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The Dutch Electricity/Heat
sector in the battle between
Economy, Environment and
Security of Supply in the
liberalized European market
drs. ing. Teus van Eck
T.U. Berlin, 19 Jan. 2004,
Fac. Economics and Management
Contents
• Market situation
• Economy
• Environment
• Security of supply
• Regulation
• Behavior of
stakeholders
• Recommendations
Market situation
Generating Capacity Netherlands
Generating Capacity Netherlands
Renewables ( 561 )
3%
WI ( 424 )
2%
Conv. Coal ( 3940 )
20%
CHP ( 7628 )
38%
Conv. Gas ( 2100 )
11%
HW CCGT ( 2308 )
12%
CCGT ( 2079 )
11%
Generating Capacity 19.660 MW (2001)
Peak ( 171 )
1%
Nuclear ( 449 )
2%
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
DGO’s
Producers
Traders
Grid Operators
Government
Consumers
Regulators
CHP / DH
The Balance
“Economy”
Environment
Security of supply
The long en short term values???
Reality T.V.
The future
of our
children
Environment
Politicians
Low prices
High earnings
Low risks
Market power
Free market
Dream versus Reality
Prosperity/
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 Electricity
in the Netherlands
Ren ew abl es
100%
• Peak Load
75
50
• Base Load
25
0
0:00
5:00
10:00
15:00
20:00
Heat Consumption Curves
10500
10000
9500
9000
Hot W.
8500
Coal
Stagg
8000
7500
7000
6500
0
100
200
300
Power Output [MWe]
400
500
600
Use of fuel CO2 Costprice
kJ/kWh g/kWh baseload
€ct/kWh
Renewables
COGEN (gas)
CCGT
Coal unit
0
5000
6700
9000
0
280
375
830
2 - …..
3,5 - 5
3,5
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
40,0
Fuel cost [€/MWh]
30,0
CONV GAS
20,0
HW CCGT
CCGT
CONV COAL
10,0
0,0
0
1000
2000
3000
4000
5000
Operation time [h]
6000
7000
8000
9000
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
43% electricity
4% E grid losses
100% fuel for
9% useful heat by CHP
electricityproduction
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
Renewables
Good gas CHP
CCGT
Bad gas CHP
Hot Windbox
Good coal CHP
Modern coal units
Bad coal CHP
Ranking on base of operational results and
not on design efficiency
COGEN Methodology
Energy savings CHP
Separate
Cogeneration
H
H ref
=
Reference
Fuel
CHP Part
Boiler
Fuel
CO 2
CO 2
CO 2
ECOGEN
E = E CHP+E
Production
E -
E
Reference
powerplant
Powerplant
Grey
CO 2
or Fossil fuel free
electricity
Fuel
E+H
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
It is never in balance
Costs
> 80% fixed costs
Income
>80% variable
without influence
Heat Distribution
E
F
E
E
CHP
Back-up/peak
Storage
H
F
E
H
Grid
Consumer
H
Energy savings for the total chain between
+90% and –40%
Alternative
Consumer
E= Electricity
F= Fuel
H= Heat
F
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
Avr. Daily Load
25.000
23.000
CHP contribution approx.
3200 - 3500 M We of
obse rv e d CHP capacity
18.550
Gen 85% - H, RRV,UCTE
11460
20.000
15.200
Gen 95% - H, RRV,UCTE
11290
15.000
11290
Gen 85% Available
13000
14242
12020
12920
3910
Other
3910
3350
3350
560
5.000
13540
Gen 95% Available
14440
7630
10.000
CHP
(O
bs
er
Renewables
ad
(O
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oa
d
A
vr
L
ax
M
ve
d)
)
bs
er
ve
d
or
r
-C
85
%
en
G
en
95
%
-C
or
r
A
vb
G
G
en
95
%
en
G
85
%
A
vb
)
bs
er
ve
d
en
G
Im
p
+
en
G
(O
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lG
en
bs
er
+
ve
d)
Im
p
0
To
ta
Supply, Demand [MWe]
Max. Daily Load
Import
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
Traders/producers
E.U. directive CO2 trading
Regulator
Consumer
Organisations
E.U. directive CHP
CHP / DH
DGO’s
Fuel markets
Local Governments
National support
Convenants between
government/market parties
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
Smile for the
environment
Power of the
market
Translate our smile in market power.
Result: a structural, payable big smile.