Jul-2024
Carbon market scenario can change conventional fired heater economics and usher in a new benchmark in design and operation of air preheaters and fired heaters.
Shilpa Singh and Rupam Mukherjee
Engineers India Limited
Article Summary
With the Paris initiative claiming the spotlight over last few years and India’s commitment to net zero, it has become imperative for the energy-consuming sectors to fine-tune their operations to the highest level of efficiency, be it on an equipment level or an overall plant level. With major governments all over the globe adopting legislature in favour of a lower carbon footprint, it is high time that carbon-intensive equipment undergoes a major fresh look into how it is designed and operated.
Carbon cost scenarios
Conventionally, heat recovery equipment or efficiency improvement initiatives were gauged solely based on payback generated by additional savings from fuel. Unfortunately, there are numerous instances where many good proposals had to be rejected on these criteria. However, the gains post-implementation of these proposals might have benefited the end-user in the long term. The majority of EU countries have already adopted the EU Emissions Trading Scheme (ETS), whereby the cost of each tonne of carbon emitted is accounted as a penalty, and likewise, each tonne of carbon dioxide (CO₂) saved is counted as credit.
In such a scenario, energy efficiency gains are a priority and can turn the tables in favour of cleaner energy techniques, albeit at higher capital investment. With carbon market scenarios emerging fast in many countries and expected to gain pace over the next few years, carbon credit or carbon cost, when factored in into conventional calculations, reveals very promising results in favour of cleaner technology alternatives. A suo motu study was conducted to establish this fact, and the same is presented in this article.
The studies presented herein may inspire a fresh look into shelved efficiency improvement proposals because carbon footprint has slowly but steadily started gaining importance, even in the case of Environmental Impact Assessment clearances. All three Rs – ‘Reduce, Recover, and Reuse’ – are also applicable in the case of fired heaters, but they come at a price. Nonetheless, they are invariably necessary for the greater good of the environment.
This article aims to provide valuable information on how the upcoming carbon market scenario can change conventional fired heater economics and usher in a new benchmark in the design and operation of fired heaters. In the first case study, a scenario demonstrates how accounting carbon cost can alter the economics for selecting air preheat systems, as opposed to the conventional approach of selection solely based on fuel saving.
In the second case study, the impact of carbon cost is illustrated while shifting from fuel oil to fuel gas firing. For the third case study, the promising aspect of blending green hydrogen in the fuel gas network was analysed on the backdrop of carbon cost. Finally, in the fourth case study, a comparative analysis was performed to ascertain whether accounting for carbon cost can alter the economics for electrically powered furnaces vis-à-vis fuel gas-fired furnaces.
Current design and operational practices
Efficiency has long been considered in terms of its economic viability. General finance terms such as simple payback, internal rate of return (IRR), and net present value (NPV) come into the picture while evaluating any additional investment. The same is the case with air preheaters (APHs) in fired heater systems, where furnace designers usually have an established set of guidelines defining whether an APH system is economically feasible. In general, APHs are adopted based on furnace duty (see Table 1). Exact economic criteria may vary from country to country and will be based on prevalent fuel and equipment prices.
A general trend is that a full-fledged outboard APH system becomes economically feasible only when the absorbed heat duty of the heater is more than 20 Gcal/h. The contrary side of this outcome is that for heaters with heat duty less than 20 Gcal/h, there remains a strong possibility that the efficiency takes a beating in lieu of additional APH system Capex. However, over the lifetime of the fired heater, valuable energy may be lost to the environment.
The effect of Capex vs efficiency is best illustrated through an example. Let us consider a small-capacity heater with 6 Gcal/h absorbed duty. According to established design practices, this heater should be designed to operate without any outboard APH, thus yielding a fuel efficiency of only 80% as opposed to a heater with an outboard APH system with an efficiency of 90%+. This means the heater of the subject example will be firing an additional 600 tonnes per annum of fuel gas.
In other words, the subject heater will consume an additional 6,700 million Kcal per year (Kcal/y) to perform the same task as a heater with 90% efficiency. With Opex determined solely by the price of fuel, and the price of fuel mainly determined by internal refinery configuration, which is generally lower compared to external bought-out energy cost such as for regasified liquefied natural gas (RLNG), this differential in terms of Opex may not overcome the burden of Capex. However, with the introduction of a carbon price on each tonne of CO₂ being emitted, the cost of CO₂ becomes an additional factor for Opex calculation.
For a comparative analysis, different examples have been considered to cover the entire gamut of fired heaters encountered in refineries. Throughout this article, the cost of carbon credit is considered as €50 per tonne (~Rs. [Indian Rupees] 4,250 per tonne), the concurrent ETS cost. There is a good possibility that the carbon cost may rise further in the coming years and may even breach €100. However, higher carbon cost will not impact the outcome of the study; rather, it will drive more strongly towards the inferences noted in this discussion.
Heat recovery equipment economics
Will carbon price affect heat recovery equipment economics? To answer this question, the impact of carbon cost on the selection of APH system is analysed in Case Study 1. One of the refiners had a charge heater operating at 83% efficiency. They intended to revamp this heater to retrofit it with an outboard APH system. Also, maximum heat recovery potential was required to be utilised by shifting to 100% fuel gas firing from the current fuel oil firing. An engineering study and evaluation were carried out to establish the feasibility of implementing the project, accounting for conventional evaluating parameters such as plot space, fuel savings, and revamp complexity.
However, the economics of this project were found to be constrained by its payback, which is also consistent with the generic criteria seen in Table 1. Being a relatively small heater with 10 Gcal/h heat duty, an outboard APH system for this heater fell in the range of infeasibility from an economic viewpoint. Table 2 gives a detailed picture of net savings projected post-implementation.
The overall project cost was estimated to be more than Rs 200 million. With an annual payback of Rs 42 million, the project was looking at a simple payback of around five years, which exceeded the threshold of three years, generally considered acceptable. Therefore, a more detailed calculation of IRR was employed. After calculation, the IRR of the project was obtained as 10.1%, again below the 12-13% threshold set by client standards. If carbon cost was taken into consideration, the IRR improved to 15.1%, easily surpassing the client’s expectations and making the project feasible (see Figure 1).
Thus, including carbon cost in project economics can overturn decisions where projects were previously infeasible. In fact, including carbon cost in the economic evaluation of heat recovery options can re-assign the demarcation lines of fired heater duty, beyond which installation of APH becomes profitable.
Carbon cost as a new method of deriving project economics can substantially impact the decision regarding investment in efficiency improvement measures like APH and may soon become an important consideration.
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