terraforming sicily
Okay not quite terraforming, but you'll understand why I called it that later.
We can make Sicily rich by turning it into a natural gas farm.
Let's start with a background on solar.
Solar
We're 10 years into a 30 year new industrial revolution: brought about by the rapid decline in price of solar PV. It'll get so cheap that putting up a new solar farm is going to be cheaper than operating an existing coal station.
In the next 5 years, even in the most northern parts of Europe, solar PV will be the cheapest source of energy.
Transferring the DC created by solar PV to AC for the grid is inefficient and will require a large infra rollout, which already has a huge backlog. At the same time, many industries that our current lifestyle relies on are hard to electrify (aviation, shipping etc). We will need a continued source of hydrocarbons to power these industries that is climate friendly. Pure solar -> battery is going to be too slow, and unable to roll out across all sectors.
Terraform Industries claims to have a solution. As the cost of solar PV continues down its learning curve, inefficient chemical processes powered by localised (off the grid) solar farms become economically viable. Terraform powers CO2 DAC, Green hydrogen generation and CO2 + H2 -> CH4 + H2O with a 1MW solar farm (no need to convert the DC to AC). In English, they pull carbon dioxide out of the atmosphere, electrolyse water to get hydrogen, and convert the carbon dioxide and hydrogen into natural gas + water. With cheap electricity (i.e from solar PV), this process is cheaper than getting natural gas from the ground (and doesn't introduce new CO2 into the atmosphere!).
This is a particularly needed solution in Europe, where natural gas costs skyrocketed during the Russian invasion of Ukraine. As Europe's working population is starting to decline, the EU is beginning to see we desperately need to boost our productivity and become more dynamic. To this day, we consume 1/2 as much energy per capita as in US.
To grow our economy and preserve the climate, solar PV will be crucial. Solar PV-powered Terraformers can produce climate-neutral natural gas to curb our emissions. We can expand our quality of life meaningfully without damaging the environment whilst we search for other solutions to sequester CO2 from the atmosphere.
Location
Where would be an ideal location for the solar-powered natural gas farms (SPNGFs)?
My answer happens to be where my family hails from: Sicily.
- Sicily has high solar utilisation rates. You typically get minimum 10 hours year round. The unit economics of a Terraformer are designed with 6 hours utilisation per day to break even.
- Sicily has cheap land on which to install these SPNGFs that does not price in the potential for SPNGFs actually. You can acquire land for 1eur/m2. In particular, you can buy any land, not necessarily arable, to get cost even lower.
- Sicily has a low cost workforce that can be trained for the installation and rollout of these SPNGFs.
- Sicily has existing natural gas infrastructure that can be leveraged, with existing natural gas pipelines that feed the Italian mainland.
- Sicily benefits from EU incentives for green hydrogen to incentivise investment.
Unit Economics
A Terraformer requires 1MW solar power so say 4-5 acres of panels. This amount of land in Sicily costs EUR 60,000 - EUR 75,000. Ammortized over the 30 year lifetime of a solar farm, it's EUR 2k/2.5k.
A Terraformer costs USD 100,000 currently (predicted to decrease to $30,000 with scale) and has a lifetime of 5 years.
The cost of 1MW of solar panels is currently USD300,000 with an installation cost in Sicily of EUR50,000.
Yearly maintenance for a 1MW array will be around EUR2,000.
On the revenue side, a Terraformer produces 1kcf gas/hour so 10kfc/day after 10 hours of day's operation. At current prices of EUR10/kcf, a 1MW solar panel installation has a revenue of EUR100 per day. For context, the price during winter 2022 when Russian gas supplies were lost was EUR40/kcf. Crucially, this revenue is immediate as it does not require joining the backlog of projects waiting for a grid interconnection.
Converting all to EUR for one year:
Revenue 36,500
Amortized Cost of Panels + Installation (2,000)
Amortized Cost of a Terraformer (20,000)
Amortized Cost of Land (2,500)
Yearly Maintenance (2,000)
Net 10,000
This is profitable purely based on the cost of natural gas and does not include calculations around EU incentives for green hydrogen production and does not consider the positive externalities: enhancing European energy security, making the land under the solar farm more fertile thanks to the water by-product of the natural gas production and curbing CO2 carbon emissions.
Risks
- Doing business in Sicily (mafia?)
- Planning permissions