Techno-economic assessment of pathways for liquefied natural gas (LNG) to replace diesel in Canadian remote northern communities

Abstract

This novel study assesses techno-economics of replacing diesel with liquefied natural gas (LNG) in remote Nunavut communities. The methodology uses an economic model to calculate delivered costs of LNG for a supply chain comprising terminal costs, shipping costs, and annual onsite storage cost. CO2 reduction potential and upfront costs to implement LNG or renewable electricity projects are estimated for five remote Nunavut sites. The impact of replacing diesel with LNG on electricity price is examined, as well as socioeconomic and environmental benefits.The study finds the most cost-effective LNG supply option utilizes arctic sealift/LNG resupply vessels that bunker LNG to ISO containers for on-site storage. With leveraging of 75% of CAPEX, a delivered cost of $0.94/DLE LNG is attained, 13% lower than the price of fuel oil in the two cases studied. The impact of fuel switching to LNG on the incremental cost of electricity generation is negligible. Also, fixed cost of avoided CO2 emissions to replace 100% of diesel with LNG falls within the same range as costs to install wind–diesel electricity generation systems at 25% renewable penetration, i.e., between $336–788/tonne CO2 avoided. Further reductions are possible by opting for higher renewable gas content in LNG.