Industry Terms

Electricity Markets

An electricity market is a system for effecting the purchase and sale of electricity using supply and demand to set the price. 

Transmission

Electric power transmission allows distant energy sources (such as hydroelectric power plants) to be connected to consumers in population centers, and may allow exploitation of low-grade fuel resources that would otherwise be too costly to transport to generating facilities. Due to the large amount of power involved, transmission normally takes place at high voltage (110 kV or above). Electricity is usually transmitted over long distance through overhead power transmission lines. Underground power transmission is used only in densely populated areas because of its high cost of installation and maintenance, and because the high reactive power produces large charging currents and difficulties in voltage management. 

Wheeling

An electric utility or IPP that generates power does not necessarily have to own electricity transmission lines: - only a connection to the network or grid. The generator then pays the owner of the transmission line based on how much power is being moved and how congested the line is. 

Distribution

Electricity distribution is the penultimate stage in the delivery (before retail) of electricity to end users. It is generally considered to include medium-voltage (less than 50 kV) power lines, electrical substations and pole-mounted transformers, low-voltage (less than 1000 V) distribution wiring and sometimes electricity meters. 

Peaking Power Plant

Peaking power plants, also known as peaker plants, are power plants that generally run only when there is a high demand, known as peak demand, for electricity. 

Distributed Generation

Distributed generation, also called on-site generation, dispersed generation, embedded generation, decentralized generation, decentralized energy or distributed energy, generates electricity from many small energy sources. 

Power Barge

A power barge is a power plant installed on a deck barge. The type of power plants include; single or multiple gas turbines, reciprocating diesel and gas engines boilers or nuclear reactors. Power barges are also referred to as barge-mounted power plants or floating power plants. They were initially developed during World War II by General Electric for the War Production Board as a transportable large scale power generation resource. 

Power Generation Technologies
Combined cycle power plant

In a combined cycle power plant (CCPP), or combined cycle gas turbine (CCGT) plant, a gas turbine generator generates electricity and the waste heat is used to make steam to generate additional electricity via a steam turbine; this last step enhances the efficiency of electricity generation. Most new gas power plants in North America and Europe are of this type. In a thermal power plant, high-temperature heat as input to the power plant, usually from burning of fuel, is converted to electricity as one of the outputs and low-temperature heat as another output. As a rule, in order to achieve high efficiency, the temperature difference between the input and output heat levels should be as high as possible (Carnot efficiency). This is achieved by combining the Rankine (steam) and Brayton (gas) thermodynamic cycles. Such an arrangement used for marine propulsion is called Combined Gas (turbine) And Steam (turbine) (COGAS).

Design principle

In a thermal power station water is the working medium. High pressure steam requires strong, bulky components. High temperatures require expensive alloys made from nickel or cobalt, rather than inexpensive steel. These alloys limit practical steam temperatures to 655 °C while the lower temperature of a steam plant is fixed by the boiling point of water. With these limits, a steam plant has a fixed upper efficiency of 35 to 42%.

An open circuit gas turbine cycle has a compressor, a combustor and a turbine. For gas turbines the amount of metal that must withstand the high temperatures and pressures is small, and lower quantities of expensive materials can be used. In this type of cycle, the input temperature to the turbine (the firing temperature), is relatively high (900 to 1,400 °C). The output temperature of the flue gas is also high (450 to 650 °C). This is therefore high enough to provide heat for a second cycle which uses steam as the working fluid; (a Rankine cycle).

In a combined cycle power plant, the heat of the gas turbine's exhaust is used to generate steam by passing it through a heat recovery steam generator (HRSG) with a live steam temperature between 420 and 580 °C. The condenser of the Rankine cycle is usually cooled by water from a lake, river, sea or cooling towers. This temperature can be as low as 15 °C.

Efficiency of CCGT plants

By combining both gas and steam cycles, high input temperatures and low output temperatures can be achieved. The efficiency of the cycles add, because they are powered by the same fuel source. So, a combined cycle plant has a thermodynamic cycle that operates between the gas-turbine's high firing temperature and the waste heat temperature from the condensers of the steam cycle. This large range means that the Carnot efficiency of the cycle is high. The actual efficiency, while lower than this is still higher than that of either plant on its own.

The thermal efficiency of a combined cycle power plant is the net power output of the plant divided by the heating value of the fuel. If the plant produces only electricity, efficiencies of up to 60% can be achieved. In the case of combined heat and power generation, the overall efficiency can increase to 85%.

Fuel for combined cycle power plants

Combined cycle plants are usually powered by natural gas, although fuel oil, synthesis gas or other fuels can be used. The supplementary fuel may be natural gas, fuel oil, or coal. Integrated solar combined cycle power stations are currently under construction at Hassi R'mel, Algeria and Ain Beni Mathar, Morocco. Next generation nuclear power plants are also on the drawing board which will take advantage of the higher temperature range made available by the Brayton top cycle, as well as the increase in thermal efficiency offered by a Rankine bottoming cycle.

Integrated Gasification Combined Cycle

An Integrated Gasification Combined Cycle, or IGCC, is a power plant using synthetic gas (syngas). This gas is often used to power a gas turbine generator whose waste heat is passed to a steam turbine system (Combined cycle gas turbine).

An Integrated Gasification Combined Cycle, or IGCC, is a technology that turns coal into gas - synthesis gas (syngas). It then removes impurities from the coal gas before it is combusted. This results in lower emissions of sulfur dioxide, particulates and mercury. It also results in improved efficiency compared to conventional pulverized coal. Because coal is the most abundant energy source for America and many other countries, the environmental benefits of this technology could be strategically important.  

The gasification process can produce syngas from high-sulfur coal, heavy petroleum residues and biomass.  

The plant is called "integrated" because its syngas is produced in a gasification unit in the plant which has been optimized for the plant's combined cycle. In this example the syngas produced is used as fuel in a gas turbine which produces electrical power. To improve the overall process efficiency heat is recovered from both the gasification process and also the gas turbine exhaust in 'Waste Heat Boilers' producing steam. This steam is then used in steam turbines to produce additional electrical power.  

There are currently (2007) only two IGCC plants generating power in the U.S; however, several new IGCC plants are expected to come online in the U.S. in the 2012-2020 time frame. The DOE Clean Coal Demonstration Project helped construct 3 IGCC plants: Wabash River Power Station in West Terre Haute, Indiana, Polk Power Station in Tampa, Florida (online 1996), and Pinon Pine in Reno, Nevada. In the Reno demonstration project, researchers found that then-current IGCC technology would not work more than 300 feet (100m) above sea level. The plant failed.  

The first generation of IGCC plants polluted less than contemporary coal-based technology, but also polluted water: For example, the Wabash River Plant was out of compliance with its water permit during 1998–2001 because it emitted arsenic, selenium and cyanide. The Wabash River Generating Station is now wholly owned and operated by the Wabash River Power Association.  

IGCC is now touted as "capture ready" and could potentially capture and store carbon dioxide. 

Cost and reliability

The main problem for IGCC is its extremely high capital cost, upwards of $3,593/kW. Official US government figures give more optimistic estimates of $1491/kw installed capacity (2005 dollars) v $1290 for a conventional clean coal facility, but in light of current applications, these cost estimates have been demonstrated to be incorrect.  

Outdated per megawatt-hour cost of an IGCC plant vs. a pulverized coal plant coming online in 2010 would be $56 vs $52, and it is claimed that IGCC becomes even more attractive when you include the costs of carbon capture and sequestration, IGCC becoming $79 per megawatt-hour vs. $95 per megawatt-hour for pulverized coal. Recent testimony in regulatory proceedings show the cost of IGCC to be twice that predicted by Goddell, from $96 to 104/MWhr. That's before addition of capital intensive and efficiency sucking carbon capture and sequestration (sequestration is not available or probable on commercial level) -- capture at a 30% rate is expected to have a $50/MWhr additional cost.  

Wabash River was down repeatedly for long stretches due to gasifier problems related to different fuel and fuel mixes, and subsequent projects, such as Excelsior's Mesaba Project, have a third gasifier and train built in. However, the past year has seen Wabash River running reliably, with availability comparable to or better than other technologies.  

General Electric is currently designing an IGCC model plant that should introduce greater reliability. GE's model features advanced turbines optimized for the coal syngas. Eastman's industrial gasification plant in Kingsport, TN uses a GE Energy solid-fed gasifier. Eastman, a fortune 500 company, built the facility in 1983 without any state or federal subsidies and turns a profit.  

There are several refinery-based IGCC plants in Europe that have demonstrated good availability (90-95%) after initial shakedown periods.  

Several factors help this performance:

None of these facilities use advanced technology ("F" type) gas turbines.

All refinery-based plants use refinery residues, rather than coal, as the feedstock. This eliminates coal handling and coal preparation equipment and its problems. Also, there is a much lower level of ash produced in the gasifier, which reduces cleanup and downtime in its gas cooling and cleaning stages.  

These non-utility plants have recognized the need to treat the gasification system as an up-front chemical processing plant, and have reorganized their operating staff accordingly.  

Another IGCC success story has been the 250 MW Buggenum plant in The Netherlands. It also has good availability. This coal-based IGCC plant currently uses about 30% biomass as a supplemental feedstock. The owner, NUON, is paid an incentive fee by the government to use the biomass. NUON is constructing a 1300 MW IGCC plant in the Netherlands. The Nuon Magnum IGCC power plant will commissioned in 2011. Mitsubishi Heavy Industries has been awarded to construct the power plant.

A new generation of IGCC-based coal-fired power plants has been proposed, although none is yet under construction. Projects are being developed by AEP, Duke Energy, and Southern Company in the US, and in Europe, by Centrica (UK), E.ON and RWE (both Germany) and NUON (Netherlands). In Minnesota, the state's Dept. of Commerce analysis found IGCC to have the highest cost, with an emissions profile not significantly better than pulverized coal. In Delaware, the Delmarva and state consultant analysis had essentially the same results. 

The high cost of IGCC is the biggest obstacle to its integration in the power market; however, most energy executives recognize that carbon regulation is coming soon. Bills requiring carbon reduction are being proposed again both the House and the Senate, and with the Democratic majority it seems likely that with the next President there will be a greater push for carbon regulation. The Supreme Court decision requiring the EPA to regulate carbon (Commonwealth of Massachusetts et al. v. Environmental Protection Agency et al.) also speaks to the likelihood of future carbon regulations coming sooner, rather than later. With carbon capture, the cost of electricity from an IGCC plant would increase approximately 30%. For a natural gas CC, the increase is approximately 33%. For a pulverized coal plant, the increase is approximately 68%. This potential for less expensive carbon capture makes IGCC an attractive choice for keeping low cost coal an available fuel source in a carbon constrained world. 

In Japan, electric power companies, in conjunction with Mitsubishi Heavy Industries has been operating a 200 t/d IGCC pilot plant since the early '90s. In September 2007 they started up a 250mw demo plant in Nakaso. It runs on air-blown (not oxygen) dry feed coal only. It burns PRB coal with an unburned carbon content ratio of < 0.1% and no detected leaching of trace elements. It employs not only "F" type turbines but "G" type as well.  

Next generation IGCC plants with CO2 capture technology will be expected to have higher thermal efficiency and to hold the cost down because of simplified systems compared to conventional IGCC. The main feature is that instead of using oxygen and nitrogen to gasify coal, they use oxygen and CO2. The main advantage is that it is possible to improve the performance of cold gas efficiency and to reduce the unburned carbon (char).  

With a 1300 degrees C class gas turbine it is possible to achieve 42% net thermal efficiency, rising to 45% with a 1500 degree class gas turbine, with CO2 capture. In case of conventional IGCC systems, it is only possible to achieve just over 30% efficiency with a 1300 degree gas turbine.  

The CO2 extracted from gas turbine exhaust gas is utilized in this system. Using a closed gas turbine system capable of capturing the CO2 by direct compression and liquefication obviates the need for a separation and capture system."          

Non-renewable resource

Non-renewable energy is energy taken from "finite resources that will eventually dwindle, or be depleted, becoming too expensive or too environmentally damaging to retrieve", as opposed to renewable energy sources, which "are naturally replenished in a relatively short period of time”.        

Renewable resources

Renewable energy is energy generated from natural resources - such as sunlight, wind, rain, tides and geothermal heat - which are renewable, or not depleteable (naturally replenished). Renewable energy technologies include solar power, wind power, hydroelectricity, micro hydro, biomass and biofuels.  

Renewable energy in developing countries

Most developing countries have abundant renewable energy resources, including solar energy, wind power, geothermal energy, and biomass, as well as the ability to manufacture the relatively labor-intensive systems that harness these. By developing such energy sources developing countries can reduce their dependence on oil and natural gas, creating energy portfolios that are less vulnerable to price rises. In many circumstances, these investments can be less expensive than fossil fuel energy systems.     

The Southern African Development Community (SADC)

The SADC is an inter-governmental organization. It furthers socio-economic cooperation and integration as well as political and security cooperation among 15 southern African states. It complements the role of the African Union.            

South African Power Pool

Regional energy trade, particularly electric power, is a high priority for the SADC-member countries. The August 1995 Inter-Governmental Agreement creating the Southern African Power Pool (SAPP) confirmed the region's commitment to expanding electricity trade, reducing energy costs and providing greater supply stability for the region's 12 national utilities.            

HVDC Western Power Corridor

Westcor is a project to supply energy from two hydroelectric power plants - the DRC’s Inga 3 and Angola's Cuanza River - to the DRC, Angola, Namibia, Botswana and South Africa.       

Department of Energy

The Department of Minerals and Energy is responsible for ensuring exploration, development, processing, utilisation and management of South Africa's mineral and energy resources.             

National Energy Regulator of South Africa

Nersa's Electricity Division (there are also Petroleum Pipeline, and Piped Gas divisions) has four departments.         

ESKOM

Eskom is an electricity public utility, established in 1923 as the Electricity Supply Commission (ESCOM) by the government of South Africa in terms of the Electricity Act (1922).             

Energy Security

Position Paper of the Department of Minerals and Energy presented at the 2007 Energy Summit. Theme: “Energy security for sustainable and shared economic growth for all”.Position Paper of the Department of Minerals and Energy presented at the 2007 Energy Summit. Theme: “Energy security for sustainable and shared economic growth for all”.       

Project Finance

Project finance is the financing of long-term infrastructure and industrial projects based upon a complex financial structure where project debt and equity are used to finance the project. Usually, a project financing scheme involves a number of equity investors, known as sponsors, as well as a syndicate of banks which provide loans to the operation. The loans are most commonly non-recourse loans, which are secured by the project itself and paid entirely from its cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling. The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given a lien on all of these assets, and are able to assume control of a project if the project company has difficulties complying with the loan terms. 

Generally, a special purpose entity is created for each project, thereby shielding other assets owned by a project sponsor from the detrimental effects of a projec failure. As a special purpose entity, the project company has no assets other than the project. Capital contribution commitments by the owners of the project company are sometimes necessary to ensure that the project is financially sound. Project finance is often more complicated than alternative financing methods. Traditionally, project financing has been most commonly used in the mining, transportation, telecommunication and public utility industries. More recently, particularly in Europe, project financing principles have been applied to quasi-privatizations of publicly-held infrastructure (e.g. schools, hospitals, light rail, prisons, government buildings, etc.) under so-called public-private partnerships (PPP) or, in the UK, Private Finance Initiative (PFI) transactions. 

Risk identification and allocation is a key component of project finance. A project may be subject to a number of technical, environmental, economic and political risks, particularly in developing countries and emerging markets. Financial institutions and project sponsors may conclude that the risks inherent in project development and operation are unacceptable (unfinanceable). To cope with these risks, project sponsors in these industries (such as power plants or railway lines) are generally completed by a number of specialist companies operating in a contractual network with each other that allocates risk in a way that allows financing to take place. The various patterns of implementation are sometimes referred to as "project delivery methods." The financing of these projects must also be distributed among multiple parties, so as to distribute the risk associated with the project while simultaneously ensuring profits for each party involved. 

A riskier or more expensive project may require limited recourse financing secured by a surety from sponsors. A complex project finance scheme may incorporate corporate finance, securitization, options, insurance provisions or other further measures to mitigate risk. 

Complicating factors

The above is a simple explanation which does not cover the contracts for delivering the power to consumers. 

In developing countries, it is not unusual for one or more government entities to be the primary consumers of the project, undertaking the "last mile distribution" to the consuming population. The relevant purchase agreements between the government agencies and the project may contain clauses guaranteeing a minimum offtake and thereby guarantee a certain level of revenues. In other sectors including road transportation, the government may toll the roads and collect the revenues, while providing a guaranteed annual sum (along with clearly specified upside and downside conditions) to the project. This serves to minimize or eliminate the risks associated with traffic demand for the project investors and the lenders. 

Minority owners of a project may wish to use "off-balance-sheet" financing, in which they disclose their participation in the project as an investment, and excludes the debt from financial statements by disclosing it as a footnote related to the investment. In the United States, this eligibility is determined by the Financial Accounting Standards Board. Many projects in developing countries must also be covered with war risk insurance, which covers acts of hostile attack, derelict mines and torpedoes, and civil unrest which are not generally included in "standard" insurance policies. Today, some altered policies that include terrorism are called Terrorism Insurance or Political Risk Insurance. In many cases, an outside insurer will issue a performance bond to guarantee timely completion of the project by the contractor. 

Publicly-funded projects may also use additional financing methods such as tax increment financing or Private Finance Initiative (PFI). Such projects are often governed by a Capital Improvement Plan which adds certain auditing capabilities and restrictions to the process.   

Power Purchase Agreement

A Power Purchase Agreement (PPA) is a legal contract between an electricity generator and a purchaser of energy or capacity (power or ancillary services). Such agreements play a key role in the financing of electricity generating assets. Under the terms of a PPA, the PPA provider typically assumes the risks and responsibilities of ownership when it purchases, operates, and maintains the turn-key facility. By clearly defining the output of a generating asset and the credit of its associated revenue streams, a PPA can be used by the owner of the asset to raise non-recourse financing from a bank or other financing counter-party.