a! techno.economic! review! of! micronized!refined! coal...
TRANSCRIPT
!
[email protected]!Kinerja!Pty!Ltd!|!ABN:!!84!142!277!058!
! !! ! ! ! ! ! !!! !!!!!!!
ABSTRACT!
Direct!Injection!Carbon!Engines!were!studied!by!the!US!DOE!and!others!during!the!1990s.!! !Engine!
wear!was!the!key!issue!to!be!addressed!for!a!practical!engine.!!This!report!seeks!to!reRexamine!the!
economics!of!this!technology!in!conditions!that!require!a!lowest!cost!pathway!to!low!GHG!emissions!
and!to!inform!ANLEC!R&D!decisions!regarding!the!DICE!technology.!
The! longest! engine! tests! by! the! DOE! were! in! the! order! of! a! few! hundred! hours.! ! ! Run! length!
between!overhauls!is!a!major!driver!of!operating!cost.!!!This!report!estimates!the!engine!run!length!
that!would!be!required!for!DICE! to!be!competitive! in!a!range!of!scenarios.! ! !A!short! required!run!
length!suggests!that!less!engine!development!will!be!required!than!a!case!with!a!long!required!run!
rate.!
The! results! suggest! that!with! relatively! little! development,!DICE!could!be!competitive! for! remote!
area! power! where! the! alternative! is! trucked! diesel.! Scenarios! that! become! competitive! with!
increasing! engine! development! are! described.! ! The! “sweet! spot”! appears! to! be! markets! using!
imported! LNG! to! generate! electricity,! which! become! attractive! with! DICE! run! length! of!
approximately!1000!hours.!
This! is!an!assessment!of!perceived!prospects! for!DICE! in!selected!commercial!scenarios! for!power!
generation.! It! recognises!some!development!may!be!required!but!assumes!these!to!be!successful.!
Engine!and!fuel!development!have!their!own!risks!and!assessment!of!their!probabilities!for!success!
is!outside!the!scope!of!this!analysis.!
A! techno.economic! review! of! Micronized! Refined!
Coal!fuelled!Direct!Injection!Carbon!Engines.!!
(MRC!DICE)!
Stage!2!!!!!!!!xxxxxxx!2013!
!
! ! ! 2!
!
!
!
!
!
Table!of!Contents!1.! Executive!Summary!.........................................................................................!3!
2.! Introduction!....................................................................................................!6!
3.! DICE!summary!.................................................................................................!8!
4.! Engine!modelling!methodology!.....................................................................!13!
5.! Economic!scenarios!.......................................................................................!16!5.1! MRC!from!tailings!stream!on!existing!plant!in!Australia!............................!16!5.2! MRC!from!tailings!and!exported!to!DICE!in!Japan!.....................................!20!5.3! MRC!from!whole!coal!to!MRC!DICE!in!South!Korea!...................................!24!5.4! MRC!from!brown!coal!to!DICE!in!Australia!................................................!26!5.5! Sensitivities!..............................................................................................!30!
6.! Acknowledgements!.......................................................................................!32!
Appendix!1!–!Economic!assumptions!....................................................................!33!
Appendix!2!–!DICE!generation!costs!and!performance!..........................................!38!
Appendix!3!–!Alternative!generation!costs!...........................................................!40!
Appendix!4!–!O&M!labour!rates!...........................................................................!43!!
! !
!
! ! ! 3!
1. Executive)Summary!
Diesel! engines!have! run!on! coal! in! the!past!however! engine!wear! rates!were! very!
high! and! development!work! ceased.! ! ! High! thermal! efficiencies! and! fast! response!
times!were!reported!making!this!a!potentially!useful!machine!if!the!wear!issues!can!
be!resolved.!
ANLEC! R&D! commissioned! this! report! to! support! their! decision! on! the! level! of!
support,! if! any,! which! should! be! directed! towards! development! of! a! commercial!
DICE!engine.!
Micronised! Refined! Coal! fuel! for! DICE! engines! has! been! successfully!made! from! a!
range!of!black!coals!and!from!brown!coal.!!!
Improvements! in!wear! rate!would! be! observed! in! an! increase! in! the! time! interval!
between!engine!overhaul.! !This!report!analyses!scenarios!of!engine! life!required!to!
compete!with!available!thermal!generation!processes.!!!Engine!run!hours!that!must!
be!achieved!for!breakeven!economics!with!the!alternatives!give!an!indication!of!the!
degree!of!engine!development!effort!required.!
The!results!suggest!that!with!relatively!little!development,!DICE!could!be!competitive!
for!remote!area!power!where!the!alternative!is!trucked!diesel.!!!Table!1!summarises!
these!results!and!shows!scenarios! that!become!competitive!with! increasing!engine!
development.! ! !This!data!could!be!the!basis!of!a!staged!development!plan!for!MRC!
DICE.!
Markets!relying!on!imported!LNG!for!power!appear!to!be!the!“sweet!spot”!for!DICE!
requiring! modest! engine! development! and! opening! new! markets! for! engine!
manufactures!and!coal!producers.!!
Current! Australian! electricity!market! conditions!make! the! justification! of! any! new!
build!plant!difficult.! ! Should! there!be!a!demand! for!new!build!plant!DICE!could!be!
competitive!with!CCGT!at!run!lengths!similar!to!the!best!available!HFO!engines.!
!
! ! ! 4!
New!pulverised! coal! (PC)!plant! in!Australia! is! only! competitive! at! gas!prices! above!
about!$11.00/GJ!due!to!the!high!cost!of!construction! in!Australia.! ! !DICE!offers!the!
opportunity!a!step!change!in!the!capital!base.!
DICE!emissions!are!lower!that!PC.!!Carbon!Capture!and!Storage!offers!the!possibility!
of! deep! emission! reductions! with! the! potential! of! reduced! cost! compared! to! PC.!!!!
The!small!modular!nature!of!DICE!may!open!the!potential!for!a!matched!CCS!module!
than!can!be!manufactured!in!the!same!low!cost!locations!as!the!engine,!and!shipped!
as!a!complete!package.!
Required!run!lengths!as!estimated!in!the!report!could!be!used!to!set!targets!for!an!
engine! development! program! that! can! be! used! as! an! enabling! technology! for! a!
lower!cost!pathway!to!reduced!emissions!from!coal.!
This!report!analyses!the!commercial!performance!of!a!number!of!DICE!scenarios,!!i.e.!
the! potential! prize! in! the! case! where! the! development! program! results! in! a!
successful!engine.!!Assessment!of!the!probability!of!successful!engine!development!
and!deployment!is!outside!the!scope!of!this!analysis.!!!!
Engine! research! &! development! is! relatively! mature! and! familiar! to! engine!
manufacturers.! ! Assuming! the! prize! warrants,! an! estimate! of! the! cost! of! a!
development! program! and! an! assessment! of! the! probability! of! success! could! be!
undertaken,!presumably!by!the!manufacturers!themselves.!!!!!
An!indication!of!the!engine!manufacturers!confidence!in!both,!the!perceived!market!
and! prospects! for! successful! engine! development! might! be! inferred! from! their!
willingness!to!invest!in!the!program.!
!
! ! ! 5!
Table&1&(&Summary&of&potential&DICE&targets&
Degree&of&engine&development&&
(hours&between&overhaul)&
Scenarios&where&MRC&DICE&is&
competitive&Incentive&for&engine&developer& Incentive&for&coal&producer&
500!hours!
(i.e.!not!a!huge!stretch!from!DOE!
testing)!
Remote!area!power!where!
alternative!is!trucked!diesel!
Engine!manufacturers!have!this!
market!already.!
Represents!a!new!market!for!
coal.!!Quantity!is!small.!!Could!
create!a!source!of!value!for!
tailings.!
1000!hours! Imported!LNG!to!CCGT!
This!would!be!a!new!and!
significant!market!for!engine!
manufacturers!
This!would!be!a!new!and!
significant!market!for!coal!(black!
and!brown.)!
2000!hours!Remote!area!power!where!
alternative!is!CCGT!
A!new!market!for!engine!
manufacturers.!
A!new!market!for!coal!sales.!!
Quantity!likely!to!be!small.!
4000!hours!
(i.e.!equal!performance!to!
current!HFO!engines)!
New!build!baseload!power!in!
Australia!if!gas!price!>!$7.70/GJ!
(assuming!MRC!for!$2.50)!
A!new!market!for!engine!
manufacturers.!
New!build!PC!is!unlikely!in!
Australia&at!projected!capital!
costs.!
!
[email protected]!Kinerja!Pty!Ltd!|!ABN:!!84!142!277!058!
!
2. Introduction#
The!US!DOE,!and!others,! studied!direct! Injection!Carbon!Engines!during!the!1990s.!!!
The! low!price!of!crude!oil! in!the! late!nineties!was,! in!part,!responsible!for!a! loss!of!
focus!on!this!technology.!
This! report! seeks! to! reSexamine! the! economics! of! this! technology! under! current!
conditions!to!assist!ANLEC!R&D!determine!the!level!of!support,!if!any,!that!should!be!
provided!to!develop!these!processes.!
DICE! fuel! is! currently!made!by!processing! coal! to! very! low!ash! content! (ca!2%!dry!
basis)!mixed!with!water!to!produce!pumpable!slurry.!!Micronised!Refined!Coal!(MRC)!
fuels!with!solids!content!in!the!order!of!50%!by!mass!were!produced!and!tested!by!
the!DOE.!!!More!recently!60%!solid!content!fuels!have!been!produced!but!testing!has!
been!limited!to!laboratory!scale!machines.!
In!principle,!lower!wear!rates!could!be!achieved!by!further!reducing!the!ash!content!
of!the!MRC!fuel.!!!Current!thinking!is!that!the!2%!dry!basis!level!represents!about!the!
lowest!practical!ash!level!achievable!without!significant!additional!expense!and!yield!
loss.!
It!is!thought!that!the!next!step!is!to!work!to!extend!the!life!of!engines!on!the!current!
fuel!specification.!!When!test!data!about!the!cost!and!scope!of!engine!improvements!
is! available,! further! decisions! about! the! relative! value! of! fuel! and! engine!
developments!can!be!made.!
The! DICE! engine! is! essentially! the! same! as! existing! diesel! engines.! ! A! major!
uncertainty! in! the! operation! of! a! DICE! engine! is! the! life! of! engine! components! in!
contact!with!the!fuel,!which!has!been!shown!to!be!significantly!more!abrasive!than!
convention!fuels.!!!!
! !
!
! ! ! 7!
Drivers!for!the!ongoing!interest!in!DICE!are!the!potential!for;!
1. Fuel!cost!reductions!compared!to!crude!oil!based!fuels!
2. Higher!thermal!efficiency!of!DICE!compared!to!pulverized!coal!(PC)!boilers!
3. Lower!CO2!emissions!than!PC!boilers!
4. Fast!response!time!of!DICE!making! it!valuable!on!an!electrical!network!with!
high!penetration!of!intermittent!generation.!!
5. The! potential! for! addition! of! CCS! using! waste! engine! heat! for! sorbent!
regeneration!
6. Lower!capital!cost!than!SCPC!in#Australia!
This! study! will! attempt! to! quantify! the! performance! required! of! DICE! to! be!
competitive!against!alternative!thermal!generation!schemes.!
These! results! could!be!used! to! set!milestones!or! targets! in! any!DICE!development!
program!that!might!be!considered.!!
Note!that!the!underlying#assumption!of!the!analysis!is!a!successful!DICE!technology!
–! both! engine! and! fuel! supply.! ! ! This! assumption! is! necessary! to! understand! the!
potential! commercial! prize! on! offer.! This! can! inform! a! stakeholder’s! appetite! for!
investment.!!!Like!all!innovative!technologies,!there!is!always!risk!of!failure,!in!which!
case!the!prize!would!not!be!achieved.!
!
! #
!
! ! ! 8!
3. DICE%summary#
The!first!diesel!engine!was!originally!run!on!coal!dust,!aspirated!into!the!engine!via!
the! air! intake.! ! Wear! rates! proved! to! be! very! high.! ! Liquid! fuels! were! becoming!
common!and!quickly!became,!overwhelmingly,!the!fuel!of!choice.!
German! researchers! continued! to! develop! coalSfired! diesel! engines! between! 1930!
and! 1944! and! developed! a! range! of! engineering! solutions! to! address! the! issue! of!
wear1.! ! ! The!most! promising! solutions! involved! the! use! of! hardened! components.!!
The!US!DOE2!continued!this!development!in!the!period!1988!to!1993,!also!testing!a!
number! of! techniques! before! settling! on! the! use! of! hard! materials! as! the! most!
practical.!
The!US!DOE!demonstrated!that!coal!could!be!formulated!into!a!satisfactory!fuel!for!
diesel!engines,!that!the!solids!in!the!fuel!could!be!kept!in!suspension!for!reasonable!
periods!of!time,!and!that!the!engine!efficiency!was!not!significantly!diminished.!
!Importantly!they!also!identified!components!that!were!subjected!to!increased!wear,!
due! to!particulates! in! the! fuel,! and! tested!a!number!of!potential! solutions.! ! These!
solutions!are!summarised!in!Table!2.!
Little!serious!development!of!DICE!after!the!end!of!the!1994!DOE!program!has!been!
reported! in! the! literature.! ! The! extent! to! which! engine! manufactures,! or! other!
researchers!have!progressed! this! issue!privately! is!not! known.! ! ! It! is! assumed! that!
component!wear! remains! the! key! to! DICE! practicality.! ! Extending! DICE! run! length!
from! the! several! hundred! hour! runs! demonstrated! by! the! DOE! to! the! order! of!
several!thousand!hours,!typical!of!modern!liquid!fuelled!engines,!is!likely!to!be!a!key!
element!of!any!commercially!practical!DICE!program.!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1!Soehngen, Erich E & United States. National Technical Information Service & E. Soehngren and Associates & United States. Energy Research and Development Administration 1976, The development of coal-burning diesel engines in Germany: : a state-of-the-art review, Energy Research and Development Administration, Washington!2Arthur D. Little 1995, Coal-fueled diesel system for stationary power applications -- Technology development. Final report, March 1988--June 1994 for the US DOE contract DE-AC21-88MC25124!
!
! ! ! 9!
!
Table#2#6#Durable#components#developed#for#US#DOE#(Table#IV61#Arthur#D.#Little#1994#for#DOE)#
Component# Best#solution#tested#Max#test#
time#(hours)#
Projected#
life#(hours)#
#
US6DoE#
Target#life#
(hours)#
#
Injection!nozzle!tip!
orifices!Sapphire!inserts! 142! >500! 500!
Injection!nozzle!
valve!
Titanium!nitride!steel,!
monolithic!tungsten!
carbide!tip!
142! >500! 500!
Injection!nozzle!
valve!seat!
Monolithic!tungsten!
carbide!142! >500! 500!
Injection!nozzle!
shuttle!Titanium!nitride!steel! 400! >500! 500!
Cylinder!liner!Tungsten!carbide!
plasma!coating!232! >5,000! 12,000!
Top!compression!
rings!
Tungsten!carbide!
detonation!gun!coating!232! >2,000! 12,000!
Other!compression!
rings!
Tungsten!carbide!
detonation!gun!coating!182! >5,000! 12,000!
Oil!control!rings! Chrome!plate! 0! >5,000! 12,000!
Exhaust!valves!Tungsten!carbide!
detonation!gun!coating!181! >500! 12,000!
Exhaust!valve!seats!Tungsten!carbide!
detonation!gun!coating!100! >1,000! 12,000!
Turbocharger!rotor!
blades!
Cyclone!plus!chrome!
carbide!detonation!gun!
coating!
0! >10,000! 25,000!
Crankcase!bearings! Centrifuge! 450! Indefinite! 25,000!
#
!
! ! ! 10!
Projected!life!reported!in!Table!2!needs!to!be!tested,!further!developed!and!the!time!
between!engine!overhauls!extended.! ! !These!would!be!the!objectives!of!an!engine!
development!program!and!the!results!are!of!course!not!yet!known.!
An!objective!of!this!report!is!to!gain!some!insight!into!the!engine!run!hours!that!will!
be!required!for!MRC!DICE!to!be!competitive!against!alternative!electrical!generation!
schemes!and!from!this,!some!indication!of!the!probability!that!competitive!operation!
will!be!achieved.!
AETA!2012!produced!data!for!a!number!of!generation!technologies,! including!DICE.!!!
This#of#course#makes#the#assumption#that#the#engine#will#be#developed#and#makes#
predictions# about# the#performance# that#might# be#obtained.! ! ! Assumptions! about!
engine!efficiency!are!included.!!At!approximately!50%!efficiency!DICE!is!significantly!
higher!efficiency!that!current!coal!conversion!technologies!and!has!the!potential!to!
deliver!benefits!in!a!low!emissions!portfolio.!
As!a!first!indication!of!how!DICE!might!fit!into!a!range!of!thermal!generation!options!
available,!LCOE!of!OCGT,!CCGT,!DICE!and!SCPC!were!evaluated!over!a!range!of!gas!
prices!and!capacity!factors.!!!Regions!with!the!lowest!LCOE!are!shown!in!Figure!1.!
It!is!important!to!note!that!this!is!LCOE!and!does!not!indicate!how!the!unit!would!be!
dispatched,!rather!it!indicates!which!technology!an!investor!might!select!if!expecting!
a!particular!capacity!factor!and!gas!price.!
MRC!fuel!price!was!held!constant!at!$2.50!and!CO2!was!priced!at!$33/tonne.!!!AETA!
predicts! a! higher! capex! for! DICE! than! for! CCGT,! so! it! is! not! surprising! that! a! high!
capacity!factor!is!required!to!exploit!the!MRC!/!gas!price!differential.!
Despite!DICE!having!a!fast!response!time!to!load!change,!this!analysis!suggests!that!
this!capability!of!DICE!will!not!be!valuable!unless!the!gas!price!is!high.!
The! rest! of! this! report! will! assume! that! DICE! runs! for! as! many! hours! as! the!
maintenance!schedule!allows.!
!
! ! ! 11!
Another! important! point! can! be! made! from! this! diagram.! ! ! Although! SCPC! was!
enabled!in!the!model,!DICE!was!selected!rather!than!SCPC.!!!This!is!a!consequence!of!
the!high!cost!of!construction!of!SCPC!in!Australia.!
!
!
Figure#1#6#Lowest#LCOE#technology#
!
5%#
10%#
15%#
20%#
25%#
30%#
35%#
40%#
45%#
50%#
5# 6# 7# 8# 9# 10# 11# 12# 13# 14# 15#
Capa
city(fa
ctor(
Gas(price((A$/GJ)(
Lowest'LCOE'by'technology'
OCGT'
CCGT'
DICE'
• DICE!appears!more!suited!to!high!capacity!factor!operation!that!for!
peaking!duty!except!at!high!gas!prices!
• The!lower!capital!base!for!DICE!makes!it!a!potential!alternative!to!SCPC,!
which!is!otherwise!challenged!in!Australia!!
!
! ! ! 12!
!
Figure#2#6#Comparison#of#AETA#costs#for#CCGT#and#SCPC#
Figure! 2! shows! the! components! of! cost! for! CCGT! and! SCPC! levelised! cost! of!
electricity! using! AETA! numbers3.! ! ! The! important! point! to! note! is! that! the! cost! of!
SCPC! capex! and!O&M! alone! is!more! than! the! cost! of! capex,! O&M! and# fuel! for! a!
CCGT.! ! !Even!coal!and!emissions!at!zero!cost!will!not!make!a!SCPC!more!attractive!
than!CCGT!on!this!basis.!
BreakSeven!gas!price!in!Figure!2!is!approximately!$11.40/GJ.!
!
!
!#! #
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
3!Emissions!have!been!priced!at!A$33/tonne!to!be!consistent!with!IEA!2010!and!the!rest!of!this!report.!
CCGT$vs$SCPC$AETA$2012$
CCGT$capex$
O&M$
Gas$at$$6.36/GJ$
Emissions$$at$$33/t$
SCPC$capex$
O&M$
Coal$at$$2.14/GJ$
!
! ! ! 13!
4. Engine&modelling&methodology#
The! methodology! to! be! used! involves! development! of! an! engine/generator!
economic!model!in!which!time!between!major!overhaul!is!the!key!variable.!!!The!run!
length!required!for!DICE!to!breakeven!with!alternative!generation!plant!will!then!be!
determined!for!a!number!of!different!schemes.!
Diesel!engines!in!Heavy!Fuel!Oil!(HFO)!service!currently!represent!the!most!arduous!
service!for!which!reliable!data!is!available,!and!represents!a!benchmark!for!the!best!
DICE!performance!that!could!reasonably!be!expected.!!This!study!will!use!the!capital!
costs,!operations!and!maintenance!costs!and!thermal!efficiency!of!HFO!engines!as!a!
benchmark.!
Engine! hours! between! major! overhaul! required! to! breakeven! with! an! alternate!
scheme! will! give! some! indication! of! the! possibility! of! success! of! an! engine!
development! program.! ! ! ! A! result! of! a! few! hundred! hours! suggests! that! little!
additional!development!is!required!for!a!commercial!success.!! !Similarly,!breakeven!
hours!in!excess!of!that!which!is!currently!achievable!in!HFO!service!suggest!that!the!
program!will!be!challenging,!if!not!impossible.!
A! quotation! for! engine! maintenance! running! HFO! was! provided! under! NonS
Disclosure!Agreement!from!a!major!engine!manufacturer4.!! !The!expected!overhaul!
tasks,! spare!parts,! labour!hours! and!overhaul! durations!were!provided.! ! From! this!
data!baseline!maintenance!cost!can!be!readily!calculated.!
The! schedule! is! based! on! intervals! of! 4000! hours,! with! relatively! minor! servicing!
every!4000!hours!and!more!significant!overhauls!included!at!various!multiples!of!this!
interval.!
The!list!of!maintenance!tasks!was!separated!into!activities!unlikely!to!be!impacted!by!
a!change!in!fuel!composition!(Group!1)!and!those!for!which!it!was!considered!that!a!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
4!The!terms!of!this!agreement!are!that!cost!data!in!this!report!will!be!on!the!basis!of!$/MWh.!!Individual!spare!part!costs!and!labour!hours!will!not!be!disclosed.!
!
! ! ! 14!
more!abrasive!fuel!could! impact!service! life!(Group!2).! ! !The!items!listed!in!Table!2!
were!the!basis!of!this!classification.!!
The!model! keeps! costs! for! the!Group! 1! activities! constant.! ! Group! 2! activities! are!
assumed!to!be!required!at!more!frequent!intervals,!resulting!in!higher!costs.!!!Costs!
for! the! total!of!Group!1!and!Group!2!activities!are!calculated! for! ten!years!and!an!
average!cost!per!year!generated.!
It!is!important!to!note!that!all!Group!2!activities!are!assumed!to!be!required.!!!Test!
data! may! demonstrate! that! some! activities! could! be! deferred,! just! as! it! could!
demonstrate!that!some!could!be!required!more!frequently.!!!Until!engine!test!data!is!
available!this!is!the!assumption!that!will!be!used.!
Similarly,!the!duration!of!these!activities!is!estimated!using!the!same!concept!of!base!
Group!1!activities!and!fuel!dependant!Group!2!activities.!
In! this!way,! estimates! for! engine! down! time,! total!manShours! and! spare! part! cost!
were!developed!as!a!function!of!the!overhaul!interval.!
To#summarise:#
• At!4000!hours!between!overhauls,!maintenance!costs!are!the!same!as!for!a!
HFO!engine.!!!Engine!operating!hours!are!set!by!maintenance!downtime!only,!
resulting!in!a!Capacity!Factor!in!excess!of!85%.!
• At! maintenance! intervals! of! less! than! 4000! hours! the! normal! HFO!
maintenance!regime!is!continued!for!the!“Group!1”!components!resulting!in!
no!change!to!the!“Group!1”!costs.!
• At!maintenance!intervals!of!less!than!4000!hours!“Group!2”!component!costs!
and!activities!are!prorated!to!the!HFO!program.!!!A!2000!hour!interval!means!
that!“Group!2”!activities!are!performed!twice!as!often!as!for!the!HFO!engine.!
• At!maintenance!intervals!of!less!than!4000!hours!engine!downtime!is!set!by!
the!sum!of!the!down!time!for!“Group!1”!and!“Group!2”!activities!resulting!in!
increasing! downtime! as! the! maintenance! interval! decreases.! ! ! Engine!
operating! hours! are! set! by! maintenance! downtime! only.! ! ! A! maintenance!
interval!of!500!hours!results!in!a!Capacity!Factor!of!less!than!25%.!
!
! ! ! 15!
The!following!allowances!were!added!to!the!raw!model!output.!
Table#3#6#Maintenance#cost#allowances#
# Value#assumed# Reason#
Freight!and!taxes! 15%!Spare!parts!cost!provided!were!on!
country!of!origin!basis.!
Additional!hours!on!
maintenance!10%!
Hours!were!for!specific!tasks.!!
Allowance!for!preparation!and!
clean!up.!
Premium!on!Group!
2!components!20%!
It!is!assumed!that!higher!
specification!materials!will!be!used!
for!parts!in!severe!service.!
!
Fixed!costs!of!$25,000/MW.year!have!also!been!included.!
! #
!
! ! ! 16!
5. Economic'scenarios#
Performance! of! a! MRC! DICE! generator! only! has! meaning! when! compared! to!
alternatives!that!an!investor!might!choose.!!In!this!section!a!number!of!schemes!will!
be! developed,! each! with! commonly! available! alternatives! that! would! likely! be!
considered!when!selecting!power!generation!technologies.!
Notes!on!the!assumptions!are!in!Appendix!1.!
!
5.1 MRC$from$tailings$stream$on!existing(plant(in(Australia#
This! scenario!models!production!of!MRC!using! the! tailings! stream!from!an!existing!
coal!preparation!plant.!!Such!a!plant!has!been!constructed!and!operated!at!the!Bulga!
mine.!!Cost!and!performance!data!for!this!unit!has!been!provided!by!Glencore.!
The! basic! model! structure! can! represent! a! number! of! variants! depending! on! the!
transportation!costs!selected.!!!Variants!to!be!studied!are;!
1. A! site! on! the! grid! where! MRC! DICE! would! be! competing! against! purchased!
electricity!(i.e.!MRC!transport!is!small!and!market!power!price)!
2. A!site!near!to!a!coal!mine,!near!to!gas!but!distant!from!the!grid!
3. A!site!near!to!a!coalmine,!distant!from!gas,!distant!from!the!grid!and!reliant!on!
liquid!fuel!delivered!by!road.!
In!these!scenarios!the!tailing!stream!is!valued!at!zero!for!the!purposes!of!electricity!
generation.!!The!mine!operator!may!derive!a!value!equivalent!to!the!disposal!costs!
but!this!has!not!been!allowed!for!in!this!case.!
Cost! components! for! scenario! 1! are! shown! in! Figure! 4.! ! ! In! this! scenario! DICE!
operates!for!4000!hours!between!overhauls,!i.e.!the!performance!observed!on!HFO!
engines!and!the!likely!best!that!could!be!expected!from!a!DICE!engine.!
Estimated! LCOE! is! in! the! order! of! $85/MWh! including! emission! costs,! and! about!
$65/MWh!before!emissions,!which!is!higher!than!current!prices!on!the!grid.!
!
! ! ! 17!
!
Figure#3#6#MRC#from#tailings#in#Australia#
#
!Figure#4#6#MRC#from#tailings#compared#to#CCGT#in#Australia.##4000#hours#between#overhaul.!
Exis%ng(prep(plant(
Transport(
CCGT((
Diesel(
Australia)
ROM(Black(coal(
Current(coal(sales(
Exis%ng(tailings(stream.(MRC( DICE(
Transport(
Delivered(gas(
Liquid(fuel(
MRC$capex$
MRC$O&M$
DICE$capex$4000$hours$
DICE$O&M$4000$hours$
Emissions$$A$$33/tonne$
DICE$from$tailings$in$Australia$
compared$to$CCGT$
CCGT$balancing$fuel$Price$A$$6.83/GJ$
!
! ! ! 18!
#A!CCGT!would!need!fuel!at!$6.83!to!match!the!LCOE!of!the!DICE!generator.!
!
Figure#5#6#MRC#from#tailings#compared#to#CCGT#in#Australia.##2000#hours#between#overhaul.#
Some# care# is# required# when# comparing# LCOE# to# current# grid# prices.# # There# is#
significant# surplus# capacity# on# the# NEM# resulting# in# bid# prices# lower# than# that#
required# to# service# capital# on#a#new#build.# # It# is# not# surprising# that#DICE# LCOE# is#
higher#than#current#prices.# #Even#a#new#build#CCGT#with#an#advantaged#gas#price#
would#have#difficulty#competing#on#the#NEM#at#current#prices.##
Figure! 5! shows! that! same! arrangement! but! reduces! the! time! between! DICE!
overhauls!to!2000!hours.!!The!graphic!is!constructed!with!the!incremental!cost!due!
to!decreased!overhaul! interval!distributed!between!capital!service!and!O&M!costs.!!!
Capital!charges!result!from!the!reduction!in!machine!run!hours!and!O&M!from!direct!
labour!and!spare!parts!cost.!!!!
MRC$capex$
MRC$O&M$
DICE$capex$2000$hours$
DICE$O&M$2000$hours$
Emissions$$A$$33/tonne$
DICE$from$tailings$in$Australia$
compared$to$CCGT$
CCGT$balancing$fuel$Price$A$$8.62/GJ$
!
! ! ! 19!
In! other! words;! the! impact! of! reduced! Capacity! Factor! can! be! seen! on! the! DICE!
Capex!bar!and!the!impact!of!direct!maintenance!costs!is!on!the!DICE!O&M!bar.!!This!
method!of!display!will!be!continued!for!all!following!graphs.!
LCOE! is! increased!to!$98/MWh!and!the!balancing!CCGT!fuel!price! is!approximately!
$8.60/GJ,! which! is! just! a! little! more! than! the! gas! price! used! in! the! AETA! 2012!
assessment.!!!The!trend!of!breakeven!fuel!price!with!DICE!run!length!can!be!seen!in!
Figure!6.!
From!this!we!could!infer!that!DICE!with!a!time!between!overhauls!of!approximately!
2300!hours!could!generate!electricity!for!the!same!price!as!a!CCGT!at!the!predicted!
gas!price.!!
The! same! analysis,! excluding! emissions! cost,! gives! a! time! between! overhauls! of!
approximately!1300!hours!to!balance!predicted!gas!price.!
!
Figure#6#6#Run#hours#verses#breakeven#fuel#price#6#Australia#
!
Figure!6!also!shows!the!run!hours!required!to!balance!a!conventional!diesel!engine!
burning!diesel!fuel!transported!by!road.!!The!cost!difference!between!site!generated!
0"
10"
20"
30"
40"
50"
500" 1000" 1500" 2000" 2500" 3000"
Breakeven((fu
el(cost(((A$/GJ)(
Run(hours(between(overhaul(
CCGT"
Diesel"
Nat"Gas"
Diesel"fuel"
Breakeven(alternate(fuel(price(0(Australia(
!
! ! ! 20!
MRC!and!road!transported!diesel!is!large!enough!to!make!the!costs!of!a!DICE!able!to!
run!only!500!hours!between!overhauls!look!competitive.!
!
!
#
5.2 MRC$from$tailings$and$exported$to$DICE$in$Japan#
In! this! section!a!scenario!where!MRC!produced!at!an!existing!Australian!coal!wash!
plant!is!exported!to!Japan!is!considered.!
A!number!of!significant!factors!need!to!be!adjusted!from!the!scenarios!in!section!5.1!
viz;!
1. Tailings!in!5.1!are!valued!at!zero!as!the!MRC!is!effectively!for!own!use.!!!Exporting!
MRC!would!presumably!require!some!financial!incentive.!!!Feedstock!is!valued!at!
$2.00/GJ!in!these!cases.!
2. Freight!to!Japan!is!assumed!at!$20/tonne!covering!Australian!land!transport!and!
sea!freight!
3. Official! interest! rates! in! Japan!have!been!zero,!or! close! to! zero! for!many!years!
now.!!!A!discount!rate!of!5%!for!Japanese!plant!is!assumed!in!line!with!IEA!2010.!
!
• DICE!with!more!than!2000!hours!between!overhaul!could!compete!with!
gas!for!remote!power.!
• DICE!with!500!hours!between!overhauls!could!compete!with!trucked!
diesel!for!remote!power!!
!
! ! ! 21!
!
Figure#7#6#MRC#from#tailings#and#exported#to#DICE#in#Japan#
!
Figure#8#6#MRC#from#tailings#to#DICE#in#Japan.##Compare#to#CCGT.#
Exis%ng(prep(plant(
Transport(
CCGT((
SCPC(
Japan%
ROM(Black(coal(
Current(coal(sales(
Exis%ng(tailings(stream.(MRC( DICE(
Transport(
Indonesian(LNG(
Aust.(coal(
DICE%in%Japan%compared%to%
CCGT%
CCGT%capex%at%5%%
LNG%at%A$%16.30%
O&M%Emissions%%A$%33/tonne%
DICE%O&M%950%hours%
DICE%capex%950%hours%
MRC%capex%MRC%O&M%
MRC%freight%
MRC%feed%A$%2/GJ%
!
! ! ! 22!
!
Figure#9#6#MRC#from#tailings#to#DICE#in#Japan.##Compare#to#SCPC.#
!
Figure#10#–#Run#hours#verse#breakeven#fuel#price#6#Japan#
DICE%in%Japan%compared%to%
SCPC%
SCPC%capex%at%5%%
Coal%at%$A%100/tonne%Newcastle%
O&M%
Emissions%%A$%33/tonne%
DICE%O&M%3000%hours%
DICE%capex%3000%hours%
MRC%capex%
MRC%O&M%
MRC%freight%
MRC%feed%A$%2/GJ%
0"
10"
20"
30"
40"
50"
500" 1000" 1500" 2000" 2500" 3000"
Breakeven(fuel(cost(((A$/GJ)(
Run(hours(between(overhaul(
CCGT"
SCPC"
Nat"Gas"
Coal"
Breakeven(alternate(fuel(price(0(Japan(
!
! ! ! 23!
Figure!8!and!Figure!9!show!the!cost!components!for!a!DICE!generator!to!breakeven!
with!imported!LNG!and!coal!respectively.!
Imported!MRC!to!DICE!could!be!expected!to!be!competitive!against!a!CCGT!at!about!
1000!hours!between!DICE!overhauls.!!!!!
A!sensitivity!using!an!MRC!feed!value!of!$3.50/GJ!(close!to!full!export!price)!moved!
the!breakeven!run!hours!from!950!to!1105.!!!Within!the!accuracy!of!this!analysis!we!
could! conclude! that! the! required!engine!performance! is!not!especially! sensitive! to!
feedstock!price.!!
A!DICE!generator!would!need!to!be!able!to!run!for!3000!hours!to!compete!against!
SCPC!on! imported!coal.! ! The! incentive! for!a! Japanese!utility! to! invest! in!DICE!over!
SCPC!is!not!strong;!the!costs!are!similar!and!there!is!no!additional!fuel!diversity.! !A!
fully! developed! DICE!may! be! of! interest! to! Japanese! utilities! however! it! does! not!
appear!to!be!a!useful!early!target.!
The! incentive!for!coal!producers! is! low!or!even!negative.! ! !Netbacks!on!whole!coal!
supplied!to!the!SCPC!are!likely!to!be!higher!than!for!MRC.!
!
! #
• DICE!could!compete!with!CCGT!on!imported!LNG!at!about!1000!hours!
between!overhaul!
• DICE!will!struggle!to!compete!with!SCPC!in!Japan!with!little!incentive!for!
Japanese!Utilities!or!coal!suppliers!!!
!
! ! ! 24!
5.3 MRC$from$whole$coal!to#MRC$DICE%in%South&Korea#
This!scenario!explores!the!option!of!exporting!whole!coal!to!Korea!and!processing!to!
MRC!near!to!the!DICE!power!station.!!!
Costs!and!yields!for!a!unit!fed!with!whole!coal!are!different!to!those!of!the!tailings!
fed!unit!of!sections!5.1!and!5.2.!!Capital!costs,!operating!costs!and!yields!for!a!plant!
using!15%!ash!export! coal!were!provided!by!Xstrata!Technology.! !Capital! cost!was!
shifted!to!Korea!using!the!ratios!in!Appendix!2.!
Comparison!to!CCGT!running!import!LNG!shows!that!this!scheme!will!breakeven!with!
DICE!running!at!approximately!1000!hours!between!overhauls!in!Figure!12!
Similarly! it! can! be! seen! in! Figure! 13! that! a! DICE! generator! running! at! 4000! hours!
between!overhauls!cannot!compete!with!a!SCPC.!!
!
!
Figure#11#6#MRC#from#whole#coal#in#Korea#
Exis%ng(prep(plant(
Transport(
CCGT((
SCPC(
South&Korea&
ROM(Black(coal(
Export(grade(coal.(DICE(
Transport(
Indonesian(LNG(
Aust.(coal(
MRC(
!
! ! ! 25!
!
Figure#12#6#MRC#from#whole#coal#in#Korea.#Compared#to#CCGT.#
!
Figure#13#6#MRC#from#whole#coal#in#Korea.##Compared#to#SCPC.#
DICE%in%Korea%compared%to%
CCGT%
CCGT%capex%
LNG%at%A$%16.30/GJ%
O&M%Emissions%%A$%33/t%
DICE%O&M%1000%hours%
DICE%capex%1000%hours%
MRC%capex%
MRC%O&M%
Coal%at%A$%100/t%Newcastle%+%$10/t%freight%
DICE%in%Korea%compared%to%
SCPC%
SCPC%capex%
Coal%at%A$%160/t%Newcastle%($10/t%freight)%
O&M%
Emissions%%A$%33/t%
DICE%O&M%4000%hours%
DICE%capex%4000%hours%
MRC%capex%
MRC%O&M%
Coal%at%A$%100/t%Newcastle%($10/t%freight)%
!
! ! ! 26!
!
!
!
5.4 MRC$from$brown$coal$to$DICE$in$Australia#
A! number! of! proprietary! processing! routes! from! brown! coal! to! MRC! are! under!
development.!!!Rather!than!attempt!to!model!a!selection!of!processes,!the!approach!
taken!in!this!review!is!to!explore!the!overall!value!chain!to!determine!the!processing!
cost!envelope!that!makes!brown!coal!MRC!DICE!competitive.!
The!scenario!described!in!section!5.1!–!“MRC!from!tailings!stream!on!existing!plant!in!
Australia”!applied!zero!value!to!MRC!feed,!resulting!in!a!finished!MRC!cost!of!$1.62.!!
If!MRC!from!brown!coal!could!be!produced!for!this!price!the!rest!of!the!analysis!of!
section!5.1!would!be!identical!and!reach!the!same!conclusions.!!!There!are!however!
a!number!of!differences;!
1. Brown!coal!could!be!expected!to!be!valued!in!the!order!of!$0.50/GJ5!!
2. Brown!coal!mines!in!Australia!are!near!to!the!electrical!grid,!meaning!that!MRC!
would!need!to!be!freighted!some!distance!for!remote!area!power!
Private!discussions!with!brown!coal!process!developers!suggest!that!MRC!processing!
costs!in!the!range!of!$1.00!to!$2.00/GJ!are!plausible.!
For!remote!area!power!a!brown!coal!price!of!$0.50/GJ!and!an!MRC!processing!cost!
of!$2.00/GJ!results!in!a!finished!MRC!price!of!$2.50/GJ!and!a!balancing!gas!price!to!a!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
5!Australian!Energy!Technology!Assessment,!BREE,!2012.!!http://www.bree.gov.au/documents/publications/aeta/Australian_Energy_Technology_Assessment.pdf!
• DICE!could!compete!with!CCGT!on!imported!LNG!at!about!1000!hours!
between!overhaul!
• DICE!is!disadvantaged!compared!to!Korean!SCPC!units!!!
!
! ! ! 27!
CCGT! a! little! higher! than! the! forecast! price,! even! with! 4000! hours! between! DICE!
overhaul.! ! ! This! is! not! to! say! that! brown! coal!MRC! cannot! compete! with! gas! for!
remote!area!power.!!Relatively!small!reductions!in!the!delivered!price!of!MRC!would!
match!the!forecast!gas!price.!!!This!sensitivity!is!shown!in!Figure!15.!
A!grid!connected!MRC!DICE!unit!at!a!brown!coal!mine!!(i.e.!no!transport!costs)!would!
breakeven!with!a!new!build!CCGT!at!a!gas!price!of!$7.70,!which!is!a!little!below!the!
forecast.!
!
Figure#14#6#MRC#from#brown#coal#to#DICE#in#Australia.#Compared#to#CCGT.#
!
!
MRC$processing$$2.00/GJ$
MRC$freight$$20/tonne$
DICE$capex$4000$hours$
DICE$O&M$4000$hours$
Emissions$$A$$33/tonne$
DICE$from$brown$coal$in$Australia$
compared$to$CCGT$
CCGT$balancing$fuel$Price$A$$8.70/GJ$
Brown$coal$$$0.50/GJ$
!
! ! ! 28!
!
Figure#15#6#Balancing#gas#price#sensitivity#to#MRC#price#
Once!MRC! has! been! produced,! the! value! chains! for! black! coal! sourced!MRC! and!
brown!are!identical.!!!MRC!produced!from!black!coal!tailings!at!$2/GJ!is!equivalent!to!
$3.90!ex!plant!(and!$5.00!delivered!to!Japan).!!!
The! result! of! comparison!of! brown! coal!MRC!DICE! to! remote! area!diesel! power! is!
very!similar!to!that!obtained!from!black!coal.! ! !The!cost!differential!between!crude!
oil!derived! fuels!and!MRC! is! large!enough! to!make!DICE!competitive!even!at! short!
intervals!between!overhauls.!
5.00$
6.00$
7.00$
8.00$
9.00$
10.00$
11.00$
1.5$ 2$ 2.5$ 3$ 3.5$ 4$ 4.5$ 5$
Blan
cing(gas(pric
e(to(CCG
T((A$/GJ)(
Delivered(MRC((A$/GJ)(
Brown&coal&DICE&at&4000&hours&and&CCGT&
!
• DICE!at!a!brown!coal!mine!needs!4000!hours!between!overhauls!to!
compete!with!a!new!build!CCGT.!
• MRC!produced!for!less!than!$3.90!will!compete!with!export!LNG!for!DICE!
over!1000!hours!
• Brown!coal!DICE!needs!4000!hours!between!overhauls!to!come!close!to!
gas!for!remote!power.!
• Brown!coal!DICE!with!500!hours!between!overhauls!could!compete!with!
trucked!diesel!for!remote!power!!
!
! ! ! 29!
!
Figure#16#–#Run#hours#to#break#even#with#diesel#fuel#
!
!
! #
0"
10"
20"
30"
40"
50"
500" 1000" 1500" 2000" 2500" 3000"
Breakeveb(fuel(cost(((A$/GJ)(
Run(hours(between(overhaul(
Diesel"
Diesel"fuel""
Breakeven(alternate(fuel(price(for(brown(
coal(3(Australia(
!
! ! ! 30!
5.5 Sensitivities#
Sensitivities! around! the! “sweet! spot”! of! MRC! to! Japan! displacing! LNG! to! CCGT!
generation!are!shown!in!this!section.!
All!sensitivities!were!generated!using!a!20%!increase!in!the!relevant!key!assumption.!!
Results!are!shown!in!hours,!which!can!be!compared!to!the!base!case!of!952,!and!also!
as! a! nonSdimensional! slope.! ! In! other!words;! a! sensitivity! of! 1.0!means! that! a! x%!
increase! in! the! subject! assumption! results! in! an! x%! increase! in! the! DICE! hours!
required!to!breakeven.!! !Similarly!a!negative!number!means!that!an!increase!in!the!
assumption!value!results!in!a!reduction!in!hours,!implying!less!engine!development!is!
required!to!breakeven.!
Table#4#6#Sensitivities#
#Base#case#
value#
DICE#balancing#hours#with#
20%#increment#on#base#value#
Delta#hours#(%)#/#
Delta#from#base#(%)#
LNG!price!
(A$/GJ)!16.30! 797! S0.82!
DICE!capex!
(A$/kW)!2308! 2770! 0.42!
Emission!cost!
(A$/tonne!CO2)!33.00! 997! 0.24!
MRC!feed!
(A$/GJ)!2.00! 986! 0.18!
CCGT!capex!service!
(A$/MWh)!18.49! 917! S0.18!
Labour!rate!
(A$/hour)!137.00! 978! 0.14!
MRC!opex!
(A$/tonne)!30.00! 965! 0.07!
DICE!fixed!costs!
(A$/MW.year)!25,000! 962! 0.05!
!! !
!
! ! ! 31!
!Figure#17#6#Sensitivities#"tornado"#chart#!!
From!this!it!can!be!seen!that!LNG!price!and!DICE!capex!have!the!greatest!impact!on!
the!DICE! balancing! hours.! ! ! DICE! fixed! cost! and!MRC!plant! cost! assumptions! have!
relatively!little!impact!on!the!outcome.! !
DICE%fixed%costs%
MRC%capex%
MRC%opex%
Labour%rate%
CCGT%capex%
MRC%feed%
Emissions%
DICE%capex%
LNG%price%
=1.0% =0.8% =0.6% =0.4% =0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0%
Sensi&vity*of*breakeven*hours*to*major*assump&ons*
Delta*breakeven*DICE*hours*(%)*/*Delta*in*key*assump&on*(%)*
DICE*requires*less*development*to*break*even*
DICE*requires*more'development*to*break*even*
!
! ! ! 32!
6. Acknowledgements#
Much!of!the!information!and!many!of!the!ideas!in!this!report!come!from!discussions!
with!the!following!people.!!Their!input!is!gratefully!acknowledged.!
!
Barry!Isherwood!–!Carbon!Connections!
Louis!Wibberley!S!CSIRO!
Shaun!Booth!–!Glencore!
Larry!Silva!–!MAN!Diesel!and!Turbo!
Jeffrey!Moloney!–!MAN!Diesel!and!Turbo!
Raymond!Vinton!–!Wärtsilä!
John!White!–!Ignite!Energy!
Russell!Rolls!–!Ignite!Energy!
Phil!Gurney!–!Brown!Coal!Innovation!Australia!
Dave!Osborne!–!Xstrata!Technology!
Martin!Bakker!–!Xstrata!Technology!
!
!
!
! ! ! 33!
Appendix(1(–!Economic'assumptions#
Assumptions! about! future! exchange! rates! or! commodity! prices! are! of! course!
speculative.! ! The! approach! taken! in! this! study! is! to! provide! historical! values! for!
context! and! then! to! be! clear! about! the! assumption!made.! ! ! Sensitivities! to! these!
assumptions!can!then!be!explored!as!required.!
In!general,!future!estimates!will!be!close!to!current!values.!
All! analyses! show! the! components! of! total! LCOE! in! the! consistent! units! of!
AUD/MWh,!making! the! sensitivity! of! the! total! to! variation! in! the! component! cost!
assumptions!readily!observable.!
!
!
Figure#18#–#Australian#dollar#to#US#dollar#conversion###www.oanda.com#
!
#
!
!
0.90$
0.60$
0.70$
0.80$
0.90$
1.00$
1.10$
1.20$
Oct-2008$ Mar-2010$ Jul-2011$ Dec-2012$ Apr-2014$
AUD/
USD
&
AUD&/&USD&
!
! ! ! 34!
!
Figure#19#6#Japanese#Yen#to#US#dollar#conversion#www.oanda.com#
!
!
Figure#20#6#Korean#Won#to#US#dollar#conversion#www.oanda.com#
!
!
!
60#
70#
80#
90#
100#
110#
Oct+2008# Mar+2010# Jul+2011# Dec+2012# Apr+2014#
USD
$/$JP
Y$
USD$/$JPY$
100.0#
600#
800#
1000#
1200#
1400#
1600#
1800#
Oct+2008# Mar+2010# Jul+2011# Dec+2012# Apr+2014#
USD
$/$KRW
$
USD$/$KRW$
1050#
!
! ! ! 35!
!
Figure#21#6#Euro#to#US#dollar#conversion#www.oanda.com#
!
!
Figure#22#6#Australian#thermal#coal#www.indexmundi.com#
!
!
0.40$
0.50$
0.60$
0.70$
0.80$
0.90$
1.00$
Oct.2008$ Mar.2010$ Jul.2011$ Dec.2012$ Apr.2014$
USD
$/$EUR$
USD$/$EUR$
0.71$
0"
20"
40"
60"
80"
100"
120"
140"
160"
Oct+08" Mar+10" Jul+11" Dec+12" Apr+14"
USD
$/$to
nne$
Australian$thermal$coal$4$Newcastle$
90.0"
!
! ! ! 36!
!
Figure#23#6#Indonesian#LNG#in#Japan##www.indexmundi.com#
!
All!costs!are!modelled!in!2013!Australian!dollars,!making!conversion!from!the!various!
available! cost! benchmarks! necessary.! ! ! Consumer! Price! Index! (CPI)! and! Producer!
Price! Index!(PPI)!are!available!at!regular! intervals! in!all!of!the!countries!of! interest,!
however!capital!cost!data!is!sparse!over!the!relatively!short!timeframes!involved.!
A!proxy!capital!cost!index!for!Japan!and!Korea!has!been!derived!using!30%!of!CPI!and!
70%!PPI.!!!These!weights!are!selected!to!approximate!the!labour/materials!split!on!a!
power!station.!!!This!approximation!is!expected!to!be!reasonable!for!Japan!and!Korea!
as! a! power! plant! in! each! country! would! be! largely! based! on! locally! produced!
equipment.!!The!time!period!(2010!to!2013)!is!relative!short!and!conveniently,!prices!
during!this!period!have!been!relatively!static.!
Capital! cost! inflation! for! Australia! is! required! to! adjust! the! AETA! 2012! prices! to! a!
2013!basis.!!An!authorative!basis!for!this!adjustment!over!such!a!short!period!has!not!
been!identified!for!this!study.!!!Anecdotally,!the!very!high!capital!cost!inflation!seen!
over!the!last!few!years!has!eased!somewhat,!however!it!is!still!thought!to!be!higher!
than!CPI.! ! !An!arbitrary!allowance!of!4%!has!been!used! to!adjust!2012!capital!and!
operating!costs!to!a!2013!basis.!
0"
5"
10"
15"
20"
25"
Oct)08" Mar)10" Jul)11" Dec)12" Apr)14"
USD
$/$m
m$BTU
$
Indonesian$LNG$in$Japan$
15.50"
!
! ! ! 37!
Any!error!in!these!proxies!for!capital!cost!over!these!short!time!periods!are!likely!to!
be!small!relative!to!the!broader!assumptions!required!to!develop!the!DICE!run!length!
scenarios.!
!
# Jul62010# Jul62013# Delta#
Japan!CPI! 99.8! 100.0! 0.20!
Japan!PPI! 100.0! 102.0! 2.00!
Japan!capital!proxy! ! ! 1.46!
Korea!CPI! 99.6! 107.2! 7.60!
Korea!PPI! 115.0! 105.5! S9.50!
Korea!capital!proxy! ! ! S4.37!
Figure#24#6#Inflation#assumptions#6#www.tradingeconomics.com
!
General#notes#
• All!analysis!is!before!tax!
• Emissions!are!costed!at!USD!30/tonne!(A$!33),!consistent!with!IEA!modelling.!!!
• Discount! rates! vary! across! the! chain! in! an! attempt! to! represent! the! various!
industries! and! shareholders! involved.! ! ! Electricity! generation! in! Australian! and!
Korea!is!modelled!at!a!discount!rate!of!10%,!consistent!with!the!assumptions!of!
the! IEA.! ! Generation! in! Japan! is! modelled! at! 5%,! also! consistent! with! IEA!
assumptions! to! allow! for! the! long! term! low! interest! rates! in! Japan.! MRC!
production! in! Australian! uses! a! discount! rate! of! 15%! on! the! basis! that! these!
investments! are! likely! to! be! made! by! the! resource! companies! and! therefore!
competing!with!capital!in!that!industry.!
• Capacity! factor! of! the! MRC! unit! is! not! varied! with! DICE! availability! as! set! by!
overhaul! interval.! ! This! implies! that! trading! options! for! MRC! exist! to! balance!
plant!capacity.!
!
!
! ! ! 38!
Appendix(2(–!DICE%generation%costs%and%performance#
A!range!of!capital!cost!estimates!for!DICE!generators!is!available!in!the!literature!and!
other!sources!are!summarised!in!this!section.!
Vuorinen6!provided!an!authorative!reference!for!a!wide!range!of!thermal!generating!
technologies,! including! medium! speed! diesel! plant! running! HFO.! ! Total! installed!
capital! cost! for! a! HFO! plant! is! listed! as! €! 991/kWe! for! commissioning! in! 2012.!!
Location!for!this!plant!is!not!specified.!!
US! DOE! estimated! a! factor! of! 20%! for! the! capital! cost! increment! between! a! HFO!
engine!and!DICE.!
Allowing! for! escalation,! currency! and! the! DOE! factor! gives! a! current! day! total!
installed!cost!of!approximately!$A!2100/kWe.!
AETA!2012!published!figures!of!$A!2285/kWe!(2012)!for!both!low!and!medium!speed!
diesels.!!This!has!been!escalated!to!$A!2375/kWe!(2013)!for!this!study.!
Glencore! provided! an! internal!model! of! an!MRC!DICE! unit,!which! included! a!DICE!
capital!cost!of!A$!2315/kWe.!!!This!number!was!based!on!2010!prices!from!an!engine!
manufacturer!and!included!allowances!for!EPC!and!owners!costs.!
Table#5#6#DICE#parameters,#adjusted#from#source#to#this#study#
Source# Capital#(A$/kWe)# Efficiency#(HHV)#
Vuorinen!! 2,100! S!
AETA!2012! 2,375! 50%!
Glencore! 2,315! 48%!
!
AETA!2012!(adjusted!to!2013)!will!be!used!in!this!study.!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
6!Planning!of!Optimal!Power!Systems,!Asko!Vuorinen!2009!!ISBN!978S952S67057S1S1.!!!!
!
! ! ! 39!
Capital! costs! of! DICE! are! also! required! in! Japan! and! Korea.! ! ! The! split! of! major!
equipment,! local! construction!materials! and! labour! for! DICE! is! similar! to! a! CCGT7.!!!
From!this!it!could!be!inferred!that!the!ratio!of!CCGT!installation!cost!in!Japan,!Korea!
and!Australia!would!be!good!analogue!for!DICE.!
Gas!turbines!and!large!diesel!engines!are!manufactured!(under!licence)!in!both!Japan!
and!Korea!making!local!costs!accessible!for!the!major!equipment,!which!is!the!bulk!
of!the!cost.!
Location#
Overnight#cost#
(USD/kWe)#
Per#IEA8#
DICE#capital#cost##
(2013#$A/kW)#
Australia! 1,594! 2,375!
Japan! 1,549! 2,308!
Korea! 643! 958!
!
!
Emissions!will!be!based!on!the!assumption!of!88.4!kg!CO2/GJ!black!coal!consumed!
and! 93! kg! CO2/GJ! for! brown! coal9.! ! For! 50%! efficiency! this! equates! to! 636! kg!
CO2/MWh!for!black!coal!and!670!kg!CO2/MWh!for!brown!coal.!
! #
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
7!AETA!2012!8http://www.worldenergyoutlook.org/media/weowebsite/energymodel/ProjectedCostsofGeneratingElectricity2010.pdf Table 3.7b!9!http://www.climatechange.gov.au/sites/climatechange/files/documents/03_2013/ngaSfactors.pdf!Table!1.!
!
! ! ! 40!
Appendix(3(–!Alternative*generation(costs#
Potential! investors! in! DICE! will! make! an! assessment! of! a! range! of! generation!
technologies!before!making!their!investment!decision.!! !Levelised!Cost!of!Electricity!
of!each!of!the!alternatives!will!be!one!component!of!the!decision.!
The!analysis!in!this!study!compares!the!LCOE!of!DICE!under!a!range!of!fuel,!emission!
and!operating!cost!scenarios!to!the!alternatives!making!models!for!capital,!operating!
and!emission!costs!of!CCGT!and!PC!necessary.!
Costs! for! generation!plant! alternatives! to!MRC!DICE!have!been!derived! from! IEA10!
and!AETA11!data!for!Asian!and!Australian!plant!respectively.!
Korean! and! Japanese! plant! fuel! can! reasonably! be! based! on! international! export!
price! however! the! degree! to!which! Australian! domestic! fuels! costs! are! decoupled!
from!the!export!price!is!uncertain.!!!AETA!data!for!fuels,!sourced!from!ACIL!Tasman,!
will!be!used!for!comparison!purposes.!
Discount!rates!of!5%!and!10%!are!used!in!IEA!2010!and!a!rate!of!10%!is!used!in!AETA!
2012.! ! ! This! study!will!maintain! the! assumption!of! 10%!discount! rate! for!Australia!
and! Korea,! but! will! use! the! alternate! IEA! case! of! 5%! for! Japan! on! the! basis! that!
Japanese!official!interest!rates!have!been!zero!for!some!time.!
!
!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
10Projected!Cost!of!Generating!Electricity,!IEA,!2010!!http://www.worldenergyoutlook.org/media/weowebsite/energymodel/ProjectedCostsofGeneratingElectricity2010.pdf!!11Australian!Energy!Technology!Assessment,!BREE,!2012.!!http://www.bree.gov.au/documents/publications/aeta/Australian_Energy_Technology_Assessment.pdf!
!
! ! ! 41!
Parameter# Units#
Japan#
CCGT##
5%#
Japan#
PC##
5%#
Korea#
CCGT##
10%#
Korea#
PC##
10%#
Plant!capacity!(net)! MW! 1600! 800! 692! 961!
Plant!capacity!factor! S! 85%! 85%! 85%! 85%!
Thermal!efficiency! S! 55%! 41%! 57%! 42%!
Investment!cost! USD/kWe! 1863! 2935! 704! 960!
Decommissioning!
cost!USD/MWh! 0.12! 0.11! 0.02! 0.01!
Fuel!cost! USD/MWh! 72.58! 31.61! 69.54! 30.78!
Emissions!(USD30/t)! USD/MWh! 11.02! 23.88! 10.38! 23.5!
O&M!cost!! USD/MWh! 5.55! 10.06! 4.12! 3.84!
LCOE! USD/MWh! 105.14! 88.08! 93.63! 71.12!
Figure#25#6#Raw#data#from#IEA#2010#
!
IEA!2010!data!is!summarised!in!Figure!25!above.!!These!data!have!been!transformed!
to! AUD! 2013! basis! using! the! exchange! rates,! inflation! rates! and! fuel! costs! as!
described! in! Appendix! 1.! ! ! Decommissioning! cost! has! been! added! to!O&M! in! this!
analysis.!
Data! from! AETA! 2012! has! also! been! converted! to! 2013! using! the! assumptions! of!
Appendix!1!and!included!as!a!reference.!!Fuel!costs!are!set!at!the!2012!NSW!medium!
case!price!and!held!constant!real.!!Emission!costs!are!constant!USD!30/t!to!match!IEA!
2010!data.!
Figure!26!and!Figure!27!summarise!the!generation!costs!used!in!this!study.!
#
!
!
!
!
! ! ! 42!
!
Parameter# Units#
Japan#
CCGT##
5%#
Japan#
PC##
5%#
Korea#
CCGT##
10%#
Korea#
PC##
10%#
AUS#
CCGT##
10%#
AUS#
PC##
10%#
Capital! AUD/MWh! 18.49! 26.12! 10.38! 14.09! 17.30! 61.67!
O&M! AUD/MWh! 6.52! 11.70! 5.05! 4.70! 5.59! 14.50!
Fuel! AUD/MWh! 98.41! 38.93! 94.29! 37.91! 46.26! 18.39!
Emissions!
(A$!33/t)!AUD/MWh! 12.12! 26.27! 11.42! 25.85! 12.14! 25.51!
LCOE! AUD/MWh! 135.55! 103.02! 121.24! 82.54! 81.29! 120.07!
Figure#26#6#Components#of#LCOE#in#AUD#2013#
!
!
Figure#27#6#Components#of#LCOE#in#AUD#2013#
CCGT$ PC$ CCGT$ PC$ CCGT$ PC$
Japan$ Korea$ Australia$
Capital$
O&M$
Fuel$
Emissions$
!
! ! ! 43!
Appendix(4(–!O&M$labour$rates#
A!fully!built!up!rate!of!A$!160/hour!has!been!assumed!for!contract!O&M!labour! in!
Australia.! ! ! This! rate! has! been! adjusted! to! Japanese! and! Korean! rates! using! the!
average!weekly!manufacturing!wage!index!the!respective!countries12!averaged!over!
the!year!2013.!
#
Country# Labour#rate#(A$/hour)#
Australia! 160.00!
Japan! 137.32!
Korea! 27.00!
!
!
!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
12!http://www.tradingeconomics.com/australia/wagesSinSmanufacturing!!