An ordinary steam turbine retrofit project is selected as a case study; through the retrofit, the project activities will generate emission reductions within the power grid for about 92,463 tCO2e per annum. The internal rate of return (IRR) of the project is only −0.41% without the revenue of carbon credits, for example, CERs, which is much lower than the benchmark value of 8%. Only when the unit price of carbon credit reaches 125 CNY/tCO2, the IRR could reach the benchmark and an effective carbon tax needs to increase the price of carbon to 243 CNY/tce in order to make the project financially feasible. Design of incentive mechanism will help these low efficiency enterprises improve efficiency and reduce CO2 emissions, which can provide the power plants sufficient incentive to implement energy efficiency retrofit project in existing coal-fuel power generation-units, and we hope it will make a good demonstration for the other low efficiency coal-fueled power generation units in China.
With the rapid development of industrialization and urbanization, the global climate-change issue has become an important factor to affect the world economic order, political regime and international relations, as well as to determine the key of the world’s energy future [
In the 12th Five-Year Plan, China has shown its intention to shift from a policy of maximizing growth to balance growth with social harmony and environmental sustainability [
Today, there are lots of low efficiency power plants in China, which is urgent to implement the steam turbine retrofit, and these power plants have the great potential to reduce CO2 emissions. Because the development among different regions and industries in China is very uneven, the enterprises cannot afford the high cost of the steam turbine retrofit by themselves [
Panshan Power Plant is located in the southeast of the Ji County, Tianjin City (117°16′58′′E, 39°59′26′′N). The mean annual temperature in Ji County is 10-11°C, and the mean annual precipitation is approximately 700 mm, of which three-quarters are distributed from July to September. Figure
The map of the project location–Panshan Power Plant.
Steam Turbine Retrofit Project of Tianjin Panshan Power Plant (hereafter refers to as the project) involves retrofitting supercritical steam turbine. The steam turbine with rated power of 500 MW (hereafter refers to as PAT, project activity turbine), which was designed in the early 1970s and introduced from Russia, has been put into commercial operation since April 16th 1996. The technical lifetime of the power unit is 24 years. Designed as a super critical turbine set, the technological level of the PAT is relatively higher than the subcritical turbine sets that are commonly used and regarded as a good practice currently in current China. So up to 2009 (the year of retrofit action), the remaining life is 11 years, more than 8 years. The principal specifications of the steam turbine are shown below (Table
The principal specifications of the steam turbine.
Item | Designed value |
---|---|
Manufacturer | Leningrad metal factory of Russia (designed in the beginning of 1970s) |
Type of turbine | Supercritical, once reheated, single shaft, 4 cylinder and 4 steam exhaust, condensing turbine |
Rated power | 500 MW |
Rated main steam flow | 1528.8 t/h |
Main steam pressure | 23.54 MPa |
Main steam temperature | 540°C |
Reheated steam pressure | 3.51 MPa |
Reheated steam temperature | 540°C |
Exhausted steam pressure | 4.27/5.44 kPa |
Number of blade stage | 54 |
Net heat rate | 8146 kJ/kWh |
Lifetime | 24 years |
The main target of the project is retrofitting the low pressure cylinder to reduce the coal consumption of the power generation, in particular, by promoting the performance of the low pressure cylinder. The components, including rotor, blades, diaphragm and its set, inner cylinder, and shaft butt seal of the low pressure cylinder, are retrofitted. Steam seal installed in the surrounding bend of the first stage of high-pressure cylinder, steam seal of each turbine stage, and shaft butt seal of high-cylinder and medium-cylinder will also be altered (Figure
Profile of turbine.
The current practice with low efficiency would be continued in the absence of the proposed project. By adopting retrofit measures, the proposed project will not only reduce GHG emissions, but also contributes to sustainable development for local communities by the means of:
To evaluate the effect of GHG emission reduction by the project with a quantitative way, the approved CDM methodology AM0062 in Unit Nation Framework Convention on Climate Change (UNFCCC) is applied to this study on the project in the following steps: calculate the baseline emissions, the project emissions, and the emission reductions [
To evaluate the emission reduction due to the retrofit, the follow case from AM0062 [
The CO2 emissions from fossil fuel consumption in the project (PEy) should be calculated using the latest approved version of the
The CO2 emission coefficient
Use the latest version of approved “tool to determine the baseline efficiency of thermal or electric energy generation systems.” Depending upon the option selected from the latest version of approved “tool to determine the baseline efficiency of thermal or electric energy generation systems.” Energy efficiency of the turbine without retrofitting in a year y(
It is expected that the project activities will generate emission reductions within the power grid for about 92,463 tCO2
Financial indicator of internal rate of return (IRR) is the most suitable for such power retrofit project and decision making context. According to Trial Implementation Methods for Economic Assessment of technology retrofit Project in Power Engineering, the benchmark of IRR of power retrofit project is set at 8% [
The key parameters of the project are showed in Tables
The key parameters of the project.
Item | Value | Unit | Data source |
---|---|---|---|
Electricity supplied to the grid in year y ( |
2,632,000 | MWh | Feasibility study report of the project (FSR) |
Standard coal consumption after retrofit | 322.5956 | kg/MWh | Efficiency test report |
Net calorific value of standard coal | 29,306 | MJ/ton | Efficiency test report |
Net calorific value of fossil coal | 23,026 | MJ/ton | Calculated |
Annual consumption of fossil coal | 1,080,643.24 | ton | Calculated |
Average net heat consumption of turbine after retrofit | 8738.92 | kJ/kWh | Efficiency test report |
The key parameters of the proposed project.
Item | Value | Unit | Data source |
---|---|---|---|
Rated continuous power | 500 | MW | FSR |
Total investment | 100,000,000 | RMB | FSR |
Equity proportion | 100 | % | FSR |
Incremental annual power generation | 0 | MWh | FSR |
Profit loss due to the retrofitting | 24,730,000 | RMB | FSR |
Annual operation hours | 5600 | h | FSR |
Power consumption rate (for self-use) | 6 | % | FSR |
Standard coal consumption for power generation before retrofit (designed in FSR) | 316 | g/KWh | FSR |
Decrease of standard coal consumption after retrofit (designed in FSR) | 13 | g/KWh | FSR, P51 |
Standard coal price (without VAT) | 389 | RMB/ton | FSR |
Electricity tariff (without VAT) | 341.2 | RMB/MWh | FSR |
New added O and M cost | −11,675,000 | RMB/year | FSR |
Of which fuel cost saving due to retrofit | −14,175,000 | RMB/year | FSR |
New added repair cost | 2,500,000 | RMB/year | FSR |
Income tax | 25 | % | FSR |
Value added tax (VAT) | 17 | % | FSR |
Town building maintenance tax | 7 (of VAT) | % | FSR |
Surcharge for education | 3 (of VAT) | % | FSR |
Project operating period | 11 | Years | FSR |
Rate of residual value of the fixed assets | 3 (out of total investment) | % | FSR |
Depreciation period | 11 | Years | FSR |
Amount of CERs | 92,463 | tCO2e/year | ER calculation sheet |
The financial analysis results are shown in Table
The financial indicators of the project.
Financial indicators | Rate |
---|---|
IRR (after tax) without CERs | −0.41% |
Benchmark | 8% |
IRR with CERs | 8.27% |
The sensitivity analysis is conducted to check whether, under reasonable variations of the sensitive factors in the critical assumptions, the results from the analysis remain unaltered. After overall checking of the IRR calculation sheet, five factors have been selected for the sensitivity analysis, which are the total investment, annual operation hours, electricity tariff, standard coal price, and the decrease of standard coal consumption.
Assuming the five factors within a fluctuation range from −20% to 20%, the IRR (after tax) of the project (without income from selling CERs) varies to a different extent, as shown in Table
The sensitivity analysis of the project within a fluctuation range from −20% to 20%.
Fluctuation range | −20% | −10% | 0 | 10% | 20% |
---|---|---|---|---|---|
Total investment | 2.34% | 0.87% | −0.41% | −1.55% | −2.57% |
Annual operation hours | −3.64% | −1.98% | −0.41% | 1.08% | 2.50% |
Electricity tariff | −0.41% | −0.41% | −0.41% | −0.41% | −0.41% |
Standard coal price | −3.64% | −1.98% | −0.41% | 1.08% | 2.50% |
Decrease of standard coal consumption | −3.64% | −1.98% | −0.41% | 1.08% | 2.50% |
As shown in the sensitivity analysis, even the varying range of the uncertain factors reaches ±20%, the IRR (after tax) could not reach the benchmark. The conclusion that the project is definitely not financially attractive would not be influenced.
As above, the internal rate of return (IRR) of the project is only −0.41% without the revenue of carbon credits for example, CERs, which is much lower than the benchmark value of 8%. In addition, only when the unit price of carbon credit comes to 125 CNY/tCO2, the IRR could reach the benchmark and become financially feasible. Therefore the GHG emission reduction cost of such retrofit project is 125 CNY/tCO2.
Carbon tax is a Pigovian tax levied on the carbon content of fuels [
In this case study, it is assumed that government levies the carbon tax on coal consumption in the power sector. It means that the carbon tax will be a part of the fuel cost in operating the power plant, being of the same effect of raising the price of coal. According to the sensitive analysis, an effective carbon tax needs to increase the price of coal by 243 CNY/tce, so as to make the project financially feasible. Then the cost of carbon tax should be 90 CNY/tCO2 (1tce leads to GHG emission of 2.77 tCO2).
Emissions trading or cap-and-trade is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. For GHG the largest is the European Union Emission Trading Scheme (ETS), whose purpose is to avoid dangerous climate change [
Since the electricity tariff is determined by the government in China, which is fixed unless the new tariff policy approved by the government, most of the coal fuel power plants resist carbon tax in practice. A very high cost of carbon tax is not very likely to occur in China. On the other hand, given the experience of the EU ETS, the credit price is of high volatility in the market [
Given the sensitivity analysis, the annual operation hours of the PAT are a very crucial factor to the IRR. The annual operation hours of a power plant are normally determined by power dispatch arrangement of grid company. In this section, the effect of encouraging dispatch plan is an analysis together with carbon tax and credit price in an ETS. Clearly, the more annual operation hours of the PAT, the higher IRR appears in the Project (Table
The necessary cost of carbon tax and credit price with/without encouraging dispatch plan.
Dispatch plan | Necessary cost of Carbon tax | Necessary cost of credit price |
---|---|---|
The dispatch electricity generation does not change | 90 CNY/tCO2 | 125 CNY/tCO2 |
Dispatched electricity generation increased by 20% | 50 CNY/tCO2 | 85 CNY/tCO2 |
This study presented the emission reductions of an ordinary thermal power plant after a steam turbine retrofit project with an incentive mechanism of carbon tax and carbon market (ETS). In particular, the most cost-efficient method is the combination of this mechanism made by central authorities with encouraging dispatch plan by grid company. The results presented within this paper indicate that the project will make a good demonstration for the other low efficiency thermal power plants in China.
This work was financially supported by the National Natural Science Foundation of China (no. 50908219 and 51209003), the Major Special Technological Program of Water Pollution Control and Management (no. 2010ZX07320-002), and Central Public-interest Scientific Institution Basal Research Fund (no. 0032012013).