Levelised cost calculation

[Mahmoud]

Dear all, 


I have a question about the calculation of levelized costs in TIMES. I am defining the following technology: 

Sets: PRE 
TechName:SNK_DAC (direct air capture process)
Tact: kt
Tcap: kt-year


With the following characteristics:

TechName: SNK_DAC
Comm-IN: TOTCO2Net (CO2 emissions from power generation and hydrogen production), ELC (power), HET (heat)
Comm-OUT: CO2Captured (CO2 captured defined with FX bounds and can be stored with infinite sink potential)
CAP2ACT: 1
NCAP_COST: 0.22
NCAP_FOM: 0
PCG: CO2Captured
VDA_FLOP(cg=ELC): 0.0025 TBTu
VDA_FLOP(cg=TOTCO2Net): 1 kt
VDA_FLOP(cg=HET): 0.01 TBTu
ACT_COST: 0.023


In my scenario, TOTCO2Net is subject to a 400$/ton tax (COM_TAXNET(totco2, 2020-2080)= 0.4). 
In this scenario, I was expecting the model to invest in SND_DAC to offset all remaining emissions from power and hydrogen production. It is the case, DAC offsets all the net emissions. But I was not expecting negative and very low levelized cost for SNK_DAC. Indeed, the model reports, via VAR_NcapR, -0.04. Is normal that the model reports such LEC for DAC? if not, is it because of emission-specific allowance expenditure for TOTCO2Net? Should I exclude these from VAR_NcapR calculation? 

Thank you very much for your help and happy new year 

[Antti-L]

You were not disclosing your settings, but as you can see from the documentation, it is normal when you include the revenues from the main product in the calculation. A negative levelized cost then tells that the technology is competitive (revenues are greater than or equal to the costs). If it would be positive, the costs would exceed the revenues, and it would not be profitable. I your case, the 400$/ton emission tax appears to makes DAC profitable, as you also seem to confirm yourself.

As an aside, I am surprised that you seem to use Trillion British Thermal Units (TBTU) as the energy unit in your model, instead of standard SI units. 

[Mahmoud]

Apologies for not sharing my settings. As you can see in the attached file, I am using RPT_OPT(NCAP=1)=1. If I am getting this right, it only accounts for emission prices and by-product revenues. But I understand that, because of the negative shadow price of CO2, I do have negative VAR_NcapR... meaning that DAC is competitive given the specs.

PS: I was not the first dev on this model, so I respect the legacy.

[Antti-L]

Ahh... ok, yes, then the price of the main output (captured CO2) is then not included.

But in your case the tax apparently is, in fact, reflected in the price of the input commodity (TOTCO2Net), which I guess must be negative. In other words, unlike for normal processes, where the inputs have costs, in your case the price of he input is negative, and so you actually get revenues (tax reduction/refund) from consuming the input TOTCO2Net. Maybe you can confirm that?

I think that would explain the negative levelized cost equally well, no?  BTW: What is the price of the captured CO2?

[Edit:] Ah... sorry, I see now that you confirmed it already, and so I guess it is all clear now?

[Mahmoud]

Yes, I do have a negative shadow price for the commodity TOTCO2Net. According to your explanation, this is the most likely cause of negative LEC for DAC.
The price of Captured CO2 is -0.04.

[Antti-L]

Thanks. One can thus also see that the calculated levelized cost of producing the captured CO2 is correct, because it is equal to the price of the captured CO2.

[Mahmoud]

It is all clear to me now. Thank you very much, Antti.