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Weekly News

5 July 2013

Overregulation puts competition in Europe's energy sector at risk

Utilities underperform EURO STOXX50

Competition in Europe's energy sector is shrinking and investment has stalled amid growing regulatory intervention in the market, Olga Mikhailova, Advisor Market Units at Eurelectric warned at Gas to Power Journal's conference in Düsseldorf this week. he European energy sector is unable to invest, as credit rating of utilities is deteriorating and most generation assets are valued at close to zero by financial investors," she said, suggesting regulatory risk has become the main cause of concern, overtaking market risk.

“T Olga Mikhailova

Subsidised renewables distort the market

"Despite a clear lack of market fundamentals the expansion of renewables has been largely driven by government subsidies. This caused market distortions and wrong dispatch of existing capacity," Mikhailova said. Combined-cycle gas turbine plants have

been pushed out of the merit order, certainly in Spain, but also in central-western Europe, as the electricity generated from wind and solar installations are putting downward pressure on wholesale power prices. Progress in integrating markets and building power grids is too slow, particularly in Germany, to accommodate the growing intermittent power supply from renewables.

Credit ratings of utilities deteriorate

Lack of European perspective Mikhailova also criticised the apparent lack of a European perspective in defining energy policies and stressed that capacity markets, if needed, should be introduced by member in a harmonized manner and not on a purely national level. While the UK is close to introducing a fullfledged capacity market to remunerate opera-

tors for making capacity available at short notice, the political tide in Germany is turning in favour of a strategic reserve. 

"Germany needs an evolution, not a revolution towards capacity markets" – BMU The political tide in Berlin is turning in favour of a strategic reserve, ideally implemented on a regional level, though there is no sense of urgency as reserve margins are healthy until 2018/19, Franzjosef Schafhausen, Head of Department for Energy at the German Federal Environment Ministry (BMU) said in a keynote speech at Gas to Power Journal's conference in Düsseldorf. hat we need is an evolution, not a revolution towards a capacity mechanism."A multitude of capacity schemes and remuneration mechanisms have been subject to a controversial debate among German policy makers, regulators and the energy industry. Schafhausen cautioned, however, that "No decision on capacity markets or else will be taken prior to the general election in September." Bottlenecks of power supply Franzjosef Schafhausen have, however, emerged in the wake of the nuclear phase-out. The risk of shortages is highest in southern Germany, where most of the country's energy intensive industry is located.

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AGENDA POLICY & REGULATION Capacity auctions in 2014 “not fast enough”to avert 2 risk of power cuts MARKETS Renewables to exceed 3 gas power by 2016 Australia: Gas power rapidly gains market share – BREE

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Georgia Power banks on infrastructure investments 6

Risk of capacity gap in the south "A capacity gap is looming in the south of the country and we're not exactly clear on what is going to happen when the nuclear reactor Grafenrheinfeld will be phased-out in 2015. By implementing a market-based strategic reserve we could gain a little bit more time. continued on page 2

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continued from page 1 bottom story

"There is 'no silver bullet', but flexibility is key – and we need more of it, as capacity alone will not be able to solve the issue," he said. The Energiewende policy encompasses the ambitious target of reaching 80 percent renewable energy supply by 2020. Germany goes green and to safeguard power supply security during the transition process, the ministry favours a ‚strategic reserve' that should be implemented alongside the normal 'energyonly market'.

A so-called ‘Winterreserve’ has meanwhile been introduced as an ‘interim solution’ to build a bridge before developing ‘flexibility options’ both on the supply and demand side.

No alternative to renewables, energy efficiency; ministry "In the long-run there is no alternative to investing in renewables and energy efficiency; the key question is, however, how much one wants to rely on it. Costs will be crucial for

getting public acceptance," he forecast. Consensus has been reached in Berlin on the need to amend the EEG [Erneuerbare Energien Gesetz], with critics saying „renewables need to grow up" and have to be made accountable for the imbalances they may cause to the system. Renewable energy accounted for 23 percent of Germany's power supply at the end of 2012, and grid operators are struggling to transport the intermittent wind power from centres of supply in the north towards the south of the county. 

Capacity auctions in 2014 “not fast enough” to avert risk of power cuts Capacity auctions in the UK are due to be launched in 2014 to bring forward investment for new projects that will start operations in 2018 or 2019. However, this is "not fast enough" to avert the risk of blackouts amid tightening reserve margins, Keith Anderson, chief corporate officer at Scottish Power warned.

fgem, the British energy regulator, issued another stark warning this week that reserve margins could fall to 2 percent in 20152016, if the projected decline in demand does not materialise. "The probability of a supply disruption [subsequently] increases from 1 in 47 years now to around 1 in 12 years for 2015/16 or lower," it said. Eager to alleviate the risk of power shortages, Ofgem, DECC and National Grid call for "additional tools" to help the grid operator balance the electricity network during the middle of this decade when capacity margins could be tight.

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Gas to Power Journal Publisher Stuart Fryer Editor Anja Karl Tel: +44 (0)207 0173417 anja@gastopowerjournal.com Reporters Cristina Brooks Michal Zuk Ramadas Rao Tel: +44 (0)207 0173402 Advertising Narges Jodeyri Tel: +44 (0)207 2533406 narges@gastopowerjournal.com Events Barbara Canals Tel: +44 (0)207 173410 barbara@gastopowerjournal.com Subscriptions Stephan M. Venter Tel: +44 (0)207 0173407 venter@gastopowerjournal.com Production Vivian Chee Tel: +44 (0) 20 8995 5540 chee@btconnect.com

Power shortages needed to spark investment? Scottish Power seems a bit more cynical about the looming blackouts: "There'll be a little bit of power shortage, because that's what the market needs to invest," Anderson suggested at the Economist's UK Energy Summit 2013. Anderson was positive, however, about the government's backing of Contracts for Differences (CfDs) as means to bring forward investment in low-carbon energy sources. These measures are meant to give investors a longterm horizon. "We need visibility as we are ploughing money into the system on a 40-50 year time horizon, and we cannot make decisions on the back of policies that have been battered together in just a couple of month," he said, injecting a strong sense of urgency in the debate. A capacity market, set to be introduced

as part of the Electricity Market Reform (EMR), which is designed to ensure that energy supply meets demand by remunerating operators for making capacity available at short notice.

Capacity Incentives penalties for non-delivery The systems operator will have the power to impose financial penalties called "capacity incentives" on energy providers that fail to deliver electricity in the circumstances defined in secondary legislation. The Government said it holds the view that judicial review is a "sufficient appeal mechanism against any decision by the system operator as to whether a particular capacity provider [...] must pay a capacity incentive in a particular situation". A right of appeal is still being considered by the legislator. 


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Renewables to exceed gas generation by 2016 Electricity generated from wind, solar, hydro and other renewable sources worldwide will surmount that of natural gas and be twice that of nuclear by 2016, the International Energy Agency (IEA) forecast its second annual Medium-Term Renewable Energy Market Report (MTRMR). n the face of difficult economics, renewable energy sources are forecast to rise by 40 percent over the coming next five years. At that rate, renewables have become the fastest-growing power source and will account for almost a quarter of the global energy mix by 2018, up from an estimated 20 percent in 2011. The most dynamic sectors globally– solar PV and onshore wind – grew faster than expected in the MTRMR 2012, spurred by falling generation costs. Gas-fired generation rose by over 150 TWh in 2012, while both coal and nuclear declined. Nonhydro renewable generation in OECD regions saw the second largest source of power generation growth in 2012, expanding by 90 TWh.

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Rising cost competitiveness of RES Renewable energy sources (RES) are becoming more competitive in an increasing number of countries and circumstances, the report finds. The levelised cost of electricity (LCOE) for onshore wind is close to competitiveness versus new coal- and natural gas-fired power

plants in some markets. Although onshore wind remains more expensive than new gas-fired generation in the US, long-term power purchase agreements (PPAs) for wind power can provide cost-effective hedges against rising fuel prices over the long term, even without federal tax incentives. In Brazil, onshore wind Global levelised costs of power generation ranges, first quarter of 2013 competes well with new gas-fired plants and other historically less exmore than that of natural gas in Europe, acpensive renewable sources, such as hydrocounting for 60 percent of the increase in the power and bio-energy. region's gross power generation. In the AmeriIn Australia, wind is competitive versus the cas, new renewable generation is expected to generation costs of new coal- and gas-fired be second to fossil fuels (largely gas), but still plants with carbon pricing, and the best wind accounts for over 40% of the increase in gross sites can compete without carbon pricing. generation. In Asia Oceania, renewable sources account for around 40% of the increase in gross generaNew-build gas about a third tion, second to nuclear, assuming a partial less than renewables return of nuclear power plants in Japan. New-build renewable generation is three times 

Fix to EU carbon trading passed in second vote The second attempt to fix the European Emission Trading Scheme (EU ETS) proved successful: Parliament in Brussels on Wednesday voted in favour of the Commission's proposal to postpone, or "backload", the release of 900m allowances the third phase of the ETS (2013-2020). ackloading curtails the length in the EU-ETS with a view to propping up the carbon price. This is meant to incentivise a shift from coal to less carbon intensive natural gas as a fuel for power generation. A final vote on backloading passed 344 to 311; while amendment 21 was passed by 346 votes to 308, which requires the commission to limit backloading to a one-off intervention.

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Long-term fix due in the autumn A longer term fix to the carbon market will be presented by the Commission in the autumn. Commenting on the vote, Eurelectric Secretary General Hans ten Berge said, "We urge the Commission to continue down this path of strengthening the ETS in the long run by proposing more significant structural reforms.

Urge for structural reform of carbon trading scheme Climate Action Commissioner Connie Hedegaard said the next step would now be for the Council to take a decision. "The sooner, the better, so that we can move on to the structural reform of the ETS as soon as possible," she said. The European Parliament now has a mandate to start negotiations with member states, and then revert a negotiated text back to the house. A legislative act is adopted if both the Parliament and Council adopt the same text in first reading, but latter does not yet have a common position.

Such reforms should include revising the ETS annual linear reduction factor in the range of 2.3% and extending the scope of the ETS to other sectors of the economy." 600 million of the total withheld allowances will now be designated to help energy intensive industries invest in energy saving or social measures with support from the EU's NER 300 scheme - a multi-million Euro fund designed to support renewable energy and efficiency projects.

Compromise accommodates energy-intensive industry

The European Parliament in Brussels

In April, MEPs rejected the backloading proposal with 334 to 315 with 63 abstentions following opposition from the energy0intensive industries which was pressuring for a quicker return of backloaded allowances than initially intended. The latest approved proposals were agreed as a compromise by the EU's three largest parties, but critics say it has watered-down initial more stringent plans. 


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Cross-border power trade facilitates RES integration Western European electricity producers will benefit from the unification of the European Electricity Market by 2020, a report by GBI Research has predicted. Expanding cross-border electricity trade has implications for renewables-dependency, in countries like Germany, where it can help to backstop power supply from inherently intermittent renewable energy sources (RES). dded nuclear power in France as well as hydro power from Austria and Switzerland may help cover demand peaks in Germany.

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More renewables in the mix The report foresees renewables growing the most of all generation sources from 2012–2020. Renewable power capacity will grow at a Compound Annual Growth Rate (CAGR) of 7.8 percent while hydropower will grow at 1.5 percent. Thermal power is predicted to remain relatively stable, growing at 0.7 percent. Despite decommissioning in Germany, UK and Spain, Europe's overall nuclear power capacity will grow 0.2 percent due to new project in France and Finland.

Integrated electricity market set to improve efficiency The emerging unification of electricity markets in Europe will mean cross-border trade of power will become more efficient and competitive, spurring technological innovation. The European Power Exchange (Epex Spot) covering markets in Germany, France, Austria and Switzerland, is set to grow further if it succeeds in joining in a co-operation with the Nordic power exchange, Nordic Pool, in Norway, Denmark, Sweden, Finland, Estonia, and Lithuania. Transmission operators, who have been upgrading their transmission systems, are looking to establish the price coupling of regions as a

way to trade power more easily by putting 80 percent of EU electricity trading markets in one basket. If price coupling of regions is adopted it will see integration of electricity markets in central west Europe, the Nordic pool and finally southern European countries (Spain and Italy). Operators in different countries are already agreeing to price coupling arrangements to decrease prices and more easily meet demand. The Netherlands, Belgium and France have since 2006 have engaged in Trilateral Market Coupling since 2006. Another kind of transnational agreement, called penetration coupling, formed in 2010 extended trilateral market coupling in these countries to central-west Europe, GBI Research said. Netherlands, Belgium, Germany and France also introduced 'Interim tight volume coupling,' as a way to calculate the cross-border flow of electricity separately from prices. In March Czech market Operator OTE joined as a partner to the Price Coupling of Regions Initiative.

Nuclear power use to decline outside of France

Nuclear power capacity is expected to grow in France and Finland while UK Spain and Sweden will be decommissioning nuclear plants. Germany closed seven nuclear generators following the Fukushima nuclear disaster in 2011. In France, a 1,650MW nuclear power facility, the Flamville 3 plant, is Power Market, Western Europe, scheduled to be commisCumulative Installed Capacity, GW, 2005 – 2020 sioned in 2014. Another 1,650MW nuclear power plant is expected to be commissioned in 2017. Renewables appear to be picking up the slack of decommissioned nuclear plants as a generation source: Power generation from renewable sources grew at the highest of all generation sources in Western Europe during 2005–2011, growing 15.3 percent.  European power capacity 2020]


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Australia: Gas power rapidly gains market share – BREE Nationwide investment in gas-fired capacity in Australia has surged 54 percent over the past decade, driven by an expanding upstream sector. Though coal still dominates the energy mix, gas is rapidly gaining market share and is forecast to account for 36 percent of power supply, up from currently 20 percent, according to projections of Australia's Bureau of Resources and Energy Economics (BREE). oday gas-fired power plants mainly supply intermediate and peaking demand. Gas-fired generation capacity is highest in Queensland, where there are many upstream gas producers and local laws promote it. Estimates for the Australia's total proven natural gas reserves have increased this last year by 15 trillion cubic feet (Tcf) to 43 Tcf and a number of new production facilities are coming online in the next few years. About 90 percent of Australia's electric generation in 2011 came from fossil fuel-fired plants, with coal making up 69 percent of electric power generation, but the trend since 2009 has been to diversify fossil fuel's overwhelming share with new natural gas, hydroelectric, and other renewable energy sources.

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National low carbon mechanism supports gas The Queensland Gas Scheme, introduced 2005, has by and large created a local gas-fired generation industry as it requires that 15 percent of the state's generation needs to be gas-fired. Queensland's new gas-fired generators, 10 in total, have buoyed the regions gas-fired capacity from 2.4 percent to 20 percent . The scheme, on successful completion, will close by end of 2013. Several plants that turn coal steam into natural gas, coal steam gas (CSG) plants, are under construction in the region: Gladstone Liquefied Natural Gas (GLNG) is a planned liquefied natural gas plant in Queensland that will be ready for its first gas in 2015 and Queensland Curtis LNG (QCLNG) is the world's first project to turn coal seam gas into liquefied natural gas. A new pipeline from the QCLNG plant is due for completion in 2013.

National carbon price works in favour of gas On a national level, the Australian govern-

ment's carbon pricing mechanism, introduced in July 2012, has a similar role in encouraging gas-fired power, Queensland's government said. The mechanism covers about 60 percent of Australia's emissions and targets a reduction of GHG emissions below the 2000 level by 2050. Under the scheme, liquefied natural gas (LNG) projects will receive a "supplementary allocation ensuring an effective assistance rate of 50 per cent in relation to their LNG production each year", and they will also have to control emissions during production. Cap-and-trade programs as the one in Australia are meant to encourage the development of natural gas as a backup for renewable intermittency.

Rise in fossil fuel exports push renewables A recent push for renewables is coming from the government's desire that Australia should profit from its coal and natural gas reserves from by selling them overseas, say analysts at the US Energy Information Administration (EIA). Australia was the world's second largest coal exporter in 2011, behind Indonesia, and the third largest liquefied natural gas (LNG) exporter in 2012. Almost all (77%) of the LNG it exported went to Japan, which replaced nuclear power with gas-fired power following the Fukushima power plant nuclear accident. Exports of LNG are set to rise with new

production capacity coming online, for example at Ichthys oil and gas development project set to begin production at the end of 2016. Australia's government published an Energy White Paper in 2012 saying it would maintain energy security at the same time as exporting more fuel to Asia by adding renewables, building more energy infrastructure, increasing energy efficient markets, and introducing pricing mechanisms. Although they comprise a small combined segment of generation, renewables are growing with over 700 percent expansion in the last 13 years. Hydroelectricity is Australia's major source of renewable energy, accounting for 7 percent of total generation, although wind is also a large renewable source. Australia's Renewable Energy Target has set out a goal of increasing the share of renewables from about 11 percent of the mix to 20 percent share in power generation by 2020. 

Industrial Application of Gas Turbines Committee The IAGT Committee Symposium and Conference, October 2013, Banff, Alberta


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Georgia Power banks on smart grid Georgia Power, owned by US multi-state utility Southern Company, plans to increase its base rates in the state of Georgia to buoy on-going investment in smart grid technology, such as metering, and environmental compliance. t asked the state-level utilities regulator, Georgia Public Service Commission (PSC) for permission to increase its prices to fund the upgrade. The cost of the upgrade to residential consumers would be a 6.1 percent increase on current bills, totalling $482 million. Georgia Power expects a decision from the PSC by December 17, 2013. The funds would go towards some of the company's initiatives already underway, including reducing emissions through scrubbers, and a distributed solar generation program.

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Investments go towards cleaner coal In the state of Georgia, power generation is mostly produced by nuclear and coal-fired plants, Energy Information Agency data shows. As part of the upgrade, and in compliance with the Clean Air Act, Georgia Power is introducing scrubbers and backhouses to reduce emissions of nitrogen oxide, sulfur and

mercury at its coal plants. Reducing nitrogen oxide emissions by 85 percent and sulfur dioxide emissions by 95 percent to 1990 levels is required by EPA law. Southern Company is using a new plant in the US state of Mississippi, Kempter County, as a testing ground for Carbon Capture and Storage (CCS), a clean coal technology geared towards reducing carbon emissions.

Georgia's generation mix to include solar, wind As part of the upgrade program, meters have been installed on homes throughout Georgia. "We spent last year 2012, we upgraded all the meters on users' homes to meters, which allows us to read energy usage remotely," a Georgia Power spokesperson said. In May, Georgia power introduced My Power Usage, an online tool which allows residential customers to track their daily energy costs using the meters by viewing their pro-

jected monthly bills online. Metered distributed solar generation is potentially a way for energy consumers to earn money in exchange for supplying the grid, while at the same time reducing loads for generators. "We do feel like there are a lot of benefits to having that smart meter ability. We're hoping down the road it will allow customers to monitor energy usage down the line, as an energy efficiency cost-saving tool, but there may be more benefits," the spokesperson explained. "We've recently put in place our Georgia Power Advanced Solar program and we have large and medium size commercial customers that can sell back to Georgia power," said the spokesperson. Georgia Power's request for proposal (RFP) process to allow the sale of distributed solar power, being managed by the public service commission, will conclude in spring. The company is also planning to buy capacity from a wind power plant in Oklahoma that comes online in 2016. 

Mexico's CFE secures gas supply to convert power plants in Yucatan by 2014 Mexico's Yucatan Peninsula will see diesel- and fuel-oil power plants converted to run on natural gas after state-owned utility CFE has secured over 300 million cubic feet per day (mmcfd) in additional gas supply from Pemex by 2014. The rise in feedstock gas is spurred by a $136 million investment of GDF SUEZ Mexico and GE Energy Financial Services to extend the Mayakan pipeline. DF SUEZ Mexico is spending about $92 million for a 67.5 percent equity stake in the pipeline, while GE Energy Financial Services pays about $44 million for a 32.5 percent stake. No debt financing is involved, the companies confirmed. Aredal, the EPC contractor for the pipeline extension, expected the Mayakan pipeline extension is slated for June 2014. Completion of the pipeline extension is slated for June 2014, and Arendal said preparations for construction are already under way. The GDF Suez-operated Mayakan pipeline, with a capacity of 10.4 MMcmd, currently runs across Southern Mexico, from Macuspana, Tabasco to Valladolid, Yucatan. The project will widen and lengthen the existing a 700km long, 24-to-16-inch-diameter Mayakan pipeline, by adding a 75km pipeline that has a diameter of 30-inches, to supply more gas for

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power generation in Yucatan. PGPB's Nuevo Pemex Gas Processing Complex in Tabasco is the starting point of the Mayakan pipeline. The Nuevo Pemex Gas Processing Complex is also the location of a new 300MW, $640 million Nuevo Pemex cogeneration power plant which is reportedly the largest of its kind in Mexico. Nuevo Pemex cogeneration plant The plant, owned by GE Energy Financial Services and Spanish other countries. Abengoa, opened in October. Mexico produces gas in Samaria-Luna and offshore fields of Tabasco. It is a net importer of natural gas most of which comes from the Gas-fired generation growing, United States, and power generation is the depends upon imports main driver of natural gas demand. In 2012 Natural gas continues to replace oil as a feedthat energy production in Mexico relied mainly stock in power generation in Mexico, though on natural gas, according to EIA statistics.  this depends on the availability of supply from


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 TECHNOLOGY & INNOVATION

GTP Journal

5 July 2013

Cogeneration – absorbing waste heat helps reduce fuel consumption Energy security, diversity and local reliability for cities and industries are critical features of clean energy infrastructure. An often overlooked feature, however, is the summer CHP load, which could be waste heat absorption chilling to prevent power use and to reduce fuel consumption, Manfred Klein, former chairman of the Industrial Applications of Gas Turbines (IAGT) Committee told Gas to Power Journal. In 1992 Canada saw the development of a naClean Energy Balancing Act tional emissions guideline for stationary gas turbines, whereby polluEnergy Supply Choices tion prevention and energy efficiency to Energy Security Health and Ecosystem minimize CO2 emissions Global Atmosphere Climate & Ozone layer were important, as well Air Pollution Water Impacts Toxics Greenh as considerations of opouse Gases CFCs, HFCs erational reliability and cost-effectiveness, with- Conservation & Efficiency out the need of backend Demand & Consumption Policy, controls. Regulations, Emissions Trading System Reliability “We [IAGT] pubTechnology lished an energy output Economic Performance basis for the Guideline, with NOx levels directly tied to the overall demonstrated overall plant efficiency in pact on the ecosystem and on our health. The kgNOx per GJ of Power and Heat output. air and liquid waste streams associated with “This was intended to promote cogeneraenergy-intensive industries and condensers also tion, district energy and waste heat recovery cause damage to rivers and lakes. Many of applications, and was likely the world's first these effluents come from the same sources such GT emission standard,” he said. that produce the above-noted air pollution and Read Mr. Klein’s full guest article in GHG emissions. the next Weekly Newsletter of Gas to Power Until recently, GHG emissions and system Journal. energy efficiency have not been closely studied in most permitting processes. Most air emission standards for gas turbines are based Environmental Impacts The regional and international issues arise from on stack concentration measurements in ppmv or mg/m3 which do not properly rethe public health concerns over traditional air flect system efficiencies. Small and medium pollution and toxics, and strong evidence sugsized gas turbines (and other equipment) are gesting a human influence on climate change well suited for onsite energy to match the due to greenhouse gas emissions. From the thermal loads, but NOx emissions may be very same energy systems that produce the air somewhat higher per MWhr than from those pollutants, useful energy is created from conof large engines. version of carbon into CO2. Canadian Gas Turbine Emission Guidelines (1992) An energy output emissions performance In assessing such matters as basis can help establish CHP as a sustainable fuel combustion choices, it Energy output-based Guidelines allows higher NOx for smaller units, which tend to have higher system CHP efficiency choice. An efficiency correction could reasonmay be appropriate that air (www.ccme.ca/assets/pdf/pn_1072_e.pdf) NOx ably be applied to a NOx emission base rate emission reductions of NOx, ppm such as 15-25 ppm, as in some EU regulations. SO Heat 40 g/GJ 2, CO2, methane, mercury, 60 Alternatively, it could be transformed directly ammonia and particulate 50 into a facility output-based standard such as emissions be considered toPower 40 lbNOx or kgNOxx per MWhr. Such a criterion gether, because they all occur 240 g/GJ could allow the plant operator to take advanat the same time in a given 30 3 - 20 MW 140 g/GJ tage of all available system efficiencies to resystem, and are highly inter> 20 MWe 20 duce both fuel consumption and emissions. related. 10 This would also make designers think more A case could be made that about cost-effectiveness and sustainable energy these impacts are relatively 20 40 60 80 100 system comparisons. of equal importance as an imOverall Plant Thermal Efficiency %

hen choosing efficiency, renewable energy, and distributed clean fueled Combined Heat & Power and district energy applications, many benefits can accrue which are normally not taken into account in economic decision-making, he said. “Fuel combustion does not directly produce electricity, it always converts into heat,” Klein singled out as a “fundamental system concept” next to the increasing importance of regional energy security to enable the transition towards cleaner energy sources, including national gas. To take advantage of multiple benefits of integrated CHP systems, a balancing of environmental issues, regulatory practice, and business case may be necessary, he suggesting addressing several institutional barriers to successful CHP growth such as: • public and private sector awareness of opportunities, and integrated system design practices; • improved and comprehensive business case for CHP systems, recognizing many benefits; • consensus on thermal efficiency criteria, measurement and performance to reduce thermal losses • GHG avoidance values, and simultaneous air pollution reductions, • the use of Higher Heat Value (HHV) for energy analyses and comparisons • environmental assessments that include GHG prevention • expanding regulatory mandates, including CHP concepts in a balanced long-term energy strategy

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5 July 2013

GTP Journal

TECHNOLOGY & INNOVATION 

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could use a reasonable $20 charge for CO2, and efits of cleaner and efficient energy systems. concurrent $2000/tonne reductions of NOx and 3  SO2 Air Pollution Comparing Emissions  NOx 2.5 In order to size to thermal SO  PM 2, plus additional valued reductions of parfrom Thermal Energy 2 loads, CHP systems are often ticulates, air toxics and mercury. The associSystems 1,5 in the small to medium size ated monetary benefits of reducing energy 1 0.5 range. Lack of ‘economies transmission losses, cooling CFCs for ozone 1 “Cannot produce Air Pollution of scale’ result in longer paydepletion, land and water issues, and avoiding Coal Oil Gas GTCC GTCHP Bio IGCC without making CO2” back periods, and high transboiler upgrades, can also be valued in energy Kg/MWhr 1200 action costs for their and environmental planning Carbon Dioxide 1000 installation, because of the For example, for replacing an old boiler 800 • Natural Gas lack of standards for standby heating plant with a gas-fueled 5 MWe gas tur600 • Coal and Oil charges and grid interconnecbine cogen system, the capital cost and onsite 400 • Biomass and Syngas CCS 200 tion. These costs are similar fuel consumption would be higher, but would 0 ‘Intergrated analyses’ regardless of the system size, be offset by many quantifiable benefits. The Coal Oil Gas GTCC GTCHP Bio IGCC making them a more signifiannual incremental cost of the new CHP might cant cost for smaller CHP systems. In addibe $2.5 million (versus the existing $2.1 milIn 1992 Environment Canada and industry tion, due to significant competition and lion in coal/oil/gas mixed power imports, a sixstakeholders led the development of a national year payback). However the CHP system with emissions Guideline for stationary gas turbines. uncertain spark spreads, private sector economic decisions may be limited to payback pesummer absorption chilling would avoid all Pollution prevention and energy efficiency to riods in the 2-5 yr range. These economic types of air pollution and GHG emissions, as minimize CO2 emissions were important, as conditions can be improved with the valuation well as increasing reliability, reducing T&D well as considerations of operational reliability of the various regional tangible benefits of losses and CFC leakages, and avoiding a boiler and cost-effectiveness, without the need of upgrade. Those extra environmental and ecobackend controls. We published an energy out- thermal and electrical CHP systems; nomic benefit categories put basis for the Guideline, with NOx levels di5 MWe CHP Plant - Multiple Benefits at $0.7 million each rectly tied to the overall demonstrated overall Heat Rate 4.5 GJ/MWhr (80%) 30 000 MWhrs $10 MM capital could easily each make plant efficiency in kgNOx per GJ of Power up the difference. If and Heat output. This was intended to promote Annual $MM = ($1(cap) + $0.3(O&M) + $1.2 (Extra Fuel) ) = $2.5 MM/yr added together, the projcogeneration, district energy and waste heat revs Power Import Purchase @ $70/MWhr = $2.1 MM/yr ect could look very good covery applications, and was likely the world's indeed, with a very short first such GT emission standard. Environmental Air Benefits ($MM/yr) 'payback'. Because of practical ‘balancing’ issues in CO2@ $20/tonne = 0.30 CACs@ $2000/t = 0.30 toxics@ $5/gr = 0.1 Cleaner energy combustion and system design, it is very diffichoices such as consercult to have strict ultra-low limits for air toxics, total emission reduction valuation = $0.7 MM/yr vation and pollution precriteria air contaminants and greenhouse gases Other Corporate Benefits ($MM/yr) vention, renewable at the same time. Very low NOx ppm levels in Avoid 2 km new T&D wires, losses; $0.2 + 0.1 = $ 0.30 energy and clean-fueled a system may tend to increase air toxics, reAvoid $1 MM old Boiler/Chiller capital upgrade $ 0.15 cogeneration can address duce system reliability, and also encourage Avoid 1 major process power outage in 5 yrs $ 0.20 reductions in all emislarger more inefficient plants. total ‘private’ benefits = $0.65 MM/yr sions and many other quantifiable impacts. The Business Case • the importance of secure, reliable and Energy output-based emissions policies, and Most cities and communities have experienced economic energy supplies integrated environmental assessments can help. occasional power outages with some economic • environmental air and water sustainability In almost all cases, when CO2 emissions are and social impact. In North America, the 1998 issues, health and ecosystem eastern Canadian ice storm, the widespread prevented, the best and most cost-effective so• cost effective infrastructure, economic power failure in parts of Ontario and United lutions can cause all other emissions and some sustainability and employment States in August 2003, and the 2012 New York water impacts tend to drop dramatically. The Aging industrial processes and community inand New Jersey storms left millions of people synergies between energy security, environfrastructure is creating a need to address how without power and heat or cooling. However, mental issues and economic sustainability can cost-effective projects can be implemented for those buildings and campuses with access to become a driver for cost-effective actions over the maximum long term benefit to society re'islanded' cogeneration did not lose heating or the short and long term.  garding the above objectives. Many of today’s power, local reliability being a very important economic benefit of a well-designed local CHP energy and environmental consulting studies Manfred Klein (MA Klein will assess additional annual costs against system. & Assoc) has retired after some of the emissions being produced. TypiWhen we purchase and pay for significant 33 years dealing with incally it will involve either air pollution or products or services, we usually evaluate the dustrial energy and envigreenhouse gases, resulting in cost-effectiveprice range, versus several (more than one) ronmental issues with ness $/tonne numbers of various individual long term benefits to justify a higher cost - we Environment Canada, the choices being high. often choose not buy the cheapest product. ational Research Council and ational So for projects such as local CHP and disWhether in our minds, or on a balance sheet, Energy Board. He is a former Chair of trict energy, a better integrated economic these 'tradeoffs' can be approximately quantiIAGT and IGTI Committees, with Bach. analysis for planning capital expenditures fied. So too can society value the various benMech Eng, 1980. Kg/MWhr


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GTP Journal

 PROJECT & FINANCE

5 July 2013

NEWS NUDGES

Dubai's DEWA gears up to seek funds for power-plant expansion

US: Low power prices drive nuclear retirements

DEWA, Dubai's state-owned utility, is getting ready to seek financing for the expansion of its gas-fired M Station facility, says chief executive officer, Saeed Al Tayer.

July 4 – A drop in power prices and high repair costs drive nuclear retirements in the US. The four reactors with a combined capacity of nearly 3,600 megawatts were taken offline since October 2012. New-build capacity, mostly run on natural gas, is making up for a significant amount of the lost nuclear power generation capacity.

ABB and Deutsche Telekom develop cloud-based solution for VPPs July 4 – Swiss-based ABB and Deutsche Telekom have developed a cloud-based solution for virtual power plants in Germany. The solution, leverages demand response management software from Ventyx, an ABB company. It has been tested as part of the T-City project in Friedrichshafen, and is now ready for commercial use.

Countdown to demolition of Port Everglades Power Plant July 2 – The July 16 demolition of the Port Everglades Power Plant, the largest of its kind in Florida, will make way for a more fuel-efficient plant that will run on low-cost natural gas, instead of imported oil. Port Everglades is the third power plant that Florida Power & Light Company plans to ill demolish in three years as part of the company's strategy to modernize its power-generation system.

UK rallies 12 EU Member States behind backloading proposal July 2 – Energy and Environment Ministers from 12 EU Member States have jointly called for MEPs to support the so called 'backloading' proposals due to be voted on in Strasbourg on 3rd July. The statement was initiated by Edward Davey MP, UK Energy and Climate Change Secretary. Support for the twin ETS reform now includes all four of the EU's largest member states – UK, France, Germany and Italy.

arly next year is pencilled in as the start date for expanding M Station by 400MW by adding two gas turbines. In a news conference Al Tayer did not disclose the projected costs for the plant expansion or the date by when the utility is seeking to raise the funds. In February DEWA sold a $1 billion Islamic bond to repay debt and a month later Al Tayer said the company would not need external funds until 2015. However, this assessment may have changed as it now aims to fast-track the power plant expansions to satisfy Dubai's electricity needs. Energy-hungry Dubai has seen a 5 percent

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increase in annual electricity demand. Keen to avert an overreliance gas power generation the utility plans find private contractors to develop and run a 100MW solar installation to advance its "renewable-energy push", Al Tayer said. A coal-fired plant will also be built by private investors. By 2030, Dubai aims to cover 12 percent of its electricity from coal-fired plants, to import another 12 percent from Abu Dhabi's planned nuclear facilities and to source 5 percent from renewables. Gas will account for the remainder, according to a strategic plan the emirate announced in 2011. 

China: Alstom to license GT13E2 through Harbin Turbine Corp Taking steps to enter the Chinese market, Alstom has signed a long term agreement to license its GT13E2 gas turbine for manufacture, assembly and sales in China through the Harbin Turbine Corporation (HTC). y working in partnership with HTC, one of China's leading power generation equipment suppliers, Alstom aims to gain better access to supply its GT13E2 E-class turbine to China. Through the cooperation with HTC, Alstom can also set-up a service joint venture to address the aftermarket needs of Chinese GT13E2 customers. HTC will manufacture and assemble the GT13E2 gas turbine in China with Alstom continuing to supply some critical components. While giving Alstom improved access to the Chinese market, the agreement provides HTC and its customers with the industry leading GT13E2 turbine that offers the best efficiency currently available in the E-class. The deal cements a relationship with Harbin which in May 2012 saw a contract award for a GT13E2 turbine and generator for the Shenzhen Nantian combined cycle power plant. Further contracts were signed in December 2012 and March 2013 for two GT13E2 sets each for the Tongxiang and Suzhou plants. Mark Coxon, Senior Vice President for Alstom's Gas Business said the accord brings

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"two strong companies coming together to meet the needs and challenges of [China's] growing gas turbine market". "Both Alstom and Harbin bring vital qualities and expertise to the table, and together they will make the GT13E2 – with its leading performance in its market segment – an indispensable part of our Chinese customers' generation portfolio," he added. 

GT13E2 gas turbine rotor


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