Weekly News 28 June 2013

The Treasury is to underwrite a £75m

loan for the Drax Power Station in North

Yorkshire, helping project sponsors get

Friends Life to agree to a cheaper debt –

a £75m loan maturing in June 2018.

“Government-backed institutions have

stepped into the funding gap. Capital markets,

meanwhile, have to continue to add on top of

this,” he said.

More clarity on EMR will facilitate debt financing Asked if investors are willing to come forward

with sufficient funding to spur swift investment

in much-needed new capacity, Lynch remained

positive: “Yes, there is enough cash out there,”

he stressed, suggesting “Once there is clarity

on the EMR, the capital will be flowing from a

myriad of sources.”

Investors need a clear outlook beyond 2020,

if they are to take investment in infrastructure

projects with a pay-back period with over 40

years on average.

Shift towards moreinstitutional debt Geoffrey Spence, CEO of Infrastructure UK at

HM Treasury, in contrast, was more pessimistic

on the availability of financing: “The demand

on balance sheets of the corporates are too big

for them to meet, so there is an accelerated

shift towards institutional and government-

backed long-term debt as many banks are no

longer prepared to lend long-terms,” he cau-

tioned at a podium discussion at the Econo-

mist’s UK Energy Summit 2013.

“A lot of the money is looking for safe in-

vestments, so the Government aims to help by

providing long-term sovereign guarantees to

support investment. We’ve done one of these

deals,” he said referring to the funding pro-

vided for Drax Power Station.

The Chancellor has extended the infrastruc-

ture guarantee scheme to 2015 as it aims to

support up to 25 projects with a combined cap-

ital value of up to 45 billion. Most of the proj-

ects are expected to be in the energy sector.

Government guarantees facilitateflow of capital – BoA Merrill Lynch

EUROPEAN MARKETSSW Düsseldorf deal spursgas buyers to press Statoilfor similar terms 3

THE UK ENERGY SUMMIT 2013 Special report 4

US MARKETSObama's proposes carbonlimits for fossil plants 5

Capacity additions don’tkeep pace with demand 6

COGENERATIONSelling heat makes German plants profitable 7

PROJECTS & FINANCEPort Ambrose pipeline to supply new gas-fired capacity in New York 11

Sleeping giants: Dehumid-ification is key to preserve mothballed plants 13

continued on page 2

AGENDA

Relying on bank loans for energy infrastructure projects in the UK isnot viable in perpetuity. The government’s £40 billion guaranteescheme, however, may facilitate the flow of capital, forecast JohnLynch, Head of EMEA Power, Utilities and Renewables at Bank ofAmerica Merrill Lynch.

continued on page 2

Gazprom ready to pay €227m to snap up first power plant asset in Europe Russia's gas export monopoly Gazprom has signed a Letter of Intent (LoI) withEnel to buy the entire share of Marcinelle Energie, a 420MW combined cycle gasturbine power plant in Belgium, for 227 million euros on a cash and debt free basis.The asset, located in Wallonia, will be Gazprom’s first power plant in Europe.

The deal was forged by Enel chief executive Ful-

vio Conti and Gazprom CEO, Alexei Miller at

the side-lines of the St. Petersburg International

Economic Forum late on Friday.

"This Letter of Intent paves the way for a

binding and final agreement, whose final terms

and conditions shall be agreed upon and executed

by the end of September 2013," Enel said. Before

the transaction can be executed, however, it needs

to be authorised by the competition and regulatory

authorities.

Enel in 2012 raised its stake in the Marcinelle

asset to100 percent by acquiring the outstanding

20 percent from Dunferco, a steel corporation.

Initially, Enel entered 80 percent of Marcinelle

Energie SA in June 2008, leaving the remaining

share to Dunferco.

Marcinelle Energy, a 420-megawatt CCGT in Wallonia

Special edition for conference on

‘The future of Gas-to-Pow

er

in Germ

any’

Snapping up gas-to-power assets in EuropeGazprom's move comes as little surprise to in-

dustry observers, as it had repeatedly tried to

snap up gas-fired power plant assets in Europe.

This shift in strategy to venture into downstream

markets is aimed at complementing Gazprom's

traditional business of selling gas under long-

term contracts to major European utilities.

Going downstream and owning power gen-

eration assets in Western Europe would suit

Gazprom at a time when its traditional gas off-

takers are adamantly seeking discounts to oil-

indexed long-term import contracts, and

demand for Russian pipeline gas is curtailed by

the rising share of LNG supply, gas supply

from Norway and discounted US coal exports.

Ongoing talks over assets in Germany, the Netherlands, and in the UKBefore signing the Letter of Intent to buy

Marcinelle, Gazprom has been advancing

negotiations to buy power plants in Germany,

the Netherlands, and the UK.

"At the present time, Gazprom is evaluating

the possibility of buying modern steam-gas

electric stations on several European markets,

where the positions of gas power generation

look most attractive," Gazprom confirmed to

Gas to Power Journal.The Russian gas giant had also been in talks

with Denmark's Dong Energy, seeking to take a

50% stake in the Dong's gas-fired Severn

Power Station (824 MW)

near Newport in South

Wales. It also pushed to

become a third stake-

holder in a Rotterdam

gas-fired plant that Dong

operates under a 50:50

joint venture with Eneco,

while eying Dong's plant

in Ludwigsau, Hesse in

Germany.

While the negotia-

tions with Dong are

"very promising",

according to Gazprom

CEO Alexey Miller,

Germany's RWE in early

2012 pulled out of talks over a potential joint

venture for building and operating gas-fired

power plants in Germany, the Netherlands and

in the UK.

The Federal State of Bavaria, meanwhile,

ratified a roadmap for cooperation in power

generation and gas supply that could serve as a

springboard for Gazprom to venture into the

German downstream market.

In eastern Germany, Gazprom is testing the

economic viability of investing in building a

1,350 MW gas-fired power plant in Lubmin

near the landfall point of its 55 Bcm/year Nord

Stream pipeline that crosses the Baltic Sea

from Vyborg, Russia. The profitability of a

Gazprom-owned gas power plant in Lubmin

would benefit from cheaper delivery costs of

gas supply through Nord Stream which is ma-

jority-owned by the Russian gas exporter.

Agreeing on terms of gas supplythrough South StreamThe Russian high-level meeting in St. Peters-

burg also served as the backdrop for Gazprom

and Enel to agree on the basic conditions for

the sale and purchase of natural gas supplied to

Europe through the proposed South Stream

pipeline.

Gazprom is keen to advance South Stream,

as a pipeline project designed to bypass

Ukraine and scheduled to deliver gas to south-

eastern Europe by 2017.

Going downstream amid dwindling gas sales to EuropeThere is a risk, however, that Europe's dwin-

dling demand for natural gas could persist in a

prolonged recession which may make it diffi-

cult for Gazprom's long-standing buyers to

fully commit to pre-arranged gas off-take

agreements.

Sales of Russian gas to the EU in 2012

plunged by nearly one-tenth, mainly due to

continental European power producers switch-

ing to cheaper coal instead of gas as a fuel to

fire their plants.

Setting aside €3.59bn for potential price rebatesKeen to compete with Qatari LNG supplies to

Europe that are sold based on traded spot gas

prices, Gazprom had to set aside €3.59 billion

($4.7bn) to cover potential gas price rebates to

European customers this year.

RWE said it expects compensation from

Gazprom dating back to spring 2010 as

part of an out-of-court settlement that would end a

price arbitration case over gas import contract.�

Gas to Power JournalPublisherStuart Fryer

EditorAnja KarlTel: +44 (0)207 0173417anja@gastopowerjournal.com

ReportersCristina BrooksMichal ZukRamadas RaoTel: +44 (0)207 0173402

AdvertisingNarges Jodeyri Tel: +44 (0)207 2533406narges@gastopowerjournal.com

EventsBarbara CanalsTel: +44 (0)207 173410barbara@gastopowerjournal.com

Subscriptions Stephan M. VenterTel: +44 (0)207 0173407venter@gastopowerjournal.com

ProductionVivian CheeTel: +44 (0) 20 8995 5540chee@btconnect.com

� TECHNOLOGY & INNOVATION GTP Journal 28 June 20132continued from page 1

continued from page 1 bottom story

Alexey Miller signing South Stream

Investors seek “not warm wordsbut contracts”Structural changes through the Electricity Mar-

ket Reform are supported by the Treasury,

Spencer said, stressing the need for visible and

clear-cut policies to free-up debt and equity fi-

nance for new-build power generation capacity.

“Investors will seek an independent frame-

work and don’t want warm words but con-

tracts, so long-term CfD can give them protec-

tions against any future regulatory changes that

may occur,” he said. �

Russian gas supply from Yamal

28 June 2013 GTP Journal EUROPEAN MARKETS � 3

Front-runner Stadtwerke Düsseldorf

struck a deal for a volume of less than 1

Bcm/year over a 15-year period, ear-

marked to fuel its upcoming 600-MW

combined-cycle gas turbine power plant

(CCGT) in Lausward near Düsseldorf,

Germany.

"We have interested an interesting phase as

pricing terms start to get moving," a senior

trader at German utility commented without

disclosing the status of talks with Statoil.

RheinEnergie Trading and Trianel are ru-

moured to be at an advanced stage of negotia-

tions with Statoil over similar gas supply

conditions as Stadtwerke Düsseldorf. Heads of

Gas Portfolio Management at the respective

two utilities did neither confirm nor deny these

rumours to Gas to Power Journal.

Price indexed to basket of electricity, carbon and gas pricesIndexing the pricing structure of long-term gas

supply contracts to a basket of electricity, car-

bon and natural gas prices is deemed an inno-

vative offer from Statoil, one of Europe's key

gas suppliers, after buyers have repeatedly

called to extend the volume gas purchase in-

dexed to spot prices.

Statoil and Gazprom in the aftermath

of the 2009 recession had both con-

ceded to sell 15 percent of their con-

tracted long-term gas supply volumes

on a spot price basis.

Commenting on the gas supply con-

tract, Dr. Udo Brockmeier, CEO of

Stadtwerke Düsseldorf said Statoil

would share the utilities' vision on the

development of the energy market and

the importance of gas-to-power projects

in Germany.

The accord was struck in the face of

adverse profit margins in Germany for burning

gas to generate electricity (spark spread) and in

the absence of capacity mechanism.

Accord struck despite Germany’s“unfavourable” G2P regulation

Rune Bjørnson, senior vice

president responsible for Sta-

toil's natural gas business, said

Germany would be a "key

market" for Statoil. The long-

term gas supply deal with

Stadtwerke Düsseldorf is "a stepping stone for

Statoil's strategy to promote gas in the power

segment throughout Europe in general, but in

Germany specifically."

"The [long-term] agreement was possible

despite very unfavourable regulatory frame-

work for gas-to-power," he underlined, hinting

that German regulators and policy makers are

still hesitant to introduce capacity markets to

remunerate fossil plant operators for making

capacity available at short notice.

The municipal utility of Düsseldorf decided

in December 2012 to invest into a new CCGT on

its existing power plant facility in Lausward with

a view to producing both electricity and district

heat. Selling heat into the local grid will be

vital to operate the plant in a profitable manner,

so plant dispatch will be largely heat-driven. �

SW Düsseldorf deal spurs German gas buyers to press Statoil for similar contract terms A plethora of German gas buyers are engaged in negotiations with Statoil to obtain similar "innovative pricing conditions" for gas supply as Stadtwerke Düsseldorf, which managed to secure supplies indexed to a basket of electricity, carbon and gas prices.

Gas is crowded out in Germany by renewables and, paradoxically, coal Gas as a fuel for power generation in Germany is "crowded out by windand solar and, paradoxically, by coal-fired capacity", E.on chief execu-tive Dr. Johannes Teyseen said calling on policy makers to take swiftaction to remedy the inherent paradox of the Energiewende.

Germany's largest power producer,

along with all other fossil power

producers in the country, remains

concerned above all about the

profitability of its legacy core business in con-

ventional generation.

Cheap coal, failure of EU-ETS"Many gas-fired power plants in Germany are

threatened by closure because their fuel is rela-

tively more expensive ... and because the EU

Emissions Trading Scheme

(EU-ETS) is failing completely

in its role of promoting climate

protection," he said.

The paradox of the En-

ergiewende policy is that gas-

fired power plants in particular are urgently

needed to ensure stable power supply and

backup intermittent renewable energy while

keeping carbon emissions as low as possible.

Teyseen called on policy makers to develop

a new market design for the power market, "a

design that contains fair rules for maintaining

reserve capacity and long-term incentives to

encourage the construction of new assets."

More than 8GW up for closure by end-2015He warned that until this new market design is

in place, the E.on will be "even more rigorous

about reducing costs". It is reviewing the prof-

itability of individual assets with an aggregate

capacity of roughly 11 Gigawatts across Eu-

rope and has already decided to withdraw more

than 8 gigawatts by the end of 2015.

"We won't stand idly by while our power

plants continue to operate in the red," Teyssen

said in a stark warning to policy makers in Berlin.

Though E.on is keen collaborate the government

and the regulator to find a viable solution oth-

erwise "we'll take action on our own", he said.

In the run-up to a general election in

September it is, however, unlikely that any

swift action and ground-breaking decisions on

Germany's future power market design will be

taken in due course. �

Rune Bjørnson

Coking Coal

Statoil gas pipline in Germany

Dr. JohannesTeyseen

� THE UK ENERGY SUMMIT 2013 – SPECIAL REPORT GTP Journal 28 June 20134UK's first capacity auctions to take place in 2014 First auctions under the UK's capacity market will take place - subject to State Aid approval - in 2014, for the delivery of flexible electricity capacity from the winter of 2018-19, the government said today. The Capacity Market, along with long-term Contract for Differences (CfDs) is meant to spur infrastructure investment of up to 100 billion pounds.

“The Electricity Market Reform

(EMR) is a market-based means

to ensure the transition towards a

low-carbon economy, though it

cannot exclude the state," Energy and Climate

Change Secretary, Edward Davey, said, main-

taining that "Only the state can restructure the

market at a cost the consumer can bear."

Looking to 2050 and beyondSolutions that the Government is designing

"are looking up to 2050 and beyond," and are

intended to give investors some clear visibility,

Davey said at The Economist's UK Energy

Summit prior to the announcement in the

House of Commons on the Energy Bill.

New-build flexible capacity is urgently

needed to maintain an adequate supply margin

– "the safety blanket over and above expected

demand – for 2018 onwards".

"We think the EMR will drive investment,

but it will not tackle the immediate crisis – the

crunch [in capacity] over the coming year,"

Davey said. Providing the right incentives and

the right framework in a timely manner is vital

to make investment forthcoming, as the regu-

lator Ofgem has repeatedly warned of tighten-

ing reserve margins that put security of power

supply at risk.

The risk of power shortages has tripled in a

year, Ofgem said today, painting a bleak pic-

ture with consumers at risk of having to pay

higher bills as spare power capacity could fall

below 2 percent.

Now that the timeline for the launch of a

Capacity Market is in place, Ofgem and Na-

tional Grid are finalising steps they could take

to ensure that mothballed power plant or de-

mand response is available if needed in the

middle of the decade.

CfDs help reduce cost of capitalThe administrative strike price for CfDs will

be set by the Department for Energy and Cli-

mate Change (DECC). "CfDs will make it

cheaper to deliver low-carbon generation by

around £5 billion up to 2030, because they will

deliver cost of capital reductions that cannot be

achieved through existing policy instruments,"

the government said.

Strike prices for renewable technologies

under the CfD scheme, announced today are

aimed at making the UK market one of the

most attractive for developers of wind, wave,

tidal, solar and other renewables technologies.

Renewables are meant to contribute more than

30% of total power by 2020.

EMR – a four stage processDavey outlined that the EMR will be rolled-out

in four stages: Phase 1 will entail CfDs to en-

sure investment in low-carbon capacity, Phase

2 will see technology-specific auction, fol-

lowed by technology-neutral auctions in Phase

3 in the 2020ies. Finally, all technologies will

have to "compete on cost" in Phase 4.

"Through new carbon fossil fuels such as

shale gas, we seek to cushion the country against

price risks and ensure energy security," Davey

said tough he was quick to admit that Britain

also needs more interconnectors to allow for im-

porting electricity from neighbouring markets.

Retorting allegations of the UK Climate

Change Commission that the Government would

be "relying on the recession to meet its climate

change targets", Davey said elaborated on diffi-

culties of the UK in meeting its carbon goals.

"There is a short-term problem: coal prices are

going down as a result of the US shale gale, so

the use of more-emissions intensive coal in

power generation in Europe is going up." �

Shale gas find not quick-fix for UK operators, says MP The UK Department of Energy and Climate Change (DECC) has announced plans to exploit newfound shalegas reserves, but this may not mean cheap power. “Shale gas’s impact on price will be much less than whatwe have seen in the US. The roll-out is likely to be a bit slower [than in the US] due to communityresistance against fracking,” commented Tim Yeo, Chairman of the UK Energy and Climate Select Commit-tee said at The Economist's UK Energy Summit 2013 in London.

ABritish Geological Survey (BGS)

study, compiled in association with

DECC, revised some estimates of

the volume of shale gas reserves in

the UK, increasing findings of shale gas by

25,000 percent.

The BGS found the motherload of shale gas

in parts of North West, East Midlands, and

Yorkshire and the Humber, but it is doing fur-

ther work to assess the South Eastern UK.

New figures increase estimates of shale gas

reserves to 1329 trillion cubic feet, or between

822 and 2281 trillion cubic feet.

£100,000 in funding set to spur shale gas explorationUK’s head financial executive, Chancellor of

the Exchequer George Osborne released further

incentives in the government’s regular Spend-

ing Review, he intended to “put Britain at the

forefront of exploiting shale gas”. For produc-

ers, this will mean easier permitting and ap-

proval processes, as well as tax incentives.

The DECC mentioned in a press release a se-

ries of shale-gas exploration incentives launched,

including £100,000 in community benefits per

well where fracking takes place and 1percent

of revenues at production stage to communities.

Shale gas is still largely undeveloped in the

UK, although the DECC expects this to change,

and a spike in licencing activity next year.

In a similar report on shale gas compled in

2010 by BGS and DECC they also found re-

serves in the same areas of northern England, in-

cluding areas near Nottingham and Blackpool.

Osborne in 2012 launched a set of tax breaks

intended to stimulate shale gas exploration.

The tax allowances planned would reduce

the tax rate on shale gas production from 62 to

30 percent, said Price Waterhouse Coopers. � Shale gas in the Northwest of the UK

This was stated in response to the Presi-

dent’s memo to the Environmental Pro-

tection Agency (EPA), directing that it

should issue new carbon standards for

all US power plants by 2014. The rules ought

to be finalised no later than June 1, 2015 and

implemented in 2016.

Another recent move by the executive, sin-

gled out by TPH Energy Research, was the re-

vision of the social costs of carbon. It claims

that a higher price must be paid for electricity

based gas generation in the US, as the amount

needed to be earned from gas-fired plants to

break even, would need to rise $2.50+/mmbtu.

Even so, utilities can still benefit from

adding new-build gas-fired generation, it said,

as the need for backup capacity for renewables

generation increases.

Gas – bridging fuel forglobal power producers The US in 2012 became the leading producer

of natural gas the cleanest-burning fossil fuel.

Amid industry plans to export US natural gas,

The President’s Climate Action Plan calls natu-

ral gas a “bridge fuel for many countries as the

world transitions to cleaner sources of energy.”

The executive plans to set up a body to

share natural gas distribution best practices in-

ternationally “to promote fuel-switching from

coal to gas for electricity production and en-

courage the development of a global market for

gas.” However, it does not specifically set out

to promote gas-fired generation in the US.

Forthcoming closure of 1/3 of coal plants “In the aggregate, this adds up to a shutdown of

roughly one-third of US coal-fired generating ca-

pacity within the space of a decade,” said Clear

View Energy Partners, noting that CCS allowance

and deadline schedule could make a difference.

A proposed cut in carbon emissions would re-

quire retirement of 70GW of coal-fired capacity

by 2020, the Partners said in an estimate using

data on coal emissions provided by the non-

profit group, Natural Resources Defense Coun-

cil. These closures are added to those required by

the implementation schedule of the EPA’s pre-

existing Mercury and Air Toxics Standards.

This beating the US is giving its coal-fired

plants through carbon emissions requirements

may only take place on US soil: in fact, the ac-

tion plan is ambivalent toward coal, encouraging

international “clean coal” through partnerships

of “China, India, and other countries”.

Resistance to environmental laws The cap on emissions proposed is an executive

branch-only regulation and has been called “a

difficult path”. After they are drafted, the new

laws remain vulnerable to lawsuits, as hap-

pened with a 2011 when coal-owning utilities

and states sued the EPA as it tried to prevent

cross-state air pollution, said Tudor, Pickering,

Holt, Energy Research.

A new EPA rule on power plant emissions

would be even more complicated and drafting

it is likely to take longer than four years, which

it recently took to draft an auto emissions rule.

It is taking the EPA six years to get from the

stage of declaring the need to implement

greenhouse gas emissions standards on vehi-

cles (2010) to an enforcement date at which it

will begin to tax auto manufacturers (2016). �

28 June 2013 GTP Journal US MARKETS � 5

The plan, denounced by opponents as a

‘war on coal’, is deemed costly for ther-

mal coal producers, although gas and

nuclear could benefit.

The President is

using executive ac-

tions to get around

the congressional

conservative major-

ity, which has previ-

ously prevented his

climate-change-

related proposals.

Installing of more

renewables is now

imminent.

Coal-fired power hit bothin US and abroadThe proposed EPA law on power plant emis-

sions would go further than previous Clean Air

Act laws that focussed on toxic Greenhouse

Gases (GHGs) like mercury and sulphur; in-

stead it would tackle cutting nationwide carbon

emissions by almost half over two decades.

The EPA is supposed to have proposal for

GHG standards for existing power plants out

by June 2014 and finalized by June 2015.

States will have input in the law, as nearly a

dozen states have already implemented market-

based carbon-reduction programs, with 25 de-

manding energy efficiency and 35 adding

renewables requirements.

Obama said he would order the Department

of the Interior to begin permitting new wind

and solar energy projects on public lands, for

example solar panels on buildings, enough to

power more than 6 million homes by 2020.

He also proposed to withdraw financial sup-

port for coal-fired power stations located interna-

tionally that does not use carbon capture and

storage (CCS) technology, but noted that devel-

oping countries have “no choice but to use coal”.

The impact of this combination of proposals

on fossil-fuel power plants, in the US and

abroad, will involve requirements for

increasing generation efficiency, potentially

more CSS technology, and potential decreases

in the use of coal. �Obama delivers speech atGeorgetown University

New EPA plans positive for global gas, not ‘war’ on coal – analystsThe US executive’s new carbon emissions rules, that will impact existing fossil-fuel power generation areseen to be “positive overall for gas-fired power and and coal in the US,” said Tudor, Pickering, Holt (TPH) Energy Research. “Coal is not going to be outlawed tomorrow, a warming-up to natural gas and renewablesis promoted, but this is largely rhetorical,” said TPH Energy Research.

Obama’s climate change proposal cuts coal,boosts gas-fired power in US US President Barak Obama has proposed an Environmental Protection Agency (EPA) regulation to start limit-ing carbon emissions for both new and existing fossil power plants, while installing wind and solar installations on federal land.

Sources of U.S. Electricity Generation, 2012

Source:U.S. Energy Information Administration

Petroleum 1%

� US MARKETS GTP Journal 28 June 20136Capacity additions don’t keeppace with peak-hour demand Additions of electric power generation capacity are not keeping pacewith Texas' rising demand for electricity, particularly during peak-hours. A robust economy and population growth spurred the need formore electricity supply, according to the grid operator Electric Reliabil-ity Council of Texas (ERCOT).

ERCOT, the grid operator for most of

Texas, warned that regulatory and mar-

ket uncertainty would limit incentives

for investment in new sources of

power supply within the

region, which causes the

risk of narrowing reserve

margins.

It's deemed "alarming"

that ERCOT is the only

region in the North Amer-

ican Electric Reliability

Corporation's (NERC)

2013 Summer Reliability

Assessment with a reserve

margin below target level,

which is based on the

highest, or peak, hour of

demand during the summer.

Missing out on targeted 13.75% reserve marginFor the second year in a row, ERCOT has

been below its target reserve margin of 13.75

percent.

This poses the risk that during extended pe-

riods of high temperatures (similar to the

record-breaking summer of 2011) combined

with unplanned outages of some generation or

transmission capacity may push demand for

electric power higher than the available supply,

analysts at the US Energy Information Admin-

istration (EIA) warned.

"In extreme cases this can lead to increased

calls on emergency demand response programs

or even rolling blackouts," they said.

Texas' electric system is expected to have

1,032 more megawatts of capacity available

this summer compared with last summer, the

grid operator forecast.

"However, the most recent economic fore-

casts for the state raised expectations of de-

mand for electricity—particularly in areas of

West Texas with increased oil and natural gas

drilling—that have outstripped the capacity ad-

ditions," according to EIA analysts.

To help alleviate looming capacity short-

ages, some transmission facilities within

ERCOT territory have also been upgraded, to

help move generation from West Texas wind

farms to load centers in the eastern part of the

state.

Lacking of payments forreserve supplyA lack of incentives available to generators and

project sponsors hampers initiatives of building

new capacity. "ERCOT is the only regional

transmission organization (RTO) that does not

have a mechanism for paying for reserve sup-

ply," EIA analysts criticized.

Utilities in the US, traditionally, are either

built or contracted for reserve generating

capacity, and the cost was covered through

retail electricity rates. This

remains the case in most of the

country, including CAISO, SPP,

and MISO.

In PJM, NYISO, and ISO-

NE, meanwhile, where there has

been divestiture of generation

assets by formerly vertically in-

tegrated utilities to varying de-

grees, capacity markets operated

by the RTOs provide capacity

payments. �

Xcel Energy ups peaking capacity

US nationwide power and gas util-

ity Xcel Energy has officially

opened its 170MW Siemens sin-

gle-cycle gas-fired unit for the

850MW Jones Generating Station southeast

of Lubbock, Texas. The new unit first began

operations in May, a month ahead of sched-

ule, and was installed at a cost of $82 mil-

lion, way under the budgeted $103.7

million.

With the additional unit, Jones Generat-

ing Station now has increased its capacity to

support demand growth coming from eco-

nomic expansion in plains Texas and eastern

New Mexico, the operator said.

The dual fuel, gas-and-fuel oil plant was

established in 1971 and all four units at the

plant are currently running on natural gas.

The generating units have varying capac-

ities: Unit 1 is 243 MW, Unit 2 is 243 MW

and Unit 3 is 169 MW, and Unit 4 is 170

MW.

The new single-cycle Unit, 4, is a twin of

Unit 3 and is capable of ramping up in about

10 minutes to achieve output of 150MW.

Siemens Energy supplied a SGT6-5000F

gas turbine for Xcel Energy's Jones Station

expansion project.

Peaking unit to back-up wind energyThe new unit is intended for use as an emer-

gency and peaking unit, and will help the

company balance its portfolio of 1,500MW

wind resources regionally. In Texas, summer

temperatures can reach 120ºF (48ºC), and

the new unit will operate in the summer

months electricity demand increases for

both air conditioning and irrigation demand.

Xcel buys wind capacity from wind farms

in Texas and New Mexico, about 600MW in

total, which it acquires through long-term

power purchase agreements. It claims that

wind conditions in the panhandle are "ideal

for wind production". The company also pur-

chases another 250 megawatts of wind power

from other facilities.

In late 2012, it began to buy 100% of the

production of the new 161MW Spinning

Spur Wind Ranch in Texas, west of Amarillo.

Xcel Energy is looking to add approxi-

mately 550 megawatts of new wind genera-

tion in Colorado, US between now and

2016, which will mean that the company

will have 2,700MW from wind capacity in

that state. �

“District heating will render

our new gas-fired cogenera-

tion unit profitable," Dr.

Karsten Klemp, head of

power plants at RheinEnergie told Gas toPower Journal. The municipal utility is invest-

ing about €350 million to build the Niehl-3

cogeneration unit adjacent to the existing

Niehl-2 unit at a site north of Cologne city.

"Basis for the profitability will be especially

low and flexible part-load operation. We will

consequentially run the plant according to heat-

ing demand, as the technology used allows for

maximising heat production by decreasing

power output," he said.

The Cologne municipal utility commis-

sioned Alstom to build the 450MW power

plant in Cologne Niehl on a turnkey basis.

Under an Engineering, Procurement and Con-

struction (EPC) contract worth €350 million,

Alstom will realise the Niehl-3 CHP based on

its KA26 gas-fired combined cycle plant de-

sign, including a GT26 gas turbine, a turbo

generator, heat recovery steam generator and

district heaters. KA26 technology achieves

close to 60 percent operational efficiency and

can be started in less than 30 minutes.

Once fully synchronised with the grid, the

plant can deliver 350MW into a low-load oper-

ation in less than 15 minutes.

Such responsiveness is attractive to a coun-

try like Germany with a high percentage of its

power coming from intermittent renewable en-

ergy sources, and where existing power storage

is insufficient to provide stable backup sup-

plies. “State-of-the-art local power plants, ide-

ally ones that generate both electricity and heat

from climate friendly gas, will form the back-

bone of supply security in Germany for the

coming decades,” Klemp forecast.

To monetise heat from cogeneration plants,

RheinEnergie operates a multi-branched dis-

trict heating network including a 500 meter

district heating tunnel under the river Rhine

that links the heating networks between the

historical centre of Cologne and Deutz.

SW Düsseldorf to build 595 MW cogeneration plant by 2016Düsseldorf is yet another location where a

municipal utility decided to build a gas-fired

power plant regardless of negative profit mar-

gins of conventional gas generation assets in

Germany.

"The usage of the plant's thermal energy for

district heating increases overall efficiency to

85 percent and boosts profitability," a

spokesman confirmed. The municipal utility

aims to build the CHP plant in Lauswald near

Düsseldorf harbour by 2016.

Siemens Energy will design and build the

Lausward project on a turnkey basis. Electrical

unit output for the combined-cycle plant is tar-

geted to reach 595MW at a net efficiency over

61 percent.

Investment in new CHP projects is attrac-

tive in Germany, after the Berlin government

upgraded support schemes and as public

acceptance for new coal-fired power plants

in densely populated areas reached a low

point, said Reinhard Rümler, senior manager,

energy advisory practice at Pricewaterhouse-

Coopers (PwC).

"It is hard to get permitting for a new coal-

fired power plant projects in densely populated

areas or near a big city, so investors shy away

28 June 2013 GTP Journal SPOTLIGHT ON COGENERATION � 7Selling heat makes German gas plants profitableProfitability of new-build gas fired power plants in Germany hinges on selling district heating; hence dispatch of two projected combined heat and power (CHP) plants in Cologne and Düsseldorf will be driven by heat rather than power production, operators confirm.

View into Cologne's district heating network

Düsseldorf's largest power plant

� SPOTLIGHT ON COGENERATION GTP Journal 28 June 20138

from new coal-fired projects and prefer CHP

projects instead where they can benefit from

upgraded support schemes," he said.

Heat-driven CHPs profitable at 5,000 full-load hoursA gas-fired CHP block requires investment

costs of €1000/kWh plus a 2 percent buffer, but

operators benefit from subsidised electricity

revenue of €21.1/MWh for the first 30,000 full

load hours.

CHP can be profitable when run as heat-dri-

ven operations with 5,000 full load hours on

average, according to PwC calculations.

“Steam turbine power plants and simple

cycle gas turbine plants tend to be operated in

the spot market only, while the use of CCGTs

should ideally be split between 70 percent on

the spot and 30 percent on the balancing mar-

ket,” Rümler suggested. At that rate, steam tur-

bine plants reach an internal rate of return

(IRR) of 11 percent, CCGTs reach an IRR of

8.9 percent and CHP reach an IRR of 8 percent.

Berlin frees up €750m to raise CHP market share to 25%The German government has allocated a €750

million budget to underpin its objective of rais-

ing the market share of CHP installations to

25 percent by 2020. Moreover, under a new

law, operators of all CHP categories obtain

0.3 cent/kWh more in compensation regardless

of the size of the installation.

"Germany has turned into a prime location

in Europe for investment in cogeneration plants

as operators profit from a rise in the CHP levy,

extended energy tax credits and priority grid

connection equal to renewables," says Aldi

Golbach, founder of the German CHP associa-

tion 'KWK kommt'.

Marco Nicolosi, Senior Consultant, Power

Systems and Markets at Ecofys has a more bal-

anced view on CHP support schemes: “As soon

as political targets are present which lie above

the purely economic market result, subsidies

are necessary to reach these targets,” he said,

adding “Wholesale power prices in Germany

are currently quite low, so the subsidy in-

creases the planning security for investors.”

Large CHP plants receive 21€/MWh on top

of the wholesale power price as a subsidy

which conventional gas-fired plants do not re-

ceive. However, investment costs are also

higher, so the profitability depends on heat

demand and operational flexibility of the

CHP plant.

Subsidies necessary toreach Germany’s CHP goalsUnder current rules, valid up to 2020, operators

of bigger plants are entitled for proportional

compensation, whereby they get 5.41 cent

for the first 50kW; 4 cent for the next 200kW,

2.41 cent for the next 1750 kW; and for the

exceeding power capacity 1.8 cent. If the

plant is subject to EU emission trading rules,

operators can claim for

2.1 cent/kWh.

To obtain the tax relief,

CHP operators need to prove

that the efficiency level of the

plant exceeds 70 percent, but

this is deemed to be quite easy

to achieve. “Producing heat

and power tends to be more

energy efficient than merely

producing electricity. While

combined-cycle power plants

can reach efficiency levels of

just above 60 percent, CHP in-

stallations can reach 52 percent

electric plus 35 percent ther-

mal efficiency,” Golbach said.

With the new support scheme, Berlin wants

to incentivise the construction of efficient, flex-

ible and decentralised CHP plants as a way to

balance fluctuating power supply from wind

and solar installations. “The laws’ main objec-

tive, according to Nicolosi, is to increase en-

ergy efficiency by reducing the consumption of

primary fuels. �

“Germany has turned into a prime location in Europe for investment in cogeneration plants as operators profit from

a rise in the CHP levy, extended energy tax credits and priority grid connection equal to renewables”

“”Aldi Golbach,ader of the German CHP association 'KWK kommt'.

Model of Stadtwerke’s project in Lausward

28 June 2013 GTP Journal SPOTLIGHT ON COGENERATION � 9

District heating and cooling (DHC)

cogeneration currently provides

1.6 million households in 26 South

Korean areas – mostly in greater

Seoul – with power and heat, after an array of

new installations came online in the wake of

the 1999 Integrated Energy Supply (IES) Act.

The latest report of the International Energy

Agency (IEA) on cogeneration and district en-

ergy highlights the Korean IES regulation as an

example of CHP best practice.

The IES promotes an integrated approach of

building district heating networks in conjunc-

tion to realising new CHP plant developments

as a means to guarantee the offtake of heat

loads to allow for a continuous deployment and

operation of CHP plants.

The Ministry of Knowledge Economy

(MKE) is entitled to mark out specific areas for

development as Integrated Energy Supply Areas

(IESA). The planning of one of these develop-

ments must include an energy supply network

connected to an Integrated Energy Facility (IEF)

which all buildings are obliged to connect to.

Under the law, a single company wins the

monopoly rights to build and operate an IEF

through a bidding process. Operators of IEFs

are also eligible for tax reductions on the in-

vestment costs for the heating infrastructure.

District Heating and Cooling CHPs, smaller-

scale heat-driven cogeneration plants for indus-

trial use, and Community Energy Systems –

CHP plants supplying power, heating, and cool-

ing to small groups of residential buildings –

are the three types of IEFs in South Korea.

The implementation of the IES law has seen

a 53 percent reduction in fuel costs, a

72 percent reduction in annual run costs and a

46 percent reduction in emissions. �

South Korea’s Integrated Energy Supply Act encourages CHP

Germany has emerged as a leader in the European Cogeneration market due to the country's strong commitment to energy efficiency,comprehensive policy promotion through the combined heat and power(CHP) support scheme and the government's decision to phase-out nuclear power, according to the industry associated COGEN Europe.

Germany leads European market in cogeneration – COGEN Europe

It’s Cogeneration Review – Germany indi-

cates that the upgraded CHP support

scheme (i.e. guaranteed premiums added to

the market price of electricity) positively

affects the business environment of CHP instal-

lations of different sizes and therefore encour-

ages investment decisions in new CHP plants

by reducing the pay-back time.

These premiums were increased in the

amended 2012 CHP Law (KWK-G 2012) and

will help increase the profitability of CHPs

below 2MW while also maintaining good con-

ditions for those above 2MW.

Germany’s Energiewende – a hugeinfrastructure project"Looking at this from a combined-cycle stand-

point, the German Energy Transition is a huge

infrastructure project aimed at essentially trans-

forming the whole energy system in the next

decade. What we need to take into account is the

so-called energy triangle – the combination of af-

fordability, sustainability and secure supply –

which drives investment decisions," he said.

"CCPPs are ideal for supplying all of these ele-

ments, especially secure supply," Norbert Wenn,

Director of Sales Support and Product Line Man-

agement at Siemens told Gas to Power Journal."The renewed German CHP law and incentive

scheme has made a business case of the Lausward

plant currently being built in Düsseldorf, which

would have never happened had it been planned

as a pure condensing plant," he said.

CHP set to increase market penetration Wenn believes that CCPPs, which also offer

heating, provide strong economic potential for

backing up the renewable power that is set to

achieve greater penetration in Germany's en-

ergy mix over the coming years

CHP plants in 2010 generated approxi-

mately 90 TWh of electricity, representing

15.4 percent of Germany's energy production.

Gas represented 59.1 percent of this generation

according to statistics from the Öko-Institut.

This figure rises to 63 percent when it comes to

power stations larger than 1MW of which most

use natural gas, although other types of gas are

also in use.

The CHP market in Germany is currently

the biggest in the EU, accounting for more than

20 percent of all cogenerated electricity.

The German government currently has a

25 percent target for CHP generation by 2020

as part of its Energy Transition Strategy, but

while the KWK-G 2012 law is a step in the

right direction further steps may also be

needed. Progress towards the 2020 target is

to be evaluated in 2014 as part of the CHP

law review.

Growth potential of 120 GWethroughout EuropeAt present 11 percent of Europe’s electricity

and associated heat requirements are produced

by cogeneration plants. COGEN Europe sees a

growth potential for cogeneration of a further

110-120 GWe.

When seriously supported, as in Denmark,

CHP has the potential to increase the energy

production and transformation system overall

efficiency from a bare 33 percent (EU average)

up to 65 percent, it said. �

The UK Energy Bill in its currentform is "unlikely to realise the fullpotential of cogeneration inBritain", says Graham Meeks, director of the British CombinedHeat & Power Association (CHPA).He called on policy makers to extend the small scale Feed-inTariff capacity threshold in addi-tion to the proposed Contracts for Difference (CfD).

EMR unlikely to realise Britain’s full cogen potential

CfD is "too complicated a measure"

to incentivise people whose core

business does not operate in the

electricity market, he said when

giving evident to the Energy Bill Committee

last week.

"The existing small scale Feed-in Tariff sys-

tem, by contrast, is "simple and well-under-

stood", Meeks said, suggesting an extension of

the FiT's threshold "would make the market far

more accessible to non-traditional investors

[including local communities, industries and

the public sector]".

"What we need to be doing is making it

possible for the Tata Chemicals and the Dow

Cornings and the cities as well—the Leicesters,

Liverpools, Manchesters—to be able to bring

forward projects in their own right," he

stressed.

CHPA believes an expansion of decen-

tralised energy production, based primarily on

new combined heat and power plants, as well

as more demand side participation could make

the UK energy system more reliable, affordable

and greener. �

� TECHNOLOGY & INNOVATION GTP Journal 28 June 201310

Texas encourages cogenerationas hurrican back-upPolicy makers in Texas have signed new legislation into law with the aim of increasing cogeneration capacity in the state as an emergency power source in the event of a hurricane.

Unfavourable market conditions and

persistent policy uncertainty has re-

versed growth in the Dutch Com-

bined Heat and Power (CHP) sector

following a period of rapid growth in the

1990s, according to the industry association

COGEN Europe.

The Dutch CHP sector used to be "one

of the best performing in Europe", with

51.8 percent of the total generated electricity

coming from CHP plants in the past year.

After a period of rapid growth in the 1990s,

however, the sector has stagnated in the past

5 years, and recently shows signs of decline,

the report reads.

A triple whammy of unfavourable gas spark

spread, a lack of stimulus from EU ETS and

the absence of a comprehensive Dutch CHP or

energy efficiency policy are undermining the

drive for investment in new CHP installations

in the Netherlands, the report reads.

Notwithstanding the difficult economics,

several studies estimate an additional economic

potential for CHP in the Netherland ranging

from 28 percent to 162 percent.

Potential for up to 3.4 GWe ofnew CHP installationsThe economic potential for new CHP

ranges between 2.3GWe and 3.4GWe

in 2020, to be achieved on top of 2010

reference values, assuming CO2 prices

between 15-50 €/t, according to a report

commissioned by the Ministry of Economic

Affairs. The costs required to achieve this

potential are expected to be between

€3.5 - 4.8 billion.

2011 saw a slight decline in cogenerated

electricity from 61.75 to 58.58 TWh. CHP

share in total electricity generation was

51.85%, according to provisional figures of the

Dutch Central Statistics Office (CBS Statline).

Installed capacity of CHP plants amounted to

12 348 MWe of electrical power and 67 949

186 MJ/h of thermal power, the CBS Statline

website shows.

Decentralised power productionon the riseThe trend goes towards decentralised CHP

units which represent 62.5 percent of the total

installed CHP capacity. Central CHP installa-

tions that are connected to TenneT's high volt-

age power grid contributed a smaller share of

electricity following to the decommissioning of

two plants.

Under an optimum policy scenario, CHP

could reach up to 20GWe and 25GWe by 2020

and 2030 respectively, Cogen Nederland said,

claiming the past government did not take ap-

propriate actions to tackle the barriers and har-

ness the full potential of cogeneration in the

Netherlands. �

Dutch CHP sector hit by unfavourable spark spread, policy uncertainty

Two Bills were passed by the Texas

House of Representatives, with the

House Bill 2049 encouraging CHP

projects by allowing plant operators to

sell electricity to multiple purchasers. House

Bill 1864, meanwhile, will create guidelines

so the state government can assess the feasi-

bility of CHP for facilities prone to disasters,

yet critical for disaster preparedness and

emergency response. Selling to neighbours

lets CHP power users to achieve better returns

on fuel use and share the financial risks, such

as shared maintenance costs.

Texas' State Energy Conservation Office

(SECO) will write the guidelines.

Hurricane Ike caused blackouts in 2008Texas suffered hurricanes and power shortages

in the last few years; Ike in 2008 left a 13 day

power outage in parts of Texas.

New CHP installations, supplied with gas

through underground

pipelines, are meant to

help keep the lights on

when hurricanes knock

down power transmis-

sion lines connecting

cities to large plants.

Laws enacted in the

aftermath of Hurricane

Ike required the govern-

ment to assess facilities

for CHP use, but the

guidance given for how

to effectively perform

cost-benefit analysis,

was minimal.

New industrial CHP could reach20,000 MWIndustrial sector users in Texas could poten-

tially install 20,000MW combined heat and

power (CHP) to reduce the expense of electric-

ity bought from the grid, the US non-profit

Natural Resources Defense Council and Ceres

reported in its report Power to Save.

An association of generation equipment

suppliers called the Texas Combined Heat &

Power Initiative (TXCHPI) announced the

headway made in the laws.

The availability of natural gas in Texas,

which produced 6,631,555 million cubic feet in

2011, means gas-fired CHP brings economic

benefits to the state, said TXCHPI.

Averting water shortagesSince last spring's drought conditions threat-

ened farmers, reducing water used for electric

power generation at plants, is a consideration,

TXCHPI said.

The state's water supply cannot cope with the

growing population and this is estimated to cause a

7million acre-feet of unmet water demand by 2060,

said Dan Hardin, water resource planning direc-

tor with Texas Water Development Board. �Hurricane Ike

Liberty Natural Gas resubmitted its pro-

posal for Port Ambrose, and a pipeline

in New Jersey, which will feed addi-

tional gas volumes into network to help

meet the region's persistent supply shortage.

LNG cargoes are scheduled to arrive from

Trinidad and elsewhere via Shuffle & Regasifi-

cation Vessels (SRVs), designed to warm and

regasify the LNG onboard into pipeline-quality

natural gas.

Urgent need for gas grid expansionThe new pipeline form the Port Ambrose will

alleviate bottlenecks of gas transport capacity

in the region of New York as most pipelines

were already being used at 100% capacity in

2009. "Pipeline infrastructure planning must

take into account the long-term growth of gas-

fired generation, as more pipeline capacity ulti-

mately will be needed," the New York State

Energy Planning Board said in a 2013 report,

underlining the urgency for expanding the gas

grid to accommodate the power sector.

John Reese, Senior Vice President at US-

PowerGen, a utility with 2,180MW of installed

capacity in Connecticut that also owns the

1,296MW Astoria Gas Generating Station in

New York, said called the additional gas supply

as "beneficial", particularly for New York City.

"As you look beyond New York, New England

has substantial supply issues as well for gener-

ation, so additional [gas] supply is certainly

favourable in from a generator's standpoint."

Elaborating on the technicalities behind the

additional gas supply from Port Ambrose, Lib-

erty Gas said, "The pipeline from the buoy to

the interconnection with the Transco Lower

NY Bay lateral, an existing pipeline that serves

the National Grid market in Long Island, will

have the capability to supply natural gas in an

approximate range between 250MMcf/d and

750MMcf/d."

Risk of power shortages on Long IslandTo counter the risk of looming electricity short-

ages, Long Island Power Au-

thority (LIPA) selected an

unidentified company to build

a new gas fired power plant

somewhere on Long Island.

In downstate New York,

meanwhile, the energy mix is

dominated by gas and dual fuel

gas-and-oil fired generation.

New York authorities, taking

into account shale gas discov-

eries and the ability to site

single- and combined-cycle

plants near centres of high

energy demand, and forecast it's "likely this

dependence will increase".

New York aims to avert risk of power shortageIn September 2009, an appointed State Energy

Planning Board in New York studied future gas

demand and warned that scenario analysis

shows New York might be left with a shortage

of gas supply that could lead to power outages

in 2018.

The plan assessed the ability of New York's

current pipeline network to deliver enough gas

during the winter and summer peak months.

The most extreme scenario for new England

and New York project a total unmet natural gas

demand of 900 MMcfd in 2018. As of 2012,

projected peak day gas demand in New York

and Long Island and surrounding areas was

33,295MW while summer capacity was

38,902MW.

Authorities also predicted a net increase in

Canadian gas demand for power generation

which may result in reduced exports through a

Canada-US pipeline, which would exacerbate

the shortage of gas supply.

The trend to re-power oil-fired units to be-

come gas-fired facilities, and weather risk can

also create a gas shortfall.

Nuclear phase-outs, such as the scheduled

retirement of the Indian Point reactor that sup-

plies 16GWhrs per year, or 25 percent of new

York's power needs, is a candidate for being

replaced with gas-fired power generation

capacity. In May it was reported that the Indian

Point reactor would continue to operate despite

the expiration of its licence, which may suggest

the plant is needed to ensure stability of power

demand. �

Port Ambrose pipeline to supply feedstock for New York's new gas-to-power generatorsLong Island's gas-fired power plants and commercial gas consumers in New York are expected to receivemuch-needed shipments of natural gas if a new pipeline is approved from Port Ambrose – a deep-water LNG port import facility off New York's coast. New Long Island gas-fired projects "may be developed in thefuture," forecast project developer Liberty Natural Gas.

Cross-view illustration of vessel technology

New York generation mix

Nautic location of Port Ambrose

28 June 2013 GTP Journal PROJECTS & FINANCE � 11

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“Temporary closure does not

merely involve 'switching every-

thing off and turning out the

lights'," he told Gas to PowerJournal. Webb was involved in the process of

Barking Power closing one of two units at its

1,000- megawatt power station in east London

in mid-2012.

In accordance with OEM recommendations,

preserving the atmosphere by maintaining a

low relative humidity inside vital and sensitive

equipment such as generators, gas turbines,

steam turbines, and boilers is essential, he said,

explaining

"Managed dehumidification provides suc-

cessful protection, and ensures the power sta-

tion will be fully operational once re-opened."

Gas plants temporarily shutto use up coal stocks Compliance with European pollution rules (e.g.

Large Combustion Plant Directive) is forcing

closure of many of Britain's coal-fired power

stations by 2015, according to Webb.

"While coal stocks are being used up, gas

power stations are being temporarily closed, as

it makes financial sense. However, they need to

be ready for full reopening when the time is

right," he stressed.

Temporary dehumidification is used to

place facilities in to a controlled, dormant

state while avoiding large capital expenditure

outlay at the time of mothballing and no

corrosion or degradation issues to deal with

at a later date.

The consequences of not using dehumidifi-

cation could be "catastrophic", Webb said,

warning Plant could become "unserviceable or

ruined", causing millions of pounds in repairs;

and operational delays could lead to "nation-

wide energy shortages."

Why desiccant dehumidifier units?Gas-fired power stations are damp environ-

ments when operational, but uncontrolled

moisture, above 30 percent Relative Humidity

(RH), can cause widespread damage to plant

during mothballing.

To avoid this, desiccant dehumidifier units

are deployed; using moisture-adsorbing materi-

als, such as silica gel. These are most suitable

when very low RH is needed as desiccant ma-

terials have a high capacity for adsorbing water

vapour – up to 10,000 cubic metres per hour.

Nitrogen – a suitable alternativeAn 'alternative' to deploying dehumidifiers is

to use nitrogen gas to fill areas to be moth-

balled, according to Webb.

He was quick, however, to mention the

disadvantage of hydrogen such as its limited

reach on site as well as health and safety risk

of nitrogen as an inert gas. �

Barking Power Station at night

Sleeping giants: Dehumidification is key to preserve mothballed plants Dehumidification is key for keeping a mothballed power station operationally ready while protecting it fromcorrosion or degradation during its temporary closure, says Carl Webb who worked with Andrews Sykeswhen Barking Power Ltd. temporarily closed one 500MW unit at its gas-fired power plant.

Carl Webb is Specialist Hire Director atAndrews Sykes. He worked with BarkingPower to temporarily close one 500MWunit at its gas-fired power plant.www.andrews-sykes.com

28 June 2013 GTP Journal PROJECTS & FINANCE � 13

Power engineering sells outside Europe

Best opportunities for Europe's power

engineering sector in the coming

years lie in projects and contract

wins in Asia, North America and

the Middle East, but notably not in Europe,

an industry survey shows.

The majority of delegates surveyed at

Power-Gen Europe in Vienna this June at-

tributed the reduced business potential in the

EU-25 to the prolonged recession and the

rising market penetration of renewable en-

ergy sources.

Modernisations and upgrades of power

plants, meanwhile, are stilled viewed as a

source for contract wins in Europe.

Respondents stressed that both the

industry and policy makers are not paying

"sufficient attention" to challenges arising

from integrating intermittent power supply

from renewable energy sources into the

system.

About 48 percent of those surveyed

expect that the EU will meet its target of

20 percent share of total energy consumption

from renewables in 2020, while 29 percent

said the EU will not meet its target and

22 percent feel it's "too early to tell". �

Before long the energy industry will see

much greater use of fluctuating renew-

able energy sources such as wind and

solar power. To ensure the supply of

balancing energy, this development will go hand

in hand with the use of highly flexible and efficient

decentralized power plants that can intervene at

extremely short notice if the output from the re-

newable sources fluctuates. According to the In-

ternational Energy Agency (IEA), natural gas will

be an important element in ensuring a sustain-

able and reliable energy supply for tomorrow. In

addition to offering a high level of supply reliabil-

ity and advantages in terms of operating costs,

the outstanding potential of gas fuel lies in the

extremely low emission values combined with

high efficiency. MAN Diesel & Turbo is well pre-

pared for the rising importance of natural gas as

source of energy. With its dual-fuel as well as

pure gas engines and gas turbines MAN Diesel

& Turbo has promoted a respective product

portfolio during the last years and has devel-

oped products for the worldwide gas markets.

Gas engine in CHP plantsThe company introduced its 35cm bore pure gas

engine for stationary use in power plants in 2011.

The single-stage turbocharged MAN 35/44G en-

gine achieves a mechanical output of 10,600 kW,

has an electrical level of efficiency of 47.2 per-

cent, low running and maintenance costs as well

as low emissions thanks to using gas as fuel.

Additionally, in combined heat and power

plants (CHP), the heat from the gas engine’s ex-

haust gases and engine cooling circuits can be

used, either for heating purposes or as process

heat for industrial processes. This means that

the total output and efficiency can be further

boosted without adding to the fuel costs.

With a CHP process, the hot exhaust gases

are used to generate steam; the HT and LT

coolant heat from the engines, as well as the lu-

bricating oil heat, are utilized in a combined heat

and power process to produce hot or warm water.

The different temperature levels in the heat flows

allow for a variety of possible uses for all clients in

the energy sector: From utility companies with

their thermal power stations to CHP applications

in industrial facilities requiring steam or hot water,

CHP concepts can respond with great flexibility to

virtually any demand. Overall efficiencies of over

85% are therefore possible with MAN Diesel &

Turbo’s gas engine power plants. Fuel savings in

the order of 35 to 40% compared to separate

generation are possible, which represents a sig-

nificant increase in efficiency over pure electricity

generation. In Germany, these systems are eligi-

ble under the CHP Act.

Gas power for Volkswagen factoryMAN Diesel & Turbo recently got an order from

the Volkswagen Kraftwerk GmbH to install a

CHP plant at the Volkswagen site in Brunswick,

Germany, to provide electricity and process heat

for the production facility. The CHP plant com-

prises the new MAN 35/44G gas engine with

generator and the components for heat coupling

to the plant’s own hot-water network. From 2014

on, the combined heat and power plant with a

rated thermal output of 24 MW will then ensure

the basic electricity and heat supply for the Volk-

swagen plant in Brunswick together with two

new hot-water boilers – as a replacement for the

site’s existing boiler system. The aim is to use

the combined heat and power plant to produce

economical and sustainable energy and heat

while at the same time complying with modern-

day environmental requirements.

Cogeneration with gas turbinesBesides engines for CHP applications, MAN

Diesel & Turbo also offers gas turbines from 6-

12 MW for the use in cogeneration plants. The

exhaust gas of the gas turbine generator set is

then going into a waste heat recovery system in

order to use the exhaust heat for various pur-

poses like process steam production, district

heating, thermo oil heating, etc. The overall effi-

ciency of such plants as the sum of electrical

and recoverable heat is depending on the

process in the range of 80%. Such plants also

become more and more popular due to the in-

creasing sensitiveness for saving of resources

and reduction of greenhouse effect in line with

the more and more stringent emission limits.

Due to the high exhaust gas temperature

process steam can efficiently being produced.

The first reference installation of MAN Diesel &

Turbo’s new gas turbine GT6 in a chemical plant

at Solvin GmbH & Co KG, a joint enterprise of

Solvay and BASF in Rheinberg, Germany, is

just under way. At its Rheinberg production

plant, Solvin manufactures chemical products

including PVC (polyvinyl chloride), which is used

for example in building construction, consumer

products, health and safety equipment and elec-

trical applications. The new CHP plant is de-

signed to supply 6 MW of electrical and 11 MW

of thermal power, thus enabling Solvin to meet

its own electricity requirements in the future,

thus reducing its dependence on the public

power network. The new CHP Plant achieves a

fuel efficiency of 80% by utilizing the waste heat

of the gas turbine in addition to the efficiency of

gas turbine itself of 34% - a peak value in this

output class, thus making a significant contribu-

tion to reducing primary energy consumption

and emissions.

Allrounder for AustraliaIn Owen Springs, in the middle of the Australian

outback, dual-fuel engines of MAN Diesel &

Turbo ensure efficient energy production. For

the Power and Water Corporation, a big

Australian utility company, MAN Diesel &

Turbo has built a 35 MW turnkey power

plant comprising three MAN 51/50DF en-

gines. The engines can be operated ei-

ther with gaseous or with liquid fuels.

Even during operation the fuel mode can

be changed without restrictions. The

power plant engines in Owen Springs

are primarily running on natural gas. But

their flexibility regarding other fuels was

an important reason behind the customer’s deci-

sion to purchase. In case of disturbances of the

gas infrastructure the customer can easily

switch to another fuel and maintain the energy

production without breaks.

Besides their fuel flexibility the high efficiency

of the engines and the low-emission and there-

fore eco-friendly combustion during gas-mode

are a big advantage. When operated in gas-

mode the dual-fuel engines cause about 80 per-

cent less nitric oxides compared to diesel

operation, almost no sulfur emissions and about

95 percent less particles.

The MAN 51/60DF engine has been origi-

nally developed for the use in LNG tankers, in

which boil-off gas from the cargo tanks can be

used for powering the engine. Now the 51/60DF

also conquers the power generation market, last

but not least because of its fuel flexibility and

eco-friendly energy production.

Gas Solutions for the worldThe above application examples show the differ-

ent requirements of a decentralized power gen-

eration in which the customer with its electrical

and heat demand is in the center. Solutions

have to be provided to meet his demand in the

most efficient way. MAN can offer out of a port-

folio consisting of engines and turbines the most

suitable solution. �

Combined Heat and Power (CHP) can further raise effi-ciency for the use of natural gas. In the picture: CHP plantwith gas turbine.

Gas-fired energy generation – powered by MANDecentralized power supply is gaining importance – natural gas as a clean fuel has hereby the biggest potential.

New pure gas engine MAN 35/44G for stationaryuse in power plants

Advertorial

Power Plant with MAN 51/60DF engines in OwenSprings, Australia

28 June 2013 GTP Journal PROJECTS & FINANCE � 15

NEWSNUDGESAverage US power bill drops to4-year lowJune 26 –The average U.S. household elec-

tric bill for June through August is expected

to total $395, down 2.5 percent from last

summer and the cheapest in four years.

Slightly higher electricity prices are

expected to be offset by a drop in elec-

tricity use to meet lower cooling demand,

analysts from the US Energy Information

Administration (EIA) forecast.

ABB wins $27m power order inAustraliaJune 26 – ABB, the Swiss power and

automation technology group, has won an

$27 million order from Rio Tinto to

upgrade a power substation at the Cape

Lambert port, in Western Australia.

The upgrade will help integrate electric-

ity produced at a new-built plant into the

existing transmission network.

ABB said the order was booked in the

first quarter.

GE sign MoU to build 1000 MWpower plant in GhanaJune 25 – General Electric has signed a

memorandum of understanding (MoU) with

the Ghana government to build a 1000MW

power plant in Ghana.

The project comes in addition to another

hydro power plant, the $980m Bui Dam

(400MW) which is under construction and

scheduled for completion by the end of 2013.

Gazprom buys Belgian powerplant from EnelJune 21 – Gazprom, Russia's gas export

monopoly, has struck a deal to buy the Bel-

gium-based power plant Marcinelle from

Italy's incumbent power producer Enel.

The agreement was signed at a major in-

vestment conference Friday, Gazprom offi-

cials said.

GE's Intellix BMT 300 helps thelights stay onJune 20 – GE has introduced the Intel-

lixTM BMT 300, a bushing monitoring sys-

tem for transformers that can detect unseen

problems before they occur.

The system is designed to keep the lights on

and avoid costly transformer failures for

utilities, industrial metals businesses and

petrochemical companies, it said.

E.on injects venture capital instart-ups on distributed powerE.on, Europe's second largest power producer, has set up new venture-capital activities through co-investments in start-up companies like Munich-based Orcan Energy and California-based Bloom Energy with aview to exploring distributed and smart energy solutions.

Distributed and smart energy solu-

tions are high up on E.on's strate-

gic agenda which helped spur the

investment in Orcan Energy, a

spin-off from Munich Technical University

(TUM). "Waste heat from industrial and

commercial processes has substantial,

largely untapped potential for enhancing the

efficiency of distributed energy solutions,"

E.on said.

Orcan Energy - a spin-off of Munich Technical UniversityOrcan Energy produces highly efficient Or-

ganic Rankine Cycle Modules and E.on is

aiming to integrate its Orcan's ePack in its

portfolio of Combined Heat and Power

(CHP) applications and biogas-fired power

plants. "The modularity of Orcan's product

combined with its highly differentiated cost

structure gives it the potential to dramati-

cally alter the waste heat recovery market,"

it said.

The ePack solution consists of a stan-

dardized module system, and an E.on

spokesman said "We see advantages

especially in easy operation and economy

of scale."

Organic Rankine Cycles can increase CHP efficiencyTechnically, the ePack produces extra en-

ergy from waste heat, generated from vari-

ous sources. Currently, up to 50 percent of

the energy used in industry is lost in the

form of heat, Orcan Energy says.

Organic Rankine Cycle technology

can be applied in industrial CHP applica-

tions, for example industrial applications

involving, industrial furnaces and flue-gas

as well as water heaters. Such technology

has in the past been used to increase the out-

put of its biogas-fired power plants through

capturing waste heat. In a biomass fired

power plant, Organic Rankine cycles can

also be used to reduce costs of equipment

and maintenance.

If E.on begins to offer ePack commer-

cially, it could be used as an upgrade to gen-

erate additional power from waste heat, or

alternatively as underused heat gradients in

existing processes.

Bloom Energy – a Californian fuel cell providerSecond, E.on has also taken a stake in

Bloom Energy, a Sunnyvale / California

based provider of breakthrough solid-oxide

fuel-cell technology.

E.on said it will start to offer Bloom

Energy's solid-oxide fuel-cell technology,

which runs on natural gas, "as an alternative

to CHP solutions". Bloom Energy claims its

fuel cell generates with "extremely high

electrical efficiencies", and can "deliver

cheap energy without relying on CHP".

E.on invests in fuel cell that mayreplace CHPThere are clear synergies between the busi-

nesses of E.on and Bloom Energy as the for-

mers solid-oxide fuel-cell technology is

currently in widespread use in the American

power generation market.

Strategically speaking, E.on suggested it

is investing in fuel cells as these plants may

ultimately replace CHP installations.

Apart from the US market, fuel cells also

have an increasing share of the distributed

generation markets in Japan.

Smart grid technologyThird, E.on become a limited partner in the

The Westly Group, an American venture

capital firm that focuses on companies fo-

cusing on renewable energy, smart grids,

and energy efficiency for buildings.

The partnership will give E.on access to

Silicon Valley technologies, including soft-

ware for grid management, as well as an in-

terest in a mechanism which converts waste

biofuels into fuel ethanol and other usable

substances.

Energy management software companies

in Westly Group's portfolio include

CIenergy, which provides cloud-based en-

ergy management solutions for building

owners and operators, and Eka Systems

which offers a product for management of

smart grids. �

Future eventsGas to Power London

17th September 2013, Copthorne Tara Kensington

Gas to Power Ankara Turkey, November 2013

Participating Organisations in past Conferences include

WHO SHOULD ATTEND?This conference is aimed at attendees from utilities and power generation companies, energy policy and regulatory

bodies, energy infrastructure project finance, banking and legal firms, and low-carbon and renewable energy companies.

Including professionals responsible for:

Energy Policy / Regulation

Power Generation

Power Plant Management

Grid Development

Business Development

Regulatory Economics

Corporate Strategy

Project Management and Development

Carbon Reduction / CCS Programmes

CCGT Technology/Operations/ Maintenance

Gas Turbine Manufacture

Fleet Management

Asset Management and Optimisation

Turbine Engineering

Gas Procurement / Origination

Gas Supply and Trading

Trading Operations

Market Development Analysis

Project Finance and Investment

Sales and Marketing

Regulatory Affairs

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