Fragmentation

What is the outlook for gas and coal generation in the era of renewables? This has been a key preoccupation of the annual International Power Summit, now in its 14th year, the 2017 event being held at Rome’s spectacular Parco dei Principi Grand Hotel.

With an astonishing 161 GW of new renewable capacity added worldwide in 2016 (according to the International Renewable Energy Agency), the question becomes increasingly urgent for those who own and operate fossil fired power plants and supply equipment for them, while the answer is of course complicated and depends where you are.

Even the European Commission, a driving force behind the transition to renewables, accepts there is a continuing vital role for flexible “conventional” (ie, fossil fuelled) generation to play in a resilient and reliable energy system. But as the IPS17 opening speaker, the EC’s Andreea Strachinescu (head of unit, new energy technologies and innovation) pointed out, when it comes to energy, the countries of Europe are “diverse and fragmented”, with different histories and political/ strategic priorities, unequal levels of power market liberalisation and lack of interconnection.

The themes of fragmentation and diversity were echoed by Adam Hamilton of Advanced Power, an independent combined cycle project developer with 6.7 GW of CCGT capacity at various stages of development, construction and operation, in the USA and Europe.

He noted that among the challenges faced by European greenfield project developers are a constantly changing energy policy landscape, and fragmented and inconsistent market structures, with, for example a diverse patchwork of energy-only and capacity market regimes across the countries of Europe.

There is also inappropriate return on capital relative to risk in Europe, with renewables growth creating increased power price seasonality and volatility, making merchant fossil projects too risky. Infrastructure investors are still interested in European power, Adam concluded, but in recent years have preferred lower risk subsidised renewables to merchant conventional power, with renewables now accounting for about 60% of power projects under development in Europe.

It is no wonder that in recent years Advanced Power has shifted its focus to the US, with considerable success, notably the recent financial close of the 1100 MW Cricket Valley combined cycle project.

He also pointed to the wide diversity within Europe in terms of the attitude to renewables, with countries in the north west seeming to be more willing to accept the higher costs than in the north east, such that power development activities in NW Europe are dominated by wind projects, while NE Europe focuses on conventional power.

A good example of a country in north eastern Europe wedded to conventional generation, namely indigenous coal, is of course Poland, represented in the IPS17 programme by Kazimierz Szynol of power plant operator Tauron, who posed the question: “How can large thermal plants survive in the future?”

His take is that the growth in subsidised renewables, with priority market access and zero marginal costs, threaten the future of conventional power and therefore, indirectly, security of supply. To survive, conventional plants must be more flexible and efficient.

Existing conventional power plants are designed for baseload operation, ie 6000-7000 h/a, but in the future can expect to run closer to 1500-4000 h/a. Areas for flexibility improvement include reduced start-up times, reduced minimum load (to below 20% of full power), control optimisation and increased knowledge of critical components and how materials perform under flexible operational regimes.

Kazimierz believes that there is considerable potential for coal plants to operate more flexibly, and therefore help accommodate more renewables on the grid, but there needs to be suitable remuneration.

Another option for coal generation assets wishing to remain in operation is to convert to biomass. This is the strategy adopted (on a grand scale) by Drax in the UK, formerly a 6 x 660 MW coal fired plant, now producing 70% of its electricity output from compressed wood pellets following conversion of three units.

Jens Price Wolf, formerly with Dong Energy Thermal Power now with Drax Power, observed that while low carbon power sources are needed, they tend to be inflexible, while biomass conversions deliver what he called “green reliability”, providing dispatchable capacity with a continuing ability to provide ancillary services to the grid, such as black start, frequency response and reactive compensation. According to whole-system-cost estimates for the UK given in his presentation, biomass conversion, at an estimated 86 £/MWh, compares very favourably with other renewables (88-92 £/MWh for onshore wind, 122-137 £/MWh for offshore wind, 92-105 £/MWh for solar PV). There are challenges to be addressed, eg fuel logistics, boiler modifications, management of dust, dealing with fire and explosion risk, but on the plus side NOx emissions are reduced, there is no need for flue gas desulphurisation and the existing infrastructure (eg grid connection and fuel supply transport links) can be put to good use.

Whatever strategy existing incumbents adopt there is always a need to increase efficiency and drive out costs, and a number of technology providers were on hand at IPS17 to offer their products and services. Among the vendors giving presentations were:

GE (presenter Jose Aguas), on “the digital industrial revolution”, ie big data, analytics, and a more condition based approach to asset management, reducing unplanned downtime and saving money.

Camlin Power (presenter Marco Tozzi), on the benefits of continuous on-line partial discharge monitoring for generators, allowing, eg, better understanding of “where maintenance can be deferred.”

Yokogawa (presenter Alessandro Roncarati), on how control system optimisation can significantly reduce the cost of flue gas desulphurisation (and is of particular interest at a time of declining appetite among power plant operators for investment in hardware).

Shell (presenter Peter Smith), on the often overlooked topic of selecting lubricating oil and monitoring its performance (pointing out that oil can be a surprisingly large proportion of the cost of asset ownership).

The IPS events unashamedly aim to facilitate interactions between buyers and sellers by having sections of the programme specifically devoted to one-to-one “business meetings”, in addition to the conference presentations and exhibition.

They also aim to be truly international in scope, with the 2017 conference including presentations from the Arab Union of Electricity, the Central Electricity Company of Jordan, HEP of Croatia and Tenaga of Malaysia (the latter shedding light on, among other things Tenaga’s somewhat surprising decision to invest in UK solar).

A further innovative feature of this year’s event was an opportunity for delegates to vote in real time on where they though the next IPS should be held. Budapest won, and the dates are 21-23 February 2018. It is planned to expand the scope of the conference to include renewables and energy storage. For further information, contact Renee Place, reneeplace@arena-international.com, +44 (0)207 936 6874.