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Fuel Overview

1. Fuel Types and Descriptions

Coal

Coal is a solid fossil fuel formed from compressed plant matter over millions of years. It is mainly composed of carbon and used for electricity generation through combustion in steam turbines.
- Energy content: 20–28 MJ/kg (~18–25 USD/MWh equivalent)
- Characteristics: Abundant but carbon-intensive; local or imported depending on the country.
- Reference price: TradingEconomics – Coal

Natural Gas

Natural gas is a gaseous fossil fuel composed mainly of methane (CH₄). It is used in gas turbines, combined-cycle power plants, and sometimes in CHP systems.
- Energy content: ~38–42 MJ/m³ (~1 MMBtu ≈ 293 kWh)
- Characteristics: Cleaner than coal or oil; requires pipeline or LNG infrastructure.
- Reference price: TradingEconomics – Natural Gas

Liquefied Natural Gas (LNG)

LNG is natural gas cooled to -162°C to convert it into liquid form for easier storage and transport. It must be regasified before use in power plants.
- Energy content: ~50 MJ/kg (~1 MMBtu ≈ 26 kg LNG)
- Characteristics: Enables international gas trade, often used where pipelines are unavailable.
- Difference vs. Natural Gas: Same energy source, but includes higher delivery and infrastructure costs.

Heavy Fuel Oil (HFO)

HFO is a residual product from petroleum refining, with high viscosity and sulfur content. It is used in large thermal or diesel plants designed to burn heavy oils.
- Energy content: ~40 MJ/kg
- Characteristics: High CO₂ and pollutant emissions; used when gas is unavailable.
- Difference vs. Diesel/LFO: Cheaper but dirtier and requires pre-heating for combustion.

Light Fuel Oil (LFO)

LFO (or light heating oil) is a refined petroleum product lighter and cleaner than HFO. It burns more efficiently and produces less particulate matter.
- Energy content: ~42 MJ/kg
- Characteristics: Used in small to medium-scale generators; more expensive than HFO.
- Difference vs. Diesel: Similar chemical composition but lower cetane number and taxation profile; typically used for stationary applications.

Diesel

Diesel (automotive-grade distillate fuel) is used in small power plants or backup generators.
- Energy content: ~43 MJ/kg
- Characteristics: High-quality, clean-burning liquid fuel with a high cetane rating that enables rapid, reliable starts; very flexible but expensive.
- Difference vs. HFO/LFO: Refined to tighter specifications, so it ignites instantly, runs cleaner, and requires less preheating, which is why backup generators favor it despite the higher cost.

Biomass

Biomass refers to organic material used as fuel, such as agricultural residues, wood chips, or dedicated energy crops.
- Energy content: ~15–20 MJ/kg (depending on moisture content)
- Characteristics: Renewable and potentially carbon-neutral if sustainably sourced; can be used in steam boilers or gasified for co-firing.
- Difference vs. Fossil Fuels: Lower energy density and higher logistics costs, but much lower net CO₂ emissions.

2. Fuel Price Methodology

The projection of fuel prices in EPM considers international market prices for each fuel type.

  • For importing countries, the international benchmark represents the actual purchase cost since the fuel must be bought on international markets.
  • For exporting countries, the same international price is used as a proxy for the opportunity cost — the value of selling the fuel abroad instead of consuming it domestically.

Steps to Estimate Delivered Fuel Price

  1. Start with international wholesale benchmark:
  2. Use reliable sources such as TradingEconomics, World Bank Pink Sheet, or IEA.
  3. Add transport and delivery costs:
  4. +1–3 USD/MMBtu for LNG shipping, regasification, or long-distance pipelines.
  5. +1–2 USD/MMBtu for local distribution.
  6. Include taxes, duties, or subsidies if applicable.
  7. Convert to USD/MMBtu (EPM unit) and optionally to USD/MWh for comparison: 1 MMBtu ≈ 293 kWh, therefore 1 USD/MMBtu ≈ 3 USD/MWh.

3. Reference Prices and Sources

Fuel Typical Source Example Reference Price (USD/MMBtu) Equivalent (USD/MWh)
Coal World Bank – Pink Sheet (Thermal Coal Australia) TradingEconomics – Coal 3–4 10–14
Natural Gas TradingEconomics – Henry Hub / TTF / JKM TradingEconomics – Natural Gas 6–10 20–34
LNG IEA or JKM LNG Index IEA LNG Outlook 9–12 31–41
HFO IEA or national petroleum regulator IEA Oil Market Report 12–16 41–55
LFO IEA or national market IEA Oil Market Report 14–18 48–61
Diesel IEA, TradingEconomics, or local fuel prices TradingEconomics – Diesel 18–22 61–75
Biomass IRENA, FAO, or local sources IRENA – Bioenergy 3–5 10–17

These prices are indicative mid-range 2025 values and should be adjusted for inflation and local conditions.
For long-term projections, EPM uses escalation factors based on IEA or World Bank forecasts.