By-product revenue

[jabarivelisdeh]

Hi all,

In order to define the obtained revenue from a by-product, should we use the FLO_COST? 
I have a process (methane pyrolysis) for producing ammonia(output commodity) from methane (input commodity). However, besides ammonia (our target product), carbon black is also produced as the by-product which can be sold. Thus, the revenue from selling carbon black allows to have reduced production cost of ammonia from the considered technology. Any advise on how we can define the revenue from a by-product? Should we use the FLO_COST for the considered commodity(carbon black) and then probably a negative cost value for it?! Thanks a lot.

Best
Banafsheh

[Antti-L]

> Should we use the FLO_COST for the considered commodity(carbon black) and then probably a negative cost value for it?!

Again, it somewhat depends on your model and your "system boundary".  If you don't have each of those commodities included in the model (and commodity balances for them), you would need to embed the revenue impact in the process operating costs. However, it is not considered good practice to use FLO_COST for defining the prices of output commodities even in that case, because then you may need to define the prices at multiple places and make sure the price data is consistent, and product prices defined by negative costs somewhere else than at the system boundary may also cause other problems.

But if you have commodity balances for such output commodities, then you have some processes consuming the commodities, and the equilibrium price is derived by the model. At simplest, the only consuming process might be an exogenous export process, and then you would define the selling price at that export process. But more generally, energy system models may include various technologies using e.g. carbon black commodities that are produced by other processes, for example processes applying biochar (a type of black carbon) to agricultural soil for achieving negative emissions and to improve soil fertility.  In that case the equilibrium prices would be fully endogenous, a cost to the consumer while a revenue to the producer.

However, as mentioned, if you have no consuming processes, you can just introduce an exogenous export process, and define the product value there as the export price (selling price). That would be good practice. Otherwise, if you insist on preferring to define the price as a negative cost on the output flow, you should also make sure that your commodity balance equations for that output either do NOT impose a balance (e.g. by using the Lim type 'N'), assuming again that there there are no consuming processes. But if you do also have some consuming processes, then you should probably make sure that your commodity balance equations DO impose an equality (assuming the revenue should actually be obtained only if the product is getting fully used by those consuming processes). So, you may need to be a bit careful if you decide to introduce product revenues as negative flow costs.

[jabarivelisdeh]

Many thanks for your thorough and clear reply. It helped a lot...

Best
Banafsheh