DEVELOPMENT TOWARDS ELECTRICITY COST REDUCTION Presented by: - - PowerPoint PPT Presentation

MINE MOUTH POWER PLANT DEVELOPMENT TOWARDS ELECTRICITY COST REDUCTION

Presented by:

Arnulfo A. Robles Ismael U. Ocampo & Mars T. Ocampo

Objectives of the Presentation

• To demonstrate that mine mouth power plant

development can greatly reduce the cost of electricity and provide energy security for the Philippines

• To show that a non-nuclear and alternative path

towards inclusive and sustainable economic growth by transitioning from fossil coal fuel to renewable biomass

How can this be achieved?

• 1. Promote mine-mouth power plant installation among

Coal Operating Contract (COC) holders and energy investors

• 2. Prioritize the dispatch in the electricity market of

mine-mouth power plants

• 3. Provide supply of electricity to host communities and

upgrade the benefits to host communities

• 4. Develop biomass farms for producing wood chips to

replace coal thus providing income to host communities and nearby areas

Table of Contents

• Mine mouth power plant as least cost electricity

generation option in North America, Thailand, Indonesia, Laos, Mongolia and the Philippines

• The Power Plant Development of the Philippines
• Coal resource & distribution in relation to the

National Transmission Grid

• Installed capacity & electricity production cost
• Reduction of national average electricity rates
• Additional benefits to the Philippine economy
• Conclusion
• Policy Recommendations

Commerciall lly Avail ilable le Power Generatio ion Technolo logie ies (1 (1/3)

• Oil and Gas Thermal (Rankin steam cycle)
• Piston Engine (SI gasoline, CI diesel)
• Nuclear Energy (e.g. PHWR)
• Open Cycle Gas Turbine (OCGT) – Brayton Cycle
• Combined Cycle GT (CCGT)
• Combined Heat and Power (CHP)

Commerciall lly Avail ilable le Power Generatio ion Technolo logie ies (2 (2/3)

• Pulverized Coal (PC*)
• Advanced Coal (CFB*, PFB*, IGCC**)
• Geothermal Energy (vapor, flash, binary)
• Hydro Power (large, pumped, mini)
• Solar Energy (PV, CSP)
• Wind Energy (on-shore, off-shore)
• *Rankin Steam Cycle

**Combined Cycle (Brayton + Rankin Cycles)

Commerciall lly Avail ilable le Power Generatio ion Technolo logie ies (3 (3/3)

• Biomass Energy (cogeneration, direct combustion,

gasification/pyrolysis, WTE)

• Ocean energy (OTEC, wave)
• Tidal Energy (single pool, modulated, dual pool)
• Fuel Cells (AFC, PAFC, PEM, MCFC, SOFC)
• Energy Storage Technologies (pumped hydro,

compressed air, utility scale battery, magnetic energy storage, flywheel)

What is a Mine-Mouth Power Plant (MMPP)?

• It is a coal-fired generating plant built in

proximity to its source of coal, a coal mine.

Semirara’s 2 x 7.5 MW Power Plant

What is the Most Favored Technology Used in MMPP?

• For MMPP that use low-heating value lignite, it is the Supercritical

Circulating Fluidized Bed Combustion (SCFBC).

Widely Used Coal-Fired Power Technologies in Mine-Mouth Plants

General Subcritical <1990 Supercritical 1990 Advance Supercritical 1995-2000 Ultra Supercritical (USC) 2000 General Characteristics Installed worldwide

• 3 GW
• 1,000 GW

Complexity Low Medium Usage Base/medium load Base/medium load Fuel range All coals, residuals, biomass All coals Technical Parameters Unit Size (2000) ≤460 MW 400-1,000 MW Live stream pressure (Mpa) 16.5 ≥22.1 27.5-30 ≥30 Mpa Live stream temperature (OC) 540 540-560 560-600 ≥600

• Max. GT applied
• Generating Efficiency (%)

48-50 43 38 41 44 46+ Environmental Parameters Desulphurisation 90% 90% SO2 emission (2000) 0.66kg/MWh 0.6kg/MWh NOx emission (2000) 0.8kg/MWh 1.2kg/MWh CO2 emission (2000) 860kg/MWh 760kg/MWh Financial Parameter Investment Costc (2000)** USD $1,120/kW USD $1,300/kW

* Including flue gas desulphurisation or desulphurisation by dolomite addition (CFBC). ** Converted from Euro to USD exchange rate in year 2000 at 1.12 Euro/USD

Source: Grammelis at al., 2002; Henderson, 2003, COORETEC, 2003, P. Lako, 2004

Pulverised Coal-Fired Power Plant*

Circulating Fluidised Bed Combustion (CFBC) *

Table 1

North America

• Canada
• Mainly in Ontario, Eastern Canada and in British Columbia,

Western Canada

• Mostly mine mouth due to distance to coast
• USA
• Mainly in Pennsylvania, Kentucky, West Virginia and

Wyoming which are in Eastern and Central US

• Mine mouth plants avoid long distance transport thereby

reducing cost by more than 50%

• Coal sent to Georgia from Wyoming costs USD 29 in 1995

while it costs USD 13 in 2015

Western Canada

In western Canada, the main coal mines include Boundary Dam, Paintearth, Poplar River, Highvale, and Sheerness mines which are all mine mouth operations. Combined, these mines fuel approximately 60% of the electricity generated in Alberta and Saskatchewan. Canada is home to 24 permitted coal mines – 19 of which are currently in operation. In addition, there are many more projects in the exploration phase or in the advanced stages of regulatory approval. More than 90% of Canada’s coal deposits are located in western provinces – in British Columbia, Alberta and Saskatchewan.

• British Columbia has 10 mines
• Alberta has 9 mines
• Saskatchewan has 3 mines
• Nova Scotia has 2 mines

United States of America

• Wyoming, the nation’s leading coal

producer since 1986, provides about 40%

• f America’s coal through the top 10

producing mines located in the Powder River Basin. Most Wyoming coal is sub- bituminous, which makes it an attractive choice for power plants because it has less sulfur and burns at around 8,400 to 8,800 BTUs per pound. Wyoming coal is considered clean burning, which means it is better for the environment. Wyoming coal has steadily gained a growing share of the nation’s total electricity over the past few decades for a variety of reasons.

• It’s more affordable than Eastern coal and
• ther fuels.
• There are huge reserves in the state.
• Wyoming’s supply of coal is reliable.
• Wyoming’s low-sulfur coal can be produced

and used in compatibility with the nations’ environmental objectives.

Jim Bridger Mine Mouth Power Plant, Point of Rocks, Wyoming, USA

• The four Jim Bridger units (mine

mouth power plants) were built between 1974 and 1979 to accommodate the adjacent mine, which also opened in 1974 under the Bridger Coal Co. – a joint venture between PacifiCorp and Idaho Power Co.

• The plant supplies 2,100 megawatts

to consumers on the Pacific Coast, as well as Idaho, Utah and Wyoming.

• More capacity and more reliability

means the Jim Bridger plant will continue to help power cities stretching all the way to the Pacific Ocean from its isolated home next to the Bridger mine.

Thailand

Mae Moh Mine Mouth Power Plant, Lampang Province,Thailand

• In 1953, an abundant lignite resource was

found at Mae Moh basin. That contributed to the project to construct Mae Moh lignite power plant. At first, two 75 MW generators were installed, but as the electricity demand has grown, the Electricity Generating Authority of Thailand (EGAT) has installed more generating units.

• Mae Moh power plant consists of 13

generators with the total generating capacity of 2,625 MW that can totally provide an average annual energy output

• f 15,450 million kWh.
• However, the generating units 1 and 2

were retired on March 1, 2000, while the unit 3 was taken out of service on September 13, 1999. As a result, the current total generating capacity of Mae Moh power plant is 2,400 MW.

Mae Moh Power Plant

• Owned by Electricity Generating Authority of

Thailand or EGAT

• Constructed:

1976-1996

• Capacity:

2400 MW

• Lignite supply:

40K tons/day or 14.6 million tons/year

• Resource:

864 million tons

• Electricity production cost: 60 satang/kwh
• r 1.6 US cents/kwh
• Now constructing 600 MW Unit of Ultra-

Supercritical to replace Subcritical Unit 4-7

Indonesia

Indonesia Energy Policy

• The Indonesian government has a target to

push the country’s electrification rate up to 99.4% by 2024.

• A government program is under way to add

35GW of electricity generating capacity into the national grid by 2019.

• Of this, 20GW is due to come from coal-fired

power plants.

• The 35GW program is the largest in the 70-

year history of Indonesian independence.

Indonesia Mine Mouth Program

• Mine Mouth Power Plant to contribute

more than 10,000 MW out of 35,000 MW to be constructed from 2010 to 2020

• Incentive to coal miners of 15-25% margin
• ver production cost with minimum of

USD 16.36 base price for GAR 3000 or higher

• Pre-bidding estimate of installation cost by

PLN in 2014 was USD 1,104.40/kW

• Target mine mouth power plant by 2020 is

11,500 MW

PT Adaro Mine Mouth Power Plant, South Kalimantan, Indonesia

Lao PDR

Lao PDR

• The 2,504 MW Hongsa Mine Mouth

power project is the first and the biggest lignite-fired power plant to be developed in Lao PDR. The project is being developed in Hongsa and Muang Nguen Districts of Xayaboury Province, Lao.

• Hongsa Power Company (HPC), a joint

venture formed in 2009 between Banpu Power (BPP), Ratchaburi Electricity Generating Holding (RATCH) and Lao Holding State Enterprise (LHSE), is the project developer.

• The investment on the power plant is

estimated to be $3.7bn.

• Construction of the plant started in

October 2010 and commercial

• perations are expected o begin in
• 2016. It will be Lao PDR's highest-

capacity power plant, providing a sustainable supply of energy for both Lao PDR and Thailand.

Lao PDR

• Hongsa Mine Mouth Power Plant
• Installed capacity:

2504 MW

• Construction period: 2010-2016
• Coal quality:

2500 kcal/kg GAR

• Coal price:

USD 8.10/ton

• Electricity price in 25-year power

supply contract with Thailand: 5.7 US cents/kWh

Mongolia

• Prophecy Power Generation

LLC (“PPG”) is developing the Chandgana coal-fired power plant project which includes the construction of a 600 MW coal-fired mine-mouth power plant consisting of four 150 MW units (4X150 MW) in two

• phases. The proposed power

plant will be located 300 km east of the capital city of Ulaanbaatar next to the Chandgana Tal coal deposit,

• n which Chandgana Coal

LLC controls mining licenses covering the deposit.

• In March 2013, Prophecy

secured a land use right covering 532.4 hectares of land to be used for Prophecy’s proposed Chandgana Power Plant from the Morun soum government.

Mongolia

• Under negotiation with government

for government guarantee of revenue requirement

• Installed capacity:

600 MW

• Coal Supply: 3.6 million tons/year
• Coal Resource:

733 million tons

• Coal Price:

USD 17.70/ton

Philippines

• Semirara
• Capacity:

15 MW

• Constructed:

2014

• Electricity production cost:

Php 3.55/kWh

• Purpose: not commercial, for mining
• perations &

host community use only

• PNOC-EC Isabela Coal Project
• Target start of construction of 50-100 MW

mine mouth plant was disapproved in 2015 pending company’s show of financial capability

Semirara Mining & Power Corp., Philippines

• Semirara Mining and Power

Corporation is the largest coal producer in the Philippines, and the

• nly power producer in the country that
• wns and mines its own fuel source

(coal).

• It operates the largest and most

modern pit mine in the Philippines.

• Its truck and shovel operations can

produce 8 million metric tons of coal a year.

• It has an installed generating capacity
• f 600MW, with an additional 1,200MW

in the pipeline฀ .

• By integrating coal mining activities

and power operations, it created a value chain that enables them to transform low-value input into high- value output in a continually efficient and responsible manner.

Semirara Mine Mouth Power Plant, Semirara Island, Antique, Philippines

Semirara’s 2 x 7.5 MW Power Plant

PNOC-Exploration Corp., Philippines

• PNOC Exploration Corporation, the upstream oil, gas

and coal exploration and development arm of state-

• wned Philippine National Oil Company, is currently

seeking partners to develop two mine-mouth coal- fired power plants, one each in Isabela and in Zamboanga Sibugay.

• The Isabela power plant is intended to utilize the

lignite coal within PNOC EC’s coal concession in the area which has reserves estimated to be sufficient for a 100MW station.

• The JV partner for the Isabela project will be

involved in the mine and power plant development as well as in operating the power station and marketing the generated electricity.

• Meanwhile, the proposed power project in

Zamboanga Sibugay will utilize the bituminous coal reserves from PNOC EC’s Malangas coal mines. Coal reserves from this area, which are estimated to be sufficient for a 50-100 MW station, are of high quality and suitable for blending with imported coal.

• The JV partner for the Zamboanga Sibugay project

will be involved in the development and operation

• f the power plant as well as marketing the

generated electricity.

MINE-MOUTH POWER PLANT DEVELOPMENT IN THE PHILIPPINES

The 5.7 US cents per kWh price of electricity sold to Thailand from the Hongsa mine-mouth power plant in Lao PDR is a viable target for mine-mouth power plants in the Philippines. If this cost is doubled to include transmission, distribution and

• ther

costs to deliver the electricity to Filipino consumers, the price would be only 11.14 US cents or just a little lower than the 12 US cents that the average American household pays for one kWh of electricity.

Figure 2

Coal Resource, Reserves, GAD (GHV, adb)

Coal Resource Coal Reserve GAD, kcal/kg adb GAD, Btu/lb adb (M+I; million tons) (P+P, million tons) min max average average

• 1. IGUIG

Iguig Cagayan 336 47 2735 4627 3681 6626

• 2. CAUAYAN

Cauayan, Isabela " 23 2735 4627 3681 6626

• 3. SEMIRARA

Semirara, Antique 550 82 4988 5373 5180.5 9325

• 4. BATAN

Batan, Albay 17 4 5447 5853 5650 10170

• 5. CEBU

Central Cebu 40 4 5312 6282 5797 10435

• 6. TANDAG

Tandag, Surigao del Sur 209 48 2599 4555 3577 6439

• 7. BISLIG

Bislig, Surigao del Sur " 48 2599 4555 3577 6439

• 8. MANAY

Manay, Davao Oriental 1 2599 4555 3577 6439

• 9. LAKE SEBU

Lake Sebu, South Cotabato 230 69 3353 5437 4395 7911

• 10. MALANGAS

Malangas, Sibugay 45 23 5118 7351 6234.5 11222 * Gross Heating Value (GHV), air dry basis (ADB) ** Electricity Cost at 12% p.a. Project IRR Used in model 2735 4627 3681 6626 SOURCE OF DATA: Department of Energy SOURCE OF INSTALLED CAPACITY and ELECTRICITY COST: Calculations by Mars Ocampo using a project finance model

Table 2a. Potential Mine Mouth Power Plants in the Philippines - Reserves, Resources and Gross Heating Value

NAME LOCATION Gross Heating Value (GAD*, kcal/kg)

Formula la for Potentia ial MW Capacity fr from Min ineable le Reserve, GHV and Effic icie iency (H (Heat Rate)

• The formula for calculating the potential

installed capacity from the coal reserves for a 25-year mine-mouth power plant is shown below which assumes a CFBC thermal efficiency

• f 34.39% (plant heat rate = 3412 / 34.39% =

9,921 Btu/kWh) and net capacity factor of 85%.

• MW = (Coal Reserve/25 x 10^6 x 10^3) x GHV x

2.2046 x (34.39% / 3412) / (365 x 24 x 85%) / 1000

Coal Moisture and Sulfur (adb)

min max average min max average

• 1. IGUIG

Iguig Cagayan 17.56 25.16 21.36 0.32 2.3 1.31

• 2. CAUAYAN

Cauayan, Isabela 17.56 25.16 21.36 0.32 2.3 1.31

• 3. SEMIRARA

Semirara, Antique 17.86 20.5 19.18 0.32 3.5 1.91

• 4. BATAN

Batan, Albay 5.75 11.91 8.83 0.41 5.24 2.825

• 5. CEBU

Central Cebu 2.24 16.61 9.425 0.28 4.56 2.42

• 6. TANDAG

Tandag, Surigao del Sur 12.7 18.78 15.74 0.16 1.47 0.815

• 7. BISLIG

Bislig, Surigao del Sur 12.7 18.78 15.74 0.16 1.47 0.815

• 8. MANAY

Manay, Davao Oriental 12.7 18.78 15.74 0.16 1.47 0.815

• 9. LAKE SEBU

Lake Sebu, South Cotabato 10.1 36.1 23.1 0.26 5.48 2.87

• 10. MALANGAS

Malangas, Sibugay 1.57 5.86 3.715 0.32 1.1 0.71 Used in model 17.56 25.16 21.36 0.32 2.3 1.31

Table 2b. Potential Mine Mouth Power Plants in the Philippines - Moisture and Sulfur

NAME LOCATION Moisture (ADB, %) Total Sulfur (ADB, %)

Capacity and Electricity Cost (at 1,850 $/kW)

Coal Reserve GHV, Btu/lb adb Installed Capacity Planned Capacity Electricity Cost Electricity Cost** million tons average MW MW USCentS / kWh PhP / kWh

• 1. IGUIG

Iguig Cagayan 47 6,626 169 200 7.67 3.61

• 2. CAUAYAN

Cauayan, Isabela 23 6,626 83 100 7.99 3.76

• 3. SEMIRARA

Semirara, Antique 82 9,325 414 600 7.17 3.37

• 4. BATAN

Batan, Albay 4 10,170 22 25 9.48 4.45

• 5. CEBU

Central Cebu 4 10,435 23 25 9.36 4.40

• 6. TANDAG

Tandag, Surigao del Sur 48 6,439 167 300 7.60 3.57

• 7. BISLIG

Bislig, Surigao del Sur 48 6,439 167 300 7.60 3.57

• 8. MANAY

Manay, Davao Oriental 1 6,439 3 35 9.22 4.33

• 9. LAKE SEBU

Lake Sebu, South Cotabato 69 7,911 296 300 7.25 3.41

• 10. MALANGAS

Malangas, Sibugay 23 11,222 140 100 7.21 3.39 1,484 1,985 7.49 3.52

Table 3a. Potential Mine Mouth Power Plants in the Philippines - Estimated Installed Capacity and Electricity Cost (at 1,850 $/kW)

NAME LOCATION

Cost Reduction at 1,850 $/kW

2014 Existing Power Plants (MW) Installed Dependable Grid Rate, P/kWh Grid Rate, cents/kWh Luzon 12,940.1 11,515.3 Visayas 2,519.9 2,159.8 Mindanao 2,150.8 1,811.6 Total Philippines 17,610.8 15,486.7 5.425 11.540 Potential Mine-Mouth (25 years) % of Installed Calculated Capacity from Reserves 1,828.0 10.4% Planned Capacity from Proponents 1,985.0 11.3% 3.520 7.490 Total Installed Capacity 19,595.8 5.232 11.130 % Reduction in Grid Rate

• 3.56%

hours/year 8760 net capacity factor 85% available hours/year 7446 plant life, years 25 tons/million ton 1000000 kgs/ton 1000 kW/MW 1000 thermal efficiency 34.39% plant heat rate 9,921 target all-in capital cost, $/kW 1,850 Fixed O&M cost, $/kW/year 21.05 Variable O&M cost, $/MWh 4.53 G&A cost, $/year 465,000 $/kW/year 2.32 cost of fuel, $/mt 16.00 exchange rate, PhP/$ 47.00

Capacity and Electricity Cost (at 1,200 $/kW)

Coal Reserve GHV, Btu/lb adb Installed Capacity Planned Capacity Electricity Cost Electricity Cost** million tons average MW MW USCentS / kWh PhP / kWh

• 1. IGUIG

Iguig Cagayan 47 6,626 169 200 6.01 2.82

• 2. CAUAYAN

Cauayan, Isabela 23 6,626 83 100 6.33 2.97

• 3. SEMIRARA

Semirara, Antique 82 9,325 414 600 5.50 2.58

• 4. BATAN

Batan, Albay 4 10,170 22 25 7.81 3.67

• 5. CEBU

Central Cebu 4 10,435 23 25 7.70 3.62

• 6. TANDAG

Tandag, Surigao del Sur 48 6,439 167 300 5.93 2.79

• 7. BISLIG

Bislig, Surigao del Sur 48 6,439 167 300 5.93 2.79

• 8. MANAY

Manay, Davao Oriental 1 6,439 3 35 7.55 3.55

• 9. LAKE SEBU

Lake Sebu, South Cotabato 69 7,911 296 300 5.58 2.62

• 10. MALANGAS

Malangas, Sibugay 23 11,222 140 100 5.55 2.61 1,484 1,985 5.83 2.74

Table 3a. Potential Mine Mouth Power Plants in the Philippines - Estimated Installed Capacity and Electricity Cost (at 1,850 $/kW)

NAME LOCATION

Cost Reduction at 1,200 $/kW

2014 Existing Power Plants (MW) Installed Dependable Grid Rate, P/kWh Grid Rate, cents/kWh Luzon 12,940.1 11,515.3 Visayas 2,519.9 2,159.8 Mindanao 2,150.8 1,811.6 Total Philippines 17,610.8 15,486.7 5.425 11.540 Potential Mine-Mouth (25 years) % of Installed Calculated Capacity from Reserves 1,828.0 10.4% Planned Capacity from Proponents 1,985.0 11.3% 2.740 5.830 Total Installed Capacity 19,595.8 5.153 10.960 % Reduction in Grid Rate

• 5.01%

hours/year 8760 net capacity factor 85% available hours/year 7446 plant life, years 25 tons/million ton 1000000 kgs/ton 1000 kW/MW 1000 thermal efficiency 34.39% plant heat rate 9,921 target all-in capital cost, $/kW 1,200 Fixed O&M cost, $/kW/year 21.05 Variable O&M cost, $/MWh 4.42 G&A cost, $/year 465,000 $/kW/year 2.32 cost of fuel, $/mt 16.00 exchange rate, PhP/$ 47.00

Cost of Delivered Electricity

Table 4. Electricity Cost Components and Annual Average Growth Rates (2004, 2014).

Volatility of Indonesian Price Reference (HBA) 2009-2016

Figure 4

Mine-mouth power development can greatly reduce the cost of electricity and provide many additional benefits to the Philippine economy, namely:

• a. Savings in petroleum fuel use;
• b. Savings in foreign exchange for imported coal;
• c. Protection from coal supply disruption and coal price

volatility;

• d. Potential to shift from coal to renewable energy; and
• e. Enhance inclusive growth and sustainability of power

development.

CONCLUSIONS

POLICY RECOMMENDATIONS

• 1. Priority dispatch for mine-mouth power plants.
• 2. Priority supply of electricity to host communities.
• 3. Upgrading benefits to host communities of

MMPPs.

• 4. Develop

commercial agricultural farms and industrial forest management areas for producing biomass and wood chips to replace coal once it is mined out or becomes economically non-viable due to high cost of mining.

THANK YOU

Arnulfo A. Robles Ismael U. Ocampo Mars T. Ocampo

COAL and Business Policy Forum 2016 November 16-17, 2016 New World Hotel