On the Importance of the Cost of Capital in the Emergence of Remote Renewable Energy Hubs

Remote Renewable Energy Hubs (RREHs) enable the harvesting of renewable energy in regions where it is most abundant. From this harvested renewable energy, RREHs allow the synthesis of e-fuels (electrical-fuels), such as CH4 and NH3, for export to load centers. Load centers are locations characterized by high energy consumption but often limited renewable energy potential. As a result, these load centers have difficulties in meeting their energy demands through only renewable sources. RREHs offer new opportunities for load centers to decarbonize their energy consumption. Many locations worldwide have significant technical potential for RREHs installation due to their vast renewable energy sources. Once a suitable location is identified, the RREH must be properly sized and operated. This involves determining the optimal capacities for each technology (e.g., battery storage capacity) and defining operational strategies (e.g., when to charge or discharge the battery). To size and operate a hub optimally, both technical and economic parameters must be considered. One key economic factor in hub optimization is the Weighted Average Cost of Capital (WACC), which can significantly impact the economic viability of potential projects in a given location. In this paper, we model the entire energy supply chain for synthetic gas production across various countries and its export to Northern Europe (Belgium). We analyze the trade-off between WACC and load factors to minimize the cost of synthetic fuel production and identify the most promising locations. Our results indicate that while some countries may be technically promising, they may not be economically attractive. This highlights the need for innovative financing mechanisms in regions with high load factors but less favorable economic conditions in order to install RREHs at a lower cost.