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The following economic analysis is based on the published residential end user prices for: number 2 fuel oil supplied by Ultramar and regulated price plan electricity supplied by Hydro One to rural customers. The rates are those that applied in Ontario in early 2012. Future rate changes will change the value of the Micro Fusion technology calculated herein.

A Micro Fusion System sinks about 30 kWe of electricity per Micro Fusion unit and sources about 250 kWt of recoverable heat per Micro Fusion Unit.

The financial values of the heat and electricity outputs of a Micro Fusion System are set by the cost to an end user of obtaining the same amounts of heat and electricity from alternate sources.

Number 2 Fuel Oil:
Assume that Number 2 fuel oil is burned in a mid-efficiency boiler with a heat recovery efficiency of 0.85.
The cost of Number 2 fuel oil as supplied by Ultramar is $1.09 / litre plus HST.
The chemical energy content of Number 2 fuel oil is 38.2 X 10^6 J / litre (published value)
Then the marginal cost of 1kWt-h of heat from Number 2 fuel oil is:
3.6 X 10^6 J / kWt-h X (1 lit / 38.2 X 10^6 J) X $1.09 / lit X (1 / .85)
= $.12085 / kWt-h + HST
Assume that the marginal cost of 1 kWe-h of electricity supplied by Hydro One to a rural commercial customer is:
= $0.16576 / kWe-h + HST

Consider a Micro Fusion Unit with a thermal output of 250 kWt and an electrical consumption of 30 kWe. If this unit is continuously fully loaded and if it displaces oil heating then the ongoing energy cost saving that it produces is:
{(250 kWt X $.12085/kWt-h) (30 kWe X $.16576/ kWe-h)} X 730.5 h/month
= {($30.212 / h) ($4.973 / h)} X 730.5 h/month
= $18,437.46 / month + HST

Assume that the thermal output of the Micro Fusion Unit is connected to a real load such as the space heating and domestic hot water heating systems of a large (250 suite) multi-residential building.
Assume a 6 month non-heating season weekly average load factor (LF) of 60% (DHW heating with storage, LF = 100% Sunday, LF = 70% Saturday, LF = 50% Monday to Friday), then the average load factor during the non-heating season is:
(1 + .70 + 2.5) / 7 = 0.6
Assume a heating season 6 month load factor of 100% = 1. Then the average annual heating load factor is:
(0.6 + 1.0) / 2 = 0.8

If the displaced heat was originally derived from fuel oil then the monthly energy cost savings per Micro Fusion Unit operating at a load factor of 0.8 are:
.8 X $18,437.46 / month = $14,749.97 / month + HST
These energy cost savings will support an installed capital value of:
25 months X $14,749.97 /month = $368,749.25 plus HST
together with an ongoing all inclusive service contract of:
.01 X $368,749.25 / month
= $3687.49 / month plus HST

The net simple payback period for the equipment owner is:
Capital cost / Cost saving per month
= ($368,749.25) / ($14,749.97 / month - $3687.49 / month)
= 368,749.25 months / 11,062.48
= (4 / 3) X 25 months
= 33.33 months.

If allowance is made for a six month installation period involving equal construction progress payments, then the Micro Fusion system purchaser achieves about a 36 month = three year payback period. This payback period allows the purchaser to arrange five year lease financing.

In the above calculations it is assumed that the building owner already owns the real estate on which the Micro Fusion unit is to be installed and that for the purpose of energy cost saving calculations this real estate has zero carrying cost.

However, there is a problem. If the installed value of a Micro Fusion unit exceeds $368,749.25 + HST, which is possible, then the price of heating oil must increase for the Micro Fusion system to make business sense for the supplier. A component of this heating oil price increase could be a fossil carbon emissions tax.

The heat output from a Micro Fusion System installed at an agricultural site can be used for concentrating fuel alcohol. Each Micro Fusion unit provides a thermal output of 250 kWt.

Various biological processes produce ethanol at a concentration of about 10%. For use as an automotive fuel the ratio of ethanol to water has to be increased from 0.1 to at least 200. This increase in ethanol purity is accomplished using a process known as pervaporation which requires a suitable separation membrane and at least four evaporation-vacuum condensation steps. Each evaporation-vacuum condensation step requires about 1000 BTU / lb, or 10,000 BTU / imperial gallon. Thus a 4 step pervaporation separation requires 40,000 BTU / imperial gallon fuel ethanol produced.

A thermal power of 250 KW allows production of:
(250 kW) X (3414.4 BTU / kWh) X (1 imp gallon / 40,000 BTU) X (4.54 lit / imp gal)
= 96.9 lit ethanol / hour

This ethanol has the same chemical energy for automotive use as a gasoline flow of about:
96.9 lit ethanol / hr X .6594 lit gasoline / lit ethanol = 63.90 lit gasoline / hour

If the farmer can keep the Micro Fusion system operating at an 80% capacity factor The cost to the farmer of the heat required to concentrate this ethanol is about:
($14,749.97 / month) / (730.5 h / month) = $20.1916 per hour
Thus, the cost of heat from Micro Fusion for ethanol concentration is equivalent to a gasoline cost component of:
($20.1916 / h) / (63.90 litre gasoline / h)
= $.3160 / litre gasoline + HST

Since the retail cost of gasoline is now consistently in excess of $1.30 / litre including HST, use of Micro Fusion for ethanol concentration should in principle be be viable for many farmers.

Ideally biofuel should be used to displace gasoline that would otherwise be consumed at or near the agricultural site. The key to improving the profitability of biofuel production is to minimize feedstock and product transportation costs and to use the heat rejected by the biofuel concentration process to displace fossil fuel heat for other purposes.

The best application for Micro Fusion Systems is for displacing fuel oil for base load heating in markets served by the electricity grid.

The web page titled Carbon Tax shows that within the forseeable future there should be a carbon tax of about $200 / emitted tonne CO2 in order to prevent use of coal for electricity generation and to prevent use of natural gas for tar sands extraction. A carbon tax of $200 / emitted tonne of CO2 causes the cost of heat from fuel oil to increase by about $.0512 / kWt-h. Implementation of such a fossil carbon emissions tax would substantially improve the financial viability of Micro Fusion.

At this time a favourable Capital Cost Allowance ruling (CCA Class 43.2) for Micro Fusion systems is being sought from Finance Canada. Such a ruling would allow investors with high taxable incomes to use investments in Micro Fusion systems to defer payment of income tax. Investment in a Class 43.2 asset allows claiming 50% per annum depreciation as compared to 4% per annum for investment in a building.

This web page last updated April 18, 2012

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