Pathway to Zero Emissions for LPG

12 March 2023

SYNOPSIS OF HEADLINE DATA

Uses for LPG in Australia

LPG use in Australia is, perhaps, more prevalent than many think. ABS data shows that almost 1.8 million Australian homes used LPG for in-home uses (cooking, hot water and space heating) in 2014, with demand consistently increasing to 2021 according the Department of Industry, Science, Energy and Resources 2021 Residential Baseline Study.

1,775,000 homes in all (56% in regional areas).
14% of homes in capital cities – 781,500 homes.
29% of homes in regional areas – 993,500 homes.

(See Table provided)

The ABS data in the table does not include the Northern Territory as the ABS could not separate metropolitan and regional use. However, GEA figures for the NT in 2022 reveal that:

20,703 NT homes use LPG for in-home use.
8,696 Darwin
12,007 regional

LPG is, typically, relied on due to the absence of mains natural gas and/or electrification not being applicable to needs. Further applications include:

Commercial: space heating, water heating, commercial kitchens (restaurants, cafes, clubs, fish and chip shops), hospitals, schools, catering vans, even as shipping fuel.
Industrial: process heat for manufacturing (ovens, furnaces) for metal processing, as well as feedstock (glass, plastic, metals, fertilisers, pharmaceuticals, to list just a few).
Agricultural: power equipment (i.e. water pumps) and heating (crop drying, animal rearing, greenhouse heating).
Recreational: BBQ, campervans, caravans, camping equipment, boating, outdoor heating, hot air ballooning.

In all, there are more than 20 million cylinders in circulation across Australia, servicing these sectors every day. All can easily be changed to 100% renewable LPG (rLPG) as a 'drop in' replacement for conventional LPG (cLPG).

Two Examples for LPG to Achieve Zero Emissions

BioLPG/rLPG

Derived from plant and vegetable waste.
Identical to cLPG. A simple 'drop in' replacement.
Same storage, transport infrastructure and appliances. No change. No additional costs.
In itself net zero, potential to be actual zero as related sectors (i.e. transport) reduce their emissions.

rDME

Derived from methanol.
Chemically similar to cLPG (propane and butane).
Can be blended with rLPG up to 20% with no change to appliances.
It can fully replace c/rLPG, however, would require minor changes to existing appliances.
Derived from gasification and catalytic synthesis or electrolysis (i.e. green H2) and catalytic synthesis.
As described above, it is net zero, but can be actual zero as related sectors (i.e. transport) reduce their emissions.

Timeline for Transition

Already Happening

Globally, the transition from cLPG has begun. (See European examples below).

*The emergence of biodiesel and Sustainable Aviation Fuel (SAF) are growing – 10% by-product is rLPG.

Australia:

SAF/HVO: first generation transition. Three plants in planning for Australia, including in Gladstone and Kwinana. BioLPG from SAF/HVO by 2025.
BioLPG from gasification with Fischer-Tropsch by 2030.
rDME from biomass by 2030.
rDME from green H2 by 2035.
rLPG from power-to-liquids by 2035.
cLPG phased-out by 2045.
By 2050 only zero/net zero sources of LPG available.

rLPG Development

There are 8 distinct paths to produce BioLPG/rLPG.
Each can achieve net zero emissions, but also have the potential for actual zero emissions.

1. Hydrotreating. Converts vegetable oils (seeds and waste) to biodiesel, SAF and other hydrocarbons by combining them with H2. This process produces BioLPG as a by-product up to 10% of production volumes. A ready-made First Gen replacement for cLPG.

2. Gasification and Fischer-Tropsch. Synthetic gas from H2 and organic carbon through a thermochemical process, converting syngas into liquid hydrocarbons – all from municipal waste, sewage, food waste, crop residues, waste water, straw and manure. This would typical be used for biodiesel and SAF – with up to 10% of output producing rLPG as the by-product.

3. Gasification with Methanation. Similar to gasification with FT, rLPG is produced from the production of syngas, sourced from bioenergy feedstock, for a liquid fuel. Methanation involves the reaction of H2 and carbon dioxide in syngas at high heat and pressure to produce water and hydrocarbons. Sourced from a range of waste streams, sewage, agricultural/municipal waste, food waste, crop residues, waste water, straw and manure.

4. Oligomerisation. Converting methane into hydrocarbons to produce BioLPG.

5. Digestion. Using the digestion of organic matter to produce biogas. Then apply the FT process to produce hydrocarbons to produce rLPG (propane and butane). Sourced from a range of waste streams, sewage, agricultural/municipal waste, food waste, crop residues, waste water, straw and manure.

6. Pyrolysis. Similar to gasification, but at lower heats to produce bio-oil (not syngas). Hydrotreating the bio-oil produces liquid fuels, including bioLPG. Again, sourced from a range of waste streams, agricultural/municipal waste, food waste, crop residues, waste water, straw and manure.

7. Fermentation. Involves microorganisms fermenting sugars to produce bio-based isobutene, to produce a component of rLPG. Using sugars and starch from cellulose.

8. Power-to-X. Producing green H2 using renewable power, then synthesizing the H2 with carbon dioxide (for instance using the FT process) to produce liquid hydrocarbons, including rLPG. Sourced from renewable electrolysis (H2 from H2O) and CO2 capture.

Case Study: BioLPG consumption – Europe:

Europe is by far the largest consumer of HVO in the world presently and it is forecast that demand for HVO will only continue to grow throughout the 2020s. A high proportion of demand is driven by the transport sector, with bio-LPG being made available at petrol stations and bioLPG vehicles operating in a number of jurisdictions.

Bio-LPG is also increasingly being made available for purchase in cylinders for a range of off-grid leisure activities as well as industrial heating. In partnership with SHV Energy, Circle K in Sweden since mid-2020 has provided 100% bioLPG cylinders across all its stores.

Rural and regional homes and hospitality venues across the UK and Ireland are also increasingly adopting bio-LPG for use in their kitchens as well as for water heating and space conditioning functions. Examples include Montalto Estate and BrookLodge & Macreddin Village in Ireland.

Bio-LPG has also emerged as an important energy source in the industrial sector. For example, La-Roche-Posay in France became the first industrial site in France to use bio-LPG in 2018. Since 2019, the facility now emits no greenhouse gas emissions, with the switch to bioLPG representing the last step towards carbon neutrality.
Source: Frontier Economics

rDME Development

Derived from methanol. Produced from a wide range of bioenergy and renewable feedstock – human and agricultural wastes.
Chemically similar to propane and butane – same storage and transport infrastructure.
Can be blended 20% of LPG or rLPG for domestic heating, cooking and hot water with no change to appliances. At more than 20% some minor modification to appliances required, i.e. change jets.

Assumed Pathways:

1. Gasification and catalytic synthesis. DME produced from syngas via two steps: methanol synthesis from syngas via hydrogeneration and the water-gas shift, followed by the dehydration of methanol to produce DME. rDME is produce when syngas comes from bioenergy feedstock.

2. Electrolysis and catalytic synthesis. Similar to the above, except methanol is produced from carbon dioxide and green H2 powered by renewable energy to produce rDME.

Both pathways have the potential to produce rDME with zero emissions. rDME has been commercially available in the US since last year.

Case Study: RDME in the United States:

A world first project, from mid-2021 Oberon Fuels began producing rDME in California. RDME is now commercially available for consumption in the United States, with retailers such as Suburban Propane making rDME available to consumers in certain areas in 2022.
Source: Frontier Economics

Australian LPG Demand Forecast

Current demand for LPG is 32Pj a year – come 2050 we expect it to drop slightly to 25.5Pj.
1 Pj = 1 million, billion joules or 278 gigawatt hours.
25.5 Pj = 7,089 gigwatt hours – so very high demand.
The forecasts are just that, based on recent trajectory. However, demand for rLPG as a zero emission, low cost and reliable energy has the potential to become a preferrable source across multiple settings.
In the early stage of the transition, given the relative size of the LPG market in Australia and the scale of the Biodiesel and SAF markets, which may include exports, supply of, and demand for BioLPG, is not likely to be a constraint.
In the latter stages of the transition, input like LPG from Power-to-Liquids and rDME will be small compared other sectors. For example, the amount of renewable generation required to produce rDME for LPG from Power-to-Liquids will be a small fraction of the renewable generation needed to convert electricity system to renewable sources or to replace the natural gas system with H2 of electrification.
In short, producing rLPG is relatively easy and can readily meet expected demand.

LPG Pathway to Zero

Based on these technologies, there a many credible pathways for the LPG sector to achieve zero emissions.
Typically, to achieve net zero energy requires offsets. However, these technology pathways show how LPG, as a closed loop process, can be actual zero or carbon neutral. That is, capturing the same CO2 in its production that is expended when it is used – meaning no offsets are needed.

The Frontier modelling charts the following credible path, comprising of:

1. BioLPG produced as a by-product of renewable diesel or SAF through the hydrotreated vegetable oil (HVO) process.

2. BioLPG produced as by-product of renewable diesel or SAF through gasification with the Fischer-Tropsch process.

3. rDME produced from biomass blended.

4. rDME produced from renewable energy blended.

5. rLPG produced through a Power-to-Liquids pathway.

In Australia the first cab of the rank is HVO – Biodiesel/Sustainable Aviation Fuel.

Case Study: European HVO Production:

As of 2021, pure HVO is available in nine European countries: Belgium, Denmark, Finland, Estonia, Latvia, Lithuania, the Netherlands, Norway and Sweden. For off-road purposes it is also available in Germany, the UK and Switzerland.

In 2019, approximately 1.9 million tonnes of HVO was consumed across Europe where the biggest consumers were France, Norway, Spain and Sweden.

Standalone HVO production capacity is presently around 3.5 million tonnes across Europe, with new production plants and capacities proposed and forecast, this figure is expected to rise. The Netherlands currently has the largest HVO production plant (Neste, Rotterdam) with new production plants also proposed in the coming years in France, Italy, Sweden and Finland.

Co-processed HVO is also prevalent across the continent with a current production capacity of around 1.8 million tonnes (the majority of which is concentrated in Spain).
Source: Frontier Economics.

Australian HVO - Biodiesel & Sustainable Aviation Fuel

In Australia, it is expected that bioLPG from the HVO process would come as a by-product of production of biodiesel and/or SAF, as is the case globally. Production and use of biodiesel and SAF are likely to increase as part of the transition to net zero as transport industries seek to lower its emissions.

There are a number of sizeable biodiesel and SAF projects in the planning for Australia, including:

Sherdar Australia Bio Refinery. Sherdar Australia is currently proposing to develop Australia's first biodiesel refinery and storage plant. There is currently no location for the project, however the proposal would cost $600 million, and the site would be able to produce 500,000 tonnes per year of biodiesel and SAF upon completion. Proposed feedstocks for production at the site include animal fats, seed oil and waste greases.
BP renewable fuel and green hydrogen project at Kwinana (WA). BP is currently proposing to establish a renewable fuel and green hydrogen site in the Kwinana industrial site in Western Australia. The project would involve repurposing a fuel import site to produce 8,000-10,000 barrels of biodiesel and SAF per day from products such as waste oil, tallow and used cooking oil.
Oceania Biofuels Project at Gladstone (QLD). Gladstone, Queensland was selected as the site in April 2022 for a $500 million biodiesel and SAF refinery. The project proposes to use locally sourced tallow, canola and used cooking oil to produce 350 million litres of SAF and biodiesel per year. Construction is planned to begin in 2023 and operations by 2025.

Under this assumed transition pathway, bioLPG from HVO becomes available from 2025, bioLPG from gasification with FT and rDME from biomass from 2030, rDME from green hydrogen from 2035 LPG from Power-to-Liquids from 2040.

The supply of conventional LPG is steadily phased-out in favour of these low emission and zero emission alternatives. Conventional LPG supply is phased-out entirely by 2045. By 2050, zero emissions sources are the only sources of supply still in the market.

11% Replacement of cLPG with rLPG from 2025

Based on the initial production volumes of the three plants cited above, rLPG production volumes would be as follows:

Sherdar Australia Bio Refinery: 50,000 tonnes of rLPG.
BP renewable fuel and green hydrogen project: 1,000 barrels of rLPG.
Oceania Biofuels Project: 350,000,000 litres.

Converting this output into litres totals 134,880,000 litres of rLPG. With 1 litre of LPG equating to 26 Mj of energy, the resultant output equates to 3,506,880,000 Mj or 3.5Pj.

As the Frontier report shows, current annual national demand for LPG is 32.2 PJ.

Looking at these three projects alone, based on their production projections, the LPG sector can replace 11% of current cLPG demand with rLPG as soon as production starts.

This would increase as export markets for biodiesel and SAF are developed.

The full Frontier Economics Report 'Path to Zero Emissions for LPG' is available below...