The Role of the Gas Generation Fleet in the Energy Transition IBC Working Committee Energy

Transcription

1 The Role of the Gas Generation Fleet in the Energy Transition IBC Working Committee Energy Pedro Lopez Estebaranz - Uniper Gas Generation Fleet Director 16th March 2018, St Petersburg

2 Uniper at a glance Our operations Power Generation Commodity Trading Energy Storage Energy Sales Energy Services We operate in 40+ countries around the world 2.1bn EBITDA in years Experience ~38 GW Generation capacity Main activities Gas fired power plants Coal fired power plants Gasstorage Regasification Hydroelectric plants Trading Nuclear plants Energy sales to small and large customers Gas infrastructure Service 2

3 Agenda Understanding the energy transition challenges How to make Energy transition become a reality The role of the Gas Fleet in the Energy transition How to compete in this situation Conclusions 3

4 EU Energy Transition Ambition is clear T r a n s i t i o n Energy affordability Sustainability Security of supply EU Low carbon Economy in 2050 Improvement in Energy Efficiency EU from RES increase Reduction in GHG emissions but how to deliver it in the best way? 4

5 Renewables replacing conventional generation... Gross Electricity Generation EU-28 (TWh) 140 Romania 3 Price [EUR/MWh] Capacity [GW] Time [h] Source: EU energy in figures, Statistical pocketbook 2017 European commission. Price Wind Romania 29-30/11/2017 Wednesday-Thursday Daily average capacity demand GW Daily average utilisation factor of wind capacity 29/11: 11.3% ; 30/11: 59.3% (highest 87.5%) More than 100 /MWh devation within 24 hours. Day-ahead prices - 29/11: highest 124 /MWh, 30/11: lowest 2.37 /MWh Germany 24/01/2017 Tuesday Daily average capacity demand 73 GW Utilisation factor of renewables wind: 2.9%; solar: 2.1% Day-ahead prices: average 102 /MWh, highest 163 /MWh Cross border Capacity FR-DE ~ +500 MW/h (export from France) Strategic reserve units were started by TenneT but security of supply problem remains 5

6 and renewables deployment policies alone are not delivering the desired results Spain increasing its CO2 emission despite being on of the EU Members with higher renewable penetration Germany aims to cut greenhouse gas emissions (GHG) by 40 percent by 2020 and by 80% - 85% in

7 EU28 subsidies in the past distorted the market Source: Subsidies and costs of EU energy sponsored by the European Commission Ecofys 2014 and customers continue paying them 7

8 Energy Market incomes alone are not enough to maintain the conventional assets CDS (Base) CSS (Peak) [EUR/MWh] Feb 17-Apr 17-Jun 17-Aug 17-Oct 17-Dec [EUR/MWh] Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 CDS (Base) CSS (Base) [GBP/MWh] Feb 17-Apr 17-Jun 17-Aug 17-Oct 17-Dec [GBP/MWh] Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Efficiencies (% net) : Coal (39%) CCGT (55%) 8 (SOURCE: INTERCONTINENTAL EXCHANGE)

9 The Coal phasing-out in Europe is not the question TOP 20 POWER PLANT SHUT DOWN YEAR COMPARISON Source: A stress test for coal in Europe under the Paris agreement - Climate Analytics (2017) the questions are when, how and its impact 9

10 Energy storage technology being developed Batteries at the UK Capacity Market Auction Originally given a 96% de-rating factor but changed due to concerns over the short discharge period Government expects current designs to be used for Frequency Response 3.3GW prequalified for the T /22 but only 153MW won contracts out of the 50.4GW Capacity Source: National Grid, Duration-Limited Storage De-Rating Factor Assessment Power-to-Gas Cavern Storage Evolution of the global electric car stock, but not ready or economically viable yet 10

11 So, the EU Energy Transition is facing challenges for its implementation Energy affordability Security of supply EU from RES increase Security of supply in the absence of large scale energy storage technology Sustainability EU Low carbon Economy in 2050 Reduction in GHG emissions Some countries failing in achieving the reduction of the GHG emissions Improvement in Energy Efficiency Delivery of the transition in the most economic and affordable way. 11

12 Agenda Understanding the energy transition challenges How to make Energy transition become a reality The role of the Gas Fleet in the Energy transition How to compete in this situation Conclusions 12

13 Securing flexible and reliable back-up capacity at competitive prices Energy affordability Security of supply EU Low carbon Economy in 2050 EU from RES increase Sustainability Reduction in GHG emissions Improvement in Energy Efficiency Example UK Capacity Market Auction 2018 Clearing price of 8.40 per kw, per year for delivery in during Acquisition of 50GW worth of contracts 13

14 Giving carbon a price which makes a real difference Energy affordability Security of supply EU Low carbon Economy in 2050 EU from RES increase Example UK is reducing its carbon emissions from electricity faster than any other major country Sustainability Improvement in Energy Efficiency Reduction in GHG emissions Key driver is the carbon price introduced in 2013 LCPD has basically killed coal 14

15 Promoting fair competition of all technologies avoiding subsidies Energy affordability Security of supply EU Low carbon Economy in 2050 EU from RES increase Sustainability Reduction in GHG emissions Improvement in Energy Efficiency Source: Lazard Nov US market 15

16 Low CCGT capacity utilization factors in Europe Energy affordability Security of supply EU Low carbon Economy in 2050 EU from RES increase Sustainability Reduction in GHG emissions Improvement in Energy Efficiency France 34.4% 15.7% 23.1% n.a Source: Spain Germany 3.6% 7.9% 10.2% 10.9% Source: % 12.6% 12.7% 16.7% Source: result unexploited infrastructure 16

17 Agenda Understanding the energy transition challenges How to make Energy transition become a reality The role of the Gas Fleet in the Energy transition How to compete in this situation Conclusions 17

18 The role of the gas fleet in the energy transition Contributor With modern gas power plants quick wins are possible for the climate Supporter Enabler Security of supply granted when renewables are not running and storage not available Flexible and reliable dispatchable capacity to support renewable deployment The Fleet for the Energy Transition and beyond 18

19 Agenda Understanding the energy transition challenges How to make Energy transition become a reality The role of the Gas Fleet in the Energy transition How to compete in this situation Conclusions 19

20 Focus on asset Cash Contribution Sustaining & Creating value Financial challenge Shorter paybacks required for investments Options Strict Investment discipline Risk Reward sharing concept Optimised investment costs using new approaches Technology fit How and when to use the right technology (e.g efficiency vs flexibility) Options Diversified portfolio with wide range of capabilities (from OCGT to high efficient CCGTs) Dynamic Operations (efficiency optimization vs life consumption) Plant technical capabilities adaptation Increasing Competition New entries in the market Options Competitive existing capacity for longer periods Improvement of all elements of the LCOE 20

21 Competitiveness in O&M costs as decisive element under capacity mechanisms Approach Example Closely monitoring our competitive position by undertaking annual internal benchmarking calibrated externally to push our ambitions levels beyond the competition. Optimum balance between cost performance risk for each asset in the specific market situation, by using advanced home made risk and opportunities tools Pushing the technical boundaries through advance condition based maintenance and GT part life extension projects implemented after thorough in-house engineering process to quantify additional technical risk but also important in Energy Market 21

22 Ensuring highest reliability 1 Value impact Market impact imbalances, lost op Incremental maintenance costs 4 Advanced condition monitoring Digitalization Advance tools Systematic approach on improving reliability 2 Commercial and technical constraints Reliability rules in contracts and markets Optimum operational setup for reliability RCA standardization Enhance Capabilities Sharing and learning Ambitious targets Reliability 3 Culture Weighted Cyclic Events (WCE) per Start to deliver when is really needed 22

23 Smart use of asset flexibility based on market needs and optimizing flexibility cost 1 Market Market demand Value of flexibility parameters W eighting Parameter1) Multipler Max score NDZ Mins A >=xmins <ymins <zmins O Average RURE from 0 MW/mi B <xmw/min <ymw/min <zmw/min P to SEL Hot n Average RDRE from MW/mi C <xmw/min <ymw/min <zmw/min Q SEL n RDRE/RURE above MW/mi D <xmw/min <ymw/min <zmw/min R SEL n SEL as a % of Base % E >=x% <% <z% S Load Synch Interval Mins F >=xmins <ymins <zmins T F.R (Primary MW G <xmwhrs <ymwhrs <zmwhrs U 0.5hz) F.R (Secondary range MW H <xmwhrs <ymwhrs <zmwhrs 0.2hz) F.R (High MW I <xmwhrs <ymwhrs <zmwhrs W 0.5hz) Using flexibility only when there is value 4 Dynamic Operation Flexibility enhancement 2 Commercial & Technical constraints Contractual issues Warranties/ guaranties Design limits, e.g max load Material boundaries e.g. temperature. gradients Less Flexible More Flexible Asset Integrity 3 23

24 Innovation delivered significant value in the past Past & Present Present & Future Flexibility, Life time extension, lead engine Digitalisation R&D and learning curve potential and further innovation potential exists 24

25 Putting People First! 25

26 Agenda Understanding the energy transition challenges How to make Energy transition become a reality The role of the Gas Fleet in the Energy transition How to compete in this situation Conclusions 26

27 Conclusions The EU Energy Transition faces unsolved challenges to grant security of supply, make an affordable transition while reaching the CO2 targets in the given timeline. To make the EU energy transition possible, it is required to: Secure flexible and reliable back-up capacity at competitive prices Giving carbon a price which makes a real difference Promoting fair competition of all technologies avoiding subsidies Exploiting the potential of the existing generation infrastructure The EU Gas Generation Fleet plays a key role by contributing, supporting, enabling the EU Energy transition and to address the associated challenges The EU Gas Generation Fleet / Industry must continue investing in R&D and its learning curve to deliver highest reliability, competitive flexibility and more competitive costs of delivery. 27