Chapter

Technicaland EconomicStatus

Technicaland EconomicStatus

The scientif ic feasibil i ty of OTEC wasdemonstrated on a very limited scale byGeorges Claude as early as 1926. Claude’s ex-periences, however, pointed up the need formore advanced ocean engineering technologybefore success of a large-scale system could beexpected.

The United States, with the Division of SolarTechnology of the Department of Energy as leadagency, is now attempting to develop the tech-nology and demonstrate the feasibility of OTECon a scale vastly larger than Claude’s work.When developed, OTEC could be used to pro-vide power for the production of such productsas electricity, ammonia, aluminum, hydrogen,magnesium, and methanol, or for ocean farm-ing. No scientific breakthrough is necessary inorder to use OTEC as a power source for theseproducts. However, there are major engineeringdevelopment problems which must be solvedbefore OTEC could become an accepted part ofany manufacturing system.

Many troublesome technical concerns en-countered during research stem from a singlefactor: low thermal efficiency. Thermal effi-ciency is the percentage of heat which can beconverted to useful work. Because the heat usedin OTEC must be extracted from a low tempera-ture difference, the resulting efficiency is low.At best only about 7 percent of the heat energystored in the ocean can be converted into usefulenergy. In practice, however, OTEC plants areprojected to operate with net efficiencies be-tween 1 and 4 percent depending on assump-tions made regarding auxiliary power require-ments.1 (By contrast, the thermal efficiency of a

‘Memorandum to G. L. Dugger from H. L. Olsen, Ap-plied Physics Laboratory, “Efficiency of OTEC PowerPlants, ” July 7, 1976, Laurel, Md.

steam plant driven with a nuclear or coal-firedheat source is as high as 42 percent.z) An offset-ting feature is that no fuel is required for theOTEC cycle. However, the result is that verylarge quantities of solar-heated surface waterand cold deep water are required. For a typical100 MW OTEC design, which is one-tenth of thesize of an existing 1,000 MW nuclear-generatingstation, Is,000 cubic feet per second of surfacewater must pass through the evaporator and alike quantity of deep water must pass throughthe condenser heat exchangers. The combinedflow rate of 30,000 cubic feet per second isslightly larger than the average flow at themouth of the Susquehanna River or more thantwo and one-half times the flow of the PotomacRiver at Washington.3

Handling this volume of fluids will requiresome pieces of equipment, such as pumps,motors, and turbines, which are larger than anynow in existence. If OTEC plants are to produceenergy economically, great care will be neces-sary to minimize parasitic losses of energy fromfriction in pumps, heat exchangers, and otherequipment. Equally important, however, themargins for design and/or operating error inOTEC plants will be quite narrow.

Beyond the inherent problem of low effi-ciency, there are many unresolved engineeringproblems. The primary concerns involve:

● the heat exchangers,● the cold water pipe,● the working fluid,● ocean platforms,● underwater transmission lines,s de-emphasis of the open-cycle system, and● the constructability and reliability of the

entire plant.

Until major problems in these areas have beenresolved, it will not be possible to estimate themany economic and environmental factorswhich will determine OTEC’S commercial pros-pects.

This study has not looked at the possible en-vironmental impact of OTEC plants because

2S. S. Penner and L. Iceman, Energy, (Reading, Mass.:Addison-Wesley Publishing Co., 1974), p. XXV.

3Phone conversation with staff members of U.S. Geo-logical Survey, Reston, Va., Jan. 30, 1978.

7 R

16 . Ocean Thermal Energy Conversion

that impact would be tremendously dependentupon specifics which are not yet known, such asthe type, size, and number of OTEC plants, thelocation of the plants, substances used in proc-esses aboard the OTEC plant, and the productproduced. However, there are a number of en-vironmental factors which should be consideredindepth when more is known about a specificsystem, such as:

●

●

●

●

●

●

The size and effects of the reduction in thetemperature of surface waters of the oceanat OTEC sites.

The effects of the working fluid on theocean environment in the event of a leak.

Possible pollution caused by chemicals andtechniques used in the construction of com-ponents of the OTEC plant.

The effects of changes in the nutrient con-tent of the surface waters caused by upwell-ing deep ocean waters.

The effects of increased marine traffic.

The effects of laying underwater transmis-sion lines if the OTEC were to produce elec-tricity for a grid.

These unknown environmental considera-tions and the better known technical problemsall cause significant economic uncertaintiesabout the cost of useful energy or energy-relatedcommodities which might be produced, In fact,contrary to the impression created by some ofthe popular literature on OTEC,4 this study hasfound the technical and economic problems tobe such that there is no obvious competitiveproduct to be produced by OTEC systems dur-ing the coming 10 to 15 years.

Currently, all of the products proposed forOTEC plants (including electricity) are existingcommodities. This means that anything pro-duced by OTEC systems will be in competitionin world or national markets with identicalcommodities produced by other means. For thisreason, a potential investor in an OTEC systemwould have to be highly confident that OTEC-produced commodities would be dependableand price-competitive.

40ne of the most recent examples is John F. Judge,“Ocean Power: Is the U.S. Afraid of It, ” Government Ex-ecutive (December 1977): 29-32.

When considering costs of the system to pro-duce these products, the fact that OTEC usesseawater as “fuel” and therefore may not be sub-ject to continually rising fuel costs is an attrac-tive aspect. In addition, the cost of site acquisi-tion and the cost of operating OTEC plants,once they are constructed, are projected to besmall, and adverse environmental impacts areprojected to be minimal.

Even so, these positive factors are not enoughto outweigh the assortment of technical prob-lems which are also currently associated withOTEC and are identified throughout this report.But as technical problems relating to OTEC aresolved and as more information is gained aboutthe future cost and availability of traditionaland alternative sources of energy, OTEC couldbecome more attractive than it currently ap-pears to be.

However, it is difficult to draw conclusionsabout OTEC or to make comparisons withother energy alternatives until there is adefinitive system to evaluate—that is, a specificplant, located at a known site, receiving mater-ials for the production of a certain product, andshipping that product out to consumers.

The following sections of this chapter willdiscuss the principal technical problems and theeconomic uncertainties about the cost of usablepower from OTEC. They will also discuss someof the economic implications of products whichcould be manufactured using OTEC as a powersource. For each of these products, the existingindustry was reviewed; the supply and demandrelationships of feedstocks and of finished prod-ucts were analyzed; and the substitution ofOTEC as the power source was evaluated.

TECHNICAL PROBLEMS

Heat Exchangers

Heat exchangers are the most critical compo-nent, i.e., largest and most expensive, of theclosed-cycle OTEC plants currently being devel-oped. Their function is to evaporate and con-dense the working fluid using the warm andcold seawater. The capital cost of the heat ex-changer is a primary factor in the total cost of

..————

Ch. II Technical and Economic Status . 17

WC+iNINGFLtJ!O

v A P C + ?IN

‘,CA MATER IN

the plant. It has beenestimated that approx-imately one-third to one-half the cost may beassigned to the heat ex-changer elements of thesystem.5 Heat transfereffectiveness is also a pri-mary factor in the cost ofpower generated by anOTEC plant.

Currently the impor-tant unresolved develop-ment problems for heatexchangers include ques-tions about materials tobe used, methods fordealing with biofouling’and corrosion, and theconstruction techniqueswhich will be necessary.

Materials: Candidate materials which havebeen considered for OTEC heat exchangers in-clude copper-nickel alloys, fiber-reinforcedplastic, stainless steel alloys, titanium, andaluminum alloys.

● Copper-nickel alloys have been the stand-ard material for marine heat exchangersand seawater piping systems for manyyears. However, while this material isrelatively inexpensive and abundant, it isnot compatible with ammonia, the prin-cipal compound being considered for a

‘R. H. Douglass, et al., Ocean Thermal Energy Conver-sion Research on an Engineering Evaluation and Test Pro-gram, (Redondo Beach, Calif.: TRW Systems Group,February 197.s) I-.5. Also, L. C. Trimble, et al., O c e a nThermal Energy Conversion (OTEC) Power Plant Tech-nical and Economic Feasibility Technical Report, Vol. I,87-90.

‘Biofouling—Biof ouling is the result of certain marineorganisms attaching themselves to submerged objects, Bio-fouling may be detrimental to the system in a number ofways; it may completely block the flow of seawater in thetubes, it may lead to sharply reduced heat transfer acrossthe tube wall, and it may lead to increased corrosive attackunder deposits, i.e., crevice corrosion. It also increases theresistance of the coldwater pipe to currents and to waterflowing through the pipe.

●

●

working fluid in closed-cycle designs. T Ifthe working fluid is Freon, however,copper-nickel is very attractive.

Fiber-reinforced plastic heat exchangershave been studied for possible OTEC ap-plications, but the feasibility of variousproposed composite plastic cores is specu-lative. Predicted lifetime between replace-ments has been estimated to be 5 years. sThus, the low initial cost of fiber-reinforcedplastic must be balanced with its poor heattransfer rate and the necessity for frequentreplacement.

Titanium has been introduced into marineservice in recent years, and two of the ma-jor OTEC studies selected titanium as thematerial for evaporators and condensersbecause operating experience indicatesgood resistance to pitting, stress, and in-tergranular corrosion can be achieved.Titanium is compatible with ammonia andhas high strength for its weight, The usefullife of titanium heat exchangers has beenpredicted to be 30 years. ’

However, there are also problems asso-ciated with titanium. It has high suscep-tibility to biofouling in stagnant seawater,and welding and joining techniques for ti-tanium in very large, complex structureshave not been satisfactoril y d e m o n -strated. 10

A major problem with titanium is thatthe high cost and limited supply would pro-hibit large-scale use of the material in thenear future. Titanium is about 3 times asexpensive as aluminum, anothe r seriouscandidate. However, since only some partsof the heat exchanger would be constructedof titanium, the total cost would not be 3times larger. In addition, life-cycle cost of

7A. M. Czikk, Ocean Thermal Power Plant Heat Ex-changers, (Tonawanda, N. Y.: Union Carbide Corpora-tion, May 21, 1976), p. 100.

BM1tre Corporation, systems ~escri~tion and Engineer-

ing Costs for Solar-Related Technologies, Vol. VII,(McLean, Va.: Mitre Corporation, June 1977), p. 73

‘Ibid.‘“L. C. Trimble, et al., Ocean Thermal Energy Conver-

sion (OTEC) Power Plant Technical and Economic Feasi-bility, p. S-60.

. . . —. .. .-— — . .

18 ● ocean Thermal Energy Conversion

titanium could prove to be less if com-ponents constructed from it are moredurable. Presently, the production oftitanium is limited. Construction of theheat exchangers for one 100 MWe OTECplant would require a supply of titaniumequal to about one-quarter the totaltitanium mill products shipped in 1974.1

1

Although the industry capacity is expectedto double by 1985, it would still be inade-quate for large-scale production of OTECplants.

● Stainless steel alloys are similar to titaniumin life expectancy and are in better supply.According to the U.S. Bureau of Mines, thepeak in stainless steel production came in1974 at 1,345,000 tons, compared to ti-tanium production of 17,600 tons. ]2 (How-ever, not all that quantity of stainless is of aquality suitable for use in an OTEC. ) Theunit cost of stainless steel is about 40 per-cent that of titanium welded tube. How-ever, a greater thickness of stainless steel isrequired because of the lower strength ofstainless; and the resulting total heat ex-changer costs would be about equivalent. 13

. Aluminum alloy is also a leading candidatefor OTEC plants. The welding and formingtechniques for aluminum are far betterestablished than for other candidate mater-ials and the existing production base ismuch larger. However, the compatibility ofaluminum with seawater and ammoniamust still be demonstrated.

So far, there is no obvious best material forthe heat exchangers. Only design and testing ofthe heat exchanger over a substantial period oftime, in connection with specific water condi-tions at a given site with known types of bio-fouling with prescribed cleaning and recleaningtechniques and with a known working fluid will

1 ILetter t. T.A.V. Cassel, Bechtel Corporation, fromStanley L. Hones, Titanium Metals Corps. of America, Ir-vine, Calif., Dec. 9, 1974.

IZExtrapolated from U.S. Department of the Interior,Bureau of Mines, Commodity Data Summaries 1977,(Washington, D. C,: U.S. Department of the Interior,January 1977). p. 178.

13A. M. Czikk, et al., “Ocean Thermal Power Plant HeatExchangers, ” Sharing the Sun, A Joint Conference of theInternational Solar Energy Society and Solar Energy Socie-ty of Canada, Inc., Winnipeg, Canada, August 1976.

determine if there is an acceptable material at anacceptable cost. Some testing has begun underthe DOE program.

Biofouling: As biofouling builds up, theoverall heat transfer is reduced. Net power out-put and overall plant efficiency are reducedbecause more power is required to move theheating and cooling water through the system.However, the rate of biofouling of heat ex-changer surfaces—which is dependent uponmany site-specific factors such as water tem-perature and nutrient concentration—is only

partially known at this time. Periodic cleaningwill be necessary to keep the seawater side of theevaporators and condensers free of biofouling.Some means of conducting this cleaning arebeing studied, but it is not known what effectsuch cleaning will have on the rate of corrosionand on the life expectancy of equipment. Like-wise it is not known how often cleaning will benecessary or the length of time the OTEC plantwill be out of operation due to biofouling. Dataare just now becoming available from DOE testswhich address these problems,

An overall assessment of the impact of bio-fouling and tube cleaning on the capacity of theplant has not yet been made for any of theOTEC concepts, but tests are underway.

Construction: Several types of heat exchangerdesigns have been proposed, using tube andshell, with fluted, enhanced, and serpentine sur-faces, Plate and fin exchangers are also beingdesigned. Yet the construction of heat exchang-ers of these designs in the size required forOTEC is not now common practice. The largestheat exchangers constructed to date have hadtube surface areas of about 500,000 square feet.A 100 MW OTEC will require 10 times that, orabout 5 million square feet of heat exchangersurface area. The surface area will be providedby a number of heat exchangers, ranging in sizefrom 200,000 square feet each to 1.2 millionsquare feet each. It is likely that this increase insize will result in problems which are not en-countered in present heat exchanger designs.Also, depending on the material selected for theheat exchanger, there may be problems of weld-ing, forming, and extruding sections.

14L. C. Trirnble, et al., Ocean Thermal Energy conver-sion (OTEC) Power Plant Technical and Economic Feasi-bility.

Ch. 11 Technical and Economic Status “ 19

One engineering company, in response to aquery about OTEC, put the construction prob-lem in these terms:

We are dealing with a conceptual designwhich does not fit within the limits of our pres-ent range of experience. We believe that theseexchangers can be built, but that the technolog-ical and practical problems which would have tobe solved would be—in the least—challengingand possibly—in the long run, when consideringcosts and manufacturing capability— prohibi-tive. 15

Cold Water Pipe

The purpose of the cold water pipe is to bringcold. water from the deep ocean to provide cool-ing water for the condensers.

The cold water pipe is one of the most signifi-cant engineering challenges in OTEC design.Several types and materials have been consid-ered to date. These include structures of steel,aluminum, reinforced concrete, fiber-reinforcedplastic, and rubberized materials. All these ma-terials raise questions as to the size of the struc-tures which can be built and deployed at thedepths at which they must be used, For example,the largest diameter reinforced-concrete andfiber-reinforced plastic pipes currently used fornuclear powerplant cooling water and sewer ef-fluent outfalls range from 10 to 12 meters indiameter. ” Steel pipe outfalls have been builtwith d iameters o f about 20 meters . However , a100 MW OTEC may require a co ld water p ipe

that is more than 40 meters in diameter*7 a n dmore than 800 meters long. The length of theOTEC cold water pipe would be the equivalentof 20 to 30 Baltimore Harbor Tunnel tubeshanging vertically in the deep ocean. 18

Two distinct types of pipeline problems exist:one for stationary plants located on shore andone for floating offshore platforms.

‘sIbid.16 T. R.w,, Oceans System Division, December 1976.

“U.S. Congress, House Committee on Science andTechncdogy, Subcommittee on Advanced Energy Technol-ogies and Energy Conservation Research, Developmentand Demonstration, FY 1979 Authorization Hearings,“Statement of Eric H. Willis, ” U.S. Department of Energy,Jan. 26, 1978.

‘8 Phone conversation with administrator of BaltimoreHarbor Tunnel, Feb. 7, 1978.

In a stationary, land-based OTEC plant, thecold water pipe would be anchored to the sea-floor and be designed to conform to the contouralong a sloping seabed to considerable depths.The cold water pipe from an OTEC plant willhave to reach depths of 300 to 1,500 meters inorder to tap the cold water resources which arerequired for OTEC operation .19 This is a dif-ficult engineering problem because the pipemight be handled in sections due to the length ofthe pipeline, which may reach 10 kilometers ormore, depending on the bottom contour of thesite. The current state-of-the-art for underwaterpipelaying is limited to water depths of approx-imately 150 meters. Small pipes have been laidat greater depths, but there is no experience withlarge diameter pipes at great depths.

Most recent conceptual designs have utilizedfloating offshore platforms rather than bottom-mounted platforms or land-based plant sites. Inthese floating plants, the cold water pipe wouldbe connected to the bottom of the platform.While the floating platforms will require pipesto reach the same depths of water as stationary

plants, pipes from the floating plants would beexposed to dynamic loads and stresses whichwould not be encountered on pipes which areanchored to the bottom. Pipe design and de-ployment for floating platforms would be dif-ficult. Tried and proven methods for couplingthe pipe to the platform, as well as reliablemethods for predicting the behavior of the pipeunder cyclic loading are not available. Some ex-perience has been gained with Shell Oil’s Spar I

floating oil loading and storage unit in theNorth Sea. The spar measures 169 meters fromits base to the highest point, the height of a 40-story office building, and is anchored in approx-imately 100-meter water depth. The largest cy-lindrical section is 29 meters in diameter.’” Ex-perience from this unit may contribute to thedesign and deployment of an OTEC plant’s coldwater pipe.

The pipe cannot be designed without an anal-ysis of subsurface flows of currents at varyingdepths in specific locations, the effect of oscilla-tions caused by a platform’s motions at sea, and

I g Je r o m e W i ] ] i a m s , Oceanography, (n.p.: Little, Brownand Co., 1962).

‘“’’Spar Connection Brings Brent Field Closer to Produc-tion, ” Ocean lndustr-y 11 (August 1976), 45.

20 ● Ocean Thermal Energy Conversion

the resultant loadings. The effects of biofoulingon the inside and outside of the pipe must alsobe analyzed. In addition, the large amount ofdrag caused by a large pipe would tremendouslyincrease power requirements if dynamic posi-tioning were used to keep the platform on site.

Working Fluid

The working fluid is a compound which is va-porized in the plant’s evaporator by the use ofwarm seawater, expanded in the turbine wherepower is extracted, and finally condensed to aliquid by the use of cold seawater. Open-cyclesystems use warm surface seawater as the work-ing fluid. The water is vaporized in a vacuumand is not recycled. Closed-cycle plants such asthose currently being proposed use a secondarymedium as the working fluid and continuouslyrecycle it. Most of the currently proposedclosed-cycle OTEC plant concepts use ammoniaas the working fluid. Some concepts use Freonsand propane.

Ammonia has been chosen for two reasons: 1)the work extracted by the turbine from eachpound of ammonia is at least 3 times that ex-tracted from propane and 2) the higher thermalconductivity and heat capacity of ammoniamay make it possible to reduce the size of theheat exchanger. There have been no tradeoffstudies on complete OTEC systems that clearlydetermine the appropriate working fluid. Freonsand propane may well be superior to ammoniafor some applications.

WARMWATERINTAME

s

HEAT EXCMAffiERS HEAT EXCHANGERS

I

-

?M R MwATERC i l n s l

Working Flutid Flow

!!?!rPuMPt COLDWATERINTAKE

In the event of a spill of the working fluid or aleak from the OTEC plant, ammonia is highlytoxic and slightly flammable. Low-level leaksare to be expected, and there could be im-mediate damage to the environment which hasnot yet been assessed. But the detrimental effectsof ammonia should be less long term than thosewhich might be caused by Freons or propanebecause ammonia decomposes into compoundswhich are nutrients. In addition, ammonia caneasily be detected because of its odor.

Ammonia will readily dissolve in seawater toform ammonium hydroxide, which may be in-compatible with some materials. Therefore, theuse of ammonia may limit the selection ofmaterials to those which are compatible andresistant to corrosion, such as titanium andstainless steel alloys.

Thus, selection of working fluid and materialswhich are compatible and protection of the sur-rounding environment from leakage are impor-tant engineering considerations which affectevery facet of plant design and materials selec-tion.

Ocean Platforms

The structures required to house OTECequipment in the open ocean may be stationaryplatforms anchored to the seafloor or floatingplatforms moored or dynamically positioned ata particular site.

To date several configurations have been sug-gested, including semisubmersible and spar-buoy shapes, ship-like forms, and disk-shapedhulls. It is expected that although OTEC plat-forms may well be larger than any platform yetdesigned by the petroleum industry, the designsand accomplishments of that industry will playan important role in development of OTECstructures. A few oil storage and productionplatforms in the North Sea approximate the sizenecessary for OTEC platforms exclusive of thecold water pipe, mooring systems, and trans-mission lines. zl Operating experience with eventhese platforms, however, is as yet very limited.

The major technical problem which must bedealt with in designing the platform is the dif-

2’Ronald Greer, Ocean Engineering Capabilities and Re-quirements for the Offshore Petroleum Industry, (NewYork: American Society of Mechanical Engineers, 1976).

Ch. II Technical and Economic Status “ 21

I

I

IL

3 Types CM Platlorms

SHIP

.ficult one of connecting a heavy submergedstructure (the cold water-pipe) to a surface plat-form subjected to wave action. Claude’s earlyexperiments with much smaller floating struc-tures resulted in failure and lost cold waterpipes. Semisubmerged or completely submergedplatforms may minimize dynamic action, butthe structural dynamics of floating platformsand cold water pipes appear to be a majortechnical problem.

Another difficult task is keeping the platformonsite in the open ocean which may be subjectto high winds, waves, currents, etc. Mooring aplatform of the size required for OTEC in verydeep waters would be a difficult engineeringproblem requiring unique designs and materials.Dynamic positioning could be used but may re-quire large amounts of power in even moderateocean currents. Warm and cold water whichmust be ejected from the machinery could beused to position the platform.

Underwater Transmission Lines

Dependability of the underwater transmissionlines which would be needed to move OTEC-produced electricity to shore would be critical tothe success of any OTEC electric powerplant.However, these lines pose a particular problembecause of the limited state-of-the-art in sub-marine cables, Two 250 MW DC power cableshave recently been laid across the NorwegianTrench in more than s50 meters of water” andFrench and British electric companies are con-sidering a 2,000 MW cable across the English

Channel .23 This technology is equivalent to thatwhich would be required for an OTEC plant de-livering electricity from a site reasonably closeto shore.

The economics of transmitting electricity toshore is greatly affected by the distance whichmust be covered by cables and the fact that theremust be a number of cables taking differentroutes to shore in order to ensure reliability.With the cost of underwater transmission linesat roughly $1 million/mile or more, 24

at some

potential OTEC sites 200 miles from shore in theGulf of Mexico, the cost of a single cable couldequal the capital cost of constructing the OTECplant. (In coal-fired or nuclear power systemsonshore, construction of the transmission cableis roughly 12 percent of the total constructioncost .25 )

/

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In addition, construction of the electricalcable connecting the OTEC plant to the sub-marine cable wifi be difficult. For example, thereis no known method of disconnecting and re-connecting the OTEC to the cables if this needarises due to severe winds and waves.

‘z’’ Power Cables Cross Norwegian Trench, ” Ocea)] IH-dustry 12 (March 1977).

231bid.“L. C. Trimble, et al., Ocean Thermal Energy Conver-

sion (O TEC) Pouler Plant Technical and Economic Feasi-bility.

“Edison Electric Institute, Statistical Yearbook of theElectric Utility ]ndustry for 2975, (New York: Edison Elec-tric Institute, October 1976), p. 59.

22• . ocean Thermal Energy Conversion

N&TER

cXXOSEA WATEU

“ rNOT SOCCiD WATER

c 0 u 0 E t 4 s E R

F R E S H W A T E R

L~. Cycle OTEC

Open-Cycle System

The open-cycle con-cept, which does not re-cover the working fluidand reuse it, was basical-ly eliminated from con-sideration about 8 yearsago when research wasunder the direction of theNational Science Foun-dation. Until recently,ERDA has directed mostof its funding toward theclosed-cycle concept, inwhich the working fluidis continuously recycled.

The f irst importantdevelopment of the opencycle was accomplishedby Georges Claude in the1920’s. Claude reasonedthat the major disad-vantage to closed-cycleocean thermal power-

plants is that the evaporator and condenser useabout one-half of the temperature difference toget the heat into the working fluid. Thus onlyhalf the temperature difference is available forwork by the turbine. Claude’s assessment of theproblem is summarized in the following state-ment:

Manifestly such a solution is burdened by anumber of inconveniences, one of them beingthe high cost of such evanescent substances(working fluids, i.e., ammonia), and another thenecessity of transmitting enormous quantities ofheat through the inevitably dirty walls of im-mense boilers with such a small difference oftemperature. 26

The open or “Claude” cycle uses ocean wateras the working fluid as well as the heat source.The warm surface water is evaporated in aboiler at very low pressure, in a vacuum of ap-proximately 0.5 psig. The resulting steam is thenexpanded in a very large diameter turbine.Finally the steam is condensed by either mixingdirectly with cold water pumped from ocean

26 Ge o r g e s Claude, “Power from the Tropical Seas, ”Mechanical Engineering 52 (December 1930): 1039.

depths or in a surface-type heat exchangersimilar to the closed-cycle type. The lattermodification permits production of potablewater from the steam condensate.

The use of direct contact heat exchangers inboth the evaporator and condenser eliminatesthe need for enormous heat transfer surfacearea. Thus the area subject to corrosion andfouling, particularly in the evaporator which isat a higher water temperature, is greatly re-duced.

The reason most often given for the choice ofa closed-cycle concept is that the open cyclewould require a turbine of prohibitive size. Forexample, a single turbine yielding 100 MWecould be as much as 57 meters in diameter.However, no practical proposal would considera single turbine. The smaller (3 to 5 MWe) tur-bines which are more likely to be used are veryclose to the size of conventional low-pressuresteam turbines now in existence. z7 Problems ofcorrosion and deareation are also inherent in anopen-cycle plant. Noncondensible gases re-leased from feedwater are the greatest source ofair in the boiler. The effect of this air is to lowerturbine output and to seriously limit the capaci-ty of the condenser, thus, this air must beremoved prior to condensation. 28 The use oflow-pressure flash distillation chambers andother methods of controlling this problem arebeing investigated .29

De-emphasis of the open cycle in current re-search and development appears to be a ques-tionable decision because the massive heat ex-changer required for a closed-cycle OTEC plantmay limit the size of each OTEC unit. Open-cycle machinery, particularly small turbines,condensers, and ejectors could be developedalong with closed-cycle machinery. Use of the

z7p L Schereschewsky, Electric Power G e n e r a t i o n F r o m. .the Tropical Sea, Geothermal Water, Wells and OtherSources of Low Temperature Water . . . Modernization ofthe Claude Process, (n. p.: United Nations Division ofResources and Transport, August 1972), p. 23.

2’Andr& Nizery, Utilization of the Therma/ Potential ofthe Sea for the Production of Power and Fresh Water,(Berkeley, Engineering Research, Sea Water Project, March1954), p. 5.

*’Donald F. Othmer, “Power, Fresh Water, and Foodfrom the Sea, ” Mechanical Engineering 98 (September1976): 27.

.

Ch. II Technical and Economic Status “ 23

~PIJMP

W(4WA

L IOUIO

c o

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open cycle, which turns out desalinated water as. .a byproduct of the process, may be especiallyattractive on some isolated island or in coastalcommunities.

Construction and Deployment of an OTEC Plant

There are conflicting views about the facilitywhich will be required. One school of thoughtbelieves that any large shipbuilding facilitycould undertake the construction. Anotherholds that the construction facility itself wouldbe a novel endeavor. Such a construction facil-ity could be a several hundred million dollar in-vestment.

Deployment and mooring of OTEC plants ina potentially hostile environment at sea mayako be a problem. There appears to be littleengineering experience which is directly perti-nent to final onsite assembly of a large OTECsystem, although much can be learned from theexperience of the petroleum industry in theNorth Sea and elsewhere. The cold water pipeand undersea electric transmission cables areparticularly challenging deployment problems.

Reliability of an OTEC PIant

Once an OTEC plant is actualiy constructedand sited, it will have to continue to operatereliably for at least 20 years in order to amortizethe very large capital investment which will berequired. Reliability is often expressed in termsof plant capacity factor. The plant capacity fac-

tor is the ratio of the power actually producedduring a given period to the total which a plantoperated at constant full power could produceduring the same period, Most of the currentOTEC plant concepts claim a capacity factor of90 or 95 percent .30 This appears to be highly op-timistic for new technology with no provenrecord of operation.

The capacity factor will be reduced primarily

by scheduled and unscheduled maintenance andrepair; seasonal variations in ocean tempera-tures; variations in ocean currents and windconditions which may increase the power re-quirements for operating equipment; and thebuildup of biofouling organisms which reduceheat transfer rates and may require that equip-ment be shutdown for cleaning.

Based on experience with ship machinery,large pieces of equipment operating in the oceanrequire a periodic overhaul, typically lasting 1to 3 months, at least once every 2 years .31 Thisgives a capacity ioss of approximately 4 to 12percent. There will also be periods when capac-ity is reduced due to equipment outages. OneOTEC design concept projects one failure last-ing 24 hours every 68 days.32 This reduces ca-pacity by another 1.5 percent. In total, sched-uled and unscheduled maintenance alone can beexpected to reduce the capacity factor below 90percent. The effects of temperature variationsand biofouling will reduce plant capacity stillfurther.

Thus, it appears that an 80- to 85-percentplant capacity factor is the maximum whichshould be projected for OTEC plants. Even thatfigure is open to question based on experiencewith other large energy systems. For example, inthe late-1960’s many nuclear powerplants weresold with the promise that over their operatinglifetime they would realize capacity factors of 80percent or better. 33 Those expectations are now

30L C. Trimble, et al., Ocean Thermal Energy Conz~er-

sion (OTEC) Powerplant Technical and E~onoml~Feasibility, p. 2-100,5-21.

3’Ibid.UTRW Systems croup, Ocean Thermal Energy c~n~er-

sion, Vol. 3, (Redondo Beach, Calif. : TRW SystemsGroup, June 1975), pp. 4-15.

331rvin C. Bupp, The Commercial Prospects for OTECSystems, unpublished, (Cambridge, Mass.: HarvardUniversity, March 1977).

24 . ocean Thermal Energy Conversion

recognized as having been extremely optimistic.Although there is a wide range of variations inthe performance of different types of equipmentand there is only a limited amount of informa-tion on the most modern plants, it appears thatcapacity factors in large (greater than 800 MW)nuclear and coal-fired powerplants range fromabout so to 7S percent and are dependent on awide variety of local circumstances .34 There aresome nuclear plants which have achieved 80percent, but this was only after considerable ex-perience.

Given that record for systems which are muchmore completely developed and working in astable and familiar environment, it appearsunrealistic to expect that OTEC plants, withmany unknowns, would achieve plant capacityfactors in excess of 90 percent.

Summary of Technical Problems

No scientific breakthroughs are needed tobuild an OTEC plant, but the technology forseveral major components of OTEC is not engi-neering state-of-the-art. No plant has been fullydesigned; many components of the system havenot yet been developed. The technical problemswhich must be solved are significant, and satis-factory solutions to the critical engineeringproblems are likely to require laboratory and at-sea testing. Even when the plant is designed andproven, there is little engineering experiencewhich is directly pertinent to the at-sea as-sembly and mooring problems which may beencountered. And finally, it is not now possibleto project how reliable an OTEC plant will beonce it is sited and operating.

NOTE: The OTA Working Paper on Ocean ThermalEnergy Conversion, which is being published separately,contains a detailed technical discussion of designs thathave been proposed.

ECONOMIC CONSIDERATIONS

Meaningful economic analyses can only beconducted for specific power systems. To date,however, the technical uncertainties of OTECare so great that only broad economic over-views are sensible, and care should be taken toavoid detailed economic calculations that createa specious aura of accuracy.341bid.

The following sections provide an overallview of three potential OTEC product systems(electricity, ammonia, and aluminum). Othersystems are, of course, possible and may, infact, prove more useful in the future. However,most Government-sponsored research has fo-cused on these three potential systems. Data areprovided on potential markets and on factorsinfluencing the range of costs of OTEC systems.

Electric Power Generation

OTEC plants are first of all powerplants. Thispower may be fed into an electric utility grid fordistribution to customers or it may be used in anenergy-intensive manufacturing process whichis coupled with the OTEC plant, such as anOTEC/ammonia system or an OTEC/alumi-num system.

In any of the foregoing cases, the economicsof generating power can be expressed in twotypes of cost: the capital cost of constructingOTEC plants and the cost per kilowatt hour ofenergy produced.

Capital Cost of Constructing an OTEC Plant:The conventional method of expressing the costof building a powerplant is in terms of dollarsper net kilowatt of capacity. Existing literatureon OTEC reflects an extraordinarily wide rangeof estimates about the total investment requiredfor the first several plants. The data presentedare for different temperature gradients, sizes,and designs of OTEC plants with differing com-ponents and equipment and differing learningcurves, The capital costs presented range from$500/kW to $3,700/kW. These cost estimatesare displayed in table 3.

It is even quite possible that the actual costscould exceed this range because all the impor-tant variables which will determine the costs arenot yet known. For example:

●

●

The choice of material for the heat ex-changers may radically affect the cost ofconstruction because the price of candidatematerials varies widely;

The choice of sites will radically affect thecost of construction because the site will in-fluence the type of platform and mooring,the length of the cold water pipe, the dis-

Ch. II Technical and Economic Status . 25

Table 3.—Estimated Capital Costs of an OTEC Electric Generating Plant

●

t r e dAPLa TRWb LSMDC (Roberts) M i tree

Capital costs in $/kW. . . . . . . . 500-1,000 2,100 2,600-3,700 1,600-1,900 1,600-2,800aw. H. Avery, et al., Maritime and Construction Aspects of ocean Therma/ Energy Conversion (OTEC) plan;

Ships, (Laurel, Md: Applied Physics Laboratory, April 1976), pp. 5-25.bM itre corporation, systems f)escriptlons anci Engineering Costs for Solar Engineering cOStS fOr Solar-Related

Technologies, vol. V1l.Cl bid. dlbid. elbid.

tance the product must be transported toshore, and the precautions which must betaken to protect the environment;

The rate of biofouling may radically affectthe cost because fouling _reduces the effi-ciency and thus the output of the plant.

Solutions to these and other technical prob-lems are necessary before rational estimates ofOTEC construction costs can be made. In addi-tion, to the capital cost of an OTEC plant mustbe added the cost of transmission cables toshore. With cable costs at about $1 million amile,ss th e transmission lines for a 5oo MwOTEC 100 miles offshore would be about$200/kW at a switching station on the beach.The need for multiple cables could double ortriple this cost.

If OTEC plants could be built at the very op-timistic investment cost of about $500/kW(1976 dollars), OTEC plants would be more at-tractive than nuclear powerplants built duringthe mid-1970’s 3b if the OTEC operating costswere modest.

However, it is prudent to remember that forthe past 10 years, engineering estimates of thecapital cost of new generating capacity havebeen persistently low. Early commercial nuclearpowerplants actually cost 2 to 3 times more thanoriginal estimates indicated they would .37

If the capital cost of an OTEC plant reachesor exceeds the high end of the estimates,$3,700/kW, construction is less likely to start.

3SL. C. ~rimb)e, et al., Ocean Thermal h~rgy ConZ’er-sion (O TEC) Power Plant Technical and EconomicFeasibility.

3 6 1 ~ v i n C . B u p p , Th e C o m m e r c i a l p r o s p e c t s f o r O T E C

Systems, March 1977.371rvin C. Bupp, et al., “The Economics of Nuclear

Power, ” Technology Review 77 (February 1975).

CON SUMEB

Cost per Kilowatt Hour of Energy Produced:The busbar cost38 of producing electricity byOTEC or any other method is dependent upon acollection of variables. First, the amount oftemperature difference has a direct bearing onthe net power output of an OT’EC plant and thecost of each unit of energy. For example, con-sider a 100 MW OTEC plant designed for a 400F temperature difference, with capital costs of$2,000/kW. If that temperature differencedecreases, the plant output would decrease andthe cost per unit of output would increase asshown in table 4.

Table 4.—Plant Output and Cost per Unitas a Function of Temperature Difference

Temperature Plant $/kW per unitdifference (“F) output (MW) of output

40 .., . . . . . . . . . . . . 100 2,00030 . . . . . . . . . . . . . . . 56 3,50020 . . . . . . . . . . . . . . . 25 8,00010 . . . . . . . . . . . . . . . 6 32,000

Source: Office of Technology Assessment.

36The busbar is an assembly of conductors for collectingelectric currents and distributing them to outgoing feeders.Thus, the busbar cost is the cost of electricity beforedistribution to consumers.

26 ● ocean Thermal Energy conversion

Table 5.—Busbar Cost of Electricity

Busbar cost of electricity = (FCR) C/kw x 1,000 + (CF) + (COM)in mills per kilowatt hour (FA) T

Busbar cost—cost in mills/kWh at the point of production with no transmission charges (one mill =one/tenth of one cent)

FCFt-fixed charged rate: a percentage figure representing estimates about the long-term costs ofdebt and equity capital. During the 1960’s FCRS of 8 to 10 percent were standard for theAmerican utility industry. During the 1970’s, 16 and 17 percent FCRS have been common.

C/kVV-capital investment in dollars per kilowatt as discussed previously in this chapter.

1000-a conversion figure used to convert dollars to mills.

FA—capacity factor: the ratio of the kilowatt hours actually produced during a given period to thetotal which a plant operated at constant full power could theoretically produce during the sameperiod.

T—total hours in a year: 8,760.

CF—cost of fuel in mills per kilowatt hour: seawater is the equivalent of fuel for OTEC and there isno charge.

COM#-cost of operation and maintenance in mills per kilowatt hour: 4 mills/kWh is an estimate usedby proponents of OTEC.

Other variables also affect the per kW cost ofelectricity produced. The major ones include thecapital cost of the plant, the plant capacity fac-tor, the fixed annual charge rate, cost of fuel,and the cost of operation and maintenance.

These costs cannot yet be predicted accurate-ly. If only favorable assumptions are used, thecost of electricity can be made to appear verycompetitive. If less optimistic assumptions are

used for one or more variables, the cost of elec-tricity rises rapidly. The equation in table 5 de-monstrates how the cost changes with thesevariables.

Some of unknowns in this formula are thefixed charge rate, the plant capacity factor, andthe capital investment in construction of theOTEC plant. Table 6 varies these three numbersto show how their uncertainty makes a firm

Table 6.—Effect of Some Variables on Cost of Busbar OTEC Electricity*

cost ofCost of operation and

Fixed Capital Total fuel in maintenance Busbarcharge investment/ Conversion Capacity hours in mills/kWh in mills/kWh cost in

rate (FCR) kW(C/kW) figure factor (FA) a year(T) (CF) (COM)** mills/kWh

16%. . . . . . . . $600 1,000 95% 8,760 0 4 1616°/0. . . . . . . . $1,200 1,000 60% 8,760 0 4 41

16%. . . . . . . . $2,400 1,000 600/0 8,760 0 4 771670. . . . . . . . $4,000 1,000 800/0 8,760 0 4 952070 . . . . . . . . $4,000 1,000 800/0 8,760 0 4 11816%. . . . . . . . $4,000 1,000 600/0 8,760 0 4 126

(FCR) C/kW x 1,000 + (CF) + (COM) = Busbar cost

(FA)T

● No transmission and distribution costs are included in busbar figures.● ● Operating and maintenance costs are less predictable than initial investment. They are influenced by the

design of capital equipment and are resolved further in the future.

Source: Office of Technology Assessment.

estimate of the final busbar cost of electricityimpossible. The first line uses numbers based ona study which produced the lowest of the capitalcost/kW estimates shown earlier. Other linessimply use a range of plausible numbers.

Although changes in the variables are ratherarbitrarily selected for purposes of this illustra-tion, they do reflect possible values for fixedcharge rates, capital investment, and OTECplant capacity, and they demonstrate how esti-mates of busbar cost of OTEC electricity can in-crease by more than 100 mills /kWh.

It is almost as difficult to determine the futurecost of power generated by any conventionalplant because many unforeseen factors, includ-ing political decisions, will determine the con-struction, fuel, and equipment cost of thefuture.

Figure 1 displays how increases in the in-stalled costs and fuel costs will affect the cost ofelectricity from conventional powerplants. Forexample, a coal-fired powerplant which cost$400/kW to build and has fuel costs of $20/toncould produce busbar electricity at about 18mills/kWh. If the plant cost $1,00()/kW to buildand coal was $60/ton, it would produce busbarelectricity at 50 mills /kWh. 39

Since there are as yet unpredictable costswhich coal plants will incur to meet air qualityregulations, nuclear plants will incur to disposeof radioactive wastes, and so on, it is again dif-ficult to predict future costs. However, projec-tions for conventional powerplants do reflectsome years of experience while OTEC projec-tions are strictly rough guesses.

Based on the history of cost escalations forcoal and nuclear powerplants and on discus-sions with personnel who have studied theOTEC concept, figure 2 pictures the differencein the range ofof electricityfigures shouldvery generalranges.

So far, this

uncertainty about the busbar costgenerated in the future. Thesebe read with caution, as they areand demonstrate only possible

wide range of uncertainty abouttechnical problems and about the cost of elec-tricity from OTEC plants has been a major fac-

“Federal Power Commission, Bureau of Pozoer, AnnualSummary of Cost and Quality of Electric Utility PlantFuels, 1976, (Washington, D. C.: Federal Power Commis-sion, May 1977).

Ch, II Technical and Economic Status 27

tor in discouraging utility company decision-makers from considering OTEC plants for partof their future generating capacity .40

Other Factors: In addition to capital cost andcost per kWh, there are other factors whichutilities take into consideration before a decisionis made to invest in a particular source of energyor type of facility which would supply electric-ity to the grid. In order to determine whetherpublic utilities could be expected to provide amajor market for electricity generated by OTECif economics were favorable in the future, OTAhas studied the planning process used by utilitiesand the variables which are analyzed before adecision is made to invest in a particular sourceof energy or type of facility. Some other majorvariables considered by the utilities include: 4

1

●

●

●

●

●

●

●

long-term availability of fuel,environmental assessment,reserve and reliability of generating capac-ity,construction and licensing time,site costs, “transmission cost estimates, andcandidate site selection.

All the variables are not of equal importancein the planning process; however several signifi-cant ones show potentially unfavorable aspectsof OTEC. Those are: 1) probable lengthy con-struction and licensing time, based on the dif-ficulty of constructing complex systems in theoceans; 2) high transmission costs, based on ex-pense of undersea cables and distance fromshores; and 3) the limited availability of sitesnear the United States.

Other factors, which show favorable aspectsof OTEC, are the possibility that it offers 1)long-term reliability of fuel; 2) low-acquisitioncosts for offshore sites; and 3) minimal en-vironmental impacts.

However, most public utilities are very con-servative when planning new facilities and haveindicated to OTA 42 that they consider onl y

PhO~e conversation between OTA and six coastal area

utilities, Feb. 7, 1978.4 I B J Washom and J, M. Niles, ]~zcenfzues for the c o m -. .

mercialization of Ocean Thermal Energy Con~~ersionTec/lno/ogy (OTEC), (Los Angeles, Calif.: University ofSouthern California, January 1977), p. 8.

‘zOffice of Technology Assessment staff meeting, Dec.28, 1976, Washington, D.C.

..—— —

Ocean Thermal Energy Conversion

Figure 1Potential Marginal Costs of

Baseload Electricity in the Year 2000for Coal or Oil-Fired Powerplants

Annual Escalation in Installed Cost (above inflation)

0% 1% 2% 3% 4 % 5% 6 %

II II l l I I I Io 500 1,000 1,500 2,000 2,500

Installed cost in 1976 $/kW

Assumptions:—75-percent capacity factor — 1976 installed cost $500/kW—35-percent efficiency in generation and transmission–Transmission and distribution cost $300 to $400/kW—Operating costs (exclusive of fuel) = $0.01/kW—Fixed charge rate = 0.15

Source: Office of Technology Assessment

120

100

80

60

4 0

20

0

E

c

120

110

100

90

80

70

%— 60

50

40

30

20

10

Ch. II Technical and Economic Status • 29

Figure 2Possible Range of Uncertainty in Future Cost of Busbar Electricity

Based on someindustry experience

III

● ● ● ● c

Nuclear

o3-.—

-— —— Optimistic

. . . ● . . . PessimisticSource: Office of Technology Assessment.

Coal

technology which is successfully demonstratedand commercially available when they begin theplanning process. The long leadtime required tobuild and license most facilities requires that thedecision to add new capacity generally be madeabout 10 years in advance of need for the elec-tricity. Therefore, the lack of demonstratedOTEC technology, the lack of dependable esti-mates for the variables which will be analyzed,and the uncertainties of operating a floatingplant in a hostile marine environment ensurethat OTEC plants will not be incorporated for

Based on no industryexperience

OTEC

0

3—.

— -- — Optimistic

● s.. ● . . Pessimistic

commercial use by electric utilities for manyyears to come.

Power for Production of Ammonia

The production of anhydrous ammonia (NH,)has been proposed as an attractive way to useOTEC. Ammonia is used in the manufacture ofmany chemicals, with about three-fourths of theU.S. production of ammonia being used tomake fertilizers for agriculture.

30 . ocean Thermal Energy Conversion

.---_____ l_.____n

Ammonia is a com-pound of hydrogen andnitrogen, and presentlylarge amounts of naturalgas are used as feedstockin the production of thehydrogen. Approximate-ly 40,000 cubic feet ofnatural gas is needed toproduce 1 ton of ammo-nia. The ammonia indus-try used approximately 4percent of thenatural gasconsumed in the UnitedStates in 1976.43 T h a tfigure is expected to risetomore than 5 percent ofthe natural gas consump-tion by 1980 and to morethan 11 percent by1990.44

A P L s C o n c e p t O T C A

If hydrogen could be produced atan OTECplant by electrolysis of seawater, the natural gasnow used as a feedstock could be eliminated.The hydrogen produced aboard an OTEC andnitrogen from the air could be fed to a ship-board commercial synthesizer, and the resultingammonia could be transferred to shuttle carriersfor delivery to consumers.

It is the savings in natural gas which makesthe OTEC/ammonia concept attractive. Thevariables which influence private industry deci-sions about ammonia production are:

expected supply and demand alternatives to existing processes and/or

OTEC, and● economic competitiveness of OTEC.

Expected Supply and Demand: World de-mand for ammonia is expected to grow duringthe next 15 to 20 years at an average annual rateof about 3 to 5 percent. Domestic demand is ex-

43 B. J. Washom and J. M. Niles, lrzcentiues for the c o m -

mercialization of Ocean Thermal Energy ConversionTechnology (O TEC), P.8.

AA]rvin ~. Bu p p, The Commercial Prospects for OTEC

Systems, p.8.

pected to grow at a slightly higher rate of 5 to 6percent .45

Demand for nitrogenous fertilizer, the largestsingle user of ammonia, is also expected togrow. The U.S. Fertilizer Institute projects an-nual growth of about 5 percent in demandthrough at least the 1980’s.46 World demand isexpected to grow at about 6.5 percent per yeardue to the increasing use of fertilizers in theLesser Developed Countries.47 Demand in theLesser Developed Countries, which accountedfor 19 percent of the world’s nitrogenous fer-tilizer use in 1975/76, is expected to increase by89 percent between 1975/76 and 1981/82. 4a

These countries will then account for nearly aquarter of the world’s use of nitrogenous fer-tilizers.

It is clear, then, that fertilizer demand in theLesser Developed Countries is of interest to am-monia producers, The demand is also partic-ularly meaningful for OTEC/ammonia plantssince many of the Lesser Developed Countrieshave easy access to areas of the oceans wherethere is a significant thermal resource whichcould be used in producing power by OTEC.However, the United Nations Food and Agricul-ture Organization projects that by 1982 theLesser Developed Countries will have increasedtheir ammonia production capacity by 151 per-cent, giving them control over 20 percent of theworld’s nitrogenous fertilizer production49 andexerting downward pressure on world prices.

In the United States, the domestic ammoniaproduction capacity is expected to increaseabout 15 percent by 1980 as plants currentlyunder construction come on stream. Althoughthe United States has been a net importer of am-monia since 1973, during the 1980’s and 1990’sdomestic production capacity is expected tokeep pace with consumption needs .’”

Meanwhile, world production capacity willalso continue to grow. The World Bank is

451bid.AbEdwin Wheeler, president of Fertilizer Institute, speech

at the Institute’s fall 1977 conference, New Orleans, La.“U.S. Department of Agriculture, Economic Research

Service, 1978 Fertilizer Situation, (Washington, D. C.: U.S.Department of Agriculture, December 1977) p. 19.

4aIbid.491bid.‘“Ibid.

Ch, 11 Technical and Economic Status . 31

presently financing a number of ammonia pro-duction projects. The Soviet Union and Chinaare expanding their ammonia production capac-ity, Saudi Arabia, Iran, and Kuwait are con-structing large facilities to produce ammoniaand petro-chemicals from natural gas which isnow being flared .5* It is clear that by the mid-1980’s, the Middle East may be a major sourceof inexpensive ammonia supplies. In all, worldconsumption of ammonia is expected to increase47 percent by 1982, reaching 82 million metrictons .52 However, considering the current stateof the technology, it is unlikely that OTEC/-ammonia plants could be a part of that massivegrowth.

Alternatives to Exist ing Processes and/orOTEC Plants: As stated earlier in this report,natural gas is critical to the current methods ofproducing ammonia. A1though ammonia pro-ducers currently benefit from a high-priorityrating in the allocation of scarce natural gas,curtailments have occurred in the past and willundoubtedly occur in the future. However, theammonia plant expansions now underway ap-pear to indicate that the domestic industry isconfident that existing technology and knownnatural gas reserves will support ammonia pro-duction at least into the 1990’s. 53 I n d u s t r ysources say they feel there is not sufficient threatto traditional ammonia production to justifymajor capital investment in an unproven tech-nology, such as OTEC, for at least the next 15 to20 years .54

Therefore, for the near term at least, theprimary alternative to OTEC/ammonia plantsis the traditional production system.

In addition, industry-sponsored studies haveshown that coal and fuel oil can be used toreplace natural gas as both a fuel and afeedstock in existing or planned ammoniaplants.

About 60 percent of the natural gas used in atypical ammonia plant is for feedstock while the

511bid.521bid.“Irvin C. Bupp,

Systems, p.9.“Ibid., p, 10,

The Commercial Prospects for OTEC

remaining 40 percent is used as fuel .55 Conver-sion of the system to be fueled by oil rather thannatural gas is a straightforward, conmicaloperation which can be accomplished duringnormal maintenance downtime and does notsignificantly increase the cost of the ammoniabeyond that resulting from any change in fuelPrice. 56 It is, however, somewhat more difficultto convert to oil as a feedstock. Such a conver-sion at existing plants would take 2 to 3 years,including a 6-month to l-year downtime. As aresult, the cost of ammonia would go up at least25 percent for the more expensive oil feedstock.The cost of the downtime and the cost of con-verting equipment would raise the price of am-monia still more.57 Converting the system to usecoal as a feedstock would result in even higherprices.

For the near term, imported liquefied naturalgas and domestic synthetic gas are also cited aspossible alternative feedstocks.

From the perspective of the U.S. ammonia in-dustry, the most important fact about near-termammonia production is the certainty of growingcompetition from low-cost foreign products,

Among the most likely competitors are theMiddle East nations, particularly Kuwait andIran, which appear likely to put large supplies ofammonia on the market as a result of produc-tion using natural gas which is currently flared.Although transportation costs may preventMiddle East ammonia from making any majorimpact in the European and North Americanmarkets, the Middle East would have a cost ad-vantage in supplying Lesser Developed Coun-tries. In the domestic market, competition fromMiddle East ammonia could be countered withtariffs on imported products, however, it islikely that any effort to impose such chargeswould meet with strong opposition from agri-cultural users.

55 L . J. Buividas, J . A. Finneran, a n d 0. J. QUartUllj,“Alternate Ammonia Feedstocks, ” American Institute ofChemical Engineers, 78th National Meeting, Salt Lake Ci-ty, Utah, Aug. 19, 1974.

‘*’’Allied Solves a Burning Problem, New SystemVaporizes Oil, Permits It to be Burned in Furnaces Equip-ped with Gas Burners Systems Also Works in Gas Tur-bines, ” Chemical Week (June 8, 1977), p. 35.

“Private communication between OTA and J. A. Fin-neran, Pullman-Kellogg Co., July 1977.

32 . ocean Thermal Energy Conversion

Economic Competitiveness of OTEC/Am-monia Plants: One key to the competitive suc-cess of OTEC will be the capital cost of a com-mercial OTEC plant. While the ammonia pro-duction component is expected to cost roughlythe same as a traditional onshore ammoniaplant, the OTEC generating component wouldbean expensive addition to the capital outlay.

Figure 3 indicates that a large fleet of OTEC/-ammonia plants would be necessary in order tocapture a significant portion of the world am-monia production capacity. This would meanan investment of billions of dollars in an un-proven technology which would have to com-pete with existing plants.

In addition, existing and planned traditionalammonia plants will not be fully amortized untilearly in the next century. From a business pointof view, this is a crucial consideration becauseunamortized capacity would not be shut downunless ammonia from an OTEC facility werecertain to be considerably cheaper than am-monia from existing plants. Such a guaranteedlow cost is extremely unlikely for any novel pro-

duction system, especially one with the tech-nical and operational uncertainties which areassociated with OTEC.

Fluctuations in world ammonia prices—caused at least in part by the price andavailability of natural gas and the price andavailability of foreign ammonia products—would also be a major factor in the ability ofOTEC/ammonia plants to compete in the worldmarket.

If an OTEC plant could be constructed for thelowest cost estimates discussed earlier, i.e.,$500/kW, 58 and if the price of ammonia were$180/ton, as suggested by the World Bank,59 thebefore tax return on equity for capital invest-ment of $367 million could be 16.5 percent.Such a return does compare favorably with in-dustry standards. But if the price of ammonia isreduced, the consequences for the return on

5 8W. H. Avery, et al. , Maritime and ConstructionAspects of Ocean Thermal Energy Conversion (OTEC)Plant Ships, pp. 5-25.

“Graham F. Donaldson,and Beyond, ” Development

“Fertilizer Issues in the 1970’sDigest XIIZ, (October 1975):5.

Figure 3Number of 1,650 Ton per Day OTEC/Ammonia Plants Necessary

To Capture Significant Portion of World Plant Capacity

Percent ofworldammoniaplantcapacity(1985)

18

15

12

9

6

3

10 20 30 40Number of OTEC/ammonia plant ships

Source: Extrapolated from estimates by the Fertilizer Institute.

equity would be severe. For example, at$120/ton, the return on equity would be about 7percent.’” At the 1978 price of about $100/ton,the return on equity would be less than 3 per-cent. Consequently, ammonia production else-where in the world and the balance of supplyand demand would be critical to the competitivesuccess of OTEC even with the most favorableassumptions about construction, operatingcosts, and reliability. As noted earlier, reliableestimates of construction and operating costscannot yet be made, and there is no experienceon which to judge the operational reliability ofOTEC plants.

Due to the technical and economic uncertain-ties discussed in this chapter, it is unlikely thatOTEC production of ammonia would be aviable business in the next 10 to 20 years .However, fertilizer for food production maybecome a critical commodity in the next centurywhen fossil fuels become very scarce. Therefore,the possibility that OTEC could produce am-monia for fertilizer is one incentive for develop-ing and proving or disproving this technology.

Power for Production of Aluminum

OTEC plants have been proposed as thesource of power for the electricity-intensivealuminum production industry. The rationale isthat offshore OTEC plants could provide elec-trical power to onshore production plants inregions which have a large supply of the rawmaterial, bauxite, but lack the necessary accessto inexpensive power.

There appear to be several major factorswhich influence whether or not OTEC would beaccepted into the aluminum industry:

● the cost and reliability of the power supply,● the need for a constant, dependable supply

of raw materials, and● the supply/demand picture combined with

current low prices and rising costs in thealuminum industry.

‘“Byron J. Washom, “Economic Evaluation of ThreeCommercial Applications for Ocean Thermal Energy Con-version, ” unpublished.

Ch. 11 Technical and Economic Status ●

(6T0U518AUXITE

/

21272320

- - - - - - - - - I

II

(2 TONS) ALUMUNII

I- - - - - - - - - - - - - - - - - - -

O N B o a r dOTEC

OTEC Aluminum

Cost and Reliability

33

ofPower: Aluminum pro-duction is a two-stageprocess: bauxite is re-fined into alumina; alu-mina is then reduced toaluminum. The aluminareduction stage is themost intensive user ofelectricity, consuming anaverage of 8 kWh of elec-tricity to produce apound of aluminum .61The estimated total costof producing a pound ofaluminum in 1976 w a s44.7 cents. 62 By compar-ison, the cost of the elec-tricity alone for pro-ducing a pound of alum-inum could range from12 cents to 96 cents ifOTEC costs from table 6

were considered. There are some efforts underway to reduce the kWh/lb ratio, 63 however, it isclear that the cost of electricity is a major factorin the profitability of aluminum production.Further increases in the cost of fuel used in othertypes of electric-generating facilities will reducethe cost differential; however—as discussed ear-lier—it is impossible to predict what the costs ofeither conventional or OTEC electricity will be.

Profitability could also hinge on reliableoperation of the OTEC plant. As discussed inthe section on technical problems, there is cur-rently no experience on which to base estimatesof the reliability of OTEC plants. However, ex-perience with large nuclear and coal-firedpowerplants has shown that these units operateat only 50 to 75 percent capacity. 64 Most costestimates for OTEC plants have been based onestimates of operation at 90 to 95 p e r c e n tcapacity, which, as mentioned earlier, is highly

“U.S. Depar tment o f Commerce , U.S. IndustrialOutlook, (Washington, D. C.: U.S. Department of Com-merce, 1976), p, 60.

6ZU. S. Department of the Interior, Bureau of Mines,Commodity Data Summaries, 1977, (Washington, D. C.:U.S. Department of the Interior, 1977), p. 5.

‘3U. S. Department of Commerce, U.S. IndustrialOudook, 1976, p. 60.

“I rv in C . Bupp, et al., “The Economics of NuclearPower. ”

34 ● Ocean Thermal Energy Conversion

unlikely for a new technology operating in ahostile marine environment.

In addition, the industry will be skeptical ofsiting new aluminum plants where they dependsolely on OTEC as a power source. Traditional-ly, plants are located where they can be inter-connected to a major utility power grid and thushave alternate sources of power. A large-scaledemonstration of the dependability of OTECand a backup supply of power will probably benecessary before industry is seriously interested.

Supply of Raw Materials: The raw materialfor aluminum production is bauxite, one of themost common ores in the world. However, dif-ferences in grades and qualities of ores are suffi-cient to make supplies from some areas muchmore economical than others. The major pro-ducers of bauxite are Australia, Jamaica,Surinam, Guyana, Guinea, India, Indonesia,Dominican Republic, Malaysia, Haiti, Brazil,and Ghana. Three tons of bauxite are requiredto produce one ton of alumina, and this reduc-tion generally is accomplished near the source ofthe raw material. Alumina is then shipped toaluminum manufacturers. Fifty-seven percent ofthe alumina consumed in the United Statescomes from Australia. Presently, this amount ofalumina, at twice the weight of the finishedproduct, is shipped 11,000 miles to manufactur-ing sites near cheap hydroelectric power in theUnited States. It appears likely that the industrywould be interested in OTEC plants at thesource of the alumina only if the cost of pro-ducing OTEC electricity and shipping light-weight aluminum was less than shippingalumina to cheap power sites.

Supply/Demand, Cost, and Prices: U.S. de-mand for aluminum primary metal in 1975 wasapproximately 5.1 million tons. The aluminumindustry estimates growth at a rate of 8 percentper year during the next 10 years, reaching atotal demand of 11 million tons by 1985.65

Presently, there is no problem in meeting thedemand. Until at least 1974, there was an over-supply of aluminum due to the Government’sreduction of its strategic stockpile of aluminum,Through the early 1970’s, the stockpile providedabout 10 percent of the annual supply. As of

“U.S. Department of Commerce, U, S. IndustrialOutlook, p. 67.

1975, U.S. capacity was approximately 5million tons. World capacity was 14.5 milliontons .66

The oversupply and a general economic slow-down left many companies with idle plants ormarginal operations as late as 1976, leadinganalysts to predict only nominal growth incapacity in the foreseeable future.

In addition to the problems caused by over-supply, the aluminum industry has faced risingproduction costs brought on by increased costof raw materials, electricity, transportation,and labor. As a result, the nominal purchaseprice of a pound of aluminum ingot has risenfrom 39 cents in 1974 to 48 cents in 1976.’7

As a result of these uncertain costs in anOTEC/aluminum system and the ability of sup-ply to meet demand, at least in the near term,OTEC is unlikely to be an attractive source ofpower for the aluminum industry.

Summary of Economic Considerations

The economics of OTEC depend primarily onthe capital cost of constructing OTEC plantsand the cost per kilowatt hour of the energy pro-duced.

Because no OTEC system is yet fully de-signed, quantitatively precise knowledge aboutthese costs is impossible and there are largeuncertainties about lifetime reliability and theinterruptions in production which result shouldan OTEC plant fail.

The basic product of most current OTEC con-cepts is power—power for use in the U.S. elec-tric grid or for use in the production of otherproducts. The busbar cost of producing elec-tricity is dependent upon a collection of varia-bles, including the thermal resource available,capital cost of the plant, plant capacity factor,fixed annual charge rate, cost of fuel, and thecost of operation and maintenance. Reliableestimates for these variables cannot yet bemade. Therefore, it is impossible to predict thebusbar cost of electricity from OTEC. Unknown

“U.S. Department of the Interior, Bureau of Mines,Mineral Facts and Problems, (Washington, D. C.: U.S.Department of the Interior, Dec. 9, 1975).

“U.S. Department of the Interior, Bureau of Mines,Commodity Data Summaries, 1977, p. 5.

Ch. 11 Technical and Economic Status •35

electrical transmission costs add another ele-ment of uncertainty.

These still unknown costs will determinewhether or not OTEC is useful in the future pro-duction of other products.

For ammonia, for example, the most promis-ing market areas are located near the most pro-mising OTEC sites; however, these areas are theLesser Developed Countries which will requirevery low-cost products. In addition, already ex-isting producers are expanding their ammoniafacilities to meet present and future demandswith existing processes and there are potentiallylow-cost alternatives to OTEC/ammonia, espe-cially ammonia made from flare gas in the Mid-dle East nations. For aluminum, world produc-tion capacity is currently greater than consump-tion of the product and little expansion is

predicted in the foreseeable future. However, intheory, the use of OTEC could allow aluminumplants to be located in coastal areas nearerdependable sources of raw materials. In thatcase, the price and dependability of electricityfrom OTEC would be crucial factors.

At this time, there is no economically com-petitive product among those which have beenproposed in connection with OTEC. These eco-nomic considerations are based on short-termprojections of supply and demand for somespecific commodities compared with the uncer-tainties associated with present OTEC technol-ogy. In the long term, however, alternativeenergy supply options could become much morecritical to the United States and to the world,and the value of developing OTEC technology,if successful, cannot be measured by simpleeconomic projections.