Building the World's Largest Reciprocating Engine Power Plant in Jordan, 600MW

Building the World's Largest Reciprocating Engine Power Plant in Jordan, 600MW Power-Gen Middle East, Abu Dhabi, October 2014 Al Azzam, Amani Mohamed 1 ; Koul, Upma 2 and Paldanius, Risto 3 1. Abstract In the energy industry, known for its inertia, technological change is often slow and gradual. However, with thorough technical and financial analysis new exiting opportunities can emerge. This joint paper with the National Electric Power Company (NEPCO) of Jordan and Wärtsilä Corporation describes one such a project. Such a new opportunity arose in Jordan in the fall of 2010, when the NEPCO published a tender for an independent power producer (IPP) project, the third such project in the country (hence the name "IPP3"). What separated IPP3 from the two previous IPP projects was its size and technology: it included an option for a 600 MW power plant using tri-fuel reciprocating engines. This paper is divided into two sections. The first section represents NEPCO's needs and approach to the IPP3 project. An analysis of the power demand trends, existing portfolio, and fuel supply issues in Jordan provides background for the paper. The main steps in NEPCO's analysis are later analysed in detail, leading to the conclusion that IPP3 should be approximately 600 MW and based on reciprocating engines. The second section of the paper represents Wärtsilä s view, the equipment supplier and EPC consortium leader for IPP3 project. The initial phases of the process, that is, information exchange with NEPCO and various technological comparisons by various consultants are overviewed. The main steps in establishing relations and coming to an agreement with the developer, KEPCO/Mitsubishi, are considered. An overview of the environmental impact assessment and the consequent adoption of new emissions regulation in Jordan is provided. Finally, challenges of managing a large-scale project in Jordan are covered. 1 Deputy Managing Director for Operation & Planning, National Electric Power Company, Jordan 2 Business Development Manager, Wärtsilä Corporation Power Plants, UAE. Corresponding author. 3 Director, Business Development, Wärtsilä Corporation Power Plants, Finland Power-Gen Middle East 2014 1

IPP3 is a ground-breaking project for Jordan, supplying not only base load, but also load following and grid stability reserves for the Jordan power system. The IPP3 power plant will be world s largest tri-fuel power plant in the world, providing Jordan with much needed fuel and operational flexibility. 2. Introduction Jordan has experienced decades of robust electric demand growth due to an expanding population of 6.41 million people and an electrification rate of 100 percent. Although located in a fossil fuel-rich region of the world, Jordan lacks significant indigenous energy resources and relies on imports to provide more than 97 percent of the country s energy needs. The electricity sector accounts for 42% of the energy resources consumed. Historically Jordan has depended heavily on natural gas for electric power generation. In 2009, 89 percent of the electricity produced was from natural gas. Natural gas is supplied from a single source the Arab Gas Pipeline which runs from Egypt to Jordan and other neighbouring countries. The reliance on a single source of fuel for the bulk of electric power posed significant energy security concerns for the National Electric Power Company (NEPCO) of Jordan. NEPCO is the state-owned transmission system operator and is responsible for planning, constructing, and maintaining the country s power system. NEPCO purchases electricity from power generation companies and from neighbouring countries Egypt and Syria via electrical interconnection lines (single buyer) and sells the power to distribution companies and large industries. In 2010, NEPCO conducted studies to forecast demand growth and analyse projected reserve margins through 2040. The analyses identified key vulnerabilities, actionable timelines, and assessed technology and fuel options to meet the country s growing electric power requirements. These studies identified the need for 600 megawatts (MW) of new generating capacity to avoid shortfalls in supply and reserve margin deficits projected to occur by 2015. A significant conclusion of NEPCO s analysis was that the new capacity needed to have operational flexibility to meet fluctuations in electrical demand. NEPCO s issuance of a tender for the construction of a third independent power producer project in Jordan the IPP3 project was pioneering for a number of reasons: scale, technology selection and environmental standards. This paper discusses the technological, energy security and Power-Gen Middle East 2014 2

economic factors that led to the construction of the world s largest tri-fuel reciprocating engine power plant. 3. Background on Jordan s Power System Annual peak electric load in Jordan has risen by an average of 9 percent from 1980 through 2010. The peak load in 2012 was 2770 MW, serving 1.65 million electricity customers. The consumer sector consumed 43 percent of the electricity generated while the industrial sector accounted for 24 percent of consumption. Electric power demand varies by as much as 30 percent daily, presenting operational and planning challenges for the transmission system operator, NEPCO. Electric demand has been met primarily with steam turbine and combined cycle gas turbine (CCGT) capacity. The current and historical profile of the generating fleet is shown in Table 1. The heavy reliance on plants that are designed to run at high load factors provides limited ability to adapt to daily fluctuations in demand. This is reflected in an overall average thermal efficiency of the generating fleet of 40.2 percent in 2012. Table 1: Installed electric generating capacity in Jordan (MW) GT Year Steam Dieselfired Gasfired GT CCGT Diesel Wind Hydro Biogas TOTAL 2006 1010 156.5 189.4 585 54.3 1.44 12 3.5 2012 2007 1010 156.5 289.4 585 54.3 1.44 12 3.5 2112 2008 1010 156.5 677.4 585 54.3 1.44 12 3.5 2500 2009 1010 156.5 389.4 965 54.3 1.44 12 3.5 2592 2010 1010 156.5 600.4 1317 46.8 1.44 12 3.5 3148 2011 1010 141.5 499.4 1737 46.8 1.44 12 3.5 3452 2012 1010 141.5 499.4 1737 46.8 1.44 12 3.5 3452 Prior to 2011, the bulk of electric generation in Jordan had been from natural gas. In 2009 natural-gas fired generation accounted for 12,986 gigawatt hours (GWh) or 89 percent of total electric generation as shown in Figure 1. Then in 2011 a major disruption to Jordan s single source natural gas supply, the Arab Gas Pipeline, intensified energy security concerns. Natural gas imports to Jordan were reduced from 89 billion cubic feet (Bcf) in 2010 to 29 Bcf Power-Gen Middle East 2014 3

in 2011. To compensate for the natural gas shortages, Jordan s fuel oil imports increased by more than 25 percent. Diesel and heavy fuel oil (HFO) accounted for 64 percent of total electric generation in 2011 and 78 percent in 2012, as shown in Figure 1. This abrupt shift from natural gas to fuel oil and diesel also affected the efficient and economic dispatch of Jordan s generating units. As a result, the cost of energy relative to Jordan s gross domestic product (GDP) increased from 11.5 percent in 2009 to 21.3 percent in 2012. 100% 90% 1 3 4 7 3 11 5 4 80% 70% 24 32 49 34 60% 50% 40% 30% 89 69 32 29 27 Imported electricity Diesel HFO Natural gas 20% 10% 0% 25 2009 2010 2011 2012 2013 (janmay) 17 35 Figure 1: Energy generated by fuel type in Jordan, 2009-2013 NEPCO hired a consultant to evaluate the power system needs, K&M Engineering and Consulting, evaluated peak load supply and reserve margins with existing capacity alone, extensions to planned retirements, and capacity additions. With the currently installed capacity, a supply deficit of 306 MW was projected for 2013. By 2015, 910 MW of new capacity would be needed to meet demand and avoid reserve margin deficits as high as 25 percent. The electricity demand forecast and the expected shortfalls without new builds are shown in Figure 2. The feasibility of getting 300 MW of new capacity online by 2013 presented significant challenges. However, by extending the retirement dates of some existing units, NEPCO could meet peak load and maintain positive reserve margins in 2013. Even with those extensions, the system would still experience supply deficits of 283 MW in 2014 and 529 MW in 2015. NEPCO identified that a third IPP tender, with a commercial operation date by 2014, should be issued to prevent these capacity shortfalls. Power-Gen Middle East 2014 4

Building the world s largest reciprocating engine power plant. Al Azzam, A.M.; Koul, U. and Paldanius, R. Figure 2: Peak electricity demand forecast and deficits, 2011-2040 4. Power System Modelling and Optimization Severe dependency on unreliable natural gas supply from Egypt and lack of needed fuel flexibility in NEPCO s power generating portfolio prompted Wärtsilä to undertake a power system optimization study in 2009. While the Jordan electric power system was a combined- cycle dominated market, Wärtsilä recognized that the use of CCGTs to meet flexible demand was not fully optimized for efficiency and generation cost, for example CCGT plants were being used as spinning reserve. Fluctuations in plant load factor increases production costs due to loss of fuel efficiency and higher maintenance costs associated with CCGT plant cycling. Wärtsilä undertook a study of the Jordan power system to identify the how the existing generating fleet operations could be optimized with the addition of highly flexible generating g sources. Flexible e generating sources can provide, for example, quick-start capability for variable loads, without sacrificing efficiency. Model results showed that existing baseload capacity was sufficient, but Jordan needed operational flexibility to meet peak demand. An analysis of the load profile revealed that onethirds load being baseload. Wärtsilä demonstrated that the overall system efficiency would dramatically increase, third of the daily load was flexible, with the remaining two-thirds reducing fuel costs, by converting open cycle GTs to combined cycle, enabling CCGTs to operate at high plant load factors and using efficient and flexible generating resources to meet fluctuations in demand. These e types of generating resources we call Smart Power Generation. Power-Gen Middle East 2014 5

Smart Power Generation is the combination of energy efficiency, operational flexibility, and fuel flexibility. This type of generation provides stability to a power system with rapid starts, stops and quick ramp up or down capacities while retaining high efficiency at partial loads. The optimized daily load cycle estimated for 2014 is shown in Figure 3 and Figure 4 for high demand and minimum demand periods, respectively. Major variations in demand are absorbed by a Smart Power Generation IPP (in purple), allowing CCGTs (in green) to run at a stable load with higher efficiency. The estimated IPP plant load factor for the high demand period would be approximately 57 percent. During low demand periods, steam plants would remain in stand-by mode and flexible power run at about 50 percent load factor. Wärtsilä presented the results to NEPCO and introduced the concept of reciprocating engine technology which can serve as Smart Power Generation. Figure 4: Optimized daily load cycle High demand period Figure 4: Optimized daily load cycle Minimum demand period Power-Gen Middle East 2014 6

In addition to this, there is a glaring need for the Jordanian power system to become ready for the upcoming development plans and accommodate the growing shares of renewable energy that are scheduled to become available in the near future. Jordan is planning to undertake major investments in renewable energy, capitalising on their privileged geography by harnessing the power of the abundant solar irradiation and strong winds in certain regions. In the Master Strategy of the Energy Sector in Jordan for the 2007-2020 period, the Jordanian government set a target to obtain 1800 MW, an amount equivalent to 10 per cent of the country s energy generation base, from renewable sources by 2020. Of this, about 1200 MW will come from wind energy, 600 MW from solar power, and between 30 and 50 MW from waste-to-energy facilities, according to the mentioned Master Strategy. This requires the Jordanian power system to incorporate a sizeable amount of flexible generation capacity that can quickly respond and come online in a matter of minutes when the renewable sources falter. For that reason, the operational flexibility dimension of the technology assessment, which will now be presented in the next chapter, becomes of paramount importance. 5. Technology Assessment To evaluate fuel selection, operational modes, and generating technologies that would provide the best solution, NEPCO tasked K&M Engineering and Consulting to conduct a project technology assessment for IPP3. The assessment examined fuel types, expected dispatch strategy and capacity factors, and technology options and plant configurations. The technologies considered were combustion turbines in simple and combined cycle, reciprocating engines, and oil-fired boiler power plants. Technologies were evaluated for fuel use, efficiency, availability, emissions, longevity, water consumption, risks, capital costs, fixed and variable O&M costs, and estimated time for construction. Table 2 presents a summary of the technology evaluation. The assessment considered natural gas, heavy fuel oil, crude oil, and light distillate oil as viable energy sources for IPP3 and examined the projected availability and costs of each fuel type. Due to anticipated shortages in natural gas supply, heavy fuel oil-fired capacity represented the most economically viable short-term alternative for a new IPP. However, Power-Gen Middle East 2014 7

NEPCO also began the process of securing liquefied natural gas (LNG) and regasification infrastructure for future energy needs. The ability of a new IPP to utilize either fuel oil or natural gas depending on changing supply conditions would provide much needed flexibility for the power system. K&M strongly recommended against using HFO in combustion turbines because of increased maintenance requirements, resulting probably lower availability and reliability numbers. Table 2: Summary of IPP3 Technology Evaluation Cycling /peaking Environmental Water Technology Fuel mode Efficiency Availability characteristics consumption Medium-speed reciprocating engines Gas or 1% sulphur HFO Well suited 44% 95% Meets requirements burning gas or low-sulphur HFO Low Conventional HFO-fired boiler Gas, low- and highsulphur HFO Not well suited 35-35% >90% Can meet requirements with FGD system Moderate, but requires very large drycooled condenser Combined Cycle Gas Turbine Gas, light distillate Not well suited 55% 92-94% Clean on natural gas, needs water injection on oil Moderate with dry cooled condenser K&M analysed load duration curves for 2012 2019 and the capacity utilization that IPP3 would be expected to have each year. During the maximum load day in 2015, 1200 MW of capacity would need to be started during peak load hours and shut down or unloaded when demand is at lowest levels. The analysis concluded that the most economical operation of existing plants would be to operate combined cycle plants as baseload and use IPP3 for cycling. The load factor for IPP3 was expected to range from 38 to 69 percent, with capacity utilization under 50 percent for several years. Further, the assessment identified that the selected technology and capacity of individual IPP3 units should be sized so that the outage of Power-Gen Middle East 2014 8

one unit would not compromise transmission system stability. NEPCO s analysis confirmed the operational and efficiency benefits of Smart Power Generation in providing tri-fuel flexibility and suitability for cycling operations. NEPCO then conducted a tariff study to compare the cost of reciprocating engine plant following Smart Power Generation principles to CCGT plants and boiler plants under various dispatch and fuel conditions. The financial methodology enabled the technology evaluation to take into consideration heat rate and the impact of fuel costs over a period of 25 years. Using natural gas, CCGTs posed the lowest cost for load capacity, whereas supercritical boiler plants provided the lowest cost for HFO-fired baseload capacity. However, the Smart Power Generation option, represented by medium-speed reciprocating engines, presented the lowest cost for meeting the flexible demand, and enabled existing CCGTs to operate at high load factors with higher efficiency. Comparing tariffs for flexible load, which included part load operation impacts, starting costs, substitution costs, and transmission line losses, Smart Power Generation provided the lowest cost with both natural gas and liquid fuels. Based on the studies conducted by K&M, the RFP for IPP3 was issued with tri-fuel reciprocating engine technology fulfilling all the aspects of Smart Power Generation. It is because of the special characteristics of modern medium-speed reciprocating engines that they are such a good fit for the needs of IPP3. First of all, the fact that a reciprocating engine plant is made of several units of close to 20MW each ensures that even if one unit suffers an unexpected outage or needs maintenance, the practical totality of the plant power is still available. Adding to that, the reliability of each individual unit is the highest of all the analysed alternatives a winning combination. As an added benefit, the engines perform especially well in load cycles. They are able to start up, run just enough time to cover the demand peak and shut down immediately after, with no impact on maintenance. Since they can be started and stopped individually, the magnitude of the peak does not impact the plant efficiency either: only the needed number of engines are started to deal with the load peak, keeping the plant efficiency at its maximum. Power-Gen Middle East 2014 9

On top of the previously discussed factors, the specific conditions affecting IPP3 made the project even more challenging: the hot and dry ambient conditions, plus the strict limitation of water usage, posed a major challenge to all of the three possible technologies. However, according to the evaluation, reciprocating engines are the technology that can best deal with these conditions. Contrary to that of other technologies, engines only suffer minimal derating in the desert climate, and their water consumption is negligible in comparison with that of gas turbines or HFO-fired boilers. This is a key point in the case of IPP3, because as one may guess, a cooling system that uses large amounts of water would pose a great risk to the midand long-term success of the project. This could even potentially impact the energy independence of the country, forcing the mothballing of a key generation asset in times of drought. The ability of reciprocating engines to start up in a matter of minutes, faster than any other thermal technology, makes them especially suitable for supporting grids with increasing shares of renewable sources. Since the output from solar and wind power is highly intermittent and can vary heavily in a matter of minutes, it is necessary to have power reserves in place that can kick in when renewable power output decreases, in order to guarantee the stability of the whole national power system. A lack of flexible balancing capacity could seriously jeopardize the bet for renewable power that Jordan has made, but thanks to the careful planning and technological evaluation, the country will be able to fully utilize its renewable potential without endangering the power system stability, hence setting a valuable precedent for other countries to develop in a similar fashion. 6. Environmental Regulation The increasing reliance on diesel and heavy fuel oil for electric power generation in Jordan spurred environmental concerns. Prior to engagement with the project developers, Jordan s existing environmental regulations were based on combined cycle gas turbine and boiler technology, and emissions standards were not technology-specific. The prospective project developers informed NEPCO prior to issuance of the IPP3 tender that the existing environmental standards were not applicable for tri-fuel reciprocating engines, which had high efficiency and low emission rates. The updated World Bank/IFC Environmental Health and Safety (EHS) Guidelines (2008) reflected the latest industry technologies and emissions control for different categories of thermal power station prime movers. After a comprehensive Power-Gen Middle East 2014 10

environmental impact assessment conducted in 2012, Jordan adopted the IFC Guidelines. NEPCO s analysis further demonstrated that a 600 MW tri-fuel reciprocating engine power plant, while burning HFO, produced 35 percent less carbon emissions than an existing steam electric plant using HFO because of the high engine efficiency performance. 7. Project Collaboration and Innovation The IPP3 project represents a unique level of international cooperation toward providing a turnkey engineering, procurement, and construction (EPC) solution to fulfil the needs of Jordan s power system. The scope and schedule of the project presented numerous challenges. To meet the tender offer, Wärtsilä of Finland teamed with the Korea Electric Power Company of South Korea (KEPCO) and Mitsubishi Corporation of Japan to form a new entity, Amman Asia Electric Power (AAEPCO) that would supply electricity to NEPCO. The development team members KEPCO and Mitsubishi brought impressive track records of successfully completing a number of power projects worldwide and access to competitive project financing, while Wärtsilä provided the reciprocating engine technology expertise. The EPC consortium is led by Wärtsilä with South Korea-based Lotte Engineering and Construction as EPC consortium partner. Figure 5: IPP3 in a computer-generated image (l) and in construction (r) NEPCO awarded the IPP3 project to the KEPCO-led consortium in January 2012. IPP3 will have 38 high efficiency Wärtsilä 50DF engines capable of running on HFO, light fuel oil Power-Gen Middle East 2014 11

(LFO), or natural gas. In the event of a fuel supply interruption, the engines have the ability to switch fuels while operating without load reduction To help NEPCO meet immediate peak load needs, the first 16 engines of IPP3 came online in February 2014, with 14 more engines planned to begin operation in the upcoming July. The full IPP3 plant is expected to be in service by September 2014. This represents an incredibly short development schedule. IPP3, nominally rated as 600 MW, can produce 632 MW under ISO conditions and a firm and consistent 573 MW under extreme Jordanian ambient conditions. The expected running regime is 60 percent for base load, and 40 percent for flexible operation. The plant is planned to run on HFO with LFO backup through 2015, then switching over to natural gas as NEPCO completes gas infrastructure projects. NEPCO has entered into a 25-year purchase power agreement with AAEPCO. Managing such a large project in an EPC Consortium posed significant challenges for the developers, EPC Consortium members and the various advisors. A proactive collaboration between the EPC Consortium members prior to submission of bid helped in overcoming the cultural differences and different ways of working. The EPC Consortium members were committed to completing the project in accordance with NEPCO s requirements and tight timeline. Close cooperation between KEPCO, Mitsubishi, Wärtsilä Development & Financial Services (WDFS), and the EPC Consortium members paved the way for winning the project and successful implementation of the largest tri-generation reciprocating engine power plant in the world. 8. Conclusion Collaboration early on in the tender process was essential for identifying the lowest cost technology that would provide Jordan with much needed fuel and operational flexibility and led to the inclusion of reciprocating engine technology in the tender. This was the first time that NEPCO had ever issued a tender for a reciprocating engine power plant. The IPP3 power plant will ensure that Jordan has flexible generating capacity that can provide baseload, loadfollowing, and peaking power to meet projected increasing demand, thus preserving essential reserve margins. The tri-fuel capability of the IPP3 reciprocating engines enables the power plant to instantaneously adapt to interruptions in fuel supply while maintaining load, ensuring Power-Gen Middle East 2014 12

a reliable and efficient source of electricity. Power system analysis showing the value from optimizing generating resources was essential to identifying the need for Smart Power Generation. Environmental concerns were addressed using a collaborative and informative approach, allowing Jordan to adopt 2008 IFC EHS Guidelines which represent best industry performance. IPP3 will be the world s largest reciprocating engine power plant, as well as provide a model for Smart Power Generation, providing operational flexibility, fuel flexibility and high energy efficiency for the electric power system. Power-Gen Middle East 2014 13

9. References EIA (2013), International Energy Statistics. Jordan. U.S. Energy Information Administration, March 2013. International Finance Corporation (2008), Environmental, Health, and Safety Guidelines for Thermal Power Plants. World Bank Group, 18 December 2008. K&M Engineering and Consulting (2011), Development of the IPP3 Power Project In Jordan. K&M Engineering and Consulting LLC, Washington D.C. K&M Engineering & Consulting (2010), Project Technology Assessment Report prepared for the National Electric Power Corporation of Jordan. K&M Engineering and Consulting LLC, Washington D.C., January 2010. Ma abreh, G. (2013), Jordan s Power System: Present and Future Development. National Electric Power Company of Jordan, 2013. NEPCO (2012), Electricity Generation in Jordan. National Electric Power Company of Jordan, 2012. Wärtsilä Power Plants (2013), Smart Power Generation, Optimizing system efficiency. Wärtsilä, 25 June 2013. Power-Gen Middle East 2014 14