Electrolysis for Energy Storage & Grid Balancing in West Denmark

Electrolysis for Energy Storage & Grid Balancing in West Denmark

A possible first step toward the creation of a

transport hydrogen Infrastructure in West Denmark

Report of the Work Group

Incoteco (Denmark) ApS EFP04 – 0330-0034

CONTENTS Page

1. Executive Summary & Recommendations • Summary 3 • Summary . fuel security 6 • SWOT Analysis 8 • Recommendations 9

2. Strategic Considerations (Strategisk teknologiudvikling ved afslutningen af den billge oilies æra) 11 3. Danish Wind Carpet Behaviour, Challenges & Solutions 16 4. Electrolysis at West Denmark’s Decentral Power Stations (incl. Stationary Fuel Cells) 24 5. Economic Assessment 30 6. Other Methods for Storing Energy 34

Work Method & Acknowledgements This project was studied and written up between mid-March and mid-August, 2004 The work has been a collaborative effort between the original stakeholders who were, Dansk Fjenrvarmeværkers Forening (DFF), Norsk Hydro Energy, Norsk Hydro Electrolysers, Naturgas MidtNord, Ringkøbing Fjernvarmværk (RFV), IRD A/S, Dr Klaus Illum and Incoteco (Denmark) ApS. Incoteco’s Hugh Sharman has been responsible for the project coordination and editing of the report and is grateful to the writers who have written up the most specialised sections. It is important to mention that other companies and institutions, although not originally nor officially partners in the project, have shown great interest and contributed with their valuable time, ideas, advice and experience. These are, ELTRA, ELSAM, Wärtsila OY, H2 LOGIC ApS, Markedskraft, Vindenergi Danmark, Danmarks Vindmølleforening, Dansk Gasteknisk Center a/s, AGA-Linde, Hollensen Energi and Ringkøbing Amt. The project was conducted in five main stages. At the end of the first four stages, the stakeholders and guests gathered to meet each other and to present their findings and/or insights. The project diary is as follows:

1. Preparation, mid-March to mid-April 2. “Kick-off” (stakeholders’ meeting at DFF, Kolding, 14 April, 2004) 3. Mid-point stakeholders’ meeting at Ringkøbing Amt, 25 May, 2004 4. Concluding stakeholders’ meeting at DFF, Kolding, 1st July, 2004 5. Final Analysis, Report preparation, review of drafts, agreement and report submission, mid August.

Special thanks are due to DFF’s Viktor Jensen and Kurt Risager, whose help, guidance, hard work and hospitality, has made the report possible. Thanks must also go to the personnel at Norsk Hydro in Oslo and Notodden, whose deep knowledge of hydrogen technologies and unstinting support with time and money under-writes the credibility of the conclusions and recommendations for action. The work was supported and sponsored by Energistyrelsen (Danish Energy Authority), Amaliegade 44, 1256 Copenhagen K www.ens.dk

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http://www.ens.dk/


1. Executive Summary & Recommendations 1.1 Summary West Denmark has a large endowment of modern wind turbines, amounting to 2,374 MW capacity (2003), while peak winter load during 2003 was 3,746 MW. The Danish Government is committed to extend this capacity before 2010, to about 2,700 MW. High wind power output often occurs out of phase with demand and often unpredictably. Wind power output also ramps up and down continuously, sometimes by large amounts. The resulting imbalance is most often handled across West Denmark’s inter-connections with Sweden (150 TWh), Norway (120 TWh) and Germany (500 TWh), all three systems being many times larger than West Denmark’s (20 TWh) . In addition, because half of Sweden’s and all of Norway’s power plants are hydro, there is an excellent match between wind and fast responding hydro, from an overall operating and grid balancing point of view.

However, when built, the wind capacity in 2008 - 2010, will be roughly equivalent to the export capacity of all West Denmark’s inter-connectors. These may become bottlenecked at times of high wind turbine output. The inter-connectors themselves, cannot be relied upon all the time. There was an extended, 5-month outage of the 500 MW Skagerrak 3 inter-connector during 2003 (July thro’ December), preceded by another failure in one of the older Konti-skan connectors to Sweden in the winter of 2002-2003. Measures are already being taken to reduce further risk of bottle-necking by changing the conditions under which the decentralized power stations operate and amending the law that forbids the use of electricity for heating at these power stations. Denmark’s well functioning, district heating generation plants (CHPs) are in almost every town and village (1,656 MW in 560 units). Provided that the right market conditions can be created, West Denmark can use them to develop a transport

hydrogen infrastructure, based on using “over-flow” wind energy, sooner and more economically, than possibly anywhere else on Earth. The high pressure, electrolysers, of the type studied and proposed in this report, can be delivered in unit sizes up to 3.5 MW. They are very fast acting, being capable of a ramping up and down from zero to full load in 200 milli-seconds and are therefore technically attractive to the power regulating market. This is expected to grow as wind capacity is added. Built in sufficiently large numbers, soon enough, these can partly address the foreseen inter-connector bottle-necking, and assist grid balancing and grid stabilisation. To develop an infrastructure that can reduce Denmark’s total dependence on hydrocarbons for transport, which consumes 200 PJ per year, and produces about 11.5 million t/y of CO2 emissions1, is an enormous task, requiring decades of development time and still uncalculated but very large amounts of money. Energistyrelsen’s terms of reference2 required us to investigate the economy of constructing electrolyser systems at these decentralized power plants. The hydrogen would be stored and spiked into the natural gas that fuels the engines and turbines. The electrolysers would be upgraded to hydrogen filling stations as vehicles became available, locally, which are fueled by hydrogen. In the first instance, these are foreseen as local fleets, with high rates of utilization, such as buses, taxis, ambulances, delivery vans, etc. The use of hydrogen as a natural gas substitute in the power plants is envisaged as an intermediate application, prior to its adoption as a transport fuel.

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1 . http://www.dst.dk/ (Danmarks Statistik) 2 EFP04 Journalnr.: 33030-0034

http://www.dst.dk/


Around 5.5 TWh of wind energy will be produced in 2008 - 2010 from West Denmark. If all of this were used to manufacture hydrogen, it would produce 1.3 billion Nm3 of hydrogen with an LCV of 14 PJ. From this, it can be seen that existing wind energy can deliver a substantial fraction of West Denmark’s transport needs when hydrogen-powered vehicles become available. The construction and development of an electrolyser system at Ringkøbing Fjernvarmværk, was pre-engineered and priced to test whether the intermediate use of hydrogen, as a natural gas substitute, could justify building and operating the electrolyser plants commercially, under present day market conditions. The calculations tested various ways to ensure that the hydrogen that would be generated would be from renewable energy sources and thus would not cause any incremental CO2 emissions. In this case, special fiscal treatment might be justified. One reliable way to ensure this, is to document that the consumption of renewable electricity, by way of tradable "Renewable Energy Certificates"3. When the European (CO2) Emissions Trading System (ETS) begins next year, 2005 environmental externalities will be partly internalized in the electricity price. Everything else being equal this will increase the price of electricity to the benefit of renewable energy generators with no CO2 emissions. However, no account of benefits from such trading could be used in our calculations, due to the lack of any reliable information about special tax treatment or ETS and likely CO2 price levels. It was assumed that the electrolyser can bid successfully into the downward regulating market, reducing the price paid for energy by the average amount recorded in ELTRA’s data base, of each year from 2000 thro’ 2003. The average, untaxed cost of electricity to the electrolyser, had it been able to bid, successfully, into the downward regulating market during 2000 thro’ 2003 was as follows

Year 2000 2001 2002 2003 Øre per kWh 5.5 10.6 9.5 13.2

In addition, during the last, record, wet year, the average price for West Denmark was 12.2 øre/kWh.

Cost of Hydrogen, DKK/GJ (6% IRR Capital Employed)

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The results show that it is not feasible to displace power station gas with hydrogen, even when that gas is taxed and the hydrogen is not. Taxed gas costs the power station DK 57/GJ while tax-free hydrogen needs a sales price in the range of DKK 150/GJ4. This is more due to the capital costs of plant constrained to run about half the year. On the other hand, Danes are paying (without excessive complaint) DKK 250/GJ for transport fuel when they pay DKK 8 per liter for petrol. Of course, about 75% of this is tax5.

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3 Peter Jørgensen, ELTRA 4 . These calculations are explained in the Chapter 5. They are based on a build up of 100 MW of capacity, constructed from 2005 thro 2015, all paid off by 2030, the replacement of cell membranes every ten years and a utilization rate of 4200 h/y. The cost of electricity to the electrolysers is assumed to be tax-free. 5 . The price of gasoline at sea, during July, 2004, was about $450/t or about $10/GJ, DKK63/GJ


Therefore, if the project is to advance further, on a commercial basis, requiring no public subsidy, the price paid for hydrogen must reflect its value as a high fraction of the price of taxed transport fuel. Special fiscal arrangements will need to be developed to encourage this. This will also probably require that companies experienced in and motivated by the retailing of transport fuel become involved6. The costs shown demonstrate that its intermediate use as power station fuel will require that the host CHP be compensated for consuming a more expensive fuel.

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6 . For example, Shell, BP and Total are involved in the ownership of prototype hydrogen filling stations. There are 69 such filling stations listed at http://www.h2cars.de/filling/index.html

http://www.h2cars.de/filling/index.html


1.2 Fuel Security

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In an unprecedented break with its past, Oil anGas Journal, the oil industry’s most influential source as regards hydrocarbon supply and demastarted in August, 2003 and continues to run, a minter

Hydrocarbons are responsible for close to 100% of Danish transport fuel; transport fuel is currently the source of 18%, or 11.5 million t/y of Danish CO2 emissions and rising. In every other sector, overall Danish CO2 emissions are falling, although emissions from the power sector rose, during 2002- 2003, due to the drought in Scandinavia.

Energistyrelesen, 2004

Danish oil production is likely to peak in 2005 and decline thereafter. Gas production is seen as stable for some years more but gas resources are also finite. Oil and gas production is already in decline in the UK sector of the North Sea while oil production is also, probably, in permanent decline in the Norwegian sector.

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esting (alarming) series of articles on the so-called “peak oil” debate7.

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developed, World demand will shortly overtake

During this decade, Europe will become even dependent than it already is, on oil and gas from outside Europe, partly alleviated by a modeWorld standards) supply of gas from Norway. Afte2020, it is foreseen that almost all of Europe’s oil and gas will come f

Leif Magne MStatoil, prese

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to WPC, Dec, 2003

Association for the SPeak Oil

tudy of , 2004

Europe will have to compete with other consumespecially the USA, the Far East and the fast-developing Indian sub-continent, for these supwhich may become expensive and also subje

Critics parody the “Peak oil” argument as a simplistclaim that “we are running out of oil”. This indeedultimately true, but it is a profound misunderstanof the case being made. “Peak Oil” proponents8 have developed various oil production models baon the fact that the World’s oil industry has failed, since 1992, to find new “conventional” oil in the quantities needed to replace such low cost oil that is being consumed. Using advanced oil field practice, they point to the strong likelihood that unless vast new resources are soon found and quickly

production and that production will decline rapidly and permanently thereafter.

7 Article search at www.pennet.ogj.com for “peak oil” returned 1000 results on 22 July, 2004

6 8 Association for the Study of Peak Oil (ASPO), at www.peakoil.net

http://www.pennet.ogj.com/

http://www.peakoil.net/


There is only a small difference in the estimated date for when “peak oil” is likely to occur. So-called “pessimists” likColin Campbell, founder of ASPO, may be right in suggesting that the present oil supply bottleneck demonstrates that we are seeing the beginning of the peak, now. “Optimists”, like Mr. Meling suggest that while there i

US Gas Prices, 1998 - 2003

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EIA, July, 2004

Power Sector Commercial Sector

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s a scant hope of uch “new” oil being found, better management of existing reserves may enable production to keep on growing for

not yet acknowledged publicly by the international agencies, many oil industry executives and insiders9 are cknowledging that an early “peak oil” scenario is more realistic than their officials are prepared to admit for the public

by the Danish Board of echnology and the Society of Danish Engineers in Copenhagen. Dr Klaus Illum, in the form of a book, wrote the

what ll

s, bitumen and coal and the delay in reaching that change-over. When this happens, there will e a step-change upward in specific CO2 emissions. That is also likely to impact price, if global warming remains an

he expected price increase of fossil derived fuels, driven by increased World demand, even affecting coal in 2003 -

haviour rket,

upply s physically

drogen

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mperhaps a further 10 – 20 years. Although arecord. The issue was examined in some detail during December 2003, at a conference organizedTreport prepared for the conference10. Dr. Illum has written the first chapter of this Report. In the short term, the issue will not be the physical supply of hydrocarbons but their cost. We simply do not know the price of oil and gas will be when demand begins to exceed supply. Demand growth is likely to slow. May be it widecline as it did twice already, in 1973 and 1981, when prices spiked in response to (politically motivated) supply constraints. Since 1981, knowledge about the Earth’s hydrocarbon reserves has grown enormously, unimpeded by Iron Curtain politics and aided by oil field techniques that were unimaginable in 1981. It is probably justified to say thatsuch reservoir knowledge, both about frontier areas and especially in mature oil provinces is close to the limit of what can be known. When the energy market realises that there is a pending physical limit in the supply of hydrocarbons, at an affordable price, the only reasonable certainty is that prices will be highly unstable, and with time, escalate to a new plateau represented by the much higher cost of producing environmentally and technically acceptable liquid fuels from oil shale, tar sandbinternational concern. T

The current beof the US gas maduring recent, relatively mild, supply constraint, gives some guidance about future global energy price volatility when all HC sbecomeconstrained. Led by the US, there is intensive effort todevelop a “hyeconomy”. Every major motor manufacturer anmost large energy compinvolved in this

9 Leading among these is Matthew Simmons, an energy adviser to President Bush, http://www.simmonsco-intl.com/ 10 Oil-based Technology and Economy - Prospects for the Future – Teknologirådet, København og Ingenieur Foreningen

7

http://www.simmonsco-intl.com/


A significant fraction of the “future vehicles” will be energized by hydrogen fuel cells whose ultimate cost will depend

questered in one way or another. The process degrades the original nergy resource by up to 20% and the need to sequester the resulting CO2 is rarely costed, let alone high-lighted by

ent costs for wind turbines are substantial, but the short-term marginal generation cost of wind energy is close zero, making electricity generation from wind turbines marginally profitable even in periods with very low electricity

able and only partly predictable wind power results in highly fluctuating electricity pot prices. In this system - if in any - the production and use of hydrogen by electrolysis could become a truly

he whole of Denmark uses roughly 200 PJ of energy per year in its transport system. Of this, about 194 PJ comes

ughly 40 TWh of electricity. he output of wind energy from West Denmark’s generators during 2003 was 4.4 TWh. This is a small but significant

Analysis (strengths, weaknesses, opportunities, threats)

Str g

• to be started well ahead of the coming crisis in the

sis.

ogen for transport applications. l

.. •

ower, whether that is from hydro or wind. y cost

• The study has received help and advice from many Danish companies and institutions who generally favour entation of its recommendations. It is likely to be a politically popular development

We n

on the volume of sales achieved. Most of the World’s effort into hydrogen manufacture is based on the gasification of coal or, most often, the reformation of natural gas. The flaw of depending on natural gas should be clear, by now. The feedstock is likely tobecome both expensive and scarce as the present efforts to rep. Gas reformation produces a mole of CO2 for every two moles of H2, requiring that the CO2 be seethe proponents of gas reformed hydrogen. West Denmark, almost alone in the World, possesses a significant surplus of renewable energy capacity. The investmtoprices. The substantial share of non-controllssustainable and competitive option. Tfrom hydrocarbons, the remainder being electricity for trains. If, as widely reported, hydrogen vehicle consume half the specific energy of the internal combustion engine, the energy of the hydrogen needed to replace today’s use of hydrocarbons would require roTfraction of the long-term goal of achieving an emission-less transport fleet in Denmark.

1.3 SWOT

en ths

The development of a real hydrogen infrastructure needs supply of low cost hydrocarbons. This project contains all the features that are needed to address the strategic threat posed by the coming “peak oil” cri

• Denmark already has already made the investment in surplus renewable energy to generate significant quantities of hydr

• Denmark’s investments in widely distributed, decentral, power stations create the possibility for a nationainfrastructure…

• …at locations where the capital cost will be minimized by the already installed distribution equipment.…where there is a high qualified staff

• The renewable power is available and mechanisms are in place to secure that hydrogen will only be generated from this renewable p

• At the times when most renewable energy is available, the spot prices are low, ensuring that the energof hydrogen will be minimized.

• The availability of renewable energy should ensure a capacity utilization of at least 4,200 h/y and this utilization could be better in many years.

• Built in sufficient numbers, soon enough, the participation of large numbers of electrolysers in the market should have the effect of balancing the grid and off-setting inter-connector congestion.

the implem

ak esses

• The hydrocarbon shortage may not materialize, endangering the quality of the investment West Denmark may have sunk in alternative energy sources.

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• It still might be shown that so-called global warming is not occurring on the scale widely publicizethe Kyoto process is in any case the wrong response, in which case the reduction of CO2 from the transport sector will cease to be a public objective.

d and/or that

be found for manufacturing hydrogen for the transport sector, taking away the “first mover” advantage which the scheme’s

mentation might otherwise have given Denmark. • The transport industry may abandon its quest to develop hydrogen fueled vehicles

Oppor

gen fueled vehicles and the

•

•

rs and service companies wishing to benefit from the World’s first “renewables based” hydrogen infrastructure.

ernational: Develop links with other pre-commercial hydrogen infrastructures, like the California Fuel Cell rtnership, the Norwegian Hydrogen Council, The European Fuel Cell Technology Platform etc.

Threat

•

ly er for its peak needs. For those genuinely wishing to see that the hydrogen economy will not be

r, n and resources away from the more serious effort to develop hydrogen from renewable

reso• The Dan e benefit from the taxation of petrol and electricity. During 2003, the

•

• The development of sufficient renewable energy resources to impact Denmark’s almost total dependence sport may be seen as too ambitious and too large for a small country like Denmark

ct shelved for these reasons.

emonstration unit, with an up-grade to a commercially operating hydrogen filling station and the launching of a local,

ssary for e Danish Government to ensure that the investing participants will receive sufficient fiscal incentives for the project

• Even if both the foregoing objections are discounted, better and cheaper ways may

early imple

tunities

• National: If none of the weaknesses materialize, then Denmark has the chance to lead the World in the development of a hydrogen infrastructure, the commercialization of hydrodevelopment of associated technologies and services. Industrial: The industrial companies involved in the project can benefit from first mover advantage in the development and sale of commercial equipment, ahead of global rivals. Regional: Ringkøbing Amt is already the “capital” of Danish wind and a focal area for wind generator development. The development of a regional infrastructure for transport hydrogen and its use is likely to attract interest and attention from all over the World, in turn, attracting entrepreneurs, manufacture

• IntPa

s

The “first mover” advantage may already be lost to the “The California Fuel Cell Partnership”11 which “is committed to promoting fuel cell vehicle commercialization as a means of moving towards a sustainable energy future, increasing energy efficiency and reducing or eliminating criteria pollutants and greenhouse gas emissions”. California does not have a surplus of renewable electricity. Indeed, it has bareenough powdeveloped from a platform of fossil fuel, the Californian effort, simply by being successful and spectaculamay divert attentio

urces. ish Treasury obtains a larg

revenues were12 o Petrol: DKK 10.4 billion o Electricity: DKK 8.3 billion

Because the project will require special fiscal treatment to succeed, its success might be misunderstood as endangering important revenues for the Danish Government13.

upon hydrocarbons for tranto undertake itself – and the proje

1.4 Recommendations As the first part of the next stage of this work, we propose that we study the construction of a significantly sized dhydrogen transport system. The study will require the active support of vehicle manufacturers and at least one energy company that is motivated by the long term development of the market for delivering transport hydrogen. In order to for the project to attract the considerable investments implied by this ambitious plan, it will be neceth

11 . http://www.cafcp.org/aboutus.html 12 . Danmarks Statistik, 2004

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13 . In fact, the proposed scale of the project, over a period of ten years, would hardly be noticeable to tax revenues. If, because of its success, World events etc. the pace of development were to increase, the Government can always re-impose taxes at a level which would not destroy investor expectations.

http://www.cafcp.org/aboutus.html


to succeed commercially. Therefore, prior to the study commencing, Energistyrelsen will need to obtain the willingness of the Danish Government to consider granting the demonstration project such fiscal incentives. If the study shows that these conditions can be met and that a sufficient number of new partners are willing to supporthe project with th

t e means necessary for its success, we recommend that the 500 kW prototype, high-pressure, unit

resently (2004) being tested by Electrolysers A/S be studied as suitable for this purpose. If it is, a negotiation should , cost and install a complete, working, demonstration plant at Ringkøbing

jernvarmværk.

he demonstration would be in two parts. FIR S

1. al ability of the electrolysers to bid competitively into the regulating market

the

5. rogen spiked into large gas engines in a manner that is flexible and economic, without

6. hydrogen to demonstrate a wider use of stationary, PEM fuel cells of the type built by IRD A/S16.

synergies obtainable from an electrolyser operating together with a local power plant, including other business 17

SEC

2. pre-commercial and commercial, hydrogen-powered vehicles suitable for operating in the

3. n on a commercial basis18

4. Development of fiscal rules for extending the use of hydrogen within Ringkøbing Amt, laying down the foundations for encouraging the development of a hydrogen infrastructure on a Nation-wide basis19

pbe opened with Electrolysers A/S to designF T

ST TAGE (2005)

The eventu2. Using energy purchased with renewable energy certificates 3. Thus proving that a Nation-wide network of electrolysers can deliver hydrogen with low energy costs in

long term 4. The ability of a large network of electrolysers to assist in grid frequency stabilisation14

The use of hydderating15 The use of locally available

7. The other, possible

OND STAGE (2006)

1. The upgrade of the electrolyser to a hydrogen filling station, on a commercial basis The identification of local area, having a high rate of utilization Assessment of the costs of operating hydrogen powered vehicles, served by a hydrogen filling statio

14 . A novel, research related development 15 . A novel, research related development 16 . A novel, research related development 17 . Possible research related developments 18 . A novel, research related development 19 . A novel, research related development

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2. Strategisk teknologiudvikling ved afslutningen af den billige olies æra

Sålænge produktionen kunne følge med efterspørgslen kunne OPEC - d.e. Saudi Arabien - holde råolieprisen indenfor det tilstræbte bånd på $ 22 - 28 per tønde. Den nuværende råoliepris omkring $ 40 per tønde betyder, at markedet er anstrengt, og med en forbrugsstigning på mere end 2% om året bliver det ikke mindre anstrengt i de kommende år. Vi er således inde i slutfasen af den billige olies æra. En sammenhængende teknologisk udviklingsstrategi for vores energisystem i dets helhed bør derfor stå højt på den politiske dagsorden. Centralt i udformningen af en sådan strategi står spørgsmålet om, hvorvidt brint som energibærer til transportmidler skal integreres i de nye energisystemer.

I december 2003 afholdt Teknologirådet og Ingeniørforeningen i Danmark (IDA) en international konference i København om Oil Demand, Production and Cost - Prospects for the Future. Som baggrundsmateriale for konferencen blev der fremlagt en foreløbig udgave af udredningen Oil-based Technology and Economy - Prospects for the Future. Den endelige udgave, med tilføjelser af yderligere information, som konferencens talere formidlede, blev udgivet af Teknologirådet og IDA i april 2004 (www.tekno.dk og www.ida.dk/oilconference ). Udredningen fremdrager den helt afgørende betydning, olien som et unikt, lethåndterligt brændstof med stor energitæthed har haft for den civil- og militærteknologiske udvikling og dermed for udviklingen af fysiske infrastrukturer og hele den økonomiske udvikling i det 20. århundrede, for på den baggrund at formidle erkendelsen af de altomfattende konsekvenser af en fortsat stigning i det globale olieforbrug lige indtil olieproduktionen topper og derpå begynder at falde. Nye oplysninger, fremkommet i artikler, der er offentliggjort, efter udredningen var færdiggjort, accentuerer den situationsbeskrivelse, der gives i udredningen. Det påpeges i udredningen, at den optimisme, som kommer til udtryk i den hyppigt fremførte sentens, at “Stenalderen sluttede ikke på grund af mangel på sten, og olie-alderen vil ikke slutte på grund af mangel på olie” (sidst fremført af Institut for Miljøvurderings direktør Bjørn Lomborg i DR1 Søndagsmagasinet d. 16. maj), forudsætter troen på, at nye, ikke-oliebaserede teknologier i stort omfang vil erstatte benzin-, diesel- og jetmotorer såvel som oliefyr før oliemangel bringer verdensøkonomien i krise. Denne tro bestyrkes imidlertid ikke af den kendsgerning, at olieforbruget fortsat stiger, nu langt hurtigere end hidtil forudsat i det Internationale Energi Agenturs (IEA) prognoser. IEA forudsatte i World Energy Investment Outlook 2003 (November 2003) en stigning i det globale forbrug på ca. 1.6% p.a. frem til 2030. IEA forudser nu en global forbrugsstigning på i gennemsnit 2 mio. tønder/dag eller ca. 2.6% i indeværende år (New York Times, 14. maj), en stigning som hovedsageligt skyldes et økonomisk opsving i USA og en meget stærk vækst i Kina’s forbrug (p.t. 10-20% p.a. imod IEA antagelse om 3% p.a. i gennemsnit frem til 2030). Det betyder, at verdensøkonomien bliver stadigt mere afhængig af tilstrækkelige olietilførsler - i takt med, at reserverne udtømmes. Selvom det er åbenbart, at en krise kun kan afværges ved at sørge for at behovet for olie topper før olieproduktionen topper, er der ingen tegn på politisk erkendelse af denne for verdensøkonomien afgørende betingelse. Tværtimod bliver samfundene overalt i verden mere og mere afhængige af olie - flere benzin- og dieselbiler, mere flytrafik, flere motorveje, flere lufthavne. Problemet vokser sig større og større efterhånden som tiden skrider frem mod det tidspunkt, hvor olieproduktionen ikke længere kan følge med. Den tid, der er tilbage bliver afkortet i takt med den øgede forbrugsstigning. Og der er stadigt flere tegn på, at der er tale om år, ikke årtier. Produktionskapaciteten De meget store fund af lettilgængelige oliefelter i 1960'erne og fundene i Nordsøen i 1970'erne og 1980'erne har hidtil gjort det lukrativt for de nationale og private olieselskaber at øge produktionen i takt med forbruget. Selvom råolieprisen har været svingende, har deres investeringer haft relativt korte tilbagebetalingstider. Reservetilvæksterne har været tilstrækkelige til at kompensere for forbruget, sådan at forholdet mellem reserver og årligt forbrug (R/P forholdet) op igennem 1990'erne har ligget nogenlunde konstant på omkring 40 år. IEA forventer imidlertid, at hvis forbruget stiger med 1.6% p.a. - hvilket som sagt er en betydeligt mindre stigning, end den der i dag er udsigt til - vil R/P forholdet i 2030 vil være faldet til kun 20 år (World Energy Investment Outlook 2003), hvilket indikerer, at produktionen til den tid vil være faldende. Der er således også ifølge IEA med udgangen af 1990'erne sket en drastisk ændring af situationen. Der skal større og større investeringer til for at tilvejebringe den produktionsstigning, der skal til for at dække det voksende forbrug.

11

For at dække en forbrugsstigning på 2% p.a. frem til 2030 skal produktionskapaciteten forøges med 66%. I mange områder, herunder Nordsøen, er produktionen imidlertid allerede i tilbagegang. Produktionen i USA er blevet

http://www.tekno.dk

http://www.ida.dk


halveret, efter at den toppede i 1970. I 2002 kom 29% af den globale olieproduktion fra områder, hvor produktionen falder med skønsmæssigt ca. 4% p.a. (Petroleum Review, April 2004). Med en forbrugsstigning i de kommende år på 2% p.a. (0.6% mindre end den forventede stigning i år) betyder dette, at produktionen i de områder, hvor der endnu er mulighed for øget produktion, skal forøges med 4.5% om året, dvs. at deres produktion skal forøges med 57% i løbet af de næste 10 år. Det er overordentligt tvivlsomt, hvor vidt dette kan lade sig gøre. Og hvis det er muligt, er det ikke sikkert, at olieselskaberne i tide vil foretage de investeringer, der skal til for at opnå en så stor vækst i produktionen. De private såvel som de nationale olieselskaber har til formål at tjene penge - ikke at sikre tilstrækkelige forsyninger til at dække en hurtigt voksende efterspørgsel til en lav pris. Mellemøsten Det er en helt afgørende forudsætning for en sådan produktionsstigning, at produktionen fra de gamle, store oliefelter i Mellemøsten - især i Saudi Arabien - kan forøges eller i hvert fald ikke begynder at falde. IEA forudsætter således i World Energy Outlook 2002, at produktionen i OPEC landene i Mellemøsten vokser med 3% p.a. fra 2000 til 2030, sådan produktionen stiger fra 21 mio. tønder/dag i 2000 til 51 mio. tønder/dag i 2030. Der hersker imidlertid begrundet tvivl om, hvorvidt denne forudsætning holder. I oliefeltet Yibal i Oman, hvor trykket i 30 år blev opretholdt ved injektion af vand, og hvor der i 1990 blev udlagt vandrette boringer, indtrådte der i 1997 et helt uventet fald i produktionen, og en kraftig indsats med de nyeste udvindingsteknikker har ikke kunnet bremse faldet (Petroleum Review, April 2004). Der er tegn på, at det samme kan ske i verdens største oliefelt, Ghawar feltet i Saudi Arabien, hvor trykket også opretholdes ved vandinjektion, og der også i stor udstrækning er udlagt vandrette boringer. Da produktionen i Ghawar toppede i 1998 var vandindholdet i den udvundne olie ca. 50%, og er i dag nærmere 60% (ASPO Newsletter, May 2004, www.peakoil.net). Ikke desto mindre udtalte den Saudi Arabiske olieminister i et interview med Oil&Gas Journal (April 5, 2004), at Saudi Arabien er i stand til at forøge sin produktionskapacitet fra den nuværende 10.5 mio. tønder/dag til 15 mio. tønder/dag, og at en kapacitet på 10 - 15 mio. tønder/dag vil kunne opretholdes i endnu 50 år. Dermed imødegik han den analyse Matthew Simmons, præsident for Simmons&Company, verdens største energi-finansieringsbank, fremlagde på en konference afholdt af Center for Strategic and International Studies, Washington DC, d. 24. februar 2004. Simmons gjorde gældende, at landene Mellemøsten ikke længere vil være i stand til at stabilisere olieprisen ved øge deres produktion, når produktionen i andre lande falder midlertidigt (Venzuela, Irak) eller varigt (Nordsøen bl.a.). Simmons frygter, at vi kan komme til at opleve et fald i Mellemøstens produktionen på 30 - 40% indenfor de næste tre til fem år. I en artikel i Oil&Gas Journal (April 26, 2004) skriver A.M. Samsam Bakhtiari, Directorate of the Iranian National Oil Company, at hans modelberegninger tyder på, at den globale olieproduktion vil toppe omkring 2006 - 2007, og han citerer det Saudi Arabiske olieselskab Saudi Aramco’s vicepræsident for olieefterforskning, Abdullah Al-Seif, for i December 2003 at sige, at der (i Saudi Arabien) årligt skal tilvejebringes ny produktionskapacitet på 800,000 mio. tønder/dag for at opretholde den nuværende produktion på 10 mio. tønder/dag, idet produktionen i de eksisterende felter falder med 5 - 12% om året. Der er således flere professionelle analyser, der indikerer en drastisk revision af de hidtidige prognoser for Mellemøstens olieproduktion. Det er ikke sandsynligt, at den af IEA forventede stigning på 3% om året vil blive realiseret. Hvis det kun lykkes at fastholde produktionen på det nuværende niveau, vil den globale efterspørgsel hurtigt overstige den globale produktionskapacitet. Den øvrige verden Der findes stadigt nye oliefelter rundt omkring i verden. I 1993 - 2003 udgjorde nye fund i gennemsnit ca. 10 mia. tønder/år, medens forbruget androg ca. 27 mia. tønder/år. Der er på dybt vand - ned til 3000 meters dybde - i den Meksikanske Golf, udfor Brasilien, langs Afrikas vestkyst og omkring Australien fundet reserver på 60 - 70 mia. tønder, og Deutche Bank skrev i en rapport i 2002, at olie på dybt vand er olieindustriens mest lovende reservepotentiale. Danmarks og Grønlands Geologiske Undersøgelser (GEUS) har på grundlag af sandsynlighedsberegninger udført af US Geological Survey udtrykt forventninger om, at der ved Østgrønland kan findes 47 mia. tønder. Spørgsmålet er om og hvornår, der er olieselskaber, som vil investere i efterforskningen. Alt i alt kan reserverne på dybt vand måske komme op på 100 - 150 mia. tønder i løbet af de næste 10 - 15 år, svarende til det globale forbrug i 3 - 5 år. Da det vil tage mange år at frembringe denne oliemængde, vil disse fund ikke væsentligt

12

http://www.peakoil.net


udskyde det tidspunkt, hvor den globale olieproduktion topper, men kun kunne dæmpe det efterfølgende fald en smule. De centralasiatiske lande omkring det Kaspiske hav er ét område, hvor der måske i de kommende år kan opnås en produktionsstigning svarende til den ovenfor nævnte stigning på gennemsnitligt omkring 4.5% p.a., der skal til for at kompensere for den faldende produktion i andre områder. IEA anslår en stigning på 4.1% p.a. frem til 2030. Men da udgangspunktet i 2000 er relativt lavt, ca. 1.6 mio. tønder/dag, når produktionen under IEA’s forudsætninger kun op på 5.4 mio. tønder/dag i 2030. Ifølge IEA’s fremskrivninger i World Energy Outlook 2002 vil den samlede olieeksport fra Rusland og de centralasiatiske republikker i 2030 andrage ca. 8 mio. tønder/dag, mod ca. 46 mio. tønder/dag fra Mellemøsten. Rusland og Centralasien vil således ikke kunne kompensere for en stagnation eller et fald i produktionen i Mellemøsten. Ikke-konventionel, syntetisk olieproduktion Hvis den potentielle syntetiske olieproduktion på basis af bitumen fra tjæresand, olieskifer, kul og naturgas medregnes i opgørelsen af verdens oliereserver, vil der være olie nok til at dække et stigende forbrug mange år frem. Et fortsat stigende olieforbrug kombineret med en kraftig forøgelse af CO2-udslippet ved syntetisk olieproduktion indebærer imidlertid, at bestræbelserne på at begrænse CO2-udslippet definitivt må opgives. Af de store forekomster af tjæresand i Canada og Venezuela kan der udvindes bitumen, som ved hydrolyse med brint fra naturgas kan omdannes til råolie. Det Canadiske potentiale anslås til 174 mia. tønder. For at udvinde denne bitumen og omdanne den til råolie skal der imidlertid bruges en meget stor mængde naturgas - svarende til omkring 80% af de samlede nuværende naturgasreserver i USA og Canada, hvis der bruges naturgas til at dampe bitumen ud af tjæresandet. Under alle omstændigheder andrager energiforbruget til produktionen 25 - 30% af energien i den udvundne olie. Dertil kommer et meget stort vandforbrug, som sænker grundvandsspejlet i store områder omkring minerne. Ved produktion af syntetisk olie på basis af naturgas (GTL: Gas to Liquids) forbruges ca. 45% af den tilførte naturgas i produktionsprocessen. IEA anslår i World Energy Outlook 2002, at olieproduktion fra tjæresand og naturgas i 2030 vil andrage henholdvis 9.9 og 2.3 mio. tønder/dag, dvs. at den ikke-konventionelle, syntetiske olieproduktion vil udgøre i alt 12.2 mio. tønder/dag eller ca. dobbelt så meget som der i dag produceres i Nordsøen. Ved en forbrugsstigning på 2% p.a. vil denne forøgelse af den ikke-konventionelle produktion kunne dække 22% af forbrugsstigningen. Vel at mærke under den forudsætning, at der ikke gennemføres nogen begrænsninger af CO2-udslippet. IEA’s fremskrivninger indebærer en forøgelse af det samlede globale CO2-udslip på 60 -70% frem til 2030. Nye udvindingsteknologier Teoretiske analyser af den fremtidige udvikling af olieproduktionskapaciteten som f.eks. den af EU-kommissionen fremlagte rapport World energy, technology and climate policy outlook (WETO, 2003) bygger på den antagelse, at kapaciteten vil blive forøget i takt med den stigning i råolieprisen, som sker, når efterspørgslen overstiger kapaciteten. Ikke så meget fordi øget efterforskning vil føre til flere nye fund, men først og fremmest fordi det bliver økonomisk attraktivt investere i avancerede udviklingsteknologier, som gør det muligt at forøge udvindingsgraden i eksisterende oliefelter. Den amerikanske oliegeolog M. King Hubbert, der opnåede berømmelse ved i 1956 at forudsige, at USA’s olieproduktion ville toppe i 1970, hvilket den gjorde, sagde i 1982: “If oil had the price of pharmaceuticals and could be sold in unlimited quantities, we probably would get it all out except the smell.” I praksis er der imidlertid grænser for, hvor stor en del af olieforekomsten (oil in place), der kan udvindes. Og som nævnt ovenfor (Yemen, Saudi Arabien) kan opretholdelse af produktionen ved hjælp af avanceret udvindingsteknologi (vandrette boringer, opretholdelse af trykket ved vandinjektion) føre til bratte, geologisk bestemte produktionsfald. De teknologier, der anvendes til at forøge udvindingsgraden (under fællesbetegnelsen EOR: Enhanced Oil Recovery), bringes i anvendelse, når produktionen fra et oliefelt begynder at falde. I de fleste tilfælde opnås ikke en forøgelse af produktionskapaciteten, men kun en opbremsning af produktionsfaldet og således en øget produktion over oliefeltets levetid efter at produktionsfaldet er indtrådt - med mindre der som i det ovenfor beskrevne eksempel

13


(Oman) indtræder et uventet, brat produktionsfald. Risikoen for sådanne bratte fald kan imidlertid i almindelighed forventet at være mindre, når trykket opretholdes ved injektion af gas eller CO2, end når det sker ved injektion af vand. Den gennemsnitlige udvindingsgrad for verdens oliefelter er i dag ca. 30%, varierende over et interval fra 3% til 80%. Francis Harper (Exploration consultant. Former Manager, Reserves and Resources at BP, UK) vurderer på grundlag af hidtidige erfaringer, at det kan være muligt at forøge den gennemsnitlige udvindingsgrad med 1/6% eller højst 1/4% om året. Dvs. at det vil tage mellem 4 og 6 år at forøge den gennemsnitlige udvindingsgrad med 1%, og derved opnå en global reservetilvækst på ca. 33 mia. tønder, svarende til godt ét års forbrug på det nuværende forbrugsniveau. Den reservetilvækst, der kan opnås ved at forøge udvindingsgraden, må derfor forventes at ske i en langsom takt og således at medvirke til at dæmpe det årlige produktionsfald efter at den globale produktion er toppet. Den vil ikke væsentligt udskyde det tidspunkt, hvor produktionen topper. Strategisk teknologiudvikling Det fremgår af det foregående, at vurderinger af olieforsyningssituationen i de kommende år er overordentligt usikker, men at en stagnation i den globale olieproduktionskapacitet efterfulgt af et permanent fald, muligvis afbrudt af kortvarige stigninger, ikke bør komme som en overraskelse. Den seneste stigning i råolieprisen til mere end $ 40 per tønde på det amerikanske marked skyldes dels en mindre formindskelse af OPEC-landenes produktionskvoter, dels genopfyldning af olielagre samtidigt med begyndelsen af den amerikanske feriesæson, hvor benzin- og dieselforbruget stiger. Det kan imidlertid vise sig, at det hurtigt voksende olieforbrug i USA, i Kina og i andre asiatiske lande medfører, at råolieprisen forbliver høj og måske stadigt stigende. Det vil vise sig i løbet af de næste år. Den alvorlige risiko opstår, hvis råolieprisen igen falder til mindre end $ 30 per tønde og forbliver på det niveau i flere år, sådan at de økonomiske vilkår for udvikling af nye teknologier til erstatning af de oliebaserede igen forringes. Sålænge olieprisen er lav bliver den globale økonomi stadigt mere teknologisk afhængig af billig olie. Når olieprisen så igen stiger, måske til $ 50, 75 eller 100 per tønde, bliver den økonomiske recession i de olieimporterende lande endnu kraftigere, end den ville være på det nuværende forbrugsniveau. Et land, som under disse usikre vilkår, hvad angår råolieprisens udsving i de kommende år, formår at udvikle teknologier, som formindsker samfundsøkonomiens olieafhængighed og nedbringer CO2-udslippet, vil opnå åbenbare fordele både i kraft af det teknologiske forspring, der således tages, og i kraft af en mindre sårbarhed, når den globale økonomi skal tilpasse sig høje oliepriser. Det bør derfor vække til eftertanke, at forventninger til økonomisk vækst først og fremmest baseres på forventninger til vækst på højteknologiske områder som bioteknologi og IT-teknologi, medens udvikling af de basale energiforsyningsteknologier og infrastrukturer, som udgør grundlaget for samfundets funktioner på alle områder, og som rummer store potentialer for eksport af viden og teknologi, ikke har opnået en tilsvarende høj prioritet. Der kan ikke herske tvivl om, at nye energisystemer, der kan dække samfundets behov med et stærkt reduceret forbrug af fossile brændsler - specielt olie - og dermed ned et væsentligt formindsker CO2-udslip, vil være overvejende elektriske og elektrokemiske systemer, hvori transportmidler indgår som integrerede enheder. Disse systemer vil på energikilde- og forsyningssiden være karakteriseret ved relativt store investeringer i infrastrukturkapital (vindmøller, solceller, elektrolyseanlæg til brintproduktion, brintlagrings- og distributionsanlæg til forsyning af køretøjer, naturgasdrevne brændselscelle kraftvarmeværker i små og større størrelser, varmepumpeanlæg, m.fl.) og relativt små variable driftsomkostninger. På forbrugssiden skal der gennemføres omfattende energieffektivitets-forbedringer, både hvad angår bygningers varmeforbrug, el-apparater og transportmidler. Vores nuværende energisystemer er blevet til under økonomiske vilkår, som er bestemt af lave priser på fossile brændsler, især lave olie- og gaspriser. Det nuværende enorme fossile brændselsforbrug er således bestemt af de energiforsyningsteknologier, de bygningskonstruktioner, de el-apparater, de transportmidler og de fysiske infrastrukturer, det under disse omstændigheder har været økonomisk hensigtsmæssigt eller muligt at bringe i anvendelse. Der er ikke tale om at erstatte de mængder af fossile brændsler, der i dag forbruges, med vedvarende energikilder. Det er i praksis umuligt. Der er tale om at udvikle nye energisystemer, som er økologisk og økonomisk bæredygtige under de nye økonomiske vilkår, der bestemmes af fremtidige høje olie- og naturgaspriser. Det kan ikke med nogen sikkerhed forudsiges, hvad råolie- og naturgasprisen vil være om ét, to eller ti år.

14


Men hvis olieprisen forbliver lav indtil den globale olieproduktion topper, hvilket efter al sandsynlighed vil ske inden 2025, så vil de investeringer med lang levetid, der betinget af de lave priser foretages i perioden indtil priserne stiger, være fejlinvesteringer, som yderligere forstærker den økonomiske recession, der afstedkommes af prisstigningerne. I denne slutfase af den billige olies æra bør udformning af en sammenhængende teknologisk udviklingsstrategi for vores energisystem i dets helhed derfor stå højt på den politiske dagsorden. Centralt i udformningen af en sådan strategi står spørgsmålet om, hvorvidt brint som energibærer til transportmidler skal integreres i de nye energisystemer.

15


Wind - Net Exchange, January, 2003

-3,000

-2,500

-2,000

-1,500

-1,000

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0

500

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1 19 37 55 73 91 109

127

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379

397

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469

487

505

523

541

559

577

595

613

631

649

667

685

703

721

739

MW

h pe

r h

Wind production, MWh per h Net exchange, MWh

Recent Wind Development, West Denmark

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capacity, MW Output, TWh

3. Danish Wind Carpet Behaviour, Challenges & Solutions 3.1 Short Analysis Denmark built its wind capacity in order to substitute fossil fuels and meet its Kyoto obligations. Last year the wind carpet produced a record 4.36 TWh in West Denmark in a year with poor wind resources (77% of normal). It might be noted that fossil fuel consumption and CO2 emissions have also risen during the last 2 years, although for different reasons.

estimate

As a consequence of the energy agreement in March, 2004, wind capacity will grow by a further 700 MW from now until 2008, mostly in West Denmark20.

ours.

behaviour.

d m

enmark to Germany, Sweden and Norway. Some might say, in effect, that wind power is being “exported”.

It is axiomatic that wind power isproduced when the wind blows, notwhen power is demanded. In theabsence of solutions that can storeenergy21, the present arrangementis that the electricity, surplus to theimmediate needs of Denmark, flows to the much larger power systems of neighb

While it is obviously not possible toidentify which electrons flowingthough the system, originate inparticular power plants, it is possible to review the data andlook for patterns of system

54 charts, such as January 2003, have been drawn between January 2000 and June 2004. Note the almost mirror reflection which occurs in many of these charts. These demonstrate that there is a clear relationship between wincarpet output and net power flows. When wind power enters the Danish system, there is usually a net flow froD

20 . http://www.ens.dk/sw1079.asp

16

21 When power flows from West Denmark to Norway and Sweden, if it is not immediately consumed, hydropower production is curtailed. It is not possible to say if it is cheap or not, that depends on the difference in spot prices between periods of storing and retrieving of energy In this way, Danish wind power is “stored” in the Scandinavian reservoirs and released when demand and price make it attractive for the hydro generator to release water for power production. Obviously the “value added” of this arrangement is usually enjoyed by the hydro generator.

http://www.ens.dk/sw1079.asp


Wind as % Local Demand - 2003

-20.0%

0.0%

20.0%

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1

207

413

619

825

1031

1237

1443

1649

1855

2061

2267

2473

2679

2885

3091

3297

3503

3709

3915

4121

4327

4533

4739

4945

5151

5357

5563

5769

5975

6181

6387

6593

6799

7005

7211

7417

7623

7829

8035

8241

8447

8653

January 2003 Prices

0

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300

400

500

600

700

800

900

1000

DK

K/M

Wh

DK-West System

This is not surprising, as since 2002, quite often, due to wind capacity growth, Danish wind output exceeds Danish demand, often by large amounts. Since November 2002, large wind outputs have often resulted in “zero price events”, to the detriment of all Danish generators. A dramatic example is shown in the chart (January 2003 Prices), when, despite record high prices in Nordpool, due to the lack of water in the reservoirs, there were frequent “zero price” events when the interconnectors were congested by excessive output in West Denmark. Wind power alone was not the only cause of this effect. The conditions under which the decentralized power stations were originally planned and financed encouraged (and subsidized) maximum output, even when the spot

arket was below the cost

mbined effect of so much power output at times of high wind output resulted in a deterioration of the generators’ prices from 2000 thro’ 2003. During 1999 through the early part of 2002, Nordpool and West Denmark prices were well aligned. This is shown in the price duration chart. However, as capacity in both the decentral and wind sectors increased, all West Denmark spot prices declined relative to Nordpool’s.

price in the mof fuel. The co

17


Average Load Factor, 2000 thro 2003

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Jan Feb. M

MWh Spot Price Development with respect to Nordpool Price

(70.0)

(60.0)

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

-

10.0

20.0

30.0

40.0

2000 2001 2002 2003

DKK

per

MW

h

Central Plant MWh price difference Decentral plant MWh price difference Wind Output MWh price difference

1843 MW 1943 MW

2316 MW2374 MW

Wind Capacity

Wind power prices were especially badly affected. The most negative effects of this for Danish windmill owners were disguised by a general rise in the price of power from 2000 – 2003. But it is in the nature of wind power which is produced according to weather conditions, not power demand, that the market value of wind power will usually be less than the power produced when the market wants it. This may change when externalities, like CO2 emissions are internalized in the energy prices when CO2 emissions begin to be traded in 2005.

3.2 Measures Adopted to Counter Zero Price Events From January, 2005, all decentralized power stations larger than 10 MW, with a collective capacity of 758 MW, will operate according to “market conditions”. The effect of the decentral power plants “going onto the market” should result in the following effects:

1. Reduce excessive and wasteful power production… 2. …thus reduce unnecessary CO2 emissions.. 3. free up interconnector capacity at times of high wind output, 4. prevent zero and ultra-low power price events

Furthermore, on 27 May, 2004, an agreement was made with the Danish Government to change the law that effectively prevents the use of electricity to provide heat at Danish combined heat and power stations22.

This new arrangement is intended to increase the opportunistic use of electricity, at any time when the electricity price is very low. This is often simultaneous with a high wind production and the proposal is to make it attractive for generators to invest in and use resistance heaters and heat pumps at both central and decentralized power stations. Therefore, some district heating can now be provided by electricity when power is cheap enough on the spot market to make it attractive to turn off thermal units. The pattern of wind production, during the last four years (Average

22 . Jyllands Post, 2Government of De23 From 2000 thro

West Denmark wind turbines

ar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.

Load Factor, 2000 – 2003), shows that most wind is generated in the winter, when heat is most often required23.

18

8 May, 2004 and widely reported. The proposals for implementing this change are still being studied by the nmark. 2003, wind loads were especially high in June when district heating loads are usually very low

Peter Jørgensen

It is not possible to say if this will defer interconnector investments.

Peter Jørgensen

We don’t know this agreement! To the best of our knowledge this is still discussed.


These two arrangements, combined, are highly cost effective and will almost certainly have a fast and beneficial effect on the so-called “wind overflow problem” and therefore for Danish Society24. However, it must also be mentioned that:

1. A fraction of all district heat is lost in its transmission between the power station and its customers, creating an inevitable and significant waste of “high tech” wind power that might be better used directly by heat consumers.

2. If the heat were instead produced by heat pumps, which deliver 2 – 4 units of heat for every unit of power consumed, the objection to energy inefficiency is largely removed. However, the capital costs are much greater and their widespread use would have proportionally less effect on “soaking up” cheap power (MW).

3. There is little requirement for heat during the summer months, when the wind still blows. The average load factor of the West Danish wind carpet during June (2000 – 2003) is actually equal to the average for the year.

Furthermore, while both these simple arrangements may bring about large, short term, economic improvements for those generators not protected by subsidy, they do not address the challenges of pending hydrocarbon fuel shortages nor do they accelerate Denmark’s preparation for a post-hydrocarbon economy. The demand for transport fuel, by contrast, is more or less independent of the season, making transport hydrogen from renewable energy an attractive option when hydrogen vehicles become commercially available. Eltra has recommended that the only reliable way to document the consumption of electricity generated from renewable energy is by way of tradable "Renewable Energy Certificates". Clearly, these can only be obtained for power that is truly renewable. In the next section, we assess whether, following the implementation of the measures just described, there will be enough available, CO2-free electricity to justify the investment in a hydrogen infrastructure?

19

24 . In 2003, the PSO support for wind generators in West Denmark was DKK 1.8 billion. The value of the power exported during periods of very high wind loads, which can be attributed to wind generation, was DKK 0.78 billion, a negative flow of DKK one billion, paid by Danish consumers.

Peter Jørgensen

They enlarge the potential for the use of windpower!


20

3.3 How much wind for CO2-free hydrogen production?

Load Duration of wind output and net exchange , actual 2000 & likely "2008"

-2000

-1500

-1000

-500

0

500

1000

1500

2000

2500

3000

MW

h pe

r h

Net Exchange Actual Wind Output, 2000Wind Output, "2008" 50 per. Mov. Avg. (Net Exchange)

CO2-free energy for hydrogen production

Likely effect of reducing 748 MW of non-economic decentralized production

Resistance heating takes up most power peaks

Based on an equal or similar wind profile to normal wind years, but adjusted according to the higher generation from offshore wind turbines, wind power output will rise from around 4.4 TWh in 2003 to around 5.5 TWh25, following the planned capacity increase to 2700 MW. Taking into account the proposed changes to install resistance heating, will there be enough wind power to justify such a large investment? In these charts, a (hopefully) realistic forecast for a future, 2008, wind load duration and net system power exchange durations have been drawn for 2 years, being

Load Duration of wind output and net exchange , actual 2003 & likely "2008"

(3,000)

(2,000)

(1,000)

-

1,000

2,000

3,000

MW

h pe

r h

Wind production "2008" Net exchange, MWhWind production, MWh per h 50 per. Mov. Avg. (Net exchange, MWh)

Resistance heating takes up most power peaks

CO2 free energy for hydrogen production

Likely effect of reducing 748 MW of non-economic decentralized production

• 2000 which was very wet and spot prices were low and

• 2003, when, due to a shortage of water in the Scandinavian reservoirs, there was a high net export of power to Norway and Swedenand prices

were very high.

The large, “clear” area under the wind production curves, and over “zero net trade” gives a measure of how much wind output coincides with net power exchange. By this measure, it can be said that 84% of the wind output during 2003 was surplus to Denmark’s demand at the times it was generated. This amounted to roughly 3.6 TWh. In 2008, given similar net trade as occurred in 2003, most of the power

produced by the extra capacity will also be surplus to Denmark’s internal requirements, unless a change occurs in the pattern of consumption. From a much smaller wind capacity in 2000, the equivalent figure for wind energy that was surplus to local demand at the time it was produced, was around 44% of the wind power generated, or 1.5 TWh. The predicted load duration profile for a capacity of 2700 MW (2008) shows that had this wind capacity been in place at the time, the proportion of wind (CO2-free) energy being available for electrolysis would obviously have been much greater even during a year of almost neutral net power flows. We can therefore conclude that large volumes (MWh) of CO2-free wind energy may still be in the system at relatively low electricity prices in 2008. Hydrogen can be manufactured to replace transport hydrocarbons from this. The “basis” economic model assumes that the electrolysers will be utilised at least 4,200 h/y. This also looks feasible from both the foregoing charts. This is because, when the reservoirs are full, the power from these can also carry “renewable energy certificates”.

25 Peter Jørgensen, ELTRA


Crucially the measures described in section 2 are designed to affect opportunistic MW demand which will rise to lop West Danish power production peaks at times of high wind output. Almost 800 MW of CHP production will be removed at these times and up to 500 MW (say) of resistance heating will free up further capacity on the inter-connectors, combining to reduce net flows at times of peak wind output by around 1,300 MW. These measures will typically operate during short periods, when the market spot price is less than, say, 12 øre/kWh. Unless, by then, the CO2 penalty weighs more on the generator than the consumer, and providing the price of gas is still unconstrained by supply, when the market spot price exceeds 12 øre/kWh (or thereabout), it will be more economic for the thermal plants to return to fossil fuel operation.

21


3.4 West Denmark within Scandinavia

Exchange with Neighbours

(6,000,000)

(4,000,000)

(2,000,000)

-

2,000,000

4,000,000

6,000,000

2000 2001 2002 2003 (estimate)MW

he

Norway exchange Sweden Exchange German exchange

As mentioned, West Denmark’s 2008 wind power capacity will be about 2700 MW. West Denmark’s inter-connector capacity is now 2760 MW (export) and 2380 MW (import). Thus it can be seen that the inter-connectors can still become bottlenecked in periods of very high wind output and net trade. The chart shows that there were large differences in the balance of power flows between 2000 and 2003. 2000 was a very wet year with very low spot prices in Nordpool, while the dry year of 2002 produced record high spot prices in the winter of 2002 – 2003.

The norwegian power balance

Source: Statkraft

Were these “typical” of what must be planned for or were they exceptional? Norsk Hydro’s Torgeir Nakken undertook a survey of the Scandinavian power market in order to better understand how West Denmark’s much smaller power market may be impacted by events outside it. He found that since 1933, the years 2000 and 2002 were “extreme”. 2000 was a record “wet” year and the second half of 2002 was a record “dry” year.

Norwegian Production & ConsumptionTWh

020406080

100120140160

1996 1997 1998 1999 2000 2001 2002 2003

Production TWh Total Consumption TWhStatnett

2001, also, was clearly among the wettest years, historically. The very low prices in 2000 resulted in a record of 125.5 TWh of power being

consumed in Norway, during 2001. The record high prices during the winter of 2002 – 2003 resulted in a sharp drop in demand of 10.5 TWh from the peak, by 2003, taking Norwegian demand down to the level last seen in 1995. If the loss of demand represents “demand destruction”, then it would be reasonable to expect that when “normal” years return, Norway would retain its net export capacity. This would have the effect of moderating prices in the Nordpool area. Mr Nakken’s analysis suggested that this is not the case and that demand growth will recommence, also in Sweden, when

22


“normally” wet years return.

Swedish Energy consumption in selected months

Consumption

10000

12000

14000

16000

18000

1992 1994 1996 1998 2000 2002 2004 2006

GW

h

JanuaryMarchOctober

3.5 Summary

As this report is being completed, in the summer of 2004, Nordpool spot prices are surging toward NOK 300 per MWh. It appears that the reservoirs are low, even while Norwegian imports are high. Norwegian demand is about the same as it was in 2003. Three especially dry years out of four may be insignificant in the historical context. But if Scandinavian demand is being destroyed by an exceptionally long run of high spot prices, caused by an extended drought, lower prices in some future year, when the rains return, may result in uncomfortably low spot prices for Danish generators. As we have seen, these could impact the average prices for wind power more severely than for the thermal generators, who only generate power according to demand. All economically viable and strategically desirable methods are needed for consuming the growing peaks of West Danish wind power output, within West Denmark, to address the increasing bottleneck caused by constrained

inter-connector capacity.

Norwegian Reservoir, August, 2004

As we have seen, resistance heating will be especially cheap to install and use. Heat pumps, costing more, will add more value to the power used but will consequently have a reduced MW effect in “soaking up” cheap power. Demand side management, coupled with modern communications could have a beneficial effect for industry and domestic consumers alike. For example, large industrial cold stores could be operated more according to price signals than they do already. When the technology is available and economic, Danish consumers could operate their home appliances in much the same way. Hydrogen, manufactured for road transport can also address the desirability of increasing West Denmark demand at times of peak wind power outputs, thus playing an early role in grid balancing. This balancing role will increase as the number and capacity of electrolysers increases.

23

It is against this background, that the proposal for the installation of electrolysers at the decentral power stations was proposed.


4. Electrolysis at West Denmark’s Decentral Power Stations 4.1 Introduction Behind the idea of installing the electrolyser at a district heating power station is that in almost every town or village in Western Denmark, such a power station already exists. Each of the coloured spots in the map of West Denmark represents one or another type of these power stations. Most are driven by high efficiency gas engines. Ringkøbing Heat and Power is typical of many26. They are modern and well managed by professional staff that have a high level of education, so understand how to adapt their plants to deal with new commercial and technical developments and challenges.

All the power stations are connected to the distribution grid, so reducing the capital cost of any new electrical installation. Because most of the wind generators are connected into the distribution grid, this feature also

AsIn de Asus

26 .pro

Ringkøbing
minimizes the power loss from the distribution grid to the HV transmission system. It is foreseen that the owners of the electrolysers will eventually operate in the downward regulating market. Until hydrogen vehicles become commercially available, the hydrogen is used as a fuel gas at these power stations, which can also host stationary fuel cells or deliver hydrogen to local, stationary fuel cells.
vehicles become available which can use hydrogen, the electrolysers will be upgraded to hydrogen filling stations. the first instance, the vehicles will typically be heavily used, locally based, “public service” units like buses, taxis and livery vans.

more electrolysers are installed, a hydrogen infrastructure becomes established. The power stations can still make e of any hydrogen that is surplus to transport requirements.

4.2 Electrolyser Arrangement The generic arrangement, prior to upgrading and applicable to all power plants is illustrated in the block diagram. The diagram illustrates the new, high pressure (30 bar) electrolyser that is currently entering commercial service. Electricity is used by the electrolyser to split water. The hydrogen will be dried and scrubbed of electrolyte and transported to the pressurized gas storage system. In most cases, the oxygen will be vented to atmosphere.

24

The generic arrangement, shown in this chapter and studied for its economic possibilities, should not be confused with the posal to build a demonstration plant at Ringkøbing, having a smaller electrolyser but still commercial in scale.


The storage tank is connected with a gas mixing station where it is mixed into natural gas from the main gas transmission system. The gas mixture, with up to 20% hydrogen, is consumed by the power station. The heat generated by electrolysis will be transferred to the town district heating system, maximizing total system energy utilization. Electrolysis is optimized at 80o C while return water from the district heating system is typically in the range 30o (winter) – 40o C (summer). The project focuses on Ringkøbing Fjernvarmværk which recently installed a Wärtsila 20V34 SG gas engine with an output of 8 MW. At the time of installation, this was the largest gas engine of its type in the World. The project has been fortunate in obtaining the full support of Wärtsila Diesel27. Although hydrogen has a high calorific value by weight, it is the Nature’s lightest element. Consequently, on a volumetric basis, its calorific value is about 27% that of natural gas, at 10.78 MJ/Nm3. Accordingly, the calorific value of the gas/hydrogen mixture will be less than that of pure natural gas. An example is shown in the chart below (left) where 20% hydrogen in the mixture results in lowering the LCV of the fuel gas from 39.7 MJ/Nm3 to 33.92 MJ/Nm3.

Operating conditions at Ringkøping FV for Wärtsilä motor W 20V34 SGB

80 % content of Natural gas0,8 Nm3/h natural gasLHV is 39,7 MJ/Nm3

20 % content of hydrogen0,2 Nm3/h hydrogen gasLHV is 10,8 MJ/Nm3

Natural gas flow: 1.600 Nm3/hWhen LHV is 39,7 MJ/Nm3

Calculation of LHV for the gas mixture when operating at max 20 % hydrogen

(0,8 x 39,7) + (0,2 x 10,8) = 33,92 MJ/Nm3

The pressure of the gas mixture must be 4,35 bar a to avoid derating of the motor

0,55

0,60

0,65

0,70

0,75

0,80

0,85

0,90

0,95

1,00

1,05

4,20 4,30 4,40 4,50 4,60 4,70 4,80

Gas Feed Pressure [bar a]

Derating constant (K5)

24262830323436

Wärtsilä® 34SG - B , NOx = 500 mg/m3N

LHV(MJ/m3N)

Gas mixture 80/20 %

Unless the gas mixture is pressurized, the engine using the mixture will be de-rated in proportion to the reduced calorific value of the mixture. The relationship between gas calorific value and rating is illustrated in the diagrams below. These show that if 20% hydrogen is mixed into the fuel gas, the feed pressure of the mixture into the engine must be raised from 4.2 bara over atmospheric to 4.35 bara to avoid derating.

The requirement for raised pressure can be accommodated differently in different parts of the West Danish gas distribution network but only by the addition of an additional blower at Ringkøbing which is at the end of a long transmission system. NOTE There is no compelling reason for testing the process against a mixture of 20% by hydrogen. This is generally foreseen as a maximum condition for this application. If the project is realised, it is believe that this will be the first time that a unit can burn a mixture with hydrogen and avoid de-rating.

25

27 . A fuller description of the V34SGB engine system is available as a separate document.


Power Supply System (3,5 MW unit)

Transformer RectifierHigh voltage3,72 MW

Power to Electrolyser3,5 MW140 V DC25 kA

We have estimated the following losses in the system:Transformer (2%), Rectifier (3%) and bars/cables (1%)

The mass flow and energy balance of the Calculation electrolyser are shown in the foregoing, simplified, block diagrams.

Scope of Supply and Price

TransformerRectifierControl panel incl. PLC and instrumentationWater treatment plant for Feed WaterElectrolyserStorage vessels 6 units of 25 m3

Estimated price for the plScope of Supply as descrNOK 20,8 MNOKEstimated price for build2 MNOKTotal estimated price for 715Nm3/h plant installed and commissioned is 22,8 MN

Scope of Supply Prices

Calculation of efficiencies

Energy consumption for the electrolyser only: 4,1 kWh/Nm3Losses in transformer, rectifier and bus bars: 6 %Overall energy consumption for the electrolyser: 4,35 kWh/Nm3Energy possible to recover by cooling water: 1 kWh/Nm3Low Heat Value for Hydrogen: 3,0 kWh/Nm3High Heat Value for Hydrogen: 3,54 kWh/Nm3

Energy efficiency for electrolyser only (LHV): 3,0/4,1 = 0,732Overall energy efficiency (LHV): 3,0/4,35 = 0,69Energy efficiency for electrolyser only (HHV): 3,54/4,1 = 0,863Overall energy efficiency (HHV): 3,54/4,35 = 0,814

Calculation of efficiency by heat recoveryEnergy efficiency for electrolyser only (LHV): (3,0 + 1)/4,1 = 0,976

From this balance, it has been calculated that the system as a whole will consume 4.35 kWh per Nm3 hydrogen and this energy consumption has been used in assessing system economics.

Overall energy efficiency (LHV): (3,0 + 1)/4,35 = 0,92

antibe

ing

O

with d is

Thus, the use of a budget, capital estimate of DKK 8million per MW, which assumes the total cost of a 3.11MW unit at a power station like Ringkøbing, would beDKK 24.9 million is felt to be sa

K

ser

of 3 million (about DKK 20.7 million).

tisfactorily “conservative”.

Norsk Hydro, working together with Wärtsila, have priced out the delivery of a “standard” electrolyinstallation at Ringkøbing. Their price for a unit that will operate at a normal rated consumption capacity3.11 MW is NOK 2

26


4.4 Upgrade to Hydrogen Filling Station (by Andres Cloumann, Norsk Hydro Electrolysers) 4.4.1 DESCRIPTION OF THE PLANT The hydrogen will be generated in the previously described electrolyser by splitting of water into hydrogen and oxygen. The gases are generated at a pressure of 30 bar g. Oxygen will be vented to atmosphere. To operate the electrolyser DC voltage is required. A specially designed transformer is therefore necessary to step down the incoming AC voltage to fit the required input voltage for the rectifier for the actual electrolyser capacity. The simplified Flow Chart below shows the main components and equipment necessary for the Hydrogen Fuel Station.

CELL BLOCK

SEPARATORTR/RE

EL/ES

DE/DR DPGD

HCGS

BT

TR/RE: Transformer/RectifierEL/ES: Electrolyser Cell Block/Electrolyser Electrolyte SystemDE/DR. Deoxidizer/DryerBT: BuffertankHC: High Pressure CompressorDP: Distribution Valve PanelGS: Gas StorageGD: Gas Dispenser

Downstream of the electrolyser gas purification equipment is included for removal of traces of both oxygen and moisture in the gas. Traces of oxygen are removed by a deoxidizer, which is a catalytic reactor. Traces of water moisture are removed by passing the gas over a water vapour adsorbent. The adsorbent has limitadsorption capacity and consequently a twin tower dryer is used.

ed

illing station in Reykjavik, Iceland)

A High Pressure Compressor is included from an approved supplier delivered as a complete skid mounted package including a complete instrument package to ensure safe and reliable operation. High pressure gas storage suitable for the fuelling station capacity, is also included. To avoid pressure fluctuations in the system a suction buffer is included upstream of the compressor. Downstream of the compressor a storage system is included. The storage systemcomprises of three independent storage banks, each equipped with it's ownpressure relief devices and pressure monitoring instruments. Three storage banksare necessary to provide a three stage "de-canting" sequence to provide adequatepressure to ensure that the on-board vehicle storage tank reaches the optimum fillpressure within the required time. (photos show the new hydrogen f

27


To be able to transfer high pressure gaseous hydrogen from the fuel station storage banks to the storage tank on-board the vehicle a Fuel Gas Dispenser is necessary. The Fuel Gas Dispenser is a "stand-alone" unit that provides the mechanical interface between the hydrogen fuel station storage banks and the vehicle together with necessary safety features and metering equipment. The safety features includes a "break-away" device that isolates and ventilates the supply of hydrogen gas to the dispenser in the event that the vehicle drives away with the dispenser unit still connected to the vehicle. The mechanical dispenser-to-vehicle connection is designed with an integral safety feature in form of physical, dimensional design that allows only the correct size connection to be used for the relevant pressure class of the vehicle on-board fuel tank. The dispenser unit has also it's own PLC unit to provide metering of the hydrogen gas fuel supplied to the vehicle, pressure monitoring and communication with the fuel station control system.

Maximum utilisation of the storage volume and the three stage decanting sequence system is provided through a Hydrogen Fuel Distribution Panel. The purpose of this panel is to safely transfer high pressure gaseous hydrogen from fuel station production equipment to the fuel station storage banks and from the fuel station storage banks to the hydrogen gas dispenser. This module control both the routing of hydrogen gas from the hydrogen production plant to correct fuel station storage bank and the routing of hydrogen gas from the correct storage bank to the dispenser. The gas distribution valve panel consists of manual isolation valves, non-return valves and pilot-air operated shutoff valves. The plant is delivered complete with an integrated PLC system for safe and unattended operation. Necessary gas quality analysers and gas detectors are included. 4.4.3. PLANT DIMENSIONS The plant will be containerised and delivered in the following units: Container 1 This container includes transformer/rectifier, electrolyser and gas purification equipment. Dimensions: 8,8 x 2,55 x 3,0 m (L x W x H) Container 2 This container includes buffer tank, high pressure compressor and gas distribution valve panel. Dimensions: 6,0 x 2,5 x 2,2 m (L x W x H) The dimensions for the containers are preliminary at this stage. The gas storage consists of 3 separate vessels each with a volume of 0,75 kbm (actual volume). Both the dispenser and storage vessels are free standing units. The hydrogen filling station can be located on the ground or on the top of the roof of a building. Dimensions of the total plot plan is approx: 15 x 13 m (L x W). There exist very few rules and guidelines for this type of plants at the moment. The dimensions of the plot plan may therefore be subject to changes due to requirements specified by local authorities.

28


4.5 Stationary Fuel Cell (by Laila Grahl-Madsen, IRD) In stationary applications, there is a growing market for combined heat and power systems especially systems with a high net power output. Up to 100 kW, the competing technologies are gas engines, Stirling engines, and micro-turbines in combined heat and power systems. Fuel cell technology offers the next generation of CHP product providing significantly higher fuel to electrical conversion efficiencies, lower emissions, and lower noise operation. Indeed these competing technologies could be viewed as facilitating market entry for fuel cell CHP units. Above 100 kW the competing technologies are diesel and natural gas engines as well as gas turbines. Fuel cell technology offers clear advantages in terms of lower maintenance, higher efficiencies, and lower emissions. Above10 MW fuel cells face a severe competition from gas turbines, with investment costs of €900/kW and high electrical efficiency. Today the most severe competition in Europe is from the existing infrastructure: the power grid, and conventional heating. Fuel cell technology offers the keystone to a new decentralized Energy Economy. CHP and trigeneration (power, heat, and cooling) will become important in the developed world. High efficiency Fuel Cell-Micro-CHP appliances for domestic and small commercial use could reduce the consumption of fossil fuels by up to 50% and hence the emission of CO2 by up to 50%..Such FC-Micro CHP-appliances in the 1-5 kW-class (e.g. IRD Fuel Cells A/S, Sulzer-Hexis, Baxi) and in the 5 kW class (e.g. Vaillant) have already shown the validity of the concept. But all teams are faced with big challenges concerning the cost and the design of key components, as well as the robustness, durability and reliability of the entire system. In a broad variety of sectors technological breakthroughs are necessary in the near term to achieve competitive components and products for the worldwide mass-markets. A virtual power plant would be created by combining a large number of such units. It will require significant development to improve cost and reliability for small domestic fuel cells to become competitive. Low investment costs are essential and also low running costs as the competition is severe. Safety issues and easy maintenance are important. Stand-alone units working on pressurized or liquefied gases can offer an important application in remote areas. R&D and demonstration on FC generators will go hand in hand for the next decade to accelerate the experience exchange between sciences, engineering, and the "real world" in which the fuel cell technology needs to prove its competitiveness.

29


5. ECONOMIC ASSESSMENT 5.1 Assumptions A spreadsheet calculation has been written to assess the economics of making hydrogen in the decentralized power stations. The results are based on the following assumptions.

1. The Danish State recognizes that it is desirable to pursue the twin goals of a post hydrocarbon, energy economy and the minimization of CO2 emissions and is willing to provide strong fiscal incentives.

2. Therefore, for the purpose of this analysis, all electricity purchased is at spot prices, in the free market, but tax-free for the purpose of hydrogen manufacture.

3. The value of the hydrogen is also realized without tax. 4. All costs associated with hydrogen production are met within the operation and such production is not

subsidized. 5. The power is purchased by the electrolyser host at times when the spot price is low, preferably accompanied

by renewable energy certificates and is therefore regarded as CO2 free. 6. The power is purchased during the roughly 4,200 hours when the downward regulating market is in operation

and the spot price of the energy purchased is reduced by the downward price deduction applying in that market.

7. The downward regulating market will increase, not decrease, by volume as the wind carpet grows further and the inter-connectors are more frequently bottle-necked

8. The overall energy consumption for hydrogen manufacture is 4.35 kWh per Nm3. 9. The total capital cost of the electrolysis system is DKK 8 million per installed MWe of normal power

consumption capacity. 10. 100 MW of such capacity will be built in ten years (see chart) and the whole investment will be paid off 30

years after the construction of the first unit. 11. The normal operating and maintenance expenses are 1% per year of the capital cost. 12. The operation of the plant is covered by the existing power station personnel; no extra staff are foreseen as

necessary. 13. Every ten years, the cell membranes will be replaced at a cost that is 30% of the original capital cost. 14. No inflation. 15. Capital investments paid in cash 16. IRR is calculated on a pre-tax basis

Cumulative MW of Electrolysers Entering Service

0

20

40

60

80

100

120

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

MW

The construction of 100 MW capacity, costing DKK 800 million and its pay off will be within the period 2005 – 2030, as shown in the chart.

30


5.2 Main Results The price of hydrogen is calculated from:

• The energy cost, based on spot price, • Capital expenses for recovering the capital employed and generating an overall profit. All the operating and

maintenance expenses are capital related and have thus been attributed under this heading.

Cost of Hydrogen, DKK per GJ Hydrogen, LCV

6% IRR on electrolyser investment

84.55 84.55 84.55 84.55 84.55 84.55 84.55

-20.18

40.3560.53

80.71100.88

121.06

0.00

50.00

100.00

150.00

200.00

250.00

0 5 10 15 20 25 30

Spot price of power, øre/kWh

Capital cost of hydrogen DKK/GJ LHV Energy cost of hydrogen DKK/GJ LHV

Price of natural gas at DKK 2.275/Nm3 (57 kr per GJ)

Cost of Hydrogen DKK per GJ Hydrogen LCV

12%IRR on electrolyser investment

-20.18

40.3560.53

80.71100.88

121.06

115.3115.3115.3115.3115.3 115.3 115.3

0.00

50.00

100.00

150.00

200.00

250.00

0 5 10 15 20 25 30

Spot price of power, øre/kWh

Capital cost of hydrogen DKK/GJ LHV Energy cost of hydrogen DKK/GJ LHV

Price of natural gas at DKK 2.275/Nm3 (57 kr per GJ)

Expected range of energy costs in

downward regulating market Expected range of energy costs in

downward regulating market These charts show that in the base case, the capital charge is the most significant cost of making hydrogen. Even though Denmark is politically stable and the project is likely to receive wide-spread public and Governmental support, most private investors, in the view of Incoteco (Denmark) ApS, would require a project IRR of 12%.

If the investment is made by the public sector, the requirement for IRR is reduced to 6%. In this case, the Capex element of the hydrogen manufacture is reduced to DKK 85/GJ. As mentioned, these returns are achieved with an utilisation rate of the electrolysers of 4200 h/y. The numbers show that it is quite impossible for the hydrogen to displace even taxed natural gas, at around DKK 58/GJ, economically. The energy cost of the hydrogen depends on how the power is bought. If the electrolysers can participate in the regulating market, the cost of energy used will reflect the deduction from the spot price, in that market.

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We analysed the downward regulating market during the years, 2000 through 2003. We found that, during these years, the energy prices and corresponding energy cost of hydrogen would have been as follows.

2000 2001 2002 2003 Average spot price, DKK øre per kWh (West DK)

12.2

17.7

18.9

25.0

Average cost of energy in the downward regulating market, DKK øre per kWh

5.5

10.6

9.5

13.2

Energy cost of hydrogen, DKK per GJ

22

43

38

53

Hours of downward regulation 3762 3907 3515 4156

Balancing inside West Denmark505,000 MWh downward – 541,000 MWh upward

Regulating Power, 2003

-1000

-800

-600

-400

-200

0

200

400

600

121

041

962

883

710

4612

5514

6416

7318

8220

9123

0025

0927

1829

27

3136

3345

3554

3763

3972

4181

4390

4599

4808

5017

5226

5435

5644

5853

6062

6271

6480

6689

6898

7107

7316

7525

7734

7943

8152

8361

8570

MW

h pe

r h

Regulating power - downward regulation, MWh/h Regulating power - upward regulation, MWh/h

800

1000Note very wide range, -800 to + 800 MW

Regulation under 100 MWgives high capacity factor

From the foregoing table, it can be seen that as wind development has grown, there appears to be a slight increase in the number of annual hours of this market.

Some of these “downward regulating events” may be reduced in the short term by the measures currently being taken. Nevertheless, as more wind power capacity is added, the “predictable” output of the decentral power stations will be replaced by a growing capacity of unpredictable, rapidly changing, wind power output at levels which might cause bottle-necking at the inter-connectors. To the hours of operation in the downward regulating market are others when there is high wind output and no downward regulating market but the spot price is very low.

During the record wet year of 2000, for example, the West Denmark spot price was below 10 øre/kWh for over 4000 hours. During the record “high price” year of 2003, there were still 1000 hours when the West Danish spot price was under 15 øre/kWh.

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During such periods, there is no reason why the electrolyser should not benefit opportunistically from low spot prices, as it is likely that renewable energy certificates will accompany such power, almost certainly wind power from Denmark, or, in the case of 2000, hydro power from Sweden or Norway.

How Capex Cost of Hydrogen varies with Capacity Utilisation

-

20

40

60

80

100

120

140

3800 4000 4200 4400 4600 4800 5000

DKK per Nm3

12% IRR 6% IRR

Increased capacity utilisation, above 4200 hours per year, therefore looks feasible and would have a profound effect on the ability to produce hydrogen economically. If the price received for hydrogen justifies it, increased utilisation will actually have the benign effect of enabling its operator to purchase higher cost renewable energy tol produce hydrogen. As the wind capacity increases, and despite the changes taking place, we have already seen (that there will be a growing number of hours in every year when wind power is likely to cause low spot prices.

5.3 Conclusions – Economic Analysis

1. In the configuration proposed, and if the electrolysers can participate in the regulating power market, hydrogen can be generated economically in the range of DKK 120 – 200 per GJ, before taxes.

2. It is therefore not economic to invest in this configuration for the purpose of replacing taxed natural gas, at

current and near-term future prices, which are in the range DKK 55 – 65/GJ.

3. If fiscal measures are adopted which encourage the use of hydrogen for transport, the configuration can most likely deliver hydrogen at costs competitive with taxed motor fuel at today’s price of DKK 250 per GJ. The additional costs of upgrading the proposed configuration into a hydrogen filling station and the extra operating costs that may be needed to run such a filling station have not been calculated, so this assumption needs verification.

4. The economy of converting to hydrogen vehicles will even better if, as widely reported, the specific energy

consumption of a hydrogen vehicle is half that of vehicles powered by the internal combustion engine. This claim, by the proponents of hydrogen transport, also needs verification

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6. Other Methods for Storing Energy 6.1 Introduction The terms of reference for the study required us to look briefly at other ways that might store “over-flow” wind energy.

A large number of energy storage options are being developed. The well developed and fully commercial pumped hydro storage (PHS), is clearly unsuitable for consideration within West Denmark. Compressed air energy storage (CAES), possibly in Danish salt caverns, is technically feasible and will likely become economically feasible, as one of a large number of options, if wind developments cause further congestion on the inter-connectors. During the course of the study, we became aware that there is an on-going dialogue between DONG and ELTRA about this option and saw no serious purpose in under-taking an independent review. However, at a cost reportedly in the range of €1000/kW, this is likely to be of great interest to West Denmark in the future.

Energy Storage Technologies - Applications

System Power Rating

Seco

nds

Dis

char

ge ti

me

Min

utes

Hou

rs

1 kW 10 kW 100 kW 1 MW 10 MW 100 MW 1 GW

SMES

PHS

CAESFlow Batteries

NAS

Lead Acid Batteries

Low-SpeedFlywheels

High S

peed Flywheels

Power Quality

Bridging Power

EnergyManagement

It is true that sodium sulfur (NAS) batteries are being developed commercially in Japan but it was felt that the high temperature of their operation (over 400o), would, in the end, become a “fatal flaw” for its widespread use in Denmark. Flywheels provide very limited storage at very high cost and while they have a power quality function in standby diesel type situations, they are not suitable for wide-spread MWh storage in Denmark.

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ANODE

CATHODE

P C S

ELECTROLYTE(1)

ELECTROLYTE(2)

Generic Flow Cell Representation Flow batteries, at a suitable scale for MWh, appeared to be the only remaining technology worth pursuing as a viable comparison with hydrogen for the purpose of energy storage. However the use of electrolysers to store energy as hydrogen for transport fuel is evidently different from the use of electricity storage systems. Of the remaining flow battery developments, following the collapse of the Regenesys developments, only Vanadium Redox and Zinc Bromine28 stay “in play”. We were fortunate to obtain the cooperation of VRB Energy29, of Canada in assessing this technology for West Denmark.

Eoc dependant on concentration

depends on concentration

Proton Exchange membrane

Proton Exchange membrane

V5 +V5 + V2+V2+

Current collectorsCurrent collectorsVVV

VRB-ESS Basics:

23 P 28 N

Electron shells

The VRB process uses the unique quality of vanadium which is that the valence electrons exist in more than one shell. The energy is stored chemically in different ionic forms of vanadium in a dilute sulfuric acid electrolyte. The electrolyte is pumped from separate plastic storage tanks into flow cells across a proton exchange membrane where one form of electrolyte is electro-chemically oxidized and the other is electrochemically reduced. This creates a current that is collected by electrodes and made available to an external circuit. The reaction is reversible, allowing the battery to be charged, discharged and recharged. The technology has been around for seven years and the current references are shown in the following table:

28 . http://www.zbbenergy.com/ 29 . http://www.vrbpower.com

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http://www.zbbenergy.com/

http://www.vrbpower.com/


Place Application Specifications Start of Operation

Kashima Kita Power Station – Japan

Load leveling 200kW x 4h 1996

Office building Osaka – Japan

Load leveling (demo) 100kW x 8h 2000

Sanyo Semi-conductor Factory – Japan

1) Voltage sag protection

2) Load leveling

3000kW x 1.5 sec 1500kW x 1h

2001

Wind power station Hokkaido Island – Japan

Stabilization of wind turbine Output (field test)

170kW x 6h 2001

Dunlop Golf Course – Japan

Load leveling (Photovoltaic hybrid system)

30kW x 8h 2001

University – Japan Load leveling 500kW x 10h 2001 Stellenbosch University – South Africa

Load leveling 250kw x 2h 2001

Electric Power Research Institute – Italy

Peak shaving 42kW x 2h 2002

PacifiCorp – United States

End of line – peak shaving, load leveling

250kW x 8h Feb 2004

Hydro Tasmania – Australia

Stabilization of wind turbine output

200kW x 4h Nov 2003

VRB-ESS Wind-Diesel Installation in Tasmania

VRB declares itself ready to deliver commercial equipment at a scale of 10 MW. Beside energy storage, it can act in UPS mode as well as power conditioning, having a speed of response under 1 milli-second. It is designed to operate at distribution voltages with a return efficiency in the range of 80%. The technology has no emissions and generates no waste. The VRB technology is at a scale that is suitable for wide-spread application in wind intensive systems, such as Denmark’s.

36


Mostly because of its relatively low power density and therefore its large specific dimensions, it is still costly. Reducing the reported costs of over €2000/kW by increasing the volume of its production and application is a worthwhile challenge.

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Electrolysis for Energy Storage & Grid Balancing in West Denmark

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