Methanol plays an important role in the chemical industry. It is an emerging energy fuel currently mostly produced from fossil fuels. A transition to renewable methanol – derived from biomass or synthesised from green hydrogen and carbon dioxide (CO2) – could expand methanol’s use as a chemical feedstock and fuel while moving industrial and transport sectors toward net carbon neutral goals. The cost of renewable methanol production is currently high and production volumes are low. But with the right policies, renewable methanol could be cost competitive by 2050 or earlier. Following are the key findings from International Renewable Energy Agency’s report, “Innovation Outlook: Renewable Methanol”…

Methanol is mainly used for producing other chemicals such as formaldehyde, acetic acid and plastics. Around 98 million tonnes (Mt) are produced per annum, nearly all of which is produced from fossil fuels (either natural gas or coal). The life-cycle emissions from current methanol production and use are around 0.3 gigatonnes (Gt) CO2 per annum (about 10 per cent of total chemical sector emissions).

Methanol production has nearly doubled in the past decade, with a large share of that growth being in China. Under current trends, production could rise to 500 Mt per annum by 2050, releasing 1.5 Gt CO2 per annum if solely sourced from fossil fuels. The cost of producing fossil fuel-based methanol is in the range of USD 100-250 per tonne (t).

Renewable methanol

Renewable methanol can be produced using renewable energy and renewable feedstocks via two routes. One, bio-methanol is produced from biomass. Key potential sustainable biomass feedstocks include: forestry and agricultural waste and by-products, biogas from landfill, sewage, municipal solid waste (MSW) and black liquor from the pulp and paper industry. Two, Green e-methanol is obtained by using CO2 captured from renewable sources (bioenergy with carbon capture and storage [BECCS] and direct air capture [DAC]) and green hydrogen, i.e. hydrogen produced with renewable electricity.

Less than 0.2 Mt of renewable methanol is produced annually, mostly as bio-methanol. The methanol produced by either route is chemically identical to methanol produced from fossil fuel sources. Interest in renewable methanol is being driven by the need to mitigate climate change by substantially reducing or eliminating CO2 emissions, and in particular by the growing focus on holding the average global temperature rise to no more than 1.5°C. This implies achieving net carbon neutral emissions across all sectors of the economy by mid-century.

Low-emission methanol could play a larger role in decarbonising certain sectors where options are currently limited – particularly as a feedstock in the chemical industry or as a fuel in road or marine transport.

Production costs of bio-methanol

Since production is currently low, limited data are available on actual costs, meaning that potential costs need to be estimated. The bio-methanol production cost will depend on the bio-feedstock cost, investment cost and the efficiency of the conversion processes. Biomass and MSW feedstock costs vary between USD 0 and USD 17 per gigajoule (GJ). With a lower feedstock cost range of up to USD 6/GJ, the cost of bio-methanol is estimated to be in the range USD 320/t and USD 770/t, with the range influenced by differences in the specific projects  including differences in CAPEX, OPEX and conversion efficiency. With process improvements, the cost range could be reduced to between USD 220/t and USD 560/t for the lower feedstock price range up to 6 USD/GJ, with a correspondingly higher range for the higher feedstock price range.

Production of bio-methanol from the waste streams of other industrial processes (e.g. black liquor from paper mills and MSW) in particular offer opportunities to simplify the feedstock logistics and improve overall plant economics. Co-production of heat, electricity or other chemicals could also potentially improve the economics of bio-methanol production.

In the short term biomass could be co-fed into a coal-based gasifier, or biogas fed into a natural gas-based methanol plant, so allowing for the gradual introduction of biomass as a feedstock and making methanol production more sustainable at a potentially lower cost.

Production costs of green e-methanol

The cost of e-methanol depends to a large extent on the cost of hydrogen and CO2. The cost of CO2 depends on the source from which it is captured, e.g. from biomass, industrial processes or DAC. The current production cost of e-methanol is estimated to be in the range USD 800-1 600/t assuming CO2 is sourced from BECCS at a cost of USD 10-50/t. If CO2 is obtained by DAC, where costs are currently USD 300- 600/t, then e-methanol production costs would be in the range USD 1 200-2 400/t.

The future cost of green hydrogen production mainly depends on the combination of further reductions in the cost of renewable power generation and electrolysers, and gains in efficiency and durability. With anticipated decreases in renewable power prices, the cost of e-methanol is expected to decrease to levels between USD 250-630/t by 2050.

As in the case of bio-methanol, co-production of brown/grey (fossil fuel based) and green e-methanol could allow the gradual introduction of green e-methanol at a reasonable cost.

Benefits and challenges for renewable methanol

Renewable methanol can be produced from a variety of sustainable feedstocks, such as biomass, waste or CO2 and hydrogen. Its use in place of fossil fuels can reduce greenhouse gas (GHG) emissions and in some cases can also reduce other harmful emissions (sulphur oxides [SOx], nitrogen oxides [NOx], particulate matter [PM] etc.)

It is a versatile fuel that can be used in internal combustion engines, and in hybrid and fuel cell vehicles and vessels. It is a liquid at ambient temperature and pressures, and so is easy to store, transport and distribute. It is also compatible with existing distribution infrastructure and can be blended with conventional fuels.

Production of methanol from biomass and from CO2 and H2 does not involve experimental technologies. Almost identical proven and fully commercial technologies are used to make methanol from fossil fuel-based syngas and can be used for bio- and e-methanol production.

Currently the main barrier to renewable methanol uptake is its higher cost compared to fossil fuel-based alternatives, and that cost differential will persist for some time to come. However, its value is in its emission reduction potential compared to existing options.

Addressing process differences and facilitating the scale-up of production and use can help reduce costs, but will require a variety of policy interventions. With the right support mechanisms, and with the best production conditions, renewable methanol could approach the current cost and price of methanol from fossil fuels.

The full report can be accessed by clicking here