drs. ing. Teus van Eck T.U. Berlin, 19 Jan. 2004, Fac. Economics and Management
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Transcript of drs. ing. Teus van Eck T.U. Berlin, 19 Jan. 2004, Fac. Economics and Management
The Dutch Electricity/Heat sector in the battle between Economy, Environment and
Security of Supply in the liberalized European market
drs. ing. Teus van EckT.U. Berlin, 19 Jan. 2004,
Fac. Economics and Management
•Market situation•Economy•Environment•Security of supply•Regulation•Behavior of stakeholders
•Recommendations
Contents
Market situation
Conv. Gas ( 2100 )11%
HW CCGT ( 2308 )12%
Conv. Coal ( 3940 )20%
CHP ( 7628 )38%
CCGT ( 2079 )11% Peak ( 171 )
1%
Nuclear ( 449 )2%
Renewables ( 561 )3%
WI ( 424 )2%
Generating Capacity 19.660 MW (2001)
Generating Capacity Netherlands
The Dutch High Voltage Grid
The most important marketplayers
• Essent: 25% production capacity+ 30% grids +Supplier• Nuon: 21% production capacity + 30% grids + Supplier• Electrabel: 21% production capacity + Supplier• Eon: 9% production capacity + Supplier.• Eneco: 1% production capacity + 25%grids + Supplier• TenneT: T.S.O. + owner of the 150(partly)/220/380 kV
grids• Gasunion: Gassupplier and owner of the gastransportgrid.• APX: The Electricity Exchange, owned by TenneT
Other market parties
• Regulatory• Dte: The Dutch Regulator for gas and electricity.• The Ministry of Economic Affairs for the Energy
Strategy• The Ministry of Environment for permits• E.U Directives.
• NGO’s and interest groups as EnergieNed, VEMW, VNO/NCW, Cogen
Fuel situation
• Natural gas: Own resources + import from Norway and Russia and exporter/balancing supplier
• Coal: 100% import world market coal., perfect logistic harbor facilities
• Biomass: Partly imported by governmental incentive policy• 15% of electricity consumption is imported.• Nuclear is marginal
Facts
• Total electricity consumption is 110 TWh/yr.• ~15% is traded by the APX• Off Peak electricity price €15 - €20/MWh based on
marginal cost op coal fired power plants• Peak electricity price the last 2 years rising from €40 -
€60/MWh and strongly fluctuating.• Reserve capacity only a few % • Import/export capacity ~3500MW. • 100% unbundling of the grids• 01-07-2004 liberalisation completed
Dutch and E.U. Energy Policy
• Energy production and supply should be as clean as possible, as cheap as possible and with nearly 100% security of supply.
• The implementation will be done by the free market• But we have no clear common objectives and operational
strategy
The actual situation
Traders
DGO’s
Consumers
Producers Grid Operators
Regulators
Government
CHP / DH
“Economy”
The long en short term values???
Environment
Security of supply
The Balance
Reality T.V. Low pricesHigh earningsLow risksMarket power
The future of our
children
EnvironmentPoliticians
Free market
Dream versus RealityProsperity/Welfare?
Dream: No coal and nuclear and efficient gas CHP in the transition period to 100%
sustainability
Reality:Growing demand, gas CHP nearly in
bankruptcy and only 2% of total production is
renewables
Economy
Weekday Demand Curve Electricityin the Netherlands
0:00 5:00 10:00 15:00 20:00
100%
75
50
25
0
•Base Load
•Peak Load
Renewables
Heat Consumption Curves
6500
7000
7500
8000
8500
9000
9500
10000
10500
0 100 200 300 400 500 600
Power Output [MWe]
Hot W.
Coal
Stagg
Use of fuel CO2 CostpricekJ/kWh g/kWh baseload
€ct/kWhRenewables 0 0 2 - …..COGEN (gas) 5000 280 3,5 - 5CCGT 6700 375 3,5Coal unit 9000 830 3,5
Fuel Costs for different Power Units
Fuel cost CCGT, Hot windbox CCGT, Conventional Gas, Conventional Coal Gas commodity 3,2 €/GJ, Coal 1,7 €/GJ
0,0
10,0
20,0
30,0
40,0
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Operation time [h]
Fuel
cos
t [€/
MW
h]
CONV GAS
HW CCGTCCGT
CONV COAL
Consequences
• Gas CHP too expensive in night and weekend.• Environment is not an item.• Bad investment climate for CHP.• Bad investment climate for coal and nuclear by
uncertainty concerning future environmental regulation • Prices too low for renewables
The Netherlands: structural importer or exporter of electricity?In a European level playing field the Netherlands should be an
exporter because we have:• Strong position in sourcing and transport of natural gas• High experience in CHP and gas turbine technology• Sea harbor facilities for import of world market coal• Cooling water facilities• Strong connections with the European E-grid• Etc.
Environment
Availability of heat excluding industrial heat
100% fuel for electricityproduction
43% electricity
4% E grid losses
9% useful heat by CHP
44% is waste heat =13 billion m3 natural gas=
23,4Mton CO2
Waste heat % of power plants
• Lignite >60%• Coal fired > 55%• Conventional gas > 55%• Hot Windbox > 50%• CCGT > 45%• Incinerator > 70%• Nuclear > 60%
Priorities?
• Only promoting Renewables vs. the lowest level of fossil fuel consumption and emissions for the total energy demand?
• Energy savings vs. the fossil fuel use/emission level per unit electricity/heat?
• Clear physical CHP electricity definition vs. lowest level of fossil fuel consumption
The environmental ranking on base of CO2 emissions
Quality
RenewablesGood gas CHPCCGTBad gas CHPHot WindboxGood coal CHPModern coal unitsBad coal CHP
Ranking on base of operational results and not on design efficiency
COGEN Methodology
FuelReference Boiler
ReferenceE powerplant
CHP Part
CO2 or Fossil fuel free electricity
Fuel
FuelCO2
CO2CO2
E -COGEN
E - Powerplant
H H ref=
E = E CHP+E Grey
Cogeneration Separate Production E + H
Energy savings CHP
Investment Opportunities/Risks of CHP
• Opportunities: Energy/emissions savings, proven technology, grid cost savings
• Risks: Continuity of heat demand and or heat source, economy of scale, weak and uncertain position in electricity and fuel market, level playing field?, no structural financial valuation of environmental aspects
CHP Renewables wind and sun
Grey electricity
CO2 free ~25% 100% 0
Investment >€700/kW >€1000/kW >€650/kW
Security of supply
>95% <25% >95%
Market position
Uncertain Government supported
Strong position, gas price?
District Heating in The Netherlands
• Only 3% of the heat market• Big opportunities for energy savings but bad investment
climate (very unclear regulation)• For producers the electricity market is the first priority• The heat market is not a free market
Risks of District Heating
IncomeCosts
It is never in balance
>80% variable without influence
> 80% fixed costs
Heat Distribution
CHP
Back-up/peak
Storage
Grid ConsumerAlternative Consumer
F
F
E E E E
H
FHH
E= ElectricityF= FuelH= Heat
Energy savings for the total chain between +90% and –40%
Some figures
• 100 km by car –15 kg CO2
• 1 Dutch family with DH saves 1500 kg CO2/yr
• 1 Windmill of 1 MW saves 700 ton CO2/yr
• 1 MWth CHP saves 700 ton CO2/yr
Security of Supply
CHP (Security of Supply)Generation capacity and CHP contribution during max and average load
3350
1129
0
1444
0
1292
0
1354
0
1202
0
1424
2
1300
0
3350
560
3910
3910
7630
1129
0
1146
0
0
5.000
10.000
15.000
20.000
25.000
Supp
ly, D
eman
d [M
We]
Avr. Daily Load
Max. Daily Load
Gen 85% - H, RRV,UCTE
Gen 95% - H, RRV,UCTE
Gen 85% Available
Gen 95% Available
Other
CHP
Renewables
Import
23.000
15.200
18.550
CHP contribution approx. 3200 - 3500 MWe of
observed CHP capacity
Security of supply
• Technical, availability fuels, the environment• Separate electricity production results in
45-75% waste heat • Political risks• Distributed vs. centralized generation• Grid capacity and load flows
Regulation
Dutch Regulation
• MEP for renewables. A price guarantee for 10 years for different types of renewables.
• CO2 index for CHP• Energy tax exemption for District Heating• Different convenants between government and “industry”• Different Codes from the Dte• Consumers of green electricity have partly exemption of
energy tax. Export of tax money.
E.U and international Regulation
• There is no level playing field in the E.U.• Every country has its own fuel position and own
regulation• Big energy flows all over Europe are structural not
economical.• Kyoto. The Netherlands have a bad starting position,
but a lot of clean technology• The Netherlands is now in a bad position, their
interest is a real level playing field and a consequent energy policy
The unworkable Regulation for CHP
CHP / DH
Regulator
DGO’s
ConsumerOrganisations
Convenants between government/market parties
National support
Local Governments
E.U. directive CO2 trading
Fuel markets
Traders/producers
E.U. directive CHP
Behaviour of stakeholders
• Nobody is responsible for security of supply• Short term behavior• A natural urge to monopoly• No money for research• The market is too risky for new entrance• Many legal conflicts• Loans become expensive• Nobody has the long term overview• Short term money is leading
Recommandations
• Formulate a clear long term energy policy in a formulate balance between economy, environment and security of supply on base of the available alternatives
• Make that policy operational with a mix of the advantages of the utility and the free market.
•We will present our proposals mid 2004.
First impression of our Recommendations
• We define a number of possible market structures from 100% utility to 100% free market
• We define a number of possible scenario´s for the balance between economy, environment and security of supply
• We present the consequences, opportunities and risks of the different possible combinations of market structures and scenario´s including regulation and behavior of market parties
• The final choice is a political choice
Recommendation
Translate our smile in market power.Result: a structural, payable big smile.
Smile for the environment
Power of the market