There are three primary
considerations when considering a prime mover which ultimately drive the
Levelized Cost of Energy: capital cost,
maintenance, and fuel expenditures. The
first two are topics of discussion for a later time, but the last item, fuel expense,
is our area of focus today.
There are several significant components
that play into fuel expenses (mapped out below). Fundamentally the fuel expense is the product
of the realized cost of fuel to the user and the realized efficiency of the
underlying generator.
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| Cost Map |
A cost effective alternative to
driving reduced costs is to have the engine operate on the lowest cost fuel of
the moment. To achieve this, a variety
of engines have been developed to work on specific singular fuels. However, in the modern environment, there is
pressure on engine manufacturers to have engines that can operate on a variety
of fuels. The physical phenomena that
drive combustion make this a technical challenge, but there are a variety of
solutions that exist on the market to meet the challenge of reducing costs—each
has their strengths and their weaknesses.
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| Source: Seeking Alpha, Tristan Brown |
Most shifts in fuel sources are
driven by an under-supply or over supply of different types of fuel. In the past, for example, the price of
natural gas would often track the price of oil for an equivalent amount of
energy. However, oil fracking and the US
natural gas export restrictions have caused a spread of roughly 6x in the cost
of energy between oil and natural gas.
Needless to say, many companies (Dynamo included) are looking to
leverage the lower cost fuels in a reliable manner.
Next time we will look at a few corner scenarios that illustrate how various fuel expense conditions can drive the cost of energy.
