government guarantees facilitate flow of capital – boa
TRANSCRIPT
Weekly News 28 June 2013
The Treasury is to underwrite a £75m
loan for the Drax Power Station in North
Yorkshire, helping project sponsors get
Friends Life to agree to a cheaper debt –
a £75m loan maturing in June 2018.
“Government-backed institutions have
stepped into the funding gap. Capital markets,
meanwhile, have to continue to add on top of
this,” he said.
More clarity on EMR will facilitate debt financing Asked if investors are willing to come forward
with sufficient funding to spur swift investment
in much-needed new capacity, Lynch remained
positive: “Yes, there is enough cash out there,”
he stressed, suggesting “Once there is clarity
on the EMR, the capital will be flowing from a
myriad of sources.”
Investors need a clear outlook beyond 2020,
if they are to take investment in infrastructure
projects with a pay-back period with over 40
years on average.
Shift towards moreinstitutional debt Geoffrey Spence, CEO of Infrastructure UK at
HM Treasury, in contrast, was more pessimistic
on the availability of financing: “The demand
on balance sheets of the corporates are too big
for them to meet, so there is an accelerated
shift towards institutional and government-
backed long-term debt as many banks are no
longer prepared to lend long-terms,” he cau-
tioned at a podium discussion at the Econo-
mist’s UK Energy Summit 2013.
“A lot of the money is looking for safe in-
vestments, so the Government aims to help by
providing long-term sovereign guarantees to
support investment. We’ve done one of these
deals,” he said referring to the funding pro-
vided for Drax Power Station.
The Chancellor has extended the infrastruc-
ture guarantee scheme to 2015 as it aims to
support up to 25 projects with a combined cap-
ital value of up to 45 billion. Most of the proj-
ects are expected to be in the energy sector.
Government guarantees facilitateflow of capital – BoA Merrill Lynch
EUROPEAN MARKETSSW Düsseldorf deal spursgas buyers to press Statoilfor similar terms 3
THE UK ENERGY SUMMIT 2013 Special report 4
US MARKETSObama's proposes carbonlimits for fossil plants 5
Capacity additions don’tkeep pace with demand 6
COGENERATIONSelling heat makes German plants profitable 7
PROJECTS & FINANCEPort Ambrose pipeline to supply new gas-fired capacity in New York 11
Sleeping giants: Dehumid-ification is key to preserve mothballed plants 13
continued on page 2
AGENDA
Relying on bank loans for energy infrastructure projects in the UK isnot viable in perpetuity. The government’s £40 billion guaranteescheme, however, may facilitate the flow of capital, forecast JohnLynch, Head of EMEA Power, Utilities and Renewables at Bank ofAmerica Merrill Lynch.
continued on page 2
Gazprom ready to pay €227m to snap up first power plant asset in Europe Russia's gas export monopoly Gazprom has signed a Letter of Intent (LoI) withEnel to buy the entire share of Marcinelle Energie, a 420MW combined cycle gasturbine power plant in Belgium, for 227 million euros on a cash and debt free basis.The asset, located in Wallonia, will be Gazprom’s first power plant in Europe.
The deal was forged by Enel chief executive Ful-
vio Conti and Gazprom CEO, Alexei Miller at
the side-lines of the St. Petersburg International
Economic Forum late on Friday.
"This Letter of Intent paves the way for a
binding and final agreement, whose final terms
and conditions shall be agreed upon and executed
by the end of September 2013," Enel said. Before
the transaction can be executed, however, it needs
to be authorised by the competition and regulatory
authorities.
Enel in 2012 raised its stake in the Marcinelle
asset to100 percent by acquiring the outstanding
20 percent from Dunferco, a steel corporation.
Initially, Enel entered 80 percent of Marcinelle
Energie SA in June 2008, leaving the remaining
share to Dunferco.
Marcinelle Energy, a 420-megawatt CCGT in Wallonia
Special edition for conference on
‘The future of Gas-to-Pow
er
in Germ
any’
Snapping up gas-to-power assets in EuropeGazprom's move comes as little surprise to in-
dustry observers, as it had repeatedly tried to
snap up gas-fired power plant assets in Europe.
This shift in strategy to venture into downstream
markets is aimed at complementing Gazprom's
traditional business of selling gas under long-
term contracts to major European utilities.
Going downstream and owning power gen-
eration assets in Western Europe would suit
Gazprom at a time when its traditional gas off-
takers are adamantly seeking discounts to oil-
indexed long-term import contracts, and
demand for Russian pipeline gas is curtailed by
the rising share of LNG supply, gas supply
from Norway and discounted US coal exports.
Ongoing talks over assets in Germany, the Netherlands, and in the UKBefore signing the Letter of Intent to buy
Marcinelle, Gazprom has been advancing
negotiations to buy power plants in Germany,
the Netherlands, and the UK.
"At the present time, Gazprom is evaluating
the possibility of buying modern steam-gas
electric stations on several European markets,
where the positions of gas power generation
look most attractive," Gazprom confirmed to
Gas to Power Journal.The Russian gas giant had also been in talks
with Denmark's Dong Energy, seeking to take a
50% stake in the Dong's gas-fired Severn
Power Station (824 MW)
near Newport in South
Wales. It also pushed to
become a third stake-
holder in a Rotterdam
gas-fired plant that Dong
operates under a 50:50
joint venture with Eneco,
while eying Dong's plant
in Ludwigsau, Hesse in
Germany.
While the negotia-
tions with Dong are
"very promising",
according to Gazprom
CEO Alexey Miller,
Germany's RWE in early
2012 pulled out of talks over a potential joint
venture for building and operating gas-fired
power plants in Germany, the Netherlands and
in the UK.
The Federal State of Bavaria, meanwhile,
ratified a roadmap for cooperation in power
generation and gas supply that could serve as a
springboard for Gazprom to venture into the
German downstream market.
In eastern Germany, Gazprom is testing the
economic viability of investing in building a
1,350 MW gas-fired power plant in Lubmin
near the landfall point of its 55 Bcm/year Nord
Stream pipeline that crosses the Baltic Sea
from Vyborg, Russia. The profitability of a
Gazprom-owned gas power plant in Lubmin
would benefit from cheaper delivery costs of
gas supply through Nord Stream which is ma-
jority-owned by the Russian gas exporter.
Agreeing on terms of gas supplythrough South StreamThe Russian high-level meeting in St. Peters-
burg also served as the backdrop for Gazprom
and Enel to agree on the basic conditions for
the sale and purchase of natural gas supplied to
Europe through the proposed South Stream
pipeline.
Gazprom is keen to advance South Stream,
as a pipeline project designed to bypass
Ukraine and scheduled to deliver gas to south-
eastern Europe by 2017.
Going downstream amid dwindling gas sales to EuropeThere is a risk, however, that Europe's dwin-
dling demand for natural gas could persist in a
prolonged recession which may make it diffi-
cult for Gazprom's long-standing buyers to
fully commit to pre-arranged gas off-take
agreements.
Sales of Russian gas to the EU in 2012
plunged by nearly one-tenth, mainly due to
continental European power producers switch-
ing to cheaper coal instead of gas as a fuel to
fire their plants.
Setting aside €3.59bn for potential price rebatesKeen to compete with Qatari LNG supplies to
Europe that are sold based on traded spot gas
prices, Gazprom had to set aside €3.59 billion
($4.7bn) to cover potential gas price rebates to
European customers this year.
RWE said it expects compensation from
Gazprom dating back to spring 2010 as
part of an out-of-court settlement that would end a
price arbitration case over gas import contract.�
Gas to Power JournalPublisherStuart Fryer
EditorAnja KarlTel: +44 (0)207 [email protected]
ReportersCristina BrooksMichal ZukRamadas RaoTel: +44 (0)207 0173402
AdvertisingNarges Jodeyri Tel: +44 (0)207 [email protected]
EventsBarbara CanalsTel: +44 (0)207 [email protected]
Subscriptions Stephan M. VenterTel: +44 (0)207 [email protected]
ProductionVivian CheeTel: +44 (0) 20 8995 [email protected]
� TECHNOLOGY & INNOVATION GTP Journal 28 June 20132continued from page 1
continued from page 1 bottom story
Alexey Miller signing South Stream
Investors seek “not warm wordsbut contracts”Structural changes through the Electricity Mar-
ket Reform are supported by the Treasury,
Spencer said, stressing the need for visible and
clear-cut policies to free-up debt and equity fi-
nance for new-build power generation capacity.
“Investors will seek an independent frame-
work and don’t want warm words but con-
tracts, so long-term CfD can give them protec-
tions against any future regulatory changes that
may occur,” he said. �
Russian gas supply from Yamal
28 June 2013 GTP Journal EUROPEAN MARKETS � 3
Front-runner Stadtwerke Düsseldorf
struck a deal for a volume of less than 1
Bcm/year over a 15-year period, ear-
marked to fuel its upcoming 600-MW
combined-cycle gas turbine power plant
(CCGT) in Lausward near Düsseldorf,
Germany.
"We have interested an interesting phase as
pricing terms start to get moving," a senior
trader at German utility commented without
disclosing the status of talks with Statoil.
RheinEnergie Trading and Trianel are ru-
moured to be at an advanced stage of negotia-
tions with Statoil over similar gas supply
conditions as Stadtwerke Düsseldorf. Heads of
Gas Portfolio Management at the respective
two utilities did neither confirm nor deny these
rumours to Gas to Power Journal.
Price indexed to basket of electricity, carbon and gas pricesIndexing the pricing structure of long-term gas
supply contracts to a basket of electricity, car-
bon and natural gas prices is deemed an inno-
vative offer from Statoil, one of Europe's key
gas suppliers, after buyers have repeatedly
called to extend the volume gas purchase in-
dexed to spot prices.
Statoil and Gazprom in the aftermath
of the 2009 recession had both con-
ceded to sell 15 percent of their con-
tracted long-term gas supply volumes
on a spot price basis.
Commenting on the gas supply con-
tract, Dr. Udo Brockmeier, CEO of
Stadtwerke Düsseldorf said Statoil
would share the utilities' vision on the
development of the energy market and
the importance of gas-to-power projects
in Germany.
The accord was struck in the face of
adverse profit margins in Germany for burning
gas to generate electricity (spark spread) and in
the absence of capacity mechanism.
Accord struck despite Germany’s“unfavourable” G2P regulation
Rune Bjørnson, senior vice
president responsible for Sta-
toil's natural gas business, said
Germany would be a "key
market" for Statoil. The long-
term gas supply deal with
Stadtwerke Düsseldorf is "a stepping stone for
Statoil's strategy to promote gas in the power
segment throughout Europe in general, but in
Germany specifically."
"The [long-term] agreement was possible
despite very unfavourable regulatory frame-
work for gas-to-power," he underlined, hinting
that German regulators and policy makers are
still hesitant to introduce capacity markets to
remunerate fossil plant operators for making
capacity available at short notice.
The municipal utility of Düsseldorf decided
in December 2012 to invest into a new CCGT on
its existing power plant facility in Lausward with
a view to producing both electricity and district
heat. Selling heat into the local grid will be
vital to operate the plant in a profitable manner,
so plant dispatch will be largely heat-driven. �
SW Düsseldorf deal spurs German gas buyers to press Statoil for similar contract terms A plethora of German gas buyers are engaged in negotiations with Statoil to obtain similar "innovative pricing conditions" for gas supply as Stadtwerke Düsseldorf, which managed to secure supplies indexed to a basket of electricity, carbon and gas prices.
Gas is crowded out in Germany by renewables and, paradoxically, coal Gas as a fuel for power generation in Germany is "crowded out by windand solar and, paradoxically, by coal-fired capacity", E.on chief execu-tive Dr. Johannes Teyseen said calling on policy makers to take swiftaction to remedy the inherent paradox of the Energiewende.
Germany's largest power producer,
along with all other fossil power
producers in the country, remains
concerned above all about the
profitability of its legacy core business in con-
ventional generation.
Cheap coal, failure of EU-ETS"Many gas-fired power plants in Germany are
threatened by closure because their fuel is rela-
tively more expensive ... and because the EU
Emissions Trading Scheme
(EU-ETS) is failing completely
in its role of promoting climate
protection," he said.
The paradox of the En-
ergiewende policy is that gas-
fired power plants in particular are urgently
needed to ensure stable power supply and
backup intermittent renewable energy while
keeping carbon emissions as low as possible.
Teyseen called on policy makers to develop
a new market design for the power market, "a
design that contains fair rules for maintaining
reserve capacity and long-term incentives to
encourage the construction of new assets."
More than 8GW up for closure by end-2015He warned that until this new market design is
in place, the E.on will be "even more rigorous
about reducing costs". It is reviewing the prof-
itability of individual assets with an aggregate
capacity of roughly 11 Gigawatts across Eu-
rope and has already decided to withdraw more
than 8 gigawatts by the end of 2015.
"We won't stand idly by while our power
plants continue to operate in the red," Teyssen
said in a stark warning to policy makers in Berlin.
Though E.on is keen collaborate the government
and the regulator to find a viable solution oth-
erwise "we'll take action on our own", he said.
In the run-up to a general election in
September it is, however, unlikely that any
swift action and ground-breaking decisions on
Germany's future power market design will be
taken in due course. �
Rune Bjørnson
Coking Coal
Statoil gas pipline in Germany
Dr. JohannesTeyseen
� THE UK ENERGY SUMMIT 2013 – SPECIAL REPORT GTP Journal 28 June 20134UK's first capacity auctions to take place in 2014 First auctions under the UK's capacity market will take place - subject to State Aid approval - in 2014, for the delivery of flexible electricity capacity from the winter of 2018-19, the government said today. The Capacity Market, along with long-term Contract for Differences (CfDs) is meant to spur infrastructure investment of up to 100 billion pounds.
“The Electricity Market Reform
(EMR) is a market-based means
to ensure the transition towards a
low-carbon economy, though it
cannot exclude the state," Energy and Climate
Change Secretary, Edward Davey, said, main-
taining that "Only the state can restructure the
market at a cost the consumer can bear."
Looking to 2050 and beyondSolutions that the Government is designing
"are looking up to 2050 and beyond," and are
intended to give investors some clear visibility,
Davey said at The Economist's UK Energy
Summit prior to the announcement in the
House of Commons on the Energy Bill.
New-build flexible capacity is urgently
needed to maintain an adequate supply margin
– "the safety blanket over and above expected
demand – for 2018 onwards".
"We think the EMR will drive investment,
but it will not tackle the immediate crisis – the
crunch [in capacity] over the coming year,"
Davey said. Providing the right incentives and
the right framework in a timely manner is vital
to make investment forthcoming, as the regu-
lator Ofgem has repeatedly warned of tighten-
ing reserve margins that put security of power
supply at risk.
The risk of power shortages has tripled in a
year, Ofgem said today, painting a bleak pic-
ture with consumers at risk of having to pay
higher bills as spare power capacity could fall
below 2 percent.
Now that the timeline for the launch of a
Capacity Market is in place, Ofgem and Na-
tional Grid are finalising steps they could take
to ensure that mothballed power plant or de-
mand response is available if needed in the
middle of the decade.
CfDs help reduce cost of capitalThe administrative strike price for CfDs will
be set by the Department for Energy and Cli-
mate Change (DECC). "CfDs will make it
cheaper to deliver low-carbon generation by
around £5 billion up to 2030, because they will
deliver cost of capital reductions that cannot be
achieved through existing policy instruments,"
the government said.
Strike prices for renewable technologies
under the CfD scheme, announced today are
aimed at making the UK market one of the
most attractive for developers of wind, wave,
tidal, solar and other renewables technologies.
Renewables are meant to contribute more than
30% of total power by 2020.
EMR – a four stage processDavey outlined that the EMR will be rolled-out
in four stages: Phase 1 will entail CfDs to en-
sure investment in low-carbon capacity, Phase
2 will see technology-specific auction, fol-
lowed by technology-neutral auctions in Phase
3 in the 2020ies. Finally, all technologies will
have to "compete on cost" in Phase 4.
"Through new carbon fossil fuels such as
shale gas, we seek to cushion the country against
price risks and ensure energy security," Davey
said tough he was quick to admit that Britain
also needs more interconnectors to allow for im-
porting electricity from neighbouring markets.
Retorting allegations of the UK Climate
Change Commission that the Government would
be "relying on the recession to meet its climate
change targets", Davey said elaborated on diffi-
culties of the UK in meeting its carbon goals.
"There is a short-term problem: coal prices are
going down as a result of the US shale gale, so
the use of more-emissions intensive coal in
power generation in Europe is going up." �
Shale gas find not quick-fix for UK operators, says MP The UK Department of Energy and Climate Change (DECC) has announced plans to exploit newfound shalegas reserves, but this may not mean cheap power. “Shale gas’s impact on price will be much less than whatwe have seen in the US. The roll-out is likely to be a bit slower [than in the US] due to communityresistance against fracking,” commented Tim Yeo, Chairman of the UK Energy and Climate Select Commit-tee said at The Economist's UK Energy Summit 2013 in London.
ABritish Geological Survey (BGS)
study, compiled in association with
DECC, revised some estimates of
the volume of shale gas reserves in
the UK, increasing findings of shale gas by
25,000 percent.
The BGS found the motherload of shale gas
in parts of North West, East Midlands, and
Yorkshire and the Humber, but it is doing fur-
ther work to assess the South Eastern UK.
New figures increase estimates of shale gas
reserves to 1329 trillion cubic feet, or between
822 and 2281 trillion cubic feet.
£100,000 in funding set to spur shale gas explorationUK’s head financial executive, Chancellor of
the Exchequer George Osborne released further
incentives in the government’s regular Spend-
ing Review, he intended to “put Britain at the
forefront of exploiting shale gas”. For produc-
ers, this will mean easier permitting and ap-
proval processes, as well as tax incentives.
The DECC mentioned in a press release a se-
ries of shale-gas exploration incentives launched,
including £100,000 in community benefits per
well where fracking takes place and 1percent
of revenues at production stage to communities.
Shale gas is still largely undeveloped in the
UK, although the DECC expects this to change,
and a spike in licencing activity next year.
In a similar report on shale gas compled in
2010 by BGS and DECC they also found re-
serves in the same areas of northern England, in-
cluding areas near Nottingham and Blackpool.
Osborne in 2012 launched a set of tax breaks
intended to stimulate shale gas exploration.
The tax allowances planned would reduce
the tax rate on shale gas production from 62 to
30 percent, said Price Waterhouse Coopers. � Shale gas in the Northwest of the UK
This was stated in response to the Presi-
dent’s memo to the Environmental Pro-
tection Agency (EPA), directing that it
should issue new carbon standards for
all US power plants by 2014. The rules ought
to be finalised no later than June 1, 2015 and
implemented in 2016.
Another recent move by the executive, sin-
gled out by TPH Energy Research, was the re-
vision of the social costs of carbon. It claims
that a higher price must be paid for electricity
based gas generation in the US, as the amount
needed to be earned from gas-fired plants to
break even, would need to rise $2.50+/mmbtu.
Even so, utilities can still benefit from
adding new-build gas-fired generation, it said,
as the need for backup capacity for renewables
generation increases.
Gas – bridging fuel forglobal power producers The US in 2012 became the leading producer
of natural gas the cleanest-burning fossil fuel.
Amid industry plans to export US natural gas,
The President’s Climate Action Plan calls natu-
ral gas a “bridge fuel for many countries as the
world transitions to cleaner sources of energy.”
The executive plans to set up a body to
share natural gas distribution best practices in-
ternationally “to promote fuel-switching from
coal to gas for electricity production and en-
courage the development of a global market for
gas.” However, it does not specifically set out
to promote gas-fired generation in the US.
Forthcoming closure of 1/3 of coal plants “In the aggregate, this adds up to a shutdown of
roughly one-third of US coal-fired generating ca-
pacity within the space of a decade,” said Clear
View Energy Partners, noting that CCS allowance
and deadline schedule could make a difference.
A proposed cut in carbon emissions would re-
quire retirement of 70GW of coal-fired capacity
by 2020, the Partners said in an estimate using
data on coal emissions provided by the non-
profit group, Natural Resources Defense Coun-
cil. These closures are added to those required by
the implementation schedule of the EPA’s pre-
existing Mercury and Air Toxics Standards.
This beating the US is giving its coal-fired
plants through carbon emissions requirements
may only take place on US soil: in fact, the ac-
tion plan is ambivalent toward coal, encouraging
international “clean coal” through partnerships
of “China, India, and other countries”.
Resistance to environmental laws The cap on emissions proposed is an executive
branch-only regulation and has been called “a
difficult path”. After they are drafted, the new
laws remain vulnerable to lawsuits, as hap-
pened with a 2011 when coal-owning utilities
and states sued the EPA as it tried to prevent
cross-state air pollution, said Tudor, Pickering,
Holt, Energy Research.
A new EPA rule on power plant emissions
would be even more complicated and drafting
it is likely to take longer than four years, which
it recently took to draft an auto emissions rule.
It is taking the EPA six years to get from the
stage of declaring the need to implement
greenhouse gas emissions standards on vehi-
cles (2010) to an enforcement date at which it
will begin to tax auto manufacturers (2016). �
28 June 2013 GTP Journal US MARKETS � 5
The plan, denounced by opponents as a
‘war on coal’, is deemed costly for ther-
mal coal producers, although gas and
nuclear could benefit.
The President is
using executive ac-
tions to get around
the congressional
conservative major-
ity, which has previ-
ously prevented his
climate-change-
related proposals.
Installing of more
renewables is now
imminent.
Coal-fired power hit bothin US and abroadThe proposed EPA law on power plant emis-
sions would go further than previous Clean Air
Act laws that focussed on toxic Greenhouse
Gases (GHGs) like mercury and sulphur; in-
stead it would tackle cutting nationwide carbon
emissions by almost half over two decades.
The EPA is supposed to have proposal for
GHG standards for existing power plants out
by June 2014 and finalized by June 2015.
States will have input in the law, as nearly a
dozen states have already implemented market-
based carbon-reduction programs, with 25 de-
manding energy efficiency and 35 adding
renewables requirements.
Obama said he would order the Department
of the Interior to begin permitting new wind
and solar energy projects on public lands, for
example solar panels on buildings, enough to
power more than 6 million homes by 2020.
He also proposed to withdraw financial sup-
port for coal-fired power stations located interna-
tionally that does not use carbon capture and
storage (CCS) technology, but noted that devel-
oping countries have “no choice but to use coal”.
The impact of this combination of proposals
on fossil-fuel power plants, in the US and
abroad, will involve requirements for
increasing generation efficiency, potentially
more CSS technology, and potential decreases
in the use of coal. �Obama delivers speech atGeorgetown University
New EPA plans positive for global gas, not ‘war’ on coal – analystsThe US executive’s new carbon emissions rules, that will impact existing fossil-fuel power generation areseen to be “positive overall for gas-fired power and and coal in the US,” said Tudor, Pickering, Holt (TPH) Energy Research. “Coal is not going to be outlawed tomorrow, a warming-up to natural gas and renewablesis promoted, but this is largely rhetorical,” said TPH Energy Research.
Obama’s climate change proposal cuts coal,boosts gas-fired power in US US President Barak Obama has proposed an Environmental Protection Agency (EPA) regulation to start limit-ing carbon emissions for both new and existing fossil power plants, while installing wind and solar installations on federal land.
Sources of U.S. Electricity Generation, 2012
Source:U.S. Energy Information Administration
Petroleum 1%
� US MARKETS GTP Journal 28 June 20136Capacity additions don’t keeppace with peak-hour demand Additions of electric power generation capacity are not keeping pacewith Texas' rising demand for electricity, particularly during peak-hours. A robust economy and population growth spurred the need formore electricity supply, according to the grid operator Electric Reliabil-ity Council of Texas (ERCOT).
ERCOT, the grid operator for most of
Texas, warned that regulatory and mar-
ket uncertainty would limit incentives
for investment in new sources of
power supply within the
region, which causes the
risk of narrowing reserve
margins.
It's deemed "alarming"
that ERCOT is the only
region in the North Amer-
ican Electric Reliability
Corporation's (NERC)
2013 Summer Reliability
Assessment with a reserve
margin below target level,
which is based on the
highest, or peak, hour of
demand during the summer.
Missing out on targeted 13.75% reserve marginFor the second year in a row, ERCOT has
been below its target reserve margin of 13.75
percent.
This poses the risk that during extended pe-
riods of high temperatures (similar to the
record-breaking summer of 2011) combined
with unplanned outages of some generation or
transmission capacity may push demand for
electric power higher than the available supply,
analysts at the US Energy Information Admin-
istration (EIA) warned.
"In extreme cases this can lead to increased
calls on emergency demand response programs
or even rolling blackouts," they said.
Texas' electric system is expected to have
1,032 more megawatts of capacity available
this summer compared with last summer, the
grid operator forecast.
"However, the most recent economic fore-
casts for the state raised expectations of de-
mand for electricity—particularly in areas of
West Texas with increased oil and natural gas
drilling—that have outstripped the capacity ad-
ditions," according to EIA analysts.
To help alleviate looming capacity short-
ages, some transmission facilities within
ERCOT territory have also been upgraded, to
help move generation from West Texas wind
farms to load centers in the eastern part of the
state.
Lacking of payments forreserve supplyA lack of incentives available to generators and
project sponsors hampers initiatives of building
new capacity. "ERCOT is the only regional
transmission organization (RTO) that does not
have a mechanism for paying for reserve sup-
ply," EIA analysts criticized.
Utilities in the US, traditionally, are either
built or contracted for reserve generating
capacity, and the cost was covered through
retail electricity rates. This
remains the case in most of the
country, including CAISO, SPP,
and MISO.
In PJM, NYISO, and ISO-
NE, meanwhile, where there has
been divestiture of generation
assets by formerly vertically in-
tegrated utilities to varying de-
grees, capacity markets operated
by the RTOs provide capacity
payments. �
Xcel Energy ups peaking capacity
US nationwide power and gas util-
ity Xcel Energy has officially
opened its 170MW Siemens sin-
gle-cycle gas-fired unit for the
850MW Jones Generating Station southeast
of Lubbock, Texas. The new unit first began
operations in May, a month ahead of sched-
ule, and was installed at a cost of $82 mil-
lion, way under the budgeted $103.7
million.
With the additional unit, Jones Generat-
ing Station now has increased its capacity to
support demand growth coming from eco-
nomic expansion in plains Texas and eastern
New Mexico, the operator said.
The dual fuel, gas-and-fuel oil plant was
established in 1971 and all four units at the
plant are currently running on natural gas.
The generating units have varying capac-
ities: Unit 1 is 243 MW, Unit 2 is 243 MW
and Unit 3 is 169 MW, and Unit 4 is 170
MW.
The new single-cycle Unit, 4, is a twin of
Unit 3 and is capable of ramping up in about
10 minutes to achieve output of 150MW.
Siemens Energy supplied a SGT6-5000F
gas turbine for Xcel Energy's Jones Station
expansion project.
Peaking unit to back-up wind energyThe new unit is intended for use as an emer-
gency and peaking unit, and will help the
company balance its portfolio of 1,500MW
wind resources regionally. In Texas, summer
temperatures can reach 120ºF (48ºC), and
the new unit will operate in the summer
months electricity demand increases for
both air conditioning and irrigation demand.
Xcel buys wind capacity from wind farms
in Texas and New Mexico, about 600MW in
total, which it acquires through long-term
power purchase agreements. It claims that
wind conditions in the panhandle are "ideal
for wind production". The company also pur-
chases another 250 megawatts of wind power
from other facilities.
In late 2012, it began to buy 100% of the
production of the new 161MW Spinning
Spur Wind Ranch in Texas, west of Amarillo.
Xcel Energy is looking to add approxi-
mately 550 megawatts of new wind genera-
tion in Colorado, US between now and
2016, which will mean that the company
will have 2,700MW from wind capacity in
that state. �
“District heating will render
our new gas-fired cogenera-
tion unit profitable," Dr.
Karsten Klemp, head of
power plants at RheinEnergie told Gas toPower Journal. The municipal utility is invest-
ing about €350 million to build the Niehl-3
cogeneration unit adjacent to the existing
Niehl-2 unit at a site north of Cologne city.
"Basis for the profitability will be especially
low and flexible part-load operation. We will
consequentially run the plant according to heat-
ing demand, as the technology used allows for
maximising heat production by decreasing
power output," he said.
The Cologne municipal utility commis-
sioned Alstom to build the 450MW power
plant in Cologne Niehl on a turnkey basis.
Under an Engineering, Procurement and Con-
struction (EPC) contract worth €350 million,
Alstom will realise the Niehl-3 CHP based on
its KA26 gas-fired combined cycle plant de-
sign, including a GT26 gas turbine, a turbo
generator, heat recovery steam generator and
district heaters. KA26 technology achieves
close to 60 percent operational efficiency and
can be started in less than 30 minutes.
Once fully synchronised with the grid, the
plant can deliver 350MW into a low-load oper-
ation in less than 15 minutes.
Such responsiveness is attractive to a coun-
try like Germany with a high percentage of its
power coming from intermittent renewable en-
ergy sources, and where existing power storage
is insufficient to provide stable backup sup-
plies. “State-of-the-art local power plants, ide-
ally ones that generate both electricity and heat
from climate friendly gas, will form the back-
bone of supply security in Germany for the
coming decades,” Klemp forecast.
To monetise heat from cogeneration plants,
RheinEnergie operates a multi-branched dis-
trict heating network including a 500 meter
district heating tunnel under the river Rhine
that links the heating networks between the
historical centre of Cologne and Deutz.
SW Düsseldorf to build 595 MW cogeneration plant by 2016Düsseldorf is yet another location where a
municipal utility decided to build a gas-fired
power plant regardless of negative profit mar-
gins of conventional gas generation assets in
Germany.
"The usage of the plant's thermal energy for
district heating increases overall efficiency to
85 percent and boosts profitability," a
spokesman confirmed. The municipal utility
aims to build the CHP plant in Lauswald near
Düsseldorf harbour by 2016.
Siemens Energy will design and build the
Lausward project on a turnkey basis. Electrical
unit output for the combined-cycle plant is tar-
geted to reach 595MW at a net efficiency over
61 percent.
Investment in new CHP projects is attrac-
tive in Germany, after the Berlin government
upgraded support schemes and as public
acceptance for new coal-fired power plants
in densely populated areas reached a low
point, said Reinhard Rümler, senior manager,
energy advisory practice at Pricewaterhouse-
Coopers (PwC).
"It is hard to get permitting for a new coal-
fired power plant projects in densely populated
areas or near a big city, so investors shy away
28 June 2013 GTP Journal SPOTLIGHT ON COGENERATION � 7Selling heat makes German gas plants profitableProfitability of new-build gas fired power plants in Germany hinges on selling district heating; hence dispatch of two projected combined heat and power (CHP) plants in Cologne and Düsseldorf will be driven by heat rather than power production, operators confirm.
View into Cologne's district heating network
Düsseldorf's largest power plant
� SPOTLIGHT ON COGENERATION GTP Journal 28 June 20138
from new coal-fired projects and prefer CHP
projects instead where they can benefit from
upgraded support schemes," he said.
Heat-driven CHPs profitable at 5,000 full-load hoursA gas-fired CHP block requires investment
costs of €1000/kWh plus a 2 percent buffer, but
operators benefit from subsidised electricity
revenue of €21.1/MWh for the first 30,000 full
load hours.
CHP can be profitable when run as heat-dri-
ven operations with 5,000 full load hours on
average, according to PwC calculations.
“Steam turbine power plants and simple
cycle gas turbine plants tend to be operated in
the spot market only, while the use of CCGTs
should ideally be split between 70 percent on
the spot and 30 percent on the balancing mar-
ket,” Rümler suggested. At that rate, steam tur-
bine plants reach an internal rate of return
(IRR) of 11 percent, CCGTs reach an IRR of
8.9 percent and CHP reach an IRR of 8 percent.
Berlin frees up €750m to raise CHP market share to 25%The German government has allocated a €750
million budget to underpin its objective of rais-
ing the market share of CHP installations to
25 percent by 2020. Moreover, under a new
law, operators of all CHP categories obtain
0.3 cent/kWh more in compensation regardless
of the size of the installation.
"Germany has turned into a prime location
in Europe for investment in cogeneration plants
as operators profit from a rise in the CHP levy,
extended energy tax credits and priority grid
connection equal to renewables," says Aldi
Golbach, founder of the German CHP associa-
tion 'KWK kommt'.
Marco Nicolosi, Senior Consultant, Power
Systems and Markets at Ecofys has a more bal-
anced view on CHP support schemes: “As soon
as political targets are present which lie above
the purely economic market result, subsidies
are necessary to reach these targets,” he said,
adding “Wholesale power prices in Germany
are currently quite low, so the subsidy in-
creases the planning security for investors.”
Large CHP plants receive 21€/MWh on top
of the wholesale power price as a subsidy
which conventional gas-fired plants do not re-
ceive. However, investment costs are also
higher, so the profitability depends on heat
demand and operational flexibility of the
CHP plant.
Subsidies necessary toreach Germany’s CHP goalsUnder current rules, valid up to 2020, operators
of bigger plants are entitled for proportional
compensation, whereby they get 5.41 cent
for the first 50kW; 4 cent for the next 200kW,
2.41 cent for the next 1750 kW; and for the
exceeding power capacity 1.8 cent. If the
plant is subject to EU emission trading rules,
operators can claim for
2.1 cent/kWh.
To obtain the tax relief,
CHP operators need to prove
that the efficiency level of the
plant exceeds 70 percent, but
this is deemed to be quite easy
to achieve. “Producing heat
and power tends to be more
energy efficient than merely
producing electricity. While
combined-cycle power plants
can reach efficiency levels of
just above 60 percent, CHP in-
stallations can reach 52 percent
electric plus 35 percent ther-
mal efficiency,” Golbach said.
With the new support scheme, Berlin wants
to incentivise the construction of efficient, flex-
ible and decentralised CHP plants as a way to
balance fluctuating power supply from wind
and solar installations. “The laws’ main objec-
tive, according to Nicolosi, is to increase en-
ergy efficiency by reducing the consumption of
primary fuels. �
“Germany has turned into a prime location in Europe for investment in cogeneration plants as operators profit from
a rise in the CHP levy, extended energy tax credits and priority grid connection equal to renewables”
“”Aldi Golbach,ader of the German CHP association 'KWK kommt'.
Model of Stadtwerke’s project in Lausward
28 June 2013 GTP Journal SPOTLIGHT ON COGENERATION � 9
District heating and cooling (DHC)
cogeneration currently provides
1.6 million households in 26 South
Korean areas – mostly in greater
Seoul – with power and heat, after an array of
new installations came online in the wake of
the 1999 Integrated Energy Supply (IES) Act.
The latest report of the International Energy
Agency (IEA) on cogeneration and district en-
ergy highlights the Korean IES regulation as an
example of CHP best practice.
The IES promotes an integrated approach of
building district heating networks in conjunc-
tion to realising new CHP plant developments
as a means to guarantee the offtake of heat
loads to allow for a continuous deployment and
operation of CHP plants.
The Ministry of Knowledge Economy
(MKE) is entitled to mark out specific areas for
development as Integrated Energy Supply Areas
(IESA). The planning of one of these develop-
ments must include an energy supply network
connected to an Integrated Energy Facility (IEF)
which all buildings are obliged to connect to.
Under the law, a single company wins the
monopoly rights to build and operate an IEF
through a bidding process. Operators of IEFs
are also eligible for tax reductions on the in-
vestment costs for the heating infrastructure.
District Heating and Cooling CHPs, smaller-
scale heat-driven cogeneration plants for indus-
trial use, and Community Energy Systems –
CHP plants supplying power, heating, and cool-
ing to small groups of residential buildings –
are the three types of IEFs in South Korea.
The implementation of the IES law has seen
a 53 percent reduction in fuel costs, a
72 percent reduction in annual run costs and a
46 percent reduction in emissions. �
South Korea’s Integrated Energy Supply Act encourages CHP
Germany has emerged as a leader in the European Cogeneration market due to the country's strong commitment to energy efficiency,comprehensive policy promotion through the combined heat and power(CHP) support scheme and the government's decision to phase-out nuclear power, according to the industry associated COGEN Europe.
Germany leads European market in cogeneration – COGEN Europe
It’s Cogeneration Review – Germany indi-
cates that the upgraded CHP support
scheme (i.e. guaranteed premiums added to
the market price of electricity) positively
affects the business environment of CHP instal-
lations of different sizes and therefore encour-
ages investment decisions in new CHP plants
by reducing the pay-back time.
These premiums were increased in the
amended 2012 CHP Law (KWK-G 2012) and
will help increase the profitability of CHPs
below 2MW while also maintaining good con-
ditions for those above 2MW.
Germany’s Energiewende – a hugeinfrastructure project"Looking at this from a combined-cycle stand-
point, the German Energy Transition is a huge
infrastructure project aimed at essentially trans-
forming the whole energy system in the next
decade. What we need to take into account is the
so-called energy triangle – the combination of af-
fordability, sustainability and secure supply –
which drives investment decisions," he said.
"CCPPs are ideal for supplying all of these ele-
ments, especially secure supply," Norbert Wenn,
Director of Sales Support and Product Line Man-
agement at Siemens told Gas to Power Journal."The renewed German CHP law and incentive
scheme has made a business case of the Lausward
plant currently being built in Düsseldorf, which
would have never happened had it been planned
as a pure condensing plant," he said.
CHP set to increase market penetration Wenn believes that CCPPs, which also offer
heating, provide strong economic potential for
backing up the renewable power that is set to
achieve greater penetration in Germany's en-
ergy mix over the coming years
CHP plants in 2010 generated approxi-
mately 90 TWh of electricity, representing
15.4 percent of Germany's energy production.
Gas represented 59.1 percent of this generation
according to statistics from the Öko-Institut.
This figure rises to 63 percent when it comes to
power stations larger than 1MW of which most
use natural gas, although other types of gas are
also in use.
The CHP market in Germany is currently
the biggest in the EU, accounting for more than
20 percent of all cogenerated electricity.
The German government currently has a
25 percent target for CHP generation by 2020
as part of its Energy Transition Strategy, but
while the KWK-G 2012 law is a step in the
right direction further steps may also be
needed. Progress towards the 2020 target is
to be evaluated in 2014 as part of the CHP
law review.
Growth potential of 120 GWethroughout EuropeAt present 11 percent of Europe’s electricity
and associated heat requirements are produced
by cogeneration plants. COGEN Europe sees a
growth potential for cogeneration of a further
110-120 GWe.
When seriously supported, as in Denmark,
CHP has the potential to increase the energy
production and transformation system overall
efficiency from a bare 33 percent (EU average)
up to 65 percent, it said. �
The UK Energy Bill in its currentform is "unlikely to realise the fullpotential of cogeneration inBritain", says Graham Meeks, director of the British CombinedHeat & Power Association (CHPA).He called on policy makers to extend the small scale Feed-inTariff capacity threshold in addi-tion to the proposed Contracts for Difference (CfD).
EMR unlikely to realise Britain’s full cogen potential
CfD is "too complicated a measure"
to incentivise people whose core
business does not operate in the
electricity market, he said when
giving evident to the Energy Bill Committee
last week.
"The existing small scale Feed-in Tariff sys-
tem, by contrast, is "simple and well-under-
stood", Meeks said, suggesting an extension of
the FiT's threshold "would make the market far
more accessible to non-traditional investors
[including local communities, industries and
the public sector]".
"What we need to be doing is making it
possible for the Tata Chemicals and the Dow
Cornings and the cities as well—the Leicesters,
Liverpools, Manchesters—to be able to bring
forward projects in their own right," he
stressed.
CHPA believes an expansion of decen-
tralised energy production, based primarily on
new combined heat and power plants, as well
as more demand side participation could make
the UK energy system more reliable, affordable
and greener. �
� TECHNOLOGY & INNOVATION GTP Journal 28 June 201310
Texas encourages cogenerationas hurrican back-upPolicy makers in Texas have signed new legislation into law with the aim of increasing cogeneration capacity in the state as an emergency power source in the event of a hurricane.
Unfavourable market conditions and
persistent policy uncertainty has re-
versed growth in the Dutch Com-
bined Heat and Power (CHP) sector
following a period of rapid growth in the
1990s, according to the industry association
COGEN Europe.
The Dutch CHP sector used to be "one
of the best performing in Europe", with
51.8 percent of the total generated electricity
coming from CHP plants in the past year.
After a period of rapid growth in the 1990s,
however, the sector has stagnated in the past
5 years, and recently shows signs of decline,
the report reads.
A triple whammy of unfavourable gas spark
spread, a lack of stimulus from EU ETS and
the absence of a comprehensive Dutch CHP or
energy efficiency policy are undermining the
drive for investment in new CHP installations
in the Netherlands, the report reads.
Notwithstanding the difficult economics,
several studies estimate an additional economic
potential for CHP in the Netherland ranging
from 28 percent to 162 percent.
Potential for up to 3.4 GWe ofnew CHP installationsThe economic potential for new CHP
ranges between 2.3GWe and 3.4GWe
in 2020, to be achieved on top of 2010
reference values, assuming CO2 prices
between 15-50 €/t, according to a report
commissioned by the Ministry of Economic
Affairs. The costs required to achieve this
potential are expected to be between
€3.5 - 4.8 billion.
2011 saw a slight decline in cogenerated
electricity from 61.75 to 58.58 TWh. CHP
share in total electricity generation was
51.85%, according to provisional figures of the
Dutch Central Statistics Office (CBS Statline).
Installed capacity of CHP plants amounted to
12 348 MWe of electrical power and 67 949
186 MJ/h of thermal power, the CBS Statline
website shows.
Decentralised power productionon the riseThe trend goes towards decentralised CHP
units which represent 62.5 percent of the total
installed CHP capacity. Central CHP installa-
tions that are connected to TenneT's high volt-
age power grid contributed a smaller share of
electricity following to the decommissioning of
two plants.
Under an optimum policy scenario, CHP
could reach up to 20GWe and 25GWe by 2020
and 2030 respectively, Cogen Nederland said,
claiming the past government did not take ap-
propriate actions to tackle the barriers and har-
ness the full potential of cogeneration in the
Netherlands. �
Dutch CHP sector hit by unfavourable spark spread, policy uncertainty
Two Bills were passed by the Texas
House of Representatives, with the
House Bill 2049 encouraging CHP
projects by allowing plant operators to
sell electricity to multiple purchasers. House
Bill 1864, meanwhile, will create guidelines
so the state government can assess the feasi-
bility of CHP for facilities prone to disasters,
yet critical for disaster preparedness and
emergency response. Selling to neighbours
lets CHP power users to achieve better returns
on fuel use and share the financial risks, such
as shared maintenance costs.
Texas' State Energy Conservation Office
(SECO) will write the guidelines.
Hurricane Ike caused blackouts in 2008Texas suffered hurricanes and power shortages
in the last few years; Ike in 2008 left a 13 day
power outage in parts of Texas.
New CHP installations, supplied with gas
through underground
pipelines, are meant to
help keep the lights on
when hurricanes knock
down power transmis-
sion lines connecting
cities to large plants.
Laws enacted in the
aftermath of Hurricane
Ike required the govern-
ment to assess facilities
for CHP use, but the
guidance given for how
to effectively perform
cost-benefit analysis,
was minimal.
New industrial CHP could reach20,000 MWIndustrial sector users in Texas could poten-
tially install 20,000MW combined heat and
power (CHP) to reduce the expense of electric-
ity bought from the grid, the US non-profit
Natural Resources Defense Council and Ceres
reported in its report Power to Save.
An association of generation equipment
suppliers called the Texas Combined Heat &
Power Initiative (TXCHPI) announced the
headway made in the laws.
The availability of natural gas in Texas,
which produced 6,631,555 million cubic feet in
2011, means gas-fired CHP brings economic
benefits to the state, said TXCHPI.
Averting water shortagesSince last spring's drought conditions threat-
ened farmers, reducing water used for electric
power generation at plants, is a consideration,
TXCHPI said.
The state's water supply cannot cope with the
growing population and this is estimated to cause a
7million acre-feet of unmet water demand by 2060,
said Dan Hardin, water resource planning direc-
tor with Texas Water Development Board. �Hurricane Ike
Liberty Natural Gas resubmitted its pro-
posal for Port Ambrose, and a pipeline
in New Jersey, which will feed addi-
tional gas volumes into network to help
meet the region's persistent supply shortage.
LNG cargoes are scheduled to arrive from
Trinidad and elsewhere via Shuffle & Regasifi-
cation Vessels (SRVs), designed to warm and
regasify the LNG onboard into pipeline-quality
natural gas.
Urgent need for gas grid expansionThe new pipeline form the Port Ambrose will
alleviate bottlenecks of gas transport capacity
in the region of New York as most pipelines
were already being used at 100% capacity in
2009. "Pipeline infrastructure planning must
take into account the long-term growth of gas-
fired generation, as more pipeline capacity ulti-
mately will be needed," the New York State
Energy Planning Board said in a 2013 report,
underlining the urgency for expanding the gas
grid to accommodate the power sector.
John Reese, Senior Vice President at US-
PowerGen, a utility with 2,180MW of installed
capacity in Connecticut that also owns the
1,296MW Astoria Gas Generating Station in
New York, said called the additional gas supply
as "beneficial", particularly for New York City.
"As you look beyond New York, New England
has substantial supply issues as well for gener-
ation, so additional [gas] supply is certainly
favourable in from a generator's standpoint."
Elaborating on the technicalities behind the
additional gas supply from Port Ambrose, Lib-
erty Gas said, "The pipeline from the buoy to
the interconnection with the Transco Lower
NY Bay lateral, an existing pipeline that serves
the National Grid market in Long Island, will
have the capability to supply natural gas in an
approximate range between 250MMcf/d and
750MMcf/d."
Risk of power shortages on Long IslandTo counter the risk of looming electricity short-
ages, Long Island Power Au-
thority (LIPA) selected an
unidentified company to build
a new gas fired power plant
somewhere on Long Island.
In downstate New York,
meanwhile, the energy mix is
dominated by gas and dual fuel
gas-and-oil fired generation.
New York authorities, taking
into account shale gas discov-
eries and the ability to site
single- and combined-cycle
plants near centres of high
energy demand, and forecast it's "likely this
dependence will increase".
New York aims to avert risk of power shortageIn September 2009, an appointed State Energy
Planning Board in New York studied future gas
demand and warned that scenario analysis
shows New York might be left with a shortage
of gas supply that could lead to power outages
in 2018.
The plan assessed the ability of New York's
current pipeline network to deliver enough gas
during the winter and summer peak months.
The most extreme scenario for new England
and New York project a total unmet natural gas
demand of 900 MMcfd in 2018. As of 2012,
projected peak day gas demand in New York
and Long Island and surrounding areas was
33,295MW while summer capacity was
38,902MW.
Authorities also predicted a net increase in
Canadian gas demand for power generation
which may result in reduced exports through a
Canada-US pipeline, which would exacerbate
the shortage of gas supply.
The trend to re-power oil-fired units to be-
come gas-fired facilities, and weather risk can
also create a gas shortfall.
Nuclear phase-outs, such as the scheduled
retirement of the Indian Point reactor that sup-
plies 16GWhrs per year, or 25 percent of new
York's power needs, is a candidate for being
replaced with gas-fired power generation
capacity. In May it was reported that the Indian
Point reactor would continue to operate despite
the expiration of its licence, which may suggest
the plant is needed to ensure stability of power
demand. �
Port Ambrose pipeline to supply feedstock for New York's new gas-to-power generatorsLong Island's gas-fired power plants and commercial gas consumers in New York are expected to receivemuch-needed shipments of natural gas if a new pipeline is approved from Port Ambrose – a deep-water LNG port import facility off New York's coast. New Long Island gas-fired projects "may be developed in thefuture," forecast project developer Liberty Natural Gas.
Cross-view illustration of vessel technology
New York generation mix
Nautic location of Port Ambrose
28 June 2013 GTP Journal PROJECTS & FINANCE � 11
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“Temporary closure does not
merely involve 'switching every-
thing off and turning out the
lights'," he told Gas to PowerJournal. Webb was involved in the process of
Barking Power closing one of two units at its
1,000- megawatt power station in east London
in mid-2012.
In accordance with OEM recommendations,
preserving the atmosphere by maintaining a
low relative humidity inside vital and sensitive
equipment such as generators, gas turbines,
steam turbines, and boilers is essential, he said,
explaining
"Managed dehumidification provides suc-
cessful protection, and ensures the power sta-
tion will be fully operational once re-opened."
Gas plants temporarily shutto use up coal stocks Compliance with European pollution rules (e.g.
Large Combustion Plant Directive) is forcing
closure of many of Britain's coal-fired power
stations by 2015, according to Webb.
"While coal stocks are being used up, gas
power stations are being temporarily closed, as
it makes financial sense. However, they need to
be ready for full reopening when the time is
right," he stressed.
Temporary dehumidification is used to
place facilities in to a controlled, dormant
state while avoiding large capital expenditure
outlay at the time of mothballing and no
corrosion or degradation issues to deal with
at a later date.
The consequences of not using dehumidifi-
cation could be "catastrophic", Webb said,
warning Plant could become "unserviceable or
ruined", causing millions of pounds in repairs;
and operational delays could lead to "nation-
wide energy shortages."
Why desiccant dehumidifier units?Gas-fired power stations are damp environ-
ments when operational, but uncontrolled
moisture, above 30 percent Relative Humidity
(RH), can cause widespread damage to plant
during mothballing.
To avoid this, desiccant dehumidifier units
are deployed; using moisture-adsorbing materi-
als, such as silica gel. These are most suitable
when very low RH is needed as desiccant ma-
terials have a high capacity for adsorbing water
vapour – up to 10,000 cubic metres per hour.
Nitrogen – a suitable alternativeAn 'alternative' to deploying dehumidifiers is
to use nitrogen gas to fill areas to be moth-
balled, according to Webb.
He was quick, however, to mention the
disadvantage of hydrogen such as its limited
reach on site as well as health and safety risk
of nitrogen as an inert gas. �
Barking Power Station at night
Sleeping giants: Dehumidification is key to preserve mothballed plants Dehumidification is key for keeping a mothballed power station operationally ready while protecting it fromcorrosion or degradation during its temporary closure, says Carl Webb who worked with Andrews Sykeswhen Barking Power Ltd. temporarily closed one 500MW unit at its gas-fired power plant.
Carl Webb is Specialist Hire Director atAndrews Sykes. He worked with BarkingPower to temporarily close one 500MWunit at its gas-fired power plant.www.andrews-sykes.com
28 June 2013 GTP Journal PROJECTS & FINANCE � 13
Power engineering sells outside Europe
Best opportunities for Europe's power
engineering sector in the coming
years lie in projects and contract
wins in Asia, North America and
the Middle East, but notably not in Europe,
an industry survey shows.
The majority of delegates surveyed at
Power-Gen Europe in Vienna this June at-
tributed the reduced business potential in the
EU-25 to the prolonged recession and the
rising market penetration of renewable en-
ergy sources.
Modernisations and upgrades of power
plants, meanwhile, are stilled viewed as a
source for contract wins in Europe.
Respondents stressed that both the
industry and policy makers are not paying
"sufficient attention" to challenges arising
from integrating intermittent power supply
from renewable energy sources into the
system.
About 48 percent of those surveyed
expect that the EU will meet its target of
20 percent share of total energy consumption
from renewables in 2020, while 29 percent
said the EU will not meet its target and
22 percent feel it's "too early to tell". �
Before long the energy industry will see
much greater use of fluctuating renew-
able energy sources such as wind and
solar power. To ensure the supply of
balancing energy, this development will go hand
in hand with the use of highly flexible and efficient
decentralized power plants that can intervene at
extremely short notice if the output from the re-
newable sources fluctuates. According to the In-
ternational Energy Agency (IEA), natural gas will
be an important element in ensuring a sustain-
able and reliable energy supply for tomorrow. In
addition to offering a high level of supply reliabil-
ity and advantages in terms of operating costs,
the outstanding potential of gas fuel lies in the
extremely low emission values combined with
high efficiency. MAN Diesel & Turbo is well pre-
pared for the rising importance of natural gas as
source of energy. With its dual-fuel as well as
pure gas engines and gas turbines MAN Diesel
& Turbo has promoted a respective product
portfolio during the last years and has devel-
oped products for the worldwide gas markets.
Gas engine in CHP plantsThe company introduced its 35cm bore pure gas
engine for stationary use in power plants in 2011.
The single-stage turbocharged MAN 35/44G en-
gine achieves a mechanical output of 10,600 kW,
has an electrical level of efficiency of 47.2 per-
cent, low running and maintenance costs as well
as low emissions thanks to using gas as fuel.
Additionally, in combined heat and power
plants (CHP), the heat from the gas engine’s ex-
haust gases and engine cooling circuits can be
used, either for heating purposes or as process
heat for industrial processes. This means that
the total output and efficiency can be further
boosted without adding to the fuel costs.
With a CHP process, the hot exhaust gases
are used to generate steam; the HT and LT
coolant heat from the engines, as well as the lu-
bricating oil heat, are utilized in a combined heat
and power process to produce hot or warm water.
The different temperature levels in the heat flows
allow for a variety of possible uses for all clients in
the energy sector: From utility companies with
their thermal power stations to CHP applications
in industrial facilities requiring steam or hot water,
CHP concepts can respond with great flexibility to
virtually any demand. Overall efficiencies of over
85% are therefore possible with MAN Diesel &
Turbo’s gas engine power plants. Fuel savings in
the order of 35 to 40% compared to separate
generation are possible, which represents a sig-
nificant increase in efficiency over pure electricity
generation. In Germany, these systems are eligi-
ble under the CHP Act.
Gas power for Volkswagen factoryMAN Diesel & Turbo recently got an order from
the Volkswagen Kraftwerk GmbH to install a
CHP plant at the Volkswagen site in Brunswick,
Germany, to provide electricity and process heat
for the production facility. The CHP plant com-
prises the new MAN 35/44G gas engine with
generator and the components for heat coupling
to the plant’s own hot-water network. From 2014
on, the combined heat and power plant with a
rated thermal output of 24 MW will then ensure
the basic electricity and heat supply for the Volk-
swagen plant in Brunswick together with two
new hot-water boilers – as a replacement for the
site’s existing boiler system. The aim is to use
the combined heat and power plant to produce
economical and sustainable energy and heat
while at the same time complying with modern-
day environmental requirements.
Cogeneration with gas turbinesBesides engines for CHP applications, MAN
Diesel & Turbo also offers gas turbines from 6-
12 MW for the use in cogeneration plants. The
exhaust gas of the gas turbine generator set is
then going into a waste heat recovery system in
order to use the exhaust heat for various pur-
poses like process steam production, district
heating, thermo oil heating, etc. The overall effi-
ciency of such plants as the sum of electrical
and recoverable heat is depending on the
process in the range of 80%. Such plants also
become more and more popular due to the in-
creasing sensitiveness for saving of resources
and reduction of greenhouse effect in line with
the more and more stringent emission limits.
Due to the high exhaust gas temperature
process steam can efficiently being produced.
The first reference installation of MAN Diesel &
Turbo’s new gas turbine GT6 in a chemical plant
at Solvin GmbH & Co KG, a joint enterprise of
Solvay and BASF in Rheinberg, Germany, is
just under way. At its Rheinberg production
plant, Solvin manufactures chemical products
including PVC (polyvinyl chloride), which is used
for example in building construction, consumer
products, health and safety equipment and elec-
trical applications. The new CHP plant is de-
signed to supply 6 MW of electrical and 11 MW
of thermal power, thus enabling Solvin to meet
its own electricity requirements in the future,
thus reducing its dependence on the public
power network. The new CHP Plant achieves a
fuel efficiency of 80% by utilizing the waste heat
of the gas turbine in addition to the efficiency of
gas turbine itself of 34% - a peak value in this
output class, thus making a significant contribu-
tion to reducing primary energy consumption
and emissions.
Allrounder for AustraliaIn Owen Springs, in the middle of the Australian
outback, dual-fuel engines of MAN Diesel &
Turbo ensure efficient energy production. For
the Power and Water Corporation, a big
Australian utility company, MAN Diesel &
Turbo has built a 35 MW turnkey power
plant comprising three MAN 51/50DF en-
gines. The engines can be operated ei-
ther with gaseous or with liquid fuels.
Even during operation the fuel mode can
be changed without restrictions. The
power plant engines in Owen Springs
are primarily running on natural gas. But
their flexibility regarding other fuels was
an important reason behind the customer’s deci-
sion to purchase. In case of disturbances of the
gas infrastructure the customer can easily
switch to another fuel and maintain the energy
production without breaks.
Besides their fuel flexibility the high efficiency
of the engines and the low-emission and there-
fore eco-friendly combustion during gas-mode
are a big advantage. When operated in gas-
mode the dual-fuel engines cause about 80 per-
cent less nitric oxides compared to diesel
operation, almost no sulfur emissions and about
95 percent less particles.
The MAN 51/60DF engine has been origi-
nally developed for the use in LNG tankers, in
which boil-off gas from the cargo tanks can be
used for powering the engine. Now the 51/60DF
also conquers the power generation market, last
but not least because of its fuel flexibility and
eco-friendly energy production.
Gas Solutions for the worldThe above application examples show the differ-
ent requirements of a decentralized power gen-
eration in which the customer with its electrical
and heat demand is in the center. Solutions
have to be provided to meet his demand in the
most efficient way. MAN can offer out of a port-
folio consisting of engines and turbines the most
suitable solution. �
Combined Heat and Power (CHP) can further raise effi-ciency for the use of natural gas. In the picture: CHP plantwith gas turbine.
Gas-fired energy generation – powered by MANDecentralized power supply is gaining importance – natural gas as a clean fuel has hereby the biggest potential.
New pure gas engine MAN 35/44G for stationaryuse in power plants
Advertorial
Power Plant with MAN 51/60DF engines in OwenSprings, Australia
28 June 2013 GTP Journal PROJECTS & FINANCE � 15
NEWSNUDGESAverage US power bill drops to4-year lowJune 26 –The average U.S. household elec-
tric bill for June through August is expected
to total $395, down 2.5 percent from last
summer and the cheapest in four years.
Slightly higher electricity prices are
expected to be offset by a drop in elec-
tricity use to meet lower cooling demand,
analysts from the US Energy Information
Administration (EIA) forecast.
ABB wins $27m power order inAustraliaJune 26 – ABB, the Swiss power and
automation technology group, has won an
$27 million order from Rio Tinto to
upgrade a power substation at the Cape
Lambert port, in Western Australia.
The upgrade will help integrate electric-
ity produced at a new-built plant into the
existing transmission network.
ABB said the order was booked in the
first quarter.
GE sign MoU to build 1000 MWpower plant in GhanaJune 25 – General Electric has signed a
memorandum of understanding (MoU) with
the Ghana government to build a 1000MW
power plant in Ghana.
The project comes in addition to another
hydro power plant, the $980m Bui Dam
(400MW) which is under construction and
scheduled for completion by the end of 2013.
Gazprom buys Belgian powerplant from EnelJune 21 – Gazprom, Russia's gas export
monopoly, has struck a deal to buy the Bel-
gium-based power plant Marcinelle from
Italy's incumbent power producer Enel.
The agreement was signed at a major in-
vestment conference Friday, Gazprom offi-
cials said.
GE's Intellix BMT 300 helps thelights stay onJune 20 – GE has introduced the Intel-
lixTM BMT 300, a bushing monitoring sys-
tem for transformers that can detect unseen
problems before they occur.
The system is designed to keep the lights on
and avoid costly transformer failures for
utilities, industrial metals businesses and
petrochemical companies, it said.
E.on injects venture capital instart-ups on distributed powerE.on, Europe's second largest power producer, has set up new venture-capital activities through co-investments in start-up companies like Munich-based Orcan Energy and California-based Bloom Energy with aview to exploring distributed and smart energy solutions.
Distributed and smart energy solu-
tions are high up on E.on's strate-
gic agenda which helped spur the
investment in Orcan Energy, a
spin-off from Munich Technical University
(TUM). "Waste heat from industrial and
commercial processes has substantial,
largely untapped potential for enhancing the
efficiency of distributed energy solutions,"
E.on said.
Orcan Energy - a spin-off of Munich Technical UniversityOrcan Energy produces highly efficient Or-
ganic Rankine Cycle Modules and E.on is
aiming to integrate its Orcan's ePack in its
portfolio of Combined Heat and Power
(CHP) applications and biogas-fired power
plants. "The modularity of Orcan's product
combined with its highly differentiated cost
structure gives it the potential to dramati-
cally alter the waste heat recovery market,"
it said.
The ePack solution consists of a stan-
dardized module system, and an E.on
spokesman said "We see advantages
especially in easy operation and economy
of scale."
Organic Rankine Cycles can increase CHP efficiencyTechnically, the ePack produces extra en-
ergy from waste heat, generated from vari-
ous sources. Currently, up to 50 percent of
the energy used in industry is lost in the
form of heat, Orcan Energy says.
Organic Rankine Cycle technology
can be applied in industrial CHP applica-
tions, for example industrial applications
involving, industrial furnaces and flue-gas
as well as water heaters. Such technology
has in the past been used to increase the out-
put of its biogas-fired power plants through
capturing waste heat. In a biomass fired
power plant, Organic Rankine cycles can
also be used to reduce costs of equipment
and maintenance.
If E.on begins to offer ePack commer-
cially, it could be used as an upgrade to gen-
erate additional power from waste heat, or
alternatively as underused heat gradients in
existing processes.
Bloom Energy – a Californian fuel cell providerSecond, E.on has also taken a stake in
Bloom Energy, a Sunnyvale / California
based provider of breakthrough solid-oxide
fuel-cell technology.
E.on said it will start to offer Bloom
Energy's solid-oxide fuel-cell technology,
which runs on natural gas, "as an alternative
to CHP solutions". Bloom Energy claims its
fuel cell generates with "extremely high
electrical efficiencies", and can "deliver
cheap energy without relying on CHP".
E.on invests in fuel cell that mayreplace CHPThere are clear synergies between the busi-
nesses of E.on and Bloom Energy as the for-
mers solid-oxide fuel-cell technology is
currently in widespread use in the American
power generation market.
Strategically speaking, E.on suggested it
is investing in fuel cells as these plants may
ultimately replace CHP installations.
Apart from the US market, fuel cells also
have an increasing share of the distributed
generation markets in Japan.
Smart grid technologyThird, E.on become a limited partner in the
The Westly Group, an American venture
capital firm that focuses on companies fo-
cusing on renewable energy, smart grids,
and energy efficiency for buildings.
The partnership will give E.on access to
Silicon Valley technologies, including soft-
ware for grid management, as well as an in-
terest in a mechanism which converts waste
biofuels into fuel ethanol and other usable
substances.
Energy management software companies
in Westly Group's portfolio include
CIenergy, which provides cloud-based en-
ergy management solutions for building
owners and operators, and Eka Systems
which offers a product for management of
smart grids. �
Future eventsGas to Power London
17th September 2013, Copthorne Tara Kensington
Gas to Power Ankara Turkey, November 2013
Participating Organisations in past Conferences include
WHO SHOULD ATTEND?This conference is aimed at attendees from utilities and power generation companies, energy policy and regulatory
bodies, energy infrastructure project finance, banking and legal firms, and low-carbon and renewable energy companies.
Including professionals responsible for:
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