Business energy security

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Business energy security ... or "there are no problems with the power system if you are the power system yourself"

What is the cost of electricity of own production?

The first and most important question that worries the owners of power plants is how much cheaper the cost of producing their own electricity is compared to buying it in the energy system (from Oblenergo). And taking into account the rise in natural gas prices, the second question involuntarily arises: what will happen to the cost of electricity if the price of gas rises sharply?

In short, with rising gas prices, it is very likely that the profitability of your own power plant will only increase. And a vivid confirmation of this is the European countries, in which the cost of gas has long been over $1,000/1,000m³. At the same time, the share of cogeneration in the electricity generation market does not decrease with an increase in the cost of gas.

Such a seemingly paradox can be explained simply – the more expensive the energy resource (natural gas), the more efficiently it should be used. And cogeneration, incl. based on gas piston engines, is currently the most efficient technology for the production of electrical and thermal energy from fossil fuels.

Here is a list of specific and undeniable competitive advantages of a cogeneration power plant installed directly at the consumer of heat and electricity (the Customer) compared to traditional power supply from Oblenergo networks:

  • The customer does not pay for technological losses in the electrical networks of Oblenergo (0.4 -110 kV), as well as UkrEnergo (more than 110 kV). NERC Decree No. 177 (21.03.05) approved the normative technological losses in networks below 35 kV for Oblenergo at the level of 12÷17%.
  • The customer does not pay for commercial losses (including theft) in the electrical networks of Oblenergo. In rural areas, with long low-voltage networks, commercial and technological losses often exceed 50%.
  • The customer does not subsidize the population from his own pocket. Electricity tariffs for the population do not cover its cost, and this “delta” is covered by commercial enterprises. The difference between the tariffs is more than twice, although in a market economy the difference should be even higher, but, on the contrary, in favor of enterprises! This is obvious, since one medium-sized enterprise with an electrical load of 2 MW is equivalent in terms of power consumption to 15–20 thousand apartments. Below are the reasons why it is much more profitable for Oblenergo to supply electricity to enterprises: 1. Enterprises have a disproportionately smaller length of low-voltage electrical networks and losses in them, respectively, are thousands of times less than the distribution of networks between tens of thousands of apartments;

    2. Electricity metering at enterprises is carried out at a voltage of 10 (6) kV, i.e. the costs of power losses in the distribution network of 0.4 kV within the enterprise, naturally fall on the enterprise, and not on Oblenergo. As for the population, where electricity is accounted for on apartment meters, losses during the transformation of 10 / 0.4 kV and distribution by networks of 0.4 kV between thousands of apartments fall on Oblenergo;3. In the case of enterprises, administrative costs for collecting payments and maintaining networks are much lower, there are practically no commercial losses and delays in payments, and so on.

  • The customer does not pay profits into the pockets of the owners of: a) generating companies; b) high-voltage networks; c) wholesale electricity market; d) Oblenergo. To date, the vast majority of Oblenergos, as well as a significant part of the generation and distribution companies, have become private. Obviously, in a market economy, no one works at a loss. Therefore, the Customer retains not only the profits of the above companies, but also the investment component included in the tariffs.
  • Cogeneration plants based on gas piston engines have the highest efficiency of converting fuel energy into electricity today – electrical efficiency is 40÷43%, and taking into account heat, the total efficiency sometimes exceeds 90%. This makes it possible to have a minimum fuel component in the cost of electricity produced.
  • For reference: large thermal power plants (TPPs), located far from cities and discharging excess heat into the atmosphere, produce more than a third of all electricity in Ukraine. The equipment available at such TPPs has an electrical efficiency of 26÷32%. Such equipment burns 42% more fuel than a gas engine-based cogeneration plant to produce the same amount of electricity. At the same time, the cogeneration plant will produce the same amount of heat energy that can be used by the Customer;
  • The customer gets the opportunity to further reduce energy supply costs by receiving electricity from Oblenergo networks at a cheap nightly rate, and during periods of expensive peak and semi-peak electricity, produce electricity at their own cogeneration power plant.

    For a two-zone tariff, the night tariff (from 23:00 to 07:00) is 0.5 of the daytime tariff (from 07:00 to 23:00), the main tariff. When choosing a three-zone tariff, two peak periods are allocated in the daytime period (from 8-00 to 11-00 and from 20-00 to 22-00), when the load in the energy network of Ukraine is maximum. During this period, the tariff is 1.5 of the main tariff. In the remaining day period, the tariff remains equal to 1.0 of the main tariff, but the night tariff is reduced to 0.4 of the main tariff

Technically, gas engines allow, moreover, in automatic mode, to carry out an average of up to three starts per day without reducing the engine life; starting and reaching the mode takes 3÷6 minutes and is not accompanied by significant fuel losses.

If the load schedule of the enterprise allows to work in this mode, the Customer can reduce the cost of energy supply (compared to the constant operation of a cogeneration plant).

Most of the flexible power plants in Europe operate according to this scheme.

  • In the case of the Customer’s heat supply from centralized boilers or CHPs before the introduction of cogeneration, a similar picture is observed in terms of thermal energy, while the benefits of the Customer from own heat generation are even greater. That is why most of the enterprises have long had their own heat sources.
  • The production of electricity from cogeneration modules leads to the replacement of electricity generation by less efficient thermal thermal power plants, and also reduces the production of electricity, which was used to cover losses during the transportation of electricity. This reduces the amount of fossil fuels burned across the entire energy system of Ukraine, and hence the amount of greenhouse gas emissions. Which also makes it possible to get additional profit, at least in terms of reducing fines for CO2 emissions
  • And, finally, the Customer receives an additional source of heat and electricity, absolutely independent of the operation of Oblenergo’s electrical networks. By applying appropriate design solutions, when working in parallel with the network, it is possible to ensure a very high degree of reliability of the power supply of the facility.

And the benefits, or rather the losses from emergency power outages, each Customer can evaluate individually, but sometimes they can be invaluable.

Like any technology, cogeneration plants also have some disadvantages compared to traditional power supply from Oblenergo networks:

A cogeneration power plant requires the allocation of a room or a plot of land for the installation of a container and a chimney structure. In addition, it is necessary to organize the current maintenance of the station, as well as take measures to protect against noise pollution and emissions of harmful substances (CO, NOx).
These features require appropriate design solutions, while, as a rule, one or another compromise can always be found in terms of the location of the cogeneration station and interaction with the enterprise’s technological process.

The reliable operation of a cogeneration plant depends on the supply of fuel: natural gas or other project fuel. In the case of increased requirements for the reliability of power supply, a two-fuel path is used, which has, for example, liquefied gas as a reserve fuel (up to 4 types of fuel are possible).
In the case when a cogeneration power plant operates in the mode of production of only electric energy, with an increase in the cost of fuel, the increase in the cost will be fully borne by the cost of electricity.

When operating in stand-alone mode (without Oblenergo networks), cogeneration modules have limitations on possible surge and load shedding. The level of possible surges and load sheddings in stand-alone (island) mode depends on many factors, such as: fuel type, unit power of the module, voltage quality requirements during surges/sheds, as well as the current load of the unit at the moment of load surge/shedding, and does not exceeds 30÷38% of the nominal unit power of the unit.\

The reliability indicators of power supply when the facility is powered only from cogeneration gas piston modules (without redundancy from the network, or from uninterruptible power supply sources UPS) are, as a rule, somewhat worse than from Oblenergo networks. However, if the Customer has the Oblenergo network as a backup source, it becomes possible to ensure a very high overall reliability of the facility’s power supply (including consumers in the 1st and special categories) without the costly laying of additional independent power lines.

Together, the above factors form the difference between the cost of electricity in the Oblenergo network and the cost of its own production.

What can be expected with rising gas prices?

What happens when the gas price increases, as has already happened since the second half of 2021, with the electricity price not yet adapted to this gas price change? First of all, it should be noted that the adaptation of electricity prices will definitely take place, though a little later, due to the use of natural gas at a number of power plants in Ukraine. In any case, with an increase in the price of natural gas to the value of the economic feasibility of obtaining electricity and heat from it, cogeneration technology will be in demand, because. This is where the most efficient combustion takes place.

The fact of the increase in the price of natural gas, in terms of the use of cogeneration technology, dramatically changes the attitude towards alternative gases and other fuels, especially renewable ones.

Sinapse Holding has been ready for such a process for a long time, because has a patented technology for generating generator gas from biomass and other even hazardous waste. The raw material here can also be any other organic fuels: coal, peat, etc. (see GAZCOM technology) The cost of the resulting generator gas compared to the price of natural gas at the beginning of 2022 is more than an order of magnitude cheaper, respectively, the price of electricity and heat significantly increases the attractiveness of creating your own cogeneration stations. In the absence of financial opportunities to independently implement such a Project, you can use an energy service company that will build such a station, including in a possible partnership, to reduce the cost of the enterprise’s energy resources.

In the world and in Ukraine, in terms of obtaining synthesis gas, there are many technologies and companies that can implement Energy Centers on renewable fuels, through their gasification, for the operation of cogeneration machines as part of the company’s own generating power plant. The whole question is in the composition of this synthesis gas, so that it meets the requirements of cogeneration machines for the use of this gas. Most likely, it will be necessary to provide for additional gas purification from gas impurities harmful to machines.

Using the calculator (see the section “cogeneration payback calculator”), you can calculate at what price of natural gas, it is no longer economically profitable to receive electricity and heat. In addition, using the same calculator, you can see the efficiency of cogeneration on alternative gases, indicating in the initial data the calorific value and the price of the corresponding alternative gas.

The price of a reliable power supply

Purchasing your own source of energy is not only economically beneficial, but also an additional guarantee that tomorrow you will have light and warmth.
Every really working company has a categorical need to protect its resources. Today, not only continuous production processes require protection: the lack of energy brings with it a shortfall in profits, and possibly losses and loss of business reputation.

Thus, the market, in its assessment of business prospects, pays close attention to energy dependence. Everyone remembers emergency power outages that sowed panic in the cities of the United States, Canada and a number of European countries. In addition to the shock and moral trauma of citizens, their consequences were serious losses for corporations (the losses of US and Canadian companies during Blackout2003 amounted to 6 billion dollars). A similar picture was observed during an emergency power outage in Moscow in May 2005.

In the case of using a cogeneration system, the consumer is insured against interruptions in the centralized power supply, which from time to time arise either due to depreciation of fixed assets in the electric power industry, or natural disasters or other unforeseen reasons. In addition, most likely, there will be no organizational, financial or technical difficulties with the growth of the enterprise’s capacity, since it will not be necessary to lay new power lines, build new transformer substations, or relocate heating mains, which is especially typical in dense urban areas.

However, power failures are terrible not only for government, financial, medical institutions, and not only for telecommunications and Internet companies. Industrial enterprises also become hostages of failures in the power grid: emergency shutdowns can cause the failure of expensive equipment (water hammer in large boiler houses, glass solidification and failure of glass furnaces, etc.)
Sites like the above require power supply reliability of “6 nines” or 99.9999% probability of uninterrupted power supply. Distribution grids provide only 4 nines, or 99.99% probability—an insufficient probability for a company that loses thousands of dollars a minute in power outages. Decentralized energy provides the main power supply, while the grid is used as a backup.

Cogeneration gas-piston power plants 2G Energy provide the possibility of power supply to the facility both in stand-alone mode from the network (the so-called “island mode”), and in the mode of operation in parallel with the network. With parallel operation, in case of emergency situations in the network, an instant transition to the island mode of power supply is possible, and when the network is restored, the “island” is resynchronized with the network. Most often, cogeneration plants operate in parallel with the network, while the control system of the power plant automatically maintains a zero (or set) flow with the network, adjusting the power of the power plant in accordance with the power consumption and the set flow. Island mode may not be possible in the case of operation on some “difficult” (primarily in terms of detonation resistance) gases, such as coke oven and ferroalloy gases.