COGENERATION: Opportunities in Today s Power Markets COGEN Europe Annual Conference 2005 10-11 March 2005 Paul Dillon Planning Executive: Europe, Middle East and Africa ExxonMobil Refining & Supply Taking on the world s toughest energy challenges.
Opening Remark The world wide energy savings associated with ExxonMobil s cogeneration capacity is more than half of Belgium s residential electricity requirements
Presentation Outline ExxonMobil Refining in Europe History of Cogeneration in ExxonMobil Why Cogeneration? The Business case for Cogen Technology Selection Investment Considerations Economics Sensitivities Market Assessment Enabling Power Market Structures Conclusions
ExxonMobil Refining in Europe Committed to Europe since the 19th century Integrated Upstream / Refining / Chemicals / Fuels Marketing and Lubricant Specialties Top three Refiner in Europe: 1.7 MB/Day Largest oil and gas producer in Europe ~10 % of Europe's oil ~15 % of Europe s natural gas 24,000 staff Europe represents roughly 25% of EM s revenue and capital investment www.exxonmobileurope.com
ExxonMobil: A Leader in Cogeneration First installation in 1950 Over 3,300 MW installed by 2004 primarily at ExxonMobil refineries and chemical plants By mid-2005, cogeneration capacity expected to top 3,700 MW with 85 installations at more than 30 locations CO 2 emissions reduced ~ 9 million tons per year; Roughly equivalent to reduction associated with 3,000 large scale wind turbines Projects under development all around the world Overall, ExxonMobil self-generates approximately 50% of it s total electricity demand 4000 3500 3000 2500 2000 1500 1000 500 0 ExxonMobil Cogeneration Capacity (MW) 1980 1990 2000 2005
Why Cogeneration? ENERGY EFFICIENT ECONOMIC LOWER EMISSIONS SUPPLY SECURITY Fawley Cogen Unit 128 MW Total Capacity
The Business Case for Cogen SIMPLE CYCLE COMBINED CYCLE 34 % Electricity 50 % Electricity 65 % Stack Gas 1 % Other 28 % Condensed Steam 20 % Stack Gas 2 % Other 18 % Stack Gas COGENERATION 2 % Other 34 % Electricity 46 % Process Heat Cogeneration utilizes useful waste heat that would otherwise escape in condensing or stack gases Efficiencies can be twice that of traditional approaches ExxonMobil global electricity spend is over US$2 G... So improved efficiency makes a difference!
Technology Selection 1400 1200 1000 800 90 80 70 60 50 Cogeneration provides highest overall efficiency, lowest cost per MWh & low CO 2 emissions. But... Total capital costs are higher Facilities must be base-loaded; Can t accept dispatch risk Requires back-up power 600 400 200 0 Peaking Traditional CCGT Small Large Heat Rate Cogen Cogen BTU/kWh 11000+ 9000 7000 ~5000 ~4300 CO 2 lbs/kwh 1.3+ 1.0 0.8 0.6 0.5 Capital Cost, Euro/kW Efficiency, % 40 30 20 10 0 Matching site power demand may not take full advantage of available steam sink Capture cost savings available from large, more efficient units Market excess power to those markets with enabling rules to encourage cogen power sales Trade-offs between capital investment, operating costs and risk for each technology choice
Investment Considerations Potential Incentives / Opportunities Investment / cost avoidance Equipment upgrades Environmental retrofits Optimize production process Economic production & Disposal of by-products used as fuel Efficient use of refinery gas Other Process Heating Spare power capacity of existing tie-ins to power grid Potential Disincentives / Constraints Reliability / Back-Up Steam Emissions implications of fuel choice Pollution control equipment Investment cost versus alternative fuel cost Physical space constraints Availability of quality cooling water Investment to increase fuel gas pressure if high-pressure gas not available Whether or not a mismatch between power and steam generation is a constraint or an opportunity depends on the commercial environment
Investment Considerations Potential Incentives / Opportunities Investment / cost avoidance Equipment upgrades Environmental retrofits Optimize production process Economic production & Disposal of by-products used as fuel Efficient use of refinery gas Other Process Heating Spare power capacity of existing tie-ins to power grid Potential Disincentives / Constraints Reliability / Back-Up Steam Emissions implications of fuel choice Pollution control equipment Investment cost versus alternative fuel cost Physical space constraints Availability of quality cooling water Investment to increase fuel gas pressure if high-pressure gas not available Whether or not a mismatch between power and steam generation is a constraint or an opportunity depends on the commercial environment
Economics - Major Sensitivities Change in Power Project DCFR for Given Change in Assumption Electricity Price (-/+ 20%) Fuel Cost (+/- 20%) Capex (+/- 20%) O&M (+/- 20%) Load Factor ( 75% / 95% ) -10% -5% 0% 5% 10% DCFR% Assumes a 1X7FA, 250 MW Capacity, 85% Load Factor, 139 M$ Capex, 9 M$ s Annual Fixed O&M, $2/MWh Variable O&M, 35% Tax Rate
Economics - Market Assessment Load / Capacity (MW) 80000 70000 60000 50000 40000 30000 20000 10000 0 0% 10% 20% 30% 40% 50% 60% Gas-Simple Cycle Gas-Steamer Gas-Combined Cycle Cogeneration Coal Nuclear / Other 70% 80% 90% 100% Load duration curve (demand) versus dispatch rank Assumes plant with lowest marginal cost runs the most hours Cogen plants typically must run due to steam requirements Serves base-load demand Power bid to ensure dispatch
Enabling Power Market Structures Rational dispatch No artificial separation of steam / power as discrete products; Cannot be made separately; Integral to site operations Balancing mechanisms can t be punitive; cogen difficult to schedule Fluctuating steam loads mean fluctuating power output Cogenerators allowed to purchase net requirements or sell potential excess without discrimination Use-based transmission / market / ancillary charges Charges based on actual use to support net internal load Flexibility around market participation / compliance costs Cogenerators may buy services from third parties Alternatives for direct sale, or indirect sale via bilateral contract with market participant
Conclusions ExxonMobil has a History of investing in Cogen - - it makes business and environmental sense and we continue to look for opportunities at ExxonMobil facilities around the world Cogeneration: Can increase steam reliability Enhances cost competitiveness of products; directionally higher dispatch rates Can reduce demand for purchased fuels Reduces emissions per unit of electricity generated Power market rules should enable increased cogeneration investments allowing industry to right-size configurations thus allowing both industry and the public to realize the benefits of cogeneration
QUESTIONS? Taking on the world s toughest energy challenges.