INCENTIVES FOR GAS-BASED COGENERATION IN COAL-INTENSIVE COUNTRIES

Transcription

1 INCENTIVES FOR GAS-BASED COGENERATION IN COAL-INTENSIVE COUNTRIES Adam Rajewski Maciej Skwara (Warsaw University of Technology) 1

2 Agenda Why support? Why it is needed? Why does it need support? How (not) to support? Case study Lessons learned Conclusions 3

3 Gas-based cogeneration is it needed? Why cogeneration? Energy efficiency fuel saving Fuel saving emission saving Emission saving EU legislation EU legislation national targets Why gas? More H, less C Less CO 2 per energy unit The cleanest fossil fuel available (You can t put renewables everywhere, not yet) Flexible technologies good for modern market (Can t run an engine on coal. Not yet.) 4

4 Why support? Incentives CHP is good for country, economy... But must also be good for the investor Prices Gas is not cheap in Europe......but final energy still is. 5

5 Challenges: load 6

6 Challenges: load < 10% max load ~30% total heat supply 7

7 Challenges: load Heat dumping in the summer Against EU policy Separate baseload and intermediate load plants Higher investment Short RH for intermediate load plant Part-load operation in the summer Lower revenues from capacity Low minimum load required Daily cycling in the summer Lower revenues compensated by power price differences (possibly in the future...) Flexible technology required 8

8 Challenges: economy Investment CHP more expensive than heating plant with same heating output CHP more expensive than power plant with same power output Cheap heat Additional revenues don t necessarily justify the cost Expensive gas Competition against cheap coal with cheap CO2 9

9 Case study: Poland. CHP penetration. CHP in power generation CHP in heat generation 17% 18% More than 1.5 GW market for strictly base load systems. 10

10 Case study: Poland. Gas plant economy Costs Revenues 11

11 Case study: Poland. Gas plant economy Costs Revenues 12

12 Case study: Poland. Gas plant economy Costs Revenues 13

13 Case study: Poland. Gas plant economy Comparative study of different CHP plants in Polish conditions by Energoprojekt-Katowice S.A. (EPK) Based on EPK s market modelling made with Plexos software. Results without incentives Plant type IC engine plant MW el 70.4 MW th IC engine plant MW 74.7 MW th Investment cost (m PLN) Low CO 2 scenario NPV for 2030 (m PLN) Medium CO 2 scenario High CO 2 scenario CCGT MW el 71.5 MW th

14 Case study: Poland. Incentive mechanism. Two certificate types Yellow - gaseous fuel or micro plant Red - any other hi-eff CHP Certificate circulation mechanism Issued to energy producers Awarded for gross electricity generation Demanded from energy suppliers under penalty Free-market trading 15

15 January February March April May June July August September October November December PLNMWh Case study: Poland. Support mechanism. Yellow certificates prices and volume in , , , ,00 110,00 Volume [GWh] Price [PLNMWh] Equivalent fee , ,

16 Case study: Poland. Gas plant economy Comparative study of different CHP plants in Polish conditions by Energoprojekt-Katowice S.A. (EPK) Based on EPK s market modelling made with Plexos software. Results with incentives Plant type IC engine plant MW el 70.4 MW th IC engine plant MW 74.7 MW th Investment cost (m PLN) CCGT MW el 71.5 MW th Low CO 2 scenario % % % NPV for 2030 (m PLN) IRR Medium CO 2 scenario % % % High CO 2 scenario % % % 17

17 Case study: Poland. What went well... Restored profitability of old projects 55 MW unit in Gorzów (commissioned in 1999), 235 MW unit in Lublin (Wrotków plant, commissioned in 2002), 100 MW unit in Rzeszów (commissioned in 2003), 198 MW unit in Zielona Góra (commissioned in 2004). Some new projects encouraged 8.4 MW gas engine plant in Mielec (contract 2010, commissioned 2011), 7 MW gas engine plant in Wejherowo (contract 2011, commissioned 2013), 7 MW gas engine plant in Leszno (contract 2011, commissioned 2013), 29 MW gas engine plant in Rzeszów (original tender in 2012, repeated tender in 2013, under construction) 450 MW GTCC in Stalowa Wola (contracted 2012, under construction) 18

18 Case study: Poland. What went wrong system enacted until new system expected to follow 2012 new system not ready. Extension of the old system to follow extension did not happen on time. System expires. Q Government proposes limited time extension. Asks EC approval. 19

19 Case study: Poland. What went wrong. Q EC investigates... Q EC investigates... Q42013 Government decides to go forward without EC s approval Q12014 Approved by the Parliament Q22014 Signed into law. Valid until Then a new system. Maybe. 20

20 Conclusions Support system is needed to promote gas-based CHP in countries where coal is the dominating fuel (at least now) To incentivise new politically-motivated projects a support system is needed Such a support system has to be stable and planned for a long-term to provide guarantees to an investor Political risk involved is huge. As demonstrated Private investors not related to existing utilities do not seem to trust feasibility of such a politically motivated business. Smart power system requires smart political framework!