Dr.-Ing. Ingo Jeromin, Advisor to the CTO Mainova AG, Verona, May 27, 2014

Bringing gas fired power plants back into the game – how to trigger the fuel switch

CEDEC Gas Day 2014 1 Curriculum Vitae – Ingo Jeromin

Study of industrial engineering / electrical power engineering at Technischen Universität (Dipl.-Wirtsch.-Ing.) area of specialisation

 Power systems

 Environmental Economics

Phd at Institute Electrical Power and Energy – Technische Universität Darmstadt Prof. Dr.-Ing. Gerd Balzer Research Focus: Optimization of maintenance strategies

Since March 2012: Assistant to the Chief Technology Officer , Mainova AG Dr.-Ing. Peter Birkner

Zahlreiche Veröffentlichungen zu energiewirtschaftlichen und technischen Themen M1 - Dr.-Ing. Ingo Jeromin Mainova AG is a municipal owned utility based in

Overview – Mainova …  Has its headquarters in Frankfurt  Supplies customers with gas, water, heat and electricity  Is amongst ‘s top 10 regional supply companies Focus area for power plants and  Owns and operates grids and power domestic customers plants  Has some European business  Has about 2 800 employees  Has a turnover of nearly 2 billion €  Is mainly owned by the City of Frankfurt  Has major stakes e.g. in o The municipal network Thüga AG

o The gas upstream and trading Focus area for company Gas Union GmbH gas and electricty grids, heat and water supply o The water upstream company Hessenwasser GmbH

Focus area for business customers

3 The production site

Production sites at 1 2 Rhein-Main-Area

5 HKW West HKW Messe

3 4

4 7 2 1 3

HKW HKW Mitte

5 6 7 6

MHKW Heiz-Kälte-Werk Biomasse-Kraftwerk Nordweststadt Fraport Fechenheim Heizkraftwerke Blockheizwerke Biomasse-Kraftwerke The German production site

1 2 Production sites Germany

13 GuD-Kraftwerk Bremen1 Windpark Havelland1

1 3 / 4 / 5 / 6 7 / 8

2

3 4 10 7 Windparks Siegbach, Hohenahr, Laufwasserkraftwerke 8 Remlingen, Niederhambach Griesheim & Eddersheim2 6 5 9 10 / 11 / 12 / 13 11

9

12

GuD-Kraftwerk PV-Anlagen Gas- und Dampf- Wind- Wasser- PV-Anlagen Irsching1 Polditz, Pfenninghof, kraftwerke kraftwerke kraftwerke In der Kultur, Eggebek1

1) Beteiligungen 2) Im Besitz des Wasser- und Schifffahrtsamts Aschaffenburg Agenda

1 Introduction – The German „Energiewende“

2 Technical consequences

3 The energy market

4 The power plant of the future

5 Summary

6 1 The German “Energiewende” is based on technical as well as on ethical pillars

Step 1 („Small Energiewende”) Instantaneous shut down of about 50 % of the nuclear power plants after the tragedy of Fukushima and subsequently, phasing out nuclear energy Step 2 („Big Energiewende”) Introduction of an energy system based on volatile renewables, tough energy savings and electricity imports by 2050. A big question mark is put behind coal and CCS On a national level capital cost will replace fuel cost (imports)

Share of renewables in the national electricity consumption

Source : National Energy Strategy 7 1 From an economic point of view “Energiewende” assumes increasing costs for fuel

Total costs of 1 energy system Conventional system

2

Pay back of Role of (US) shale gas? capital 3 Low fuel cost A Timeframe of ? transition B System transformation from „fossil“ to „renewable“ Dependency from imports?

2013 Time

1 Significant price increase A Constant technical The break even point is progress strongly influenced by the 2 Moderate price increase cost increase of fossil B Significant technical 3 Low price increase energies, capital costs and progress available technology 8 1 What does it mean from a technical point of view to create a system based on volatile renewables?

The German energy system shall be Most likely based on growth of renew- Source: BMU able capacity . Volatile energy sources

. With a low energy density Planned growth of renewable . And high generation gradients capacity

A huge power of renewable energy sources has to be installed which covers a huge surface + Additionally, a controllable and highly flexible back-up generation Conventional back-up capacities: park is still necessary and has to be . Gas (CCGT) maintained . Coal, lignite Operation time of the conventional (back- up) system is reduced compared to today . Flexible CHP The transportation issue has to be fixed with residuum generation (≈ 30 %) 2 A portion of 35 % of renewable Energy means the doubling of the installed power capacity

Percentage of power generation

5 % 18 % 35 % 80 %

Power Generated Power

(conventional) has to be: Import / Export Import / Transported (Location of Available power plants Available

Maximum consumption source and sink) Pumped hydro storages 122 % Dealt with (Consumed, 100 % exported, stored or destroyed)

50 % + Note: The national energy concept Assumes substantial efficiency 2010 2020 2050 2000 increase and energy savings 0 % but also significant renewable Installed capacity of renewables energy imports! 10 2 Above a 50 % proportion of renewable energy sources costly reversible energy storage systems are inevitable

Infrastructure (power plants, storages) without grid The first 35 % share of RES in the electricity Target system requests one 900 % additional infrastructural unit on top of the exiting 800 % power plants (generation) Energy efficiency All other 18 % shares of 700 % RES in the electricity system request two 600 % additional infrastructural 500 % 2020: units (generation plus + 22 Bill. €/a storage systems) 400 % Technology Demand Side Manage- 2011: ment (DSM) and spatial 300 % + 14 Bill. €/a DSM and spatial interconnection allow roughly an additional 200 % interconnection 15 % RES share without storage systems. 100 % Fuel demand Share of 0 % 0 % 20 % 40 % 60 % 80 % 100 % renewables 11 2 Reinforcement of grid versus storage – Consideration of total cost

Starting point

New generation and grid extension

What is less expensive, doubling of grid capacity with New generation and use of storage small power plants or use of a storage?

12 3 Electricity price indices in Germany – Controllable power needs a value

Electricity price indices in Germany Price level in the year 2005 = 100% (Source: Statistisches Bundesamt, destinatis.de) [%]

Controllable power needs a value!

Power exchange Private households Year Commercial customers Customers with specific contracts 13 3 Controllable power – Prices for coal and gas fired power plants

Clean Dark Spread

Clean Spark Spread 3 Reflections on the electricity price building mechanism

Conventional Renewable Energies (*): Energies (**):

Capital costs plus Energy-Only-Market Capital costs fuel costs Price setting according to marginal Sun and Wind Import of fuel and costs and demand are for free export of capital Non-controllable Emission of Preferred feed-in carbon dioxide Current prices at the power exchange: 3 … 4 ct/kWh Full costs: Controllable 8 … 9 ct/kWh Full costs: 5 … 7 ct/kWh

* Gas and hard coal fired power plants ** Solar and onshore wind generation 15 3 Reflections on the energy-only market model

. Merit order based on short term marginal costs (OPEX plus CO2 price) . Long term full costs in theory achievable through higher price defined by the price setting power plant

. In practice only depreciated power plants can survive in this market model as long as no major reinvestments are necessary(missing money problem)

. There is no bonus for controllable power (capacity market). The only possible additional income is based on the participation in the frequency-power-control market

. The energy only market has – at least temporarily – to lead to very high energy prices in order to allow controllable power plants to earn there long term full costs

Price Demand Generation 1 New RES

Requested 2 Decommissioning CHP price corridor Decommissioning 3 Actual price hard coal 1 2 3 Power

16 4 Bidirectional coupling of media as well as cooperation amongst industries is forming the smart system of the future

RES Electrical Energy

- Organic - Electrolyser Rancine H2 Process - Sabatier Process CH4

- Electrical Heat Heater - Heat Pump

RES G2P G2P G2H G2P H2P P2H P2G Natural Gas G2H G2H CHP CHP CCGT Gas- Steam Turbine Gas Turbine boiler Control … But also Fuel Cell or μCHP 17 4 Principles of a successful implementation of Energiewende

Technical subsidiarity Solving the challenge of energy balancing at the place where it occurs by respecting the Principle of Pareto (concentric structures) E.g.: building – quarter / town – city – region – country – EU

Technical diversification Combination of different generation patterns with different consumption patterns in order to achieve system stability and partial adequacy

E.g.: solar generation – wind generation – biomass – CHP; commercial area – housing areas – industry; city – country

Technical modification Using and supplementing existing infrastructure in order to support Energiewende E.g.: Using district heating systems and gas grids as storages 18 4 Thermal and electric coupling of CHP power plants increases efficiency and flexibility

Hard coal Oil Waste Bio mass

Natural gas

Heat Electricity

Gas Gas Steam Steam Steam Steam turbine turbine turbine turbine turbine turbine Electricity Electricity Electricity Electricity Electricity Electricity

Heat Heat Heat Heat Heat Heat

19 4 The future flexibility of the CHP system of Frankfurt - Decoupling of heat and power generation

Electrical power [MW] 500

400

300 Minimum flexibility Area of flexibility of the thermally and electrically 200 connected system

Feasible through 100 electric boiler and steam boilers

Thermal power 0 [MW] 0200 400 600 800 1 000 20 4 The urban power plant has the potential to become the future energy storage hub

Thermal storage with Electrical electric heating Grid

Heat District H2 generation heating Storage Temperature control H2O

Up to 40% H2 is acceptable ~ for the gas turbine Electrolyser for H2 generation Carbon- dioxid, Natural water gas grid Closed gas cycle Control logic

21 5 Summary – Future elements of Energiewende

Installed block capacity of power plants

1,5 GW Thermal power plants

Traditional energy business

Off-shore wind farms Energiewende 1.0

Renewable power plants Energiewende 2.0

Integrated Energiewende 3.0 generation Time

Today

22 5 Summary – Opportunities for existing CHPs

There are a multitude of opportunities to bring gas fired power plants back into the market

. capacity market eg. „Integrated-Market-Model“ of the Thüga-Gruppe

. Stimulation of the CO2 market

. Taxes (CO2, fuel, else) . Emission limits for existing power plants

. Subsidies

. Permit of price spikes

23 Dr.-Ing. Ingo Jeromin, Mainova AG Verona, Italy, May 27, 2014

Thank you for your attention!