Dr.-Ing. Ingo Jeromin, Advisor to the CTO Mainova AG, Verona, May 27, 2014 Bringing gas fired power plants back into the game – how to trigger the fuel switch CEDEC Gas Day 2014 1 Curriculum Vitae – Ingo Jeromin Study of industrial engineering / electrical power engineering at Technischen Universität Darmstadt (Dipl.-Wirtsch.-Ing.) area of specialisation  Power systems  Environmental Economics Phd at Institute Electrical Power and Energy – Technische Universität Darmstadt Prof. Dr.-Ing. Gerd Balzer Research Focus: Optimization of maintenance strategies Since March 2012: Assistant to the Chief Technology Officer , Mainova AG Dr.-Ing. Peter Birkner Zahlreiche Veröffentlichungen zu energiewirtschaftlichen und technischen Themen M1 - Dr.-Ing. Ingo Jeromin Mainova AG is a municipal owned utility based in Frankfurt Overview – Mainova …  Has its headquarters in Frankfurt  Supplies customers with gas, water, heat and electricity  Is amongst Germany‘s top 10 regional supply companies  Owns and operates grids and power plants  Has some European business  Has about 2 800 employees  Has a turnover of nearly 2 billion €  Is mainly owned by the City of Frankfurt  Has major stakes e.g. in o The municipal network Thüga AG o The gas upstream and trading company Gas Union GmbH o The water upstream company Hessenwasser GmbH Focus area for power plants and domestic customers Focus area for gas and electricty grids, heat and water supply Focus area for business customers 3 The production site 1 Production sites at Rhein-Main-Area 5 2 HKW West HKW Messe 3 4 2 4 7 1 3 HKW Niederrad 5 HKW Mitte 6 7 6 Heizkraftwerke Blockheizwerke Biomasse-Kraftwerke MHKW Nordweststadt Heiz-Kälte-Werk Fraport Biomasse-Kraftwerk Fechenheim The German production site 1 2 Production sites Germany 13 GuD-Kraftwerk Bremen1 1 3/4/5/6 Windpark Havelland1 7/8 2 3 10 4 7 6 8 Windparks Siegbach, Hohenahr, Remlingen, Niederhambach 5 9 11 Laufwasserkraftwerke Griesheim & Eddersheim2 10 / 11 / 12 / 13 9 12 Gas- und Dampfkraftwerke Windkraftwerke Wasserkraftwerke PV-Anlagen GuD-Kraftwerk Irsching1 1) Beteiligungen PV-Anlagen Polditz, Pfenninghof, In der Kultur, Eggebek1 2) Im Besitz des Wasser- und Schifffahrtsamts Aschaffenburg Agenda 1 Introduction – The German „Energiewende“ 2 Technical consequences 3 The energy market 4 The power plant of the future 5 Summary 6 1 The German “Energiewende” is based on technical as well as on ethical pillars Step 1 („Small Energiewende”) Instantaneous shut down of about 50 % of the nuclear power plants after the tragedy of Fukushima and subsequently, phasing out nuclear energy Step 2 („Big Energiewende”) Introduction of an energy system based on volatile renewables, tough energy savings and electricity imports by 2050. A big question mark is put behind coal and CCS On a national level capital cost will replace fuel cost (imports) Share of renewables in the national electricity consumption Source : National Energy Strategy 7 1 From an economic point of view “Energiewende” assumes increasing costs for fuel Total costs of energy system Conventional system 1 2 Pay back of capital Role of (US) shale gas? 3 Low fuel cost Timeframe of transition ? A B System transformation from „fossil“ to „renewable“ Dependency from imports? 2013 1 Significant price increase 2 Moderate price increase 3 Low price increase Time A Constant technical progress B Significant technical progress The break even point is strongly influenced by the cost increase of fossil energies, capital costs and available technology 8 1 What does it mean from a technical point of view to create a system based on volatile renewables? The German energy system shall be based on  Volatile energy sources  With a low energy density  And high generation gradients Source: BMU Planned growth of renewable capacity A huge power of renewable energy sources has to be installed which covers a huge surface Additionally, a controllable and highly flexible back-up generation park is still necessary and has to be maintained Operation time of the conventional (backup) system is reduced compared to today The transportation issue has to be fixed Most likely growth of renewable capacity + Conventional back-up capacities:  Gas (CCGT)  Coal, lignite  Flexible CHP with residuum generation (≈ 30 %) 2 A portion of 35 % of renewable Energy means the doubling of the installed power capacity Available power plants (conventional) Pumped hydro storages Import / Export Maximum consumption Power Percentage of power generation 5% 18 % 35 % 80 % Generated Power has to be: Transported (Location of source and sink) 122 % Dealt with (Consumed, exported, stored or destroyed) 100 % 2050 2020 2010 0% + 2000 50 % Installed capacity of renewables Note: The national energy concept Assumes substantial efficiency increase and energy savings but also significant renewable 10 energy imports! 2 Above a 50 % proportion of renewable energy sources costly reversible energy storage systems are inevitable Infrastructure (power plants, storages) without grid Target 900 % 800 % Energy efficiency All other 18 % shares of RES in the electricity system request two additional infrastructural units (generation plus storage systems) 700 % 600 % 2020: + 22 Bill. €/a 500 % 400 % Technology 2011: + 14 Bill. €/a 300 % DSM and spatial interconnection 200 % 100 % 0% Fuel demand 0% 20 % 40 % The first 35 % share of RES in the electricity system requests one additional infrastructural unit on top of the exiting power plants (generation) 60 % 80 % Demand Side Management (DSM) and spatial interconnection allow roughly an additional 15 % RES share without storage systems. 100 % Share of renewables 11 2 Reinforcement of grid versus storage – Consideration of total cost Starting point New generation and grid extension New generation and use of storage What is less expensive, doubling of grid capacity with small power plants or use of a storage? 12 3 Electricity price indices in Germany – Controllable power needs a value Electricity price indices in Germany Price level in the year 2005 = 100% (Source: Statistisches Bundesamt, destinatis.de) [%] Controllable power needs a value! Power exchange Private households Commercial customers Customers with specific contracts Year 13 3 Controllable power – Prices for coal and gas fired power plants Clean Dark Spread Clean Spark Spread 3 Reflections on the electricity price building mechanism Conventional Energies (*): Capital costs plus fuel costs Import of fuel and export of capital Emission of carbon dioxide Controllable Renewable Energies (**): Energy-Only-Market Capital costs Price setting according to marginal costs and demand Sun and Wind are for free Non-controllable Current prices at the power exchange: 3 … 4 ct/kWh Preferred feed-in Full costs: 8 … 9 ct/kWh Full costs: 5 … 7 ct/kWh * Gas and hard coal fired power plants ** Solar and onshore wind generation 15 3 Reflections on the energy-only market model  Merit order based on short term marginal costs (OPEX plus CO2 price)  Long term full costs in theory achievable through higher price defined by the price setting power plant  In practice only depreciated power plants can survive in this market model as long as no major reinvestments are necessary(missing money problem)  There is no bonus for controllable power (capacity market). The only possible additional income is based on the participation in the frequency-power-control market  The energy only market has – at least temporarily – to lead to very high energy prices in order to allow controllable power plants to earn there long term full costs Price Demand Generation Requested price corridor Actual price 1 2 3 1 New RES 2 Decommissioning CHP 3 Decommissioning hard coal Power 16 4 Bidirectional coupling of media as well as cooperation amongst industries is forming the smart system of the future RES Electrical Energy - Electrolyser H2 - Sabatier Process CH4 - Organic Rancine Process Heat - Electrical Heater - Heat Pump RES G2P G2H G2P G2H G2H CHP CHP CCGT Steam Turbine Gas Turbine … But also Fuel Cell or μCHP G2P Gasboiler H2P P2H P2G Natural Gas Control 17 4 Principles of a successful implementation of Energiewende Technical subsidiarity Solving the challenge of energy balancing at the place where it occurs by respecting the Principle of Pareto (concentric structures) E.g.: building – quarter / town – city – region – country – EU Technical diversification Combination of different generation patterns with different consumption patterns in order to achieve system stability and partial adequacy E.g.: solar generation – wind generation – biomass – CHP; commercial area – housing areas – industry; city – country Technical modification Using and supplementing existing infrastructure in order to support Energiewende E.g.: Using district heating systems and gas grids as storages 18 4 Thermal and electric coupling of CHP power plants increases efficiency and flexibility Hard coal Oil Waste Bio mass Natural gas Heat Heat Heat Steam turbine Heat Steam turbine Heat Electricity Steam turbine Electricity Gas turbine Electricity Gas turbine Electricity Electricity Electricity Electricity Heat Steam turbine Heat 19 4 The future flexibility of the CHP system of Frankfurt Decoupling of heat and power generation Electrical power [MW] 500 400 300 Area of flexibility of the thermally and electrically connected system 200 Feasible through electric boiler and steam boilers 100 0 Minimum flexibility 0 200 400 600 800 1 000 Thermal power [MW] 20 4 The urban power plant has the potential to become the future energy storage hub Thermal storage with electric heating Electrical Grid H2 Storage Heat generation Temperature control H 2O Up to 40% H2 is acceptable for the gas turbine ~ Electrolyser for H2 generation Natural gas grid Control logic District heating Carbondioxid, water Closed gas cycle 21 5 Summary – Future elements of Energiewende Installed block capacity of power plants 1,5 GW Thermal power plants Traditional energy business Energiewende 1.0 Off-shore wind farms Renewable power plants Integrated generation Energiewende 2.0 Energiewende 3.0 Time Today 22 5 Summary – Opportunities for existing CHPs There are a multitude of opportunities to bring gas fired power plants back into the market  capacity market eg. „Integrated-Market-Model“ of the Thüga-Gruppe  Stimulation of the CO2 market  Taxes (CO2, fuel, else)  Emission limits for existing power plants  Subsidies  Permit of price spikes 23 Dr.-Ing. Ingo Jeromin, Mainova AG Verona, Italy, May 27, 2014 Thank you for your attention!