october 2012 clp power … · clp power “ready to expand” ... india talks tough on grid...

CLP Power “ready to expand” Black Point Power Station

October 2012 www.gastopowerjournal.com

“BPPS has sufficient space at the

site to allow for additional units

to be built, if needed," he said,

stressing that CLP is “ready to

provide full support” and step up its role in help-

ing to meet Hong Kong’s growing electricity de-

mand while complying with the Government’s

tightened carbon emission reduction goals.

Hong Kong has targeted an annual increase

of 5% in the use of gas for power generation in

the ten years from 2010 to 2020.

Black Point - due to its size and the compar-

atively low carbon emissions intensity of gas-

fired generation – is poised to play a significant

role in realizing Hong Kong's stricter emission

targets. "As emissions control in the territory is

becoming more and more stringent, the gas-

fired BPPS will continue to be one of the most

important infrastructures in Hong Kong's

power industry," Cochran said.

By 2015, the plant operator CLP/CAPCO

has to comply with the Government's tightened

statutory emission caps, which requires a

further 45% reduction from 2010 emission

caps. “To achieve this goal it is necessary to

import more gas from new sources from main-

land China as set out in a Memorandum of

Understanding (MoU) on energy co-operation

between the People's Republic of China’s

(PRC) Central Government and the Hong

Kong Government,” he pointed out.

Analysts estimate that CLP will need about

twice the current volumes of natural gas for

Black Point Power Station going forward.

Already today, BPPS is one of the world's

largest gas-fired combined cycle power sta-

tions, accumulating a total capacity of 2,500

MW in one single site. The plant consists of

eight 312.5 MW units and the gas turbine used

at Black Point is GE'S 9FA technology and the

units are part of "the leading fleets in GE 9FA

machines in terms of cyclic operations,"

Cochran said.

CLP Hong Kong operates the Black Point

Power Station, the Castle Peak Power Station

and a backup facility at Penny’s Bay Power

Station, on behalf of CAPCO, a partnership bet-

ween CLP and ExxonMobil. The three power

plants have a combined total power generation

capacity of 6,908 MW as of 30 June 2012.

Pipe-laying works underway forBPPS to receive more gas fromChina in Q1-2013Construction works are underway at Black

Point Power Station to build a pipeline that will

connect the plant with the Second West to East

Gas Pipeline (WEPII) in preparation for the ar-

rival of new gas supplies from Mainland

China. First gas deliveries through the WEPII

interconnector are scheduled to start in the first

quarter of 2013.

CLP Power Hong Kong is capable of expanding the capacity at the 2,500 MW gas-fired combinedcycle Black Point Power Station (BPPS) to guarantee security of power supply and meet the Government's tightened statutory emission cap, Robert Cochran, Head of Planning and VentureSupport at CLP told Gas to Power Journal.

Hong Kong: Gas supplies secured,but pricing issues constrain tocoal-to-gas switch

Hong Kong has secured sufficient natural

gas supplies from China but pricing issues

constrain operators to switch from coal-to

-gas generation.

See page 3.

E.on Russia prefers Novatek overGazprom as gas supplier forpower plant fleet

Starting from 2013, E.on Russia will source

its entire gas supply for its power plant fleet

from Russia's second largest gas supplier

Novatek instead of Gazprom.

See page 4.

Hawaii Gas seeks FERC approvalto import LNG for power generation

Hawaii Gas is gearing up to importing more

LNG as it aims promote natural gas as an

alternative fuel for power generation, taking

advantage of declining gas prices in the U.S.

See page 10.

The 2,500-MW Black Point Power Station is located at Tuen Mun in the New Territories of Hong Kong

02 Gas to Power Journal � October 2012

Gas To Power Journal2nd Floor, 8 Baltic Street EastLondon EC1Y 0UPUnited Kingdomwww.gastopowerjournal.com +44 (0)20 7253 2700

PublisherStuart Fryer

EditorAnja KarlTel: + 44 (0) 7017 [email protected]

AdvertisingNarges Jodeyri Tel: + 44 (0) 7253 [email protected]

EventsKamil HussainTel: + 44 (0) 7017 [email protected]

SubscriptionsStephan M. VenterTel: + 44 (0) 7017 [email protected]

ProductionVivian CheeTel: +44 (0) 20 8995 [email protected]

Markets

To accommodate the new supplies, a 20 km

subsea pipeline linking WEPII and BPPS is

required. Construction works are underway

with the pipeline slated to be completed by the

end 2012 or early 2013. A new gas receiving

station and gas modification plant are also

under construction on the BSPS site.

The Hong Kong administration has taken

arrangements to secure an undisclosed volume

of additional gas supplies from Mainland

China through new fields. It had to identify

new sources of gas supply following the deple-

tion of reserves at the Yacheng 13-1 gas field

offshore Hainan Island, which used to be the

only source of gas supply for the power plant.

Gas deliveries through WEPII tomake up for depleting suppliesfrom Yacheng field“The field has now entered a phase of rapid

depletion, but in recognition of the limited

potential of the field, CLP/CAPCO began to

plan for additional gas supplies already about

a decade ago,” Cochran said.

Though more supplies have been sourced in

a first step from a smaller field near Yacheng

13-1, the combined volume of gas supplies

were still insufficient to meet rising demand

without additional volumes from Mainland

China. Black Point’s gas consumption is set to

grow, as gas generation in Hong Kong is likely

to be expanded as operators want to comply

with more stringent statutory emission caps.

In view of the depleting gas supplies at

Yacheng 13-1, the Hong Kong administration

and the Central Government of the People’s

Republic of China have entered a MoU on an

energy co-operation already back in August

2008. “Since that time, CLP/CAPCO has been

working diligently with our partners to make

arrangements to ensure the timely arrival of

new gas supplies,” Cochran said.

The Memorandum ensures firm supply of

natural gas to Hong Kong from three sources in

Mainland China, namely gas deliveries through

the WEPII pipeline, additional gas sourced at

new fields in the South China Sea and regasified

LNG from an import terminal in Southern China.

Black Point gets FQMS retrofit toaccommodate diverse gasqualities With new supply sources being tied up, Black

Point’s future operating regime will get a new

fuel quality management system (FQMS) as it

needs to be able to receive and burn a diverse

portfolio of gas supplies. These may range

from regasified LNG to more variable supplies

of Mainland onshore and offshore pipeline gas.

“BPPS is currently undergoing a suite of

modifications to meet this need. These modifica-

tions will prepare it for an unprecedented breadth

of gases and gas qualities,” Cochran said.

“Under the retrofit, each of the eight BPPS

generating units is being retrofitted with a fuel

quality management system that adjusts the

combustion properties (Modified Wobbe

Index) of the fuel in real time just upstream of

the gas turbine,” he outlined.

Before the installation of a new fuel quality

management system, the power station was

confined to utilize gas within only +/-5% of

expected quality. After installation of the

system, the upper bound could be raised to

+16.7%, while the lower bound of quality

tolerance remains at – 5%.

Two units of the plant will also be enhanced

with facilities that will blend gas from the

Yacheng pipeline with gas from the new

pipeline in controlled ratios and send the mixed

stream to the gas turbine. If needed, the new

gas quality operating range can be “shifted”

downward by change to different combustion

hardware with different design set point,

Cochran explained.

Plant features “one-on-one” single shaft configurationAnother special feature of the BBPS is that the

plant has adopted a so-called “one-on-one”

plant configuration, whereby each unit consists

of one gas turbine, one steam turbine and one

heat recovery steam generator. Hereby, the gas

turbine, steam turbine and electrical generator

are coupled in a single shaft arrangement to

form the power train.

The Black Point station is designed for

cyclic operation based on natural gas as the pri-

mary fuel and diesel for back-up fuel purposes.

“The combined cycle gas turbine can produce

electricity at an efficiency of about 52.9%

which is significantly higher than that of a

coal-fired power plant,” he added.

No part of this publication may be reproduced or storedin any form by any mechanical, electronic,photocopying, recording or other means without theprior written consent of the publisher. Whilst theinformation and articles in Gas to Power Journal arepublished in good faith and every effort is made tocheck accuracy, readers should verify facts andstatements direct with official sources before acting onthem as the publisher can accept no responsibility inthis respect. Any opinions expressed in this magazineshould not be construed as those of the publisher.

Printed by: Manson Group, Reynolds House, 8 Porters’ WoodValley Road Industrial Estate, St Albans, Hertz AL3 6PZ

Subscription1 Year £95

IndexCLP Power Hong Kong able to expand BlackPoint Power Station - coverHong Kong: Gas supplies secured, but pricingissues constrain to coal-to-gas switch - page 3India talks tough on grid discipline - page 6Doosan focuses on power plant business inIndia, Vietnam and Indonesia - page 7E.on rules out new gas/coal plant projects inWestern Europe until 2020 - page 8New gas power projects require more spot-price gas supply - page 9Hawaii Gas seeks FERC approval to importLNG for power generation - page 10Alstom’s MXL2 upgrade for GT26 gas turbines adapts power production to marketneeds - page 11

Robert Cochran, CLP Power

“Sufficient gas supplies for Hong

Kong are guaranteed from

China's ambitious West–East

Gas Pipeline project linked to

the eastern seaboard," Chow said. The market

share of natural gas in the city state’s power

generation mix is on the rise, he forecast refer-

ring to the push of the Hong Kong government

to halt construction of new coal-fired generat-

ing units in favour of natural gas.

Hong Kong’s major utilities, including

China Light & Power (CLP) and Hong Kong

Electric, have been asked to switch from coal

to gas-fired generation as the Government aims

to reduce greenhouse gas emissions in the

megacity of Hong Kong.

Tighter emission caps from 2015support gas generationIn a multi-pronged drive to reduce pollutants,

the Hong Kong government has encouraged

the use of natural gas for power generation and

at the same time has imposed more stringent

emission caps under a new Scheme of Control

Agreements (SCA).

As emission caps are bound to be tightened

further from 2015, compliance with govern-

ment's rules will require utilities to increase the

use of existing gas-fired generation units and pri-

oritize the dispatch of coal-fired generation units

retrofitted with emission abatement facilities.

The environment protection department

pointed out that "natural gas emits 50% less

greenhouse gas for the same amount of elec-

tricity produced".

Hong Kong Electric is increasing the share of

gas in its power plant portfolio and has secured

LNG imports shipped by Australia Northwest

Shelf LNG Venture to the Guangdong LNG

Terminal, located in Shenzhen at Chengtoujiao,

Dapeng Bay.

“To secure additional gas supplies CLP had

initially considered building an LNG terminal

in Hong Kong because supplies from Hainan

were projected to run out by 2015. But these

plans were dropped when Chinese authorities

assured that gas supplies to Hong Kong would

be maintained,“ Chow said.

Sufficient gas supplies, however, are just

one side of the supply & demand equation and

pricing issues are challenging, if not partly un-

dermining, the drive of Hong Kong-based utili-

ties to comply with the Government’s targets

of shifting from coal to gas generation.

Pricing issues constrain gasgeneration"The fuel cost of gas generation is much higher

than that of coal-fired generation. At the same

time, power companies had difficulties in re-

couping the fuel costs," Chow said, outlining

utilities cannot pass on added costs to the con-

sumers as the government is sensitive to con-

sumer relation to higher costs.

The Government has voiced concern about

power companies passing on the additional

costs of gas as a fuel directly to consumers.

Though some incentives - in the form of

bonuses - are provided by the Government for

utilities that choose to switch plants to run on

natural gas as a cleaner form of power genera-

tion, these bonuses still leave a gap between

plant operator’s costs for gas generation and

the price they can charge for electricity from

industrial and household customers.

As long as the spark spread (profit margin for

gas generation) remains unattractive, the interest for

Hong Kong utilities to switch from coal to gas at

a large scale is bound to remain fairly limited. �

Markets

Gas to Power Journal � October 2012 03

Hong Kong: Gas supplies secured, but pricing issues constrain to coal-to-gas switch Hong Kong has secured sufficient natural gas supplies fromChina but pricing issues constrain operators to switch fromcoal-to-gas generation, Larry Chuen-Ho Chow, Director, HongKong Energy Studies Centre at Hong Kong Baptist Universitytold Gas to Power Journal.

Over the 15 years of Black Point’s opera-

tional lifetime a comprehensive mid-life as-

sessment of plant equipment and subsequent

refurbishment works were carried out. “The

aim of the assessment was to identify compo-

nents that required refurbishment, modification

or upgrades so that we could make timely

arrangements to ensure that units continue to

operate safely and reliably,“ he outlined.

Switch to gas power generationhinges on pricingPricing is a key factor that determines whether

plant operators switch to from coal to natural

gas. In Hong Kong, power companies face

challenges when shifting to gas generation be-

cause of price constraints, Larry Chuen-Ho

Chow, Director, Hong Kong Energy Studies

Centre at Hong Kong Baptist University told

Gas to Power Journal. “The fuel cost of gas generation is much

higher than that of coal fired generation, but

the power companies had difficulties in re-

couping the fuel costs,” according to Chow, as

the Government is concerned about the impact

on tariffs if the power companies passed on the

added costs directly to consumers

“The tariff regime is a big constraint to

switch to gas from coal. Consumers are not

willing to pay extra for gas-fired generation

and legislators, for their part, are not willing to

oppose popular sentiment. Power utilities have

to bear the brunt of switching to gas,” he said

Cochran of CLP, the utility running BPPS,

also said he expects gas prices to rise in the

coming years. In Asia, the price of gas is closely

linked to the price crude oil and gas prices have

lately shot up in tandem with rocketing oil prices.

Back at the time when the Yacheng gas

contract was signed, the oil price was around

$20 per barrel (bbl) – while in early

September 2012 the Brent Crude Spot Price

was hovering around $115.85/bbl.

“Fuel price has become one of the common

challenges facing many utilities because of

their volatile nature,” Cochran said.

In Hong Kong, the power industry is regu-

lated under a Scheme of Control signed be-

tween the power companies and the SAR

Government in which fuel cost is based on

what Cochran calls a “direct pass through

mechanism.” Under this scheme, electricity

tariff is determined by a whole host of factors

with fuel cost being just one component.

“For its part, CLP/CAPCO adopts an opti-

mized fuel strategy and prudently manages

operating cost,” Cochran said, adding “We

believe it is an effective way to minimize the

cost to our customers and this has made our

tariff the lowest among many metropolitan

cities in the world.” �Larry Chuen-Ho Chow, Director at the HongKong Energy Studies Centre

Despite short term restraints in the

market for gas-fired power genera-

tion, Frost & Sullivan Industry Di-

rector, Harald Thaler expects

"sound" medium- and long-term prospects and

forecasts global gas-fired power plant orders

will total 537 GW through 2020.

"The global market will be sustained by the

burgeoning demand for new plants in emerging

economies as well as replacement demand aris-

ing from decommissioning of old coal-fired

power plants, particularly in Europe and North

America," he forecast.

North America and Europe are likely to main-

tain their lead as the regions with the largest

installed gas-fired capacity. For new business,

however, Thaler singled out the Middle East

and China as "the leading regions for gas-fired

power plant orders during the current decade."

The global rise of gas power generation is

underpinned by a high availability of shale gas

in North America and rising LNG production

in Qatar and Australia, which brought about a

prolonged period of relatively low gas prices.

In North America, falling prices for natural gas

have prompted utilities to phase out old coal-

fired plants in favour of newly-built gas gener-

ation capacity.

Another key market driver for gas genera-

tion is the “unpopularity of coal in developed

regions,” and the greater operational flexibility

of new gas turbines, Thaler said. Fast start-up

capabilities and higher part-load efficiencies

are seen as a “key differentiator” that will help

gas generation gain in market share over coal

and nuclear.

On a more cautious note, he added that that

in the short term, projects to realise gas-fired

power plants will face delays, particularly in

Europe, as low carbon prices make operators

favour a higher utilisation of existing coal

plants, the lack of available financing for new

build and electricity consumption in many de-

veloped economies still not having recovered

to pre-recession levels. �

Markets

Global gas-fired power plant orders forecast to total 537 GW through 2020


Starting from 2013, E.on Russia willsource the entire gas supply for itspower plant fleet from Russia’s secondlargest gas supplier Novatek insteadof Gazprom. Under a $22 billion agree-ment, Novatek will supply gas to E.onRussia's plants at Smolensk, Surgutsk,Shatursk and Yaivinsk until 2027."From 2013 on, fuel will be supplied to

E.on Russia's gas-fired power plants by

Surgutneftegaz JSC, Novatek JSC, Lukoil JSC

and Suek JSC," E.on spokesman Dr. Adrian

Schaffranietz told Gas to Power Journal.E.on Russia, owned by Germany's largest

utility E.on, confirmed it has entered a long-

term contract worth 702 billion rubles ($ 21.82

billion) with Novatek to source long-term gas

supplies between 2013 and 2017 for its branches

Smolenskaya GRES, Surgutskaya GRES-2,

Shaturskaya GRES and Yaivinskaya GRES.

The deal was announced after E.on Russia

said it chose not to extend a long-term contract

with Gazprom, the world's largest gas pro-

ducer.

“The necessity of entering into the contracts

was due to the fact that E.on Russia's contracts

with Gazprom JSC regional companies expired

in 2012," the company said.

Russia's power and gas market is of strate-

gic importance to E.on and the company is on

track to complete an extensive new-build pro-

gram of power plant projects.

1.6 GW of new CCGT capacitycommissioned over past twoyears"Over the past two years, we have commis-

sioned 1.6 gigawatts of new combined-cycle

gas turbine (CCGT) capacity at three of our

power stations in Russia. This completes a sig-

nificant portion of our new-build program

there," Schaffranietz said, adding E.on's new

CCGTs are among the most efficient units of

their class in Russia.

E.on's new-build program also includes

an 800-megawatt thermal generating unit at

Berezovskaya power station, which is currently

under construction. Start-up of the coal-fired

plant is scheduled for 2014.

Since the acquisition of the Russian power

generator OGK-4 in 2007, E.on has not only

been one of the largest buyers of Russian gas

but is also the biggest foreign investor in the

Russian energy market. This includes several

new power stations and investments in gas

production and transmission.

"With these long-term activities we do not

only underscore Russia's importance for E.on

but also make a significant contribution to

enhancing security of supply in Europe as our

home market. In the future, Russia as a focus

region will remain a strategically important

market for our company," Schaffranietz said.

E.on Russia's posts 23.3% growthin H1-2012 net profitsFor the first half-year of 2012, E.on Russia

posted a 23.3% growth in net profit to 8.67 bil-

lion rubles ($0.26 billion) and a 12.4% growth in

revenues to 35.21 billion rubles ($1.09 billion).

The growth in revenue was mostly due to

the operational start of new CCGTs commis-

sioned in 2011 under the company's new

investment program. �

E.on Russia prefers Novatek over Gazpromas gas supplier for power plant fleet

E.on Russia's five power generation units with the aggregate capacity of 10,345 MW.

WHERE THE INDUSTRY CONNECTS

RUSSIA POWERCONFERENCE AND EXHIBITION5 – 6 MARCH 2013 EXPOCENTRE, MOSCOW, RUSSIA

System Operator of Russia

Co-located with:

www.russia-power.org

Further information on exhibiting and sponsorship is available from:

WorldwideGilbert Weir JnrExhibition Sales ManagerT: +44 (0)1992 656 617F: +44 (0)1992 656 700E: [email protected]

Russia & CISNatalia GaisenokExhibition Sales ManagerT: +7 499 271 93 39F: +7 499 271 93 39E: [email protected]

INVITATION TO PARTICIPATERussia Power is now widely recognized as a central meeting point for the Russian and International power generation industry.

Regarded by many exhibitors as essential for maintaining business in Russia, Russia Power features top Russian and international power industry companies demonstrating state of the art services and technologies covering the crucial aspects of electrical power generation. The insightful and thought-provoking conference sessions covers strategic and technical topics chosen and presented by leading practitioners from the power industry itself.

Russia Power 2012 and co-located HydroVision Russia attracted 5,851 visitors 158 exhibitors and over 790 delegates from 62 countries

Why you should exhibit at Russia Power 2013

us for Russia Power - where the industry connects.

Owned and produced by: In partnership with: Presented by:Supported by:

Markets


More combined-cycle gas-fired

power plants will have to be

built, should the ruling Demo-

cratic Party of Japan (DPJ)

choose to implement a long-term energy plan

which posits zero nuclear output by 2030. As

an alternative, a compromise policy of 15 per-

cent nuclear use is also being considered.

Japanese utilities have already started to plan

for building more gas-fired plants and to add na-

tionwide to LNG infrastructure in terms of re-

gasification terminals and storage capacity.

Analysts expect DPJ will disclose the land-

mark policy shift towards a nuclear-free energy

mix in the coming weeks. Voters have been

disgruntled by the restart of nuclear reactors

after the country managed to cover peak elec-

tricity demand this summer by increasing the

output of thermal capacity while most nuclear

plants remained offline following the

Fukushima incident in March 2011.

“If we are to believe that the decision to fol-

low the zero nuclear option will be taken, then it

seems inevitable that those in favour of a more

rapid decommissioning schedule will point to

the fact that Japan has successfully navigated

the peak summer season of power demand with

only 2.36 GW of nuclear capacity online,” said

Deutsche Bank analyst, Michael Lewis.

Deutsche Bank expect Japan's total thermal

power generation requirement will rise to 90

GW in December 2012, provided that no fur-

ther nuclear reactors will be restarted and over-

all demand pattern are consistent with the

previous year. "This forecast implies that ther-

mal power requirement will be 5 GW to 8 GW

higher in January and February 2013 than it

was this past winter," Lewis said.

The shutdown of most of Japan's nuclear

generation capacity in the wake of the

Fukushima nuclear crisis has led to a drop in

the average utilization rate of nuclear power

plants to 38% in 2011, down from 68% in

2010, according to the Federation of Electric

Power Companies of Japan.

Japan’s LNG-to-power demandsurged 20% in 2011The delayed restart of suspended nuclear reac-

tors in the wake of the Fukushima nuclear inci-

dent, led to a 20% surge in LNG consumption

by Japan's power sector in 2011 as utilities had

to increase the share of thermal power genera-

tion in the energy mix.

The rising gas burn rate in thermal power

plants is causing additional costs for highly-

priced LNG imports, estimated to total 22.6

trillion yen ($285 billion) during 2012.

Japan is forecast to import about 5.5 million

tonnes more of LNG during 2012 compared

with last year's record imports as gas-fired

power continues to replace nuclear capacity.

METI plans to loosen regional-ization of power generation The economy ministry also aims to overhaul

the current strict regionalization of Japan's

main electric power utilities, which consume

about 5 million tonnes per month of LNG to

fuel gas-fired power plants.

METI aims to organise Japan's main utilities in

a more centralised way and seeks to introduce

an open bidding on the construction of new

gas-fired power plants in Japan. This would

open up a segment of quasi-monopolies

operated by electricity companies in their own

areas and would provide more value for con-

sumers and industries, it said. �

Japan to host LNG talks in Tokyo, plans toloosen regionalization of power generation Japan’s ministry for economy, trade and industry (METI) has hosted an LNG conference in Tokyoon September 19 to evaluate the increasingly central role of gas supplies for power generation asthe party of Prime Minister Yoshihiko Noda is close to adopting a zero-reliance policy on nuclearpower prior to a snap election in the autumn.

“At the moment we see a suf-

ficient level of capacity in

Central Western Europe

for the upcoming years

until 2020 or possibly even 2022. So we

won't be building any more new gas and coal

power generation plants in Western Europe,

because the market does not need them,"

E.on spokesman Dr. Adrian Schaffranietz told

Gas to Power Journal.The U.K. is deemed to be "an exception"

he said, cautioning that market conditions for

new-built power plants in the country depend

on the outcome of the Electricity Market

Reform (EMR).

In Germany, there might be scope for the

construction of new conventional plants "only

after 2022", when the last remaining German

nuclear reactor will be shut down permanently,

he forecast.

As the planning and approval process for

realising new power plant projects takes be-

tween three and seven years on average, utili-

ties need to start evaluating whether to realise

new projects in the second half of this decade.

The profitability of some of E.on's older

gas-fired plants in Germany is at risk, due to

the general trend of declining number of

operating hours, in which these power plants

are demanded by the market.

In Bavaria, E.on has been considering shut-

ting-down three gas-fired power plants with a

combined capacity of 1,420 MW. In particular,

it has mulled to close the Irsching-3 (415 MW)

and the Staudinger-4 (622 MW) gas-fired

plants in 2013, followed by Franken-1

(383 MW) in 2014.

"No concrete decision has been made yet,"

E.on spokeswoman Fabienne Dreßler said,

adding the company is still in talks with the

regulatory authority (BNA) and the regional

transmission system operator (TSO) to “find a

solution in the interim until the government has

established a market mechanism for a strategic

capacity reserve”. �

E.on rules out new gas/coal power plantproject in Western Europe until 2020Germany's largest utility E.on said it has no intention of building additional gas- or coal-firedpower plants in Western Europe until 2020 as it expects markets to be oversupplied with powergeneration capacity until the final shutdown of all German nuclear reactors.

Markets


“Since the end of 2008, the price

level of supply contracts for [gas

fired power plants] has often

been above the level required

for a commercially attractive use in power

generation,” Uli Brunner, energy expert at PA

Consulting Group told Gas to Power Journal.“The volumes had to be taken nonetheless

due to take-or-pay arrange-

ments, and without adjust-

ment, operators of gas-fired

power plants may have

incurred substantial losses,"

he said.

Brunner explained that

new gas-fired power plants

that were going ahead either

had innovative pricing ele-

ments in long-term contracts in place, or in-

vestors did not go for a long term delivery

contract, instead procuring gas directly at more

liquid gas hubs.

A prerequisite for investors to realise new

gas-to-power projects would be the availability

of more gas supply at spot price levels, he

stressed.

Despite concerns over the pricing of gas,

four key upcoming factors could boost the pop-

ularity of gas usage in the power generation

gas market in the short term:

The first is the completion of the second leg

of the Nord Stream pipeline to Germany later

this year.

The second is the expected agreement of the

European Commission's reforms of the EU's

Emission Trading System during the next ses-

sion of the European Parliament, with the aim

of lifting the carbon price so that gas would be

able to compete with coal.

Thirdly, the long awaited impact that cheap

LNG gas exports to Europe will have on the

European gas market.

Lastly, the coming on stream of parts of Eu-

ropean domestic shale production in the early

2020’s.

The outcome of these factors will determine

whether there are sufficient volumes of low-

priced gas in Europe, Brunner said.

Eneco uses GATE for sourcingflexible gas supplies, tradingFor some companies, like the Dutch energy

company Eneco, LNG has already shown that

it can provide European gas markets with

greater flexibility when sourcing gas.

"Our involvement in GATE is to ensure that

we have sufficient capacity to meet our own

needs for the portfolio. In addition, we can use

GATE for trading purposes,” Eneco spokesman

Cor de Ruijter said.

In 2010, Eneco signed a multi-term agree-

ment to supply Rotterdam’s new LNG GATE

facility with up to 1 billion cubic meters (Bcm)

every year as from last September when the fa-

cility officially opened.

GATE has also signed long term contracts

with Dong Energy, EconGas OMV, Essent

Trading and E.on for its initial capacity.

GATE – E.on’s door-opener forreceiving LNG supply in north-west EuropeE.on Ruhrgas has booked an annual capacity of 3

Bcm gas import capacity when acquiring a 5%

stake in the GATE terminal operating company.

Buyer like E.on are keen to gain access to

more spot-priced LNG supply as this strength-

ens their negotiating position with Gazprom

over price openers for gas purchased on the

basis of long-term oil-indexed gas contracts.

While plans for construction of a new 10 bcm

LNG facility at Wilhelmshaven, appear to have

been suspended, as one of its main backers E.on

has opted for involvement in GATE instead.

“The GATE terminal is – quite literally –

our gate for receiving LNG supply for the

north-west European market," said E.on

spokesman Dr. Adrian Schaffranietz.

Denmark’s Dong Energy last September

started 1 Bcm per year deliveries of a 10-year

import agreement with Spanish energy com-

pany Iberdrola, according to Ulrik Frøhlke,

spokesman for DONG Energy.

Austria’s EconGas, meanwhile, has secured

an annual regasification capacity of three bil-

lion cubic metres of natural gas at GATE since

September 2011, Econgas spokeswoman,

Denise Giselbrecht, confirmed.

In the past decade, there has been a rapid ex-

pansion of LNG gas import terminals at European

regasification terminals. Even so, LNG currently

provides just 15% of the EU's gas imports, the

rest being via pipeline, according to Eurostat.

In northern France, construction works for

the €700m Dunkirk LNG terminal are under-

way, with the facility scheduled to start opera-

tions in 2014. Once operational, Dunkirk LNG

is expected to bring an additional 10-13 bcm in

LNG deliveries per year (equivalent to 20% of

French gas demand) for its owner EDF.

UK becomes Europe’s largestLNG buyer, overtakes SpainEurope remains the second largest LNG market

– behind Asia – with 88 bcm imported in 2011,

a drop in 0.3 bcm compared with 2010, accord-

ing to IEA statistics.

The UK became Europe’s largest LNG con-

sumer last year, overtaking Spain by importing

close to 35 bcm which marks a 30% increase

from 2010 levels. The growth in LNG imports

to Britain was largely driven by reduced LNG

imports in Continental Europe which is why the

UK became a ‘market of last resort’ for new

Qatari LNG volumes looking for a market.

‘Demand destruction’ is what some pundits

call the ongoing reduction of power and gas

demand in the prolonged recession in Conti-

nental Europe. In 2010, Spain, Belgium,

Turkey and France have imported between

15% and 21% less LNG than in 2010, accord-

ing to the IEA.

The 4 bcm drop in LNG imports to Spain

was not only driven by a 2 bcm drop in gas

demand, but also due to the operational start

of a new gas pipeline link from Spain to

Algeria – the Medgaz pipeline, capable to

deliver 8 bcm/year of natural gas per year. �

Long-term gas contracts need more ‘spot elements’ - PA ConsultingSpot-price elements in long-term gas purchase contracts (LTCs) are required for new gas powerprojects to ensure enough gas is supplied at a sufficiently low price, analysts say.

Uli Brunner, PA ConsultingGroup

Bu Samra - the 1st commercial LNG ship arriving at GATE

Areal overview of the GATE terminal.

Markets


“India is promising high returns

and entering the Indian market is

significantly easier than establish-

ing a stronghold in China,” he

said. South Korea used to be the biggest

market for Doosan Heavy’s power plant busi-

ness but Seo forecast that growth prospects

would be limited.

In India, Doosan Heavy Industries is

competing with the Japanese power plant

suppliers MHI and Hitachi, the U.S. company

B&W and India's largest power plant facilities

firm BHEL to secure tenders to build power

plants. Doosan Chennai Works, a local

subsidiary of Doosan Heavy Industries &

Construction, has won orders from India's

state-run energy service company NTPC in

late February to supply five boilers for two

separate power plants in India.

International power plant manufacturers

are racing to enter and consolidate their

position in the Indian market, attracted by

plans of Indian energy companies to spend

$25 billion annually on new power plants

through 2020 to ease the country's energy

shortage.

In Asia, Doosan Heavy Industries is

rapidly growing its business in the power

industry. A Technology Licence Agreement

with Mitsubishi Heavy Industries (MHI)

enables Doosan to source gas turbine

products.

Doosan HI eyes local investment to manufacture turbines in India Keen to increase its business in India’s

rapidly growing power generation market,

Doosan HI is considering local investment

and may end up building a turbine manufac-

turing plant or acquiring a local manufacturer

in India.

"We are making various efforts to target

the Indian power generation equipment mar-

ket,” a Doosan spokesman confirmed, stress-

ing that no concrete steps have been taken

towards building local turbine manufacturing

facilities in India or acquiring a local

turbine manufacturer.

All steam turbines, gas turbines, and hydro

turbines that Doosan is selling to India are

currently manufactured in Changwon, South

Korea.

By considering taking a share in an Indian

company, Doosan HI is responding to legal

changes for doing business in India. The

central government has recently altered its

policy of protecting domestic industry by lift-

ing tax exemption for foreign power genera-

tion equipment.

With this move, the Government is protect-

ing India's domestic power generation equip-

ment manufacturers while controlling threats

from a growing number of imported products

from China.

Doosan Chennai Works to supply five boilers to India’sstate-owned NTPCDoosan Chennai Works, a local subsidiary

of Doosan Heavy Industries & Construction,

has recently won $1.3 billion of orders from

NTPC, India's state-run energy service com-

pany, to supply five boilers for two separate

power plants.

Under the contract, Doosan Chennai

Works will supply three boilers (800MWx3)

for a power plant in Kudgi, in India's

Karnataka Province. The Korean company

said it also expects a letter of award from

NTPC to supply two boilers (800MWx2)

for the Lara Power Plant in Chhattisgarh in

central India.

Doosan Heavy Industries & Construction

executive VP, Dongsoo Suh, said the order

win "confirms the competitiveness of

Doosan’s products amid intense competition

[with other turbine manufacturers] in

performance and price.”

"Going forward, we are expected to

win additional orders for facilities and equip-

ment in other foreign markets, as well as the

Indian market," he added. Doosan has already

won orders for a string of projects in India,

including Lalitpur thermal power plant in

2010, the Mundra thermal power plant in

2008 and the Sipat thermal power plant

in 2004. �

Doosan focuses on power plant business inIndia, Vietnam and Indonesia South Korea’s Doosan Heavy Industries & Construction has been recently focusing on new business for its power plant section in growth markets such as India and the Middle East, shifting its focus away from its South Korean home market. “India has become the biggest growth market for us, followed by Vietnam and Indonesia,” Doosan spokesman Gang Cheol SEOtold Gas to Power Journal.

Markets


While the Indian government is

blaming the federal states for

causing the blackout by over-

drawing electricity from the

grid, Sarin stressed that "to remedy, if not pre-

vent future crippling power cuts" the creation

of decentralized, reserve power is of para-

mount importance. "This is one thing we have

to work on in right earnest," he said.

The Indian power ministry, in contrast, has

awarded licenses for four Ultra Mega Power

Projects with a capacity of 4,000 MW each. All

plants are coal based.

The power ministry issued three licenses

to Reliance Power, which is on the verge of

commissioning its 2,400 MW gas-fired

combined cycle power plant in Samalkot in

the eastern state of Andhra Pradesh. Reliance

plans to build a 7,480 MW gas-fired plant in

Dadri near New Delhi, but the project is

understood to be on hold due to uncertainty

over gas supplies from a far-flung block in

the KG basin in the south-eastern state of

Andhra Pradesh.

The location of the gas field explains

Reliance's move to prioritize construction of

the Samalkot plant which is also in Andhra

Pradesh - the same state as the gas field.

Reliance Power did not respond to ques-

tions over its strategy on new gas generation

projects sought by Gas to Power Journal, but it

is understood that falling gas supplies from the

KG basin are dampening the mood for realis-

ing new gas-fired power plants.

Production volumes of natural gas in India

exceeded targets this year, but the overall vol-

ume declined compared with 2011. In the pe-

riod from April to July, gas production declined

to 14,439 million cubic metres (mcm), down

from16,356 mcm for the same period in 2011.

Output from the KG block, awarded to

Reliance Industries, declined to 15.611 billion

cubic metres (bcm) in the fiscal year 2011-12,

down from 20.400 bcm in 2010-11, according

to Indian government statistics.

Ensuring adequate gas supplies is a critical

factor as India is shifting part of its power gen-

eration to gas-based plants. The Government is

backing plans to build LNG receiving termi-

nals on the east coast that would complement

existing terminals on the Indian west coast.

Keen to remedy gas supply shortages, the

Indian government has announced steps to

bolster the supply side of the gas equation.

R.P.N. Singh, minister of state for petro-

leum and natural gas, told parliament that

multi-pronged measures have been rolled out

to increase the availability of natural gas in the

country, including issuing fresh licenses for

exploration, import of LNG "from various

countries including the US". �

India needs more gas-fired reserve capacity - WärtsiläThe Indian government is not paying enough attention to smaller gas-based power plants to caterfor peak load demand as it focusses on large-scale coal plants that provide base load capacity.Rakesh Sarin, Managing Director of Wärtsilä India told Gas to Power Journal that building a flexible, reserve capacity of at least 20 to 25 GW, preferably based on gas generation, would beideal for supplying peaking capacity.

Reliance Power's 2,400 MW combined-cycle power plant in Samalkot, India.

In the resolution, the states express a firm com-

mitment to adhere to India's electricity grid

code that calls for disciplined and coordinated

behaviour when drawing power from the com-

mon grid. Other points of the 12-point resolution

call for the establishment of adequate defence

plans and protection systems to ensure integrated

operations of both national and regional grids; in-

dependent audits of protection systems, adopting

good operation and maintenance procedures, car-

rying out random checks and manpower capacity

building through training and certification.

The efficient management of India’s grids is

essential to prevent future power outages, but

the country also needs to find ways to remedy

its current acute shortage of power supply

caused by limited generation capacity.

While the exact causes of the grid collapse are

still under investigation, it is certain that a significant

overdrawl of electricity from the grid by some states

has been a key factor that caused the blackout.

India's new power minister, Veerappa Moily,

in an address to the states came down heavily on

what he termed as persistent overdrawl of electric-

ity from the grid: "Despite the availability of long-

and short-term contracts in the market, I understand

some states have resorted to persistent overdrawl,

which often endangers the stability of the transmis-

sion system," he said, adding that it has been

brought to his attention that states overdraw as

they find it “convenient not to pay immediately”.

The minister also warned that the phenome-

non of overdrawing electricity from the grid

despite full knowledge of the codes of the State

Load Dispatch Centre (SLDC) is a "breach of

confidence in the grid management structure".

Moily emphasized that the SLDC is “the

brick where which the structure of national

grid is based on”.

“There is no way to run a national grid if

SLDCs do not subject themselves to strict

adherence to grid-code."�

India talks tough on grid discipline India's power ministry has clamped down on grid discipline. The Central government and theeight north Indian states, affected by blackouts after the power grid collapse in late July, agreedto abide by a 12-point resolution to ensure that such breakdowns in the power grid do not recur.

Markets - Hawaii Gas


Hawaii Gas seeks FERC approval to importLNG for power generation Hawaii Gas is gearing up to import more LNG as it aims topromote natural gas as an alternative fuel for power generation,taking advantage of declining gas prices in the United States.

“Gas from LNG will pro-

vide fuel for up to 400

MW of existing and new

conventional and/or com-

bined cycle power generation facilities, as well

as for industrial and other commercial applica-

tions in the state," Hawaii Gas said, outlining

it has developed a comprehensive, multi-

phased LNG strategic plan.

Currently about 75% the islands power

generation comes from expensive oil, which is

increasingly costly for the islands power com-

panies. Hawaii residential power prices are

three times the United States average.

"The decline in natural gas prices, the po-

tential expansion of the LNG trade throughout

the Pacific region, and advances in storage,

shipping and distribution technology together

provide a unique opportunity to introduce [nat-

ural gas as] an alternative fuel into Hawaii,"

the company said in a regulatory filing to U.S.

Federal Energy Regulatory Commission

(FERC).

Hawaii Gas' said its LNG imports are in-

tended to meet up to 75% of its customer re-

quirements and are planned to start later in the

year, pending approval of FERC and the

Hawaii Public Utilities Commission.

"Subject to obtaining approval from the

Federal Energy Regulatory Commission, the

Hawaii Public Utilities Commission and

other regulatory agencies, the Gas Company

intends to start importing LNG later this

year," said Jeff Kissel, Gas Company presi-

dent and CEO. The Gas Company is doing

business under the name of Hawaii Gas and

is Hawaii's only government franchised full-

service gas company.

Prior to venturing into LNG imports for

power generation, Hawaii Gas has been

focussing on producing synthetic natural gas

(SNG) for most of its utility customers on

O’ahu and distributes propane to utility and

non-utility customers throughout the state's six

primary islands and produces renewable gas

products from agricultural feed stocks.

Doing business on an isolated remote tropi-

cal island in the Pacific tends to be an expen-

sive business for both consumers and power

utilities. Hawaii is a collection of volcanic is-

lands, each with their own independent power

system. It has to ship in all its fuel supplies

from sources hundreds of miles away.

Due to the small size of the market, with a

population of just over 1.5 million people scat-

tered across this Archipelago of 137 islands,

Hawaii Gas cannot take full advantage of the

usual economies of scale.

Utilities in Hawaii are looking at convert-

ing existing oil power plants into gas, building

new gas plants, developing an intra-island

smart grid to link up not only traditional

power stations, but also encourage the devel-

opment of its extensive geothermal, wind,

wave power and wave power potential. Due

to the volcanic nature of the state, Hawaii's

energy leaders have ruled out nuclear power

for now. �

Source: Hawaii Gas

Hawaii State Energy Mix, 2010 and Hawaii State Energy Mix, 2050 (planned)

Technology


Alstom's MXL2 upgrade adapts power production to fluctuating demandAlstom has developed a MXL2 upgrade for GT26 gas turbines, offering power plant operators toadapt production hours of their plants to fluctuating demand and to significantly extend inspec-tion intervals and increase availability –key features in markets with a large share of intermittentwind generation such as Spain.

“The first unit of the Alstom’s

MXL2 upgrade for GT26 gas

turbines was implemented in

Castejon Spain in 2009,” Leone

Tessarini, Manager, Product Management, Gas

turbine Services told Gas to Power Journal.The MXL2 upgrade is emissions compliant and

was already fully tested at the Alstom’s Power

Plant in Birr, Switzerland. It can be imple-

mented on site during a scheduled C inspec-

tion, he added.

The GT26 MXL2 upgrade allows online

switching between two modes of operations –

the M and the XL mode – by adjusting the tur-

bine inlet temperature of the new LP turbine.

When market demand for electricity is high,

plant operators can instantly adjust the inlet

temperature in order to switch to the M mode

to improve turbine performance to maximise

power output and efficiency. By the same

token, at times when demand is lower, opera-

tors can seamlessly switch to the XL mode,

whereby a temperature drop reduces the ther-

mal loading on components. In addition, by

choosing the XL mode, power plant operators

can expect to increase the electricity output at

the plant by 3.0 MW and improve efficiency by

0.5 percent, In the M-mode, the improvements

go even up to 13 MW and 0.7 percent effi-

ciency, Alstom said.

Operating in XL mode leads to an extension

of the inspection interval by up to 8,000 oper-

ating hours before the next type C hot gas path

inspection is necessary. The longer turbine

service interval increases plant availability and

reduces maintenance costs.

“This upgrade transforms any GT26 into the

most flexible engine in its class, ready to meet

new grid challenges in the changing market

with the growth of renewables,” Tessarini said.

Alstom's advanced class gas turbines- the

GT26 for 50 Hz electricity markets and the

GT24 for 60 Hz markets, both feature sequen-

tial combustion technology that allows them to

deliver outstanding flexibility.

“To support mode switching, the GT26 MXL2

upgrade requires a new operating data counter

(ODC) based on a more differentiated view of

events and operating hours,” he explained.

Three alternative criteria are used to deter-

mine the C inspection interval: Weighted cyclic

events (WCE), accounting for the different im-

pact on components of high load starts and

stops or partial load stops as well as sudden

load jumps during a frequency response;

Weighted operating hours (WOH) that recog-

nise the varying impact of the firing tempera-

ture (M or XL mode), fuel type, and equivalent

operating hours (EOH) that consider the com-

bination of cyclic events and operating hours

on component lifetime.

“In certain occasions, the MXL2 upgrade

might make plant modifications necessary due

to a changed exhaust energy, e.g. on the heat

recovery steam generator (HRSG), the genera-

tor, or the balance of plant (BoP). This will be

analysed and determined in a preceding plant

assessment,” Tessarini said.

The MXL2 improvements are made possi-

ble by redesigning the four stages of the LP

turbine – the exhaust gas housing, the turbine

housing, the turbine vane carrier and the se-

quential combustor.

To that end, 3D airfoil profiling was applied

to the entire LP turbine, including the heat

shields. 3D airfoil profiling achieves the high-

est aerodynamic efficiency. Moreover, to sup-

port the increased turbine inlet temperature of

the M mode, the thermal barrier coating protec-

tion has also been enhanced, Alstom said.

Optimised cooling of the turbine further con-

tributes to improving efficiency and flexibility of

the GT26 MXL2 turbine. Alstom said that lower-

ing the vane part count on vane rows 1 and 2 re-

duces the hot gas surface and thereby reduces the

air cooling need of the turbine. Furthermore, the

shroud design of the turbine blades has been im-

proved to reduce over-tip leakages.

Modifications to the sequential environmen-

tal (SEV) combustor inner liner were intro-

duced to adapt to the redesigned vane 1 and to

optimise cooling at the interface to the LP tur-

bine. The pre-swirl nozzle at the rotor cover

has been reworked for improved cooling of

front stages. The pre-swirl nozzle at the rotor

cover has also been reworked for improved

cooling of the front stage of the combustor.

“To mechanically integrate the upgraded LP

turbine blading requires a new cast and machined

turbine vane carrier (TVC),” Tesssarini said.

Flexible operations - more thanjust high ramp ratesThe proven flexible performance achieved

with Alstom’s MXL2 upgrade for GT26 gas

turbines exemplifies that operational flexibility

of a turbine encompasses more than just having

a high ramp rate. It is rather a combination of

start-up and shut-down times, ramp rates and

efficiency at part load operations.

Sequential combustion is a unique feature of

the GT26 gas turbine, which makes it possible

to 'park' the entire KA26 combined cycle power

plant at very low load (below 20%) with only

one of the two GT26 combustors in operation,

fully complying with the emission limits. This

provides reliable and rapid reserve power of

more than 350 MW within less than 15 minutes.

To further improve the flexibility of power

plant dispatch, Alstom has also optimized the

operation concept of the KA26 combined cycle

power plant for fast start-up to make it ideally

placed to quickly fill the sporadic gaps in

power supply generated from intermittent wind

and solar power technologies. �

These improvements and the updated oper-ating concept ensure that the combustioncharacteristics are fully optimised for eachoperating mode

Enquiries please contact: Youngsuk Park, GTP Korea Project Manager

T: +82 70 8637 0112, M: +82 10 9024 9139 or +44 75 5375 0160, E: [email protected]

Power GenerationKorea

27th – 28th November 2012,

Imperial Palace Hotel, Seoul

Electricity Market Drivers and the

Changing Role of Gas in the Energy Mix

As one of the world’s largest energy consumer nations that lacks of domestic

natural energy resources, South Korea must compete for fuel for power generation

in a global energy market that has experienced great changes in recent years.

With no international oil or natural gas pipelines, South Korea is reliant on tanker

shipments of LNG and crude oil for its power needs. South Korea is the fifth

largest importer of crude oil, the third largest importer of coal, and the second

largest importer of LNG.

The future of South Korea’s complex energy balance will be discussed at this

conference as well as key strategic, commercial and technological drivers

impacting on power production.

The conference to be conductedwith simultaneous translation

in Korean and English

• Alexander Antonyuk, Gas and Electricity Markets Analyst, International Energy Agency (IEA)

• Byeong Kyu Jeon, Team Leader, Electricity Demand Forecast,Korea Power Exchange (KRX)

• Yong Tack Kim, Deputy General Manager, Win-win Strategy for Growth, Korea Western Power (KOWEPO)

• Woong Chan Park, Team Head, Power & Energy Team,Korea Development Bank (KDB)

• Mi Hye Jang, Policy Committee, Ministry of Knowledge and Economy (MKE) and Professor at Yonsei University

• Jerry Yang, Team Leader, International Cooperation,Korea Smart Grid Institute

• Mike Thomas, Consultant, Lantau Group

*To see the up-to-date information on confirmed speakers, please visit www.gastopowerjournal.com and click the Gas to Power JournalEvent tab.

Confirmed speakers include:

WHO SHOULD ATTENDThis forum has been developed

with representatives from the

following industry players in

mind:

• Gas Suppliers/NOCs/IOCs

• Power Plant Operators

• Utilities Companies

• Power Generation/Transmission Companies

• Gas Storage and Processing Organisations

• Government and Industry Regulators

• Engineering, Design and Construction Companies

• Gas Turbine/RotatingEquipment Manufacturers

• Original Equipment Manufacturers (OEMs)

• Investment Banks

• Risk & Insurance Companies

• Law firms and Consultancies

october 2012 clp power … · clp power “ready to expand” ... india talks tough on grid...

Documents