The competitiveness of synthetic natural gas as a propellant in the Swedish fuel market

The road transport sector today is almost exclusively dependent on fossil fuels. Consequently, it will need to face a radical change if it aims to switch from a fossil-based system to a renewable-based system. Even though there are many promising technologies under development, they must also be economically viable to be implemented. This paper studies the economic feasibility of synthesizing natural gas through methanation of carbon dioxide and hydrogen from water electrolysis. It is shown that the main influences for profitability are electricity prices, synthetic natural gas (SNG) selling prices and that the by-products from the process are sold. The base scenario generates a 16% annual return on investment assuming that SNG can be sold at the same price as petrol. A general number based on set conditions was that the SNG must be sold at a price about 2.6 times higher per kWh than when bought in form of electricity. The sensitivity analysis indicates that the running costs weigh more heavily than the yearly investment cost and off-peak production can therefore still be economically profitable with only a moderate reduction of electricity price. The calculations and prices are based on Swedish prerequisites but are applicable to other countries and regions. (C) 2012 Elsevier Ltd. All rights reserved.