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VGB PowerTech - All rights reserved - Alle Rechte vorbehalten - © 2018 49 VGB PowerTech 12 l 2018 How flexibility enhances value in CHP portfolios Authors Kurzfassung Ein modellgestützter Ausblick auf die KWKG-Ausschreibung in Deutschland Seit dem 1. Dezember 2017 werden erstmals die Fördersätze für KWK-Anlagen von über 1 MW bis zu 50 MW ausgeschrieben. Mit Fördersätzen von bis zu 7 €ct./kWh ist die Teilnahme an den Aus- schreibungen für viele Unternehmen attraktiv. Ak- tuell ist daher ein wachsendes Interesse von Ener- gieversorgungsunternehmen und anderen festzu- stellen bei der Auktion teilzunehmen. Diese Veröffentlichung beleuchtet daher die Wirtschaft- lichkeit von KWK-Projekten. Das neue KWK-Gesetz belohnt die Flexibilität. Es ist jedoch wichtig zu be- stimmen, welche Größe (1 bis 50 MW) der Anlage in der Ausschreibung bevorzugt wird. Ein Schwer- punkt dieser Studie ist es zu bewerten, wie Flexibi- lität den Gewinn nach der neuen KWK-Ausschrei- bung antreibt. Ein Fokus liegt dabei auf einem modellgestützten Ausblick auf mögliche Auktions- ergebnisse sowie auf Gebotsstrategien. Zielstellung ist die Ermittlung eines KWKG-Mindestgebots. Aus den Kosten sowie den erwarteten Erlösen lässt sich ableiten, welchen KWKG-Zuschlag die Anlagen mindestens benötigen, um eine Wirtschaftlichkeit zu erreichen („Indifferenzpreis“). Dies entspricht dem „Break-even“-Gebot, also der Gebotshöhe, bei der Kapitalwert der Anlagen ge- nau 0 beträgt. Um diesen Wert zu ermitteln, wur- den Anlagentypen definiert, für die dann im Fol- genden Wirtschaftlichkeitsberechnungen vorge- nommen wurden. Für jeden Anlagentyp wurde im Anschluss die KWKG-Förderung dem Betrage nach so lange variiert, bis der Kapitalwert der Anlagen näherungsweise Null beträgt. Neben den Kosten gilt es auch die Erlöse der Anla- gen für Stromverkauf und Wärmeerzeugung zu quantifizieren. Die Strukturierung der Strom- und Wärmeerzeugung in Abhängigkeit der Wärme- nachfrage und der Strompreise sowie unter Be- rücksichtigung aller technischen Rahmenbedin- gungen des Anlageneinsatzes ist dabei regelmäßig eine herausfordernde Aufgabenstellung. Um den Anlageneinsatz und damit der Erlöslage der Anlagen möglichst realistisch abzubilden, wur- de eine Modellrechnung mit einem am Markt breit etablierten Tool (Bofit) zur Einsatzoptimierung vorgenommen. l Jan Andersson Market Development Analyst, Energy Solutions Wärtsilä Finland Oy Rana Mitra Business Development Manager Wärtsilä Deutschland GmbH Hamburg, Germany A model-based outlook on the KWKG tender in Germany How flexibility enhances value in CHP portfolios Jan Andersson and Rana Mitra Introduction 1 st December 2017, the subsidy rates for traditional CHP plants of 1 MW up to 50 MW was auctioned for the first time. The capacity of the first auction was 100 MW, after which 100 MW are auc- tioned twice a year. With subsidy rates of up to 70 €/MWh, participation in the auc- tion was attractive for many companies. At the same time, however, the uncertainty was high before the auction. A central role was naturally played by the question of which results could be set in the auctions, with which bidding strategy one could place oneself successfully in the auctions and how the overall profitability of CHP projects could be presented under these framework conditions. This paper highlights the cost-effectiveness of CHP projects in the upcoming auction round. A focus is also on an outlook on pos- sible auction results as well as possible bid strategies. The aim is to provide information to mar- ket players through a clear model-based approach, and to assist them in the deci- sion-making process. Framework conditions for the auctions The current KWKG act aims to increase co- generation power generation to 110 TWh in 2020 and 120 TWh by 2025. The central instrument here is the auctioning of KWKG subsidies for the generation of CHP elec- tricity. There is an increasing interest among the participants to bid into the upcoming auc- tions. An interest that is also partly fueled by the fear that the CHP subsidies could be discontinued in the future, and thus any investment need for replacement or exten- sion should be undertaken as soon as pos- sible and under the regulations of the cur- rent CHP Act. General regulations of the KWKG Participation in the tender is compulsory for all new and modernized CHP plants with an electric CHP capacity between 1MW and 50MW. However, a transitional provision stipulates that facilities that were ordered in 2016 or have been granted a permit in accordance with the Federal Im- mission Control Act (BImSchG) and will be put into operation in 2018 are eligible to participate in the tender procedure. The promotion of CHP power generation is basically possible for all fuels except coal. This means that CHP plants, for example, based on biomass (solid, liquid, gaseous), garbage-based plants as well as gas-based CHP plants are eligible to participate in the auction. Traditional and innovative schemes The auction distinguishes between tradi- tional CHP and innovative CHP schemes. The Auction held in December 2017 did only consider traditional CHP, whereas the auction in June 2018 considered innova- tive CHP schemes. Traditional CHP The traditional CHP scheme focuses on the CHP performance of fuel fired plants, i.e. much the same as the guaranteed CHP scheme for plants larger than 50MW. No additional technological specifications are made for this scheme. The legal frame- work provides for a maximum CHP bonus of 70 €/MWh for traditional CHP plants. In addition, subsidies for conventional CHP plants are limited to a total of 30,000 full load hours. Twice a year 75MW of KWKG subsidy is auctioned under the traditional CHP scheme. Innovative CHP The so-called innovative scheme includes CHP plants that are combined with renew- able heat generation technologies and ad- ditional power-to-heat technology. By this is meant, CHP plants, in combination with e.g. heat pumps, solar thermal or geother - mal energy. The share of renewable heat must amount to at least 30 % of the annual total heat production from the plant. For innovative CHP systems, the maximum subsidy rate is 120 €/MWh and the subsidy is limited to 45,000 full load hours. 25 MW of KWKG subsidies will be auctioned twice a year for the innovative CHP scheme. In addition, there is also an annual limit for the subsidized amounts of energy. To en- courage more flexible plant operation, the

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VGB PowerTech 12 l 2018 How flexibility enhances value in CHP portfolios

How flexibility enhances value in CHP portfolios

Authors

Kurzfassung

Ein modellgestützter Ausblick auf die KWKG-Ausschreibung in DeutschlandSeit dem 1. Dezember 2017 werden erstmals die Fördersätze für KWK-Anlagen von über 1 MW bis zu 50 MW ausgeschrieben. Mit Fördersätzen von bis zu 7 €ct./kWh ist die Teilnahme an den Aus-schreibungen für viele Unternehmen attraktiv. Ak-tuell ist daher ein wachsendes Interesse von Ener-gieversorgungsunternehmen und anderen festzu-stellen bei der Auktion teilzunehmen. Diese Veröffentlichung beleuchtet daher die Wirtschaft-lichkeit von KWK-Projekten. Das neue KWK-Gesetz belohnt die Flexibilität. Es ist jedoch wichtig zu be-stimmen, welche Größe (1 bis 50 MW) der Anlage in der Ausschreibung bevorzugt wird. Ein Schwer-punkt dieser Studie ist es zu bewerten, wie Flexibi-lität den Gewinn nach der neuen KWK-Ausschrei-bung antreibt. Ein Fokus liegt dabei auf einem modellgestützten Ausblick auf mögliche Auktions-ergebnisse sowie auf Gebotsstrategien. Zielstellung ist die Ermittlung eines KWKG-Mindestgebots. Aus den Kosten sowie den erwarteten Erlösen lässt sich ableiten, welchen KWKG-Zuschlag die Anlagen mindestens benötigen, um eine Wirtschaftlichkeit zu erreichen („Indifferenzpreis“).Dies entspricht dem „Break-even“-Gebot, also der Gebotshöhe, bei der Kapitalwert der Anlagen ge-nau 0 beträgt. Um diesen Wert zu ermitteln, wur-den Anlagentypen definiert, für die dann im Fol-genden Wirtschaftlichkeitsberechnungen vorge-nommen wurden. Für jeden Anlagentyp wurde im Anschluss die KWKG-Förderung dem Betrage nach so lange variiert, bis der Kapitalwert der Anlagen näherungsweise Null beträgt.Neben den Kosten gilt es auch die Erlöse der Anla-gen für Stromverkauf und Wärmeerzeugung zu quantifizieren. Die Strukturierung der Strom- und Wärmeerzeugung in Abhängigkeit der Wärme-nachfrage und der Strompreise sowie unter Be-rücksichtigung aller technischen Rahmenbedin-gungen des Anlageneinsatzes ist dabei regelmäßig eine herausfordernde Aufgabenstellung. Um den Anlageneinsatz und damit der Erlöslage der Anlagen möglichst realistisch abzubilden, wur-de eine Modellrechnung mit einem am Markt breit etablierten Tool (Bofit) zur Einsatzoptimierung vorgenommen. l

Jan AnderssonMarket Development Analyst, Energy Solutions Wärtsilä Finland OyRana MitraBusiness Development Manager Wärtsilä Deutschland GmbH Hamburg, Germany

A model-based outlook on the KWKG tender in GermanyHow flexibility enhances value in CHP portfoliosJan Andersson and Rana Mitra

Introduction

1st December 2017, the subsidy rates for traditional CHP plants of 1 MW up to 50 MW was  auctioned  for  the  first  time. The capacity of the first auction was 100 MW, after which 100 MW are auc-tioned twice a year. With subsidy rates of up to 70 €/MWh, participation in the auc-tion was attractive for many companies.  At the same time, however, the uncertainty was high before the auction. A central role was naturally played by the question of which results could be set in the auctions, with which bidding strategy one could place oneself successfully in the auctions and  how  the  overall  profitability  of  CHP projects could be presented under these framework conditions.This paper highlights the cost-effectiveness of CHP projects in the upcoming auction round. A focus is also on an outlook on pos-sible auction results as well as possible bid strategies.The aim is to provide information to mar-ket players through a clear model-based approach, and to assist them in the deci-sion-making process.

Framework conditions for the auctions

The current KWKG act aims to increase co-generation power generation to 110 TWh in 2020 and 120 TWh by 2025. The central instrument here is the auctioning of KWKG subsidies for the generation of CHP elec-tricity.There is an increasing interest among the participants to bid into the upcoming auc-tions. An interest that is also partly fueled by the fear that the CHP subsidies could be discontinued in the future, and thus any investment need for replacement or exten-sion should be undertaken as soon as pos-sible and under the regulations of the cur-rent CHP Act.

General regulations of the KWKGParticipation in the tender is compulsory for all new and modernized CHP plants with an electric CHP capacity between 1 MW and 50 MW. However, a transitional 

provision stipulates that facilities that were ordered in 2016 or have been granted a permit in accordance with the Federal Im-mission Control Act (BImSchG) and will be put into operation in 2018 are eligible to participate in the tender procedure.The promotion of CHP power generation is basically possible for all fuels except coal. This means that CHP plants, for example, based on biomass (solid, liquid, gaseous), garbage-based plants as well as gas-based CHP plants are eligible to participate in the auction.

Traditional and innovative schemesThe auction distinguishes between tradi-tional CHP and  innovative CHP schemes. The  Auction  held  in  December  2017  did only consider traditional CHP, whereas the auction in June 2018 considered innova-tive CHP schemes.

Traditional CHPThe traditional CHP scheme focuses on the CHP performance of fuel fired plants,  i.e. much the same as the guaranteed CHP scheme for plants  larger  than 50 MW. No additional technological specifications are made for this scheme. The legal frame-work provides for a maximum CHP bonus of 70 €/MWh for traditional CHP plants. In addition, subsidies for conventional CHP plants are limited to a total of 30,000 full load hours. Twice a year 75 MW of KWKG subsidy is auctioned under the traditional CHP scheme.

Innovative CHPThe so-called innovative scheme includes CHP plants that are combined with renew-able heat generation technologies and ad-ditional power-to-heat technology. By this is meant, CHP plants, in combination with e.g. heat pumps, solar thermal or geother-mal energy. The  share of  renewable heat must amount to at least 30 % of the annual total heat production  from the plant. For innovative CHP systems, the maximum subsidy rate is 120 €/MWh and the subsidy is limited to 45,000 full load hours. 25 MW of KWKG subsidies will be auctioned twice a year for the innovative CHP scheme.In addition, there is also an annual limit for the subsidized amounts of energy. To en-courage more flexible plant operation, the 

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How flexibility enhances value in CHP portfolios VGB PowerTech 12 l 2018

subsidy per year is paid for a maximum of 3 500 full load hours. Only the first 3,500 full-load hours of a year will be eligible for subsidy. Herein lies an optimization chal-lenge, namely, the plant should ideally run  only  during  the  3,500  hours  of  the year with highest electricity prices. How-ever, once reached the annual limit on full-load hours, it does not mean that the plant cannot be operated, only that exceeding operating hours will not be eligible for sub-sidy.Furthermore, the additional support for CHP plants that replace a hard coal or lig-nite plant also does not apply within the framework  of  the  auction. However,  this so-called fuel-switch premium continues to be available for CHP plants above 50 MW.

Eligibility, Penalties and CollateralIn order to participate in the auction, nei-ther a building permit nor a permit in the sense of the Federal Immission Control Act (BImSchG) is required. However, the plant location must  already be  specified  at  the time of bidding in the form of a postal ad-dress.However, to achieve a high realization rate, a collateral security of 70 €/kW is to be de-posited for each submitted bid. The collat-eral corresponds to about 5-10 % of the project investment cost. Depending on the size of the bid, this equates to between € 100,000 and € 5,000,000 for CHP plants of  1  to  50 MW  (for  non-innovative  sys-tems).  If  the  bidder  violates  notification obligations, auction guidelines or if com-missioning is delayed, the security will be fully or partially withheld. First penalties take effect if commercial operation is start-ed later than 48 months after contract. The penalty  is  performance-specific  and  not plant-specific. In the case of a system with 2 MW, which only achieves a capacity of 1.8 MW 54 months after contract, only an amount of € 19,200 corresponding to the difference of 0.2 MW will be retained. 

Auction designBids between 1 and 5 MW are permitted for traditional  CHP  systems.  For  innovative CHP systems, the upper bid limit is 10 MW. It is not allowed to split performance in one location into multiple bids, or to bid in par-allel to the traditional and innovative auc-tion.  The  auction  is  settled  according  to pay-as-bid procedure, which allows for competitive bidding and bidding strate-gies.

Development of bidding strategy

Before bidding on  the auction,  a bidding strategy should be worked out. In a pay-as-bid auction, every successful bid receives the amount with which it went to the auc-tion. Therefore, the optimal bid is the one that is as close as possible to the last bid still to be cleared. Thus, unlike the pay-as-

cleared method, pay-as-bid auctions invite to  strategic  bidding  behavior.  However, since no bidder knows the marginal price at the time of participation, there is an in-evitable trade-off: the higher the bid, the lower the probability of winning, but the better the profitability in the event of a suc-cessful bid.Methodologically, in past pay-as-bid auc-tions, it has proven to be helpful in deter-mining a bid strategy in two steps:

– Determine the minimum bid, the so-called indifference price

– Determine whether it make sense to bid above  the  indifference  price  (strategic bid mark-up)

These steps are explained below.

Determine minimum bidThe indifference price is the bid price at which the bidder does not care whether he or she wins a bid or not. The basis for deter-mining the indifference price is formed by accurate estimates of cost, revenue and risk structure  of  the  project.  Auctions  mean competition and any competitive advan-tage can be converted into a higher proba-bility of winning or obtaining better project returns. Therefore, accuracy is very impor-tant here.One of the main parts of the indifference price is costs, especially investment costs. Investment costs can be determined rela-tively accurately, but it is important to use account  for  the  full  scope  of  the  project. The second part is the determination of a risk-adjusted minimum return for the pro-ject. Frequently, more in-house discussions are likely to be around this topic as the operation of a CHP plant is not a risk-free business.  Even  if  the  CHP  subsidy  is safe,  technical  risks  and,  of  course,  the electricity price risk  itself remain. Hence, the next step is to make an estimate of fu-ture  market  developments  (electricity price, gas price, heat revenue and other variable factors). It is important to make the calculation and decision-making process for determining the indifference price as objective as pos-sible. It  is also important to keep in mind the internal interests of the company and, if necessary, include a third-party perspec-tive. The result is the indifference price of the investment, which should be as neutral as possible. 

Strategic bid mark-upThe art of the auction strategy is to find a bid level for the project that appropriately reflects  the return vs.  risk appetite. How-ever, this should not be a decision based on gut feeling, but rather be anchored on a sound analysis of the energy market.There are no simple strategy recommenda-tions. Rather, an individual strategy devel-opment is necessary, which includes the following factors:

Successfulness:The necessity to realize the project plays an important role, i.e. the necessity to replace an existing CHP plant or increase capacity to maintain the heat supply of customers.Risk appetite:The risk preference differs between all bid-ders and projects. Certain companies will be prepared to accept a lower probability success if the expected return is favorable, while others may not.Competition:Not only the costs of your own project are relevant, but also the costs and bid strate-gies  of  the  competitors.  This  requires  an analysis of which projects might be includ-ed in the auction round and at what cost.Once  an  assessment  of  the  above-men-tioned topics has been completed, a prom-ising bid strategy can be defined based on an optimization bid mark-up and the prob-ability of winning.

Break-even analysis

The objective of this chapter is to deter-mine a minimum bid for the auction for both the traditional as well as the innova-tive  scheme.  As  discussed  in  the  earlier chapter, from the costs and the expected revenues, it can be deduced which CHP subsidy the plants would need at least to achieve economic feasibility, i.e. the indif-ference  price.  This  corresponds  to  the “break-even” bid, i.e. the bid level at which the capital value of the investments is ex-actly zero.To determine this value, different plant configurations were defined and modelled in BoFiT optimization software. F i gu r e  1 shows  and  overview  of  the  BoFiT model that was  developed  for  the  analysis.  The new CHP plant was considered to be part of an already existing portfolio of heat gener-ating assets.   By optimizing the new CHP plant in context of a larger portfolio gives additional aspects on the situation

– A more  realistic  result  of  how  the new CHP plant should be operated as the dy-namic properties of the other assets also impacts the operation of the new CHP plant. This translates directly into great-er accuracy when determining the bid strategy.

– The addition of a new plant with differ-ent dynamic properties will most likely give the opportunity to optimize the op-eration of existing assets. For example, if an existing asset can run at higher load and  higher  efficiency  by  introducing  a new flexible plant there is a tangible val-ue that is not directly related to the new  plant  itself,  but  rather  the  whole portfolio.

For all these scenarios the KWKG subsidy was subsequently varied in amount until the net present value of the investments was approximately zero.

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VGB PowerTech 12 l 2018 How flexibility enhances value in CHP portfolios

ScenariosThe scenarios for the traditional and the in-novative scheme differs a bit as the require-ment are different. However, the objective is the same to minimize generation cost while  fulfilling  boundary  conditions  on heat production. Tab l e  1  outlines the sce-narios in detail and are described below.For the traditional scheme a small and a large plant were considered, 9 MW and 50 MW electrical  power  respectively. Dif-ferent plant sizes offer an view on how the specific investment cost impacts the feasi-bility. It should also be emphasized that the smaller case is dimensioned so that the rated thermal input is less than 20 MW and therefore is exempted from ETS certificate trading.The innovative scenario differs from the small traditional case only in the sense that the renewable heat generation assets has been added, i.e. 10 MW solar thermal and an  8 MW  heat  pump.  The  solar  thermal generation profile  corresponds  to  central Germany latitudes with a capacity factor of around 20 %. As the innovative scheme re-quires that 30 % of generated heat comes from the renewable assets it indirectly puts a limit on how many hours that plant can run without having to drastically oversize the solar thermal and the heat pump. The model results show that engine plant in the innovative scheme is running 2,500 to 3,000 hours, which is slightly less than the upper limit of 3,500 hours.

Model assumptionsThe size of the plant is the factor that has largest  effects  on  the  specific  investment costs of the plants. The assumptions used for the modelling and the consequent fea-sibility study are listed in F i g u r e   2 . The stated  investment  costs  are  turn-key  (or EPC) investment costs. It should be noted that investment costs can vary widely de-pending on the situation and special re-quirements posed on the project. For this 

calculation the investment cost for the large engine plant is taken to be 850 €/kW and for the small case 1,200 €/kW.As the KWKG excludes industrial self-gen-eration from the auction it is assumed that all generated electricity is fed to the grid

through the Day-ahead and Intraday mar-kets and the generated heat is fed to a local district heating network. F i gu r e  3  shows the considered district heating demand for the large case. For the small-scale case the same profile has been used with the differ-ence that it has been scaled down accord-ingly.Another important assumption is that the electricity, fuel and CO2 prices used in the optimization are from 2016. This neglects a not  insignificant  potential  for  improving economic feasibility, as many model-based forecasts predict an increase in electricity prices relative to the gas prices (spreads) in the beginning to middle of 2020.

Dispatch modellingOne of the results from the BoFiT model-ling is the operational profiles of the whole Fig. 1. BoFiT model overview.

Tab. 1. Overview of modelled scenarios.

Traditional – 10 MW Traditional – 40 MW lnnovative – 10 MW

Heat demand (peak) 30 MWth 140 MWth 30 MWth

Assets

Waste (MHKW) 12 MWth 37 MWth 12 MWth

Gas boiler 30 MWth 140 MWth 30 MWth

Heat storage 100 MWth 20 MWth

400 MWth 65 MWth

100 MWth 20 MWth

Engines 1 x Wärtsilä 20V34SG 10 MWth

4 x Wärtsilä 20V34SG 40 MWth

1 x Wärtsilä 20V34SG 10 MWth

Solar thermal - - 10 MWth

Heat pump - - 8 MWth

Gas engine CHP750 – 1 200 €/kWe

Solar thermal570 €/kWth

Heat pump600 €/kWth

Equity / debt30 % / 70 %

WACC6.4 %

Economical lifetime15 years

Fig. 2. Investment related parameters.

160140120100

80604020

0

h

MW

Peak: 140 MW

Average: 48 MW

0 1000 2000 3000 4000 5000 6000 7000 8000

Fig. 3. District heating demand profile for the large case.

portfolio. F i gu r e   4  and F i gu r e   5  show examples of the dispatching for the portfo-lio for traditional and innovative schemes respectively. What  can  be  noted  from  all the examples below is the dynamic opera-tion of the engine plant with a lot of starts

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How flexibility enhances value in CHP portfolios VGB PowerTech 12 l 2018

and stops during the day. It is clear that the engine plant is following the price signals on the market, i.e. it only runs when prices are high. This frequent start-stop behavior is only possible to achieve with heat stor-age in the portfolio that can decouple elec-tricity and heat production. Furthermore, in the winter week example for the traditional CHP scheme the engine plant behaves more like a base load CHP plant and only reacts to very unfavorable electricity prices, which can be explained by the necessity to provide heat to the con-sumers. In comparison, the winter example for the innovative scheme looks very differ-ent. The inclusion of a heat pump opens for better optimization also on the heat gen-eration  side,  i.e.  the  engine plant  is  con-tinuously following the price signals and does not operate as a base load plant.During the summer season the engine plant is only operating sporadically when the prices are high. For the innovative scheme a big part of the heat demand is covered by solar thermal together with storage.

Calculation of break-even subsidy ratesAdding the results of the dispatch model-ling, i.e. operating revenues and costs, to-gether with the fixed operating costs and the cost of capital, one obtains an overall picture  of  the  profitability  of  the  plants. F i g u r e 6 shows the determined break-even CHP subsidies of the plants. The point where the lines intersect the X-axis is the “break-even  CHP  subsidy  rate”.  Overall, the  level of  subsidy rates  required  is  low. The plants considered here, larger gas en-gine power plants, can hence be very com-petitive in the auction.The level of subsidy required for traditional plants is in the range of 25 to 30 €/MWh. Furthermore, the larger plant types tend to have lower break-even rates, i.e. they have a specifically lower need for subsidies. This is due to the lower specific investment and operating costs of the plants.For the innovative scheme the break-even value lies at approximately 35 €/MWh, which is less than what could be anticipat-ed considering the small plant size and the

additional capital cost of solar collectors and heat pump. However, the longer eligi-bility period of 45,000 full-load hours is one  obvious  explanation.  In  addition,  a couple of conclusions can be made based on the result

– Inclusion of renewable heat generation equipment  allows  for  more  flexibility also on the heating generation side. This gives the opportunity to optimize heat generation irrespectively of electricity production.

– Despite the positive effects of renewable heat generation assets, the related in-vestment cost still outweighs the bene-fits.  However,  decreasing  investment costs and increasing emission costs could change this rapidly.

Outlook for the future

The  first  auction  held  in December  2017 cleared in the interval 32 to 50 €/MWh with  two  plants  >30 MW.  Analyzing  the results of the December auction it is clear

Winter week Spring week Summer week

Dem

and

in M

Wth

140

120

100

80

60

40

20

0

Elec

trici

ty p

rice

in E

UR/M

Wh

Dem

and

in M

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trici

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rice

in E

UR/M

Wh

140

120

100

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40

20

0

Dem

and

in M

Wth

120

100

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60

40

20

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-20

Elec

trici

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rice

in E

UR/M

Wh

Waste Engines HOB-Gas HS-unload DH Demand DA - Price

120

100

80

60

40

20

0

-20

140

120

100

80

60

40

20

0

120

100

80

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20

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-20Mon Tue Wed Thu Fri Sat SunMon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun

Fig. 4. Weekly dispatch examples for traditional CHP portfolio.

Gen

erat

ion

in M

Wh

th

Elec

trici

ty p

rice

in €

/MW

h

35

30

25

20

15

10

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0

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Gen

erat

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in M

Wh

th35

30

25

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Elec

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in €

/MW

h

Summer day

70

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50

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10

0

70

60

50

40

30

20

10

0

HOB-GasWaste

HS-unloadSolar thermal

Heat pumpDH Demand

EnginesDA - Price

Fig. 5. Daily dispatch examples for innovative CHP portfolio.

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VGB PowerTech 12 l 2018 How flexibility enhances value in CHP portfolios

that the above method pinpointed the low end of the subsidy rate and the tendency to favor  larger  projects  over  smaller.  The higher end of the interval is clearly below the maximum of 70 €/MWh, which is also indicating that the bidders did more than speculative bidding. The interest in the ten-der for CHP plants has declined in the sec-ond round. 14 bids with a total volume of 91 MW generation capacity would have been awarded a contract, informed the Federal Network Agency.  The  tender  vol-ume of 93 MW was thus not completely ex-hausted, partly because the authority ex-cluded a bid that did not meet the legal re-quirements. Compared to the first tendering round of December 2017, both the number

of bids, 20 and their total capacity (225 MW) have declined. The first auction cleared at the interval 32 to 50 €/MWh for a total of 83 MW. Nevertheless, the auction mechanism has proved to be a competitive instrument for bringing the new CHP plants in the energy mix. In particular, the level of extra charges, which again re-mained  well  below  the  fixed  ceiling  of 7cents / kWh. The average cleared bid val-ue was 4.31 cents / kWh, compared to the first round (4.05 cents / kWh) has gone up. The lowest bid value of the most recent round was 2.99 cents / kWh,  the highest bid value was 5.20 cents / kWh.  In addi-tion, the Federal Network Agency also an-nounced the results of the first tender for 

innovative  CHP  systems.  For  such  plants with additional renewable heat source or with  electric  heat  generator  (power-to-heat) there has been a separate auction of 25 MW. Again,  the  volume was  not  com-pletely exhausted. Five bids with a volume of just under 21 MW received a surcharge, two others were treated as invalid. The av-erage  additional  value was 10.27  cents  / kWh – well above the value of the regular tender.Since  KWKG  does  not  included  any  fuel switch premiums for coal replacement pro-jects in the auction segment, the economic effects of this additional remuneration were  not  taken  into  consideration  here. However, it is apparent in the market that many projects are attempting to project larger systems (> 50 MW) and thus obtain the fuel switch premium outside of the auc-tion segment.For the upcoming auction in December 2018, a similar result can be expected as the amount of MW’s are almost the same compared to last two auctions.The heating sector is often overlooked when discussing emissions and reduction targets. The fact  is  that  the generation of heat in Germany accounts for roughly the same amount of CO2 emissions as elec-tricity  generation.  Therefore,  the  initia-tive  to  include  renewable  heat  genera-tion as a special  segment  in  the KWKG is showing a will by the German govern-ment  to  reduce  emissions  in  the  heating sector  as  well.  Even  though  renewable heat  generation  technology  still  requires higher investments it is pointing towards a new, more environmental friendly future for CHP.   l

CHP Bonus in €/MWh

NPN

in M

EUR

5

4

3

2

1

0

-1

-2

-3

-4

-520 30 40

Traditional - 10 MW Traditional - 40 MW Innovative - 10 MW

Fig. 6. CHP subsidy versus net present value.

VGB-Book

Modelling primary NOx and primary N2O of Pulverised, Fuel Combustion and Circulating Fluidised Bed CombustionFrans van DijenVGB-B 015, 2018, DIN A5, 88 pages, Price € 91.59–, + VAT, ship ping and hand ling

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Knowledge regarding primary NOx and primary N2O, and their models, is useful for suppliers of boilers, burners, etcetera, regarding the influence of (the change of): – Design, with PFC and CFBC – Fuels and fuel flexibility, with PFC and CFBC – Conversion of the boiler for other fuels, with PFC and CFBC – Developing assisting systems / software, with PFC and CFBC – Temperature, with CFBC – Addition of limestone to the bed, with CFBC.

With this thesis, the mathematical models of primary NOx of CFBC, primary NOx of PFC and primary N2O of CFBC were improved. The models are based on chemical aspects, such as thermodynamics, kinetics and reaction mechanisms.

Modelling primary NOx and primary N2O of Pulverised Fuel Combustion and Circulating Fluidised Bed Combustion Frans van Dijen

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The electricity sector at a crossroads The role of renewables energy in Europe

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Dynamic process simulation as an engineering tool

European Generation Mix Flexibility and Storage

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2012

International Journal for Electricity and Heat Generation

ISSN 1435–3199 · K 123456 l International Edition

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The electricity sector

at a crossroads

The role of renewables energy

in Europe

Power market, technologies and acceptance

Dynamic process simulation as an engineering tool

European Generation Mix

Flexibility and Storage

1/2

2012

International Journal for Electricity and Heat Generation

ISSN 1435–3199 · K 123456 l International Edition

Publication of VGB PowerTech e.V. l www.vgb.org

The electricity sector

at a crossroads

The role of

renewables energy

in Europe

Power market,

technologies and

acceptance

Dynamic process

simulation as an

engineering tool

European

Generation Mix

Flexibility and

Storage

1/2

2012