Choice of Power Plant for Belina Government - Report Example

Technical Report On Selection of Supplier for GW Power Plant For the Government of Belina (January, 2008) Prepared by: Karrson Consulting Services Table of Contents Section Page No. Executive Summary 1.0 Introduction 1 2.0 Alternative Choices Available 1 2.1 Bids 1 2.1.1 Bid No.1: EUROGEN 1 2.1.2 Bid No.2: Windiber 2 2.1.3 Bid No.3: RelRose 2 2.1.4 Bid No.4: Atishi 3 2.1.5 Bid No.5: NATFUEL 3 2.1.6 Bid No.6: MINIGEN 3 2.2 Factors Meriting Attention 3 2.2.1 General 3 2.2.2 Nuclear plants 4 2.2.3 Fossil fuel plants 5 2.2.4 Non-conventional plants 6 2.3 Other Important Considerations 6 3.0 Conclusion 7 4.0 Recommendations 8 References 9 Bibliography 9 Executive Summary Six international firms have submitted bids for supply of 1GW power plant to the government of Belina, the sub-Saharan African country with limited human resources. The bids from the European Union, UK and the USA are based on nuclear, fossil fuel and non-conventional energy sources. Bids for nuclear plants are supported by commitments to supply fuel and waste disposal for 40 years. Added attractions are financial support, subsidised prices and low to medium cost of power generation. Bids for conventional plants based on oil and liquefied natural gas are dependent on imported fuels to be brought by ships from the Middle East. Unit cost of generation is low to medium. Bids for non-conventional sources are based on wind power and locally produced biomass from woody crops. Analysing the state of development of Belina and its human resources, it is felt that nuclear power plants are not quite appropriate. Uncertainties and international politics of nuclear fuel supply and waste disposal are issues of importance. Low cost of power from these plants and financial support are seen as inducement to the buyer. Option of fossil fuel power plant suffers from the need to import the fuel in the absence any developed local resources. Fluctuating oil prices and adverse environmental considerations further negatively impact these offers. Bids for the non-conventional power plants are attractive on comparable terms discussed above. The offer from Natfuel is considered the best option since it benefits the people of Belina more widely and significantly even as it frees the government from dependence on foreign sources of fuel supply. The apparently high price per unit of power generated is offset by the larger socio-economic benefits to the local population. Technical report 1 Technical Report on Choice of Power Plant for Belina Government I. Introduction Government of Belina is planning to set up a 1 GW power generating facility immediately, with the possibility for substantial expansion in future. The plant is to be located in the vicinity of the two main towns that are being industrially developed to cater to the export based industries coming up in the region. International bids have been received from reputed firms covering the supply of plant and machinery and offering a choice of energy generation based upon conventional technologies using oil, natural gas (liquefied) or nuclear fuels, and renewable sources based on wind power and biomass. The bids identified the issues relating to fuel linkages and handling of spent fuel, where necessary. Indications are also given as to the unit cost of generated power. This technical report is prepared for assisting the selection process and considers the relevant issues in the background of the prevailing circumstances in Belina and provides professionally and ethically justifiable advice. 2.0 Alternative choices available 2.1 Bids Six bids have been received and it is appropriate to recapitulate the salient features of these bids. 2.1.1 Bid No 1: EUROGEN Eurogen is an international nuclear engineering company in Sudeten, located in the European Union region. It proposed to set up 1 GW pressurised water reactor technology nuclear plant. Its price bid is attractive, possibly due to the subsidy provided Technical report 2 by Sudeten government, and is also backed by attractive loan facility from local financial institutions. Fuel supply and disposal of spent fuel being important issues for any nuclear fuel power plant, the bid promises to guarantee supply of fuel for the first 40 years of operation and to deal with the spent fuel as well. 2.1.2 Bid No 2: Windiber The bid from this experienced European firm proposes installation of a wind farm consisting of 20 arrays, each having 50 windmills of 1 MW capacity, thus totaling 1GW power generation. The site conditions confirm the technical feasibility to set up such a farm, with the minimum and maximum wind velocities being within the desirable range and prevailing through most of the year. The installation is proposed on a ridge nearby the industrial towns. Unit cost of power generated is in the medium range. 2.1.3 Bid No 3: RelRose RelRose is a reputed international engine builder with headquarters in the USA. They propose installation of 3 no. of 300 MW combined cycle power plant units. Liquefied natural gas (LNG), imported from the Middle East, is the fuel for this proposal. LNG is burnt in gas turbines for main power production and the waste gases are then passed through steam turbines for secondary power production. Since plant operations are tied up with imported gas, the bid proposed location of the plant near coastal area. Unit cost of power generated is in the medium range. Technical report 3 2.1.4 Bid No 4: Atishi Atishi from Japan proposed installation of 2 no. of 500 MW units near the coastal area. The fuel for this proposal is fuel oil, imported from the Middle East. This conventional power plant is expected to produce power at low unit cost. 2.1.5 Bid No 5: NATFUEL This interesting proposal from NATFUEL, the European consortium, is for setting up 10 units of 100 MW each. Fast growing biofuel plants like timber are the basis for this proposal and the availability of suitable agricultural land close to the plant location is an added advantage. Unit cost of power generated is in the medium-high range. 2.1.6 Bid No 6: MINIGEN MINIGEN, the UK based international nuclear engineering company, proposed setting up 10 units of 100 MW capacity each. The technology is Pebble Bed Reactor type nuclear power plants. MINIGEN agreed to supply fuel and also so take care of the disposal of spent fuel, during the first 40 years of plant operation, being the licensing period. The proposal has financial support from international financiers. Unit cost of power generated is low with this technology. 2.2 Factors meriting attention 2.2.1 General: The offers can be broadly classified as based on conventional, nuclear and non-conventional technologies. It is a fact that all offers are based on proven technologies. The over-riding consideration for making the choice should be the relative merits of each offer as it applies to Belina, the location and its present stage of development. Technical report 4 Belina, located in the sub-Saharan region of Africa, is among the poorest regions of the world, although it is making steady progress in the past few years. While its natural resources are abundant, its human resources are severely limited. This is an important factor since training and deploying adequate number of employees should be ensured to operate and maintain the power plant safely. In other words, it is more appropriate to select plants which can be operated with relative ease and comfort level for the local people and administrators. 2.2.2 Nuclear plants: Nuclear plants are more complex and critical units that require the services of specialists round the clock. Safety is the biggest concern for these plants. In spite of the progress achieved in safety and back-up safety systems, accidents keep happening even in developed countries – e.g., the Long Island (USA) and Chernobyl (Russia). Fuel supply and disposal of spent fuel are major issues. Nuclear fuel supply is strictly regulated by a few countries and international controls, in view of its potential misuse for production of weapons of mass destruction. In view of its radioactive nature, storage / handling / disposal of spent fuel is also regulated very strictly. Finally, a supplier-company and its parent country gain an undue leverage vis-à-vis the customer-country, in demanding and enforcing political support in lieu of continued fuel supplies. Belina may be in such risk if it opts for nuclear based power plant for its most important industrial towns. On the flip side, since major suppliers of nuclear power plants are facing lot of resistance in securing orders (NRDC, 2008), they are being subsidised by their governments thus making the bids attractive price-wise. In addition, such bids are also supported by low cost long-term loans by financial institutions. In the case of Technical report 5 EUROGEN bid, it is noted that fuel supply guarantees are contingent upon Sudeten government supporting its nuclear industry in the next 50 years. This would mean that any change in government policy in this regard even within the first 40 years would impact the contract and would lead to litigation. Unit cost of power generated is unusually low for comparable nuclear power plants and this confirms the government and institutional support, raising questions on why the bid is being pushed aggressively, and whether the supplier-country gets greater benefit than the underdeveloped people of Belina in the ultimate analysis. This becomes morally and ethically difficult to justify. 2.2.3 Fossil fuel plants: Coming to conventional fuel power plants based on fuel oil or natural gas, Belina is again dependent upon imported sources since it does not have them locally produced yet. To the extent that fossil fuel prices have been fluctuating widely – above US$ 140 per barrel in July 2008 (Leigh, 2008) to around US$ 40 per barrel now, Belina would find it extremely difficult to manage supplies and maintain a steady price regime for the power that it supplies to the industrial units. It may have to bear the burden of subsidising power supply if the imported fuel prices go up or if its currency depreciates. In the longer run, there is a possibility for using local gas since the Belina coastal zone is a potentially gas bearing one. However such prospects are remote in view of the prohibitive costs of proving and exploitation. A second and more important issue is the environmental impact of using fossil fuels. They are exhaustible in nature on the one hand and cause environmental pollution on the other. While adequate supplies can certainly be assured in view of the large number of sources of supply (both OPEC & non-OPEC sources), global warming caused by carbon emissions from burning fossil fuels is Technical report 6 a major concern (UN Conferences). It adds to the already deteriorating global scenario in this regard. Among the plus points for conventional power plants are their relative low costs, ease of operation, and low to medium cost of power generation. 2.2.4 Non-conventional plants: Finally, non-conventional technologies – in this case, wind power and biomass – offer attractive alternatives, especially for a country like Belina at its present state of development. Both are renewable sources of energy. Wind turbines do not cause chemical pollution of the atmosphere at all, although noise pollution is often cited as a negative aspect. But since most wind turbine makers are either in Europe or in the USA, equipment and service prices are generally high. Operation and maintenance costs are minimal, which is a plus point in favour of wind turbine power. Use of biomass, derived from plants like timber and food / agricultural waste products etc. is environmentally more sustainable. Biomass power plants are carbon neutral since emissions are quickly absorbed by the plants grown for producing the biomass (PowerScorecard, 2008). Belina has the advantage of good tracts of agricultural land, close to the proposed location of the power plants and they are at the disposal of the government and can be used to grow the required crops. The increasing population around the industrial towns will also be a source of municipal solid waste, part of which can be used as fuel. Thus non-conventional technologies appear as more appropriate for Belina. 2.3 Other important considerations While recommending non-conventional technologies, a final selection can be made based on economical, environmental and ethical reasoning. From all these counts, NATFUEL’s Technical report 7 offer is the most appropriate one. Its greatest advantage is the involvement of a wider cross section of local population in beneficial economic activities. Their purchasing power increases, which will lead to higher aspirations for better education and healthcare for their children and a higher standard of living. Local production of crops helps generate many jobs for the locals and training is also not a major issue. Land and water are available in sufficient quantity. Costs of crop production will be low as per local norms. This route would add to the overall gains to the economy of the country, in addition to the industrial activity in the two towns that get the benefits of the power plants. Crop production and conversion to biomass can be taken up round the year and is environmentally-friendly. It is a perennial source of locally produced and economical fuel that ensures that the local government is not entangling itself in the international politics of nuclear fuels and waste disposal or at the mercy of highly fluctuating international prices of fossil fuels and on exchange rates. When the overall gains are taken into account, the significance of unit cost of power production reduces and becomes irrelevant since the power will be used by industries catering to the export markets. Wind turbine power may be cheaper but suffers from limited benefit to the local population and hence is can not be rated as the first choice. 3.0 Conclusion In conclusion, all the bids are based on proven technologies. Nuclear power plants would demand higher level of development of local human resources and at the same time fuel supply and waste disposal are major concerns. Conventional fossil fuel based power plants would need to depend upon the vagaries of imported fuel supplies. They are also Technical report 8 major cause for air pollution and global warming. Non-conventional energy sources are most appropriate for Belina for now and in the foreseeable future. These plants are environmentally least harmful, simpler technologies to master and are insulated from uncertainties of fuel supplies. Growing the crops suitable for biomass will add to the productive economic activities of a larger section of the population. 4.0 Recommendations NATFUEL’s offer based on biomass to be produced by locally grown woody crops is the most appropriate choice for Belina. It should put the agricultural tract available close the industrial towns into good use by promoting contract farming for meeting the needs of the biomass plant that will provide fuel to the power plant. Municipal solid waste materials, to the extent that can be segregated and used as feedstock along with the woody crops, should also be tied up as a source of fuel. This would improve the environmental standards and living conditions also. Technical report 9 References Leigh, J., (2008), “Crude Oil Price Retreat: Sunrise or a Lull Before the Storm?” Available at: http://www.energybulletin.net/node/46199 [Accessed on January 3, 2009]. NRDC, (2008), “Nuclear Facts”, Available at: http:// www.nrdc.org/nuclear/plants/plants.pdf [Accessed on January 3, 2009]. Power Scorecard (2008), “Electricity from Biomass”, Available at: http://www.powerscorecard.org/tech_detail.cfm?resource_id=1 [Accessed on January 3, 2009]. Science Daily, (June 29, 2007), “Biofuel crops double as greenhouse-gas reducers. Available at: http://www.sciencedaily.com/releases/2007/06/070628063747.htm [Accessed on January 3, 2009]. UN Conference on Climate Change, Available at: http://unfccc.int/meetings/cop_11/items/3394.php [Accessed on January 3, 2009]. Bibliography Case brief, Adopted from: Ward, I., (2007), “Energy consultancy”, Inter-disciplinary ethics resources database, Leeds: IDEA CETL University of Leeds. Available at: http://www.idea.leeds.ac.uk/resources [Accessed on October 26, 2008]. Livemint.com, (2008), “Ethanol blending”, Available at: http://www.livemint.com/2007/08/28235832/10-ethanol-blending-in-fuel-t.html [Accessed on January 3, 2009]. Module lectures 1 & 2 and supporting notes Read More