Distributed Generation IMPORTANCE OF CHOOSING THE RIGHT POWER GENERATION TECHNOLOGY Suraj Narayan General Manager Wärtsilä Australia Pty Ltd
ABSTRACT During the boom years, much of the media coverage of the mining sector related to project cost blowouts, delays in project completion time, and skills shortages. While these aspects may have a negative impact on expected returns, high operating costs can further question the viability of a project. Power generation cost can significantly impact the cost of operating a mine. Substantial savings can be achieved by choosing the right power generation technology which offers lowest lifecycle cost. Lifecycle cost covers not only the initial investment in setting up a power plant but also expenses relating to its operation throughout the duration of its economic life. Choice of a power generation technology should be made based on the real needs of the end user primarily taking into account the cost of fuel, expected operating hours per year, the operating profile and the flexibility offered by the power generating units. Different power generation technologies offer different benefits. Making the right choice is necessary not only to reduce the cost of generation but also to secure uninterrupted production. These power plants require significant investment and they are expected to be in operation for anywhere between 10 to 25 years. Business situation may change over the years therefore the flexibility aspect of a power generation technology should be taken into account for the duration of its economic life. In this paper I reason that power generation solutions based on medium speed combustion engine can provide cost-effective and secure long-term power supply thereby reducing a mines operating cost, boosting its bottom line and improving profitability. 2
INTRODUCTION During the boom years, multi-billion dollar investments were made for new mine developments and expansions. Mines were built, infrastructure constructed and, at that time, much of the media coverage of the mining sector related to project cost blowouts, delays in project completion time and skills shortages. In recent months, we are witnessing a visible slowing down of the sector. Business sentiment is increasingly negative primarily due to tough and volatile market conditions, falling demand and falling commodity prices. Miners are responding by slashing CAPEX spend, and in some cases with mine closures. Jobs are being cut across Australia. Just as in the boom years a multiplier effect cascaded through the economy, we are now seeing the end of the boom follow that same path, affecting support industries, government revenues, terms of trade and jobs. Businesses servicing the mining sector are also feeling a ripple effect from the pullback on spend with many now struggling to survive, closing their doors or reducing staff and costs, despite once being beneficiaries of the boom. It is not all doom and gloom for the sector. Every cloud has a silver lining. The challenge now is for mining leaders to rethink their approach to operational excellence and management of mine operations in order to move forward and deliver shareholders and investors a return on investment. Delivering a return to investors will improve the lending environment and we should see investment flowing into the sector and other areas of the economy again. As access to funding becomes more difficult and falling commodity prices wreak havoc with business plans and future projects, the opportunity is now to focus on cost management, operational efficiencies, improved productivity, profitability and cash flow. Understanding real needs and installing the right power generation technology can offer the potential to lower lifecycle cost and improve mine profitability. 3
UNDERSTANDING REAL NEEDS Owners and lenders want expected returns from their mine developments. Interruptions, curtailment or limitations in power supply can significantly reduce return on investment. Following factors feature among the top considerations when evaluating various alternatives for a meeting a mines power demand. A. Reliable power supply 1. Proven technology mines are usually located in remote areas with limited or nonexistent grid connectivity. Distributed generation (island mode), is in many cases the only alternative. Considering remoteness of location, installing proven power generation technology becomes a necessity. Engines (high speed and medium speed) as well as gas turbines are mature and proven technologies and widely used for power generation. Total installed capacity is a good indicator of the acceptance of a technology. For example, more than 53000 MW of land based power plant references is proof that Wärtsilä s medium speed engines are proven technology. 2. Multi-unit configuration no equipment is 100% reliable which means that any equipment can fail. It is prudent to build in redundancy. Depending on nature of loads, unit size etc., N+1 or N+2 configuration is preferred. Figure 1: Illustration of firm capacity provided by a multi unit medium speed engine power plant versus CCGT power plant 4
Figure 1 shows that a power plant with many Wärtsilä units provides significantly higher firm capacity and availability than a power plant with a few large gas turbine units. Smaller unit size also offers the benefit of lower installed capacity and related lower capital expenditure. 3. Fuel flexibility liquid fuel like diesel is expensive (AUD 27.5/GJ) but it can be stored at the power plant site. Natural gas is less expensive (AUD 8 12/GJ depending on site location), less carbon intensive but supply is dependent on a pipeline. Substantial savings in fuel cost can be achieved by operating on natural gas. Interruption in gas supply can cripple a mine operation with losses amounting to millions of dollars per day. Fuel flexibility i.e., the ability to switch from gas to diesel mode and vice versa, is another key attribute which can provide tremendous comfort to owners. Wärtsilä Dual-Fuel (DF) engines offer such fuel flexibility. B. Competitive lifecycle cost Different power generation technologies have different strengths. Some are ideally suited for baseload operation while others are suited for peaking or intermediate application. Wärtsilä medium speed engines are multimodal i.e., they can operate as baseload, peaking or intermediate plants. Choice of a technology depends on factors such as ambient conditions (temperature, altitude etc.), availability of water, operating load profile, type of fuel and its price, redundancy requirements, ability to start large loads, lifecycle cost. 1. Capital cost capital cost depends on factors such as type of technology, its complexity, standardization achieved and production volume. High speed engine solutions offer lower price per kilowatt but their efficiency is lower and, when used for continuous power generation, they require refurbishment after 3-4 years. Medium speed engines such as Wärtsilä engines are heavy duty hence ideal for 20+ years of baseload service, have highest simple cycle efficiency but also have relatively higher price per kilowatt compared to the high speed engines. Combined cycle gas turbine plants offer the highest electrical efficiency when operating at or close to full capacity but they also have very high price per kilowatt. 5
Cost per kwe (AUD) 1600 1400 1200 1000 800 600 400 200 0 Capital cost per Kilowatt (AUD/kWe) Distributed Generation Technologies Figure 2: Capital cost per kilowatt for different technologies (HSE high speed engine, MSE medium speed engine, OCGT open cycle gas turbine, CCGT combined cycle gas turbine) Figure 2 indicates that capital cost varies in a specific range for different power generation technologies. For example, a power plant with 10 units has lower capital cost per kilowatt compared to a power plant with 2 or 3 units of the same type. Capacity Factor (CF) of a power plant is a measure of how well the asset is being utilized or expected to be utilized. A power plant having highest efficiency at full load may not necessarily deliver the lowest lifecycle cost. An investment decision should take into account the expected load profile over the years the power plant is expected to be in service. Figure 3 shows power demand (measured at 30 minute intervals) in a mineral processing operation during the course of two days. The power demand varies as equipment is switched-on or taken off duty. The variation would be even higher when measured on real-time basis. A mine power station is expected to supply such varying demand. Also, spinning reserve must be maintained in order to avoid blackout and mine process interruption in the event of tripping of a generating unit. This means that the mine power station will usually operate at part load; almost never at full load. 6
140 120 Power demand vs Time Power demand (MWe) 100 80 60 40 20 0 00:00:00 02:30:00 05:00:00 07:30:00 10:00:00 12:30:00 15:00:00 17:30:00 20:00:00 22:30:00 01:00:00 03:30:00 06:00:00 08:30:00 11:00:00 13:30:00 16:00:00 18:30:00 21:00:00 23:30:00 Time period 30 minute intervals Figure 3: Example of power demand in a mineral processing operation Part load operation lowers the capacity factor of a power plant which in turn results in higher specific capital cost. Specific Capital Cost Cost per MWh (AUD/MWh) 16 14 12 10 8 6 4 2 0 30% 40% 50% 60% 70% 75% 80% 85% 90% 95% Capacity Factor Figure 4: Impact of capacity factor on specific capital cost Figure 4 illustrates the variation in specific capital cost (specified in AUD / MWh) over a range of capacity factors. I have assumed capital cost of AUD 1000 per kilowatt, interest 7
rate of 8% per annum, 20 year period and discount factor of 8% to arrive at the levelized specific capital cost. One may conclude that, in order to achieve lower specific capital cost, investment should be made in solutions having lower price per kilowatt. But specific capital cost is just one component of lifecycle cost. Specific fuel cost, due to high fuel price, forms a large component of lifecycle cost. 2. Operating cost operating cost depends to a large extent on the fuel efficiency of the power generation technology. Efficiency depends on the type of technology applied, ambient conditions (like intake air temperature, altitude), operating load (part load or full load operation). Figure 5: Simple cycle efficiency of various power generation technologies Figure 5 shows the simple cycle efficiency of various power generation technologies. Although fuel cells have the highest efficiency, their application is limited due to small capacity and prohibitive capital cost per kilowatt. Of all technologies commercially used for power generation, medium speed engines have the highest simple cycle efficiency. 8
kw Output (kw) vs. ambient temperature ( C) 60000 50000 40000 Aeroderivative GT 6 * Wartsila 20V34SG 30000 0 10 20 30 40 C Figure 6: Deration in power output with ambient temperature A gas turbine is more sensitive to ambient temperature than an engine. Figure 6 shows that power output of an aeroderivative gas turbine decreases considerably with increase in ambient temperature. On the other hand, power output of a Wärtsilä gas engine remain unchanged upto ambient temperature of 35 degc. Efficiency (%) vs. ambient temperature ( C) 100% load 50 % 45 40 35 Aeroderivative GT 6 * Wartsila 20V34SG 30 25 0 10 20 30 40 C Figure 7: Simple cycle efficiency of Wärtsilä gas engine and aeroderivative gas turbine Figure 7 shows that efficiency of an aeroderivative gas turbine decreases with increase in ambient temperature. On the other hand, efficiency of a Wärtsilä gas engine remains unchanged upto ambient temperature of 35 degc. In Australia, and in many other countries, mines are located in places with high ambient temperature. Water is scarce in such locations; even if water is available cost of water 9
treatment is expensive. As shown in figure 3, power demand varies and spinning reserve must be maintained. Therefore, a mine power station would operate at part loads for a considerable period of time. Medium speed engines (open cycle), Aero GTCC (1-1-1) 1 * Aero GT 1 * Industrial GT Figure 8: Part load efficiency of various power plants Figure 8 shows the efficiency of power plants based on different technologies when operating at part load. One can observe that a Combined Cycle Gas Turbine (CCGT) power plant offers highest efficiency when operating at loads close to full capacity. But when operating at part loads, the efficiency of a CCGT plant drops below the efficiency of a medium speed engine power plant operating in cascading mode. In cascading mode, high plant efficiency can be maintained by starting-up or shutting down units so that the units that are in operation can be optimally loaded. Maintenance costs and routines for engines remain unaffected despite frequent starting and stopping. Medium speed engine based power plants consume negligible amount of water and are ideally suited for a mining and mineral processing operation due to high fuel efficiency even at part loads and high ambient temperatures encountered in operating mines. 10
C. Load acceptance capability Most mines have large mills which start and stop according to process demands. Such mills are driven by 2 large AC motors operating in tandem. Starting currents can be 1.5 times the nominal current despite using liquid resistance type starters. An islanded mine power station should be able to accept impact loading due to simultaneous starting of such large motors. Further, there are power quality requirements that must be met during such transient events. Engine: 5 x 20V34SG Gen. speed [p.u.] 1 0.99 0.98 35 40 45 50 55 60 65 70 75 80 Time [sec] Gen. voltage [p.u.] 1 0.98 0.96 0.94 0.92 35 40 45 50 55 60 65 70 75 80 Time [sec] P [kw] (blue), Q [kvar] (green) x 10 4 3 2 1 0 35 40 45 50 55 60 65 70 75 80 Time [sec] Freq. [Hz] (blue) 50.5 50 49.5 49 48.5 35 40 45 50 55 60 65 70 75 80 Time [sec] Figure 9: Load acceptance capability of an islanded power plant with 5 units of Wärtsilä W20V34SG gas engines Figure 9 shows the transient drop in frequency and voltage during simultaneous starting of 2 large AC motors with a combined capacity of 17MW. It can be observed that reduction is frequency and voltage is limited to less than 3% and 7% respectively. Above example demonstrates that Wärtsilä gas engines have excellent load acceptance capability and are ideally suited for applications with demanding requirements. 11
CONCLUSIONS Choice of a power generation technology should be made based on real needs. Reliability of power supply, competitive lifecycle cost and technical features like load acceptance capability are important considerations for mine owners. Land based power plant references totalling 53000+ MW of Wärtsilä medium speed engines demonstrates that the technology is proven and widely accepted. Multi-unit configuration and fuel flexibility of Wärtsilä engines improve reliability of power supply. Mining and mineral processing operations have varying power demand; many are located in places with high ambient temperatures and water is scarce. For such operations, Wärtsilä medium speed engines provide lower lifecycle cost due to following: lower specific capital cost per kilowatt compared to combined cycle gas turbines lower operating cost due to operation in cascading mode thereby achieving high fuel efficiency negligible water consumption maintenance costs and routines for engines remain unaffected despite frequent starting and stopping Wärtsilä engines have excellent load acceptance capability and are ideally suited for applications with demanding requirements. Power generation solutions based on Wärtsilä medium speed combustion engines can provide cost-effective and secure long-term power supply thereby reducing a mines operating cost, boosting its bottom line and improving profitability. 12
References 1. Mining Business Outlook Report 2013-14, Newport Consulting, Sydney 2. Jacob Klimstra, Markus Hotakainen & Wärtsilä Finland Oy, Smart Power Generation, Avain, Helsinki, ISBN 978-951-692-846-6 13