PB GPA presentation. Overview of recent studies for the Electricity Commission 16 th October 2009

Transcription

1 PB GPA presentation Overview of recent studies for the Electricity Commission 16 th October 2009

2 PB: Introduction Four reports 1. Thermal power plant report Typical operating lives of thermal plant 2. Coal prices and availability report Projections of NZ coal prices and availability 3. O&M costs report Estimates of fixed and variable non-fuel O&M costs for thermal plant 4. Reciprocating engines report Review of the costs and performance of reciprocating engines for electricity generation 2

3 Thermal plant report: Scope Generic technical advice for thermal plant including: Task 1: Overview NZ thermal plant, including a discussion of when it was commissioned, annual operating hours and major outages experienced by the plant. Task 2: Trends in the typical operating lives of thermal plant with and without major life extension refurbishment. Task 3: Major maintenance and refurbishment costs. Task 4: Using findings, estimates of decommissioning dates for thermal plant in NZ, with and without a major life extension. Task 5: Economic impact of a life extension refurbishment by estimating the LRMC of generation for thermal plant in NZ. Study focus was physical life capacity, not technical or economic redundancy. 3

4 Thermal plant report: Task 2 - plant life trends Brief: A quantitative review of the world trends of the life of coal and gas power stations for plant with and without a major life extension refurbishment. Key technical factors affecting plant operating life. Main data sources: NERC, GADS US Department of Energy US National Energy Technology Laboratory UK Department of Trade and Industry International Energy Agency PB databases & OEM guidelines. 4

5 Thermal plant report: Task 2 - plant life trends Economic vs. Operating vs. Design life Typical design life 25 years or 200,000 hours Economic life? Years Operating life? years IEA research In most cases coal-fuelled power plant can have its life extended by a factor of % over the original design life. This arises in part from the conservative assumptions made in the original design process and in part is a consequence of wellmanaged repair and maintenance in these plants. 5

6 Thermal plant report: Task 2 - plant life trends Wheeler, 1999: Whilst maintenance costs will increase with age in power plant, this is normally more than offset by the decrease in capital costs resulting from depreciation. In most cases, the decision to replace power generation plant by new equipment is based on the savings to be realised from increased efficiency, rather than any technical difficulty in extending plant life (Wheeler, 1999; Verma and others, 1999). NZ experience, Marsden A and Meremere. Economic reasons around fuel and efficiency. Recent US and Europe retirement decisions replace still operable, but less efficient older plant with newer more efficient, lower emissions plant. 6

7 Thermal plant report: Task 2 - plant life trends USA: 50% of coal plant is > 30 years old 7

8 Thermal plant report: Task 2 - plant life trends USA: Gas plant No of units 600 BIT +SUB LIG NG RFO > Age (years) 8

9 Thermal plant report: Task 2 - plant life trends Europe: gas plants older than in the US. 9

10 Thermal plant report: Task 2 - plant life trends Approximating a probability distribution for operating life of thermal plant: Lognormal distribution Characterised by few plant decommissioned before design life Majority around the mean with progressively less plant in older age brackets Shape of curve supported by generators typically retaining older more inefficient plant for peaking and reserve roles, leaving younger plant for baseload operations. Estimate made on observed data and engineering experience. 10

11 Thermal plant report: Task 2 - plant life trends Probability curve for coal plant: 100% 90% Cumulative probability 80% 70% 60% 50% 40% 30% 20% 10% CDF for Coal plant 0% Operating life (Years) 11

12 Thermal plant report: Task 2 - plant life trends Probability curve of operating life for CCGT plant: 100% 90% Cumulative probability 80% 70% 60% 50% 40% 30% 20% 10% 0% Operating life (Years) CDF for CCGT 12

13 Thermal plant report: Task 2 - plant life trends Effects of major life extension refurbishment? Insufficient data. Unique nature of plant. Routine vs. life extension maintenance definition. E.g. CCGT major maintenance inspections occurring every 50,000 EOH. Difficult to isolate observed operating lives with and without major life extension refurbishment. 13

14 Thermal plant report: Task 3 Maintenance and Refurbishment costs Effects of major maintenance (Babcock & Wilcox, 1992): 14

15 Thermal plant report: Task 3 Maintenance and Refurbishment costs OCGT and CCGT design lives 25 to 30 years. Hot gas path components design life of 100,000 EOH If operated in baseload, require replacing every 10 to 12 years as part of routine maintenance program. Refurbishment vs. Replacement vs. Upgrade vs. Redesign Complete replacement of plant nearing end of design life seldom enjoys a compelling economic argument Usually stronger justification to improve efficiency, availability and reliability through cost-effective upgrading or refurbishment. New replacement units usually justified once the extended life has been expended. Plant performance improvements = reduced relative emissions. 15

16 Thermal plant report: Task 3 Maintenance and Refurbishment costs Level of cost dependant upon: Scope of works How plant has been operated e.g. gas vs. coal fuelled Amount of life extension required Major life-extension cost estimates: Coal plant: NZ$400 per kw for a 250 MW unit Estimate based on recent estimate for Callide B (QLD), 20 years operating life extension expected. CCGT plant: 40-50% of original cost ST and GT should require normal major maintenance approximately every 5 years Typical design life of 25 years, life extension to 40 years 16

17 Thermal plant report: Task 4 Decommissioning estimates For NZ thermal plant: Technical assessment of decommissioning dates Without major life extension refurbishment With major life extension refurbishment Cost estimates of major life extension refurbishment Assumptions include: Technical engineering assumptions on plant lives Original design life Operating regime No comment on whether an asset is financially viable at some point in the future or not. 17

18 Thermal plant report: Task 4 Decommissioning estimates Huntly PS 35 years, CCGT 30 years, OCGT 25 years. Plant Commissioning date Design life (Years) Projected decomm. date Refurb. date Refurb. Capex ($/kw) Projected decomm. date with mid-life refurb. CCGT - 40% of original plant cost, after 2/3 of design life passed, providing 20 years extension. Huntly PS - (Units 1 to 4) Huntly PS - CCGT Huntly PS OCGT to Huntly PS 40% of original plant cost in 2020, providing extra 15 years of operation. OCGT 40% of original plant cost after 2/3 of design life passed, providing additional 17 years of operation. TCC to Ota B to New Plymouth Southdown CCGT Southdown E n/a n/a n/a n/a to Whirinaki n/a n/a n/a 18

19 Thermal plant report: Task 5 Life extension effects on LRMC Is life extension cost effective? Simple LRMC model created Used estimates contained in the report and existing GEM assumptions. 19

20 Thermal plant report: Task 5 Life extension effects on LRMC The extension of plant operating life and resultant extra generation generally offsets the additional capital expenditure required for the major life-extension refurbishment. Plant LRMC without refurbishment $/MWh LRMC with refurbishment $/MWh Difference between $/MWh Huntly (units 1-4) Huntly e3p Huntly P Otahuhu B TCC New Plymouth Southdown CCGT Southdown E Whirinaki

21 Thermal plant report: Summary Gas and coal plant are exceeding their original design lives of 25 to 30 years. Most major life-extension works will include a heat rate/efficiency (& emissions) improvement increasing the economic justification through fuel savings. Availability of viable sites for new plant and existing planning/regulatory incentives for upgrading existing plant, rather than building new. 21

22 Coal price and availability report: Scope Coal prices and availability 3 tasks: Task 1 - Key drivers of the coal price Task 2 - The relationship between coal and oil prices Task 3 - NZ coal price and availability projections Study completed using publicly available information and PB in-house data. 22

23 Coal Report: Task 1 Key drivers of the coal price Demand Supply Substitutes Technology developments Regulatory settings 23

24 Coal Report: Task 1 Key drivers of the coal price Demand Global demand increase at 2% per annum to % of the increase in production to occur in non-oecd countries. Supply Total recoverable reserves 929 billion tonnes (137 years) Total production in 2006 approx. 6.9 billion tonnes Bituminous 51%, Sub-bit. 32% and Lignite 18%. Australia and Indonesia leading suppliers 24

25 Coal Report: Task 1 Key drivers of the coal price Substitute fuels Trends away from coal to higher efficiency gas fuelled generation, and renewables in OECD countries Carbon charging further incentivising this shift However, coal and gas will fuel 2/3 of generation in 2030 High gas and oil prices promote economics of coal especially in China, India and the US. 25

26 Coal Report: Task 1 Key drivers of the coal price Technology developments Clean coal technology, improves efficiency & emissions Super-critical up to 41% efficiency (subcritical 35%) Atmospheric fluidised bed combustion Pressurised fluidised bed combustion and IGCC Developmental technologies, commercial? Carbon sequestration, storage issues? Commercial? Regulatory settings Carbon charging Emissions targets Promotion of renewables e.g. RECs 26

27 Coal Report: Task 1 Key drivers of the coal price Domestic demand 3.9 million tonnes p.a (~ 80PJ) Other Commercial Industrial Gross PJ Other transformation Electricity generation

28 Coal Report: Task 1 Key drivers of the coal price Major NZ consumers include: Huntly PS (units 1-4), sub-bituminous or thermal coal Glenbrook steel mill Cogen plant MED forecast for future electricity demand at 0.6% year on year to

29 Coal Report: Task 1 Key drivers of the coal price Domestic prices affected by: Extraction costs Supply competition Coal quality Location of fuel relative to place of consumption Competing fuels and utilisation technology Abundant recoverable reserves in NZ At what price? 29

30 Coal Report: Task 1 Key drivers of the coal price Coal resources and costs: 30

31 Coal Report: Task 1 Key drivers of the coal price Domestic coal production, exports, imports & consumption Gross PJ Exports Domestic production - exports Domestic production - domestic consumption Imports 31

32 Coal Report: Task 1 Key drivers of the coal price Net result: Thermal coal consumption variable, renewable and gas generation replacing some coal. Competitive imports have displaced one third of domestic thermal coal production. Domestic production becoming increasingly more expensive with extraction costs expected to increase faster than international suppliers such as Indonesia and Australia. Most thermal coal produced domestically, consumed in NZ, with imports making up the shortfall. International coal price provides cap for domestic coal, and will lead to greater penetration of imports. 32

33 Coal report: Task 2 Coal and oil price relationship Historic trends 5 Oil and gas demonstrates a stronger relationship than oil and coal Price index, Jan 2000 = Coal Gas Oil Year Potential for linkage to increase with commercialisation of technology to convert coal into oil and gas substitutes 33

34 Coal report: Task 3 Coal & price availability projections Projections out to 2049 Relies on discussion past and future demand and supply trends covered in report Coal available to cost-minimising coal purchasers as a schedule comprising a series of price-quantity pairs Upward sloping supply curve Marginal purchases made at increasing prices Model estimates the supply curve confronted by domestic purchasers and likely sources of supply given forecasts of domestic demand. 34

35 Coal report: Task 3 Coal & price availability projections Base case and four scenarios: Increased demand Reduced demand Demand shift up Demand shift down Key assumptions Based on long term coal contracts International supply of coal unlimited from a single supplier Thermal coal demand growth set at growth in electricity demand Domestic extraction cost growth greater than international 35

36 Coal report: Task 3 Coal & price availability projections Base case price availability supply curve As annual demand increases, domestic supply prices exceed international prices due to greater increases in extraction costs. Offered price ($/GJ) Availability (PJ) Bid Home 2010 Bid Home 2030 Bid Home 2049 Bid Abroad 2010 Bid Abroad 2030 Bid Abroad

37 Coal report: Task 3 Coal & price availability projections Base case domestic supply and price The proportion of thermal coal supplied by international sources increases over time. Price increases from $4/GJ to over $6/GJ by Availability (PJ) Home Abroad Price average Price max $6.50 $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 Price ($/GJ) 37

38 Coal report: Task 3 Coal & price availability projections Increased demand scenario $6.50 $6.00 E.g. reduced gas supply increasing gas prices at a faster rate Approximately 90% of domestic demand met by international supply in Availability (PJ) $5.50 $5.00 $4.50 $4.00 $3.50 Price ($/GJ) Domestic supply of cheap thermal coal limited. Home Abroad Price average Price max 38

39 Coal report: Task 3 Coal & price availability projections Reduced demand scenario 60.0 $ $6.00 Importation of LNG, increased gas supply, carbon charging. Demand met more equally from domestic and international suppliers. Availability (PJ) Home Abroad Price average Price max $5.50 $5.00 $4.50 $4.00 $3.50 Price ($/GJ) 39

40 Coal report: Task 3 Coal & price availability projections Demand shift up $ E.g. new IGCC plant Demand met equally from domestic and international suppliers until Majority of demand shift met by international supply (using existing infrastructure) Availability (PJ) Home Abroad Price average Price max $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 Price ($/GJ) 40

41 Coal report: Task 3 Coal & price availability projections Demand shift down 60.0 $ $6.00 E.g. Huntly coal units decommissioned. Prices unlikely to change significantly as domestic costs of extraction will continue to rise but at a slower rate. Availability (PJ) $5.50 $5.00 $4.50 $4.00 $3.50 Price ($/GJ) Little impact on international supply prices. Home Abroad Price average Price max 41

42 Coal report: Task 3 Coal & price availability projections Lignite projections 14.0 $3.50 Importation unlikely, all supply from Southland mines. Prices increase marginally over time, consistent with anticipated increases in extraction costs. Availability (PJ) $3.30 $3.10 $2.90 $2.70 $2.50 $2.30 $2.10 $1.90 $1.70 $1.50 Price ($/GJ) Made before SI Urea plant announcement. Home Abroad Price average Price max 42

43 Thermal plant O&M costs report Provide estimates of the non-fuel fixed (FOM) and variable (VOM) O&M costs for thermal plant Based on broad literature review Australia, NEM US, Energy Information Administration Previous PB reports to the EC Europe, PB and others. All values in NZD. 43

44 Thermal plant O&M costs report ST coal fuelled findings: Technology Variable $/MWh Fixed $/kw/year GEM current assumption Australia, NEM $ USA, EIA 2009 $ PB reports 2006 $ East Harbour 2001 $ 8 45 NEM value low, considering additional VOM expenses such as ash handling, limestone. GEM FOM value appears high. 44

45 Thermal plant O&M costs report CCGT findings: Technology Variable $/MWh Fixed $/kw/year GEM current assumption Australia, NEM 2009 $ USA, EIA 2009 $ PB reports 2006 $ East Harbour 2001 $ Includes variable O&M costs. 2 Excludes major maintenance costs GEM value in correct range given includes routine scheduled major maintenance costs. GEM FOM value appears high. 45

46 Thermal plant O&M costs report OCGT, gas fuelled findings: Technology Variable $/MWh Fixed $/kw/year GEM current assumption 6 14 Australia, NEM 2009 $ USA, EIA 2009 $ PB reports Peaking 2008 $ 6 14 GEM VOM and FOM values should be closer to NEM levels. 46

47 Thermal plant O&M costs report OCGT, liquid fuelled findings: Technology Variable $/MWh Fixed $/kw/year GEM current assumption Australia, NEM 2009 $ PB reports Peaking 2008 $ A penalty factor is incurred running plant on liquid fuel, as interval times between maintenance are reduced. VOM should be around 1.2 times greater than equivalent gas fuelled plant. 47

48 Thermal plant O&M costs report Summary Technology specific: Technology Existing GEM values PB recommendation 1 Variable $/MWh Fixed $/kw/year Variable $/MWh Fixed $/kw/year ST (coal fuelled) CCGT OCGT (100 MW, gas fuelled) OCGT (100 MW, liquid fuelled)

49 Thermal plant O&M costs report Summary Plant specific recommendations based on technology: Asset Technology Existing GEM values PB recommendation 1 Variable $/MWh Fixed $/kw/year Variable $/MWh Fixed $/kw/year Southdown CCGT TCC CCGT Otahuhu B CCGT Huntly unit 5 (E3P) CCGT Huntly unit 6 (P40) OCGT Southdown (E105) OCGT Huntly PS (Units 1-4) ST (Coal) Whirinaki OCGT (liquid)

50 Reciprocating Engines report Provide an overview of the costs and performance of reciprocating engines for electricity generation. Typical unit sizes and arrangements Heat rates/efficiency Fixed and variable O&M costs Capital costs Used public domain information and PB in-house data. 50

51 Reciprocating Engines report Engine speed: High speed, over 1,000 RPM, under 2 MW Medium, between 400 and 1,000 RPM, 1 10 MW Low, up to 400 RPM, 3 80 MW, highest efficiency & capital cost Ratings Standby, for periodic operation Prime, for power generation at varying load Continuous, for base load operation at full rated load 51

52 Reciprocating Engines report Characteristics Widely available, suited to distributed generation Mature technology, large number of suppliers Quick start (0.5 to 15 minutes) Follow load well, good part load efficiency, high reliability Can have higher electrical efficiency than gas fuelled GT counterparts, lower fuel related operating costs Capital costs generally lower than gas engine variants up to 5 MW. Short build times, order times may be longer 52

53 Reciprocating Engines report Performance 30% efficiency for high speed diesels Up to 50% (HHV) for large bore, slow speed engines. Diesels in 5 MW range achieve between 40 and 45% efficiency Emissions Highest NOx emissions amongst distributed generation options Can improve using post-combustion control systems Operating life With proper maintenance, large engines up to years Engine heads and blocks are rebuilt after about 8,000 hours Oil and filter changes after 700 1,000 hours of operation 53

54 Reciprocating Engines report Liquid fuel High quality distillate for high speed engines Low and medium speed can burn heavier oils Natural gas LPG Sour gas (unprocessed natural gas) Biogas Industrial waste gases Manufactured gases 54

55 Reciprocating Engines report Capital costs Between $1,350 and $1,950 per kw Breakdown: 55

56 Reciprocating Engines report O&M costs: Fixed cost, high speed $35/kW Fixed cost, medium speed $15 19/kW Variable cost, high speed NZ cents 2.5/kWh Variable cost, medium speed NZ cents /kWh Total non-fuel O&M cost, high speed NZ cents 2.9/kWh Total non-fuel O&M cost, med. speed NZ cents 2.1/kWh 56

57 Thank you Questions 57