June 10, 2014 Jason Ethier

Combustion Dynamics and Fuels—Part 1: Drivers of Cost of Energy

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.
Cost Map

A logical first step in reducing the cost of energy would be building a more efficient generator, such as a fuel cell, or a complex cycle engine.   However, Fuel efficiency is pretty much set by the state of the art in technology, and will change only incrementally with time.  There are some minor enhancements that can be made with energy storage to keep the generators operating at their peak operating point, but making systems more efficient is very expensive and the development effort takes a long time.

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.
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.