Harmonized Stochastic Techno-Economic Assessment and Policy Analysis for Alternative Fuels

by Juju (Zhishen) Wang (CAAFI SOAP Webinar) Kicked-off the 2019 CAAFI Webinar Series with Juju Wang, an MIT graduate student presenting.

Summary of Breakeven Policy
• In all cases except for capital grant policies, it is possible to reach a median NPV of 0 for
every pathway.
• Even when the entire fixed capital investment cost is covered through a capital grant,
some pathways still have a negative NPV
• The input subsidy required to achieve a breakeven price can be over 100% of the
feedstock price.
• For a breakeven case, the policy value for GHG emissions reduction incentive when
applied only to jet fuel is very high

Key takeaways from policy scenario examples
• These policies stack – when combined, the effect of the policies are added.
• In some cases, these policies combine to give a MSP less than the price of jet fuel today.

Takeaways
• All policies modeled have a linear affect. For example, when the cost of the policy is
doubled, the impact on the MSP is also doubled.
• Three policies: Input subsidy, output subsidy, and GHG based incentive policies, have
identical effects on the mean minimum selling price.
• Capital grant is most effective at reducing mean MSP because the benefit of the policy to
the fuel producer is not taxed.
• The variance of the MSP changes in the input subsidy case. This is because the input
subsidy is given as a percentage of the total cost. The policy takes on some of the
burden of varying feedstock costs.
• Coupled with the fact that the policies stack, the impact of any combination of the four
policies considered can be approximated at different levels than those explicitly
quantified here.

Limitations
• The model has simple implementation of policies. It doesn’t take into account policy
variations over the 20 years or stochastic variation in the policy (i.e. policy could
increase/decrease every year by an unknown amount)
• This study is a nth plant analysis. Costs are uncertain for commercialized facility and
technology maturity has not been taken into account.
• An important part of the facility net present value calculation takes into account future
fuel prices. We can only give our best prediction of what those may be.

Next Steps
• Verify our TEA model with researchers at Purdue University
• Model more complex policies that deal with risk reduction such as off-take agreements
and loan guarantees
• Include additional pathways such as the waste gas to ethanol ATJ READ MORE