Options and Possible Solutions: Gas. Power Ring Conference, December 2008, Warsaw

Transcription

1 Options and Possible Solutions: Gas Power Ring Conference, December 2008, Warsaw

2 Demand for electricity in Poland grows faster than availability of new production capacities GW Possibility of a 6 to 7 GW deficit Supply of electricity Demand for electricity Warszawa, 9 grudnia 2008r *source: data from WestLB presented at the conference Europower conference

3 Problems with the National Power Grid increase, and so does the risk of blackout Annual and monthly national demands, and attainable capacity for PSE-Operator in the national daily peak demand periods* January December 2007 March 2008 Attainable capacity for TSO National normal demand National demand Attainable capacity for TSO Day of the month Day of the month Nowadays, during the periods of peak demand, some shortages occur in the system power reserves, which in subsequent years (with shut-downs of consecutive units) may result in power supply disruptions *source: data from PSE-Operator SA Warszawa, 9 grudnia 2008r 3

4 Coal-fired power generation requires large investments into replacement units part of new capacity will come from gas [MW] Changes of attainable power of utility power plants, taking into account power decrease (permanent close-downs, and outages due to modernisation) as well as power increase due to completed modernisation and new investments already approved (Bełchatów II, Pątnow II, Łagisza II) Power Plant Skawina Power Plant Opole PKE Power Plant Halemba PKE Power Plant Blachownia PKE Power Plant Siersza PKE Power Plant Łagisza PKE Power Plant Łaziska PKE Power Plant Jaworzno II PKE Power Plant Jaworzno III Power Plant Stalowa Wola ZEL Ostrołęka "B" Power Plant Rybnik Power Plant Połaniec Power Plant Dolna Odra Power Plant Kozienice Power Plant Pątnów II Power Plant Pątnów I Power Plant Adamów Power Plant Turów Power Plant Konin Power Plant Belchatów II Power Plant Bełchatów bcm mld m Forecast of gas consumption structure in Poland outlook for the year Domestic-weather Households corrected Industry Power industry Commercial-weather Individual consumers corrected (commercial space, etc.) Petrochem Petrochemistry and chemistry Due to replacement modifications to take place in the next years in the production subsector, one of the possible development paths will involve simultaneous extension of production capacities based on coal and based on gas. According to analyses conducted by independent institutions, the increase in demand for gas in Poland will be largely created by the power industry source: Global Insight; PKEE Report 2030 Warszawa, 9 grudnia 2008r 4

5 Implementation of the EC Energy Package 3x20 by 2020 will promote increased consumption of natural gas by the power industry Main targets 20% reduction of greenhouse gas emissions from energy production, by % increase in renewable energy sources share in primary energy balance, by % energy efficiency increase by 2020 Additional targets Implementation of the obligation to capture and store CO2 - for each new power plant using fossil fuels Achievement, by 2020, of 10% share of biofuels in the overall fuel consumption balance Warszawa, 9 grudnia 2008r 5

6 Advantages of gas: low investment cost and shorter project implementation period Specification of electricity production costs for various technologies (the costs include CO2 emission costs 30 EURO/ton, rate of return of 10%, and a reference scenario for fuels, developed by IEA Euro/MWh CO2-related costs Fixed costs Cost of fuel Investment cycle: - for gas power plants ca. 4 years - for coal power plants ca. 8 years Capital costs Coal - existing Coal - modernised Coal - new Coal - CCS Gas Nuclear Biomass Wind CF:25% Wind CF:40% Gas and steam systems Low investment outlays as compared with other fuels Unit type Investment per unit Gas and steam system Coal unit with overcritical parameters Nuclear unit ERP reactor Source: Enrst&Young; Ramboll Warszawa, 9 grudnia 2008r 6

7 Advantages of gas: higher efficiency and lower emission Gas-fired systems producing electricity or electricity and heat are characterised by higher efficiency and lower emissions. Gas-fired sources are characterised by high efficiency of production, reaching 60% (coal-fired power plants: 47%); this, with proper gas to coal price ratio, may decide about the competitiveness of sources supplied with gas. Energy sources supplied with gas operating in cogeneration system, meeting the criteria re. cogeneration index, may obtain yellow certificates. kg CO2 / MWh Relationship between carbon dioxide emission and fuel type and incineration technology 810 lignite Conventional systems 741 hard coal oil gas NGCC IGCC Future prices of CO2 emission rights will determine the competitive edge of specific fuels. Source: Report 2030 by Polish Electricity Association Warszawa, 9 grudnia 2008r 7

8 Advantages of gas: a convenient fuel for dispersed generation Power as well as combined heat and power plants can perfectly operate as dispersed sources of electricity and heat, providing additional support to the National Power Grid (for the forced generation) in places with electricity deficit Due to reduced possibility of supply with pipeline natural gas, it is possible to supply gasfired power plants via LNG system Pregasification and LNG supplies Liquefaction Transport Warszawa, 9 grudnia 2008r Storage / regasification CCGT 8

9 Fuel prices will remain a key factor for electricity production based on gas Comparison of selected European contract prices with international oil prices Gas trans-border prices ($/mmbtu 1) ) International oil prices ($/mmbtu) Troll to Germany The Netherlands to Italy Algeria to Spain (GME) Netherlands Gasunie export Border Russia to Turkey Russia to Germany Rotterdam Gasoil Rotterdam LSFO Mediterranean LSFO Brent Mediterranean Gasoil Gas price indexation based on oil prices greatly affects gas prices in Europe considering the time difference of 6 months, correlation between trans-border gas price and Brent oil price is equal to ) 1 mmbtu=0,293 MWh; 2) ØUE 15 Warszawa, 9 grudnia 2008r Source: A.T. Kearney 9

10 Gas prices in the world may increase Gas demand trend, and demand satisfaction trend, in China and India (billion m³) China Import LNG India 67 Own production Export pipeline Own consumption Own production % 73 Import by pipelines Import LNG Own production % Import LNG Own production Currently, China remains a gas exporting country In 2020, China s net import will amount to 82 billion m³, with demand for gas increasing fourfold in 15 years By 2020 demand for gas in India will have increased twofold Principles of gas contracts renewal by key players will have major impact on future prices and shape of the gas market Wingas: Contracts renewed to 2030 Gaz de France: Contract renewal from 2012 to 2030 in return Gazprom will be granted access to the retail market (similar to the Wingas model) ENI: Contract renewal to 2027 (originally to 2017 r.) in this case Gazprom was also granted access to the retail market OMV: Contracts were renewed to 2012 with increasing the amount of contracted gas from 5.5 billion m³ to 6.5 billion m³; further contract renewal to 2027 for 7 billion m³ E.ON Ruhrgas: Contracts were renewed to 2036 (total of 400 billion m³) Warszawa, 9 grudnia 2008r Źródło: IEA; A.T. Kearney 10

11 just like prices of other energy carriers 18 Scenarios of fuel price increase in EU import 16 General increase of environmental costs, fuel and electricity prices will result in diversification of production sources. The international investment cycle leads to cyclic fluctuations of fuel prices [USD'2005/GJ] Changes of global oil prices in the years and of oil prices in EU import between 1988 and 2007; data source: OPEC MODER. - oil MODER natural gas MODER hard coal HIGH - oil HIGH natural gas WYSOKI hard coal Investment stage Operation stage Investment stage? Current prices import to EU (USD/bbl) Fixed pricese USD'2005/bbl (acc. to OPEC) Source: Report 2030 by Polish Electricity Association; Report: Warszawa, 9 grudnia 2008r The impact of auctioning on EU whosale electricity prices post New Carbon Finance

12 But the CO 2 emission costs will reduce the attractiveness of coal Hypothetical merit order without the cost of CO 2 The system of CO 2 emission settlements, proposed by the European Commission will considerably increase the attractiveness of gas-based generation CO 2 emission prices (Euro/ton) Price Euro/MWh Demand - MW Hypothetical merit order with the cost of CO 2 Koszt paliwa Koszt emisji CO 2 Price Euro/MWh nulear coal gas oil Distribution of electricity prices following the implementation of the EC package nuclear gas coal oil Demand - MW Warszawa, 9 grudnia 2008r Source: 1) EIB, Ramboll Source: Report: The impact of auctioning on EU whosale 12 Gas Market Study for Poland by 2035 electricity prices post 2010 New Carbon Finance

13 Hence, EU s newly constructed units are gas-fired power plants Age structure of existing power plants in EU-27 Natural gas Coal Gas Nuclear Oil Other Steam Hydro Wind Strucuture of investments planned until 2025 Power plants age structure, and information about planned investments, clearly indicate that natural gas has a key place in new investment projects Natural gas Warszawa, 9 grudnia 2008r 13 Source: Second Strategic Energy Reviev UE {COM (2008) 744}

14 Similarly to key leaders of the industry, PGNiG is going to get engaged in power production Largest companies in the power and fuel sectors, operating on the European market, offer their customers both electricity and gas supplies. Company Country Original market Share in power market Share in gas market PGNiG SA can also use of the synergy of operation and scale by: - Extending the value chain by power production assets - Building competence in new areas of business (electricity production and trade, CO2 storage, coal gasification, etc.) Gas Gaz Ziemny E&P Polska E&P Zagranica Abroad Obr ó t Mi International? dzy - narodowy trade Magazy Storage nowanie Przesy Transmission?* Dystrybucja Distribution /OSD /DSO Synergies involving the use of natural gas as fuel in electricity and heat production will also make it possible to increase the sales of gas Oil Ropa Naftowa Power Energia and Heat i Ciep?o Chemia Chemicals E&P Produkcja Production Produkcja Production Przesy Transmission?* Dystrybucja Distribution /OSD /DSO Obr Tradeó t? Provided by OGP Gaz - System S.A./PSE SA Warszawa, 9 grudnia 2008r 14

15 Ensuring gas supplies for secure development of Polish gasbased power sector is PGNiG s priority NCS Skanled Skanled The Skanled pipeline will be 840 km long (incl. branches) and will link the Karsto terminal in Norway with the gas distribution systems in Denmark and Sweden. The Skanled pipeline will be operated by Gassco. The formal decision to carry out the investment will have been taken by 4Q The pipeline will be opened in Danish pipeline system Baltic Pipe The pipeline is planned to be 260 to 290 km long, depending on its landing site. Baltic Pipe Polish coast Niechorze The pipeline is to run through the Danish and Polish territorial waters. However, its major part is to be situated in the Polish, Danish and German (or Swedish) economic zones. About 3 billion m 3 is to be delivered annually to Poland through the Baltic Pipe. It will be possible to deliver gas in both directions; thanks to this, the pipeline can also be used for gas export. The pipeline will be opened in LNG Terminal Berlin-Szczecin bidirectional interconnector Lwówek Tietierowka (Gazprom Export) Kondratki (Gazprom Export) Regasification: Stage billion m 3 ; Stage billion m 3 ; Stage billion m 3 of gas p.a. LNG tanks: 2 tanks (each with the capacity of 160,000 m 3 ); plot of land reserved for a new tank. LNG ships: Standard size of ships: max up to 216,000 m 3 Włocławek Location: winouj cie. Lasów (VNG Verbundnetz Gas, EON Ruhrgas) Wysokoje (Gazprom Export) The terminal will be opened in Interconnector links Morawia bidirectional interconnector Yamal pipeline Present state Present state Hrubieszów (NAK) Drozdowicze (Gazprom Export, ROSUKRENERGO) Implementation of a project to build interconnectors will give PGNiG S.A. the possibility to send gas in both directions. Construction of the connections will enable trade with the neighbouring markets and participation in the balancing markets of Europe (access to the hub). The interconnector is planned to be opened at the end of Warszawa, 9 grudnia 2008r 15

16 Thank you for your attention