FORTUM Experiences in district heating and CHP business operations
EPHA 15: District Heating For the Cleaner Future 12th of May 2010 Disclaimer
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Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser.
2 Content
Fortum today
European power markets
Russia
Baltic Rim
Heat service at competitive conditions
What makes investors to invest: ... legal framework, credibility of the local policy, price regulations, subsidies, EU targets, market conditions, ...? Our geographical presence today Total Nr 1 Heat Nordic countries Electricity 77 TWh/a
Nr 1 Distribution Generation 48.1 TWh Heat 53 TWh/a Electricity sales 54.9 TWh Nr 2 Electricity Heat sales 18.0 TWh sales Distribution cust. 1.6 million Nr 3 Power Electricity cust. 1.2 million generation Russia TGC-1 (~25%) Power generation ~6 TWh Heat sales ~8 TWh Poland Heat sales 3.7 TWh OAO Fortum Electricity sales 20 GWh Power generation 16.0 TWh Heat sales 25.6 TWh
Baltic countries Heat sales 1.3 TWh Electricity sales 0.1 TWh Distribution cust. 24,100
4 A power and heat company
• Listed at the Helsinki Stock Exchange 1998 • Approximately 90,000 shareholders • Among the most traded shares in Helsinki stock exchange • Market cap ~17 billion euros
Households 7.1% Financial and insurance institutions 2.7%
Other Finnish investors 8.9%
Finnish State 50.8% Foreign investors 30.5%
28 February 2010
5 Climate change is the most imminent challenge of our planet
We, at Fortum, don't want to be part of the problem, but part of the solution
6 Fortum's carbon exposure among the lowest in Europe
g CO2/kWh electricity, 2008 1200
1000
800
600 Average 350 g/kWh 400
200 41 0 DEI CEZ Enel EDF EDP Drax PVO RWE Nuon E.ON Fortum Statkraft Verbund Iberdrola Vattenfall Dong Energy Union Fenosa British Energy GDF Suez Europe GDF Suez Scottish&Southern Source: PWC & Enerpresse , 2009 Changement climatique et Électricité
7 Fortum’s investment programme – Nordic region, Poland and Baltic countries
Project Electricity, MW Heat, MW Commissioned Olkiluoto 3, Finland 400 2012 Swedish nuclear upgrades 260 by 2013 - Forsmark 3 upgrade (to be decided) 30 post 2013 Refurbishing of hydro power 20-30 annually Częstochowa, Poland 65 120 Q3/2010 (coal/biomass CHP) Pärnu, Estonia 20 45 Q4/2010 (coal/biomass CHP) Brista, Sweden (to be decided) 20 60 2013? (waste CHP) Klaipeda, Lithuania 20 50 2013 (biofuel/waste CHP) Total by ~2013 >900 ~300
Electricity capacity over 900 MW
~95% CO2-free
8 Fortum today
European power markets
Russia
Baltic Rim
Heat service at competitive conditions Key EU objectives by 2020
• Minimum reduction of EU • Implementation of CO2 emissions 20% (2020) internal energy markets • Renewables 20% (2020) • Energy efficiency +20% • Development of CO2 (2020) Competitiveness Sustainability capture and storage • Increased resources for technology development
Security of supply
• Development of cross-border transmission • Increase in own production • Enhancement of external energy relations
10 New capacity, except nuclear, will require over 60 EUR/MWh power price
EUR/MWh EUR/MWh 110 110 CO2 cost 100 100 Other costs ( variation) 90 90 80 80 70 70 60 60 Futures 50 28 April 2010 50 40 40 30 30 20 20 10 10 0 0 1995 -97 -99 -01 -03 -05 -07 -09 -11 -13 -15 Coal Gas Nuclear Hydro Wind Clean coal Source: Nord Pool Estimated lifetime average cost in nominal 2014 terms. Large variations in cost of new hydro and wind due to location and conditions.
11 Nordic and Continental markets are integrating – interconnection capacity could double by 2020
1400 MW link to the UK could connect offshore New interconnections could wind, too; North Seas Countries’ Offshore Grid double the capacity to over Initiative launched for supergrid development 8000 MW by 2020
Additional 700 MW cable New internal Nordic grid NO-NL, as well 1400 MW investments provide for NO-DE links studied increased available capacity for export to the Continent and Baltics EU financial support for 700 MW DK-NL link to connect EU’s European Energy offshore wind, too Programme for Recovery to cofinance to Estlink 2 and Jylland – DE capacity to be NordBalt increased by 500 MW in 2012 and by further 500 MW by 2018 LitPol Link of 1000 MW to connect the Baltic In the EU's Second Strategic Energy market to Poland by EU support to connect Kriegers Review the Commission focuses 2015/18. It would open Flak offshore wind area to strongly on interconnecting the Baltic a new transmission DK&DE; new 400 kV AC cable states and Poland to form an electricity route from the Nordic SE-DK by 2017 market around the Baltic Sea market to the Continent
12 Fortum today
European power markets
Russia
Baltic Rim
Heat service at competitive conditions Russian power industry reform has progressed well
Key steps in the reform Time
"Power industry law" approved 2003 Establishment of Russian power exchange (ATS) 2001 Launch of the free-trade sector of the wholesale market in European & Urals 2003 in Siberia 2005 Launch of balancing power segment 2006 Launch of new wholesale market model 2006 Restructuring of regional "energos" (P&H companies) complete Formation of new companies complete Capacity market – transitional model 2008 Long term capacity market model 2010 Competitive market of ancillary services 2010 Financial derivatives market 2010 Full liberalisation of the wholesale market 2011 onwards
14 Power market liberalisation – wholesale power market will be 100% liberalised in 8 months
Share of liberalised trade for existing capacity • Further liberalisation of energy 100 % 90 % 100100 %% market increased to 60% in 80 % January 2010 80 % 70 % 60 % 60 % • 80% in 1 July 2010 50 % 50 % • 100% in 1 January 2011 40 % 30 % 30 % 25 % • The sales to households will 20 % 15 % 10 % remain regulated still after 10 % 5 % 2011 0 % Jan July Jan July Jan July Jan July Jan 2007 2007 2008 2008 2009 2009 2010 2010 2011
15 .... major foreign investments in Russia as a result
Fortum in Russia
OAO Fortum (former TGC-10) • OAO Fortum operates in the heart of Russia’s oil and gas producing region TGC-1 • OAO Fortum’s power generation ~16 TWh/a and heat generation ~26 TWh/a OAOTGC-10 Fortum St. Petersburg Nyagan TGC-1 Khanty-Mansisk Surgut Tobolsk Moscow • Slightly over 25% of territorial generating company TGC-1 Tyumen operating in north-west Russia Chelyabinsk • ~6,250 MW electricity production capacity (appr. 50% hydro), ~24 TWh/a electricity, ~30 TWh/a heat
16 Over 80% increase in power generation capacity by 2015 through the investment programme
Power generation capacity (MW)
Plant Fuel type Existing Planned Total
MW Tyumen CHP-2 Gas 755 450 (Condensing) 1,205 6,000 Tyumen CHP-1, Q3/2010 Gas 472 190 (CHP/Condensing) 662 5,000 Tobolsk CHP, Q3/2010 Gas 452 210 (Condensing) 662 4,000 +82% Chelyabinsk CHP-3, Q4/2010 Gas 360 220 (CHP/Condensing) 580 +2,270 MW Chelyabinsk CHP-2 Coal, gas 320 320 3,000 Argayash CHP Coal, gas 195 195 2,000 5,055 Chelyabinsk CHP-1 Coal, gas 149 149 2,785 1,000 Chelyabinsk GRES Gas 82 82 0 Nyagan GRES Gas 3x400 (Condensing) 1,200 2007 2015 Boilers -
Total 2,785 2,270 5,055
17 Fortum today
European power markets
Russia
Baltic Rim
Heat service at competitive conditions Fortum's heat business in the Baltic countries Outsourced energy service (BtoB) and district heating • Customers • Production capacity – industry – 144 heating plants – services and commerce – Fuels: natural gas, oil, biomass, – public buildings peat – real estates – CHP power plant of 25 MWel/ 50 MWth in operation in Tartu, • Energy sales in Estonia Estonia, by peat and bio fuels – heat 1.1 TWh/a – CHP power plant of 4 MWel/ 4,8 – electricity 140 GWh/a MWth in operation in Jelgava, Latvia, by natural gas – gas 200 GWh/a – CHP power plant under construction in Pärnu, Estonia, 23 • Energy sales in Lithuania MWel/45 MWth by bio fuels and – heat 64 GWh/a peat – fuels 50 GWh/a – CHP power plant under construction in Klaipeda, • Energy sales in Latvia Lithuania, 20 MWel/50 MWth by – heat 210 GWh/a municipal and industrial wastes – electricity 32 GWh/a – CHP development in Jelgava, Latvia, 23 MWel/ 45 MWth by bio fuels and peat – CHP development ... • Personnel: 400
19 Fortum's heat business in Poland District heat to 30 cities and towns • Heat sales volume 3.6 TWh • Heat and electricity production in • 100 heating plants • One gas engine CHP power plant • Fuels: coal, natural gas, oil • Personnel: 800 • Past acquisitions: Płock • DZT, a privately owned DH company in 2004 • Czestochowa, a state owned DH company in 2005 • Wroclaw, a stock listed DH company in 2006 • Plock, a municipal DH company in 2006 • CHP plant of 65 MWel/130 MWth under construction in Czestochowa Fortum DZT and Fortum Czestochowa Fortum Wrocław Fortum Płock
20 Fortum's heat business in Finland
• Energy sales – heat 10.7 TWh – electricity 3.2 TWh – industrial cooling 0.05 TWh – gas 0.9 TWh • Personnel around 400 • Production capacity – 199 heating plants – 9 CHP plants
21 Fortum's heat business in Sweden
District heat CHP Delsbo Näsviken Sörforsa Industrial co-op. 80 percent of business in the great Stockholm area City gas District cooling Hudiksvall Idenor Iggesund
Valsta Hofors Bristaverket
Torsby Avesta Vilunda Arvika Kopparberg/Bångbro Hällefors/Grythyttan Rotebro Karlskoga Grums/Gruvön Stockholm Järfälla Örebro Akalla Gullspång Värtaverket Laxå Hässelbyverket Sundbyberg Säffle/NP Nynäshamn Solna Kristinehamn Lidingö Hammarbyverket Högdalenverket Fittja Farsta Bollmora HMC Skogås
Igelstaverket Drevviken
22 Case Stockholm: District heating an environmental success story
Fortum Värme's reduced emissions in Stockholm since 1980:
-60% of CO2 >95% of SO2 >80% of NOx
23 Case Stockholm: Key issue is change of fuel mix
1986 2006
Sea water 12% Waste 10% Seawater 16% Waste 12%
Electricity 12% Bio fuel 22% Industrial Coal 22% waste 9%
Coal 14%
Bio oil 13% Fossil oil 44% Fossil oil 3% Electricity 11%
Production 5202 GWh (4432 heat, 771 electricity) Production 10200 GWh ( 8565 heat, 1635 electricity )
CO2 1200 Kt CO2 400 Kt Renewable 20 % (EU's goal 2020!) Renewable > 70 %
24 Case Stockholm: Energy efficient District Cooling is part of the sustainable development The largest system in the world for district cooling with 7 000 000 m2 connected GWh 400 350 300 250 200 150 100 50 0
1994 1996 1998 2000 2002 2004 2006
25 Case Stockholm: New waste to energy CHP-plant at Brista, sister plant to Klaipeda "Waste to energy a win win solution for business and society" Bristaverket
• Fuel 240 000 ton waste • 57 MW heat • 20 MW electricity
26 Fortum today
European power markets
Russia
Baltic Rim
Heat service at competitive conditions Fortum's experiences of heat service at market conditions Market based District Heat service in Finland, Sweden and Norway • No centralized price regulation • Consumer protection and competition laws protect Customers against misuse of the dominant market position DH companies are in good shape; financially, technically and environmentally • Profitable and able to invest for future competitiveness – ... in productivity improvements, growth, heat production with optimal fuel mix (bio fuels, wastes, peat, natural gas, coal), and co-generation of heat and power; Competitive service (customer service, quality, price) Profitability of investments is based on market conditions – Opportunities to benefit from high efficiency of the CHP plants, optimal fuel mix, reduction of CO2 emissions priced by CO2 allowances market, green and CHP certificates priced at market Investment decisions are based on understanding the future market and competitiveness of the DH service – All opportunities to improve competitiveness of the service will be utilised, for benefit of the customers and investors Price of heat is competitive towards customers' own alternatives (natural gas, electricity, heat pump, wood, pellets, ...) – Prices are transparent and price changes are reasoned by the DH companies to the Customers
• ... if not competitive, no-one can help but the market is lost for alternatives!!!
28 Indifferent, market conditions or regulated market!! Anyway 1.) product must be competitive towards Customers' own alternatives and 2.) price must not be much lower to enable DH companies to invest in the future competitiveness Price development of district heating in Stockholm
SEK/MWh 1 200 Electric boiler Oil 1 000 Woodchips Heat pump 800 District heating
600 Total heating cost, normal building with new installation (193 MWh)
400 1996 1998 2000 2002 2004 2006 Source: Oil prices SCB, Electricity prices Nordpool, Woodchips STEM
29 Congratulations to the Estonian Power and Heat Association due to the 15th anniversary