future energy costs: coal and gas technologies

KIC InnoEnergy · Clean Coal and Gas Technologies01

Clean Coal and Gas Technologies

Future Energy Costs: Coal and Gas TechnologiesHow technology innovation is anticipated to reduce the cost of energy in Europe from new gas CHP plants and coal plants retro-fitted with upgraded technology

KIC InnoEnergyClean Coal and Gas Technologies

Authors

Giles Hundleby, Director, BVG AssociatesBruce Valpy, Managing Director, BVG AssociatesKate Freeman, Junior Associate, BVG Associates

Coordination of the study

Marcin Lewenstein, Thematic Leader, Clean Coal and Gas Technologies, KIC InnoEnergy Poland PlusJakub Miler, CEO, KIC InnoEnergy Poland Plus

Section 2 on coal and gas in the EU policy framework was commissioned by KIC InnoEnergy and written by Maciej Bukowski and Aleksander Sniegocki of WiseEuropa, Warsaw.

BVG Associates

BVG Associates is a technical consultancy with expertise in wind and marine energy technologies and other clean energy systems. The team has deep experience of modelling technology impacts on cost of energy for wind, marine and solar energy systems. BVG Associates has over 150 combined years of experience in the clean energy sector, many of these being “hands on” with system manufacturers, leading RD&D, purchasing and production departments. BVG Associates has consistently delivered to customers in many areas of the clean energy sector, including:•Marketleadersandnewentrantsinwindandmarine

renewables supply chain and UK and EU wind farm development

•Marketleadersandnewentrantsincleanenergycomponentdesign and supply

•Newandestablishedplayerswithinthecleanenergysectorof all sizes, in the UK and on most continents, and

•TheDepartmentofEnergyandClimateChange(DECC),RenewableUK, The Crown Estate, the Energy Technologies Institute, the Carbon Trust, Scottish Enterprise and other similar enabling bodies.

KIC InnoEnergy

KIC InnoEnergy is the Innovation engine for sustainable energy across Europe. The challenge is big, but our goal is simple: to achieve a sustainable energy future for Europe.Innovationistheanswer.Newideas,productsandsolutionsthatmakearealdifference,newbusinessesandnewpeopletodeliverthemtomarket.

At KIC InnoEnergy we support and invest in innovation at every stage of the journey – from classroom to customers.Withournetworkofpartnerswebuildconnections across Europe, bringing together inventors andindustry,entrepreneursandmarkets,graduatesandemployers, researchers and businesses.

Weworkinthreeessentialareasoftheinnovationmix:•Educationtohelpcreateaninformedandambitiousworkforcethatunderstandswhat sustainability demands and industry needs – for the future of the industry.

• InnovationProjectstobringtogetherideas,inventorsand industry in collaboration to enable commercially viable products and services that deliver real results.

•BusinessCreationServicestohelpentrepreneursand start-ups who are creating sustainable businesses to grow rapidly to contribute to Europe’s energy ecosystem.

Together,ourworkcreatesandconnectsthebuildingblocksforthesustainableenergyindustrythatEuropeneeds.WithourheadquartersintheNetherlands,wedevelopouractivitiesthroughanetworkofofficeslocatedinBelgium,France,Germany,theNetherlands,Spain, Portugal, Poland and Sweden.

Future Energy Costs: Coal and Gas TechnologiesHow technology innovation is anticipated to reduce the cost of energy in Europe from new gas CHP plants and coal plants retro-fitted with upgraded technology

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Executive summaryAs an innovation promoter, KIC InnoEnergy is interested in evaluating the impact of innovations on the cost of energy from various clean and renewable energy technologies. This analysis is critical in understanding where the biggest opportunities and challenges are from a technological point of view.

KIC InnoEnergy is publishing a set of consistent analyses of various technologies that help in the understanding and definition of innovation pathways that industries could follow to maintain thecompetitivenessoftheEuropeancleanandrenewableenergysectorintheglobalmarket.

KIC InnoEnergy has developed credible future technology cost models for four renewable energy generation technologies (onshore and offshore wind, solar photovoltaic and solarthermalenergygeneration)usingaconsistentandrobustmethodology.Thepurposeofthesecostmodelsistoenabletheimpactofinnovationsonthelevelisedcostofenergy(LCOE)tobeexploredandtrackedinaconsistentway.

This report documents the anticipated future cost of energy for new gas combined heat and power (CHP) projects and coal plant upgrades reaching their financial investment decisions(FIDs) in2020and2025. Itadoptstheestablishedmodellingapproachtoexplorethe impactofarangeoftechnicalinnovationsandothereffectsonbaselinecasesatthestartof2016.Forthe coal plants, because these already exist, the model considers the impact of retro-fitting technology innovationsatdifferentFIDyears to theexisting infrastructure.Acoalplantafterretro-fitting is referred to here as a clean coal plant.

ThereportalsocoverstheroleoftheEUinregulatingenergymarketsandinregulatingemissions,energy policy trends in the EU covering climate change and carbon dioxide emissions, energy security and air quality.

Industry input has been provided by subject matter experts nominated by KIC InnoEnergy. These experts provided input on innovations and their impacts, and review and challenge of the modelling through the project.

KIC InnoEnergy · Clean Coal and Gas TechnologiesFuture Energy Costs: Coal and Gas Technologies 06 07

Attheheartofthisstudyisacostmodelinwhich‘elements’ofbaselineTechnologyTypes(thepowerplants)areimpactedonbyarangeoftechnologyinnovations.TheseTechnologyTypesarea225MWeunitofacoalpowerplant(alsocapableofburningotherfuelswithappropriateinvestment)anda500kWegascombinedheatandpower(CHP)plant.Thelevelisedcostofenergy(LCOE)wascalculatedforprojectsreachingFIDin2016(thebaseline),2020and2025.The combined impacts of anticipated technology innovations over the period for these two TechnologyTypesarepresentedinFigure0.1andFigure0.2.

ThestudyconcludesthatLCOEsavingsofabout17%and27%in2025areanticipated ingasCHPandcoalplantsrespectively.WithbothTechnologyTypes,numerousinnovationsgenerateimprovementsinLCOEthroughchangesincapitalexpenditure(CAPEX),operationalexpenditure(OPEX)andannualenergyproduction(AEP).

Gas CHP plant

Figure0.3showsthatwellovertwo-thirdsoftheLCOEsavingsanticipatedinthegasCHPplantarisefrominnovationsinenginedesign,fuelsandcombustion(thefirstfourinnovationsinthefigure).

For the gas CHP plant, 12 technology innovations have the potential to cause a substantialreductioninLCOEthroughachangeinthedesignofhardware,softwareorprocess.Technologyinnovations are distinguished from non-technology innovations, which are addressed separately asOtherEffects.Manyother technical innovationsare indevelopmentandsosomeof thosedescribedinthisreportmaybesupersededovertime.Overall,however,weanticipatethattheLCOEreductionshownwillbeachieved.Inmostcases,thepotentialimpactofeachinnovationhasbeen moderated downwards in order to give overall levels of cost of energy reduction consistent with past trends. The availability of such a number of innovations with the combined potential to reduceLCOEmorethanshowngivesconfidencethatthepicturedescribedisachievable.

Tocalculatea realisticLCOE,costs for increasingemissionscharging inexcessof thebaselinevalueshavebeenconsideredinadditiontotechnologyinnovations.Theeffectsofsupplychaindynamics, pre-FID risks, insurance, contingency or transmission have not been considered. Costoffinanceisassumedtobeatafixedrateof10%forallprojects.

ImprovementsinthecombustionchamberforleanmixturesareanticipatedtoreduceLCOEbyabout4%intheperiod.Savingsareduetoinnovationsincombustionchambershapeand/ortheuseofpre-chambers.TheseinnovationsdriveLCOEdownthroughincreasedAEP.TheseeffectsmakeimprovementsinthecombustionchamberforleanmixturesthelargestcontributortotheoverallreductioninLCOE.

Improvements in the engine mechanical design enable increased power output, utilisation and AEP,whichmorethanoutweightheCAPEXandOPEXincreasesrequiredandareanticipatedtoreduceLCOEbyabout3%.

ImprovementsintheuseofalternativegaseousfuelsareanticipatedtoreduceLCOEbyabout3%intheperiod.SavingsareduetoOPEXreduction.

Figure 0.1 Anticipated impact of all innovations for the gas CHP plant with FID 2025 compared with FID 2016.

100

75

50

25

0

-25

% CAPEX OPEX Net AEP LCOESource: BVG Associates

Figure0.2 Anticipated impact of all innovations for the coal plant compared at FID 2025 with baseline.

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Figure 0.3 Anticipated impact of technology innovations for a gas CHP plant with FID in 2025, compared with a baseline gas CHP plant with FID in 2016.

LCOE for a CHP plant with FID in 2016Improvements in combustion chambers for lean mixtures

Improvements in engine mechanical designImprovements in use of alternative gaseous fuels in IC engines

Improvements in power per cylinder from IC enginesImprovements in thermodynamic cycles in IC engines

Improvements in structural materialsImprovements in ignition systems

5 other innovationsLCOE for a CHP plant with FID in 2025

70% 75% 80% 85% 90% 95% 100%Source: BVG Associates


Innovations in power per cylinder from internal combustion (IC) engines are anticipated toreduceLCOEbyabout2%intheperiod.Savingsareduetoinnovationsinthecombustionairboosting system to enable increased fuel-air mass per cycle and increased AEP.

Other innovations in other areas are anticipated to reduce LCOEby a further 5%, through amixtureofCAPEXandOPEXreductions,andAEPincreases.

There are innovations not discussed in detail in this report because their anticipated impact is still negligibleonprojectsreachingFIDin2025.Amongthesearetheuseofliquefiednaturalgasfuel,combined thermodynamic cycles, fuel-cell hybrids, alternatives to internal-combustion engines andadvancedemissionstreatmentsystems.TheunusedpotentialatFIDin2025ofinnovationsmodelled in the project, coupled with this further range of innovations not modelled, suggests therearefurthercostreductionopportunitiesbeyond2025.

Coal plant

Figure0.4showsthatwelloverhalfoftheLCOEsavingsanticipatedforthecleancoalplantin2025arise from innovations in themodification,pre-treatmentandcombustionofnewfuels(thefirstthreeinnovationsinthefigure).

Forthecoalplant,16technologyinnovationsweremodelledashavingthepotentialtocauseasubstantialreductioninLCOEthroughanimprovementinthedesignofhardware,softwareorprocess. Technology innovations are distinguished from non-technology innovations which are addressedseparatelyinOtherEffects.Manyothertechnicalinnovationsareindevelopmentandsosomeofthosedescribedinthisreportmaybesupersededovertime.Overall,however,weanticipate that the level of cost of energy reduction shown will be achieved. In most cases, the potential impact of each innovation has been moderated downwards in order to give overall levels of cost of energy reduction consistent with past trends. The availability of such a number ofinnovationswiththepotentialtoreduceLCOEmorethanshowngivesconfidencethatthepicture described is achievable.

AsfortheCHPplant,theeffectsofsupplychaindynamics,pre-FIDrisks,insurance,contingencyortransmissionhavenotbeenconsidered.Costoffinanceisassumedtobeatafixedrateof10%for all projects.

Introduction of thermal pre-treatment of biomass and waste-based fuels is anticipated to reduce LCOEbyover9%comparedtothebaselineplantinFID2025.SavingsareduetoOPEXreductionsenabledbygreateruseofthesecheaperfuels.ThiseffectmakesthisthelargestcontributortotheoverallreductioninLCOE.

IntroductionofhybridfuelcombustionisanticipatedtoreduceLCOEbynearly6%comparedwiththe2025baselineplant.SavingsaredueOPEXreductionsenablingfurtherincreaseintheuse of cheaper fuels.

ImprovementsinfuelmodificationandswitchingareanticipatedtoreduceLCOEbynearly6%comparedtothebaselineplantinFID2025.SavingsaredueOPEXreductionsthroughtheuseof additives to reduce emissions and other combustion waste products and through enabling further increase in the use of cheaper fuels.

Improvements inpreventativemaintenanceareanticipatedtoreduceLCOEcomparedtothebaselineplantinFID2025.SavingsareduemainlytoreducedOPEXandincreasedAEPthroughthe avoidance of unexpected failures and downtime.

OtherinnovationsinotherareasareanticipatedtoreduceLCOEbyafurther8-9%,throughamixtureofCAPEXandOPEXreductions,andAEPincreases.

There are other coal plant innovations not discussed in detail in this report because their anticipated impact is still negligible onprojects reaching FID in 2025. Among these are thephysical pre-treatment of fuels and carbon-dioxide abatement methods. The unused potential at FIDin2025ofinnovationsmodelledintheproject,coupledwiththisfurtherrangeofinnovationsnotmodelled,suggeststhereare furthercost reductionopportunitieswhen lookingto2030and beyond, if coal plants are still a long-term part of the energy mix then.

Figure 0.4 Anticipated impact of technology innovations for a 225MW unit of a coal plant with FID in 2025.

LCOE for a coal plant with FID in 2025 without innovationsIntroduction of thermal pre-treatment of biomass and waste-based fuels

Introduction of hybrid fuel combustionImprovements in fuels through modification and switching

Improvements in preventive maintenanceImprovements in power plant start-up systems

Improvements in boiler flexibilityImprovements in treatment of coal combustion byproducts

9 other innovationsLCOE for a clean coal plant with FID in 2025 with innovations


Future Energy Costs: Coal and Gas Technologies 10

Glossary

AEP. Annual electrical energy production.Anticipated impact. Termusedinthisreporttoquantifytheexpectedmarketimpactofagiven innovation. This figure has been derived by moderating the potential impact through theapplicationofvariousreal-worldfactors.Fordetailsofmethodology,seeSection2.Baseline. Term used in this report to refer to “today’s“ technology, as would be incorporated intoagasCHPprojectwithFIDin2016,orasexistsinatypicalcoalplanttoday,(andinthefutureifitremainsunmodified).Capacity Factor (CF). Ratio of annual energy production to annual energy production if the powerplantisgeneratingcontinuouslyatratedpowerforthewholeyear(8,760hours).CAPEX. Capital expenditure.FEED. Front end engineering and design.FID. Final investment decision, defined here as that point of a project life cycle at which all consents, agreements and contracts that are required in order to commence project constructionhavebeensigned(orareatornearexecutionform)andthereisafirmcommitment by equity holders and in the case of debt finance, debt funders, to provide or mobilise funding to cover the majority of construction costs.Generic WACC.WeightedaveragecostofcapitalappliedtogenerateLCOE-basedcomparisons of technical innovations.LCOE.Levelisedcostofenergy,consideredhereaspre-taxandrealinstartof2016terms.Fordetailsofmethodology,seeSection2.MW.Megawatt.MWh. Megawatthour.OMS. Operations,plannedmaintenanceandunplanned(proactiveorreactive)serviceinresponse to a fault.OPEX. Operationalexpenditure.Other Effects. Effectsbeyondthoseofpowerplantinnovations,suchassupplychaincompetition and changes in financing costs.Potential impact. Term used in this report to quantify the maximum potential technical impact of a given innovation. This impact is then moderated through the application of variousreal-worldfactors.Fordetailsofthemethodology,seeSection2.Scenario-specific WACC. Weighted average cost of capital associated with a specific TechnologyTypeandyear.Usedtocalculatereal-worldLCOEincorporatingOtherEffects.Technology Type. Termusedinthisreporttodescribearepresentativepowerplant(suitedtoagivenapplication)forwhichbaselinecostsarederivedandtowhichinnovationsareapplied.Fordetailsofmethodology,seeSection2.WACC. Weighted average cost of capital, considered here as real and pre-tax.WCD. Workscompletiondate.

Table of contents

Executive summary 5

1. Introduction 12

2. Coal and gas policy in the EU 15

3. Methodology 24

4. Gas CHP plant 29 4.a.Baseline 29 4.b.Innovationsinfuelhandling 32 4.c. Innovations in the combustion system 33 4.d.Innovationsintheenergyconversionsystem 36 4.e.Innovationsinemissionstreatment 37 4.f.Innovationsinpowerplantoperation,maintenanceandservice 37 4.g. Summary of innovations and results 40

5. Coal power plant 43 5.a. Baseline 43 5.b. Innovations in fuel handling 45 5.c.Innovationsinthecombustionsystem 47 5.d.Innovationsintheenergyconversion(steamandelectrical)system 49 5.e.Innovationsinemissionstreatment 52 5.f. Innovations in power plant operation, maintenance and service 53 5.g. Summary of clean coal innovations and results 55

6. Conclusions 59

7. About KIC InnoEnergy 60

AppendixA.Furtherdetailsofmethodology 62 AppendixB.Datasupportingtables 67

Listoffigures 70 Listoftables 72



1. Introduction1.1. FrameworkAs an innovation promoter, KIC InnoEnergy is interested in evaluating the impact of visible innovations on the cost of energy from various clean and renewable energy technologies. This type of analysis is critical in understanding where the biggest opportunities and challenges are from a technological point of view.

KIC InnoEnergy is publishing a set of consistent analyses of various technologies, to define and help industries understand the innovation pathways they could follow to maintain the competitiveness oftheEuropeancleanandrenewableenergysectorworldwide.Inaddition,itseekstohelpsolvethe existing challenges at the European level: reducing energy dependency; mitigating climate changeeffects;andfacilitatingthesmoothevolutionofthegenerationmixforthefinalconsumers.

With a temporal horizon out to 2025, this work includes a range of innovations thatmightbe further from themarket thannormally consideredbyKIC InnoEnergy. This constitutesanapproach that is complementary to KIC InnoEnergy technology mapping which focuses on innovationsreachingthemarketintheshort/mid-term(uptofiveyearsahead).

1.2. Purpose and backgroundThe purpose of this report is to document the anticipated future cost of energy from two TechnologyTypes-coalplantswithupgradesandnewgascombinedheatandpower(CHP)plants - reachingtheirfinancial investmentdecisions (FIDs) in2020and2025,byreferencetorobustmodellingoftheimpactofarangeoftechnicalinnovationsandOtherEffectsonbaselinecasesatthestartof2016.ThisworkisbasedonmethodologiesestablishedforKICInnoEnergybyBVGAssociates(BVGA)overfourpreviousprojectscoveringonshoreandoffshorewind,solarphotovoltaicandsolarthermalenergygeneration.ThefocusisontheEUmarket.

Industry input has been provided by subject matter experts nominated by KIC InnoEnergy, and who have provided input on innovations and their impacts, and review and challenge of the modelling through the project. These subject matter experts are:

Gas combined heat and power experts•Dr.Eng.JacekKalina,InstituteofThermalTechnology,SilesianUniversityofTechnology•Dr.Eng.MarcinLiszka,PresidentoftheManagementBoard,Exergon•Dr.Eng.PawelRaczka,DepartmentofMechanicalEngineering,WroclawUniversityofTechnology•Dr.Eng.JakubTuka,ChiefSpecialistforEnergyTechnologies,ExergonClean coal experts•HenrykKubiczek,ViceDirectorofResearchandDevelopment,EDFPolska•Associate Prof. Dr. Eng. Halina Pawlak-Kruczek, Institute of Heat Engineering and FluidMechanics,WroclawUniversityofTechnology•AssociateProf.Dr.Eng.SylwesterKalisz, InstituteofPowerMachinesandEquipment,Silesian

University of Technology

ThestudydoesnotconsidertherelativemarketshareofthetwoTechnologyTypesconsidered.Theactualaveragelevelisedcostofenergy(LCOE)inagivenyearandregionwilldependonthemix of all projects with FID in that year.

1.3. Structure of this reportFollowing this introduction, this report is structured as follows:Section 2. Coal and gas policy in the EU. This Section describes the role of the EU in regulating energymarketsand in regulatingemissions,energypolicy trends in theEUcoveringclimatechange and carbon dioxide emissions, energy security and air quality.Section 3. Methodology. This Section describes the scope of the model, project terminology and assumptions, the process of technology innovation modelling, industry engagement, and thetreatmentofriskandhealthandsafety.

Section 4. Gas CHP plant.Section 4.a. Baseline. This Section summarises the parameters relating to the baseline power plant for which results are presented. Assumptions relating to this power plant are presented in Appendix A.The following five sections consider each element of the power plant in turn, exploring the impact of innovations in that element.Section 4.b. Innovations in fuel handling. This Section incorporates fuel treatment and handling before and after arrival at the power plant, and includes all processes before combustion and the use of alternative fuels.Section 4.c. Innovations in the combustion system. This Section incorporates the combustion system itself, pistons, cylinder heads, fuel admission systems, the ignition system and the combustion control aspects of the control system.Section 4.d. Innovations in the energy conversion system. This Section incorporates changes in other parts of the energy conversion system in the power plant and includes hybridisation with other energy sources, thermodynamic improvements and increase in power density.Section 4.e. Innovations in emissions system. This Section incorporates primary and secondary(postcombustion)emissionsreductionsystemsandapproaches.Section 4f. Innovations in operation, maintenance and service. This Section incorporates improvements for reliability as well as design and remote operation and diagnostics.Section 4.g. Summary of impact of innovations for clean gas. This Section presents the aggregate impactof all innovations, exploring the relative impactof innovations indifferentelementsofthegasCHPplant.

15Future Energy Costs: Coal and Gas Technologies 14

Section 5. Coal power plant.Section 5.a. Baseline. This Section summarises the parameters relating to the baseline power plant for which results are presented. Assumptions relating to this power plant are presented in the Appendix.The following five sections consider each element of the power plant in turn, exploring the impact of innovations in that element.Section 5.b. Innovations in fuel handling. This Section incorporates fuel treatment and handling before and after arrival at the power plant, and includes all processes before combustion and the use of alternative fuels.Section 5.c. Innovations in the combustion system. This Section incorporates the combustion system itself, improvement in combustion control for start-up and output flexibility, hybrid fuel combustion systems and combustion waste-heat recovery.Section 5.d. Innovations in the energy conversion system. This Section incorporates changes in other parts of the energy conversion system in the power plant and includes the steam circuit, steam turbine, boiler and downstream waste-heat recovery.Section 5.e. Innovations in emissions system. This Section incorporates primary and secondary(postcombustion)emissionsreductionsystemsandapproaches.Section 5.f. Innovations in operation, maintenance and service. This Section incorporates improvements for reliability, preventative maintenance as well as remote operation and diagnostics.Section 5.g. Summary of impact of innovations for clean coal. This Section presents the aggregate impactof all innovations, exploring the relative impactof innovations indifferentelements of the coal power plant.

Section 6. Conclusions. This Section includes technology-related conclusions for both types of power plant.

Appendix A. Details of methodology. This appendix discusses project assumptions and provides examples of methodology use.Appendix B. Data tables. This appendix provides tables of data behind figures presented in the report.

2.CoalandgaspolicyintheEU2.1. IntroductionEuropean energy systems have entered a period of rapid transition. This transition is driven by technological and policy responses to three major inter-connected challenges: avoiding dangerous climate change; ensuring energy security for the EU; and fostering economic competitiveness in the EU.

Electricity generation based on fossil fuels is currently a significant element of most European energy systems, and for many countries domestic production of lignite, hard coal, and natural gas still contributes to energy independence. In its current form, this method of electricity generation is not consistent with the long-term goals of EU energy policy. Coal- and gas-based power generation will have to undergo the greatest changes as a part of energy transition in the EU, affecting both the technologies used and their roles in the system.

TheEUpolicy framework sets the stage for this transition,both in short and long term. It isthusimportanttotakeintoaccountitscurrentformandlikelyfutureevolutionwhenexploringthe development of novel energy solutions based on fossil fuels. This will ensure that current innovationeffortwillmeetfuturemarketdemand,notonlyintheEU,butalsoglobally.Successfulimplementation of new technologies in Europe provides an opportunity to lead by example anddevelopproductsandexpertisetosellinothermarkets.

This Section presents the EU role in regulating energy sector in the member states. Subsections 2.3and2.4provideanoverviewofcurrent legislative framework in thisareaandanticipatedfuturedynamicsoftheEUpolicyarecoveredinsubsection2.5.TheSectionconcludeswithadiscussiononimplicationsforenergytechnologiesbasedoncoalandgas(subsection2.6).

2.2. Coal and gas-fired plants in the EU energy systemThe EU electricity production is diverse, with a limited share for each type of energy technology, and the dependence on fossil fuels varies significantly by member state.


While numerous central European countries rely on domestic lignite deposits, natural gas and hardcoal are vital elementsof energymixesacross theEU.Only countrieswitha significanthydropowerpotentialand/orambitiousnuclearenergyprogrammeshavebeensofarabletominimise their reliance on the fossil fuels to produce electricity.

While new energy technologies based on wind and solar energy are being deployed in the EU, so far the issue of supply variability has not been addressed. Thus, there is still a need for flexible back-upplants,whichshouldbe in linewithclimateandenvironmentalobjectivesoftheEUpolicy.

While the EU as a whole imports most of the natural gas and hard coal it uses, the level of energy dependence also varies among the member states. Despite the phase-out of hard coal mininginmostoftheEU(withPolandremainingthebiggestproducer),numerousEuropeancountries such as Germany, the Czech Republic, and Greece rely on their domestic lignite resources. Several member states have enough natural gas deposits to cover a significant partofdomesticdemandorevenexportthefuelabroad(forexample,theNetherlandsandDenmark). Thus, while renewables and energy efficiency are crucial for ensuring energysecurity for the EU as a whole, there is also a rationale for further development of coal and gastechnologieswhichwillallowtouseEuropeanindigenousfossilfuelsinthecost-efficientand sustainable way.

2.3. The EU role in regulating the energy sectorTheLisbonTreaty,whichcameintoforceinDecember2009,introducessharedcompetencein the area of energy policy between the member states and the EU. This means that both the states and the EU institutions have an impact on the regulations shaping the energy sector.Thespecificprovisionsaregiveninarticle194oftheTreatyfortheFunctioningoftheEuropean Union.

The EU’s aims in the energy sector are to:•ensurethefunctioningoftheenergymarket•ensure security of energy supply in the EU•promoteenergyefficiencyandenergysavingandthedevelopmentofnewandrenewable

forms of energy, and•promotetheinterconnectionofenergynetworks.

The Treaty assumes that the member states retain the right to determine their own energy mix. Theunanimous support from the states is required forenvironmentalpolicies affectingdomestic energy use as well as energy taxation. Thus, while the EU institutions have a mandate to pursue the development of single energy market and decarbonisation of the Europeanenergy system, they cannot directly determine the energy choices on national level. In practice, however, the European climate and environment protection legislation is a complex set of rules that significantly limit viable energy options in accordance with the broader sustainable development goals of the EU. Furthermore, the EU has an exclusive competence in the area of competitionprotection.Thismeansthatithasafinalsayonthestateaidrulesandisabletoblockdomestic support schemes in the energy sector if they are seen as harming the competition on theinternalmarket.OtherareasoftheEUintervention–suchasR&Dsupportorcohesionpolicy– may also influence energy sector by redirecting the public funds towards development of preferred elements of the energy mix.

As a result, the EU regulatory framework in the areas of energy, climate, environment andcompetitiondefinetheprospectsfortheenergysectorinEurope,asshowninFigure2.1.Powergeneration from fossil fuels – notably hard coal, lignite, and natural gas – faces the greatest challenges. In order to meet the stringent environmental targets, this part of the energy sector has to transform itself while facing ever more competitive pressure from low-carbon sources.

2.4. Key European regulations affecting coal and gas-fired plants

2.4.1. EU emissions trading schemeTheEUEmissionTradingScheme (EUETS) is a key instrument for achieving the long-termgreenhouse gas (GHG) reduction targets in the EU. By setting an absolute cap on thegreenhousegasesemittedbythesectorscovered(includingpowergeneration)andallowingemitters to trade the resulting limited number of emission allowances, it creates the price signal to reduceGHGemissions.Graduallydecreasing the totalGHG limitby reducing thenumber of available emission allowances each year increases the pressure to lower emissions fromtheenergysectoroverthelongterm.From2013to2020,thecapisreducingby1.74%peryear.From2021onwards,theannualreductionwillriseto2.2%inordertomeetthegoalof40%GHGcutsintheEUby2030.

In the short and medium term, the relevance of EU ETS as a driver of power sector decarbonisation isunclear,due tooversupplyofallowanceson themarket.Thishasdrivendown thecostsofCO

2emissions and weakened the price signal to invest in low-carbon solutions. The EU has

respondedbypursuingstructural reformof thesystem. Itskeyelement– themarketstabilityreserve (MSR)–will startoperating in2019.Eachyear,12%ofallowances incirculationwillberemovedfromthemarkettoMSRifthesurplusofallowancesishigherthanapredefinedlevel(833millionallowances).Whenthesurplusfallsbelow400millionallowances(ortheirpricerisessharply),100millionallowancesaccumulated in theMSRwillbe releasedback to themarketeachyear.Thus,theMSRisaquantity-basedmechanismwhichaimstostabilisethepriceofGHGemissions. It remains to be seen whether and to what extent this goal will be achieved.

Figure2.1Key European policy areas influencing the energy sector.

Source: WiseEuropa

Competitionrules

Energy

Environment/ Climate

Stronger Member States’

Stronger EU competency


EU ETS is also intended to provide a source of funding for low-carbon technologies. Regulations state that at least half of the revenue from national auctions should be used for funding climate changemitigationandadaptationmeasures.Inaddition,after2020,400millionallowanceswillbe used to create an innovation fund, which will support deployment of innovative low-carbon technologies in the energy sector and wider industry. It will operate in a similar way to the currentNER300programme,whichisfocusedonlyonlow-carbonenergygeneration.

EU ETS will finance a modernisation fund, which will support the energy sector transition in member states with relatively low GDP per person. Most of these countries have alreadysecured derogation for their energy sectors, allowing free allocation of allowances to electricity generators in exchange for investments to modernise and reduce carbon emissions. In principle, all these funds may be used for the development and scaling up of technologies for low-carbon production of energy from coal and gas technologies, including carbon capture and storage (CCS)solutions.Thecurrent lowpriceofallowances,however,doesnotprovideanadequatepricesignalforthistechnologydevelopmentasshowninFigure2.2.Thus,whileEUETSreducesincentives for the development of conventional coal- and gas-fired- power plants in the long term, itdoesnotprovide sufficient support for thedevelopmentof cleanalternativesbasedonfossilfuelstoproceedasquicklyasitcould.Theresultisinvestmentuncertaintyandslowerprogress in deployment of technologies including CCS in Europe.

2.4.2. Air qualityEUclimatepolicyisnottheonlydriverofenvironmentalregulationsaffectingtheprospectsofcoal- and gas-based power generation in the EU. Another important factor, especially in short and medium term, is EU legislation related to air quality. The EU Industrial Emissions Directive (IED)setsmandatoryemissionsstandardsforlargeindustrialinstallations,includingpowerplants,asshowninTable2.1.Thestandardsconcerningharmfulsubstancessuchassulphurornitrogenoxides apply to existing installations from January 2016.Numerous derogations give utilitiesenough time to retrofit their power plants according to new rules, however. These include plants that have a limited lifetime and are expected to be decommissioned at the latest by the end of 2023,smallsystemsisolatedfromtheenergynetwork,andplantsfocusedonprovidingusefulheattopublicnetworks.Thederogationsendbetween2020and2023.

TheIEDintroducesthemandatoryuseofbestavailabletechniques(BAT),whichmeanstheones that offer the greatest (currently feasible) reduction of pollutant emissions and theirimpact on the environment. The BATs are defined in BAT reference documents (BREFs),whichwillbecomelegallybindingintheregulatoryframeworksetbytheIED.BATsforlargecombustion plants will be applicable to coal- and gas-powered plants. They are expected not only to tighten the existing standards (such as those for emissions of sulphur andnitrogenoxides),butalsointroducenewstandardsforsubstancespreviouslynotcoveredbyenvironmental regulations. This will result in further retrofit needs for existing power plants, as well as increased investment costs.

Utilities that decide to invest in retrofitting existing coal- and gas-fired power plants face the riskofnot recovering the costsof compliance tonewairquality regulations. This isduetotwokeyfactors.Firstly,revenuesfromthewholesaleelectricitymarketdonotcoverthe fixed costs of conventional plants. While this issue may be eventually addressed by theenergymarketreform,thereisthesecondfactor:unclearpositionofretrofittedpowerplants inthefuturemeritorder(supplycurve)duetopotential increases intheemissionallowance prices and further growth of renewables. The higher the variable costs of coal and gas plants relative to other installations in the system, the lower their capacity utilisation. This, in turn, increases the cost of compliance to emission standards per unit of energy produced.

2.4.3. State aid rulesThe EU Guidelines for State Aid1 isthekeydocumentdescribingstateaidrulesrelatedtotheenergysector.Fromtheperspectiveofcoal-andgas-basedgeneration,thetwokeychaptersarethoserelatedtogenerationadequacy(capacitymechanisms)andCCSsupport.Whileguidelinesfor the latter are relatively clear, allowing both operating and investment aid for CCS if it covers

1 GuidelinesonStateaidforenvironmentalprotectionandenergy2014-2020,EuropeanCommission,28June2014

Figure2.2The role of the EU emissions trading system in stimulating low carbon investments.

Long-termGHG target visibilty

Funding for innovations

Price signal

Low-carbon investment

Uncertain price developments

Source: WiseEuropa

Table2.1EU air quality regulations for coal and gas-fired power plants.

Regulation Timeline

Industrial Emissions Directive (IED) Entry into force: 6 January 2011

Compliance deadline for existing plants: 1 January 2016

IED derogations Transitional National Plans 1 January 2016 – 30 June 2020

Limited life time derogation 1 January 2016 – 31 December 2023

Small isolated systems 1 January 2016 – 31 December 2019

District heating plants 1 January 2016 – 31 December 2022

BAT conclusions concerning 4 years after publication

Large Combustion Plants (LCP) Estimated compliance deadline: 2021

Source: IED Directive, WiseEuropa


the additional costs of the installation compared to conventional plant, the Commission’s approach to the generation adequacy is more nuanced.

Accordingtotheguidelines,variousformsofcapacitymechanisms(providingremunerationto utilities for maintaining availability of power plant capacities in order to ensure security of supplyonelectricitymarket) shouldbe introducedonly ifotheroptions forbalancingsupplyanddemandhavefailed,asshowninFigure2.3.Specifically,thisincludesusingthepotential of interconnections between the national energy systems and providing incentives forelectricityusers to reduce their consumptionat timesofpeakdemand (demandsideresponse).Furthermore,beforeaddingnewmechanismstothemarket, improvements totheexistingstructuremustbeexplored.Oneexampleisremovingpricecapsonwholesaleelectricitymarkets,whichshouldprovideadditionalincentivestomaintainexistingpowerplants and invest in new installations. From the point of view of coal- and gas-based power plants this means that they will have to compete with alternative options for providing securityofsupplyinelectricitymarkets.

2.5. Prospects for EU policy

2.5.1. Climate policy after COP21Since2005andtheestablishmentoftheETS,theEUhasdemonstratedthatitisstronglycommittedtoitsclimategoals.TheCOP21Parisagreementhasreinforcedthiscommitment,signalling that global and EU climate policy will be tightened over time. Although the negotiations that concluded during COP21 took a bottom-up approach (each partydeclaring itsownclimatepolicytargets), theglobalpolicyshift towardsdecarbonisationhas been confirmed. In consequence, calls for upward revision of EU climate and energy targets for 2030 have re-emerged. These calls have been largely ignored so far, as thedebate on climate policy within the EU remains largely driven by the internal discussions on ETS reform.

Thekeyunresolvedquestionconcernstheroleofthesystemintheexpecteddecarbonisationof Europe’s power system and industries. At the same time, the need for technology specific policies for renewable energy systems, energy efficiency, nuclear or clean coal is oftenunderlined. In this context the Paris agreement should be seen as a confirmation rather than an enhancement of European ambitions in the climate protection area. In the future, actions of third parties including the U.S. and China may put additional pressure on Europe to adopt more far-reaching commitments.

The long-term viability of coal- and gas-based electricity generation depends on the technological innovations allowing them to stay in the merit order not only if the EU ETS price significantly increases, but also if even near-100% carbon emissions reductions targets areadopted. While the EU provided funding for pilot CCS projects, low ETS prices and investment uncertainty have resulted in much slower progress than expected in this area. Various measures to increase the pace of CCS development in Europe are considered for the near future, but no actionshavebeenundertakenuptodate.

Ontheotherhand,withouttechnologiessuchasCCS(andotherssuchascarboncaptureandutilisationandCO

2enhancedoil recovery),achieving theEUclimate targets for2050maybe

either costly or technically not feasible, especially if process emissions in industry are takenintoaccount(suchasproducedfromcementorchemicalplants).Thepotential forachieving“negative emissions” from biomass and CCS plants creates opportunities for future research and innovations within this area.

2.5.2. Energy securityWhilethecurrentEUframeworkprioritises renewablesandenergyefficiencyas long-termcontributors to improved energy security, the role of indigenous fossil fuels (includingcoalandshalegas)isalsorecognisedbytheCommission,providedtheiruseisin-linewithclimate goals and environmental standards. There are major technological and geopolitical arguments for their continued use in the European energy system even if the ambitions reduction targets are accepted.

Coal- and gas-fired power plants are still expected to contribute to security of supply, providing necessary flexibility and predictability for the future energy system. This may change if technological alternatives in the form of cost-effective energy storage are developed. It is, however, considered unlikely that thiswill happen on a system-widescalebefore2030.Therefore,theEUhasundertakennumerousstepstowardsincreasinggas supply security, including supporting infrastructure developments, promoting regional approaches to resolving gas supply distortions, and increasing the transparency of intergovernmental agreements in energy. On the other hand, coal supplies areconsidered secure despite the significant dependence of the EU as a whole on imports, thanks to thediversity in thepotential suppliersandhighmarket liquidity.Becauseofthat,domestichardcoalsourcesarenotperceivedbymostoftheparties(includingtheCommissionandmostmemberstates)asasignificantcontributortoenergysecurityforthe continent.

2.5.3. Cost of energy, air quality and single energy marketEnergyaffordabilityisoneofthecoreobjectivesofEUenergypolicy.However,itco-existswithother goals, notably climate protection and security of supply.

Figure2.3EC approach to the capacity mechanisms assessment.

Preferred options Last resort option

Reforming energy onlymarket

Capacity mechanismsDemand side

response

Interconnections

Source: WiseEuropa


This means that minimisation of energy costs is constrained by reaching other targets. In practice,thisisseenintheEUpreferenceformarket-basedmechanismswhichareexpectedtoallowcost-efficientachievementofsustainable,secureenergysupply.

Two converging processes are visible:1.Developmentofanewenergymarketdesign,and2.DeepeningenergymarketintegrationundertheThirdEnergyPackage.

Thesearebothintendedtoincreasecost-efficientlythesecurityofsupplywithintheEUand–atthe same time – support gradual decarbonisation of the European power system. A consequence oftheseprocessesis likelytobethatcoal-andgas-firedplantswill facemorecompetitionineachmarket,throughexternalenergysupplyandinternallythroughhigherlevelsofrenewableand increased demand response.

At the same time, clean coal technologies and CCS for gas are included in the long-term energy decarbonisation pathways by the EU and other international institutions, such as the InternationalEnergyAgency(IEA).Whilemoreexpensivethanconventionalcoal-andgas-fired power plants, they significantly reduce the costs of the deep decarbonisation policies in the energy sector and therefore remain an attractive alternative option as part of the future power mix. In this context more innovative approaches to the integration of clean coal and gas technologies with renewable generation are required in the longer term to achieve least-costoperationof thewholeenergy system (for example to avoid very lowcapacityutilisationratesatCCSplants).

An important element of EU energy and environmental policy is air quality. Policy focus in this respect isgraduallymoving from industrialemissions (coveredby IED) towardspollutionfrom other sources, such as the transport and residential sectors. In this context, electrification of transport and development of district heating may contribute to air quality improvement, while at the same time increasing demand from the power sector. As such, this offers newopportunities for fossil-fuel-based technologies, provided they are able to reduce theirGHGemissions significantly. This again shows the importance of CCS and other clean coal and gas technologies for their future in the EU energy system.

CHPproductionisoneofthetechnologicaloptions,providingreducedfuelinputsandCO2

emissions.TheuseofCHP ispromotedbytheEnergyEfficiencyDirective,whichrequiresa cost-benefit assessment of CHP introduction whenever there is a potential for suchinvestment (usually when there is new investment or substantial refurbishing of powerplant,industrialfacilityordistrictheatingnetwork).Nevertheless,coal-andgas-basedCHPplantsareunder significant regulatoryandmarketpressure. They facechallenges relatedboth to electricity and heat production, such as low wholesale electricity prices, new emission standards and the need to compete with distributed heat production, which is often not subject to similar climate and environmental standards. Furthermore, in its Heating and Cooling Strategy communicationreleasedinFebruary2016,theEuropeanCommissionfocusesmainlyonrenewables-basedCHP,suchasbiomass-firedorgeothermalinstallations.Nevertheless,therearepotentialsynergiesbetweenCHPandCCStechnologieswhichmayimprove the competitiveness of coal- and gas-fired plants because the unit costs of capture and storageofCO

2 are reduced, as the investment and operating burden is spread over

higher total energy production.

2.6. Implications for coal and gas-fired energy technology developmentTheEuropeanregulatoryframeworkputspressure inthreewaysonconventionalcoal-andgas-based power plants:

•Increased costs related to climate and other environmental externalities•Limitedpossibilitiesforreceivingstateaid,and•Increasedcompetitiononthesingleenergymarket.

Global climate policy leads in the same direction. After the COP21 Paris summit in 2015, itregained its momentum, casting doubts on the long-term prospects of unabated fossil fuels in theglobalenergymix.Theseprocessesmakeconventionalcoal-andgas-basedpowerplantslargely incompatible with the European and global climate policies in the long-term. Further developmentofrenewablesandenergyefficiencymeasurestogetherwiththeincreaseofETSallowance prices will gradually decrease the capacity utilisation factors of existing and planned conventional coal- and gas-fired plants.

Atthesametime,fossilfuelpowerplantshavedistinctivetechnologicalfeaturesthatmakethemuseful, elements of the modern energy systems. Therefore, the energy transition foreseen by European policy should not be seen as just a threat for fossil fuels, but also an opportunity to redefine the place of coal- and gas-fired plants in the broader energy system.

There is an urgent need for low-carbon innovations, as only affordable, near zero-emissiontechnologiesarelikelytosecuremarketshareforelectricityproductionafter2030.Developingsolutions for near zero-emission fossil fuel plants will significantly decrease the cost of energy transition, stabilizing the energy system and providing much-needed security of supply.

Marketliberalisationandintegrationmeanthatinnovativecoal-andgas-basedsolutionsshouldaddressnotonlytechnical,butalsomarketchallenges,suchaslowcapacityfactorsdrivingupthe average total cost of electricity production. Developing affordable low-carbon optionsfor fossil fuel use is also important from the global perspective. It will contribute to increased ambition of climate policies beyond the EU, which is necessary to meet ambitious goals set by the Paris agreement.


3.Methodology3.1. Scope of modelThe basis of the model is a set of baseline elements of capital expenditure (CAPEX),operational expenditure (OPEX) and annual energy production (AEP) for two differentrepresentative Technology Types under given conditions, impacted by a range of technology innovations. Analysis is carried out at two further points in time (years ofFID),thusdescribingvariouspotentialpathwaysthattheindustrycouldfollow,eachwithan associated progression of LCOE. Themodel has been successfully used in previousprojects delivered by BVGA for KIC InnoEnergy.

While the baselines each represent a relevant current plant, the innovation impact modelling andmoderationprocessresultsinanaverageimpactonLCOEforprojectswithFIDintheyearunder consideration.

There is significant variability in costs between projects, due to both supply chain and technologyeffects,evenwithintheportfolioofagivenpowerplantdeveloper.Assuch,anybaseline represents a wide spectrum of potential costs and it is accepted that there will be actualprojectsinoperationwithLCOEssignificantlyhigherandlowerthanthoseassociatedwith these baselines.

NotethatthebaselinesandmethodologiesareslightlydifferentforthegasCHPplantandthecoal plant, as described below. There are two reasons for this:

•CHPplantsgeneraterevenuefromheatsales.Therevenuefromthisisincludedbyoffsettingitagainst fuel usage costs.•CHPplantsareconstructedasnewprojectsateachFIDyear,whilethecoalplantsareexisting

infrastructure in most countries and are considered as such in this study. For the coal plants, because these already exist, the impact modelled is that of retro-fitting technology innovations atdifferentFIDyearstotheexistinginfrastructure,andassumingafixedendoflifein2035.Acoal plant after retro-fitting is referred to here as a clean coal plant.

3.2. Project terminology and assumptions

3.2.1. AssumptionsA detailed set of baseline assumptions were established in advance of modelling. These are presented in Appendix A, covering technical and non-technical global considerations and power-plant-specific parameters.

3.2.2. TerminologyForclarity,whenreferringtotheimpactofaninnovationthatlowerscostsortheLCOE,termssuch as reduction or saving are used and the changes are quantified as positive numbers. When these reductions are represented graphically or in tables, reductions are expressed as negative numbers as they are intuitively associated with downward trends.

Changesinpercentages(forexample,losses)areexpressedasarelativechange.Forexample,ifinnovationreduceslossesby5%fromabaselineof10%,thentheresultinglossesare9.5%.

3.3. Innovation impact modelling – gas CHP plantThebasisofthemodelisanassessmentofthedifferingimpactoftechnologyinnovationsineach of the power plant elements on the baseline power plant, as outlined in Figure 3.1. This Section describes the methodology for analysis of each innovation in detail. An example is given in Appendix A.

The baseline power plant is defined in detail in Section 4.a, and represents a typical modern gas CHPplantforprojectsreachingFIDatthestartof2016thatproduces700kWofheatand500kWof electricity.

Whereaninnovationchangeselectricitygenerationefficiencyandthereforeheatoutput,theplantisscaledtodeliverthesame700kWheatoutputasthebaseline,asconsistentheatdeliveryisapriorityforaCHPplant.Thischangestheelectricalenergyoutput,anditisassumedthatthiscan be supplied to the grid at commercial rates.

Figure 3.1 Process to derive impact of innovations on the LCOE. Note that Technology Type in this study means type of power plant.

Baseline parameters for given power plant

Revised parameters for given power plantAnticipated technical impact of innovations for given Technology Type and year of FID


Figure3.2summarisesthisprocessofmoderation.

3.3.1. Maximum technical potential impact

Innovations are considered in clusters of similar technologies or impacts. Each of these may affectanumberofdifferentcosts,AEPorlosses,aslistedinTable3.1.Themaximumtechnicalpotential impact on each of these is recorded for each innovation cluster. Where relevant and where possible, this maximum technical impact considers timescales that may be well beyond 2025,thefinalyearofFID.

Frequently, the potential impact of an innovation can be realised in a number of ways, for example through reduced CAPEX or OPEX, or increased AEP. The analysis uses the implementationresultinginthelargestreductionintheLCOE,whichisacombinationofCAPEX,OPEXandAEP.

3.3.2. Commercial readinessIn some cases, the technical potential of a given innovation will not be fully realised, even on a projectwithFIDin2025.Thismaybeforanumberofreasons:

•A long research, development and demonstration period for an innovation•The technical potential can only be realised through a design’s ongoing evolution based on feedbackfromcommercial-scalemanufactureandoperation,or

•The technical potential impact of one innovation is decreased by the subsequent introduction of another innovation.

This commercial readiness is modelled by defining a factor for each innovation specific to each year of FID, defining how much of the technical potential of the innovation is available to projectswithFIDinthatyear. Ifthefigureis100%,thismeansthatthefulltechnicalpotentialis realised by the given year of FID. For some of the innovations modelled, it is anticipated that furtherprogresswillbemadeafterthelastyearofFIDmodelled(2025).

The factor relates to how much of technical potential is commercially ready for deployment in a commercialplantofthescaledefinedinthebaseline,takingintoaccountnotonlytheofferingfor sale of the innovation by the supplier but also the appetite for purchase by the customer. Reachingthispointislikelytohaverequiredfull-scaledemonstration.Thismoderationdoesnotrelatetotheshareofthemarketthattheinnovationhastakenbutratherhowmuchofthefullbenefitoftheinnovationisavailabletothemarket.

3.3.3. Market shareEach innovation is assignedamarket share foreachyearof FID. This is amarket shareof aninnovationforagivenTechnologyTypeforprojectswithFIDinagivenyear.Itisnotamarketshareof the innovation in thewholeof themarket that consistsof a rangeofprojectswithdifferentTechnologyTypes.

Themarketsharemaybeimpactedbyfactorssuchasthelimitedavailabilityoflowcostfuels,andtakesintoaccounttheapplicationofcompetingtechnologyinnovations.

Theresultinganticipatedimpactofagiveninnovation,asittakesintoaccounttheanticipatedmarketshareofthisTechnologyTypeinagivenyearofFID,canbecombinedwiththeanticipatedimpact of all other innovations to give an overall anticipated impact for this Technology Type and year of FID. At this stage, the impact of a given innovation is still captured in terms of its anticipated impact on each cost and operational parameter, as listed in Table 3.1.

These impacts are then applied to the baseline costs and operational parameters to derive the impactofeachinnovationonLCOEforeachTechnologyTypeandyearofFID,usingagenericweightedaveragecostofcapital(WACC).

The aggregate impact of all innovations on each operational and energy-related parameter in Table3.1isalsoderived,enablingatechnology-onlyLCOEtobecalculatedforeachcombinationof Technology Type and FID year.

3.3.4. Treatment of Other EffectsToderiveareal-worldLCOE,this‘technology-only’LCOEisfactoredtoaccountfortheimpactofvariousothereffects,definedforeachcombinationofTechnologyTypeandyearofFIDasfollows:•Scenario-specificWACC,takingintoaccountriskbeyondthatcoveredbycontingency•Increasing costs over time for emitting pollutants (emissions costs in excess of thebaselinecosts)

AfactorforeachoftheseeffectswasderivedforeachspecificTechnologyTypeandFIDyear,aspresented in Appendix A.

The factors are applied as follows:

Figure3.2Three-stage process of moderation applied to the maximum potential technical impact of an innovation to derive anticipated impact on the LCOE.

Anticipated technical impact for a given Technology Type and year of FID

Technical potential impact for a given Technology Type and year of FID

Maximum technical potential impact of innovation under best circumstances

Commercial readiness

Market share

Table 3.1 Information recorded for each innovation.(%)

Impact on cost of• Power plant development and balance of plant• Fuel handling• Energy conversion system• Emissions system• Power plant operation, maintenance and service• Fuel usage, and• Emissions

Impact on• Gross AEP, and• Losses

Future Energy Costs: Coal and Gas Technologies 28 29

•Scenario-specificWACCisusedinplaceofthegenericWACCtocalculatearevisedLCOE,and•TheemissionscostfactorisappliedtothisLCOEtoderivethereal-worldLCOE,forexample,a12.0%effecttoaccountforemissionscostisappliedasafactorof1.120.

Thesefactorsarekeptseparatefromtheimpactoftechnologyinnovationsinordertoclearlyidentifytheimpactofinnovations,buttheyareneededinordertobeabletocompareLCOEfordifferentyearsandTechnologyTypesrationally.

Theeffectsofchangesinconstructiontimeorschedulingarenotmodelled.

3.4. Innovation impact modelling – coal power plant Themodellingforthecoalpowerplantfocusesonasingle225MWunitandissimilartothatdescribedabove,withthreeimportantdifferences:•Compared with the existing installed base, only a small number of new coal plants are

expected to be built in Europe in the period being studied and an alternative method for setting capital cost baselines was needed. The capital cost baseline for this Technology Type in2016ismodelledasthemarketpriceforanexistingpowerplantasitcurrentlyis.Capitalcost baselines for this Technology Type in 2020 and 2025 are also produced in the sameway assuming no innovations or other upgrades are implemented at earlier points in time. TheCAPEXbreakdownismodelledasanominalsplitbasedonexperience(ratherthanbyknowledgeofthecostsofcomponentsproducedbythesupply-chainasisthecaseforthegasCHPplant).•Thepowerplantisassumedtoceaseoperationin2035,soin2016itslifeis19years,in2020itslifeis15yearsandin2025itslifeis10years.•Theinnovationsaremodelledasbeingimplemented(orretro-fitted)onthisbaselinepowerplantin2016,2020or2025.

Asaresultofthisapproach,althoughthebaselineLCOEincreases,theimpactofinnovationsinreducingtheLCOEincreaseswithtime,asshowninFigure3.3.

4.GasCHPplant4.a. BaselineThe modelling process described in Section 3 is to:•Define a set of baseline power plants and derive costs, and energy-related parameters

for each•For each of a range of innovations, derive the anticipated impact on these same parameters

for each baseline power plant, for a given year, and•Combine the impact of a range of innovations to derive costs, and energy-related

parameters for each of the baseline power plants for each year.

ThisSectionsummarises thecostsandotherparameters for thebaselinegasCHPplant.ThisbaselinewasdevelopedbythesubjectmatterexpertsingasCHPsystems.

ThebaselinecostspresentedinTable4.1andFigure4.1andFigure4.2arenominalcontractvalues, rather than outturn values, and are for projects with FID in 2016. As such, theyincorporate real-life supply chain effects such as the impact of competition. All resultspresented in this report incorporate the impact of technology innovations only, except forwhenLCOEsarepresented inSection4.g.3,whichalso incorporate theOtherEffectsdiscussed in Section 3.3.4.

Figure 3.3 Baseline LCOE for the 225MW unit of a coal plant and LCOE with innovations.

80

60

40

20

0

LCOE (€/MWh) Coal-16 Coal-20 Coal-25

Source: BVG Associates •LCOE (With innovation) •LCOE (No innovation)


Thebaselineplantisassumedtouseareciprocating,spark-ignitedinternalcombustionengineoperating on natural gas from the pipeline grid. It is assumed to operate at 1500 revolutions per minute, and use turbocharging, aftercooling and a lean-burn combustion strategy with an excessairratioofapproximately1.5.1.Theelectricalratingis500kW,andtheheatoutputratingis700kW,whichistypicalforindustrialanddistrictheatingsectorsinEurope.234

BecauseCHPsystemsaresizedtodeliveracertainheatoutput,ifinnovationsaffectelectricalefficiency(andhenceenergyavailableasheatchanges),thentheunitwouldbere-sizedtokeepheatoutputthesame.Anyextraelectricitygeneratedfromthisre-sizingwouldbesoldto the grid.

CAPEXisassumedalltobeintheyearbeforestartofoperation.ThevalueoftheheatoutputiscalculatedandusedtooffsetthefuelOPEX.

2 ForaCHPplant,theemissionstreatmentsystemisintegraltotheenergyconversionsystem.TheCAPEXforemissionstreatmentisshownasnilandimpactsonthecostofthissystemaremodelledbychangesintheCAPEXfortheenergyconversionsystem.

3 Afterallowingforheatsalesincomeof€247,000,basedon5,280MWhperyearand€46.8/MWhpricefortheheatforthe500kWunit.

4 EmissioncostfromaCHPplantdependsonnationalregulations.InthiscaseitismodelledasthesamenominalvalueasusedinPoland for this plant size.

ThesebaselineparametersareusedtoderivetheLCOEforthebaselineplant.TheLCOEforthebaseline power plant is presented in Figure 4.3

Source: BVG Associates

Figure4.2 Baseline OPEX and net capacity factor.

250 100

200 80

150 60

100 40

50 20

0 0


CHP-16

Net c

apac

ity

fact

or (%

)

OPEX

(€k/

MW

/yr)

•OMS •Fuel usage •Emissions cost •Net capacity factor

Figure 4.1 Baseline CAPEX by element.

1,500

1,000

500

0

Source: BVG Associates Table 4.1 Baseline parameters for 500kW gas CHP plant with FID in 2016.

Type Parameter Units 2016 FID

CAPEX Development €k/MW 244

Fuel handling 81

Energy conversion system 1,303

Emissions treatment2 0

OPEX Operations, planned and unplanned Maintenance €k/MW/yr 68

Fuel usage cost (net of heat sales income) 2023

Emissions cost4 1

AEP Gross AEP MWh/yr/MW 7,500

Losses % 2.5

Net AEP MWh/yr/MW 7,312

Net capacity factor % 83.5


CHP-16€k/MW

•Development •Fuel handling •Energy conversion system •Emissions treatment

Figure 4.3 LCOE for baseline power plant with Other Effects incorporated.

100 100

80 80

60 60

40 40

20 20

0 0

Source: BVG Associates •LCOE including Other Effects •Net capacity factor

CHP-16

Net c

apac

ity

fact

or (%

)

LCOE

(€/M

Wh)


4.b. Innovations in fuel handling4.b.1. OverviewInnovations in fuel handling and usage are anticipated to reduce the LCOE of gas CHPplantsin2025byabout4%comparedwiththebaseline2016plant.AllthesavingsresultfromOPEXreductions.

Table4.2andFigure4.4showthattheinnovationwiththelargestanticipatedimpactinFID2025is improvementsintheuseofalternativegaseousfuels ininternalcombustion(IC)engines.

4.b.2. InnovationsInnovationsinfuelhandingandusagegenerallyfocusontheuseoffuelsotherthannetworknaturalgas(thenormalfuel).Asubsetofthemoreimportantofthesehasbeenmodelledhere.

Inaddition,aninnovationintheuseofliquefiednaturalgas(LNG)asafuelwasconsidered.Operation on LNG could reduce the LCOE in niche applications where the engineotherwise uses diesel fuel, and in applications where the availability of low-temperature cooling has significant benefit. In most applications, however, this innovation would increasetheLCOEfromabaselinesystemoperatingonnaturalgasandsoisnotincludedin the overall analysis.

Improvements in use of alternative gaseous fuels in IC engines

Practice today:GasenginesinCHPplantsaredesignedforoperationonnaturalgasand,when demanded, are adjusted for operation on alternative gas fuels. This adjustment is usually accompanied by engine derating and control problems due to variability in the gas composition causing differences in fuel energy value and combustion flame propagation rates.Innovation: This innovation covers the development of reliable and effective gas enginetechnologyforutilisationofcokeovengas,biomassgasificationgas,andotherindustrialwastegasses. Activities are focused on:•Effectiveandreliablefuelsystemsforlowcalorificandpollutedgases(suchascoke-ovengas,blast-furnacegas,tailgas,tar-richgas,hydrogen-richpurgegases,biogas)•Power plant integration with electrolysis for hydrogen production and injection into

the engine•Combustion of hydrogen and natural gas mixtures.Commercial readiness:70%ofthebenefitoftheseinnovationsisrealisablein2020,with100%realisableby2025,because,althoughtechnologydevelopmentisrequired,thereisastrongcostsaving driver.Market share: It isanticipatedthat this innovationwillbe implementedon10%ofplants in2025,duetothelimitedavailabilityoflow-costalternativegases.

Improvements in use of alternative liquid fuels in IC engines

Practice today: EnginesintheCHPsectoralmostexclusivelyrunongaseousfuels,duetopooravailability of low-cost liquid fuels.Innovation: This innovation covers development of engines to use liquid fuels from biomass conversion processes. This includes bio-oils from pyrolysis, biodiesel, methanol and ethanol. The innovation concerns combustion system development for full operation ontheliquidfuelandforfuelmixtures(especiallyliquidbiofuelsandmethanolmixedwithgasindual-fuelengines).Commercial readiness:30%ofthebenefitoftheseinnovationsisrealisablein2020,with70%realisableby2025,astechnologydevelopmentwillbecomplete,butnotallmanufacturersmaychoosetoofferengineswithliquidfuelcapability.Market share:Itisanticipatedthatthisinnovationwillbeimplementedon5%ofplantsin2025,duetothemarketbeinglimitedbythesupplyofsuchfuels.

4.c. Innovations in the combustion system4.c.1. OverviewInnovations in the combustion system are anticipated to reduce the LCOE of gas CHPplantsin2025byover10%comparedwiththebaseline2016plant.Allthesavingsresultfrom AEP increases.

Table4.3andFigure4.5showthattheinnovationswiththelargestanticipatedimpactinFID2025are improvements in engine mechanical design and improvements in combustion chambers for leanmixtures.InbothcasesAEPincreasesfaroutweighCAPEXandOPEXincreases.

Figure 4.4 Anticipated and potential impact of fuel handling and usage innovations on LCOE for a project with FID in 2025.

Improvements in use of alternative gaseous fuels in IC engines

Improvements in use of alternative liquid fuels in IC engines

Impact on LCOE


•Anticipated •Potential

0% 10% 20% 30% 40% 50%

Table4.2Anticipated and potential impact of fuel handling and usage innovations for a project with FID in 2025.

Innovation Maximum technical potential impact Anticipated impact FID 2025

CAPEX OPEX AEP LCOE CAPEX OPEX AEP LCOE

Improvements in use of alternative gaseous fuels in IC engines -16.0% 100.8% -15.5% 39.8% -1.6% 10.1% -1.6% 3.4%

Improvements in use of alternative liquid fuels in IC engines -15.9% 48.6% -0.6% 19.6% -0.6% 1.7% 0.0% 0.7%



4.c.2. InnovationsInnovations in the combustion system span a range of technologies from ignition systems to control and mechanical design. A subset of the more important of these has been modelled here.

Improvements in ignition systems

Practice today: GasenginesinCHPplantsareusuallysparkignited.Sparkignitioniseffectivebutlimitspeakefficiencyduetothetendencyofthegas-airmixturetodetonate.Dualfueltechnology,where a small injection of diesel is used to ignite the gas is available but not widely adopted due to the higher price of diesel fuel and the additional complexity of a second fuel system.Innovation: This innovation covers the improvement of engine ignition systems to support fastercombustionandenableoperationathigherefficienciesandwith loweremissions.Theinnovation includes:•Laserandotherhigh-energyignitionsystemsforveryleanair-fuelmixtures•Development and implementation of homogeneous charge compression-ignition combustion •Furtherdevelopmentofdual-fueltechnologyusingverysmall(pilot)quantitiesofdieseloralternatives.Commercial readiness:30%ofthebenefitoftheseinnovationsisrealisablein2020,with100%realisableby2025afterthedevelopmentandcommercialisationofsomeofthemoreadvancedsystems is completed.Market share: It isanticipatedthat this innovationwillbe implementedon50%ofplants in2025andfocusedonthehigher-costsystemsinapplicationswithhigherutilisation.

Improvements in engine mechanical design

Practice today: Mechanical design ofmodern gas CHP engines features reciprocating fourstrokemulti-cylinderdesignsusuallyinveeorin-lineconfigurations,constructedfromamixofsteels, cast iron and aluminium alloys.Innovation: This innovation covers two areas:•Increase in power output through new configurations, such as opposed piston engines,

through new designs of pistons and cylinder heads enabled by new materials and design methods, and•Improvement in utilisation by avoiding environmentally-driven downtime through development

of better cooling enclosures for engine and generator and implementation of noise and vibration reduction systems.

Commercial readiness:70%ofthebenefitoftheseinnovationsisrealisablein2020,with100%realisableby2025onwards,astechnologydevelopmentwillbepiece-wise.Market share: It isanticipatedthat this innovationwillbe implementedon70%ofplants in2025,coveringallbutthelowestcostgasCHPsystems.

Improvements in combustion chambers for lean mixtures

Practice today: Today most engines with lean-burn technology operate with an air excess ratio (lambda)intherange1.3to1.7.Innovation: An increase in excess ratio is beneficial but is only possible with advanced ignition technology, combustion control and combustion chamber design. This innovation focuseson the increaseof combustionair excess ratio (up to2.2) and specificpowerpercylinderthroughthedevelopmentofpre-chambertechnologyand/orshapeoptimisationofthe combustion chamber.Commercial readiness: 70%ofthebenefitoftheseinnovationsisrealisableby2020and100%by 2025, due to the availability of some technologies already and the expectedprogress ofdevelopment in this area by the engine manufacturers. Market share: It is anticipated that this innovationwillbe implementedon80%ofplant in2025,coveringallbutthelowestcostgasCHPsystems,asitwillgenerallybeavailablewithnoadditional capital cost.

Improvements in combustion control

Practice today: Advancedcombustioncontroltechniquesareusedinlargeengines(multi-MWclass).Smallerenginesareusuallycontrolledwithconventionalcylinderpressureandexhaustgas temperature measurements.Innovation:This innovationisaimedatmeetingemissionsregulationsmoreeffectively,withbetterefficiencyandreliabilitythanothermethods.Theinnovationcoversthreeareas:•Fuel-airmixturecompositioncontrol(cylinder-by-cylinder)•Newvalvedesignsandcontrolofvalveoperationforincreasedvolumetricefficiency,and•Electronicsandsensorsforbettercontrolandincreasedefficiencyatpartload.Commercial readiness:20%ofthebenefitoftheseinnovationsisrealisableby2020,with80%realisableby2025onwards,assomeofthetechnologyalreadyexists,butwilltaketimetoadaptand optimise for smaller engines.Market share: It isanticipatedthat this innovationwillbe implementedon70%ofplants in2025,coveringallbutthelowestcostgasCHPsystems.

Figure 4.5 Anticipated and potential impact of combustion system innovations on LCOE for a project with FID in 2025.

Improvements in ignition systems

Improvements in engine mechanical design

Improvements in combustion chambers for lean mixtures

Improvements in combustion control

Impact on LCOE



0% 2% 4% 6% 8% 10% 12%

Table 4.3 Anticipated and potential impact of combustion system innovations for a project with FID in 2025.



Improvements in ignition systems -12.0% -26.8% 22.4% 1.7% -6.0% -13.4% 11.2% 1.0%

Improvements in engine mechanical design -4.0% -20.8% 20.2% 5.6% -2.8% -14.6% 14.1% 4.2%

Improvements in combustion chambers for lean mixtures 0.0% -15.6% 15.1% 5.6% 0.0% -12.5% 12.1% 4.6%

Improvements in combustion control -4.0% -7.7% 7.6% 1.4% -2.2% -4.3% 4.2% 0.8%



4.d. Innovations in the energy conversion system4.d.1. OverviewInnovations in theenergyconversionsystemareanticipated to reduce theLCOEofgasCHPplantsin2025bynearly4%comparedwiththebaseline2016plant.AllthesavingsresultfromAEP increases.

Table4.4andFigure4.6showthattheinnovationwiththelargestanticipatedimpactinFID2025is improvements in power per cylinder from IC engines.

4.d.2. InnovationsInnovations in the energy conversion system span a range of technologies from thermodynamic cycle improvements to hybridisation and alternatives to the IC engine. A subset of the more important of these has been modelled here.

Innovations for introduction of combined thermodynamic cycles and for fuel-cell hybrid power systemswereconsidered.ThesewouldincreasetheLCOEfromabaselinesystemwithasinglepower unit and a single thermodynamic cycle and so are not included in the overall analysis.

In addition, an innovation for use of alternatives to the conventional internal combustion engine wasconsidered.ThiswouldincreasetheLCOEfromthebaselinesysteminthistimeframe,andso is not included in the overall analysis. Alternative prime movers, however, could reduce the LCOEinapplicationsinthelongerterm.

Improvements in thermodynamic cycles in IC engines

Practice today: GasenginesinCHPplantsusetheOttocycle,whichisnormalforspark-ignitedICengines.Innovation: This innovation covers the implementation of modified thermodynamic cycles suchastheMillercyclewhichcanimproveefficiencybychangingtherelativecompressionandexpansion ratios in cylinders. This may be achieved by implementation of variable valve timing systems supported by external air compression. Activities are focused on:•Development of engine control maps for individual fuels, with adaptive adjustment to site and

fuel conditions, and•Variable valve timing.Commercial readiness:70%ofthebenefitoftheseinnovationsisrealisablein2020,with100%realisableby2025onwards,because,althoughtechnologydevelopmentisrequired,thereisastrong cost saving driver.Market share: It isanticipatedthat this innovationwillbe implementedon50%ofplants in2025,coveringmostgasCHPsystemsbasedonnewenginedesigns.

Improvements in power per cylinder from IC engines

Practice today: Engines inthegasCHPsectoroperatewithabrakemeaneffectivepressure(BMEP)ofbetween9and17bar,whichlimitspowerpercylinder.Innovation: This innovation covers increasing the power per cylinder by increasing BMEPthrough developments in three main areas:•Increased turbocharger pressure ratios and improved aftercooling•Newdesignsofheatexchangers,especiallyforintakechargecooling,and•Multi-stageturbocharging.This innovation is usually implemented alongside lean combustion and combustion control.Commercial readiness:50%ofthebenefitoftheseinnovationsisrealisablein2020,with100%realisableby2025onwards,astechnologydevelopmentisongoingcurrently.Market share: It isanticipatedthat this innovationwillbe implementedon80%ofplants in2025,coveringallbutthelowestcostgasCHPsystems.

4.e. Innovations in emissions treatment4.e.1. OverviewInnovations in emissions treatment generally focus on primary and post-combustion reduction methodsandbothapproachedhavebeenconsidered.TheywouldbothincreasetheLCOEfromthebaselinesysteminthetimeperiodupto2025,andsoarenotincludedintheoverallanalysis.Increasesinthecostsforemittingpollutantscould,however,reducetheLCOEinapplicationsinthelongerterm.

4.f. Innovations in power plant operation, maintenance and service4.f.1.OverviewInnovationsinplantoperation,maintenanceandserviceareanticipatedtoreducetheLCOEofgasCHPplantsin2025byover2%comparedwiththebaseline2016plant.MostofthesavingsresultfromAEPincreases.

Figure4.6 Anticipated and potential impact of energy conversion system innovations on LCOE for a project with FID in 2025.

Improvements in thermodynamic cycles in IC engines

Improvements in power per cylinder from IC engines

Impact on LCOE



0% 1% 2% 3% 4% 5%

Table 4.4 Anticipated and potential impact of energy conversion system innovations for a project with FID in 2025.



Improvements in thermodynamic cycles in IC engines -4.0% -20.6% 16.0% 2.3% -1.6% -8.2% 6.4% 1.0%

Improvements in power per cylinder from IC engines -8.0% -26.8% 22.4% 3.2% -6.4% -21.4% 17.9% 2.6%



Table4.5andFigure4.7showthattheinnovationwiththelargestanticipatedimpactinFID2025is improvements in structural materials.

4.f.2. InnovationsInnovationsingasCHPplantoperations,maintenanceandservicespanarangeoftechnologiesfrom materials, to lubricants and overall design. A subset of the more important of these has been modelled here.

Improvements in structural materials

Practice today: Cast ironofdifferentgrades is typicallyused in themain structureof an ICengine with steel and aluminium also being used in other parts.Innovation: This innovation covers new materials:•Forextendedlifetimeofhotparts(suchasthepre-combustionchamber,sparkplugsandgasinjectors;thesematerialsincludesteelalloysandceramics)•Forbetterdurabilityandreliability(materialshereincludesteelandaluminiumalloys,plasticsandcomposites),and•Forlowercostengineperipheralcomponents(materialshereincludescomposites,elastomersandplastics).

Commercial readiness:50%ofthebenefitoftheseinnovationsisrealisablein2020,with70%realisableby2025,astechnologydevelopmentwillcontinue.Market share: It isanticipatedthatthis innovationwillbe implementedon80%ofplants in2025,becauseimprovedmaterialsarestraightforwardtoadoptinmanycases.

Introduction of remote control and optimisation

Practice today:MostgasCHPplantsarecontrolledon-site,withremotemonitoring(ifpresent)limited to operational parameters.Innovation: This innovation covers three areas:•Remote and automated diagnostic procedures for IC engines•Improved monitoring systems to support the transition from preventive maintenance to

condition-based maintenance, and•Development of remote control software and procedures.Commercial readiness: 40%ofthebenefitoftheseinnovationsisrealisablein2020,with100%realisableby2025onwards,astechnologyandservicedevelopmentisongoingcurrentlyandmarketdemandishigh.Market share: It isanticipatedthat this innovationwillbe implementedon50%ofplants in2025,especiallythoseplantswithmorethanonegasCHPsystemonthesamesite.

Improvements in lubricants and additives

Practice today: Modern lubricants need changing at regular intervals and do not preventdeposits in the engine which degrade performance.Innovation: This innovation covers three areas, which between them reduce OPEX anddowntime and increase reliability:•Lubricatingoilon-lineconditionmonitoring•Newlubricatingoils,especiallyfornon-naturalgasfuels,and•Development of air filtration systems.Commercial readiness:30%ofthebenefitoftheseinnovationsisrealisablein2020,with100%realisable by 2025 onwards.New technology developmentwill be needed, but the pace ofdevelopment can be relatively fast.Market share: Itisanticipatedthatthisinnovationwillbeimplementedon100%ofplantsin2025,duetotheeaseofimplementation.

Improvements in CHP module design for maintenance

Practice today: Engines in thegasCHP sectorhavehighmaintenance requirements,whichlimitavailabilitytoaround92%.Innovation: This innovationcoversbetterdesignof theCHPmodule toshortenserviceandmaintenanceactivities andextendavailability, and includespackaginganddesign forbetteraccesstoenginecomponents(especiallycrankshaft,camshaftandcylinderheads).Commercial readiness: 50%ofthebenefitoftheseinnovationsisrealisablein2020,with100%realisableby2025onwards.Technologydevelopmentisalreadyunderwayandmarketdemandis high for innovation in this area.Market share:Itisanticipatedthatthisinnovationwillbeimplementedon100%ofplantsin2025.

Figure4.7 Anticipated and potential impact of power plant operation, maintenance and service innovations on LCOE for a project with FID in 2025.

Improvements in structural materials

Introduction of remote control and optimisation

Improvements in lubricants and additives

Improvements in CHP module design for maintenance

Impact on LCOE



0% 1% 2% 3% 4%

Table 4.5 Anticipated and potential impact of plant operation, maintenance and service innovations for a project with FID in 2025.



Improvements in structural materials -8.0% -10.7% 11.4% 1.7% -4.5% -6.0% 6.4% 1.0%

Introduction of remote control and optimisation -1.6% 3.8% 0.0% 1.4% -0.8% 1.9% 0.0% 0.7%

Improvements in lubricants and additives 0.0% 0.1% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0%

Improvements in CHP module design for maintenance 0.0% 1.2% 0.0% 0.7% 0.0% 1.2% 0.0% 0.7%



4.g. Summary of innovations and results4.g.1. Combined impact of innovationsInnovationsacrossallelementsofthegasCHPplantareanticipatedtoreduceLCOEbyabout17%betweenprojectswithFIDin2016and2025.Figure4.8showsthatalthoughtheCAPEXandOPEXincrease,thereisalargerincreaseinAEPwhichiswhytheLCOEisreduced.

It is important tonote that the impact shown in Figure4.8 is anaggregate (asdescribed inSection3.3.3)oftheimpactsshowninFigure4.4toFigure4.7andassuchexcludeanyOtherEffectssuchasWACCandemissioncosts.ThesearediscussedinSection4.g.3.

4.g.2. Relative impact of cost of each power plant elementInordertoexploretherelativecostofeachgasCHPplantelement,Figure4.9showsthecostofallCAPEXelementsandFigure4.10showsthesameforOPEXelementsandthenetcapacityfactor.ThesefiguresshowtherelativestaticdevelopmentandfuelhandlingCAPEX.TheincreaseintheenergyconversionsystemCAPEXisaresultofinvestingtodeliverhigherefficiencies.TheCAPEXincreasesareexploitedtodeliverhigherAEP.ThefuelusageOPEXincreases,butnotasmuchasAEP,andoperations,maintenanceandservice(OMS)OPEXincreasesonlybyasmallamount.

4.g.3. Levelised cost of energy including impact of Other EffectsInordertocomparerealLCOEateachFIDdate,Figure4.11alsoincorporatestheOtherEffectsdiscussedinSection3.3.4.Itshowsthat,despitetheeffectofemissioncosts,theLCOEfortheelectricalpowerfromthegasCHPplantreducesastheinnovationsidentifiedhaveincreasingimpact over time.

ThecontributionofinnovationstothisLCOEreductionispresentedinFigure4.12.Itshowsthatwellovertwo-thirdsoftheLCOEsavingsanticipatedinthegasCHPplantarisefrominnovationsinenginedesign,fuelsandcombustion(thefirstfourinnovationsinthefigure),butinnovationsin many other areas are also important.

Figure4.8 Anticipated impact of all innovations for FID in 2025 compared with FID in 2016.

100

75

50

25

0

-25


Figure4.9 CAPEX for gas CHP plants with FID in 2016, 2020 and 2025.

2,000

1,500

1,000

500

0


CHP-16 CHP-20 CHP-25€k/MW

Figure 4.10 OPEX and net capacity factor for gas CHP plants with FID in 2016 (baseline), 2020 and 2025.

600 90

400

200 85

0 80


CHP-16 CHP-20 CHP-25

Net c

apac

ity

fact

or (%

)

OPEX

(€k/

MW

/yr)

Figure 4.11 LCOE of gas CHP plants with FID in 2016, 2020 and 2025 with Other Effects incorporated.

100 100

80 80

60 60

40 40

20 20

0 0

•LCOE including Other Effects •Net capacity factor

CHP-16 CHP-20 CHP-25Source: BVG Associates

Net c

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LCOE

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5. Coal power plant5.a. BaselineThe modelling process described in Section 3 is to:•Define a set of baseline power plants and derive costs, and energy-related parameters for each•For each of a range of innovations, derive the anticipated impact on these same parameters for

each baseline power plant, for a given year, and•Combine the impact of a range of innovations to derive costs, and energy-related parameters

for each of the baseline power plants for each year.

This Section summarises the costs and other parameters for the baseline coal power plants. The baselines were developed by the KIC subject matter experts in coal power systems, and relate to subcritical conventional power plants suitable for retrofitting of technology to improve cost of energy.

Thebaselinecostspresented inTable5.1andFigure5.1andFigure5.2arenominalcontractvalues (or currentasset values in thecaseofCAPEX), rather thanoutturnvalues, andare forprojectswithFIDin2016,2020and2025.Assuch,theyincorporatereal-lifesupplychaineffectssuch as the impact of competition. All results presented in this report incorporate the impact of technologyinnovationsonly,exceptforwhenLCOEsarepresentedinFigure5.3andinSection5.g.3,whichalsoincorporatetheOtherEffectsdiscussedinSection3.3.4.

Figure4.12Anticipated impact of technology innovations for a gas CHP plant with FID in 2025, compared with a baseline gas CHP plant with FID in 2016.

LCOE for a CHP plant with FID in 2016Improvements in combustion chambers for lean mixtures

Improvements in engine mechanical designImprovements in use of alternative gaseous fuels in IC engines

Improvements in power per cylinder from IC enginesImprovements in thermodynamic cycles in IC engines

Improvements in structural materialsImprovements in ignition systems

5 other innovationsLCOE for a CHP plant with FID in 2025



The baseline is assumed to be a unit of a thermal power plant fired with pulverised hard coal dust,producing650t/hourfreshsteamoutputat130barand540°C,equippedwithselectivecatalytic reduction treatment for oxides of nitrogen and wet flue-gas desulphurisation. The electricalratingis225MW,whichistypicalforasmallsingleunitofapowerplantinEurope.Theplant is also assumed to be capable of burning other fuels with appropriate investment.

ThetimingprofilesofCAPEXandOPEXarepresentedinAppendixA.These baseline parameters are used to derive the LCOE for the three baseline plants. AcomparisonoftherelativeLCOEforeachofthebaselinepowerplantsispresentedinFigure5.3.

TheLCOEincreaseswithtimeforthebaselineplantsbecauseoftheanticipatedreductioninAEPthroughreduceddemand;increasedemissionscoststhroughregulation;increasedOMScostsas the plant ages; and reduction in remaining useful life of the plant.

5.b. Innovations in fuel handling5.b.1. OverviewInnovationsinfuelhandlingareanticipatedtoreducetheLCOEofcoalplantsin2025byjustover15%comparedwiththebaseline2025plant.ThemajorityofthesavingsresultfromOPEXreductions(especiallyfromthethermalpre-treatmentofbiomassandwaste-basedfuels).

Table 5.1 Baseline parameters for 225MW unit of coal power plants from 2016 to 2025.

Type Parameter Units 2016 FID 2020 FID 2025 FID

CAPEX Development €k/MW 62 60 54

Fuel handling 16 14 12

Energy conversion system 164 141 152

Emissions treatment 81 62 64

OPEX Operations, planned and unplanned maintenance €k/MW/yr 16 17 21

Fuel usage cost 156 128 94

Emissions cost (Polish market) 19 95 104

AEP Gross AEP MWh/yr/MW 6,000 5,000 4,000

Losses % 8.0 8.0 8.0

Net AEP MWh/yr/MW 5,520 4,600 3,680

Net capacity factor % 63.0 52.5 42.0 Source: BVG Associates

Figure 5.1 Baseline CAPEX by element.

€k/MW

175

150

125

75

50

25

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Coal-16 Coal-20 Coal-25

Figure5.2 Baseline OPEX and net capacity factor.

200 80

150 60

100 40

50 20

0 0



Net c

apac

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fact

or (%

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OPEX

(€k/

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Figure 5.3 LCOE for baseline power plants with Other Effects incorporated.

100

80

60

40

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LCOE (€/MWh)• Coal-16 Coal-20 Coal-25





Table5.2andFigure5.4showthattheinnovationwiththelargestanticipatedimpactinFID2025is introduction of thermal pre-treatment of biomass and waste-based fuels, which improves the quality of the fuel and allows plants to use greater quantities of biomass and waste-based fuels in place of higher cost fuels.

5.b.2. InnovationsInnovations in fuel handling include physical and thermal treatment of the fuel, blending and the use of additives. A subset of the more important of these has been modelled here.

In addition, innovations for improvements in the physical pre-treatment of fuels were considered. Thesewould increase theLCOE from thebaseline system in this time frame, and soarenotincluded in the overall analysis.

Improvements in fuels through modification and switching

Practice today:Fueladditivesareused,butarelimitedtobasicmineralssuchaskaolinitethatare targeted at reducing slagging and fouling. Fuel blending is practised, but limited to fuels that are not classified as waste.Innovation: This innovation covers two areas:•The use of advanced mineral or artificial additives which reduce ash deposition and influence emissions

such as oxides of nitrogen and mercury, while also reducing high-temperature corrosion, and•Blendingoflowqualityfuels(includingthoseclassifiedaswastes)withprimaryfuelsuptofull

replacement.Commercial readiness:80%ofthebenefitoftheseinnovationsisrealisablein2016,with100%realisableby2020onwards.

Market share:Itisanticipatedthatthisinnovationwillbeimplementedononly40%ofplantsin2025,becauseoflimitationsinapplicabilityduetovariationsinlocalpolicyandregulations.

Introduction of thermal pre-treatment of biomass and waste-based5 fuels

Practice today: In the limited proportion of applications using biomass and waste-based fuels, these are are used without torrefaction or gasification.Innovation: This innovation covers two areas:•Thermal pre-treatment in the form of torrefaction which upgrades the properties of biomass

and biomass-derived waste fuels. This increases energy density, reduces fuel preparation costs (grinding),reducestransportationcostsandincreasestheamountsthatcanbeused(whichalsoreducesemissionscost),butincreasesprocessingcosts;and•Gasification, which reduces pollutant emissions when using some solid fuels containing harmful elements such as trace heavy elements and corrosion-inducers (potassium andchlorine).Someof theseharmfulelementsare retained in thegasifier rather thanpassingthrough to the power plant, so that emissions costs are reduced and the gas produced is easier to use than the solid fuel.

Commercial readiness: 40%ofthebenefitoftheseinnovationsisrealisablein2016,with80%realisableby2020and100%by2025.Market share:Itisanticipatedthatthisinnovationwillbeimplementedon30%ofplantsin2025,becauseoflimitationsinapplicabilityduetovariationsinlocalpolicyandregulations.

5.c. Innovations in the combustion system5.c.1. OverviewInnovationsinthecombustionsystemareanticipatedtoreducetheLCOEofcoalplantsin2025byjustover10%comparedwiththebaseline2025plant.ThemajorityofthesavingsresultfromOPEXreductionsfromhybridfuelconsumptionandAEPincreases(especiallyfrompowerplantstart-upandboilerflexibility).

Table5.3andFigure5.5showthattheinnovationwiththelargestanticipatedimpactinFID2025isimprovementsinhybridfuelcombustion,whichreducedOPEXbyenablinguseoflowercostfuel.

5 Notethatmunicipalsolidwasteandrefuse-derivedfuelareexcludedfromconsiderationhere,duetothestringentemissionsregulations around incinerator plants that would then apply.

Figure 5.4 Anticipated and potential impact of fuel handling innovations for FID in 2025.

Improvements in fuels through modification and switching

Introduction of thermal pre-treatment of biomass and waste-based fuels

Impact on LCOE



0% 10% 20% 6% 30% 40%

Table5.2Anticipated and potential impact of fuel handling innovations for FID in 2025.



Improvements in fuels through modification and switching -2.6% 17.8% 0.0% 14.3% -1.0% 7.1% 0.0% 5.7%

Introduction of thermal pre-treatment of biomass and waste-based fuels -2.1% 33.6% 5.2% 31.0% -0.6% 10.1% 1.6% 9.6%


Figure 5.5 Anticipated and potential impact of combustion system innovations for FID in 2025.

Improvements in power plant start-up systems

Improvements in boiler flexibility

Introduction of hybrid fuel combustion

Introduction of boiler waste-heat recovery systems

Impact on LCOE



0% 5% 10% 15% 20% 25%

© M

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5.c.2. InnovationsInnovations in the combustion system span a range of technologies from boiler start-up systems through to the use of combustion waste heat. A subset of the more important of these has been modelled here.

Improvements in power plant start-up systems

Practice today:Thefirststepinstarting-upapowerplant isheatingtheboiler.Heavyoil istypicallyusedinasystemofoilburnerstoachievethis,duetoitslowcost.However,heavyoilneeds to be heated prior to use which causes delay and produces pollutants during start-up.Innovation: This innovation covers the use of advanced burner systems (including plasmaburnersanddedicatedburnersforfine,driedfossilfuel).Italsoincludescombiningthesewiththereplacementofheavyoilbycoalslurry; liquidbiofuel (suchasglycerol,spentcookingoilandalcohols)waste;orfine,driedfossilfuel;toreducepollution,costandincreasetheenergyproduction by reducing start-up delays.Commercial readiness:70%ofthebenefitoftheseinnovationsisrealisablein2016,with100%realisableby2020onwardsafterthecommercialisationofplasmasystemsandthedevelopmentand testing of new burner systems is completed.Market share:Itisanticipatedthatthisinnovationwillbeimplementedon50%ofplantsin2025,thelimitationbeingthelargenumberofsuchplantswithmultipleindividualboilerstobe modified.

Improvements in boiler flexibility

Practice today: Conventional powerplants today canonlyoperate efficientlybetween60% and 100%output, and cannot produce electricity in response to rapidly changingloadsefficiently.Innovation:Thisinnovationcoverstwoareasthatcanenableefficientplantoperationatbelow40%ofmaximumoutputandincreaseflexibilityofresponse:•Use of pre-dried coal and optimisation of the boiler-turbine system through electronic control,

which support reduced load operation, and•Addition of high temperature heat accumulation systems, which enable more flexible

operation during demand fluctuations from night to day.

Commercial readiness: 60%ofthebenefitoftheseinnovationsisrealisablein2016,with100%realisableby2020onwards,becausemostofthetechnologyexists.Market share: It isanticipatedthat this innovationwillbe implementedon50%ofplants in2025.Atleastthislevelofimplementationwillbeneededtoprovidetheflexibilityforincreasinglevels of intermittent renewables being added to the total electricity system.

Introduction of hybrid fuel combustion

Practice today: Conventional coal combustion plants use a single combustion chamber with air injected at multiple levels.Innovation: The innovation is to produce an integrated boiler with innovations such as multiple fuel feeds, combustion chambers and reactors that enable the burning of coal alongside low grade fuels, wastes and biomass.Commercial readiness:40%ofthebenefitoftheseinnovationsisrealisablein2016,with80%realisableby2020and100%by2025.Themostcost-effectivecombustiontechnologywilltakethis long to develop.Market share:Itisanticipatedthatthisinnovationwillbeimplementedon30%ofplantin2025,themarketbeinglimitedduetovariationsinplantpreferencesandavailabilityofsuitablefuels.

Introduction of boiler waste-heat recovery systems

Practice today: Typically, there is a cross-flow heat exchanger before the flue gas desulphurisation (FGD)plantwherehot inletfluegasheats thefluegasexiting theFGD.There is typicallynowaste-heat recovery.Innovation: This innovation is to use recovered waste heat from the boiler flue gas exhaust to heat cold combustion air before the boiler’s air pre-heater. It replaces the heat from turbine bleedsteamandincreasestheoutputandefficiencyofthepowerplant.Theeffectivenessofthisinnovationriseswithfuelwatercontent(andisthereforehigherforfuelssuchasrawbiomassorlignite)becauseofthehigherlatentheatrecoveryfromfluegasinacondensingheatexchanger.Commercial readiness: 80%ofthebenefitoftheseinnovationsisrealisablein2016,with100%realisableby2020onwards,asmostofthetechnologyalreadyexists.Market share: It isanticipatedthat this innovationwillbe implementedon70%ofplants in2025,becausetheincreasinguseofbiofuelsandwetlignitewillmakeitincreasinglyattractiveto all but the oldest plant.

5.d. Innovations in the energy conversion (steamandelectrical)system5.d.1. OverviewInnovationsintheenergyconversionsystemareanticipatedtoreducetheLCOEofcoalplantsin2025byabout3%comparedwiththebaseline2025plant.ThemajorityofthesavingsresultfromacombinationofAEPincreasesandOPEXreductions.

Table5.4andFigure5.6showthatthe innovationswiththe largestanticipatedimpact inFID2025are improvements inwasteheat recovery (which increasesefficiency, raisingAEP,whilereducingfuelusage)andimprovementsinsteamflowinturbines(whichreducesfuelusage).

Table 5.3 Anticipated and potential impact of combustion system innovations for FID in 2025.



Improvements in power plant start-up systems -3.3% 0.9% 3.0% 4.0% -1.7% 1.0% 1.5% 2.0%

Improvements in boiler flexibility -1.9% -3.0% 10.0% 3.7% -1.0% -3.4% 5.0% 1.9%

Introduction of hybrid fuel combustion -5.8% 10.8% -0.2% 19.2% -1.7% 7.4% -0.1% 5.7%

Introduction of boiler waste-heat recovery systems -10.3% 0.8% 1.0% 0.8% -7.2% 1.3% 0.7% 0.5%


© Pa

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5.d.2. InnovationsInnovations in the steam and electrical system include steam circuit and turbine flow improvements to materials, waste heat recovery and the electrical system. A subset of the more important of these has been modelled here.

Improvements in steam circuit design

Practice today: Current steam circuits are usually equipped with several steps of high and low pressure heat exchangers and a steam reheating system.Innovation: This innovation covers improved interconnection between stages, which increases heat transfer to useful parts of the cycle. It also includes additional heat recovery processes suchasorganicRankinecyclesystemsandheatpumps,aswellasheatstorageandimprovedprocesses for reheating of steam and preheating of feedwater.Commercial readiness: 50%ofthebenefitoftheseinnovationsisrealisablein2016,with100%realisableby2020.Themainbarrierislimitedexperienceoftheintegrationofthesesystems.Market share:Itisanticipatedthatthisinnovationwillbeimplementedon20%ofplantsin2025.Thelimitationistherelativelyhighcapitalcostforthebenefitsdelivered,makingitattractiveforonly a minority of plants.

Improvements in materials in the boiler and steam circuit

Practice today: Power plants operating with ultra-supercritical steam conditions use advanced steel, but material failures are frequently reported. When existing plants are modernised (includingchanging thesuperheater tubes in theboiler), this isgenerallydonewithout increasing outlet steam temperature and pressure. Corrosion can also be a problem for conventional power plants, especially with furnaces operated for low-emissions and when biomass is co-fired.Innovation: This innovation covers the application of new steel alloys for high temperature, highpressureconditionsandcoatings forwater-walls (evaporators). Thesewillenablehigherefficiencythroughhigheroutletsteamtemperatureandpressurefromthesuperheater,aswellas reduced failure costs. Commercial readiness: 10%ofthebenefitoftheseinnovationsisrealisablein2016,with50%realisableby2020and80%by2025,asnewsteelalloydevelopmentanddemonstrationwilltaketime.Market share: It isanticipatedthat this innovationwillbe implementedon10%ofplants in2025,asitsusewillprimarilybefocusedon(theverylimitednumbersof)newplants,andnewer,existing plants which are operating at high capacity.

Introduction of waste heat recovery

Practice today: Waste heat recovery is generally not incorporated in plant units as small as 225MWtoday.Innovation: Theinnovationcoverstherecoveryofsensibleandlatentheat(heatofcondensationof steam in flue gas) which replaces the use of bleed steam for feed-water preheating. Bydirecting bleed steam to the condenser, more power can be produced from the same amount offuelduetoa1.5%increaseofpowerplantefficiency.Commercial readiness: 80% of the benefit of these innovations is realisable in 2016, with100%realisableby2020,asthetechnologiesexist,butexperienceofintegrationisashort-termobstacle for a small number of power plants.Market share: Itisanticipatedthatthisinnovationwillbeimplementedononly30%ofplantin2025,duetotherelativelyhighcostcomparedtothebenefits.

Improvements in steam flow in turbines

Practice today: Steam flow in the turbine is continuously improving. The latest power plants use new blade designs, new seals, valves, and new low-pressure outlet and condenser designs.Innovation: This innovation covers the continued development in all these areas, focusing on increasedefficiencyandreducedOPEX.Commercial readiness: 50%ofthebenefitoftheseinnovationsisrealisablein2016,with80%realisableby2020and100%by2025.Muchofthetechnologyalreadyexistsforretrofittingandnew technology will be developed as new plants are delivered.Market share: Itisanticipatedthatthisinnovationwillbeimplementedon30%ofplantsin 2025. It is unlikely tobehigherbecauseof the relativelyhigh cost compared to thebenefits.

Figure5.6 Anticipated and potential impact of energy conversion system innovations for FID in 2025.

Improvements in steam circuit design

Improvements in materials in the boiler and steam circuit

Introduction of waste heat recovery

Improvements in steam flow in turbines

Introduction of high temperature superconducting technology in power transformers and cables

Impact on LCOE



0% 2% 4% 6% 8% 10%

Table 5.4 Anticipated and potential impact of energy conversion system innovations for FID in 2025.



Improvements in steam circuit design -3.4% 2.4% 1.0% 2.3% -0.7% 0.5% 0.2% 0.5%

Improvements in materials in the boiler and steam circuit -1.1% 2.6% 3.0% 4.9% -0.1% 0.3% 0.3% 0.5%

Introduction of waste heat recovery -6.2% 4.0% 1.0% 3.2% -1.9% 1.2% 0.3% 1.0%

Improvements in steam flow in turbines -2.7% 3.7% 0.0% 2.6% -0.8% 1.1% 0.0% 0.8%

Introduction of high temperature superconducting technology in power transformers and cables -3.8% 0.5% 1.1% 0.8% -1.1% 0.1% 0.3% 0.2%



Introduction of high temperature superconducting (HTS) technology in powertransformers and cables

Practice today: Power transformers and cables mainly use copper as the conductor. Thermal management,electricalinsulationandconductionmaterialssignificantlyaffectservicelifetimeandreliability.Transformerefficiencycanbeashighas99%.Innovation: Theinnovationcoversuseofmaterialswithlowerlosses,specificallyHTStechnologyin transformer windings, transmission cables and fault current limiters. As well as reducing losses,HTStechnologiescouldreducefailuresandmaintenancecostsinthesesystems,butalsointroduce potential extra complexity.Commercial readiness: 10% of the benefit of these innovations is realisable in 2016, with50% realisableby2020and100%realisable from2025,as the technologiesexist,but requiredevelopment and commercialisation during this period.Market share:Itisanticipatedthatthisinnovationwillbeimplementedon30%ofplantin2025.Implementation is limited due to the relatively high cost compared to the benefits achievable over the remaining life.

5.e. Innovations in emissions treatment5.e.1. OverviewInnovationsinemissionstreatmentareanticipatedtoreducetheLCOEofcoalplantsin2025bynearly2%comparedwiththebaseline2025plant.ThesavingsresultfromOPEXreductions.

Table5.5andFigure5.7showthatthe innovationswiththe largestanticipatedimpact inFID2025isimprovementsinthetreatmentofcoalcombustionbyproducts,whichextractsrevenuefrompartofthewasteproductsandhencereducesOPEX.

5.e.2. InnovationsInnovations in the emissions treatment system span a range of technologies from pollutant control, through carbon dioxide capture and waste ash treatment. A subset of the more important of these has been modelled here.

In addition, an innovation in abatement methods for carbon dioxide was considered. This would increasetheLCOEfromthebaselinesysteminthetimeframeupto2025,andsoisnotincludedin the overall analysis. Increases in the costs for emitting carbon dioxide, and significant reductions inthecostofthetechnologycould,however,reducetheLCOEinapplicationsinthelongerterm.

Introduction of simultaneous pollutant control methods

Practice today: Current pollution control happens in series. First, oxides of nitrogen are managed through combustion control, followed by selective catalytic or non-catalytic reduction in the exhaust stream. Then sulphur oxides are removed in a wet or dry process using calcium-based sorbents. Finally, dust is removed using cyclones and electrostatic filters.Innovation: This innovation covers simultaneous reduction of all pollutants in the exhaust, using hybrid methods, sorbents and oxidisers in wet scrubbers. Commercial readiness:60%ofthebenefitoftheseinnovationsisrealisablein2016,with80%realisableby2020and100%by2025,theonlybarrierbeingthedriverofemissionslegislationtodeliver the final developments required.Market share: Itisanticipatedthatthisinnovationwillbeimplementedon40%ofplantsin2025,assumingallplantsusingcoalonly(ratherthanacoal-biofuelmix)willneedthistechnologytomeet emissions regulations by then.

Improvements in treatment of coal combustion byproducts

Practice today:Thebyproductfromboilersfiredwithhardcoalisashwithacarboncontentbelow5%,whichcanbeusedbythecementindustry.Pulpwaterfromtheashesisusedtorefillmineworkings.Innovation: This innovation covers the production of artificial zeolites, geopolymers and cenospheres, and vitrification of fly ash, to produce useable output and eliminate landfill disposal.Commercial readiness: 70%ofthebenefitoftheseinnovationsisrealisablein2016,with90%realisableby2020and100%by2025.Vitrificationtechnologyalreadyexists,whileproductionofzeolitesisintheindustrialtestingphase,andwilltakeuntilthelatterstagesoftheperiodtobefully commercially ready.Market share: Itisanticipatedthatthisinnovationwillbeimplementedon60%ofplantsin2025(themajorityofhardcoalfuelledplants),duetoitsrelativelywideapplicabilityanditsbenefits.

5.f. Innovations in power plant operation, maintenance and service5.f.1. OverviewInnovations in plant operation, maintenance and service activities are anticipated to reduce the LCOEofcoalplantsin2025bynearly5%comparedwiththebaseline2025plant.ThemajorityofthesavingsresultfromanincreaseinAEPandareductioninOPEX.

Figure5.7 Anticipated and potential impact of emissions treatment innovations for FID in 2025.

Introduction of simultaneous pollutant control methods

Improvements in treatment of coal combustion byproducts

Impact on LCOE



0% 1% 2% 3% 4% 5%

Table 5.5 Anticipated and potential impact of emissions treatment innovations for FID in 2025.



Introduction of simultaneous pollutant control methods -2.9% 2.2% 0.0% 1.3% -2.0% 1.5% 0.0% 0.9%

Improvements in treatment of coal combustion byproducts -0.8% 2.3% 0.0% 1.7% -0.5% 1.4% 0.0% 1.0%


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Table5.6andFigure5.8 showthat the innovationwith the largestanticipated impact inFID2025isimprovementsinpreventativemaintenance,whichreducesunexpectedfailureandlostgenerationtimeaswellasreducingOPEX.

5.f.2. InnovationsInnovations in the operations and maintenance of plants cover a range of technologies from control and sensor systems and algorithms to maintenance processes. A subset of the more important of these has been modelled here.

Improvements in control systems

Practice today: Mostofthedistributedcontrolsystems(DCS)installedonolderpowerplantsuse conventional control algorithms, implemented when the boiler was originally commissioned. During the life of the plant, control hardware and user interfaces have generally been upgraded, but control algorithms have not usually changed.Innovation:Thisinnovationcoversadvancedprocesscontrolmethodsincludingneuralnetwork,fuzzy logic, computational models and other advanced, multidimensional algorithms. These control innovations may target any part of the power generation process; however the main focusisthecombustionstage,whereimprovedcontrolwillimproveefficiencyandreduceOPEX.Commercial readiness: 80% of the benefit of these innovations is realisable in 2016, with100% realisable by 2020, because new control ideas and innovations can be implementedindependently of the original manufacturer of control system without significant cost.Market share:Itisanticipatedthatthisinnovationwillbeimplementedon40%ofplantsin2025.

The application of this solution is limited by factors including the age of the distributed control system, the condition of instrumentation and control equipment and the condition of boiler as well as the strategy of the plant operator.

Improvements in diagnostics and measuring systems

Practice today: Coal plants use extensive sensors, measurements systems and diagnostic tools to support monitoring and control of the power generation process.Innovation: This innovation covers the development of advanced sensors and diagnostic systems to improve and extend the inputs to the control system. Innovations include:•Thermal stress monitoring systems, which provide detailed information about dangerous

stress in critical components and enable prediction of the remaining life of components, and•Advanced sensors to measure qualitative process parameters such as flame quality, combustion processes,emissionssystemsefficiencyandbyproductquality.

Commercial readiness:80%ofthebenefitoftheseinnovationsisrealisablein2016,with100%realisableby2020,becausenewsensorsandmeasurementanddiagnosticsystemsarealreadyin use in other industries, and others are currently in the later stages of development. Market share: It isanticipatedthatthis innovationwillbe implementedon40%ofplants in2025,becausetheadditionalbenefitsareeasiest toachieve inconjunctionwiththoseplantsundertakingimprovementsinthecontrolsystem.

Improvements in preventative maintenance

Practice today: 70% of coal plants have been in operation for 20 years ormore, and theiraverage life is 45 years. Their integrated maintenance strategy combines regular planned overhauls with emergency action if equipment fails between overhauls. Basic IT systems and remote monitoring systems inform asset management. Innovation: This innovation covers preventative maintenance algorithms, which provide information about failure in advance, and new maintenance strategies based on operational conditions, device conditions and their remaining estimated life.Commercial readiness: 60%ofthebenefitoftheseinnovationsisrealisablein2016,with90%realisableby2020and100%by2025,asthedevelopmentofmodelsofsystemconditionandremaining life needs until the end of the period.Market share: It isanticipatedthat this innovationwillbe implementedon40%ofplants in2025,becausenewworkingpracticeswillbelimitedbystrongdependenceonlocalconditionsand the operator of the plant.

5.g. Summary of clean coal innovations and results5.g.1. Combined impact of innovationsInnovationsacrossallelementsofthe225MWunitofthecoalplantareanticipatedtoreduceLCOE by around 27% for projects with FID in 2025. Figure 5.9 shows that the savings aregenerated throughOPEXsavingsandan increase inAEP,whichsignificantlyoutweighsomeCAPEXincreases.

Figure5.8 Anticipated and potential impact of power plant operation and maintenance innovations for FID in 2025.

Improvements in control systems

Improvements in diagnostic and measurement systems

Improvements in preventive maintenance

Impact on LCOE



0% 2% 4% 6% 8% 10%

Table5.6Anticipated and potential impact of power plant operation and maintenance innovations for FID in 2025.



Improvements in control systems -2.8% 2.8% 0.0% 1.8% -1.1% 1.1% 0.0% 0.7%

Improvements in diagnostic and measurement systems -3.0% 3.7% 0.0% 2.6% -1.2% 1.5% 0.0% 1.0%

Improvements in preventive maintenance 3.8% 1.9% 5.0% 6.9% 1.5% 0.8% 2.0% 2.8%


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It is important tonote that the impact shown in Figure5.9 is an aggregate (asdescribed inSection3.3.3)oftheimpactshowninFigure5.4toFigure5.8andassuchexcludesanyOtherEffectssuchasWACCandemissioncosts.ThesearediscussedinSection5.g.3.

5.g.2. Relative impact of cost of each power plant elementIn order to explore the relative cost of each clean coal plant element, Figure 5.10 shows the cost ofallCAPEXelementsandFigure5.11showsthesameforOPEXelementsandthenetcapacityfactor.ThesefiguresshowtherelativestabilityofdevelopmentandfuelhandlingCAPEXandthechanges inthecostoftheenergyconversionsystemCAPEX.EmissionstreatmentCAPEXreduces slightly over time. Fuel usage and net capacity factor drop together as demand for coal power reduces over the period, but the costs for emitting pollutants increase due to regulation.

5.g.3. Levelised cost of energy including the impact of Other EffectsInordertocompareLCOE,Figure5.12alsoincorporatestheOtherEffectsdiscussedinSection3.3.4. It shows that,whilebaseline LCOEs increasedue tohigheremission costs anda lowercapacityfactor,innovationsdelivergreaterreductionfromthesebaselinesovertime.By2025,innovationsarereducingthebaselineby27%.

ThecontributionofinnovationstothisLCOEreductionispresentedinFigure5.13.Itshowsthat innovations associated with fuel type, pre-treatment and handling (the first threeinnovations inthefigure)havethebiggesteffectonLCOE,but innovations inmanyotherareas are also important.

Figure5.9 Anticipated impact of all innovations on the coal plant.

30

15

0

-15

-30

% CAPEX OPEX Net AEP LCOE


Figure 5.10 CAPEX for 225MW unit of a clean coal plant with FID in 2016, 2020 and 2025.

250

200

150

100

50

0



CAPE

X (€

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Figure 5.11 OPEX and net capacity factor for 225MW unit of a clean coal plant with FID 2016, 2020 and 2025.

200 80

150 60

100 40

50 20

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Net c

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Figure5.12 LCOE for 225MW units of clean coal plants with FID 2016, 2020 and 2025 with Other Effects incorporated.

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LCOE (€/MWh) Coal-16 Coal-20 Coal-25Source: BVG Associates

•LCOE (With innovation) •LCOE (No innovation)




6.ConclusionsInboththegasCHPandcoalSectionsofthisreport,weconsideredalargenumberofinnovationswith thepotential to reduce LCOEby FID 2025. The commonmajor theme inboth cases isreducingthepartofOPEXrelatingtothecostofthefuelusedperMWhofelectricityproduced,thoughthisisachievedthroughdifferentmethods.

In the case of the gas CHP plant, reduced fuel OPEX is achieved through innovations thatimprove the electrical output achieved per unit of fuel consumed. The four major innovations here are in engine mechanical design and in boosting systems, which both help increase power density,inleancombustion,whichhelpsincreasethermalefficiencyandintheuseofalternativegaseousfuels,whichreducesOPEX.

In the caseof the clean coalplant, reduced fuelOPEX is achieved through innovations thatenable the use of lower cost fuel and waste products. The three major innovations here are thermal pre-treatment of biomass and waste-based fuels, hybrid fuel combustion, and fuel modification(withadditivesandhigherproportionsofwaste-derivedfuel).

Improvements in operations also deliver significant savings, and include innovations in preventative maintenance, start-up and operational flexibility, and in treatment and disposal of the byproducts of solid-fuel combustion.

In total, forbothTechnologyTypes,nearly40different innovationswere identifiedand theirpotentialtoimpactLCOEintheconditionsmodelledwasevaluated.Ofthese,28innovationsmadeapositivecontributiontoreducingLCOEandhavebeenpresentedhereindetail.Someof the other innovations could have a small impact in the timescales of this study, but have significantpotentialtoimpactLCOEoverlongertimescalesordifferentconditions(forexamplewhereemissioncostsaremuchhigher).

Figure 5.13 Anticipated impact of technology innovations for a 225MW unit of a coal plant with FID in 2025.

LCOE for a coal plant with FID in 2025 without innovationsIntroduction of thermal pre-treatment of biomass and waste-based fuels

Introduction of hybrid fuel combustionImprovements in fuels through modification and switching

Improvements in preventive maintenanceImprovements in power plant start-up systems

Improvements in boiler flexibilityImprovements in treatment of coal combustion byproducts

9 other innovationsLCOE for a clean coal plant with FID in 2025 with innovations


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7.AboutKICInnoEnergyKIC InnoEnergy is the Innovation engine for sustainable energy across Europe. The challenge is big, but our goal is simple: to achieve a sustainable energy future for Europe. Innovation is the answer.Newideas,productsandsolutionsthatmakearealdifference,newbusinessesandnewpeopletodeliverthemtomarket.

At KIC InnoEnergy we support and invest in innovation at every stage of the journey – from classroom to customers.With our network of partnerswebuild connections across Europe, bringing togetherinventorsandindustry,entrepreneursandmarkets,graduatesandemployers,researchersandbusinesses.

Weworkinthreeessentialareasoftheinnovationmix:•Education to help create an informed and ambitious workforce that understands what

sustainability demands and industry needs – for the future of the industry.•Innovation Projects to bring together ideas, inventors and industry in collaboration to enable

commercially viable products and services that deliver real results. •Business Creation Services to help entrepreneurs and start-ups who are creating sustainable

businesses to grow rapidly to contribute to Europe’s energy ecosystem.

We are committed to ensuring security of supply in the face of a growing population. We need to reduce carbon emissions while remaining competitive with the rest of the world. And we must decrease the cost of energy to boost enterprise and ensure that no one is left in fuel poverty. To achieve this, we focus our activities around eight thematic areas:

•Energy Storage•Energy from Chemical Fuels•Sustainable Nuclear and Renewable Energy Convergence•Smart and Efficient Cities and Buildings•Clean Coal and Gas Technologies•Smart Electric Grid•Renewable Energies, and•Energy Efficiency

Weare headquartered in theNetherlands, andmanageour activities throughoffices acrossEuropeinBelgium,France,Germany,theNetherlands,Poland,Portugal,SpainandSweden.

Supported by the EITKICInnoEnergywasestablishedin2010andissupportedbytheEuropeanInstituteofInnovationandTechnology(EIT)toaddressthischallenge.LikeallKnowledgeandInnovationCommunitiesestablished by the EIT, KIC InnoEnergy brings together the three elements of the so-called KnowledgeTriangle-highereducation,researchandindustry–totacklesomeofthebiggestchallenges facing Europe today.

For more information on KIC InnoEnergy please visit: www.kic-innoenergy.com

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Figure7.1 KIC InnoEnergy partners over Europe.


Appendix AFurther details of methodology

Assumptions that are relevant to this studyareprovidedbelow. Theseapplyboth to thecoal andgasCHPplantsunlessidentified otherwise.

A.1 DefinitionsDefinitions of the scope of each element are summarised in Table A.1, below.

Table A.1 Definitions of the scope of each element.

Parameter Definition Unit

CAPEX

Development ThedevelopmentCAPEXcostelementincludesdevelopmentandconsenting €/MW workuptothepointofworkscompletiondateandincludes: •Internalandexternalactivitiessuchasenvironmentalsurveysandengineering and planning studies •Costofthebuildingsandassociatedinfrastructurefortheplant •Costofconstruction •Projectmanagement(workundertakenorcontractedbythedeveloperuptoWCD),and •Otheradministrativeandprofessionalservicessuchasaccountancyandlegaladvice. The development cost element excludes: any reservation payments to suppliers; construction phase insurance and suppliers own project management.

Fuel handling ThefuelhandlingCAPEXcostelementincludesallofthemachineryassociated €/MW withpre-processingthefuelbeforecombustion.ItincludesadditionalCAPEXforfuel pre-treatmentoff-site.

Energy conversion TheenergyconversionsystemCAPEXcostelementincludesallofthemachinery €/MW system used to convert the fuel to electricity. This includes: •Combustionchamberinthecaseofthecoalplant •InternalcombustionengineinthecaseofthegasCHPplant •Steamsystem. •Turbine •Generators,and •Transformer&switchgear.

Emissions treatment TheemissionstreatmentCAPEXcostelementincludesallofthemachinery €/MW system used to treat the emissions after combustion and dispose of the combustion by products such as ash.

OPEX

Operation, planned TheoperationsandplannedmaintenanceOPEXcostelementstartsonce €/MW/yr and planned the plant is operational. It includes: maintenance •Operationalcostsrelatingtotheday-to-dayrunningoftheplant •Conditionmonitoring •Plannedpreventativemaintenance,healthandsafetyinspections •Anybenefitsfromnewrevenuestreamsenabledbynew investment such as the sale of value-added combustion byproducts. These are modelled as an OMSOPEXreduction.

Fuel usage ThefuelusageOPEXcostelementstartsoncetheplantisoperational.Itincludes: €/MW/yr •Costofannualfuelused •Fueldeliverycosttosite •BenefitsfromtheCHPheatingwater.ThesearemodelledasafuelusageOPEXreduction.

Emissions cost Theemissionscostelementstartsoncetheplantisoperational. €/MW/yr It includes costs due to emissions of: •CO

2

•NO •SO

2

•Hg,and •Particulates. It also includes the cost of consumable emissions treatment materials such as lime and urea.

AEP

Gross AEP ThegrossAEPelementisthegrossenergyproducedinanaverageyear, MWh/yr/MW based on the realistic annual operating cycle. It excludes losses other than losses impliedbythebaselinethermalefficiency.

Losses Thelosseselementincludes: % •Lifetimeenergylossfromplantstart-upandshut-down •Lossesinconvertinggeneratoroutputbetweenthegeneratorandthegridconnection and metering point, and •Lossesduetolackofavailabilityoftheplant. Transmission losses beyond the grid connection and metering point are excluded.

Net AEP ThenetAEPaveragedovertheplantlifeatthegrid MWh/yr/MW connection and metering point.


A.2 AssumptionsBaseline costs and the impact of innovations are based on the following assumptions.

Global assumptions• Real(end2015)prices• Commoditypricesfixedforaverageof2015• Exchangeratesfixedforaverageof2015

Gas CHP plant assumptionsGeneral. •A700kWthermaloutput,withelectricaloutputdeterminedbytherelativeefficiencyoffuel

energy to heat and electrical outputs•Operationallifeof15years•FIDisoneyearbeforestartofoperation,andallCAPEXtakesplaceinthisyear•AEPandOPEXareassumedtobelevelannualamountsthroughouttheoperationallife•Developmentandconstructioncostsarefundedbytheprojectdeveloper,and•ConstructioniscontractedonanEPCbasis.

Development. The baseline assumptions are:•ThesiteissuitablefordevelopmentforaCHPplant,withoutspecialremedialorpreparatoryworksrequired

•Thesiteiswithin100mofroadssuitablefordeliveringthecomponents,plantandequipmentrequired for the site

•Thegridoperatorprovides anon-site substation at no cost to theproject, or access to anexisting substation within 100m

•Theuseroftheheatoutputprovidesanon-siteconnectiontotakeandreturnthehotwaterproducedbytheCHPsystem,and

•Noproblemsinobtainingconsentsareencountered.

Fuel handling. The baseline assumptions are:•Anon-siteconnectiontothenaturalgasgridisprovidedbythegasgridoperator•Thegassuppliedhaspropertiesthatremainwithintherequirementsoftheengineatalltimes,

and•Fuelhandingequipmentcomprisespressureandtemperatureregulationsystems including

controls and sensors.

Energy conversion system. The baseline assumptions are:•The prime mover is a four-stroke, spark-ignited natural gas engine that is turbocharged,aftercooled,andoperatesataleanair-fuelratioof1.5:1,andabrakemeaneffectivepressureof15 bar

•Emissionscontrolisincludedwithinthissystemaspartofthecontrolstrategyandasacatalystin the exhaust system

•The engine operates at a fixed speed of 1500 or 1800 revs / minute (depending on gridfrequency),andisconnectedtoa3-phaseelectricalACalternatoroperatingat600V

•Astep-uptransformerconnectstothelocaldistributiongridatbetween4kVand13kV•Electricaloutputis500kWandheatoutputis700kW,and•As innovationsare implemented,heatoutput iskeptconstant.Thismeans that ifefficiencyimproves and heat output per kW of electricity reduces, a larger system is specified, withhigher electrical output.

Emission treatment system. The baseline assumptions are:• The emissions treatment system is incorporated into the energy conversion system, and no additional cost is required

OMS. The baseline assumptions are:• Localservicesupportisavailablewith7-dayworkingwithin‘officehours’,and• The plant can be remotely monitored via a SCADA system.

Fuel usage. The baseline assumptions are:• Theengineoperatesatanaverageelectricalefficiencyof36.08%,andconsumes1,069,05m3 ofgasatacostof€0.3256perm3(total€348,064)toproduce3,750MWhofgrossAEP

• Heatproductionis5,280MWhperyear(net),atavalueof€46.8/MWh.

Emissions costs. The baseline assumptions are:• EmissionscostsarebasedonthePolishsystemof€0.000465perm3 of gas used.

Coal plant assumptionsGeneral.•A225MWunitofathermalpowerplant•Operationaluntil2035,soin2016lifeis19years,in2020lifeis15yearsandin2025lifeis10years•Thecapitalcostbaselinein2016ismodelledasthemarketvalueofanexistingpowerplantas

it currently is. •Capitalcostbaselinesin2020and2025areproducedinthesamewayassumingnoupgrades

are implemented.•CAPEXbreakdownismodelledasanominalsplitbasedonexperience• Innovationsaremodelledasupgrades implemented(or retro-fitted)onthebaselinepowerplantin2016,2020and2025

•FIDisoneyearbeforestartofoperation,andallCAPEXtakesplaceinthisyear•AEPandOPEXareassumedtobelevelannualamountsthroughouttheoperationallife•Developmentandconstructioncostsarefundedbytheprojectdeveloper,and•Construction(implementationofupgrades)iscontractedonanEPCbasis.Development. The baseline assumptions are:•Thesiteissuitableforimplementationofupgrades,withoutspecialremedialorpreparatoryworksrequired

•The site has existing roads suitable for delivering the components, plant and equipmentrequired for the site

•Theexistingon-sitesubstationcanwithstandanyincreasesinpoweroutputthatresultfrominnovations, and

•Noproblemsinobtainingconsentsareencountered.Fuel handling. The baseline assumptions are:• Aconventionalsystemusingpulverisedhardcoaldust.

Energy conversion system. The baseline assumptions are:• Aboilerproducing650tonnes/houroffreshsteamat13MPaand540°C• Amulti-stagesteamturbineand3-phaseACoutputfromelectricalalternatorsat16kV,and• Electricaloutputis225MW.

Emission treatment system. The baseline assumptions are:• Selectivecatalyticreductiontreatmentforoxidesofnitrogenandwetflue-gasdesulphurisation

OMS. The baseline assumptions are:• On-siteservicesupportisavailablewith7-day,three-shiftworking,and• TheplantcanberemotelymonitoredviaaSCADAsystem.

Fuel usage. Thebaselineassumptionsforthe225MWunitare:• In2016,theplantconsumes615,100tonnesofcoalatacostof€57/tonne(total€35,061,000)toproduce1,350,000MWhofgrossAEP

• In2020,theplantconsumes525,000tonnesofcoalatacostof€55/tonne(total€28,874,000)toproduce1,125,000MWhofgrossAEP

• In2025,theplantconsumes425,000tonnesofcoalatacostof€50/tonne(total€21,250,000)toproduce900,000MWhofgrossAEP

Emissions costs. The baseline assumptions are:• EmissionscostsarebasedonanaverageofthePolishandCzechsystemsforpollutantsandSynapseEnergyEconomics2015CO

2priceforecast(midcase).


Appendix BData supporting tables

A.3 Other Effects Emissionscoststhatallplantsarerequiredtospend,butthatwillnotleadtogainsinLCOE,areincludedasOtherEffectsfortheCHPplant.ThepercentagechangeinLCOEappropriatefortheemissionsregimebeginningineachof2016,2020and2025arecalculatedandthenappliedtotheLCOEafterallofthetechnologyeffects.

Table5.6Anticipated and potential impact of power plant operation and maintenance innovations for FID in 2025.

FID year Emissions WACC

2016 0.0% 10%

2020 4.3% 10%

2025 6.2% 10%

Table B.1 Data relating to Figure 4.1.

Element Units Value

Development €k/MW 244.4

Fuel Handling €k/MW 81.5

Energy conversion system €k/MW 1,303.4

Emissions treatment €k/MW -

TableB.2Data relating to Figure 4.1.

Element Units Value

Operations, planned and unplanned maintenance €k/MW/yr 67.5

Fuel usage cost (net of heat sales income) €k/MW/yr 201.9

Emissions cost €k/MW/yr 1.0

Net capacity factor % 83.5


Element Units 2016 2020 2025

Development €k/MW 244.4 244.4 244.4

Fuel handling €k/MW 81.5 81.4 81.4

Energy conversion system €k/MW 1,303.4 1,524.4 1,786.2

Emissions treatment €k/MW - - -



Operations, planned and unplanned maintenance €k/MW/yr 67.5 63.1 63.6

Fuel usage cost (net of heat sales income) €k/MW/yr 201.9 296.4 400.5

Emissions cost €k/MW/yr 1.0 1.2 1.3

Net capacity factor % 83.4 83.4 83.3





LCOE including Other Effects €/MWh 66.3 61.4 58.5





Energy conversion system €k/MW 206.7 192.2 212.0

Emissions treatment €k/MW 79.5 58.7 59.3


Units 2016 2020 2025

LCOE with no innovation €/MWh 41.5 60.1 72.3

LCOE with innovation €/MWh 39.5 46.8 52.7





Energy conversion system €k/MW 164.4 140.7 152.2

Emissions treatment €k/MW 81.1 62.1 64.0





Emissions cost €k/MW/yr 19.3 94.9 104.5






Emissions cost €k/MW/yr 12 42 40.0



Innovation Value

LCOE for a gas CHP plant with FID in 2016 100%

Improvements in combustion chambers for lean mixtures 3.7%

Improvements in engine mechanical design 3.4%

Improvements in use of alternative gaseous fuels in IC engines 2.8%

Improvements in power per cylinder from IC engines 2.2%

Improvements in thermodynamic cycles in IC engines 0.8%

Improvements in structural materials 0.8%

Improvements in ignition systems 0.8%

5 other innovations 2.4%

LCOE for a gas CHP plant with FID in 2025 83.2%


Innovation Value

LCOE for a coal plant with FID in 2025 without innovations 100%

Introduction of thermal pre-treatment of biomass and waste-based fuels 7.4%

Introduction of hybrid fuel combustion 4.4%

Improvements in fuels through modification and switching 4.4%

Improvements in preventive maintenance 2.2%

Improvements in power plant start-up systems 1.6%

Improvements in boiler flexibility 1.5%

Improvements in treatment of coal combustion byproducts 0.8%

9 other innovations 4.6%

LCOE for a clean coal plant with FID in 2025 with innovations 73.0%


List of figures

Number Page Title

Figure0.1 06 AnticipatedimpactofallinnovationsforthegasCHPplantcomparedwithFID2016.

Figure0.2 06 AnticipatedimpactofallinnovationsforthecoalplantcomparedwithFID2025.

Figure0.3 07 AnticipatedimpactofallinnovationsforthegasCHPplantwithFIDin2025,comparedwithFIDin2016.

Figure0.4 08 Anticipatedimpactoftechnologyinnovationsfora225MWunitofacoalplantwithFIDin2025.

Figure2.1 17 KeyEuropeanpolicyareasinfluencingtheenergysector.

Figure2.2 18 TheroleoftheEUemissionstradingsysteminstimulatinglowcarboninvestments.

Figure2.3 20 ECapproachtothecapacitymechanismsassessment.

Figure3.1 25 ProcesstoderiveimpactofinnovationsontheLCOE.

Figure3.2 28 Three-stageprocessofmoderationappliedtothemaximumpotentialtechnical impact of an innovation to derive anticipated impact on the LCOE.

Figure3.3 29 BaselineLCOEforthe225MWunitofacoalplantincreases,buttheimpactofinnovationsinreducingLCOEalsoincreases.

Figure4.1 31 BaselineCAPEXbyelement.

Figure4.2 31 BaselineOPEXandnetcapacityfactor.

Figure4.3 31 LCOEforbaselinepowerplantwithOtherEffectsincorporated.

Figure4.4 32 AnticipatedandpotentialimpactoffuelhandlingandusageinnovationsonLCOEforaprojectwithFIDin2025.

Figure 4.5 34 Anticipated and potential impact of combustion system innovations on LCOEforaprojectwithFIDin2025.

Figure4.6 36 AnticipatedandpotentialimpactofenergyconversionsysteminnovationsonLCOEforaprojectwithFIDin2025.

Figure4.7 38 Anticipatedandpotentialimpactofpowerplantoperation,maintenanceandserviceinnovationsonLCOEforaprojectwithFIDin2025.

Figure4.8 40 AnticipatedimpactofallinnovationsforFIDin2025comparedwithFIDin2016.

Figure4.9 40 CAPEXforgasCHPplantswithFIDin2016,2020and2025.

Figure 4.10 41 OPEXandnetcapacityfactorforgasCHPplantswithFIDin2016,2020and2025.

Figure4.11 41 LCOEofgasCHPplantswithFIDin2016,2020and2025withOtherEffectsincorporated.

Figure4.12 42 AnticipatedimpactoftechnologyinnovationsforagasCHPplantwithFIDin2025,comparedwithagasCHPplantwithFIDin2016.

Figure5.1 44 BaselineCAPEXbyelement.

Figure5.2 45 BaselineOPEXandnetcapacityfactor.

Figure5.3 45 LCOEforbaselinepowerplantswithOtherEffectsincorporated.

Figure5.4 46 AnticipatedandpotentialimpactoffuelhandlinginnovationsforFIDin2025.

Figure5.5 47 AnticipatedandpotentialimpactofcombustionsysteminnovationsforFIDin2025.

Figure5.6 50 AnticipatedandpotentialimpactofenergyconversionsysteminnovationsforFIDin2025.

Figure5.7 52 AnticipatedandpotentialimpactofenergyconversionsysteminnovationsforFIDin2025.

Figure5.8 54 AnticipatedandpotentialimpactofpowerplantoperationandmaintenanceinnovationsforFIDin2025.

Figure5.9 56 Anticipatedimpactofallinnovations.

Figure5.10 56 CAPEXfor225MWunitofacleancoalplantwithFIDin2015,2020and2025.

Figure5.11 57 OPEXandnetcapacityfactorfor225MWunitofacleancoalplantwithFID2015,2020and2025.

Figure5.12 57 LCOEfor225MWunitsofcleancoalplantswithFID2015,2020and2025withOtherEffectsincorporated.

Figure5.13 58 Anticipatedimpactoftechnologyinnovationsfora225MWunitofacoalplantwithFIDin2025.

Figure7.1 61 KIC InnoEnergy partners over Europe.


List of tables

Number Page Title

Table2.1 19 EUairqualityregulationsforcoalandgas-firedpowerplants.

Table3.1 26 Informationrecordedforeachinnovation.

Table4.1 30 Baselineparametersfor500kWgasCHPplantwithFIDin2016.

Table4.2 32 AnticipatedandpotentialimpactoffuelhandlingandusageinnovationsforaprojectwithFIDin2025.

Table 4.3 34 Anticipated and potential impact of combustion system innovations for a projectwithFIDin2025.

Table4.4 36 AnticipatedandpotentialimpactofenergyconversionsysteminnovationsforaprojectwithFIDin2025.

Table4.5 38 Anticipatedandpotentialimpactofplantoperation,maintenanceandserviceinnovationsforaprojectwithFIDin2025.

Table5.1 44 Baselineparametersfor225MWunitofcoalpowerplantsfrom2016to2025

Table5.2 46 AnticipatedandpotentialimpactoffuelhandlinginnovationsforFIDin2025.

Table5.3 48 AnticipatedandpotentialimpactofcombustionsysteminnovationsforFIDin2025.

Table 5.4 50 Anticipated and potential impact of energy conversion system innovationsforFIDin2025.

Table5.5 52 AnticipatedandpotentialimpactofenergyconversionsysteminnovationsforFIDin2025.

Table5.6 54 AnticipatedandpotentialimpactofpowerplantoperationandmaintenanceinnovationsforFIDin2025.

Future Energy Costs: Coal and Gas TechnologiesHowtechnologyinnovationisanticipatedtoreduce thecostofenergyinEuropefromnewgasCHPplants and coal plants retro-fitted with upgraded technology

©KICInnoEnergy,2016ISBN978-94-92056-05-4

Future Energy Costs: Coal and Gas Technologies report is a property of KIC InnoEnergy. Its content, figures and data may only be re-used and cited with a clear reference to KIC InnoEnergy as a source.

The document is also available in an online format on the KICInnoEnergywebsite:www.kic-innoenergy.com

For more information about the report, please contact: [email protected]


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future energy costs: coal and gas technologies

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