Potential of Distributed Generation (DG) in Thailand and a Case Study of Very Small Power Producer (VSPP) Cogeneration

Potential of Distributed Generation (DG) in Thailand and a Case Study of Very Small Power Producer (VSPP) Cogeneration POWERGEN ASIA 2015 Nicolas Leong, Business Development Manager, South East Asia, Power Plants, Wärtsilä Singapore Pte Ltd Saara Kujala, Manager, Development & Financial Services, Asia & Australia, Power Plants, Wärtsilä Finland Oy 1

Table of Contents 1. Abstract... 4 2. Introduction... 5 3. General Market Overview... 6 3.1 EGAT... 8 3.2 PEA and MEA... 9 3.3 Power Development Plan (PDP) 2010 Rev 3... 9 3.4 VSPP Program...10 4. Feasibility Study: Internal combustion engine (ICE)...11 4.1 Internal Combustion Engine (ICE)...11 4.2 Wärtsilä 34SG Engine Technology...13 4.3 Wärtsilä GasCube...15 4.4 Wärtsilä EPC capabilities... 17 4.5 Wärtsilä O&M capabilities... 17 4.6 Case Study Wärtsilä GasCube (1 x 20V34SG)... 17 5. Conclusion...21 2

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1. Abstract Distributed Generation in Thailand has been seriously developed through national energy polices and government supporting schemes over the past decade and has good prospects also going forward. Various measures have been initiated and applied to encourage the investors, such as adder or feed-in tariff program, government funding program and energy efficiency funding. Distributed generation in Thailand will continue to grow in line with the country power development plan and national policy on increasing renewable energy target to reach 25% generation share in year 2021. The current power development plan PDP Rev.3 (2013-2030) targets a further increase in distributed generation (DG) through new SPP cogeneration (6,347 MW) and renewable energy (13,937 MW) that are planned to be added in the system by year 2030. Small Power Producer (SPP) and Very Small Power Producer (VSPP) programs are good examples of success stories under the distributed generation schemes. Both SPP and VSPP programs are implemented for promoting of primary energy saving and for encouraging the use of alternative energy in power generation sector. As of December 2013, the government has released SPP licenses for 11,988 MW (129 projects) and VSPP licenses for 3,727 MW (888 projects). In addition, more than 3,250 MW are currently in the licensing process. To focus on onsite generation, where the generation is next door to the electricity user, this paper will study in detail the VSPP cogeneration scheme which is for power plant sizes <10MW that supply electricity and heating or cooling directly to consumers. This paper contains a case of natural gas based VSPP cogeneration plant with efficient internal combustion engine as prime movers. The study will present a technology overview, and a feasibility study in order to guide investors on the best solution for investment. 4

2. Introduction Distributed generation is an approach where electricity is produced near to the end-users of power. In other words, the generation source is as near as possible to the consumption point. Historically, electricity generation and distribution model was dominated by centralized power generation. In that model, power plants are located far away from the consumers and extensive transmission lines are required for distribution. Such system has its drawbacks such as expensive transmission lines and power and transmission losses over lengthy distance. Nowadays, there is a trend for more and more countries to move towards decentralized power generation and the benefits are reduced transmission and distribution losses, improved energy efficiency, better reliability in terms of electricity supply and possibility of cogeneration (heat recovery). Figure 1: Central Generation 5

Figure 2 Distributed Generation Thailand is one of the countries that have adopted such distributed generation schemes. The Small Power Producers (SPP) and Very Small Power Producers (SPP) programs implemented by the Thai government have been success stories and such achievement can be measured by the number of SPP and VSPP licenses issued in Thailand. The future of distributed generation in Thailand looks promising and both schemes are expected to further grow with the upcoming release of the next Power Development Plan. 3. General Market Overview Thai electricity market operates under a single-buyer system and consists of three main state-owned players, as illustrated in Figure 3 below. Electricity Generating Authority of Thailand (EGAT) acts as the single buyer and controls a sizeable part of generation capacity and the transmission system. Two utilities the Provincial Electricity Authority (PEA) and the Metropolitan Electricity Authority of Thailand (MEA) are responsible for electricity distribution to end-users. As of April 2015, Thailand s Power System has total generation capacity of 34.87GW as shown in Table 1. 6

Figure 3 Thailand Electricity Market (Source: www.pugnatorius.com) Type of Power Plant Apr-15 MW % EGAT s Power Plants - Thermal 3,647.00 10.46 - Combined cycle 8,382.00 24.04 - Hydropower 3,444.18 9.88 - Diesel 4.4 0.01 - Renewable energy 4.55 0.01 Total 15,482.13 44.4 Purchase from Domestic Private Power Plants Independent Power Producers - Electricity Generating Public Co.,Ltd 748.2 2.15 - Ratchaburi Electricity Generating Co.,Ltd. 3,481.00 9.98 - Global Power Synergy Co.,Ltd. 700 2.01 - Tri Energy Co.,Ltd. 700 2.01 - Glow IPP Co.,Ltd. 713 2.04 - Eastern Power & Electric Co.,Ltd. 350 1 - BLCP Power Limited 1,346.50 3.86 - Gulf Power Generation Co.,Ltd. 1,468.00 4.21 7

- Ratchaburi Power Co.Ltd. 1,400.00 4.01 - GHECO-One Co.,Ltd. 660 1.89 Gulf JP Nongsang 1,600.00 4.59 Small Power Producers 3,816.60 10.95 Neighboring Countries - Theun Hinboun Expansion (Laos) 434 1.25 - Houay Ho(Laos) 126 0.36 - Nam Theun 2(Laos) 948 2.72 - Nam Ngum 2(Laos) 596.6 1.71 EGAT-TNB Interconnection System 300 0.86 Total Purchase 19,387.90 55.6 Grand Total 34,870.03 100 Table 1 Thailand Power Generation Mix (Source: EGAT) 3.1 EGAT EGAT, as the state-owned single-buyer utility, has the sole rights to supply electricity directly to customers and also, to the other 2 distributors - PEA and MEA. As of April 1, 2015, EGAT generates 15,482MW from its own power plants. The breakdown in terms of type of power plants is as follows: - Coal 3,647MW - CCGT 8,382MW - Hydro 3,444MW - Diesel 4.40MW - Renewable energy 4.55MW EGAT also purchases power from domestic private power plants under the Independent Power Producer (IPP) and Small Power Producer (SPP) programs. The IPP programs contributes to 13,166MW and the SPP program to 3,816.60MW of power capacity. In addition to domestic supply, EGAT purchases a total of 2404MW of power from neighbouring countries (Laos and Malaysia). Moreover, EGAT is one of the shareholders in large IPPs such as: - Ratchaburi Electricity Generating Holding Public Company Limited (RATCH) at 45.01%, - Electricity Generating Public Company Limited (EGCO) at 25.41% From the above, it is obvious that EGAT plays a dominant role in the whole Thai electricity generation market due to: 1. Ownership of power plant assets and their operation. 2. Entitlement of being the single purchaser of electricity generated from IPP and SPP. 3. Majority shareholders in major IPP players. 8

3.2 PEA and MEA The distribution market is controlled and geographically separated by the PEA and MEA. PEA is a stated-owned enterprise in the utility sector attached to the Interior Ministry. Its primary responsibilities include procurement, distribution and sale of electricity to the public, business and industrial sectors in 74 provinces, over a nationwide area of 510,000 square kilometers or 99.4% of Thailand, with the exception of Bangkok, Nonthaburi and Samut Prakarn provinces. MEA is a stated-owned enterprise and is responsible on supplying electric power to distribution areas for three provinces: Bangkok Metropolis, Samut Prakan and Nonthaburi with a coverage service area of 3,192 square kilometres. As per its Annual Report 2013, MEA energy sales was 47,617 GWh and MEA had 3,281,574 customers. 3.3 Power Development Plan (PDP) 2010 Rev 3 Power Development Plan ( PDP ) is an official study and projection of the electricity supply and demand in Thailand over 20 year period, endorsed by the National Energy Policy Council and the Cabinet. PDP 2010 Revision 3, of which a summary was published in June 2012, indicates that the total added capacity during the period of 2012 2030 would be 55,130 MW according to the following power plant types: 1. Renewable energy power plants 14,580 MW a. Power purchase from domestic 9,481 MW b. Power purchase from neighboring countries 5,099 MW 2. Cogeneration 6,476 MW 3. Combined cycle power plants 25,451 MW 4. Thermal power plants 8,623 MW a. Coal-fired power plants 4,400 MW b. Nuclear power plants 2,000 MW c. Gas turbine power plants 750 MW d. Power purchase from neighboring countries 1,473 MW Total 55,130 MW From the above, 6,476MW is expected to come from Cogeneration plants under SPP and VSPP schemes. All information related to VSPP Cogeneration have been extracted from Appendix 4 of PDP 2010 Revision 3, and the results are compiled below in Table 2. Year Projected VSPP Projects (MW) 2012 27 2013 43 2014 59 2015 76 2016 96 2017 96 2018 97 9

2019 102 2020 102 2021 103 2022 108 2023 108 2024 109 2025 113 2026 113 2027 114 2028 119 2029 119 2030 12 Total 1,716 Table 2 Projected VSPP Project from 2012 to 2030 (Source - PDP 2010 Rev3) We can see that a total of 1,716 MW of VSPP Cogen are being planned over the period of 2012-2030. 3.4 VSPP Program The Very Small Power Producer (VSPP) schemes can be divided into 2 main schemes: renewable (biogas, municipal waste, biomass, hydro, wind, solar) and non-renewable co-generation (natural gas). As per Energy Policy and Planning Office (EPPO), the definition of VSPP cogeneration system means a generator of a private entity, state agency, state-owned enterprise or an individual with his own generating unit, whose power generating process is Cogeneration or Combined Heat and Power (CHP) system fueled by non-renewable energy and who sells no more than 10 MW of electrical power to the Distribution Utilities. The objectives of power purchase from Very Small Power Producers are: 1. To promote the participation of VSPPs in electricity generation 2. To promote efficient use of domestic natural resources and reduce dependency on electricity generation using commercial fuels, which will help decrease expenditure on fuel import from foreign countries and lessen the environmental impact; 3. To promote efficient electricity generation, making optimum use of energy via Combined Heat Power (CHP) application; 4. To open up an opportunity for people in remote areas to participate in electricity generation; 5. To alleviate the government s investment burden in electricity generation and distribution systems. The majority of VSPP in operation are small renewable energy plants (1,471MW). There are also about 113 MW of natural gas based cogeneration VSPP plants in operation in Thailand. However, their popularity is lower than that of renewable VSPP systems. While reasons for this are not fully known, one of the reasons could be challenges in reaching competitive generation cost in small power plants in comparison to grid electricity. Therefore, the overall efficiency is extremely important for VSPP co-gen systems. 10

The total amount of VSPP in operation is now 1,585 MW (476 projects). In addition, 412 projects (2,142 MW) are under implementation and construction. In total, 888 VSPP licenses for 3,727 MWs have been released. In addition, around 1,244 MW of capacity (313 projects) currently under PPA signing process will also be added to the system. Therefore, the total amount of VSPPs in operation, construction, and PPA process is 4,971 MW (1,201 projects). The majority of these are solar power plants with a total capacity of 2,465MW (572 projects). A complete list of VSPP projects is listed below in Table 3. Status In Operation Under Implementation / Construction VSPP Number of Projects Generating Capacity (MW) Number Projects of Generating Capacity (MW) Under Process of Power Purchasing Agreement Number Projects of Generating Capacity (MW) Biogas 95 158 60 107 36 54 Municipal Waste 18 43 16 111 4 20 Biomass 104 642 141 990 83 160 Hydro 2 1 11 14 3 0 Wind 8 9 22 69 3 16 Solar 226 619 162 850 184 996 Natural Gas 23 113 0 0 0 0 Total Renewable (1) 453 1471 412 2142 313 1244 Non-Renewable (2) 23 113 0 0 0 0 Total (1) + (2) 476 1585 412 2142 313 1244 Table 3 VSPP Status (February 2014 (Source: http://www.erc.or.th/ercspp/mainpage.aspx) 4. Feasibility Study: Internal combustion engine (ICE) In this section, we evaluate the feasibility of internal combustion engine technology for the Thailand VSPP market. From this study, we would know whether it makes sense both technically and economically to have a VSPP cogeneration using Internal Combustion Engine (ICE) with natural gas as fuel. 4.1 Internal Combustion Engine (ICE) Today s modern internal combustion engines are excellently suited for various stationary power generation applications. They cover a wide capacity range, and have the highest simple cycle efficiency in the industry. At the lower end of the range, the power plant can consist of only one generating set, while larger plants can consist of tens of units and have a total output of several hundred MW. 11

On 29 April 2015, the inauguration of IPP3, the world s largest internal combustion engine (ICE) power plant, took place at the plant site near Amman, Jordan. The plant is powered by 38 Wärtsilä 50DF multifuel engines with a combined capacity of 573 MW. In recognition of its world record size, the plant has been accepted into the Guinness book of records. Figure 4 The tri-fuel power plant IPP3 is the world s largest internal combustion engine power plant. It comprises 38 Wärtsilä 50DF engines with a combined capacity of 573 MW. Combustion engine power plant solutions have many unique features compared to power plants based on other technologies. Below are the key features of internal combustion engines: a) Flexible plant sizes Investments in combustion engine power plants can easily be made in several steps. Due to several sizes of engine generating sets, the right number of units can be chosen to match the required power demand. This breaks the concept of one size fits all for power plants. For example, a power plant can initial operate on open cycle application. Later, due to increased power demand or funds availability, additional units can be added or Heat Recovery Steam Generators (HRSG) and a steam turbine can be installed to close the cycle for combined cycle operation. This modular concept also enables easy and repeatable installation work. b) Multiple independent units 12

Since power plants typically consist of several generating sets, the excellent fuel efficiency can be maintained across a wide load range also at part load operation. The plant can be operated at all loads with almost the same high efficiency. c) Start-up, synchronisation and loading Fast start-up, synchronisation, and quick loading are valuable benefits for power plant owners. Quick synchronization (30 seconds) is especially valuable for the grid operator, as these plants are the first to synchronise when an imbalance between supply and demand begins to occur. System operators benefit from the possibility to support and stabilize the grid in many situations, such as peaking power, reserve power, load following, ancillary services including regulation, spinning and non-spinning reserve, frequency and voltage control, and black-start capability. d) Fast track EPC project delivery Internal Combustion engine power plant construction projects can be executed with fast delivery schedules. EPC (engineering, procurement, construction) power plant construction projects can take as little as 10 months from the notice to proceed to final handing over. As an example, a 102 MW Dohazari power plant in Asia was delivered in only 10 months. 4.2 Wärtsilä 34SG Engine Technology The Wärtsilä 34SG is a four-stroke, spark-ignited gas engine that works according to the Otto process and the lean-burn principle. The engine has ported gas admission and a pre chamber with a spark plug for ignition. The engine runs at 720 or 750 rpm for 60 or 50 Hz applications and produces 9,340 and 9,730 kw of power, respectively. The efficiency of the Wärtsilä 34SG is among the highest of any sparkignited gas engines today. The natural gas fuelled, lean-burn, medium-speed engine is a reliable, highefficiency and low-pollution power source for baseload, intermediate, peaking and cogeneration plants. Wärtsilä has delivered more than 1000 34SG engines (8.7 GW) to 40 countries worldwide and accumulated more than 14 million running hours. 13

Figure 5 Wärtsilä 34SG Engine Some of the Wärtsilä 34SG engine strengths are: Competitive efficiency and lube oil consumption Fast starting and loading High power density and compact size Reliability and low maintenance costs Advanced engine control & diagnostics Ergonomic interface. Below is the main technical data of the Wärtsilä 34SG Engine Technology: Parameter W34SGD Cylinder output (kw, 720/750rpm) 480 / 500 Engine speed (rpm) 720 / 750 Bore / stroke (mm) 340 / 400 BMEP (bar) 22.0 Piston speed (m/s) Cylinder configurations Turbocharger location Fuel types 9.6 / 10.0 m/s 9L,16V, 20V Free end Natural gas Gas fuel MN optimization High 80, Low 65 NO x optimisation TA-Luft, ½TA-Luft, 14

IED2010 (0.4xTA-Luft) Table 4 Technical data for Wärtsilä 34SG Engine Technology Below is the engine range in the Wärtsilä 34SG Engine Technology: Figure 6 Engine range in the Wärtsilä 34SG Engine Technology 4.3 Wärtsilä GasCube The Wärtsilä GasCube is a modular, pre-engineered single-engine power plant produced within a cost framework that justifies turnkey deliveries for small plants while still complying with the needs of different clients and applications. With this solution, the same benefits as customers for large turnkey power plants can be enjoyed such as proven technical and logistical solutions and reliable delivery schedules guaranteed by a single supplier. Gas cube concept can be cost efficiently employed also for 2 and 3 engine power plant installations. 15

Figure 7 Wärtsilä GasCube Figure 8 GasCube Bontang, Indonesia (2 x Wärtsilä 16V34SG) Some of the advantages of the Cube Design are listed below: Validated and reliable technical solutions High electrical efficiency through minimization of the plant s own consumption 16

Compact design and a minimized annex system Fluent and cost-efficient project execution from planning to start-up Optimized lifetime support and reduced warranty costs Future expansion flexibility. 4.4 Wärtsilä EPC capabilities In addition of being the leading supplier of Internal Combustion Engines for global power generation markets, Wärtsilä has proven capabilities to execute power plant projects on EPC/ full turnkey basis. Once awarded the contract, Wärtsilä takes care of all engineering, logistics, construction, installation and commissioning. The customer has a single point of contact and in the end, receives a complete Power Plant solution which is fully ready to start operating. Wärtsilä Global EPC experience is a total of 456 plants with 1,657 engines producing 15,873 MW in 103 countries over the last 35 years. 4.5 Wärtsilä O&M capabilities Wärtsilä has provided operation and maintenance ( O&M ) services to customers owning Wärtsilä equipped power plants for over 20 years. Wärtsilä currently operates 151 power plants worldwide with a total of 6600 MW under O&M contracts. 4.6 Case Study Wärtsilä GasCube (1 x 20V34SG) In this case study, we evaluate the feasibility of a VSPP cogen system for an industrial user. W e have chosen Wärtsilä GasCube with 1 unit of 20V34SG as prime mover for a VSPP engine-based cogeneration power plant. We calculate the payback period for the VSPP cogeneration system where half of the electric output is used to replace grid electricity purchases and the other half is sold to a distribution utility under the VSPP tariff scheme. Thermal output of the cogenerat ion plant is assumed to partially replace industrial natural gas use for steam generation. 17

Figure 9 3D model of a VSPP cogen system using the Wartsila GasCube (1 unit of 20V34SG) The common assumptions are listed below in Table 5: Item Unit Value Project lifetime Years 20 Fx-rate THB / Eur 37.7 Natural gas cost THB/MMBTu (HHV) 299 Lube oil cost THB/litre 75.4 Altitude m 20 Barometric Air Pressure kpa 101 Ambient air temperature C 32 Relative humidity % 65 Gas feed pressure kpa 700 Gas Lower Heating Value (LHV) kj/m3 36,000 Gas Methane number - 82 Table 5 Common assumptions 18

Key technical performance figures are listed in Table 6 below: Item Unit Value Plant configuration 1 x 20V34SG EPC cost M THB 224 Net Electrical Output MW 9,6 Thermal Output (Steam @ 10bar a) Ton/h 4.7 MW(th)* 3.2 Net life-cycle efficiency (electrical, LHV) % 43.6 Net life-cycle efficiency (total) % 58.2 Lube Oil Consumption g/kwh 0.3 Variable O&M cost THB / MWh 170 Fixed O&M cost M THB/ Year 15 Plant operating hours (Peak; Monday- h / Year 3380 Friday 9am to 10pm) Plant operating hours (Off-peak; other h / Year 4620 times) Annual capacity factor % 65% * 95% condensate return percent and 80 C condensate temperature Table 6 Technical assumptions In addition, we base the assumptions of the electricity sales and purchase prices on the current MEA tariff rates for large general services, and use the most recent electricity tariff paid to VSPPs when selling electricity to PEA and MEA. Table 7 below make a distinction between the pricing during peak hours (weekdays from 9am to 10pm) and off-peak hours. We also make an assumption on the avoided cost for self-generation of steam based on its production cost in a boiler. Item Unit Value MEA Large general service tariff based on time of use (Peak / Offpeak) VSPP Grid selling price (Peak / Offpeak) THB/ kwh 3.6 / 2.2 THB / kwh 3.9 / 2.0 19

Ft rate THB / kwh 0.3 Electricity demand for industrial MW 4.8 / 4.8 use (Peak / Off-peak) Electricity sold to distribution MW 4.8 / 0 utility (Peak / Off-peak) Steam use Tons / hour 4.7 Steam production cost in a boiler MWh (th) 1.3 Table 7 Tariff assumptions Based on the assumptions listed above in Tables 5, 6 and 7, we can calculate the average electricity cost of production, as summarized in Table 8 below. Variable costs THB/kWh M THB/year Variable expenses 0.2 10.5 Fuel expenses 2.7 149.1 Total Variable Costs 2.9 160.0 Fixed costs Fixed expenses 0.3 15.0 Cost of own capital (5%) 0.2 11.2 Cost of Production 3.4 185.9 Table 8 Cost of production for 1 x 20V34SG cogeneration system Cost of production for electricity with the co-generation system doesn t give a complete picture of the project feasibility. In addition, we need to consider the savings from replacing steam generation by cogeneration system. We assume that in absence of VSPP co-generation system, the steam would be generated using natural gas in an industrial boiler. Finally, the project can generate additional revenue by selling 50% of power output to the distribution utility under VSPP rates during peak times. The results of the overall project costs and revenues are illustrated below in Table 9 and Figure 10. Item Unit Value Annual production (electricity) MWh 54 453 Annual production (steam) MWh 25 688 Project Savings 20 year average + Avoided cost (Grid Purchase for M THB /year 117.8 industrial use) + Avoided cost (Steam production) M THB /year 34.6 + Revenue from electricity sold under M THB /year 67.4 VSPP scheme 20

- Fuel cost M THB /year - 149.1 - Variable operating cost M THB /year -10.5 - Annual fixed operating cost M THB /year -15.1 Total savings M THB /year 43.5 Payback Years 5.1 Table 9 VSPP project savings and payback time 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Cumulative savings - - 100,000 0 2 4 6 8 10 12 14 16 18 20-200,000-300,000 Years Figure 10 Cumulative savings for a VSPP cogeneration project The results illustrate that for an industry with some steam and electricity demand, the cogen VSPP scheme is a good fit. The project can take advantage of time of use tariffs and sell surplus output to the grid during times when grid sales price is high. Due to the high total efficiency of over 58%, the project can reach significant savings with about 5 years payback period. 5. Conclusion To summarize, Thailand has invested heavily in promoting energy efficiency, distributed generation, and renewable energy through SPP and VSPP schemes. In particular, VSPP projects based on renewable and cogeneration systems will continue to benefit from government s policies and subsidies programme implemented during last few years. We firmly believe that the next Power Deve lopment Plan (PDP) 21

which is expected to be officially released in the near future, will provide further incentives for both foreign and local investors to move towards Distributed Generation. Hence, it is clear that Distributed Generation will keep on growing over the next few decades and represent the way forward in Thailand This paper gives an overview of the Power Development Plan (PDP), focuses on VSPP scheme, and also, introduces Wärtsilä V34SG gas engine model, which is an ideal choice for VSPP cogene ration systems. For a typical VSPP system with both industrial use and electricity sales to grid, a VSPP project with 1 unit of Wärtsilä 20V34SG can yield payback time of 5 years and total efficiency of over 58%. With such value proposition, Wärtsilä is offering an alternative solution to VSPP owners and investors. This will contribute in the long term to the ever-growing success of VSPP cogeneration power plants in Thailand. 22