Post on 23-May-2018
A CRADLE TO GRAVE APPROACH TO LOWEST COST OF POWER GENERATION FOR IPP’S IN
SOUTHERN AFRICA
BY
MIKE BLENKINSOP
NET ENERGY (PTY) LTD
29 JULY 2014
WHY IS CRADLE TO GRAVE ANALYSIS IMPORTANT
• LANDSCAPE OF POWER GENERATION IN SOUTHERN AFRICA HAS CHANGED WHERE PARTIAL OR FULL INTEGRATION OF COAL SUPPLY AND USE IS INCORPORATED INTO ONE PROJECT
• IT IS THE ONLY WAY TO DETERMINE THE TRUE AND SUSTAINABLE COST OF FUTURE POWER AND UNDERSTAND AND MITIGATE RISKS
• THE CHEAPEST COAL DOES NOT NECCESARILY MEAN THE CHEAPEST POWER
• RELATIVE COSTS OF EACH ASPECT OF THE VALUE CHAIN NEED TO BE SEEN IN CONTEXT
• IT TENDS TO REMOVE EGOS AND PARADIGMS FROM THE PROCESS
WHERE ARE THE GAMECHANGERS
THE IPP ENVIRONMENT AND THIS: - THE AIR QUALITY ACT
EMISSIONS LIMITS
South
Africa:
mg/Nm3
@ 10 %
O2 dry
basis
mg/Nm3
@ actual
O2 dry
basis
kg/hr1 kg/GJ1 ppmvd1
SO2 500 727 416 0.33 255
NOx 750 1,091 624 0.49 533
PM 50 72 41 0.03 0.1
IT IS A LITTLE DIFFERENT IN SA THAN THE WORLD BANK GUIDELINES
WHERE ARE THE GAMECHANGERS
THE IPP ENVIRONMENT
REF:- IFC Environmental Health and Safety Guidelines, Thermal Power Plants
THERMAL COAL POWER PLANTS
ASSUMING THAT THERMAL COAL FIRED STEAM DRIVEN POWER PLANTS ARE USED, • COAL QUALITY HAS A SIGNIFICANT IMPACT ON POWER PLANT
TECHNOLOGY SELECTION
REF:- EGBUNA, 2013
THERMAL COAL POWER PLANTS
ASSUMING THAT THERMAL COAL FIRED STEAM DRIVEN POWER PLANTS ARE USED, • BOILER TECHNOLOGY CHOICE WILL DRIVE MUCH OF WHAT SHOULD
HAPPEN ON THE MINE
• MINE SIDE CAN DO LITTLE ABOUT NOx ABATEMENT, BOILER TECHNOLOGY CAN
• MINE SIDE CAN SIGNIFICANTLY INFLUENCE SOx MITIGATION TECHNOLOGY CHOICE AND COSTS
• FOR IPP INDUSTRY, AS OF RECENTLY COAL PROCESSING IS NOW ALMOST SOLELY FOCUSSED UPON SULPHUR REDUCTION NOT GRADE CONTROL – THE MINING INDUSTRY NEEDS TO WAKE UP TO THIS
• GRADE IMPROVEMENT IS AN ADDED BONUS
EMISSION CONTROL - NOx
MINE SIDE CAN DO LITTLE ABOUT NOx ABATEMENT, BOILER TECHNOLOGY CAN
• PC TECHNOLOGY – NOx EMISSIONS CAN BE RELATIVELY COST EFFECTIVELY BE MANAGED ON NEW PLANT TO A CERTAIN LEVEL THEREAFTER EXPENSIVE TECHNOLOGIES ARE REQUIRED, (SNCR, SCR)
• PRIMARY NOx ABATEMENT TECHNOLOGIES ARE REGARDED AS STANDARD IN NEW PLANT AND CAN MITIGATE BETWEEN 45% AND 70% OF NOx COMPARED WITH OLDER TECHNOLOGY . THIS IS SUFFICIENT TO MEET NEW SA REGULATIONS
• CFBC TECHNOLOGY GENERATES VERY LITTLE NOx ANYWAY, APPROX 40% OF PC MITIGATED VALUES
REF:- IEA, 2009
EMISSION CONTROL - SOx
BOILER TECHNOLOGY SELECTION
• PC TECHNOLOGY – SOx EMISSIONS CAN ONLY BE CONTROLLED BY POST PROCESS FGD WHICH CAN MITIGATE IN EXCESS OF 95% OF SOx
• THIS ADDS 10% - 15% TO THE CAPITAL COST OF A POWER PLANT
• FGD PLANT ALSO USES A SIGNIFICANT AMOUNT OF WATER AND USES APPROX 1% - 1.5% AUXILLIARY POWER
• THE Ca:S RATIO IS APPROX 1.05 TIMES STOCHIOMETRIC VALUE
IN A TYPICAL IPP SCALE PROJECT FGD CAPITAL COST IS GREATER THAN THE ENTIRE MINE AND ASSOCIATED INFRASTRUCTURE, WATER CONSUMPTION IS APPROX FOUR TIMES THAT OF A MATCHED WASHPLANT AND AUXILLIARY POWER CONSUMPTION IS FOUR TIMES THAT OF A COAL PROCESSING PLANT
EMISSION CONTROL - SOx
BOILER TECHNOLOGY SELECTION
• CFBC TECHNOLOGY – SOx EMISSIONS CAN BE CONTROLLED BY IN PROCESS SORBENT INJECTION, WHICH CAN MITIGATE IN EXCESS OF 85% OF SOx
• THERE IS NO ADDITIONAL CAPITAL COST FOR THIS, BUT THE BOILER IS TYPICALLY 15% MORE EXPENSIVE THAN A PC BOILER WITHOUT MITIGATION TECHNOLOGY, (BOILER NOT POWER PLANT)
• THE Ca:S RATIO IS APPROX 2 - 3 TIMES STOCHIOMETRIC VALUE DEPENDING ON REQUIREMENT
IN A TYPICAL IPP SCALE PROJECT NO ADDITIONAL FGD IS REQUIRED TO MEET EMISSION STANDARDS
COAL QUALITY
REF:- EGBUNA, 2013
ECONOMIES OF SCALE
REF:- EPRI, 2008
COST COMPARISONS
THIS STUDY REFERRED TO LARGE UNITS, (300mwE AND ABOVE) AND A MIXTURE OF OVERNIGHT AND TOTAL CAPITAL COSTS
IN THE SOUTHERN AFRICAN CONTEXT, EPC ONLY CAPITAL COSTS FOR 15OMWe CFBC PLANT IN THE LAST 5 YEARS HAVE RANGED FROM $1,500/kWe – $2,300KWe INSTALLED FOR EASTERN AND WESTERN SOURCED PLANT. THE SAME SIZE PC PLANT HAS A HIGHER CAPITAL COST
REF:- IEA, 2013
SO WHY IS THE MINE IMPORTANT
• COAL QUALITY AFFECTS PERFORMANCE
• COAL PROCESSING OFFERS OPTIONS TO REDUCE PYRITIC SULPHUR
• WHERE ORGANIC SULPHUR IS PRESENT THE REVERSE OCCURS BECAUSE IT IS ASSOCIATED WITH THE ORGANIC MATRIX
• SEVERAL IMPROVEMENTS CAN BE MADE TO COAL QUALITY BUT AT A COST IS IT JUSTIFIED?
• PROCESSING COAL INCREASES MINING COSTS
• THE INFLUENCE OF THE MINE SIDE OPERATIONS GOES FAR BEYOND THE COST OF COAL, IT AFFECTS CAPEX, OPEX AND OTHER MATERIALS COSTS ON THE POWER PLANT AS WELL AS POWER PLANT EFFICIENCY
AN INTEGRATED CRADLE TO GRAVE ANALYSIS NEEDS TO BE DONE WITH BOTH PARTIES TO UNLOCK THE SYNERGIES BETWEEN OPERATIONS
HYPOTHETICAL BUT REALISTIC SCENARIO SITUATION – OPENCAST TIED MINE FOR AN IPP OF 300MWe
STRIP RATIO = 2,
RAW CV = 15.5MJ/KG
RAW SULPHUR CONTENT 1.9%
PROCESS OPTIONS
Raw Coal Air Plant PARTIAL DMS WASH FULL DMS WASH
Mine Capex R 245 050 000 R 320 450 000 R 320 450 000 R 377 000 000
Plant Capex R 40 000 000 R 72 000 000 R 130 000 000 R 195 000 000
R/Rom Ton (Opex) R 89.11 R 89.11 R 89.11 R 89.11
Yield 100.0% 78.0% 73.0% 55.0%
R/Product Ton R 103.06 R 154.81 R 188.98 R 264.66
Product CV 15.50 17.20 18.80 20.50
Product S 1.90% 1.00% 0.89% 0.70%
R/GJ R 6.65 R 9.00 R 10.05 R 12.91
HYPOTHETICAL BUT REALISTIC SCENARIO
POWER PLANT ECONOMIC ASSUMPTIONS
CFBC BASE EPC CAPEX - $1,870/KW PC BASE EPC CAPEX (FGD) - $2,037/KW
LIMESTONE COST – R450/TON
FIXED OPEX :
CFBC – R76.53/MWHR PC – R77.79
VARIABLE OPEX (EXCL FUEL, OIL, SORBENT AND WATER)
CFBC AND PC – 3.6% OF CAPITAL
INTEREST RATE ON DEBT 8%
DEBT PERIOD 20 YEARS
EPC CAPEX AS A FRACTION OF PROJECT CAPEX
CFBC – 65% PC – 66%
BOTH ARE DRY COOLED
HYPOTHETICAL BUT REALISTIC SCENARIO
POWER PLANT ECONOMIC MODEL OUTPUTS
INDICATIVE COST OF GENERATION, (PRE TAX, 80% DEBT, NO INVESTOR IRR OF 11%)
THIS IS JUST FOR A HIGH LEVEL REVIEW OF TECHNOLOGY CHOICE
Raw Coal CFBC
Air Plant CFBC
PARTIAL DMS CFBC
FULL DMS CFBC
PARTIAL DMS PC
FULL DMS PC
COE (R/MWHR) R 1 062.24 R 936.88 R 903.39 R 904.61 R 946.89 R 948.98
PP CAPITAL 62.23% 59.95% 59.57% 57.76% 61.27% 59.06%
MINE CAPITAL 2.93% 3.68% 4.31% 4.98% 4.01% 4.66%
FUEL 7.32% 11.09% 12.64% 16.41% 11.96% 15.45%
SORBENT 5.43% 3.62% 2.26% 0.83% 1.02% 0.37%
NEEDS PPFGD NEEDS PPFGD NEEDS PPFGD
HYPOTHETICAL BUT REALISTIC SCENARIO
POWER PLANT ECONOMIC MODEL OUTPUTS
THE PREVIOUS OUTPUTS WERE BASED UPON A SIMPLE HIGH LEVEL ASSESMENT USED FOR EMISSION MODELLING AND COMPARATIVE PURPOSES ONLY
IF THESE FIGURES ARE PUT INTO A FULL REAL TERM DCF MODEL, WHERE ENTERPRISE IRR IS SET AT 11%, IT IS UNLIKELY THAT AN IPP CAN GENERATE POWER AT UNDER R1.05/KWHR ON AN LCOE BASIS WITH THESE ASSUMPTIONS
IN A NOMINAL TERM DCF MODEL, BASED UPON THESE ASSUMPTIONS, THE FIRST DAY COST, (REQUIRED IN THE DOE COAL BASED POWER GENERATING MODEL ) IS NOT LIKELY TO BE UNDER R0.88C/KWHR
THEREFORE EITHER LOWER CAPITAL PLANT, LOWER IRR, LOWER INTEREST RATES ARE REQUIRED TO ACHIEVE DOE GOAL OF AROUND R0.82/KWHR
IS THIS REALISTIC FOR INVESTORS? – TIME WILL TELL!!!
THANK YOU FOR YOUR ATTENTION IF I HAD IT