Session V Market Driven ES Existing Business Cases give an Insight to their Revenue Streams. Business Cases for large Capacity Storage Projects

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1 Session V Market Driven ES Existing Business Cases give an Insight to their Revenue Streams. Business Cases for large Capacity Storage Projects (4x4) by clicking on icon T. Buddenberg Mitsubishi Hitachi Power Systems Europe GmbH

2 Content 1. Introduction 2. Future Market Development 3. ES Technologies Overview 4. Liquid Air Energy Storage (LAES) 5. Pumped Hydro Storage (PHS) 6. Conclusions 7. Outlook towards Power to Fuel (PtF) 2

3 Euros/ MWh Introduction Energy Pricing in Europe Daily Electricity Prices 213 (PHELIX) Average Daily price Maximum Value-6 peak hours minimum value-6 peak hour Poly. (Average Daily price) Poly. (Maximum Value-6 peak hours) Poly. (minimum value-6 peak hour) 12 1 With a gas price of 27 EUR/MWh most CCPP are in operation for less than 1. h/year. Lignite & hard coal power plants take the control in the conventional electricity market. 8 European Methanol Price (or Gasoline): EUR/t or EUR/MWh Days ARBITRAGE 6 h storage for Storage device 2 4 EUR/MWh 3

4 Future Market Development Increased RES share creates the shift from instant storage and load following technologies to long term high capacity storage. Power to Fuel is the best choice for long term, large scale energy storage. LAES is the only large scale electricity storage to be applied without any geological restriction both on brownfield and greenfield sites. LAES, CAES, PHS Power to Fuel Time Shift Flexible Fossil Plants 3 Hour Ramp Batteries Load Following Regulation

5 Future Market Development Energy System in Germany Prediction for 25 Energy-System 25 Control-Energy >5% Storage >8% Energy from renewable sources with needed surplus production 315% (259 GW) Secured energy from conventional power plants, CHP, multi-fuel & bio-mass; 2% CO 2 Fossil fuels Cross-Sector-Market CO 2 Sector Developed Power to Heat Vehicle to Grid Power to Gas Overspill State 25 (target) 1 GW max. load demand 397 GW available capacity 59 GW conventional 259 GW renewables 14 GW storage 53 GW cross sector 12 GW biomass Load demand is expected to slightly rise until 25 (13 GW) Demand Side Management to be planned and operated by big consumers Conventional power plant fleet to decrease to 5% electricity = a cheap commodity Maximum load 87 GW + 13 GW in Demand Side Management (DSM) 5

6 ES Technologies Overview Power to Fuel LAES Thermal Thermal storage systems 6

7 Liquid Air Energy Storage (LAES) Charging part Discharging part Compression Liquefaction Liquid Air Storage Pump Evaporation/ Heating Expansion Cold storage Heat Storage Power-In Power-Out Efficiency increase by integration of cold storage or industrial cold Solid bed cold storage Further efficiency increase by integration of heat storage or industrial heat 7

8 Liquid Air Energy Storage (LAES) Bulk Electricity Storage and Back-up Power LAES is an energy storing technology, which is producing liquid air and heat (district heating) while charging and is producing electric energy from natural gas and liquid air while discharging. The efficiencies of this technology are up to 65% without district heating and above in case of considering also the produced heat as used. Joint development project of Linde AG and Mitsubishi Hitachi Power Systems Europe GmbH (MHPSE) combination of well proven know-how in terms of air liquefaction technology and power plant engineering Process Variant GT-LAES: integrated gas turbine based on mature components combination with wide MHPSE gas turbine portfolio wide range in possible LAES plant size (1-6MW) possible combination with existing gas turbines and other high temperature heat sources (e.g. diesel engines) installation site flexibility 8

9 Liquid Air Energy Storage (LAES) Generation 2 - higher Efficiency and adiabatic Systems Process Variant Fuel-LAES: modified gas turbine w/o compressor parts increase in efficiency of approx. 1 %-points possible development issues for necessary equipment, especially high temperature turbine Process Variant A-LAES: A for adiabatic system no fuel use no CO 2 emissions Lower efficiency and power density as GT-LAES and Fuel-LAES expected development issues for necessary equipment, especially high temperature heat storage 9

10 Relative Power [%] Relative EBITDA [%] Remaining Storage Capacity [h] Relative EBITDA [%] OCGT: max. 173 h/a Liquid Air Energy Storage (LAES) Enhancement of Operating Hours in Comparison to an Open Cycle Gas Turbine (OCGT) LAES LAES: 527 h/a (discharging) Speicher Storage EBITDA Jan 73 Feb 1,46Mar 2,19 Apr 2,92 May 3,65 Jun 4,38 Jul 5,11 Aug 5,84 Sep 6,57 Oct 7,3 Nov 8,3Dec 8,76 Calculation based on PHELIX 213 and NG price 27 /MWh OCGT 213 Leistung Power EBITDA All Natural Gas consuming power plants are suffering from high European gas prices, compared to relatively low electricity prices. So is LAES with yearly EBITDA in arbitrage business < 1Mio.. In addition, high PV capacity inhibits economical operation of LAES and OCGT in peak time hours, especially in summer months. 5 1

11 Liquid Air Energy Storage (LAES) Operation Flexibility of LAES enables broader Participation in Control Energy Market. Control Energy "-SCP" 26.6% 8-16 Mio. /a "+MR" 46.8% OCGT LAES LAES can provide negative Control Power and thereby generates higher incomes compared with an OCGT. Further LAES can provide back-up power, even when the storage is empty. "-MR" 26.6% Calculation based on German Balancing Power Market ; 9% Availability; 5% Award +MR -MR -SCP positive Minutes Reserve (<15 min) negative Minutes Reserve (<15 min) negative Secondary Control Power (<5 min) 11

12 Discounted cash flows [Mio. /a] Liquid Air Energy Storage (LAES) Estimation of discounted cash flows and possible capacity premium LAES (527h operation) GT (173h operation) Calculations based on German wholesale electricity prices (PHELIX 213) and German control energy market data Electricity wholesale market Control Energy market Capacity premium Dept capital annuity Equity capital interest Gas costs CO 2 certificates (~) Staff costs Maintenance Capacity premium causes compensation of yearly expenditures and incomes In spite of higher CAPEX the capacity premium for LAES is lower because of higher incomes from control energy market Incomes from electricity wholesale market are currently low, i.e. in this estimation 15-2 % of receipts 12

13 Remaining Storage Capacity [h] Relative EBITDA [%] Relative EBITA [%] Pumped Hydro Storage (PHS) Comparison of yearly yield and CAPEX Storage Speicher 25 7 EBITDA Jan 73 Feb 146 Mar 219 Apr 292 May 365 Jun 438 Jul 511 Aug 584 Sep 657 Oct 73 Nov 83 Dec 876 Calculation based on PHELIX 213 and Efficiency 75 % PHS PHS can reach full load hours of approx. ~15 h/a, but EBITDA are also relatively low (< 2 Mio. /a from wholesale market). With capital costs of ~1 /kw ROI would be reached after >45 years. In comparison to LAES, PHS cannot provide back-up power and underlies geologic restrictions. Incomes from control energy market necessary for positive business case 13

14 Pumped Hydro Storage (PHS) What are the advantages of a PHS in the control energy market vs. other technologies Control Energy of a LAES +MR -MR +SCP -SCP ±PCP "-SCP" 26.6% 8-16 Mio. /a "-MR" 26.6% positive Minutes Reserve (<15 min) negative Minutes Reserve (<15 min) positive Secondary Control Power (<5 min) negative Secondary Control Power (<5 min) Primary Control Power (3 sec) "+MR" 46.8% 14 Due to its mature developed technology of variable speed controlled pumping and turbine mode PHS is able to serve all control energy markets including also +SCP and ±PCP. Therefore PHS is for ancillary services in advantage of LAES or even CAES, but still the LAES technology is also a backup power plant and has no geological restrictions

15 First Conclusions 1. Today s energy market does not support large scale capacity energy storage systems 2. Regulatory constraints a. Dispatching order b. Pricing, e.g. subsidy similar to EEG (RES subsidy) or pure market 3. Market development a. Ancillary services mature b. Capacity payments limited importance 4. Technology screening to analyse first of its kind projects 5. All bulk storage technologies are not serving RES surplus production of more than 6 hours for this we need time shifting technologies like Power to Fuel 15

16 Outlook towards Power to Fuel(PtF) Cross Sector Energy storing Technology PtF is a cross sector energy storing technology, which is producing methanol and its following derivatives as olefins, gasoline, DME and other chemicals or transportation fuels. It is processing from electrical energy hydrogen and oxygen. The produced hydrogen is together with captured CO 2 processed to methanol with an exothermal process. The heat is used in the water steam cycle of an power plant for efficiency gain of the process. The efficiencies of the technology are up to 67% without the use of the oxygen in other processes. Using the oxygen this efficiency rises up to 72%, if it is used close to other industries using oxygen as one of its educts. 16

17 Outlook towards Power to Fuel(PtF) PtF in a Power Plant (Lignite) A Flexibility Option with a Market for its Products. 474 MW th Coal Consumption 191 MW el at 3% Load Power From Heat Electrolysis H2 Consumption Losses (O2) Heat η el/th = 67% η th/th = 27% 128 MW Methanol PtF keeps power plants in the business due to combined production. 17

18 Outlook towards Power to Fuel(PtF) Retrofit Case of a typical 3 MWel Class A) Operation today, only electricity 3 MW source: B) Operation with PtF, power-operated, 65MW electrolysis 3 MW GWh PtF Maintain only small 2 base load of PtF during peak price 1 times GWh 1857 GWh C) Operation with PtF, MeOH-operated, 65MW 3 MW GWh PtF 2 Greece Example: Lignite with 4 MJ/kg GWh 1681 GWh - 4 D) Operation with PtF, MeOH-operated, 13MW electrolysis 3 MW 534 GWh PtF 2 Fill the PP utilization gap created by (excess) renewable energy MeOH=Methanol

19 /MWh today 6 23h Outlook towards Power to Fuel(PtF) Profit (Sales-Cost) without CAPEX/taxes 37 4h In future 5 23h 3 4h D) 13 MW, Prices in future, MeOH-operated C) 65 MW, Prices in future, MeOH-operated B) 65 MW, Prices in future, power-operated A) Prices in future, electricity only D) 13 MW, Prices from today, MeOH-operated C) 65 MW, Prices from today, MeOH-operated B) 65 MW, Prices from today, power-operated A) Prices from today, electricity only Mio. /a simplified approximation of EEX prices and their extrapolation 2 246h h h - 5, 1, 15, 2, 25, 3, 35, 4, 45, MW = maximum installed el. capacity of power to fuel CO 2 emission cost 5 /t MeOH price 4 /t ROI of PtF in industrial scale after approx. 8-1 years Electricity Methanol MeOH=Methanol 19

20 Final Conclusions 1. All storage technologies are necessary for the future 2. Mature bulk storage can be intelligent complemented hybrid-storage technologies like LAES 3. Power to Fuel Storage opens new sustainable markets and economic chances 2

21 (4x4) by clicking on icon Thank you for your attention