From page 146... ... With regard to the economic assumptions delineated in Chapter 3, prices for the various energy and nonenergy feedstocks are expressed, where appropriate, as a function of the prevailing crude oil price. For each technology, the cost per equivalent barrel of oil, measured in 1988 dollars, is calculated as the summary cost measure based on the assumed oil price environment. Read the entire page →
From page 147... ... SPECIFIC FACTORS Table D-1 summarizes the specific input factor assumptions for the economic analysis of the various fuel production technologies. The relationships between crude oil price and other energy prices were calibrated from Read the entire page →
From page 148... ... Costs of gas delivered to industrial users were assumed to be $0.94/Mcf higher in both cases. In the present analysis this relationship between oil prices and wellhead natural gas prices is linearly extrapolated as oil prices increase, but natural TABLE D-2 Prices of Energy in the Year 2000 from the Energy Information Administration's Forecasts in 1988 Dollars Year 1990 1995 2000 Low World Oil Price Case World oil price ($/bbl~a 12.89 16.70 1.70 Natural gas ($IMcf~b 1.69 2.49 3.52 Coal ($/ton) Read the entire page →
From page 149... ... The EIA estimated average electricity price delivered to industrial users in the year 2000 as $0.04896/l`Wh and $0.05038/kWh in the Base and High World Oil Price cases, respectively. A linear relationship between oil and electricity prices was derived for the present analysis from these points. Read the entire page →
From page 150... ... One perspective is that the appropriate discount rate for a policy planning study should be equal to the estimated cost of capital facing corporations of the types that might consider investing in such projects. A second perspective is that the discount rate should be equal to the estimated typical hurdle rates for investments made by such corporations. Read the entire page →
From page 151... ... Hurdle rates can be lower than IS percent, particularly if a project is not seen as being more risky than typical other investments. The perspective based on typical hurdle rates leads to a higher discount rate because a firm's hurdle rates typically exceed its costs of capital. Read the entire page →
From page 152... ... This would suggest a 15 percent cost of capital. Annual Capital Charge Factors Annual capital charge factors are calculated so that the net present value of the stream of capital charges, after taxes, is just equal to the initial investment cost, using the cost of capital as the discount rate. Read the entire page →
From page 153... ... Figure D-1 shows the investment cost per oil equivalent daily barrel of capacity for each technology. In what follows, this ratio will be referred to as the "per-barrel investment cost." These figures can be interpreted as the NG > Methanol Coal > Methanol UCG > Methanol Wood > Methanol NG, MTG Coal, MTG NG, Shell MDS Compressed NG Corn > Ethanol Oil Shale Tar Sands, Pyrolysis Tar Sands, Extraction Direct Liquefaction 1 1 1 1 1 1 ~7~ ~ 1 1 1 1 1 1 1 r - 1 1 1 1 ~~ 1 ~ ~,,,,,,,,,,,,,,,,,,,,,,,,,,,,,~ ~: ~=L ~1~ Tang~/~ ~/////~/////~////1///-///1///2 1 1 1 HI No Demonstration C: Demonstrated ~ Commercial $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 COST: CRUDE OIL EQUIVALENT ($ per barrel) Read the entire page →
From page 154... ... In general, these per-barrel investment costs exceed the $10,000 to $20,000 range typical of investments for crude oil exaction in the United States, ranging from a low of $20,000 for production facilities for methanol from natural gas to a high of $102,000 for gasoline produced from coal using methanol-to-gasoline conversion processes. While the CNG investment cost is shown as lower than the range cited, these figures include the investment cost only for a CNG delivery station and do not include the additional costs of the vehicles themselves or the investment cost of natural gas wells. Read the entire page →
From page 155... ... Tables D-4 to D-8 show costs under a number of combinations of the various inputs. These sensitivity studies show variations of costs win respect to the discount rate, the crude oil price, and the natural gas price function. Read the entire page →
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From page 177... ... were adjusted by the committee to larger plant sizes of 50,000 bbVday of oil equivalent using a scaling component of 0.85. This size plant is consistent with the scale used for natural gas to methanol, oil shale conversion, and direct coal liquefaction. Read the entire page →

From page 146...

... With regard to the economic assumptions delineated in Chapter 3, prices for the various energy and nonenergy feedstocks are expressed, where appropriate, as a function of the prevailing crude oil price. For each technology, the cost per equivalent barrel of oil, measured in 1988 dollars, is calculated as the summary cost measure based on the assumed oil price environment.

Appendix D: Cost Analysis Methods Pages 146-177

Appendix D: Cost Analysis Methods
Pages 146-177