Economy & Finance

Carbon Price Evaluation in Power Systems for Flaring Mitigation

ISSN Journal of Sustainable Development of Energy, Water and Environment Systems Journal of Sustainable Development of Energy, Water and Environment Systems
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ISSN Journal of Sustainable Development of Energy, Water and Environment Systems Journal of Sustainable Development of Energy, Water and Environment Systems Carbon Price Evaluation in Power Systems for Flaring Mitigation Javier Tovar-Facio 1, Luis F. Fuentes-Cortés 2, José M. Ponce-Ortega *3 1 Chemical Engineering Department, Michoacan University of Saint Nicholas of Hidalgo, Ave. Francisco J. Múgica S/N, Ciudad Universitaria, Morelia, Mich , México 2 Department of Chemical Engineering, National Institute of Technology of Mexico Technological Institute of Celaya, Celaya, Guanajuato, 38010, México 3 Chemical Engineering Department, Michoacan University of Saint Nicholas of Hidalgo, Ave. Francisco J. Múgica S/N, Ciudad Universitaria, Morelia, Mich , México Cite as: Tovar-Facio, J., Fuentes-Cortés, L. F., Ponce-Ortega, J. M., Carbon Price Evaluation in Power Systems for Flaring Mitigation, J. sustain. dev. energy water environ. syst., 7(4), pp , 2019, DOI: ABSTRACT This work aims to study the effect of greenhouse gases monetization to promote the reduction of flare gas. We propose to design a cogeneration system that uses natural gas as main fuel and flare gas as complementary fuel. A multi-objective nonlinear programming model is presented to determine the optimal design variables of the cogeneration system. This model maximizes the profit and minimizes the carbon dioxide equivalent simultaneously. The key factor to minimize carbon dioxide emissions is the replacement of natural gas with flare gas. Three different cases, which consider different methods to sponsor flare gas, are compared. The first case seeks to maximize the profit with trading carbon emissions. The second case also looks for maximizing the profit, however, carbon dioxide emissions are penalized by carbon taxes. In the third case, a multi-objective optimization approach based on a compromise solution that balances conflicting priorities on multiple objectives is presented. Results show that these two policy schemes work with some limitations to decrease carbon dioxide emissions. On the other hand, when the approach based on a compromise solution is used, the results show, at the same time, environmental and economic benefits. KEYWORDS Flare gas, Carbon tax, Trading carbon emissions, Multi-objective optimization. INTRODUCTION Since Kyoto protocol, several actions and international agreements have been taken in order to mitigate the climate change problem. For example, the Paris agreement looks for holding the increase in the global average temperature below 2 C through greenhouse gases mitigation [1] and many countries have set clear strategies in this sense. For example, the European Union (EU) has put forward a goal that the share of renewable energy in energy consumption should reach 20% by 2020 [2] and to reduce total greenhouse gas emissions from EU territory with 40% by 2030, compared to 1990 levels * Corresponding author 716 [3]. However, many countries are unable to achieve their climate change strategies because implementing some of these policies in their economies is difficult [4]. Energy and environmental policies play important roles in ensuring energy supply security, coordinating energy with economic development and environmental protection, as well as addressing global climate change [5]. Carbon pricing (taxes) and carbon emissions trading are two globally practiced carbon regulatory policy schemes. The carbon pricing scheme aims to control emissions by taxing the generated carbon. Each greenhouse gas emitter is charged a tax proportional to the size of the generated emissions [6], so the prices of products and services are increased and the demand for them is reduced. The advantage of implementing a carbon tax is to encourage the use of alternative sources of energy by making them cost competitive with cheaper fuels [7]. On the other hand, in the emissions trading scheme the right to emit carbon is tradable, and the participants with high abatement costs will spend money on buying emission rights to emit more, while the participants with low abatement costs are being rewarded for their avoided emissions [8]. The biggest advantage of implementing emissions trading is to ensure that essential reductions in greenhouse gas emission targets are met at the lowest possible cost. The other main advantage of this program is to provide the private sector with the flexibility required to reduce emissions while stimulating technological innovation and economic growth. This mechanism provides financial support for greenhouse gas emission reduction projects, nevertheless, the effects in different regions and different sectors would be different under the same pattern [9]. Such program has been implemented in many US states, in the EU, and in New Zealand and Australia [7]. Mentioned price incentives and economic penalties (monetization) are common approaches to control water usage and total direct greenhouse gas emissions (externalities) of industrial processes [10]. Some countries have already introduced a carbon tax or carbon emissions trading system, nevertheless, most countries are still hesitant to take actions or currently remain in a cautious wait-and-see attitude [11]. There are many reasons why some countries are cautious in including these policies. Specially, because carbon markets cannot be sufficiently sustained without government assistance and intervention [12], furthermore, pushing relatively costly alternative for energy technologies into the market increases the overall social cost of climate protection and reduces the efficiency of policy intervention. In this way, alternative energy-subsidies could also reduce public acceptance of renewable energies and thus may reduce the political leeway for climate protection in general [13]. Transport, electricity and heat production are some of the main contributors to total greenhouse gas emission in most countries, particularly in the industrial sector, and there are several researches in this area. However, one of the key factors to achieve the Paris agreement is gas flaring reduction. Flares are open flames used for disposing waste fuel gases during normal and abnormal operations. They are used as safety devices and they achieve 98% of destruction efficiency [14], nevertheless, this practice is responsible of contributing 400 million tonnes per year of carbon dioxide equivalent (CO2eq) [15], which contribute to the climate change and affect all the fossil fuels producing countries. The World Bank Group has a leadership role in the initiative for gas flaring reduction through the global gas flaring reduction partnership, and some legislations have been proposed to promote the minimization of emissions. In many cases, the success of flare gas reduction technologies is supported by monetization of emission. Moreover, because flared gas represents a serious problem, several alternatives to eliminate or reduce gas flaring have been reported. This way, Stanley [16] examined the prospect of Gas-to-Liquid (GTL) technology in Nigeria to convert natural gas, wasted through the continuous flaring, into more suitable fuels for transportation like diesel, naphtha and kerosene. The first step in GTL technology is to convert natural gas into syngas, which is produced using partial oxidation or steam reformation. Then, the syngas is converted to long-chain hydrocarbon molecules via 717 Journal of Sustainable Development of Energy, Water and Environment Systems Fischer-Tropsch process, and finally long-chain hydrocarbons are fed into a cracking unit and fractioned into liquid fuels. The products of GTL technology are sulfur free and flexible to replace other similar products, therefore, countries with huge natural gas resources can find in GTL an alternative to flare gas [16]. Comodi et al. [17] proposed flare gas recovery as a method to improve energy efficiency in oil refineries and decrease greenhouse gas emissions. Particularly, they selected a liquid ring compressor technology, which is a rotary volumetric machine that uses a secondary fluid to compress the flare gas. As expected, the presence of inert gas and hydrogen sulphide, and a strongly variable flow rate and composition were the main problems, however, they reported environmental and economic advantages using this method [17]. Also, Hajizadeh et al. [18] presented an evaluation of three methods of flare gas recovery in a gas refinery in Iran including liquefaction, liquefied petroleum gas production and gas compression for returning flare gas to refinery inlet stream, and their results showed that using flare gas recovery methods more that 80% of flare gases can be recovered [18]. Another alternative is to use flare gas to produce electricity. It has several advantages like reduction of gas consumption, simple preparation of the required equipment and its affordable costs. To produce electricity, usually a cogeneration system is implemented, which has higher efficiencies than conventional power generation systems. Cogeneration can provide a wide variety of utilities, including heating, cooling and electricity. Furthermore, cogeneration can be fed with different fuels, and the available technology can be adapted to manage flare [19]. Heidari et al. [19] presented a study where two methods were introduced to use flare gas as a fuel for electricity generation considering variable flow rate and low LHV of flare gas, which use natural gas as a complementary fuel for flare gas. Furthermore, it is possible to find examples of power generation using flare streams and carbon regulatory policy schemes in literature. Kazi et al. [20] proposed an optimization model for sizing a cogeneration system for flaring mitigation in an ethylene plant. The idea was to use flaring streams in cogeneration units to produce heat and power, which can be used to satisfy the process needs or exported to generate extra revenues. Also, the results showed economic and environmental benefits [20]. Kazi et al. [21] extended the mentioned optimization framework to study the benefits of integrating a flare mitigation tool with a wastewater treatment facility to mitigate flaring and increase the process efficiency [21]. The utilization of each technology depends on the characteristics of the flare streams, however, it has been demonstrated that electricity generation is economically superior [22]. Rahimpour and Jokar [22] compared GTL technology, electricity generation and gas recovery in Farashban gas refinery to recover flare gas instead of conventional gas burning in flare stacks. The electricity production gives the highest rate of return and annual profit, moreover, the lowest payback period. Zolfaghari et al. [23] found electricity production as one of the most economical ways to recover flare gas when they compared this method with GTL and gas to ethylene processes. This paper presents a multi-objective formulation based on a compromise solution that balances conflicting priorities of multiple stakeholders on multiple objectives (environmental and economic objectives). This formulation is compared with the typical mono-objective problem where an economic function includes the environmental cost in terms of carbon tax savings or trading carbon emission. We argue that it is more effective to encourage the use of environmentally friendly alternatives using a compromise solution than monetization. To the best of our knowledge, a study that compares these two alternatives in flaring mitigation systems has not been reported. PROBLEM STATEMENT We consider a set of flare streams from distinct plants in an oil refinery, whose mixture has the potential to be used as complementary fuel in a cogeneration system as Journal of Sustainable Development of Energy, Water and Environment Systems 718 shown in Figure 1. If this operation results in economic and/or environmental benefits, the energy of flare streams can be exploited. On the other hand, if feeding cogeneration system with the mentioned flare gas brings economic losses and/or environmental problems, flare streams must be burned into the atmosphere, as traditionally done, using a flare system. The cogeneration system is dimensioned according to a range of minimum and maximum electricity production to satisfy plant necessities with the options to use natural gas, flare streams or a mix of both as fuel. It is assumed that the characteristics of the blend remain constant during the operation, therefore, the use of waste gas fuel does not affect the performance of the system. Also, the flare gas mass flow stays constant all the time. Then, the problem consists in determining the optimal size of the system to produce power utilizing flares, while maximizing profit and minimizing CO2eq. The main contribution of this work is to study the impact of giving an economic value or penalization to the emission with the goal to promote the use of technology to reduce gas flaring. Therefore, two different cases are solved to analyze the result of using the externalization of carbon dioxide emissions as a way to decrease flaring versus a proposed multiobjective formulation based on a compromise solution that gives the same importance to the reduction of emissions and to the economic feasibility. Industry with flare streams D Flaring Fresh Fuel F FF CO 2 Monetization vs Multiobjective Optimization Fr Cogeneration System Figure 1. Superstructure of the proposed system Physical model The mathematical formulation is derived from a previously published scenario-based optimization approach [24]. The mentioned work seeks to design a cogeneration system that can be fed with flares and natural gas simultaneously, moreover, it considers the uncertainty of the flare stream flow and natural gas (fresh fuel) prices employing one hundred random scenarios ( s ) for these parameters. The flare stream ( F i, t, s ) is a mixture of different waste fuel streams (i ) with distinct composition and mass flow that change over time (t ). In this project, the model includes similar mass and energy balances, cost functions and emission calculations to represent the superstructure shown in Figure 1. However, in order to study the effect of trading carbon emission and carbon taxes in gas flaring reduction, the uncertain scenarios are not taken into consideration and it is assumed that the mass flow for flare streams ( F ) and their physical properties remain constant. In this section, the modified mathematical model is presented in a deterministic way. The first expression involves the total mass balance of the waste fuel stream. The stream ( F ) can be burned in the open atmosphere using the flare system ( D ), sent to 719 Journal of Sustainable Development of Energy, Water and Environment Systems feed the cogeneration system ( FF ) as supplementary fuel, or divided to burn a fraction in the flare stack and take advantage of the rest: F = D + FF (1) Also, a set of relationships is needed that represents the energy balance in the boil cogeneration system. The heat generated by the boiler ( Q ) is equal to the sum of the Fr FF energy obtained from fresh fuels ( Fr H ) and the flare gas sent to the boiler ( FF H ) boil times the equipment efficiency ( η ): ( ) Q boil = η boil Fr H Fr + FF H FF (2) boil cond The energy balance in the boiler( Q ), ine( P ), condenser ( Q ), and pump pump ( P ) can be used to determine the water mass flowrate ( m ) in the steam Rankine cycle, which must consider the outlet and inlet enthalpies as follows: boil Q m h1 h4 = ( ) (3) P m h1 h2 = ( ) (4) cond Q m h2 h3 = ( ) (5) pump P m h4 h3 = ( ) (6) elect The profit for the energy sales( Sales ) is calculated as a function of the power elect produced in the cogeneration system( P ) and the market price ( price ) : Sales = P price (7) elect elect The steam used in Rankine cycle ( m ) is limited by a maximum allowed flowrate m, and it can be calculated as a function of the ine capacity( P ) : max ( ) m max m (8) m = C P + C (9) 1m 2m cond Then, there are considered the operating cost for the condenser ( OC ) pump rep ( OC ) and fresh fuel ( OC ) cond pump as functions of equipment capacity ( Q and P ) and fresh fuel flow ( Fr )., pump. The operating costs for the needed units are determined OC = Q price (10) cond cond cw OC = P price (11) pump pump power Journal of Sustainable Development of Energy, Water and Environment Systems 720 OC rep Fr rep = Fr H price (12) The cost of combusting flare streams as supplementary fuel is calculated using the method of Ulrich and Vasudevan [25]. First, the utility cost coefficients (A and B) are calculated using eq. (13) and eq. (14). LHV and waste gas flows (q) [Nm 3 /s] are used to find the coefficients: ( ) A LHV q = (13) B 4 = 6 10 LHV (14) Afterward, the utility cost coefficients (A and B) are used to calculate the cost per Nm 3 of waste fuel gas ( CSU ) using the next equation: CSU = A CEPCI + B CSF (15) Finally, eq. (16) calculates the cost of using flare streams as supplementary fuel to flow feed the cogeneration system ( OC ). Also, this equation uses a conversion factor to compute this cost in USD per month: OC = qcsu (16) flow 6 The equations to calculate equipment capital cost were taken from literature [26]. boil cond pump This way, the boiler ( CC ), ine ( CC ), condenser ( CC ), and pump ( CC ) capital costs involve a fixed part (CF) as well as a part that depends on the unit size (CV) elevated at the exponent (c) to account for the economies of scale: boil boil boil boil boil c CC = CF + CV ( Q ) (17) c CC = CF + CV ( P ) (18) cond cond cond cond cond c CC = CF + CV ( Q ) (19) pump pump pump pump pump c CC = C1 + C2 ( P ) (20) It should be noted that the power generated by the Rankine cycle ( P ) must be lower than the maximum demand ( EMAX ) and greater than the minimum required ( EREQ ), which is modelled as follows: P P EMAX (21) EREQ (22) Greenhouse gas emissions (CO2eq) produced by the cogeneration system ( GHGCS ) take into account the emissions produced by combustion of fresh fuel ( Fr ) and combustion of flares ( FF ): 721 Journal of Sustainable Development of Energy, Water and Environment Systems FF X Y Fr X Y GHGCS = PM + PM PM PM c c cfr cfr ( CO ) ( ) 2 CO (23) 2 c c cfr cfr Furthermore, the emissions (CO2eq) produced by flare streams when flare gases are not exploited (GHGFS ) are calculated in a similar way: D X Y GHGFS = ( PM CO ) c c 2 c PM (24) c Therefore, total emissions (CO2eq) generated by the whole system (TGHG ) are the sum of the emissions for flares (GHGFS ) and emissions from the cogeneration system (GHGCS ): TGHG = GHGCS + GHGFS (25) The objective function was formulated for three different cases to compare the effect of monetization in greenhouse gas reduction versus a multiobjective solution that aims to simultaneously minimize the emissions and maximize the profit. The objective function changes in each case as follows. Case 1. The first case looks to maximize the profit as presented in eq. (26a). Flaring mitigation is promoted through carbon emissions trading, so it is expected that the carbon dioxide emissions can be reduced due to an economical compensation for each tonn of CO2eq avoided. Table 1 shows the values that take the parameter CTrad in each scenario of Case 1: ( ) elect UB Profit Sales OC kf CC CTrad ( GHG TGHG) = + (26a) Case 2. The second case seeks to maximize the profit as previously presented, however, the reduction of emissions is promoted through an economic penalization per tonn of CO2emitted. Table 2 presents the cost per tonn that the parameter CTax has in each scenario of Case 2: ( ) elect Profit Sales OC kf CC CTax( TGHG) = (26b) Case 3. The last case looks to simultaneously maximize the profit and minimize the greenhouse gas emissions. Neither carbon pricing nor carbon emission trading intervene in this case. Here, different weights are assigned to each objective (see Table 3)
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