ENERGY MANAGEMENT: TECHNOLOGICAL, ENVIRONMENTAL AND ECONOMICAL FACTORS INFLUENCING THE OPERATING REGIME AT MAJUBA POWER STATION
by
LAURENCE CORNELIUS GREYVENSTEIN
for the degree
MAGISTER INGENERIAE
in ENGINEERING MANAGEMENT
at the
RAND AFRIKAANS UNIVERSITY
SUPERVISOR: PROF. L PRETORIUS
NOVEMBER 1997 2
"It is not so very difficult to predict the future. It is only pointless
....What is always far more important are fundamental changes
that happened though no one predicted them or could have
possibly have predicted them."
Peter Drucker CONTENTS
Chapter Topic Page
i. Opsomming 4
ii Abstract 6
iii Definitions 8
1 Introduction 9
Technology for energy management 14
Economic forces in energy management 32
Energy management and the environment 47
Recommendations 56
A Case study 60
Conclusion 74
References 77 4
i. OPSOMMING
Suid Afrika staan vandag voor groot uitdagings rakende ekonomiese groei. In 'n verslag waarin vyftig lande se ekonomiese en politieke mededingingheid gemeet is, behaal Suid Afrika die sewe en veertigste posisie. Die land se grootste speler in die energiebedryf het besluit om hierdie uitdaaging die hoof te bied, met die visie "om die wereld se goedkoopste elektrisiteit to verskaf vir groei en vooruitgang". Kragstasies in
Eskom ding mee teen mekaar om elektrisiteit aan die netwerk te verkoop. Majuba kragstasie is huidiglik die duurste elektrisiteitsvoorsiener in die Suid Afrikaanse netwerk. Die bestuur en personeel van Majuba is genoodsaak om vindingryke strategied aan die dag te le om oorlewing in hierdie kompeteerende mark te verseker.
Dit is nie nodig om in 'n kristalbal te staar om te besef dat streng wetgewing binnekort ingestel sal word om atmosferiese besoedeling te bekamp. Die huidige elektrifiserings projekte sal die laspatroon van daaglikse energiegebruik beinvloed. Arbeidskoste en inflasie het skerp gestyg die afgelope tyd en verdere stygings is te verwagte. Dit is noodsaaklik om te weet wat die invloed wat al hierdie faktore op die Suid Afrikaanse kragindustrie sal he. Majuba moet instaat wees om hierdie veranderinge te identifiseer en aksieplanne in pick he om al die geleenthede wat in hierdie uitdagings le te benut.
Hierdie werk ondersoek die tipes aanlegte wat volgens literatuur gebruik word om die daaglikse energie aanvraag te bevredig. Dit word dan vergelyk met die tipe aanlegte wat in Suid Afrika gebruik word. Dit lei tot die gevolgtrekking dat die geinstalleerde aanlegte in Suid Afrika the behoorlik toegerus is om effektief die daaglikse las patroon te bevredig the. 5
`n Gevalle studie word gedoen op Majuba kragstasie wat sedert Desember 1996 in 'n twee skof opset bedryf word. Dit behels dat 'n eenheid aangeskakel word om teen die oggend piek aanvraag op vol wag to wees en dan weer na die aand piek afgeskakel word. Dit word ook getoon dat die soon bedryf winsgewend is vir 'n relatief duur kragontwikkeling aanleg. 6
ii. ABSTRACT
In a country that ranks forty seventh on a list of fifty countries in a world competitive
survey economic growth should be a high priority in South Africa. The main player in
South Africa's energy industry took up the gauntlet and is moving to economic growth with the vision 'to provide the world's cheapest electricity for growth and prosperity."
Competition was introduced among the electricity producers by a process called trading and brokering. Majuba power station, the most expensive electricity producer
on the South African grid, was left out in the cold. Management of Majuba is challenged to derive resourceful strategies to ensure sustained profitability. These
strategies will require a study into world trends to enable them to be more competitive.
Crystal ball gazing is not needed to know that major restrictions on pollution of the atmosphere by industry will be curbed by stringent legislation. The current electrification programme in South Africa is bound to impact the shape of the daily load curve. Labour cost and the rate of inflation have been increasing and can be expected to keep on rising in the foreseeable future. It is important to know what macro effect these factors will have on the South African power industry. Majuba must be able to identify the changes lurking on the horizon and have contingency plans in
place to meet these challenges.
In this work different types of plant needed to meet the daily load demand are researched from literature. It is then compared to the types of plant installed in South
Africa. This leads to the conclusion that the installed plant in South Africa is not
sufficient to meet the daily demand effectively. 7
A case study is done on Majuba Power Station that has been operating in a two
shifting mode since December 1996. This means that the units is started every day to be on full load in time for morning peak and then shut down after evening peak. It is
also shown that this mode of operation is proffitable for a relatively expensive power
generator. 8
DEFINITIONS
Load Factor This is a term that describes the percentage of the time that a particular electricity generating unit will produce energy. It is calculated from the total time producing
Availability In a time period usually a year, a unit is able to produce electricity. The percentage of time the unit produces electricity is the availibility. A unit will be unable to produce electricity for planned maintenance periods and periods of unplanned break downs. These periods will decrease the availibility.
Reliability The reliability of a unit depends on the reliability of all its components. Reliability is an indication of the time a unit can run without a failure that would result in a load loss and therefore inversely proportional to failure rate.
Thermal efficiency The fuel used in electricity generation has a certain energy value or calorific value. The thermal efficiency is the ratio of energy produced from the fuel to the energy supplied by the fuel.
Supply side Every electric utility has a mix of electricity generating units. These units are dispatched to meet the energy demand. All the units in a power system is reffered to as the supply side.
Demand side Electricity is supplied to a wide range of consumers. These include domestic, commercial and industrial consumers. Combined they are reffered to as the demand side.
Utility A single company that owns a number of power generating facilities in an electrical system is called an utility. Power plant A single electricity generating facility is a power plant. Power plants can consist of more than one electricity generating units. 9
CHAPTER 1 . INTRODUCTION
1.1 Background
Modern man depends on energy. As technology evolves the need for energy increases dramatically. It is known that energy consumption increased exponentially after the
Second World War. This increase in demand creates forces for more reliable and economical energy supply.
The power industry is not only affected by the economic climate, but can also play a roll to influence it. A competitiveness survey conducted by IMD, Lusanne on forty six countries
[1] shows that South Africa is currently ranked at forty four. This ranking did not change much since 1993, when South Africa was ranked at forty three. The ranking is determined by comparing 244 criteria in eight categories which are internationalisation, domestic economy, government, finance, infrastructure, management, science and technology and people. Two reasons can be singled out for the level of competitiveness not improving.
These are science and technology and finance. The South African science and technology ranking dropped from 29 in 1993 to 40 in 1997. The finance ranking dropped from 23 to
36 in the same period. A significant improvement was seen in the government category where the ranking improved from 43 in 1993 to 34 in 1997, due to the first democratic
elections held in 1994. It can be derived that the efforts of the South African government
does concentrate on the development of technology and improvement of the economy.
Herein lies a challenge for business and industry.
10
1.2 Eskom's contribution to economic growth
Eskom, South Africa's major energy supplier, takes a step towards addressing this need
through the vision: "To supply the world's lowest cost electricity for growth and
prosperity " [2]. The commitment of management to this vision puts the management and
personnel of Eskom power stations under a constant pressure to achieve their goals.
A corporate philosophy of trading and brokering was introduced in 1996. This system is
used to determine which units will be called upon to export electricity to the national grid.
Every power station enters a bid for a specific generating unit to produce energy at a
certain price for a certain period of the day. The number of generating units required to
meet the forecasted demand is determined. The prices in the bid will determine which
generating units will be called up to generate energy for the following day. Power stations
with a lower production cost will be preferred for loading and the more expensive units
will only be used when the demand for electricity is high and when the cheaper generating
units are unavailable.
1.3 Majuba' situation
Majuba Power Station is the last coal fired, six pack power station in Eskom's current
expansion plan. It is situated near Volksrust in the south of Mpumulanga. Construction at
the Majuba site started in September 1983. After many deferments, Unit 1 went on
commercial load on 1 April 1996. An additional unit is scheduled to go on commercial
load every April until unit six in 2001 [3]. Majuba is one of South Africa's largest capital 1 1
projects to date, at an estimated cost-to-completion of R12,5-billion [4].
The production cost of Majuba Power Station is almost three times higher than the current cheapest station on the national grid. (Due to confidentiality production prices of power stations cannot be quoted here). The most significant reason for the high production cost is the high capital cost. The deferment periods played a significant role in inflating the capital cost. Major work contracts were postponed and some were terminated at Eskom's cost. Additional contracts had to be placed for the preservation of erected plant.
Production at the dedicated colliery started in 1989. Geological problems forced management to terminate the contract with the mine in 1992. It was decided that coal would be railed to Majuba from coal mines in the Mpumulaga Highveld. A 22km rail link was constructed to connect Majuba with the Durban - Johannesburg rail line at Pah -nford near Perdekop [5]. The cost of the railway link and the cost of additional coal handling
facilities once again added to the capital cost. The running cost automatically increased with increased fuel cost due to a high transport component.
A third factor contributing to high production cost is the loading capability of Majuba.
With only two commercial units currently the fixed cost is covered by one third of the
production capability resulting in a high rand per Megawatt hour value. This causes a
spiralling effect where Majuba is an expensive power station in the trading and brokering
process and therefor not preferred to run. On the other hand if Majuba does not run not 12 enough energy is sold to generate an income and not enough Megawatts is produced to lower the cost per Megawatt hour.
The onus lies now on management of Majuba Power Station to find a niche market to ensure high production rates and therefore a healthy cash flow. The aim of this study is to create an information basis for the Management of Majuba Power Station to strategically position Majuba in the South African power generating industry towards sustained profitability.
1.4 Scope and structure of this study
This study will concentrate on factors and trends in the national and international power industry, specifically investigating technological, environmental and economical matters.
Electricity generating technologies are studied from literature. This leads to the discussion of how these technologies are applied in supply side management. A comparison is then made between the theoretical applications and the way Eskom manages the supply side in
South Africa.
After building the technological picture the economical factors are researched. The aim is to identify the economic factors that impact the electricity business. Historic macro economic trends in the international power markets are analysed and compared to the
South African situation.
13
The effect that electricity generators have on the environment cannot be ignored. A third
chapter will be dedicated to environmental factors to emphasise the extent of the problem
and to create an awareness of environmental legislation.
1.5 A case study
The South African demand side has a characteristic with relatively high morning and
evening week day peaks with low midday demand and even lower demand during night-
time. Majuba Power Station found a niche market in the South African electricity business.
This was achieved by operating their 650MW units in a two shifting mode. The units are
started every morning to be at full load for morning peak and then shut down at night after
evening peak. The advantage is that Majuba will run if the prices are higher during the day
and shut down if prices and demand are low.
1.6 Conclusion
Strategic planning for an electricity producer in South Africa will be based on trends in the
economy and environmental legislation. Due to the high capital cost of new plant it is
unforeseen that any capital expansion will be implemented to obtain technology required
for specific load demands. The following chapter details the types of electricity production
technologies and how they are managed in the supply side. 14
CHAPTER 2 TECHNOLOGY FOR ENERGY MANAGEMENT.
2.1 Introduction Energy management involves the management of technology to a very large extent. The
purpose of this chapter is to make the reader familiar with the technology applied in
electricity generating companies by exploring processes of the steam cycle and alternative
technologies in energy production. It will be illustrated how these technologies are used to
satisfy the demand of the electricity consumers by power system management. The
limitations that confront the engineers are briefly discussed.
To manage the technology of the electricity business it is not only important to know and to understand the technology of the plant on a local level but also to have an understanding of the technologies implemented internationally.
2.2 Limitations for the engineer
Engineers are constantly striving to improve the efficiency of the thermal cycle. The more
efficient a heat engine is the less fuel is required for a given duty and the lower the emissions of combustion. Engineers, scientists and aspiring inventors are bound by the
laws of Thermodynamics that can be expressed as follows:
First law = "You can't win. You can only break even"
Second law = "You can only break even at absolute zero" 15
Third law = "You can't get to absolute zero"
French Scientist Sadi Carnot first realised in 1824 that even a perfect heat engine using an ideal gas, had to reject some of the input heat energy [6]. The fraction rejected is equal to the ratio of exhaust temperature to the initial temperature, both measured from absolute zero. Since Carnot engineers have striven to maximise the initial temperatures and to cool the exhaust temperatures to close as possible to ambient.
2.3 The simple steam cycle
The fossil fired power station is the most common technology used in electricity generation today. The Southern Company, an utility that generates 30.7 percent of the electricity in the USA, generates more than two thirds of its production from coal [7]. Of the total generating facilities in China, 80 percent is coal fired and 20 percent is hydro electric [8].
The fuels burnt, mainly coal and heavy oil, are mainly composed of carbon and hydrogen.
Their latent chemical energy is released as heat during combustion. This thermal energy is converted into mechanical energy, which in turn can perform useful work to generate electrical power.
The simple steam cycle with flue gas desulphurisation is shown in figure 2.1 [9].
Powdered coal is burned in a stream of air to give a flame temperature of about 1 500°C. 16
About 90% of the heat is captured in a boiler which produces steam under high pressure
and raises its temperature. It is not possible to get the steam temperature as high as the
flame temperature. The temperature of the steam is limited by material properties of the materials used in boiler construction. No material could withstand that temperature and pressure. The practical limit is in the order of 570°C. The superheated steam passes through a turbine, causing it to rotate and drive an electrical generator. At each stage of the turbine energy is removed from the steam, at the turbine exhaust the steam is condensed and fed back into the boiler.
CO2 NO/
Limestone , FGD Gypsum
Pr ecipito for % Ash
Cool Steon Powder 57Cicle_gc Loriloos tor Turbine
Air
Reject heot S5degC
Figure 2.1 The simple steam cycle [9].
The Carnot efficiency of the steam cycle would be 64%, if the steam temperature could be raised to approach the flame temperature. It follows from the second law that such a station must reject 36% of the input energy as low temperature heat. A cycle with real 17 material can now achieve efficiencies of up to 42% i.e. two thirds of the theoretical maximum. Further improvements in efficiency are currently difficult to achieve because of temperature and pressure limitations of alloys for boiler tubes and steam turbine casings.
2.4 The combined cycle gas turbine
Another avenue is the use of combustion gases themselves as working fluid in a gas turbine. The principle of the gas turbine is first to compress air in a rotating compressor, mix it with natural gas in a combustion chamber and burn it. The resulting flame is hot and at a high pressure. Hot gases from the combustion chamber drive the turbine blades directly. Although the temperature is higher than in a steam turbine, the pressure is lower and within the capacity of the alloy's. In the latest designs the gas temperature at the turbine inlet is 1 250°C and 500°C at the exhaust.
The exhaust gas is used in a waste heat steam generator for steam production for a steam turbine. The combined cycle is shown in figure 2.2. Combined cycle gas turbines have achieved overall efficiencies of 54% that is two thirds the theoretical efficiency. An example is Ambarli Power Station in Turkey. The 1 350 MW combined cycle gas turbine power station was ordered in October 1987 by the Turkish national electric utility,
Turkiye Elektrik Kurumu. The station base load efficiency guaranteed by Siemens was
51,37 percent. In April 1993 the first of three 450MW units established a world record for thermal power plant performance of by demonstrating net base load and peak load efficiencies of 52,5 percent and 53,17 percent respectively [10]. 18
Air ,---- ------, ______--/1 , / Gas 1 / ,,------. / ( !Combustor7-7; Turbine \ .7. 1 N "-----,------/ 1 Natural ,t, Gas I 1500degC CO2 NOx ,st I. 1 \
Boiler I Stearn LTurbine
Reject heat 25degC
Figure 2.2 The Combined cycle gas turbine [9]
Further improvements of thermal efficiency are expected in the near future. The turbine manufacturer ABB is designing a 2 000MW combined cycle power plant for Korea
Electric Power Corp. that is rated at 58 percent. ABB expects the plant to achieve an overall fuel efficiency of nearly 60 percent [11].
The impact that a combined cycle gas turbine has on the environment is significantly less than the impact that a fossil fired power station has. Figure 2.3 illustrates the relative impact of a combined cycle gas turbine is compared with a conventional power station of similar rating and flue gas desulphurisation. Fuel consumption is cut by 25%. CO2, NO and waste heat is cut by about 60%. Solid waste and the requirement for limestone are eliminated. SO2 emissions are virtually zero because of the purity of natural gas supply.
19
The biggest limitation of the combined cycle gas turbine is the availability of natural gas.
.... ,
— ':-:-.,'• .. , : n vi,— - — - — - — - - - -
.,,
.... 71— _ _
Figure 2.3 A comparison between a coal fired power station and
a combined cycle gas turbine of similar rating [9].
2.5 The Pressurised fluidised bed combined cycle
The pressurised fluidised bed combined cycle is shown in figure 2.4. The fuel takes the
form of a crushed coal in a combustion chamber. Air is compressed and introduced at the
bottom of the bed of burning coal at such a speed that the bed is fluidised. This promotes
good combustion and good heat transfer to the boiler tubes immersed in the bed. Crushed
limestone is added to the coal, and reacts with the sulphur dioxide to form gypsum, which
remains in the ash. 20
950degC Hot Gas Limestone I gas I clean Turbine ! I up Coal CO2 NOx \If 500degC
Air Steam Boiler Steam Turbine
v Reject heat 25degC Mixed waste
Figure 2.4 The pressurised fluidised bed combined cycle.
The hot combustion gases are cleaned and passed through a gas turbine, which drives a generator. Steam from the bed is passed through a recovery boiler that is heated by the gas turbine exhaust gas. The final steam is sent to a conventional steam turbine, which drives the second generator. The maximum temperature of the bed is limited by the initial ash deformation temperature of the fuel. This temperature varies between 900°C and 1 000°C.
Higher temperatures would cause the ash to melt and the bed to seize up. For this reason the efficiency is limited to about 41%.
Sulphur removal can be as high as 90°C. NO„ levels are relatively low. The quantity of solid waste is higher than that of a conventional power station, and is more difficult to 21 dispose of.
2.6 The integrated gasification combined cycle
The temperature limitation in the fluidised bed can be avoided by converting the coal to a fuel gas in a gasifier. Gasification is a process that has been used in the petrochemical industry for many years. The essentials of this process are shown in figure 2.5. Powdered coal is partially burned in a restricted stream of oxygen and steam under pressure to produce a fuel gas consisting mainly of carbon monoxide and hydrogen and containing up to 80% of initial energy in the fuel. The gas is cleaned and cooled and used in a combined cycle gas turbine. Waste heat of the gas cleaner and gas turbine is used in a conventional boiler, which feeds steam to a steam turbine [91.
An overall efficiency of 45% can be achieved. A demonstration integrated gasification combined cycle gas turbine plant was commissioned at Buggenum, the Netherlands in
1993 and it is expected that the environmental advantages are substantial. The solid waste appears as a glassy slag, which is acceptable as a construction material [9]. 22
; i:nmbuc" I
,13 (4_ riot t•on., r sic '500degC 11 :<'1 ,21 P rI I G " S clean f4j up 1 Boiler Steam Waste Turbine heat
Sulphur /Re ject Mixed heat waste 25degC
Figure 2.5 The Integrated Gasification Combined Cycle [9].
Two 250MW units are currently in their operational demonstration phase. They are
Demkolic in the Netherlands and Wabash in the USA. Two further units of similar capacity are planned for operation during 1997. They are the Peurtollano plant in spain and the Tampa plant in the USA. A nett electrical efficiency of 46 to 68 percent is expected. Successfull operation of these four units is the next step to full commercialisation and acceptance of the integrated gasification combined cycle for power generation [12]. 23
2.7 Other electricity generation technologies
Other technologies employed in electricity generation on a smaller scale are briefly listed below:
i. Nuclear power plants
Despite public controversy, nuclear power plants are playing a significant
role in the supply side structure world wide. Nuclear and large coal fired
plants are preferred to operate in the base load application. These
installations have high fixed costs but particularly low operating costs.
Reducing the output from these stations, to be available for covering peaks
results in a low utilisation factor. This means that more of these high cost
installations must be built to make up the load, or medium sized plants
should be operated at higher load factor to make-up the lost power.
Almost 30 percent of Japan's electricity is currently supplied by 51 nuclear
reactors totaling 42 711MVV. It was planned to generate up to 42 percent
of Japan's electricity from nuclear power by the year 2010 but following
the Monju sodium leak incident the plan is being re-examined [13].
Hydro electric power schemes.
Hydro plants are the oldest and most reliable type of generating equipment.
They can cover any part of the load demand provided there is enough
water. Hydro plants may be started within seconds and they have 24
practically constant efficiency within the entire range of power output.
This makes hydro plants useful for maintaining grid frequency if a sudden
drop in load occurs due to a forced outage.
An example is the Guangzhou pumped storage power station in Southern
China. It consists of four reversible units of 12 000MW [8].
Maentwrog, a hydro power station near the village of Maentwrog in North
Wales was built in 1925. It's original output was 18MW but has been
refurbished recently and its capacity increased to 30MW [14].
Hi. Natural gas fired boilers.
Gas turbine plants have the advantage of low investment costs and short
construction lead times. Gas turbines are inefficient for operating over an
entire load range, and are less suited to longer periods of operation. Gas
turbines are pure peaking installations and run on average two hours per
start up. An advantage of a gas turbine is the fact that it could be at full
load within two to three minutes. This makes it possible to meet rapid
demand variations or sudden loss of generation.
The Hartwell energy project is a gas turbine power plant in Hart County,
Georgia USA. It is a 300MW peaking facility that does multiple starts 25
every day and has an on-line time of anything between 20 minutes and 18
hours. [15].
iv. Renewable energy.
Renewable energy sources, wind, solar and tidal, will play a significant role
in the supply side structure for future power systems. Wind and tidal
sources will contribute in base generation and solar power is better suited
to the intermediate zone of the generation curve.
Currently an estimated 2 000 wind-power stations are operating
throughout the world. Europe is the largest global market for wind power
plants, with a installed capacity of 3 000MW. America has 1 600MW
installed wind power capacity [16].
The state of Himachal Pradesh, in northern India, replaced diesel
generators with a solar power system. The mountainous terrain made
transport of diesel to the diesel generators a tedious task. The solar systems
have been performing well for over 18 months. Although designed for
240Ah/day the systems have delivered over 300Ah/day [17]. 26
2.8. Supply and demand side management
Every energy utility has a set of electricity generating facilities. Eskom, for example, has ten coal fired power stations, three gas fired power stations, two hydro electric stations, two pumped storage stations and one nuclear power station currently in operation.[18].
With these generating facilities electricity utilities must meet fluctuating demands for power at the lowest possible cost with the reliability required. The demand side of the power system is made up of consumers in three categories: industrial, domestic and commercial (the last including public lighting). Each group has its own peculiarities and each has a considerate influence on the total energy consumed.
Maximum consumption in the domestic sector occurs during morning and evening hours
and over weekends when people are at home and use their electrical devices. Public lighting requires power only during the evening and in a reduced quantity during night
hours.
Commercial consumption reaches a maximum during the daytime and at the end of a
working day, and particularly during lunch time. Industrial consumption is more stable
than domestic and commercial consumption because of the possibility of organising work
in shifts. Figure 2.6 shows how the shape of the daily load curve depends on domestic,
commercial and industrial consumption. The profiles of these demands are fairly constant
although there are some possibilities of changing them, using tariff policy, introducing 27 different administrative clock times for different regions or interconnecting remote systems with different clock times.
Influence of domestic, industrial and comercial consumption on daily demand
120
100 -
80 Total Domestic .1 60 - Industrial 40 - -Commercial
20 -
0 11111Z11 0:00 3:00 6:00 9:00 12:00 15:00 18:00 21:00 Time (h)
Figure 2.6 Influence of domestic, industrial and commercial demand on a typical daily load curve. Source: Ter-Gazarian [191
In Western countries, which have considerably higher living standards, domestic and commercial demands represent a significant part of over all consumption, which has visible morning and evening peaks, and night time troughs in demand. In countries like China,
Russia etc where domestic consumption is limited owing to the lack of household appliances, and most industrial enterprises work on a three shift basis with a sliding day of overall consumption is quite stable with rather small fluctuations. The shape of the daily consumption diagram, its weekly and seasonal diversification and their statistical features, depends on the behavior of the different consumer groups and is also strongly
28 influenced by climate.
Typical daily damand profiles
35000
30000 _1
F 25000 - - Maximum demand - Typical w inter day 20000 - as -Typical summer day 15000 - - Kilnimum demand
10000 -
5000 ,,,,, „ , „ „ „ .... 0:00 3:00 6:00 9:00 12:00 15:00 18:00 21:00 Time (h)
Figure 2.7: Typical summer and winter demand of the South African system, including days of minimum and maximum demand. Source: Eskom Web.[20]
The maximum power consumption in California occurs during the summer owing to air conditioning requirements, while in Canada, seasonal peak demands occurs in winter owing to heating requirements [19]. Figure 2.7 illustrates the differences between summer and winter demand in South Africa. The minimum demand for a typical day during the
December Christmas period is also shown.
The performance of the power system must be considered in the context of covering the afore mentioned demand curves by means of the supply side which is essentially the set of all the installed generating machines. From this entire set of installed units different subsets 29
(depending on the availability of water for hydro units, maintenance schedules and forced outages) can be committed to operation. The sets of committed units can be different for different levels of load demand and the availability of the different units commitment. The load dispatch among the different units should also take into account their economic characteristics.
Plant mix in daily load
120.0
100.0
80.0
04 60.0 E O 40.0 4— 2
20.0 1
0.0 0:00 2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00 Time (h)
Figure 2.8 Plant contribution for typical day load demand coverage.
Source: Ter-Gazarian [19]
Key to figure 2.8: Hydro power Nuclear and coal fired >500MW Pumping demand Coal fired sets below 500MW Oil fired sets, gas turbines and imported power Discharge of stored energy (3) 30
Figure 2.8 shows the way in which different types of units would be dispatched in a power system for a certain load demand. Between 40% and 60%, areas land 2, of a system's load is supplied by large coal fired, nuclear power stations and hydro power plants. These stations are termed "base-load" stations and operate continuously most of the year. The broad daily peak in demand, representing another 30 to 40%, area 4, of the load, is met by cycling or intermediate generating equipment. This range usually utilise less modern and inefficient fossil fired units, gas turbines and hydro electric power where available.
The peak demands, area 5, are met by gas or oil fired plants and diesel generators. During times of low demand, area 3, energy is used for storage. This is usually done by hydro pumped storage schemes. An increase in demand during a peak demand period, area 6, is supplied by releasing the previously stored energy.[19]
The Eskom power system has a slightly different approach. The demand for areas 1 and
2 are met by large coal fired base-load stations and the one nuclear station. The availability of water for hydro power plants is limited in South Africa. Hydro power is only used for peak demand periods, area 5. Pumped storage is however used as detailed above. The main difference in the Eskom system is loading for the intermediate demand, area 4. There are no combined cycle units or gas fired stations supplying electricity to the
South African grid. Eskom runs a number of units at a low load factor. When the demand
increases the load factor of these units are increased to meet the demand. 31
2.9. Conclusion
This chapter described the different types of power generating plant and how they ideally are used to meet the consumer's demand. Eskom does not have this ideal plant mix and relies mainly on fossil fired power plants.
Conventional power plants fired by fossil fuels are in sufficient numbers perfectly capable of fulfilling the technical conditions for peaking power, but they can perform this duty only at considerable operating and economical disadvantages. The desired flexibility and availability call for a correspondingly large number of units, independent of the load demand, to be operated at part load. This is uneconomical due to numerous high efficiency bands of thermal units and it is not possible to control conventional units over the entire load range.
The following chapter will discuss the economic characteristics of the electricity generating business and how the operating regime influences profitability. 32
CHAPTER 3. ECONOMIC FORCES IN ENERGY MANAGEMENT
3.1 Introduction
The business world is constantly changing and as time progresses the rate of change increases [32]. Any successful business must be aware of this changing world and have the ability to align the company with the changing needs and wants of its customers and adapt to the changing environment.
Apart from major industries, such as SASOL, SAMANCOR and municipalities of major cities, that do have the capability to produce small amounts of electricity for in- house consumption, Eskom has the monopoly for generating electricity in South
Africa. Being a para-statal organisation, Eskom experienced to a large extent a luxury of being sheltered from the causes and effects of economic factors. This situation allowed management to concentrate it's efforts on issues such as quality, safety and efficiency. The danger of having a monopoly and being a para-statal company does not make one immune to change. On the contrary, it could only create a false sense of security.
Eskom's vision is "to supply the world'S lowest cost electricity for growth and prosperity". This statement contains a hard economical message that cannot be ignored by any manager in Eskom. It is not to say that quality, safety and performance are not important, but rather through the past number of years Eskom has managed to excel in these areas and for most of the time the focus was not on economic performance. 33
3.2 Economic characteristics of electricity utilities Electricity utility companies have economic characteristics unlike those of manufacturing companies. To be competitive, managers in the power industry must be familiar with these characteristics as a prerequisite for wise decision making. Edwin
Vennard [6] lists these economic characteristics as shown below:
i. Electric utilities are the most capital intensive of all industries.
Furthermore, this large capital investment must be committed five to
twelve years in advance. This is about the time required to build a
power plant. Any severe change in the rate of inflation and perhaps
foreign exchange or cost of capital has a serious effect on utility
earnings and the price of electricity.
Because of the large capital investment required, most of the annual
expenses are fixed and do not vary with the number of kilowatt hours
sold.
iii. Electricity cannot be stored economically in large amounts. It must be
generated the instant the customer throws a switch. Water and gas
industries also have high capital costs but their products can be stored.
This enables high load factors which results in a lower unit cost in their
prices. 34
Load factor is of primary importance to the electric utility. It is the
major influence of pricing policies of electric utilities.
Customers patterns of use of electric energy vary both in volume and
load factor.
The business is typically regulated. Thus there is a fine line as to price,
which must not be too high or too low. Fluctuations in the economic
climate are reflected in the unit cost of service and therefore in the
price.
These characteristics are valid for the South African electricity business of today. The capital cost of Majuba Power Station is estimated at R12,5-billion. This was committed well in advance and the period was extended due to the deferments. This high capital cost results in a high fixed cost in relation to the relatively low variable cost that consists mainly of fuel and water costs and does not vary with the number of kilowatt hours produced.
3.3. The price of electricity
In the USA the price of electricity could be reduced up to 1970 because of operating efficiency. As can be seen in figure 3.1, the price declined from 4c(USA) per kilowatt hour in 1902 to about 1,5c(USA) per kW hour in 1968. This reduction in cost is mainly the result of higher operating efficiency. More factors are discussed later. The 35
increase in improvements in efficiency, however, cannot possibly offset the much higher inflation rates experienced since 1970, and therefore the sharp increase.
Average Cost of Making and Delivering a Kilowatthour in the USA 6
5-
1:4 4 1 3 o 2 3 - w c. ZI c 2 - w (..) 1-
0 IIIIIIIIIII411111 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990
Figure 3.1, The cost of generating electricity in the USA From 1900 to 1990,
Source: Vennard [6].
Reasons for the pre 1970 downward trend and the post 1970 upward trend of the cost of electricity are given in the following paragraphs
The factors for the decrease in the cost of generating electricity in the USA before
1970 are listed below [6]:
i. Increased volume
The more electricity used by customers brings down the unit production
cost and, therefore, the price. 36
Larger generating units
With a larger size of unit the investment cost per kilowatt is lower.
Higher transmission voltages
Higher transmission voltages lowers the cost per kW of transmitting large blocks of power.
Higher load factors
Running a unit at a higher load factor reduces the fixed cost per kilowatt hour.
Consistent improvement in thermal efficiency
With an improving efficiency more kilowatts can be produced from a fixed quantity of fuel, therefore less primary fuel is required for generation.
Energy is constantly available
High availability and reliability will increase volume that will lower the price. 37
Some of the factors leading to the increase of the electricity price is the USA in the years after 1970 as listed below [6].
There was an extraordinary increase in the rate of inflation.
The cost of capital increased sharply
Labour, especially, construction labour, demanded increases above
those justified by increased productivity
Environmental problems have multiplied since 1970
Fuel costs, increased steeply. Surveys in the USA showed that most of
the fuel used was oil and gas. This fact was dramatised by the oil
embargo, which led to the increase in the cost of fuel and was reflected
in the price of electricity.
In the early seventies an unusual amount of labour disturbances caused
delays in delivery of electrical equipment and in the construction of
power plants. The completion of nuclear power plants required a
longer time than anticipated. In the light of the above electricity utilities
decided in the interest of reliability to increase power plant reserves
from 15% to 20%. 38
All the factors leading to an increase of cost and those leading to a decrease in the cost of producing electrical energy are not unique to the USA. The energy industry in
South Africa is faced with these factors every day. Studying the trend in figure 3.1 it is clear that the factors leading to a decrease in the cost of generating electrical energy was more prominent in the years before 1970 and those leading to an increase in the cost of electricity played a larger role in the years after 1970. These factors are almost conveniently separated by time.
The selling price of electrical energy in South Africa is shown in Figure 3.2. When comparing figures 3.1 and 3.2. it is clear a similar trend was evident in South African energy business.
Eskom average electricity selling price 1955 to 1994
12
10
8
6
4 a. 2
1 11111111111 1 9 9 9 9 9 9 9 9 9 9 9 9 9 5 5 6 6 6 7 7 7 7 8 8 8 9 5 8 1 4 7 0 3 6 9 2 5 8 1 Year
Figure 3.2: The average selling price of electricity in South Africa
from 1955 to 1994.
Source: Eskom statistical yearbook 1994 [21]. 39
South Africa did not, as the USA, experience a price reduction but the cost of electricity increased very little up to 1979. The price increased by 58% in 1970 and stabilised again until 1979 when the yearly price increase varied between 5 and 20%.
[21].
3.4. Factors in South Africa leading to the decrease of the electricity price
The following sub-paragraphs will examine the behaviour of the aforementioned factors in South Africa. From the trends shown it should be possible to understand the behaviour of the price curve shown in figure 3.2.
3.4.1. Volume electricity sold in South Africa
The first factor that will result in a reduction in electricity cost is increasing volume.
Increased volume means more consumption from an increased number of customers.
This will lead to higher load factors and more optimal use of installed capacity and therefore a lower cost of energy. Of all the factors listed before, the increase in consumption is the most prominent factor in South Africa. The growth in electricity consumption from 1963 to 1993 is shown in figure 3.3.
The figure shows an almost constant increase in electricity consumption through the years. Based on this characteristic one can conclude that the sharp increase in the electricity price experienced after 1979 was not influenced by electricity consumption.
With the increase in consumption shown here one would rather expect that the price of electricity should have decreased. 40
Electricity consumption in South Africa, 1963- 1993
Figure 3.3: Electricity consumption in South Africa from 1963
to 1993. Source: Energy Futures 1995 [22]
3.4.2 Size of generating units
Larger generating units is the second reason given for price reductions. This holds true for the South African energy market. With the exception of Koeberg, which is a nuclear power station, it can be seen from the chart below that the capacity of newer power stations was generally more than the previous ones commissioned. The chart, figure 3.4, displays all the Eskom power stations commissioned since 1953 and the capacity of these stations.
41
Capacity of new power stations in Eskom from 1953 - 2001
4500 4000 3500 g 3000 iii 2500 - 2000 -
c.)IT 1500 - 1000 - 500 -
0 1111111111a111111111111 111 III III 1111 I 111111 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 5 5 5 6 6 6 7 7 7 8 8 8 8 9 9 9 0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 8 1 Year last unit went into sevice
Figure 3.4 Capacity of new power stations commissioned in Eskom Shown in the year the last unit of the station went in operation. Source: Eskom statistical yearbook 1994 [21].
3.4.3. Thermal efficiency and reliability in South Africa
Thermal efficiency and availability are two further factors that have an influence on the
cost of generating electricity From 1972 the South African power industry saw a
steady growth in thermal efficiency. Power Station availability trends have not shown a
steady improvement up to 1994. Management effort in 1995 changed this and a
positive improvement is evident in the last two years. It is expected that Eskom's
overall availability will be more than 90% in 1997. Eskom's performance in thermal
efficiency and availability is shown in the graph, figure 3.5. 42
Eskom power station's overall efficiency and availability, 1972 - 1996.
100 90 - 80 - 70 - 60 50 ao - 30 - 20 - 10- 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 2 3 4 5 8 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 Year
Efficiency -Availability . Figure 3.5 Eskom power station's efficiency and availability. 1972-1996, Source: Eskom statistical yearbook 1986 [23] and 1996 [18].
3.4.4. Load factor in South Africa
A further factor that leads to a decrease in the cost of generating electricity is the load factor. A higher load factor will increase the amount of energy produced and therefore reduce the cost per Megawatthour. Eskom's system load factor from 1972 to 1996 is shown in figure 3.6 . 43
Eskom generation load factor, 1972 -1996.
80 70 - 60- ...... 50- 0 40 - 30- 20- 10- 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 . 9 9 9 9 9 9 9 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6
Year
Figure 3.6 Eskom generation load factor from 1972 — 1996
Source Eskom statistical yearbook 1986 [23] and 1996 [18].
Previously it was stated that a higher load factor will lead to a decrease in the cost of electricity. From figure 3.6 it is clear that the load factor in the South African power industry was declining from 1974 to 1994 and could therefore lead to the increase of the electricity price since 1979.
3.5. Factors in South African leading to the increase of the electricity price
Factors leading to the increase of the price of electricity in the USA, after 1970, are evident in the South African economy and are proved in the following paragraphs. 44
3.5.1. The South African Production Price Index
To demonstrate how the inflation rate performed in South Africa, the production price index is discussed here and shown in figure 3.7.
Production Price Index
600
500 -
400 -
300 200 -
100 -
0 1925 1933 1941 1949 1957 1965 1973 1981 1989 1997 Year
—Actual index —Predicted index
Figure 3.7 The production price index from 1925 to 2002.
Source: South African Statistic — CCS Pretoria [24]
The values shown in figure 3.7 is referenced to an annual factor of 100 percent in
1985. The production price index trend shows a dramatic increase from 1973 onwards.
The shape of the curve has close resemblance to the electricity price curve, figure 3.2.
The main difference is that the price increase in electricity lagged by almost six years. 45
3.5.2. The cost of fuel in South Africa
The cost of fuel is a major factor in the cost of generating electricity. Although all but one of Eskom's power stations have dedicated coal mines supplying coal to the power station with long term contracts the cost of fuel increased steadily in line with inflation as shown in figure 3.8.
Average cost of coal burnt, 1972- 1996
40 35 - - I..: 253° - C 20- 15 - 4g 10 - 5 - 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 Year
Figure 3.8 Average cost of coal burnt from 1972 to 1996 Source: Eskom annual report 1986 [23] and 1996 [18].
It is interesting to note that the cost of fuel does not have the same characteristic as the production price index. Fuel cost increased at an almost constant rate and is comparable with the increase in demand. 46
3.6. Conclusion
There is very little correlation between the behaviour of the electricity price in South
Africa and the expected behaviour from the literature given the factors discussed before.
The most significant correlation is found in the production price index. This is by no
means saying that the theoretical impact of the other factors could be ignored. An
explanation for this result may be that the influence of the production price index was big
in comparison to the other factors.
It is now important to identify the economic factors that can be influenced by power station management. They are :
Improvement of thermal efficiency.
Higher availability and reliability factors.
Labour costs.
Environmental management.
And for Majuba in particular, fuel costs could be effectively
negotiated. Although the fuel cost of Majuba is significantly higher
than that of other Eskom power stations, Majuba has a larger market
for obtaining fuel. Healthy competition will ensure reasonable prices
Environmental problems was listed as a factor that would lead to an increase in the price of electricity. This following chapter is dedicated to the influence environmental problems have on power system management. 47
CHAPTER 4. ENERGY MANAGEMENT AND THE ENVIRONMENT
4.1. Introduction
Environmental problems were listed in the previous chapter as a factor that would lead to an increase in the price of electricity. The impact that power generating plant has on the environment is discussed in this chapter. From this discussion it will be clear that strict , measures need to be put in place to protect our natural resources.
The growing effects that technology has on the environment cannot be ignored in energy management today. Power plants have to be designed and operated to minimise the impact on the environment. Energy-environmental issues are primarily related to atmospheric pollution caused by the burning of fossil fuels. Other environmental issues in the energy industry are deforestation, open-cast mining, over head power lines and hazardous and nuclear waste products. The most common atmospheric pollutants discharged by power plants are carbon dioxide, sulphur dioxide, nitrogen oxides and fly ash.
4.2. CO2 Emissions
4.2.1 World CO2 Emissioni [25]
A report by the World energy council covered CO2 emissions between 1990 and 1996.
The report showed that the world's aggregate CO 2 emissions from coal, oil and natural gas totaled approximately 6,51 billion tons in 1996, up 2,7 percent from 1995 and 7.8 percent from 1990. The World Energy Council is a private London based organisation 48
with more than 100 members world wide. The results are calculated from data provided
by each of the members and by private companies. The United States accounted for 15
percent of world CO2 emissions and Japan 5,6 percent. Emissions from developing
countries in the Asia-Pacific region increased with 37 percent from the 1990 levels.
Four European countries namely Germany , France , Britain and Austria, managed to keep
CO2 emissions below the 1990 levels. This was achieved by switching from coal to natural
gas as primary energy.
4.2.2. CO2 Emissions in South Africa [22]
According to World Resource Institute calculations South Africa's Greenhouse index ranks seventeenth out of fifty countries. South Africa's attributable share of the increase in the atmosphere's global warming is 1.12%. South Africa is the largest carbon dioxide emitter on the African continent and at almost 300 million tonnes per annum it ranks fourteenth on the international list of those countries with the largest emissions of CO 2.
Electricity generation accounts for forty five to fifty percent of South Africa's overall carbon dioxide emissions. The concentration of coal mines, power stations, burning coal heaps, the petrochemical industry and other industries in the Mpumulanga highveld result in one of the highest concentrations of sulphur dioxide levels in the world. More than 80% of South Africa's electricity is generated in this area. 49
4.2.3. The Carbon Crisis [26]
The main gaseous emission in the power industry is carbon dioxide. - a major contributor to the greenhouse effect. The amount emitted per unit of heat released depends on the proportion of the carbon to hydrogen in the particular fuel. Human activity in the industrial era has added more and more extra carbon dioxide. The current proportion of carbon dioxide in the atmosphere is estimated to be 25% above pre-industrial levels. This leads to the "Carbon Crisis" where carbon, the basis of life, is becoming a threat to life.
The flow of carbon through the living and non-living world, from the atmosphere to animals, from animals to the soil and water, from the soil to the plants and back to the animals and atmosphere is called the carbon cycle. The carbon cycle is a vast process of recycling, storing and reusing of carbon. Quantities of carbon involved in all these processes are enormous. The carbon produced in human activity, such as burning of fossil fuels and deforestation, are small by comparison. The problem is that the carbon cycle is in balance. Although a lot of carbon passes through the atmosphere there should not be a net build-up over the years, though there are seasonal changes.
The fundamental problem underlying the carbon crisis is that the atmosphere has been regarded as "free", rather than something valuable. Unless legal restrictions on pollution levels or smoke fire zones are instituted this resource of the capacity of the atmosphere will be used up. Because the economy fails to register the fact that this resource are being used up, it fails to bring a response to it, such as using the atmosphere more carefully and 50 efficiently. Basic economic theory suggests that if something is being used up at too fast a rate its price should be increased. This reasoning led to the idea of "Carbon Tax".
4.2.4. Carbon Tax 1261
The philosophy is that fuel should be taxed on the basis of the amount of carbon in it. The amount of carbon in the fuel and the quantity used determines how much carbon dioxide released into the atmosphere.
The coalition parties in Austria planned to implement an energy tax in 1996. Electricity would be taxed at Sc0.05($0,005)/kWh and gas at Sch0.50($0,05)/rn3. They have as yet not produced a formula which would provide for gas used in electricity generation or an alternative scheme to avoid double taxation on thermally generated power [27]
The likely outcomes of Carbon Tax would be:
switching from one carbon fuel to another e.g. switch from coal to gas,
switching from carbon-based fuels to non carbon based fuels e.g. from oil to
nuclear or solar energy,
using fuels more efficiently to achieve the same result,
switching from fuel use to substitutes e.g. car ride to telephone call
critics warn that the generated funds may go into the coffers of government
and not to promote energy conservation and to reduce CO2 levels [27] 51
The dangers associated with the introduction of a carbon tax are:
i. There will be a shift away from carbon based fuel to nuclear
energy. Despite the urgency of the greenhouse effect, it is
important not to forget the fears and dangers associated with
nuclear power. Care should be taken that the implementation of a
carbon tax will not strengthen the case of the nuclear power
industry.
Carbon tax would have an adverse macro economic impact,
tending to worsen a country's balance of payments,
unemployment and inflation rates.
iii. The poor countries, spending a much higher portion of their
income on domestic fuel, will suffer a more severe impact than
richer countries.
4.3. Sulphur emissions
Another impurity in coal is sulphur, which is oxidised to form sulphur dioxide in the combustion process. In British coal sulphur generally ranges from 1 to 3 percent by weight. Other coals for example some from America and Australia range between 0,5 to
0,8 percent.[9] The sulphur content of South African coal is low and usually in the order
of 0.8 to 1 percent [28]. 52
Since industry moved away from coal and oil towards electricity and gas, urban levels of dust and sulphur dioxide have fallen steadily in Europe, up to half in the past decade. In contrast, urban nitrogen oxide levels have risen over the same period by roughly the same percentage.
In the 1970's the discovery of long-range transport of air pollutants taught industry that they must be as much concerned about the distant environment - indeed for the global environment - as for the local environment. Attention was given to remove sulphur dioxide from boilers. It appears that there is no practical way to remove sulphur from coal before combustion. Efforts are concentrated to remove sulphur dioxide from the flue gas after combustion. This process is called flue gas desulphurisation or FGD for short.
The most common type of FGD was applied at Drax Power Station in North Yorkshire,
England. [9]
After passing through the precipitators, the flue gas is blown through a spray cascade of water made alkaline with powdered limestone. The major problems with retrofitting a
FGD plant is layout, high initial cost, high running costs and loss of station efficiency. A scrubbing tower can be up to 50 m high, with ductwork of 9 - 10 m in diameter.
In 1993 the capital cost of a FGD plant was estimated to be about £700 million. The annual limestone requirement is approximately 500 000 tons and the energy requirement can reduce Power Station efficiency by one percent [9]. 53
4.4. Nitrogen Oxide emissions [9]
A third gaseous emission is nitrous oxides. When any fuel is burnt in air, which is four
fifths nitrogen, some of the nitrogen is oxidised in the flame to form nitrous oxides, NO. for short. The higher the temperature of the fame, the more nitrogen is oxidised and the higher the levels of NO.. In contrast to sulphur dioxide, the release of NO. is as much a function of the combustion conditions as of the fuel.
The amount of NO„ formed during combustion can be reduced by reducing the flame temperature. The flame temperature is reduced by restricting the mixing of fuel and air at the burner, so doing starving the initial stages of combustion of oxygen. Starving the initial combustion of oxygen gives the nitrogen atoms more chance of combining with each other instead of with oxygen atoms.
A variety of "low NO,, burners" are available on the market, the less efficient designs include minor modifications to existing burner design that can be effected with the minimum capital cost.
Bridgeport Harbor power plant retrofitted low NOx burners in their unit 3. Pre retrofit tests were conducted and found NOx levels in the order of 0,46 to 0,58 lb/Mbtu. Post retrofit tests were conducted and found that NOx levels decreased to 0,20 lb/Mbtu. It was however found that the percentage unburnt carbon in fly ash increased from 5,8 percent to
8 percent. This was expected to have an impact on the efficiency of boiler operation.
54
Interesting enough boiler efficiency remained at values from 91,4 percent to 91,7 percent
regardless of the NOx levels. [29]
4.5. Fly ash emission
Coal contains minerals, which survive the combustion process as fine particles of ash.
Modern power stations are capable of capturing up to 99,8% of the ash in electrostatic
precipitators or fabric filter plants.
4.6. Conclusion
The facts presented in this chapter are alarming. It is clear that an urgent need exists to
reduce the negative effects power generation has on the environment. Power station
management should be actively seeking ways to reduce the impact on the environment and
not wait for legislation that forces restrictions on to the industry.
The impact on the environment can be reduced by increasing energy efficiency. The same
output can be achieved by far less energy input if the efficiency improves. A good example
of advances in the field of energy efficiency is seen in the United Kingdom. The amount of
primary energy used for homes and producing domestic hot water has not changed
materially over the last twenty years. During this period the population has grown by some
20%, the living space per head has probably doubled and the level of living comfort has
improved enormously. Yet all this has been achieved without growth of primary energy
consumption. 55
At this point the reader should have an understanding of the energy management environment. Every single power plant is an integral part of this environment. The power plant is a form of technology that forms part of the supply side to meet the needs of the demand side, as described in chapter one. Economical factors as described in chapter two have an impact on the profitability of the power plant. A power station is one of the contributors to the environmental situation that is discussed in this chapter. I
Chapters 2,3,and 4 describe the framework that power station management should use in strategic business planning. In chapter 5 recommendations are made to aid power station management in strategic planning. 56
CHAPTER 5. RECOMENDATIONS
5.1 Introduction
The aim of Majuba power station is to be a profitable business in a highly competitive market. Any business has to know what its strategic market options are. Figure 5.1
provides a general indication of strategic market positions.
Figure 5.1 Strategic marketing options. Source: Freeman-bell [30]
Electricity is not a new product in a new market. Therefore the best way to increase
profitability is by market penetration. The preceding chapters give the areas of
attention that will position Majuba to penetrate the electricity market in South Africa. 57
5.2. Recommendations derived from chapter one
5.2.1. Thermal efficiency
Improvement in thermal efficiency leads to lower production costs. A contractual acceptance test was done at Majuba where the overall cycle efficiency was determined to be 35,63% [31]. This compares well with the best thermal efficiency of any station in Eskom. Management focus should not be to improve on this efficiency but rather see to it that it remains at this performance level.
The following recommendations are made based on the information discussed in the previous chapters.
5.2.2. Daily load pattern
The daily load pattern experienced by the South African electricity grid has the same characteristics of the load pattern from the literature (figure 2.6).
Eskom's contribution towards the national Reconstruction and Development Program is the electrification project. In this project Eskom sets itself a target to electrify houses of the previously disadvantaged communities. This significant increase in domestic consumers is expected to have an impact on the daily load pattern. It is expected that the evening peak will grow considerably. The expected load curve is shown in figure 5.2. 58
Expected daily load pattern
28000
26000-
24000-
22000-
*. 20000 -
3 18000 - -1 16000 -
14000-
12000-
10000 it i i E i i i !III II i i i i I II 0 2 4 6 8 10 12 14 16 18 20 22
Time (h)
Figure 5.2 Expected daily load pattern. (No reference)
The plant mix used by Eskom is different to the mix discussed in the literature. Eskom runs a number of units at part load in the base load demand. When the demand increases to the intermediate loading area, the loading of these machines are increased to meet the demand. Majuba should focus on supplying electricity during this intermediate period. This would imply that Majuba run up, to be on full load in time for morning peak and shut down after evening peak. This operation is commonly known as "two-shifting".
5.3. Recommendations derived from chapter two
The price of electricity in South Africa is strongly influenced by the production price index. Management should pay close attention to expected changes in the production price index and be aware that the price of electricity will follow the trend. This will enable management to adopt a philosophy of cost based pricing as described by Peter 59
Drucker [32]. Current high levels of thermal efficiency can be maintained by performance management and maintenance management plans. Labor costs can be minimised by keeping staff levels as low as possible. Fuel costs can be reduced by carefully negotiating fuel supply contracts
5.4. Recommendations from chapter three
Majuba does contribute to the atmospheric pollution. The installed fabric filter plant controls the fly ash discharge within acceptable levels. No technologies are applied to reduce sulphur dioxide and nitrous oxide emissions.
Authorities are bound to enforce stricter controls on gaseous emissions. Management of Majuba should anticipate this and conduct feasibility studies to be able to commit the required capital for the installation of flue gas desulphurisation plants and low NOx burners.
5.5. Conclusion
Majuba Power Station is a new power station and performance levels are of a high standard. The main aim should be to maintain these performance levels with minimum capital outlay. Capital expenditure is required to reduce gaseous emissions and this should be timed carefully.
The management of Majuba conducted a test by two shifting unit one in November
1996. The success of the test lead to a decision to operate Majuba as a two shifting station. The two shifting operation is discussed as a case study in chapter 6. 60
CHAPTER 6. A CASE STUDY
6.1 Introduction
This case study will first describe the different possible operating regimes of a power station then focus on two shifting operation as implemented by Majuba Power Station. It will be illustrated how two shifting operation is more profitable than base load operation.
The cost figures quoted are approximate values and not actual due to confidentiality.
Operating plant data will be compared with design data to show the impact of plant life.
6.2. The Majuba steam cycle
Majuba Power Station has six electricity generating units of the simple steam cycle type with a single reheat as shown in figure 6.1.The power output of a single unit is 650MW.
CO2 NOx 1\ Fabric Fitter > Ash
Coat Powder Cornbusto
Air
Stearn 570degC HP IP&LP Turbine Boiler Turbine
Reject heat Reheater 25degC• ...Figure 6.1 The steam cycle with single reheat of Majuba Power Station Source: Majuba Operating, Maintenance and Training Manual [33] 61
6.3. Operating regimes of fossil fired power plant
As discussed in chapter one a mix of plant is required to meet the daily demand. Larger fossil fired and nuclear power stations are required for base load operation. When the demand increases for peaks intermediate loading is done with smaller fossil fired and gas turbine power plants. During peak demands hydro power plants are loaded to meet the demand. Base load , block load following and two shifting are described here.
6.3.1. Base load operation
This is the most common operating regime for units of 500MW and larger. These units are started and run continuously at fill load for most of the year. Examples of power stations in Eskom doing base load operation in Eskom are Koeberg, a nuclear power station,
Matimba and Kendal, both six pack fossil fired power stations.
Figure 6.2 Base load operation of a 600MW unit. 62
Figure 6.2 shows the loading of a 600MW base load unit supdrimposed on a typical load demand curve.
6.3.2. Block load following operation
Block load following is an operating regime commonly used in Eskom for the intermediate loading sector. As with base load operation the unit will run continuously for most of the year but not at full load. The unit will be loaded to produce full load during the two daily peaks and will then run at minimum load in the off peak period as shown in figure 6.3. The minimum load is dependant on the characteristics of the particular machine.
Block load following operation
29000 700
- 650 27000 600
25000 -, 550
500 23000
2 450 g 21000 400
19000 350
300 17000 250
15000 r 200 0:00 3:00 6:00 9:00 12:00 15:00 18:00 21:00 Time
Derrand(KM) -Load MN)
Figure 6.3 Block load following operation 63
6.3.3. Two shifting operation
As a result of a successfull trail the management of Majuba Power Station decided that two shifting operation is the current running mode of the station. The unit is started every day in time to be at full load for morning peak. The unit will remain at full load during the day and then be shut down overnight after evening peak. Figure 6.4 shows the loading of a single unit super imposed on the daily demand profile.
Two shifting operation
29000 700
27000 - 600
25000 -
23000 400 2 2 21000 - 300
19000
17000 100
15000 I I iiiii I I llll 0 0:00 3:00 6:00 9:00 12:00 15:00 18:00 21:00 Time
Demand(MW) - Load (NN)
Figure 6.4 Two shifting operation. 64
6.4. Profitability of two shifting operation
The profitability of two shifting operation will be demonstrated by using the price of electricity paid to the electricity generators on a typical summer day. This curve is shown in figure 6.4. This price is determined by the trading and brokering process. This price will then be compared to the costs incurred by Majuba for generating electricity by first base load operation and then two shifting operation
0 I I i 0:00 3:00 6:00 9:00 12:00 15:00 18:00 21:00 Time
Figure 6.5. Price of energy paid to the electricity generator. Source: Trading prices, The Eskom web [34]. 65
6.5. Cost of production
As in most other businesses the cost of production consists of a fixed and a variable cost.
The fixed cost will consist of maintenance, administration, management and amongst
others salaries. The variable cost will consist of primary energy, direct materials, direct
labour (operating) costs and cost of water.
The difference between a one unit fixed cost and a six unit station fixed cost is minimal.
The product sold by a power station is energy. Therefore the cost per energy unit of a
power station with one productive unit is considerably higher that the cost per energy unit
of a six producing unit power station. The incremental cost from one unit to two units are
significant but the incremental cost from 5 to 6 units is minimal.
The fixed cost of running Majuba Power Station is approximately R35 500.00/hr which
includes the depreciation of the capital. The variable cost excluding cost of fuel oil for
start-up is R100.00/MW hr. for two units running.
The total cost per MW hr during operation will be:
F , f CB = ± v + ...6.1 L Li
Where CB = the total cost [R/MWh] F = the fixed cost [R/hr] L = the sent out capacity or load [MW] V = the variable cost [R/MW h] 66
f = the cost of fuel oil used during the operational cycle [R] t = the time the unit has been on load [h]
6.6. Running Majuba as a base load station
When base load operation is considered all the factors in equation 6.1 is constant except f, the cost of fuel oil due to the oil burns out of operation. For continuous operation the last term becomes negligible, due to the large time span, the amount of fuel burnt, f, is small compared to F and V.
The base load cost of running Majuba Power Station unit 1 would be:
CB= + V ...6.2
35500 +100 612
= R158.01 /MWh
For base load operation the hourly cost of running two units at Majuba is then the total above multiplied by 612 times the two units, 1224, thus R193 404,24. The data that was used to construct figure 6.5 is presented in an hourly table. The total price that would be paid to Majuba is shown in the third column. The hourly cost that would be constant due to base load operation is shown in the forth column. The last column shows the hourly profit or loss made. 67
Table 6.1 Profit/loss due to base load operation
Hour Hourly Total hourly Hourly Profit/loss price/MW income cost 00:00 30 36720.00 193404.24 -156684.24 01:00 32 39168.00 193404.24 -154236.24 02:00 30 36720.00 193404.24 -156684.24 03:00 31 37944.00 193404.24 -155460.24 04:00 30 36720.00 193404.24 -156684.24 05:00 30 36720.00 193404.24 -156684.24 06:00 50 61200.00 193404.24 -132204.24 07:00 180 220320.00 193404.24 26915.76 08:00 240 293760.00 193404.24 100355.76 09:00 200 244800.00 193404.24 51395.76 10:00 160 195840.00 193404.24 2435.76 11:00 100 122400.00 193404.24 -71004.24 12:00 70 85680.00 193404.24 -107724.24 13:00 50 61200.00 193404.24 -132204.24 14:00 60 73440.00 193404.24 -119964.24 15:00 55 67320.00 193404.24 -126084.24 16:00 60 73440.00 193404.24 -119964.24 17:00 65 79560.00 193404.24 -113844.24 18:00 160 195840.00 193404.24 2435.76 19:00 200 244800.00 193404.24 51395.76 20:00 150 183600.00 193404.24 -9804.24 21:00 90 110160.00 193404.24 -83244.24 22:00 60 73440.00 193404.24 -119964.24 23:00 30 36720.00 193404.24 -156684.24 Daily -1994189.76 profit/loss
Running two units at base load Majuba would make a current net loss of almost R2,0 billion
6.7. Running Majuba in a two shifting mode
When operating the units in a two shifting mode the cost of fuel oil can not be ignored as in the case for base load operation. A two shifting operation will require a hot start once a day. During a hot start 12 oil burners are used to put the boiler into service. All firing on
68
high fire mode and using 1035 t/hr. Six of the burners will be firing for a duration of 50
minutes and 6 will be firing for a duration of 40 minutes. When the unit is shut down after
evening peak the oil burners will be put into service to take out the mills. It can be
assumed that the same number of burners will be used for the same duration.
The cost of fuel oil is R810.00/t.
For one start or shut down per unit:
11 = n•t•r•Coo 6.3
Where n = number of burners t = time burner firing [hr] r = fuel flow rate [t/hr]
CF/0 = cost of fuel oil [R/t]
50 . 40 11 = + 6 . —] . 1 ,035 * 810 6.4 [6. 60 60 = R7 545,00 per unit.
This cost of fuel oil must be added to the production cost during the start up and shut
down hours.
Whether Majuba is producing or not the fixed cost will be evident. The variable cost will
only be incurred if the unit is running. In table 6.2 the current hourly profit or loss is
shown. The first column displays the hour of day. The second column shows the load 69 produced with two units two shifting and the income generated by them is shown in the third column. The total cost in the eighth column is made up of the fuel oil, fixed and variable costs.
Table 6.2 Current profit/loss due to two shifting operation
Hour Hourly Load of Total Hourly Hourly Hourly Total Cost Profit/loss price/MW two hourly fuel oil fixed variable units income cost cost cost (MW) 0:00 30 0 0 0 35500 0 35500 -35500 1:00 32 0 0 0 35500 0 35500 -35500 2:00 30 0 0 0 35500 0 35500 -35500 3:00 31 0 0 0 35500 0 35500 -35500 4:00 30 0 0 0 35500 0 35500 -35500 5:00 30 0 0 0 35500 0 35500 -35500 6:00 50 900 45000 15090 35500 45000 95590 -50590 7:00 180 1224 220320 0 35500 61200 96700 123620 8:00 240 1224 293760 0 35500 61200 96700 197060 9:00 200 1224 244800 0 35500 61200 96700 148100 10:00 160 1224 195846 0 35500 61200 96700 99140 11:00 100 1224 122400 0 35500 61200 96700 25700 12:00 70 1224 85686 0 35500 61200 96700 -11020 13:00 50 1224 61200 0 35500 61200 96700 -35500 14:00 60 1224 73440 0 35500 61200 96700 -23260 15:00 55 1224 67320 0 35500 - 61200 96700 -29380 16:00 60 1224 73440 0 35500 61200 96700 -23260 17:00 65 1224 79560 0 35500 61200 96700 -17140 18:00 160 1224 195840 0 35500 61200 96700 99140 19:00 200 1224 244800 0 35500 61200 96700 148100 20:00 150 1224 183600 0 35500 61200 96700 86900 21:00 90 900 81006. 15090 35500 45000 95590 -14590 22:00 60 0 0 0 35500 0 35500 -35500
23:00 30 0 0 , 0 35500 0 35500 -35500 Daily profit/loss 439020
The current daily profit experienced by two shifting operation is approximately
R440 000,00 which is much more acceptable than the loss made if the unit was running in base load conditions. . 70
6.7. A Tool for the Energy Manager
Note: This paragraph does not refer to any literature. It is merely a philosophy by the author.
It has now been proven that two shifting is profitable. This does not mean that Majuba should not consider operating in a base load mode or have fixed on-load and off-load times. The energy manager must be able to sense how the demand and price curves will look before committing the station for operation.
To aid the energy manager in his decision making a simple tool is derived. Figure 6.6 shows a curve with daily demand displayed on the Y-axis and hourly price on the X-axis.
Every point on the curve represents the demand and the price of the specific hour. Every day will have a unique pattern, called a "daily load finger print" by the author. The data used in figure 6.6 is that of figure 6.3 (Demand) and figure 6.5 (Price).
How does this work? A vertical line is drawn at the cost of generation value, R120/MWh in this case. This devides the finger print into two areas. On the left hand side is the time operating at a loss and on the right hand side, the time operating at a profit. 71
Figure 6.6 An example of a daily load finger print
According to this example it would be most profitable to two shift on this particular day.
The best time to be on full load is between 06:00 and 07:00. This is when the line of the finger print crosses the cost line and a profit is made. During the period from just after
10:00 to after 17:00 the unit will be running at a loss. The following period up to 20:00 will be profitable again after which shut down is recommended.
The position of the finger print is not fixed in the coordinates. A move to the left will indicate an increase in price. This would be due to high system demands or unavailability of low cost base load stations. During these situations extended running hours could be 72 planned or base load operation could be considered.
If the finger print moves to the left it would indicate a low demand and an over supply of energy from low cost station. It would be opportune to plan maintenance activities during these periods.
The data used to construct a finger print is available to the energy manager on a daily base.. Information regarding planned and forced maintenance outages of other power plants is obtainable. Daily load finger prints should be recorded and information regarding system performance, plant outages and weather should be attached to it. With enough history finger print prediction should not be to far fetched.
6.9. Long term plant health
Majuba Power Station was designed to be operated as a base load station. [33]. This included a total amount of 200 000 continuous operating hours. It was also designed for
1 000 hot starts, 700 warm starts and 300 cold starts during the life.
Two shifting unit one from November 1996 to the end of October 1997, unit one has experienced a total of 140 starts.[28] This is seven percent of the number of starts the unit was designed for. Theoretically the unit should by now have consumed seven percent of its life measured in number of starts in one year. 73
On the other hand unit one started commercial operation in April 1996 and has been two shifting since November 1996. During this time up to the end of October 1997 Majuba has run for a total of 6 000h.[28] This equates to 4 000h per year which is approximately half the time a base load station would have been on load for the same period. In terms of running hours Majuba has consumed six months of design life in one year.
The net effect of two shifting on the life of the plant is not clear at this stage. Aptech
Engineering Services, Inc. researched the effect that cycling has on fossil fired power plants [35]. The major effect of cycling on boiler plant was identified to be accelerated fatigue cracking in rigid parts e.g. boiler corners and transition areas such as tube to header, tube to windbox, tube to burner and buckstay attachments. Further findings are more applicable to drum type boilers that have more thick walled component than once through, Benson type boilers. conducted studies
Research done by EPRI shows that cycling boilers have a higher risk of incurring corrosion fatigue failures [36].
A monitoring program was put in place at Majuba to record metal temperatures during start up and load changes to ensure that the metal temperatures in the boiler and turbine are kept well within the design values. Inspection programs were also put in place to record the plant condition with every opportunity. 74
6.8. Conclusion
It is clear that two shifting operation is much more profitable than base load operation for a power station that has a high running cost. This does not consider the impact that cycling will have on the full life cycle cost.
Cycling of thermal plant introduces thermal fatigue. The amount of fatigue suffered cannot be quantified easily. It is therefore important to monitor the plant carefully and be aware of any premature aging of any plant component. Part of the profits made should be invested in monitoring programs and detailed maintenance programs.
A formal study to investigate the impact that two shifting has on the life cycle cost would be recommended. 75
7. CONCLUSION
The objective of this study was to determine an information basis that would aid the management of Majuba Power Station in the process of strategic planning towards sustained profitability.
From the three categories, technology, economics and environment, single factors were identified that could have a significant impact on Majuba. They are in brief:
i. The impact that the electrification projects will have on the daily demand
curve and the installed plant that is not designed for intermediate loading.
The primary dependancy of the price of electricty on the production price
index and the secondary dependancy of the price of electricity on factors
such as demand, fuel cost and load factor.
The need for flue gas cleaning.
Flexibility of the operating regime as determined by the daily load finger
print.
These factors should be central in Majuba's business planning excercises.
The case study presented in chapter 6 indicates that operating Majuba in a two shifting mode is currently economically feasible. This does not imply that any station with a high operating cost should consider two shifting as a standard operating mode. 76
It is strongy reccomended that a formal study is conducted to determine the effect that cycling has on the design life of specific components in the power plant. This study should compare the life cycle cost curve of a cycling power station with a life cycle cost curve of a typical station operating as a base load station. 77
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