Carbon Commentary newsletter
1, Peatland restoration. Returning degraded peatland to a healthy state is a very cheap way of storing new carbon. Scottish entities gave us new details of two projects. One government body said it had restored 10,000 hectares of degraded land and expects to store almost 9 extra tonnes of carbon per hectare each year. Separately, Edinburgh University plans to restore about 800 hectares and will use this land to ‘offset’ the university’s remaining emissions. Typical costs of peatland restoration run to around £1,000-£2,000 per hectare depending on whether tree removal is necessary. The Scottish government intends to improve about 250,000 hectares of degraded peatland. At the lower bound of prospective cost, the bill will be about £250m. This investment will reduce Scottish emissions by about 2.2 million tonnes a year, or around 6% of the national total. Given that healthy peatland continues to absorb carbon almost indefinitely, these actions are extremely inexpensive and may cost less than £10 per tonne of CO2. Nothing matches this in cost. More details on the value and scalability of peatland restoration in Possible.
2, Polyester recycling. Although clear plastic bottles are increasingly mechanically recycled, very few textile fabrics are fully reused. H&M invested in Syre, a new Swedish company that will chemically recycle polyester clothing. Sparse details were provided about the technology to be used but the backers do state that it will employ glycolysis, a chemical route to breaking up polyester into its constituent monomers. Scientists have been working on efficient breaking down of polyester using glycolysis for decades, partly because the temperatures required are around 200-250 degrees, meaning energy costs are significantly lower than other routes. Perhaps the most important aspect of this investment is the financial backing also provided by Vargas, the Swedish finance group that is behind H2 Green Steel and battery maker Northvolt. Syre has ambitious plans to open first in the US and then to expand internationally to recycle about 3 million tonnes of polyester a year, or about 5% of the global production of this most important plastic. There didn’t seem to any detail on the likely cost of creating circular polyester but based on other sources, I’d estimate an initial premium of 20-30%. Not much extra cost for a polyester dress, a large percentage for a soft drinks bottle.
3, Nuclear costs. In April 2021, EdF estimated the potential cost at around €8.6 billion for each new EPR reactor to be built in France. Less than two years later, EdF’s latest estimate is €11.2 billion (also in 2020 prices) for the first phase of six power plants. This is a 30% increase and commentators asked why the company is so pessimistic about achieving economies of scale. (However Hinkley Point C, the EPR reactor being built currently in the UK by EdF, is likely to cost very substantially more – perhaps twice as much as the new estimate).
4, Romanian steel. A report from a Romanian think-tank into the country’s steel industry offers some excellent analysis of the costs and consequences of switching to hydrogen. The calculations are useful for any analyst looking at the conversion of blast furnaces to direct reduction using hydrogen anywhere in the world. The key conclusion from this work is that the switch of the single remaining coal-fired blast furnace in Romania will require the country to more than double its total renewable energy capacity in order to make sufficient H2 just for this site. Indeed, the amount of hydrogen required for one direct reduction plant will be greater than the Romanian government currently envisages for the entire economy. As we’d expect, the grid will need substantial upgrades to cope with the expanded renewable electricity output and pipelines will need to be converted to carry hydrogen. By 2050, the report says that steel produced using hydrogen will still be more expensive than metal made using coal today, even at very low electricity costs. The gradual increase in EU carbon taxation will however mean that green steel is likely to be the cheapest alternative at mid-century. However the cost of all electricity made in Romania may be forced up by the ravenous needs of this single steel plant. And it is also pointed out that as recently as 2023 production from this single site was disrupted by the low level of the Danube river which made shipping in raw materials impossible for part of the year. The steel industry remains vulnerable to climate change, even after the switch to hydrogen. (Thanks to Gijsbert Huijink).
5, Electrolysers. BloombergNEF reported that the manufacturing costs for electrolysers in both China and the rest of the world have increased over the past year, rather than decreasing as expected. Volumes of sales and orders are lower than expected for some manufacturers. However investor interest has not significantly abated. German manufacturer Sunfire raised a further €315m on the back of several other large fund raisings in recent months and years. Sunfire specialises in solid oxide electrolysers, which rely on the supply of high temperature heat but deliver the highest conversion efficiency of electricity into hydrogen. It also makes pressurised alkaline electrolysers, machines which work well with rapidly varying renewable power sources. Sunfire said it had spun off its full cell business to concentrate exclusively on electrolysers. If solid oxide electrolysis turns out to be the cheapest route to make hydrogen, Sunfire is in an enviable global position.
6, Advanced supercapacitors. A Cambridge, UK startup claims it has invented a new energy storage technology that combines the ‘physics’ of capacitors with the ‘chemistry’ of conventional batteries. Superdielectrics launched this week stating that its product can accept electricity for storage at a faster rate than conventional batteries, that it can cope well with rapid fluctuations in power input and that the energy density (kWh per litre) is better than lithium ion, a particular feature not seen before in supercapacitors. In addition, the product uses no scarce materials, is cheap to make and can be fully recycled. These are giant claims but if halfway accurate this product will strongly influence the development of the global energy storage industry.
7, Share of electric cars. The addition of a new small SUV increased the share of EVs in Volvo’s global sales. Including hybrid models, 44% of the manufacturer’s global sales in February were electric, up from 40% last year. The share of pure electric cars in Europe was up slightly to just under a third of all Volvo sales.
8, Active travel. A detailed study of the impact of measures to increase walking and cycling in outer London produced results suggesting that the benefit outweighs the cost by at least ten times. These benefits principally arise from estimates of improved health increasing average life expectancy and reducing the working time losses through illness. Gains are even sharper in ‘low traffic neighbourhoods’ (LTNs), where reduced car use encouraged a greater shift to active travel. In these areas, the average resident walked for 100 minutes more per week than people in the control group. The calculations suggest that in some areas the health benefits exceeded the costs of establishing LTNs by over two hundred times.
9, Paris renovations and energy consumption. Many previous studies have suggested little long-term impact on energy consumption from improved insulation and other measures. By contrast, a Paris study of renovations in social housing completed between 2012 and 2020 suggested large reductions. Energy use was down 28% in the 76,000 housing units under study, representing a saving of around 2,200 kWh, or between €200-450 a year. Interestingly, the study also found no ‘rebound’ effect, whereby householders increase the temperatures in the house after better insulation is installed. However the cost of a typical renovation is now running at around €70,000 per unit, meaning the financial return is very limited. But commentators note that the returns to better insulation should just be measured financially. The French study suggests that proper insulation may reduce daytime heatwave temperatures by 15 degrees on the top floor of a building, improving the health of residents, particularly older people.
10, EV assembly costs. We know that battery prices are falling. And because they can represent 50% of the costs of an EV, this is vital progress. But what about the other aspects of making a car? A report from Gartner noted the surprisingly rapid reduction in assembly costs arising from the simpler designs of electric cars and from improvements in manufacturing processes that are possible with EVs. The Tesla innovation of casting a large section of the base of the car as a single piece (‘gigacasting’) is particularly identified as helping to reduce costs. as well as the increasing use of battery packs as a structural element in the vehicle. Although the decline in the rate of growth in EVs is currently slowing the pace of cost reductions, Gartner comments that ‘electric vehicles will be less expensive to build than internal combustion cars by 2027 thanks to new manufacturing techniques and lower battery costs’.
Possible is published on 21st March. Please get in touch if you would be interested in having a presentation on the book’s contents. Thank you very much to those who responded to a similar suggestion in last week’s newsletter.