March 2013 www.gastopowerjournal.com Carbon price at €40/ton needed to make power producers opt for gas, not coal - IEA For power producers to prefer gas over coal as a fuel for power generation the price of carbon emission allowances would have to rise to €40-50/ton, Thijs van Hittersum, natural gas analyst at the International Energy Agency said at a conference held by Gas to Power Journal in Brussels.

egulatory interventions such as the pro- more economic at current market prices. posed backloading of up to 900 billion "Cheap US coal supply and low carbon carbon emission allowances (EUAs) prices make coal the fuel of choice for Euro- Rinto the third phase of the ETS is, how- pean power producers," he said. ever, in his view "most likely not sufficient to The IEA expects gas demand in Europe solve the oversupply situation to increase at "a very slow pace of only 1.3 in the carbon market." percent" over the coming five years, compared "The backloading proposal to over 13 percent in China. is only going to temporarily Production costs for gas are around reduce the oversupply. If this €60/MWh for the average gas plant, compared will only push prices up a little with €40/MWh for average coal plants at cur- Fire tube boiler of a coal-fired power plant. bit, to levels of €10-15/ton, rent fuel prices. Thijs van that is not going to make "There is too much gas generation capacity in concluding that it is "very difficult" to make a Hittersum much of a difference at current Europe that is not running at the number of hours business case for new gas generation capacity. fuel prices," he told Gas to Power Journal. that they were built for," he said. Investment in "Open cycle gas plants are in a better position, To provide residual load, gas-fired power recently build facilities was made with a view to due to their lower investment costs and because plants currently loose out against coal plants, run plants at 5,000 operating hours and not at they need less run-time hour to earn back capital as operational cost of coal-fired plants are way 1,500 hours as is currently the case, he explained, costs," he said. Interview: “All conventional power plants should get €15/kW capacity payments” – Statkraft Injecting a sense of realism in the debate on Germany’s future power market design, Statkraft has come up with a concrete figure by suggesting €15/kW/year should be paid on a non-discriminatory basis to support operations of fossil plants regardless of age, location and technology. Torsten Amelung, Managing Director at Statkraft Markets and responsible for Trading, Origination & Business Development speaks out about the reasoning behind this proposal. e have suggested a flat Direct capacity payment Stressing the importance of a non-discrimi- fee payment for all fos- schemes can serve as a "sim- natory approach, Amelung strongly criticised sil plants which creates ple model for a transition pe- the current political bargaining over plant-spe- “Wa level playing field for riod", he said, but in the long cific payments, for example for so-called ‘strate- all power producers. The number €15/kW/year run German policy makers gic reserve’. “Such payments for selective plants which we gave out is based on a rough cost calcu- should take example of capac- split the market and only benefit a small number lation and indicates what support operators need ity obligations and auctions as of plants at the cost of the others,” he said. Torsten to avoid early closure of loss-making plants,” Amelung considered in France and the Operators feel the pinch as profit margins of he told Gas to Power Journal in an interview. UK, respectively. continued on page 2

Enerjisa looks for new gas supplies, Interview: GE invested over $500m “No new fossil plants in Europe expands gas-to-power capacity in Turkey, to spend further $900m without capacity mechanism”

Enerjisa aims to increase gas Turkey’s rising energy demand, Keeping existing fossil import volumes to more than spurred by a flourishing expand- capacity in the market will double its power generation ing economy, is attracting “prove difficult” forecasts capacity to 8 GW to reach a 10 percent market investors and facilitators of Jørgen Kildahl, board member share by 2020. new power plant projects. of E.ON SE. See page 4 See page 5 See page 6 Markets

continued from page 1 gas-fired power plant assets have turned nega- tive amid rising renewable power supply. Sup- ported by feed-in tariffs, renewable capacity in Germany saw an unprecedented surge in recent Index years which reduced run-time hours of fossil Carbon price at €40/ton needed to make plants and increased the volatility of power power producers opt for gas, not coal - IEA prices. Regulation gives renewable plants pri- - cover ority to supply electricity to the grid, which Pan-European capacity design ‘unlikely’ – further limits dispatch of fossil capacity and Eurelectric - page 3 exacerbates the squeeze on profits margins. “The rise in renewable energy supply has Statkraft's Knappsack-1 power plant Enerjisa on the lookout for new gas supplies, expands gas-to-power capacity caused a drop in average power prices, but the gas of capacity payment system intensify, a full- - page 4 price remains the same. To improve spark spreads, fledged regulatory scheme is unlikely to mate- simply negotiating the oil-formula out of gas sup- rialise before the upcoming September Interview: GE invests over $500m in Turkey ply contracts is not good enough,” Amelung said. election. “I don’t think anything will be to date, plans to spend further $900m - page 5 Persistently negative spark spreads give decided before the election, he said, suggesting power producers an incentive to close down policy makers are more prepared to revise the “No investment in new fossil plants in Europe gas-fired plants. Asked if Statkraft’s power renewable law at short notice. without capacity mechanism” - page 6 plant Knappsack-1 is lossmaking, Amelung said the plant was profitable in the first years “Renewables need Interview: CCGT repowering allows Senoko of operation but it does not pay back its Capex to grow up” to cut generation costs - page 8 under current market conditions. Amelung called for a revision of preferential “If the capacity utilisation of a plant is not regulation for wind and solar capacity through Gas To Power Journal guaranteed, the plant cannot earn back its oper- reducing feed-in tariffs and subsidies. 2nd Floor, 8 Baltic Street East London EC1Y 0UP ating costs and does not have any chance to “Renewables need to grow up and should be United Kingdom recoup its long-term capital costs,” he said, treated like other power generation technolo- www.gastopowerjournal.com pointing out that Statkraft’s gas-fired Emden gies,” he stressed. +44 (0)20 7253 2700 power plant, which was shut down and put in Asked how spark spreads could be improved, Publisher Stuart Fryer the status of ‘cold reserve’, is “very unlikely to Amelung advocates a tightening of the Euro- come back to the market anytime soon”. pean Emissions Trading System (EU ETS) as a Editor Anja Karl harmonised pan-European approach to support Tel: + 44 (0) 7017 3417 Statkraft on track to start-up gas-fired power generation, with less risk to dis- [email protected] Knappsack-II this summer tort energy-only-markets that national regulatory Reporter This summer, Statkraft plans to commission support schemes for fossil capacity. Michal Zuk [email protected] Knapsack II, a 430 megawatt gas-fired com- Withdrawing carbon emission allowances Advertising bined cycle power plant. But beyond this proj- (EUAs) in the third phase of the European Narges Jodeyri ect no further investments in conventional Emissions Trading System (EU ETS) could help Tel: + 44 (0) 7253 3406 plants are planned in Germany, Amelung said. improve the profit margins of gas-fired plants. [email protected] Although power demand in Germany has “By reducing the eligibility of EUAs, thus driv- Events stabilised and recovered since the 2008 eco- ing up the carbon price one could incentivise the Kamil Hussain Tel: + 44 (0) 7017 3404 nomic crisis, this gives little relief to fossil plant use of cleaner-burning gas-fired plants,” he said. [email protected] operators. “You have to subtract the renewable The European Commission plans to backload Subscriptions power supply from total power demand, so fos- up to 900 billion EUAs by restricting their usage Stephan M. Venter sil plants can only compete to supply the re- before putting them back in the market in 2029. Tel: + 44 (0) 7017 3407 [email protected] mainder and get dispatched less,” he said. Apart from EUA backloading, the Commis- sion also considers setting tougher carbon Production Vivian Chee General election in September reduction targets for 2030 and reduce carry Tel: +44 (0) 20 8995 5540 delays new power market design over quotas of EUA form the third to fourth [email protected] Even if calls for the introduction of some sort trading period of the ETS. 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02 Gas to Power Journal March 2013 ...From our Brussels Conference “Capacity mechanism to reward backup service is vital in Spain” - Gas Natural Fenosa

Spain’s power producers are calling for new regulatory support mechanisms to help cover investment costs of existing fossil plants. “It is vital to establish a mechanism to reward the backup service of existing gas-fired plants to assure the reliability of the system” says Carmen Vindel, Head of International Regulation, Gas Natural Fenosa.

ost of the existing CCGTs in do not provide adequate returns to keep dropped from a small 18.7 percent share of the Spain were initially designed to sufficient flexible capacity in operation," total generation in 2011 to an even smaller operate for 4,000 to 5,000 hours she said. The squeeze on profit margin is 14.3 percent in 2012," Vindel said. M a year, according to the exacerbated by the fact that the current Gas-fired power plants in 2012 covered system requirements at Spanish regulation does not allow the closure 14.35 percent of Spain's power demand by the time of investment. of loss making units, deemed necessary for producing 36.593 GWh out of 268.779 GWh. Today, however, they grid stability. Power demand is unlikely to recover signif- are running less than The market share of gas-to-power produc- icantly in Spain's current economic climate 1,000 hours per year tion declined from 42 percent in 2008 to and given the huge penetration of renewables, and cannot cover their 23 percent in 2012, according to Enagas which constrain the market share of conven- capital costs. figures. tional powerplants, Vindel suggested that "the "Current market "The drop became even steeper last year. construction of new fossil plants seems to be Carmen Vindel conditions in Spain The amount of electricity generated by CCGTs unnecessary before 2017."

Pan-European capacity design ‘unlikely’ - Eurelectric

The emergence of a harmonised pan-European capacity market design is “unlikely” and efforts may come “too late”, says Håkan Feuk, Chairman of TF Market Design for Renewable Energy Integration at Eurelectric, adding that some common denominators for national Capacity Remuneration Mechanisms (CRM) need to be established to ensure a level playing field for investors and consistency with the integration process of European energy markets.

peaking to Gas to Power Journal at the The European Commission, for its part, is discriminatory grid access. Flexibility plat- sidelines of a conference in Brussels, set to publish guidance for member states that forms can play an important role in guarantee- he said "it is too late for having debates consider introducing capacity mechanisms. Eu- ing operational flexibility and allow for plant Son introducing harmonised capacity relectric, the European association of power dispatch close to real-time. mechanisms across Europe", producers, is helping to establish coherent EU Improving cross-border balancing mecha- as policy drivers differ and compatibility criteria to define the level of gen- nism at the day-ahead and intra-day market can some EU member states al- eration adequacy needs in each country depen- help resolve power supply bottlenecks. ready have national schemes dant on the level of RES in-feed and grid To enable the German 'Energiewende' pol- in place. interconnection. icy, Feuk underlined the urgency to fast-track "We see a plethora of pol- If introduced, CRMs should neither favour large scale investment to enhance both the icy drivers for possible capac- specific fuel types nor plant technology but domestic network and cross-border intercon- Håkan Feuk ity mechanisms throughout also reward capacity from existing and new nectivity with power grids of neighbouring Europe. While extreme peak-load coverage is plants equally, Feuk stressed. CRMs should not countries. But demand side response mecha- the main driver in France, Sweden and Finland, only focus on remunerating suppliers of flexi- nisms should also be given a role and adequate it is the risk of losing existing flexible genera- ble power generation capacity but equally incentives to participate in the market, he added. tion capacity that led Spain to introduce capac- incentivise demand response mechanisms and ity payments," Feuk said. energy storages solutions. Renewables need to grow up In Germany, power plant operators are Prices for capacity payments should be As market integration progresses in Europe, lobbying for a market design that remunerates established at auction, while the impact of national support schemes for renewable energy backup capacity and there is also a 'weak cross-border power transmission lines should should be aligned and gradually phased out. business case' for rewarding flexibility. be considered before introducing CRM "Renewable generators should be requested schemes at a national level. to progressively enter the market and take Risk of overregulation As the decentralization of the power system scheduling, nomination and balancing obliga- "There is a risk that Europe will eventually go progresses, the role of power distribution net- tions," he said implying that the preferential back to overregulated energy markets but this works is becoming more complex and involves treatment of renewable energy through feed-in is a political decision that will be taken on a active management of the power system in tariffs and guaranteed offtake of power supply country by county basis," he said. addition to guaranteeing transparent and non- should soon become a thing of the past.

Gas to Power Journal March 2013 03 Spotlight on Turkey Enerjisa on the lookout for new gas supplies, expands gas-to-power capacity

Enerjisa is on the lookout for opportunities to increase its volumes of natural gas imports as it aims to more than double its power generation capacity to 8 GW to reach a minimum market share of 10 perent by 2020, a Turkish market source told Gas to Power Journal.

o achieve its target of 8 GW power acquisitions and has also filed applications Setting targets for 2020, Enerjisa said it will generation capacity, Enerjisa needs to expand capacity at its existing Bandırma add gas import and trading to its business port- to build or buy more than 2,000 MW (930 MW) and Izmit (120 MW) power plant," folio as it aims to grow into a leading regional Tof additional capacity, most of which the source said. energy company. will be gas-fired plants. Enerjisa's installed power generation capac- "No contract for additional pipeline gas "Enerjisa is considering power plant ity in Turkey amounts to almost 1,7000 MW, supply has been signed yet," the source said including 1,307 MW of com- but he indicated that Enerjisa is at an early bined-cycle gas-fired power stage of negotiations with various partners. plants in Kocaeli, Adana, More pipeline gas supplies as well as LNG Çanakkale, Mersin and Bandırm imports can help to reduce Enerjisa's depend- as well as some smaller sale ence on gas imports from Botas, Turkey's in- hydro, and wind assets. An addi- cumbent gas supplier. Enerjisa currently covers tional 2,000 MW is under con- 25 percent of its gas requirements from its own struction, and a further 1,500 MW sources but still needs to buy the lion's share is at a development stage. (75 percent) from Botas. A key driver behind Enerjisa's "Buying gas from Botas is cheaper than im- expansion plans is E.ON's recent porting LNG at current prices," the source said. purchase of a 50 percent share Spot LNG imports to Turkey in 2011 which puts it on par with the other dropped to about 14 percent of total gas con- main shareholder, the family- sumption amid surging global LNG prices, Enerjisa Bandırma plant near Antalya controlled Sabancı Group. down from 21 percent in 2010. Saudi’s ACWA, Turkey’s Eser spend $930m on Kirikkale combined-cycle power plant project

The Saudi energy company ACWA is venturing to invest in Turkey in partnership with Eser Holding to build a gas-fired combined-cycle power plant on a green field site in Kirikkale, central Anatolia. Realising the 800 MW plant project comes at a cost of up to US$ 930 million. he objective of the project partners is to it will also serve as a model for other Turkish close insights on project progress and financing develop the plant on a fast track basis to and Saudi Arabian firms willing to cooperate in at the upcoming 'Gas to Power Turkey' confer- enable power to be dispatched via bilat- different sectors," said ACWA Power President ence in Istanbul on March 14. Teral contracts and to the emerging spot & CEO, Paddy Padmanathan. South Korea's Samsung C&T is responsible market before the end of 2014. Ilhan Adiloglu, chairman of ESER Holding for engineering, equipment procurement, and Once operational, the Kirikale plant is added that the Kirikkale power plant invest- and for the construction of the complex, which intended to deliver competitively priced elec- ment not only carries importance for ACWA will be built at a cost of US$ 930 million. After tricity in a reliable manner while maximizing and ESER, but also serves as a role model for a 30-month construction period, the plant is the value of gas as a fuel resource, project other Turkish and Saudi Arabian firms willing scheduled to start delivering electricity to the partners said. to cooperate. Turkish power grid. Construction, commission "This power plant investment will not only Abid Malik, country head for business de- and operations of the plant are estimated to carry an importance for ACWA and ESER, but velopment in Turkey, ACWA Power will dis- create employment for some 2,000 people, Samsung said. "Samsung C&T is participating in the “This power plant investment will not only carry an Kirikkale project as a sponsor and contractor," importance for ACWA and ESER, but it will also serve Mehmet Oguz of Samsung C&T Turkey “ confirmed. as a model for other Turkish and Saudi Arabian firms A feasibility study for the project was com- willing to cooperate in different sectors” pleted in just 60 days after ACWA Power and ESER signed a Memorandum of Understand- ” ing (MoU) in January 2011. 04 Gas to Power Journal March 2013 Spotlight on Turkey Interview: GE invests over $500m in Turkey to date, plans to spend further $900m Turkey’s rising energy demand, spurred by a flourishing and expanding economy, is attracting investors and facilitators of new power plant projects.

n an interview, Mete Maltepe, General Using the latest technology, GE Manager at GE Power & Water – Turkey, 9F 7-series, combined with wind (24MW) and told Gas to Power Journal that the com- solar (up to 50MW) power, the Dervish plant Ipany Turkey GE Energy has invested over will generate 1,080 megawatt in combined $500 million in Turkey to date, with a further cycle operation with an efficiency of over 59 $900 million planned over the next three years. percent. “GE works on things that Turkey needs Another GE product high in demand is today, a strategy built on our six decades of their latest in aeroderivative technology, the partnership with the country. About 25 percent FlexAero LM6000. Over 50 of the gas turbines of the electricity generated in Turkey in 2011 are installed at various sites around the country. was provided by GE technology,” Maltepe The new LM6000-PC Sprint unit and an asso- said. As one of the first foreign investors in ciated steam turbine generator has increased Turkey, GE has been active in the country the installed capacity at the plant since 1948. at Bursa, operated by Bis Enerji Elektrik Ure- Natural gas is the primary fuel for power tim AS, from 410MW to 495MW. generation in Turkey and GE has provided its “Our customers need power fast and the 9F 5-series (9FB) turbines to an array of com- FlexAero LM6000 was developed as a solu- GE’s LM 6000 turbine bined-cycle projects. GE’s most recent projects tion combining breakthrough flexibility and ment in highly efficient and increasingly more includes the provision of turbines to various efficiency. Moreover, GE’s FlexAero can flexible combined cycle gas turbine plants,” gas-to-power projects such as the new plant operate without the need for water, which he said. in the Erzin district operated by Akenerji, the helps relieve the stress on water resources,” As for GE’s distributed generation business, Egemer Elekrik Uretim A.S. (Egemer) and the Maltepe explained. including Jenbacher gas engines and aeroderiv- cogeneration plant at Bursa, operated by Bis GE continues to monitor the growing ative gas turbines, Maltepe suggested this seg- Enerji Elekrik Uretim AS. gas-to-power sector closely with the aim of ment will be supported by demand for smaller enhancing its business and scale gas-fired plants from local municipalities Maltepe suggested GE’s wide or industries. range of turbines can offer key Rising demand for GE products is also solutions for Turkey’s energy expected from urban waste, especially when needs. it comes to environmentally sensitive applica- GE also sees opportunities in tion for gas engines, power plants and bio- the wind sector as the Turkish mass/biogas. “Jenbacher gas engines from GE government has plans to in- are a great fit here as they can run on either crease wind power capacity to natural gas or a variety of other gases such as 20GW by 2023 from just biogas, landfill gas, coal mine gas, sewage 2.3GW today. gas, and combustible industrial waste gases,” “We announced 43 wind tur- he said. bines deal – almost 100MW - In September 2012, GE entered a partnership with FINA Enerji last Novem- with Çalik Yedas to jointly develop a grid man- A GE turbine is installed at Bis Enerji Elektrik Uretim’s ber to power four projects agement system (SCADA/MS) in the Samsun, cogeneration plant in Bursa across the country with our Ordu, Amasya, Çorum and Sinop provinces. A “The Erzin combined cycle gas turbine 1.6-100 and 2.75-100 turbines. We also re- distribution management system (DMS) is to be power plant will generate 900MW of power, cently launched our new wind turbine 2.5-120, completed this year to ensure that whole grid enough to meet 2.6 percent of Turkey’s current GE's first wind turbine that integrates energy can be intertwined and monitored. electricity requirements. Once operational, the storage, advanced controls and forecasting al- Keen to bring its engineering competence plant will add 1.6 percent to Turkey's total gorithms while communicating seamlessly to the Turkish market, GE has inaugurated a installed capacity," Maltepe said. with neighboring turbines, service technicians Repair Development Centre in Gebze, one of and customers. This tall tower turbine will con- only four GE Centre’s of Excellence around Integrating wind, solar and siderably facilitate the integration of wind en- the world, in a joint initiative between Tusaş gas combined-cycle ergy to the grid,” Maltepe said Motor Sanayii A.Ş. (TEI) and GE Aviation. “We are continuously working with our partner “Turkey is pursuing a portfolio strategy for “Investing in R&D, GE is contributing METCAP on the first Integrated Renewables power generation, supporting multiple fuels to Turkey’s 2023 that focus on innovation and Combined-Cycle (IRCC) plant - the FlexEffi- such as coal, hydro, wind, solar, geothermal, technological development, Maltepe said. ciency50 Dervish project - located in etc…but natural gas will continue to be a key “Our efforts will increase due to the develop- Karaman,” Maltepe said. part of the mix. We expect continued invest- ments in the businesses we operate.”

Gas to Power Journal March 2013 05 INTERVIEW “No investment in new fossil plants in Eu Keeping existing fossil capacity in the market will “prove difficult” and European utilities will abstain fro low electricity demand, low CO2 prices and relatively high gas prices persists, forecasts Jørgen Kildahl

he power generation business of most The British government, for example, plans European utilities is under pressure. Op- to hold its first capacity auctions as early as erations of most peak-load power plants 2014 as part of a wider electricity market Tthat run on gas, but also some coal-fired reform; while operators in the Republic of plants, have become loss-making due to the ris- Ireland and Northern Ireland can claim capac- ing supply of subsidised renewable energy. In ity payments since 2005. consequence, power producers started to close or mothball loss-making gas-fired units, and Carbon taxes – a remedy intensify their urge on policy makers and regu- for the broken EU ETS? lators for a new power The seemingly unstoppable fall in carbon market design that would prices in the European Emissions Trading remunerate operators to System (EU ETS) is exacerbating the pressure guarantee the availability on spark spreads - the profit margin for gener- of fossil backup capacity. ating electricity by burning gas as opposed to “There will not be any coal (dark spread). investments in new con- “Carbon prices have fallen from around ventional power plant ca- €20/t to €4/t in only two years due to an over- pacity in Europe without supply in carbon allowance. Prices movements Jørgen Kildahl capacity mechanisms, as in the EU ETS are now purely driven by specu- long as the current mar- lation, and not by fundamentals. If nothing E.ON’s power plant in Irsching consisting of five unit ket situation with low electricity demand, low is done to tighten the amount of available CO2 prices and relatively high gas prices per- allowances, the price could fall to zero,” 7,000 MW of gas fired capacity since 2008, sist. “Investments based on energy-only mar- Kildahl warned. and these investments were made in the belief kets will not take place,” he said. E.ON believes that stronger measures are in a stable political framework and a function- “In the short-term we need to find a solution needed to correct the system than to temporar- ing carbon emission market. for existing power plants which suffer under ily withhold 900 million carbon emission "These expectations have, however, not current market conditions – but this discussion allowances from the market under the been met. Today we face falling electricity has just started. How to incentivise investment Commission’s back loading proposal. prices combined with reduced run-time hours in new fossil plants is a much more difficult “We are in favour of carbon trading, but it for gas-fired plants," Kildahl said, concluding long-term issue,” Kildahl told Gas to Power needs to work. If it doesn’t work, it is probably that operators have currently little, or no incen- Journal in an interview. better to put a tax on CO2, similar to the tive to keep plants operational unless the oper- In Germany, debates over a new power mar- carbon floor in UK, but at European level,” ational profitability of fossil power generation ket design are heating up in the run-up to the he said. assets is restored. general election in September, while proposals Although low carbon emission prices make for a coordinated, pan-European approach on power producers favour coal rather than gas Strategic reserve – capacity remuneration schemes (CRM) are still as a fuel to power their plants, there is no Bavaria’s interim solution at an infancy stage. imminent threat that the lights might go out Asked if the ‘Bavarian solution’ to put the Acknowledging that capacity markets, due to a lack of generation capacity. aging power plant units Irsching 3 and when introduced at a national level, help en- Reassuringly, Kildahl said that E.ON Staudinger 4 in a ‘strategic reserve’ is suffi- sure the country’s security of power supply, believes there is a sufficient level of installed cient to ensure supply security, Kindahl Kildahl underlined the need to coordinate power generation capacity in Central Western stressed the problem in southern Germany CRM schemes to reduce the risk of market dis- Europe to cover demand for years to come, but would be “less an issue of capacity than rather tortions in the increasingly integrated European he was quick to add that this assessment only a matter of power grid bottlenecks”. energy markets. holds true if operators are able to restore prof- Security of power supply in Bavaria is itability of our existing power plants. strongly affected by the nuclear phase-out due EU member states to the fact that five out of the eight decommis- have taken the lead Fossil back up capacity sioned nuclear plants were located in southern “E.ON has always advocated further market comes at a price Germany. The transmission lines from the liberalisation and European integration,” "The real question is: How much is the society North to the South are not yet constructed as Kildahl said. “However, we observe that an willing to invest in security of supply? needed. increasing number of EU countries pursue their “If the society needs back up capacity, we “Therefore, the grid operator asked us to own national energy policies such as operating are ready to provide it. But we cannot keep this keep Irsching 3 and Staudinger 4 in operation renewables outside the market or introducing security cushion in place and lose money at the for grid stability reasons. Let’s call it a good capacity markets without any alignment with same time," he stressed. interim solution for older power plants.” their neighbouring countries,” he criticised. Across Europe, E.ON commissioned around “But the real question now is how to deal

06 Gas to Power Journal March 2013 German Power Market Design urope without capacity mechanism” om building new plants without capacity mechanisms as long as the current market situation with l, board member of E.ON SE.

E.on keeps Irsching 5 running until March 2013 E.on and its partners agreed with the Bavarian State Government in early December to run the Irsching 5 plant until March 2013. “This gives time to find a solution for this modern and highly efficient asset," he said. “But at the moment we are seriously consider- ing mothballing it.” To confront the falling revenue contribu- tion of fossil power plant assets, E.ON is forging ahead with implementing a strategic repositioning process. Under a “cleaner & better energy” strategy, the company reevalu- ates the value contribution of its entire European power plant fleet. “We expect improving competitiveness and strict cost control to be a strong differentiator in the per- formance of utilities in the coming 10 years,” ts with a combined capacity of 1,850 MW Kildahl said. E.ON also wants to become “less Euro- with modern assets like Irsching 5,” he said. located in Bavaria - a region of reoccurring centric”, he said, and aims to “expand its pres- The gas turbine installed at the Irsching 5 unit capacity shortages. “Last year we had 200 ence beyond Europe like we did in Brazil and is one of Europe’s most efficient installations. redispatch measures on Irsching 4 and 5,” Turkey.” And last but not least, he highlighted With a capacity of 845 MW, it started opera- Kildahl said underlining the importance of the E.ON’s commitment to improve returns on tions in 2010. units to supply backup capacity at times of investment by making best use of the capabili- The irony is that the Irsching 5 unit is peak demand. ties of its employees. Gazprom jeopardizes gas-to-power markets in Europe - OIES

Russia’s gas export monopoly Gazprom is jeopardising the future commercial viability of gas-fired power generation in Europe by insisting on the principle of oil indexation, say Jonathan Stern and Howard Rogers, leading academics at the Oxford Institute of Energy Studies (OIES).

as supplies of oil-indexed gas are "We suggest that Komlev should simply sustained basis. significantly more expensive than acknowledge that he wants to retain traditional Maintaining gas prices at artificially high hub-based gas. This prompts long-term oil indexed contracts because they levels linked to oil has caused a damaging Gpower producers to idle gas-fired provide the highest price, and therefore the effect on European gas demand in the 2008-12 plants and turn to coal as the preferred fuel for highest return, for gas producers and ex- period, OIES academics argue, predicting a power generation in a move that contradicts the porters," they said, conceding this would be move to hub-based pricing is "inevitable" in European Union’s efforts to reduce carbon "an entirely logical and commercial position, liberalised markets because of competition and emissions. but not one which can be defended in analyti- consumer choice. In a response to the latest paper of cal or theoretical terms." While Gazprom adamantly insists on the Sergei Komlev, Gazprom Export's pricing OIES research does not argue that oil prices principle of oil-indexation, Norwegian and director, Stern and Rogers said "Komlev are, or will be in the future, irrelevant to gas Dutch gas producers no longer oppose market- fundamentally confuses the relationship prices, but they stress that in liberalised mar- based pricing and have introduced spot-price between oil and gas price levels with the kets hub-based gas can be periodically priced elements in their long-term contracts and by case for maintaining formal contractual above their oil-linked counterparts. Komlev, providing flexibility of supplied gas volumes linkage to oil product prices in long-term in contrast, said he does not believe hub-based in return for a fee for buyers with no access gas contacts." prices will rise above oil-linked levels on any to storage.

Gas to Power Journal March 2013 07 Technology & Innovation INTERVIEW: CCGT repowering allows Senoko to cut generation costs Following completion of its second stage repowering project at Senoko for over S$1 billion ($860 million), Singapore’s Senoko Energy believes it is now in an advantageous position for selling electricity to consumers at competitive prices. "The cost of generation per megawatt hour in these new units is significantly lower than the cost per generating megawatt hour in the old oil-fired units," President & CEO Brendan Wauters told Gas to Power Journal. he two newly installed F class turbines are more efficient and burn considerably less fuel when compared to the 30-year- Told oil-fired units. “This gives us a better position in the market. We need these machines to offer competitively priced electricity to consumers," he said. Electricity prices in Singapore are deregulated so companies have to compete for market share. "Under the 32 month long repowering pro- gramme, three 250 MW oil-fired units at Senoko Power Station were replaced with what Wauters describes as "highly efficient" combined cycle units (431 MW CCGT capacity) with a total Senoko Power Station capacity of 862 MW. The new 701 F4 gas tur- bines named CCP 6 and 7, respectively, were combined cycle capacity,” he said. veal details on the company’s gas supply arrange- provided by Mitsubishi Heavy Industries. The F-class combined cycle machines used ments. He did say however that the company has The fuel efficiency of Mitsubishi F-class gas at the plant are amongst the most efficient tur- good contractual relations with Malaysia's oil and turbine technology outperforms the pervious in- bine available on the market, according to gas giant Petronas and expects the existing stalled gas turbine, which helps Senoko achieve Wauters who expects the upgrade to lead to a piped natural gas arrangement with them will fuel savings. “Simply put, less fuel is burnt to gen- sizeable increase in installed capacity. “We be- be upheld for the full term of the contract. erate the same amount of electricity,” Wauters said. lieve that going forward, these machines will As a result of the repowering process, the set a benchmark and generate a major share Bridging gas arrangements Senoko Power Station now uses brand new Singapore’s overall power demand,” he said. in place turbines. The old boilers were taken down and The high utilisation of gas as a fuel and the To meet its rising gas demand Senoko has also replaced with new heat recovery steam genera- “repowering exercise” is also aimed at reduc- entered into some 'bridging gas' arrangements tors. Existing steam turbines, generators and ing carbon emissions savings by of up to 1 mil- with other suppliers but he noted that "once the transformers, together with the main auxiliaries lion tonnes per year, as the carbon intensity of LNG starts flowing, bridging gas will be phased were also refurbished. About 30% of the origi- combined cycle gas-fired technology is about out." Singapore's first LNG terminal is sched- nal equipment was re-used in order to keep 40 percent lower than that of oil-fired units. uled to be operational later this year. costs to a minimum. Senoko Power Ltd provides over a quarter The EPC consortium for the repowering No plans for Stage III repowering of Singapore’s energy needs; it imports natural project comprised of the Japanese companies Even after the upgrade, Senoko Power gas for power generation since 1992 and Mitsubishi, MHI and . Hitachi was Station still runs two further oil-fired units with launched a combined cycle plant in 1996. Gas praised by Wauters for executing the construc- a capacity of 500MW but Wauters said there makes up close to 90 percent of Senoko’s gen- tion works within time and budget despite the are no immediate plans for repowering these. eration mix and Walters underlined Senoko has 2011 Fukushima disaster which had affected "Our strategy and approach is to only add “consistently chosen natural gas combined their facilities. “There was a bit of an impact, capacity when the market needs it," he said. cycle technology as our technology of choice.” but they did a great job of recapturing the delay The logical next step would be to now go Senoko Energy is owned by an international they had incurred,’ he said. for Stage III repowering, but Wauters said the consortium comprising Marubeni (30%), GDF company "do not see that happening in the Suez (30%), Kansai Electric Power (15%), Licence to expand short to medium term." Kyushu Electric Power (15%) and Japan Bank Senoko has a license to install up to 3,300 MW The overriding concerns for power generat- for International Cooperation (10%). at the plant. “Currently this is the limit we have ing companies in Singapore such as Senoko Senoko Stage II to stay at,” Wauters said but he was quick to are high prices for gas and LNG in Asia which Repowering Timeline point out that even so, Senoko Energy will impact on electricity prices. "Fuel prices in Total construction period: 32 months remain Singapore’s the largest supplier in Singapore are almost exclusively, directly EPC contract signing: October 2008 terms of both overall and gas-fired capacity driven by international commodity prices Site hand-over: December 2009 (2,800 MW) until at least 2015. “And most based on indices," he pointed out. First gas turbine on base: July 2011 importantly, we will stay at par with one of the With the new units coming online, Senoko's First fire: January 2012 generators as the largest in terms of ‘F’ class gas needs increases but Wauters did want to re- COD: August 2012

08 Gas to Power Journal March 2013 Proven in 15,000 EOH and in commercial operation

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Tried, tested, and proven under real operating condi- Highest flexibility tions in Irsching, Germany, the new SCC5-8000H The plant’s daily start/shutdown and cycling capabili- single-shaft power plant with the innovative Siemens ties as well as the fast start-up concept – with up SGT5-8000H gas turbine has set a pioneering world to half a GW in half an hour – support intermediate record for combined cycle plants – with an energy load requirements and foster high efficiency and low efficiency of over 60 percent. emissions in part-load operation. With a combined- cycle power output of 570 MW at 50 Hz and 410 MW Environmentally responsible power generation at 60 Hz, the single-shaft SCC-8000H series represents With its extra two percentage points of efficiency a new foundation for sustainable success. compared to standard F-series combined-cycle power plants, every SCC5-8000H single-shaft power plant prevents approximately 43,000 metric tons of carbon- dioxide emissions annually.

Highest customer value Siemens plant solutions provide an optimal balance between capital costs, plant performance, and opera- tional and maintenance considerations. Thanks to its fully air-cooled design, the SGT-8000H series gas turbine features the highest possible reliability and availability, drastically reducing life-cycle costs. The Benson HRSG achieves steam temperatures of 600 °C required to break through the 60 % efficiency barrier. As a result, single-shaft SCC-8000H series power plants offer you maximum value and long-term investment security.

Answers for energy. Technology & Innovation Siemens to supply H-Class gas turbine to new power plant in Turkey Siemens has won a contract to supply a single-shaft power island with a H-Class turbine, with up to 61% operational efficiency, to power Cengiz Enerji's proposed gas-fired combined-cycle power plant (600 MW) in Samsun, Turkey. he project will be configured as a single- supply a power island including a SGT5- "Our new plant in Samsun will meet Cengiz shaft plant capable of producing full 8000H gas turbine, an SST5-5000 steam tur- Enerji's requirements for a flexible power plant load in as little as 30 minutes after six bine and a SGen5-3000W generator. The with short startup times and fast load capability Thours shutdown. Plants of this kind are company will also provide a Benson heat re- and will be the perfect complement to our power designed for 250 starts per year and can react covery steam generator, the electrical system, plant fleet," said Ӧmer Mafa, CEO of Cengiz very quickly to grid fluctuation, adapting their the SPPA-T3000 control system, and auxiliary Enerji. Cedigaz Enerji's new and very flexible output by more than 35MW within a minute's and ancillary systems. Additionally, Siemens plant is expected to outperform most of Turkey's time to meet changing power requirements. has signed a long-term service contract for the installed power generation capacity. "We are Commissioning is scheduled for the beginning equipment, which will help reduce emissions happy to join forces with Cengiz to execute the of 2015 and it is due to be the most efficient and ensure the reliability of the plant. The total most efficient power plant project in Turkey," fossil fuel fired plant in Turkey. order volume including the long-term service said Peter Gisbert, Direktor Gas Turbine Power In accordance with the deal, Siemens will contract stands at almost €300 million. Plant Solutions. MAN Diesel & Turbo launches Shell aims to grow 35/44G engine engine segment hell aims for a growing engine oils seg- MAN Diesel & Turbo has launched the 35/44G engine as its ment by launching a new sour-gas com- latest addition to its four-stroke power portfolio. With an patible lubricating oil. "There could be a electrical efficiency of 47.2 percent, the newly developed Otto 10% sales growth in the stationary gas gas engine is available for Combined Heat & Power (CHP) or can S engine oils segment this year," Richard be installed in a combined cycle mode jointly with an MAN Holdsworth, Global Brand Manager for Shell steam turbine of the MARC series. Power Lubricants told Gas to Power Journal. Shell Lubricants is releasing a new addition he 35/44G comes in a V-type version to the Mysella product range of gas engine lu- with 20 cylinders and an output of bricants called Mysella S5 S which is specifi- 10,600 kWm, (10,200 kWm). Its rated cally designed for engines such as four-stroke Toutputs – 530 kW per cylinder for 50 Hz stationary engines that operate on sour gas. Re- power generation and 510 kW for 60 Hz power cent sales wins for the new product include generation – give the 35/44G "best-in-class customers in the US, UK and Germany. power density among gas engines", according "The product Mysella S5 S is targeted at en- to MAN Diesel & Turbo. gine operators who use sour gas as a fuel," "Essentially, the MAN 35/44G offers cus- Holdsworth said. Sour gases are generated from tomers a compact, clean and flexible power so- bio digestion, sewage decomposition and land- lution for base-load, peaking and cogeneration fill. In each process the gases contain contami- The 20V35/44G engine on the MAN Diesel & plants and meets requirements for total cost of Turbo test bed in Augsburg, Germany nants like acids or siloxanes which can cause ownership for energy production with fast engine damage and reduce oil life, he explained. ramp-up times and long times between over- while emissions of sulfphur oxides, soot, and "Shell Mysella S5 S is designed to combat hauls," said Martin Kalter, VP for Power Plant particles are virtually non-existent. these issues," he stressed. Reacting to a rising Sales at MAN Diesel & Turbo. 35/44G is a lean-burn engine whereby the use of sour gas, Shell is seeking to improve the The 35/44G engine includes a single-stage mixture of air and gas in the cylinder is lean, so product performance of Mysella S5 S with a turbocharger with variable turbine area (VTA) more air is present in the cylinder than is view to increasing the value that can be gained technology. The spark-ignited unit, which is needed for complete combustion. With leaner by using the product, Holdsworth added. ideal for combined cycle and combined-heat combustion, the peak temperature can be re- Gas engines have relatively high single and power configuration with waste-heat utili- duced which leads to less NOx production. cycle efficiency, typically above 40%, and a sation, complies with all current emission lim- "Higher output can be reached while avoiding relatively low level of harmful exhaust gas its solely by in-engine measures. knocking and increasing efficiency," according emissions. They also have a proven ability to A key advantage of gas-fired power plants to MAN Diesel & Turbo. run on different qualities of biogas, although lies in low emissions coupled with a high level The engine is also equipped with the safety this may require more maintenance than run- of efficiency. Due to the lower carbon content and control system SaCoSone to guarantee reli- ning the engine on natural gas. of the fuel, gas engines emit around 25% less able engine operation with an optimum opera- After 3,670 running hours with Shell Mysella CO2 than diesel engines. Nitrogen oxide tion range between knocking and misfiring. All S5 S, the cylinder liners were in excellent condi- (NOx) emissions are roughly 80 percent lower, cylinders can be regulated individually. tion with very little wear of the honing pattern.

10 Gas to Power Journal March 2013 Technology & Innovation

Summit, Linde develop commercial-scale gas-to-power plants with CCS

Seattle-based Summit Power Group and German technology company Linde have teamed up to develop commercial-scale natural gas-fired power plants that will capture up to 90% of carbon emissions.

typical gas-fired power plant with emissions; in many U.S. oilfield locations, in gas-fired plants would otherwise emit, just CCS is intended to produce 250 MW contrast, operators inject the captured carbon as it is with coal-based plants," he stressed, of net electric power and will emissions for enhanced oil recovery which suggesting "Linde has the capability to Acapture up to 750,000 tons of CO2 allows them to produce an additional 1.5 to achieve this and is ready to deploy it at annually. 2.5 million barrels of oil per year. commercial scale." Summit and Linde said they have identified The venture into developing natural gas several geologically suitable locations in the Dash for gas – not enough based carbon capture is built on a long-stand- United States for this new type of power plant, to cut emissions ing cooperation between the Munich- and where the ultra-low carbon electric power can "In the U.S. and abroad, the electric power Seattle-based companies. be sold to utilities and large consumers. sector is making a 'dash for gas,'" said Donald Both Summit and Linde are already devel- Paul Hodel, Summit's Chairman Emeritus and oping power projects with CCS where the CO2 Selling the captured carbon for former U.S. Secretary of Energy. can be either geologically sequestered in enhanced oil recovery Adding a note of caution, Linde board depleted gas fields and deep saline formations, Revenues earned from using captured CO2, member, Prof. Dr. Aldo Belloni, said that or injected into depleting oilfields. e.g. for enhanced oil recovery, reduce the envi- merely increasing reliance on natural gas Two major coal gasification projects are ronmental cost premium that CCS inflicts on would not be a sufficient carbon-reduction currently set up by Summit, namely the Texas conventional power plants. strategy for the global power industry. Clean Energy Project (TCEP) in the US and CCS policies outside of the U.S. favour de- "It is still necessary, valuable, and emi- the Captain Clean Energy Project (CCEP) in pleted gas fields and deep saline formations as nently feasible to capture and geologically the UK. Linde has worked as a long-term oper- geological "sinks" for the captured carbon sequester the carbon dioxide that natural ations and maintenance provider to TCEP. “Complementarity between renewables and gas is crucial” – Dong Energy

Enhancing the complementary use between renewables and gas is crucial to achieve Europe’s targets on ensuring sustainable, secure and affordable energy supply, Dong Energy, Shell, GE and First Solar have formed an Energy Partnership, Jasper Vis, Head of Regulatory Affairs, DONG Energy said at a Gas to Power Journal conference Brussels.

he Energy Partnership between renew- To incentivise power producers to switch the third ETS phase] is a good step forward, able energy and gas is a brand novel from coal to gas as the primary fuel source in but he warned it is might not be enough to re- way of unifying the industry to help power generation, a structural reform of the EU store the functionality of the carbon market. Treach Europe's 2050 de-carbonization ETS is needed to prop up price levels of carbon "If the ETS is not giving the right incentive and energy goals, according to Vis. emission permits. for a switch from coal to gas power generation, "We are in a transformation period whereby "The carbon price should be at least €35/ton then other measures such as a coal tax or a car- highly intermittent energy supply from wind just to make modern gas plants competitive bon price floor should be considered," he said. and solar requires flexible backup capacity, and with old coal plants," Vis said. In his view, the Ultimately, renewables and gas are expected natural gas being the fuel best suited to provide backloading proposal [to withdraw and delay to emerge as key energy sources to cover that," he said. of up 900 million carbon emission rights into swings in power demand. "Combining variable renewable energy and the flexibility of gas is key to Europe's low-carbon energy future," he stressed. “We are in a transformation period whereby highly When launching the Energy Partnership in intermittent energy supply from wind and solar requires late 2012, the founding companies – Dong Energy, Shell, GE and First Solar – said they “ flexible backup capacity, and natural gas being would welcome the participation and support the fuel best suited to provide that" of other companies to increase their negotiating position in the European decision making process.

Gas to Power Journal March 2013 ” 11 Gas to 2ndPower Annual Conference Turkey Challenges and Solutions for a Secure Energy Future Wednesday 13th - Thursday 14th March Conference Highlights Pera House, Istanbul • Keynote address from H.E. Hasan Murat Mercan, Contributions from leading industry organisations and experts including: Deputy Minister, Ministry of Energy and Natural Resources • East-West energy corridor • Gas transit and supply and role of Turkey as a turntable Orhan Duran, Atıf Kır, H. Hakan Ünal, Karsten Fuelster, Burak Baştacı Korkut Öztürkmen, for gas supply to Europe PETFORM Ministry of Privatization BOTAŞ International EnerjiSA OMV Gas and Administration Finance Corporation Power • Energy policy and demand growth outlook • The road to market liberalization Fatih Kolmek, Levent Özcan Caner, Dennis Volk, Mehmet Demirel David Tonge, • Ensuring energy security Energy Market Ministry of Energy and International Energy Rolls Royce IBS Research & Regulatory Authority Natural Resources Agency Consultancy • Turkish natural gas network development and investment • Growth prospects of Turkey's electricity market Irmak Bademli, Yeşim Bezen, Andi Aranitasi, Ali Güleç, Emre Hatem, • Project investment in power Marcus Scholz PwC Bezen & Partners European Bank for Deloitte Consultancy Garanti Bank generation assets Reconstruction and GE Development • The economics behind gas- fired power plant projects • Case studies of new gas-fired power generation projects Mustafa Karahan, Arif Aktürk, Anduvap Servet Akgün, Cafer Eminoğlu, Abid Malik, Energy Traders Naturgaz Statkraft Trading, University of ACWA Power • Role of independent power Association Turkey Yıldırım Beyazıt producers • CCGT operations and technology

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