Electrolysis for Energy Storage & Grid Balancing in West Denmark

Transkript

1 Electrolysis for Energy Storage & Grid Balancing in West Denmark A possible first step toward the creation of a transport hydrogen Infrastructure in West Denmark Report of the Work Group

2 CONTENTS 1. Executive Summary & Recommendations Summary 3 Summary. fuel security 6 SWOT Analysis 8 Recommendations 9 2. Strategic Considerations (Strategisk teknologiudvikling ved afslutningen af den billge oilies æra) Danish Wind Carpet Behaviour, Challenges & Solutions Electrolysis at West Denmark s Decentral Power Stations (incl. Stationary Fuel Cells) Economic Assessment Other Methods for Storing Energy 34 Page Work Method & Acknowledgements This project was studied and written up between mid-march and mid-august, 2004 The work has been a collaborative effort between the original stakeholders who were, Dansk Fjenrvarmeværkers Forening (DFF), Norsk Hydro Energy, Norsk Hydro Electrolysers, Naturgas MidtNord, Ringkøbing Fjernvarmværk (RFV), IRD A/S, Dr Klaus Illum and Incoteco (Denmark) ApS. Incoteco s Hugh Sharman has been responsible for the project coordination and editing of the report and is grateful to the writers who have written up the most specialised sections. It is important to mention that other companies and institutions, although not originally nor officially partners in the project, have shown great interest and contributed with their valuable time, ideas, advice and experience. These are, ELTRA, ELSAM, Wärtsila OY, H2 LOGIC ApS, Markedskraft, Vindenergi Danmark, Danmarks Vindmølleforening, Dansk Gasteknisk Center a/s, AGA-Linde, Hollensen Energi and Ringkøbing Amt. The project was conducted in five main stages. At the end of the first four stages, the stakeholders and guests gathered to meet each other and to present their findings and/or insights. The project diary is as follows: 1. Preparation, mid-march to mid-april 2. Kick-off (stakeholders meeting at DFF, Kolding, 14 April, 2004) 3. Mid-point stakeholders meeting at Ringkøbing Amt, 25 May, Concluding stakeholders meeting at DFF, Kolding, 1 st July, Final Analysis, Report preparation, review of drafts, agreement and report submission, mid August. Special thanks are due to DFF s Viktor Jensen and Kurt Risager, whose help, guidance, hard work and hospitality, has made the report possible. Thanks must also go to the personnel at Norsk Hydro in Oslo and Notodden, whose deep knowledge of hydrogen technologies and unstinting support with time and money under-writes the credibility of the conclusions and recommendations for action. The work was supported and sponsored by Energistyrelsen (Danish Energy Authority), Amaliegade 44, 1256 Copenhagen K 2

3 1. Executive Summary & Recommendations 1.1 Summary West Denmark has a large endowment of modern wind turbines, amounting to 2,374 MW capacity (2003), while peak winter load during 2003 was 3,746 MW. The Danish Government is committed to extend this capacity before 2010, to about 2,700 MW. High wind power output often occurs out of phase with demand and often unpredictably. Wind power output also ramps up and down continuously, sometimes by large amounts. The resulting imbalance is most often handled across West Denmark s inter-connections with Sweden (150 TWh), Norway (120 TWh) and Germany (500 TWh), all three systems being many times larger than West Denmark s (20 TWh). In addition, because half of Sweden s and all of Norway s power plants are hydro, there is an excellent match between wind and fast responding hydro, from an overall operating and grid balancing point of view. However, when built, the wind capacity in , will be roughly equivalent to the export capacity of all West Denmark s inter-connectors. These may become bottlenecked at times of high wind turbine output. The inter-connectors themselves, cannot be relied upon all the time. There was an extended, 5-month outage of the 500 MW Skagerrak 3 inter-connector during 2003 (July thro December), preceded by another failure in one of the older Konti-skan connectors to Sweden in the winter of Measures are already being taken to reduce further risk of bottle-necking by changing the conditions under which the decentralized power stations operate and amending the law that forbids the use of electricity for heating at these power stations. Denmark s well functioning, district heating generation plants (CHPs) are in almost every town and village (1,656 MW in 560 units). Provided that the right market conditions can be created, West Denmark can use them to develop a transport hydrogen infrastructure, based on using over-flow wind energy, sooner and more economically, than possibly anywhere else on Earth. The high pressure, electrolysers, of the type studied and proposed in this report, can be delivered in unit sizes up to 3.5 MW. They are very fast acting, being capable of a ramping up and down from zero to full load in 200 milli-seconds and are therefore technically attractive to the power regulating market. This is expected to grow as wind capacity is added. Built in sufficiently large numbers, soon enough, these can partly address the foreseen inter-connector bottle-necking, and assist grid balancing and grid stabilisation. To develop an infrastructure that can reduce Denmark s total dependence on hydrocarbons for transport, which consumes 200 PJ per year, and produces about 11.5 million t/y of CO 2 emissions 1, is an enormous task, requiring decades of development time and still uncalculated but very large amounts of money. Energistyrelsen s terms of reference 2 required us to investigate the economy of constructing electrolyser systems at these decentralized power plants. The hydrogen would be stored and spiked into the natural gas that fuels the engines and turbines. The electrolysers would be upgraded to hydrogen filling stations as vehicles became available, locally, which are fueled by hydrogen. In the first instance, these are foreseen as local fleets, with high rates of utilization, such as buses, taxis, ambulances, delivery vans, etc. The use of hydrogen as a natural gas substitute in the power plants is envisaged as an intermediate application, prior to its adoption as a transport fuel (Danmarks Statistik) 2 EFP04 Journalnr.:

4 Around 5.5 TWh of wind energy will be produced in from West Denmark. If all of this were used to manufacture hydrogen, it would produce 1.3 billion Nm 3 of hydrogen with an LCV of 14 PJ. From this, it can be seen that existing wind energy can deliver a substantial fraction of West Denmark s transport needs when hydrogenpowered vehicles become available. The construction and development of an electrolyser system at Ringkøbing Fjernvarmværk, was pre-engineered and priced to test whether the intermediate use of hydrogen, as a natural gas substitute, could justify building and operating the electrolyser plants commercially, under present day market conditions. The calculations tested various ways to ensure that the hydrogen that would be generated would be from renewable energy sources and thus would not cause any incremental CO 2 emissions. In this case, special fiscal treatment might be justified. One reliable way to ensure this, is to document that the consumption of renewable electricity, by way of tradable "Renewable Energy Certificates" 3. When the European (CO 2 ) Emissions Trading System (ETS) begins next year, 2005 environmental externalities will be partly internalized in the electricity price. Everything else being equal this will increase the price of electricity to the benefit of renewable energy generators with no CO 2 emissions. However, no account of benefits from such trading could be used in our calculations, due to the lack of any reliable information about special tax treatment or ETS and likely CO 2 price levels. It was assumed that the electrolyser can bid successfully into the downward regulating market, reducing the price paid for energy by the average amount recorded in ELTRA s data base, of each year from 2000 thro The average, untaxed cost of electricity to the electrolyser, had it been able to bid, successfully, into the downward regulating market during 2000 thro 2003 was as follows Year Øre per kwh In addition, during the last, record, wet year, the average price for West Denmark was 12.2 øre/kwh. Cost of Hydrogen, DKK/GJ (6% IRR Capital Employed) Cost of Hydrogen, DKK/GJ, (12% IRR on Capital Employed) Electricity cost after downward regulating deduction Electricity cost after downward regulating deduction Cost of electricity, øre per kwh Power gas price at 1.5 kr/nm3 + kr 0.78 tax Electricity Cost, øre/kwh Power gas price at 1.5 kr/nm3 + kr 0.78 tax LHV GHV LHV GHV The results show that it is not feasible to displace power station gas with hydrogen, even when that gas is taxed and the hydrogen is not. Taxed gas costs the power station DK 57/GJ while tax-free hydrogen needs a sales price in the range of DKK 150/GJ 4. This is more due to the capital costs of plant constrained to run about half the year. On the other hand, Danes are paying (without excessive complaint) DKK 250/GJ for transport fuel when they pay DKK 8 per liter for petrol. Of course, about 75% of this is tax 5. 3 Peter Jørgensen, ELTRA 4. These calculations are explained in the Chapter 5. They are based on a build up of 100 MW of capacity, constructed from 2005 thro 2015, all paid off by 2030, the replacement of cell membranes every ten years and a utilization rate of 4200 h/y. The cost of electricity to the electrolysers is assumed to be tax-free. 5. The price of gasoline at sea, during July, 2004, was about $450/t or about $10/GJ, DKK63/GJ 4

5 Therefore, if the project is to advance further, on a commercial basis, requiring no public subsidy, the price paid for hydrogen must reflect its value as a high fraction of the price of taxed transport fuel. Special fiscal arrangements will need to be developed to encourage this. This will also probably require that companies experienced in and motivated by the retailing of transport fuel become involved 6. The costs shown demonstrate that its intermediate use as power station fuel will require that the host CHP be compensated for consuming a more expensive fuel. 6. For example, Shell, BP and Total are involved in the ownership of prototype hydrogen filling stations. There are 69 such filling stations listed at 5

6 1.2 Fuel Security Energistyrelesen, 2004 Hydrocarbons are responsible for close to 100% of Danish transport fuel; transport fuel is currently the source of 18%, or 11.5 million t/y of Danish CO 2 emissions and rising. In every other sector, overall Danish CO 2 emissions are falling, although emissions from the power sector rose, during , due to the drought in Scandinavia. Danish oil production is likely to peak in 2005 and decline thereafter. Gas production is seen as stable for some years more but gas resources are also finite. Oil and gas production is already in decline in the UK sector of the North Sea while oil production is also, probably, in permanent decline in the Norwegian sector. Production, Gboe/a 50 NGLs 40 Association for the Study of Polar Oil Peak Oil, Deep Water Heavy 20 Conventional Leif Magne Meling, Statoil, presentation to WPC, Dec, 2003 During this decade, Europe will become even more dependent than it already is, on oil and gas from outside Europe, partly alleviated by a modest (by World standards) supply of gas from Norway. After 2020, it is foreseen that almost all of Europe s oil and gas will come from outside its borders. Europe will have to compete with other consumers, especially the USA, the Far East and the fastdeveloping Indian sub-continent, for these supplies, which may become expensive and also subject to disruption. In an unprecedented break with its past, Oil and Gas Journal, the oil industry s most influential source as regards hydrocarbon supply and demand, started in August, 2003 and continues to run, a most interesting (alarming) series of articles on the socalled peak oil debate 7. Critics parody the Peak oil argument as a simplistic claim that we are running out of oil. This indeed is ultimately true, but it is a profound misunderstanding of the case being made. Peak Oil proponents 8 have developed various oil production models based on the fact that the World s oil industry has failed, since 1992, to find new conventional oil in the quantities needed to replace such low cost oil that is being consumed. Using advanced oil field practice, they point to the strong likelihood that unless vast new resources are soon found and quickly developed, World demand will shortly overtake production and that production will decline rapidly and permanently thereafter. 7 Article search at for peak oil returned 1000 results on 22 July, Association for the Study of Peak Oil (ASPO), at 6

7 There is only a small difference in the estimated date for when peak oil is likely to occur. So-called pessimists like Colin Campbell, founder of ASPO, may be right in suggesting that the present oil supply bottleneck demonstrates that we are seeing the beginning of the peak, now. Optimists, like Mr. Meling suggest that while there is a scant hope of much new oil being found, better management of existing reserves may enable production to keep on growing for perhaps a further years. Although not yet acknowledged publicly by the international agencies, many oil industry executives and insiders 9 are acknowledging that an early peak oil scenario is more realistic than their officials are prepared to admit for the public record. The issue was examined in some detail during December 2003, at a conference organized by the Danish Board of Technology and the Society of Danish Engineers in Copenhagen. Dr Klaus Illum, in the form of a book, wrote the report prepared for the conference 10. Dr. Illum has written the first chapter of this Report. In the short term, the issue will not be the physical supply of hydrocarbons but their cost. We simply do not know what the price of oil and gas will be when demand begins to exceed supply. Demand growth is likely to slow. May be it will decline as it did twice already, in 1973 and 1981, when prices spiked in response to (politically motivated) supply constraints. Since 1981, knowledge about the Earth s hydrocarbon reserves has grown enormously, unimpeded by Iron Curtain politics and aided by oil field techniques that were unimaginable in It is probably justified to say that such reservoir knowledge, both about frontier areas and especially in mature oil provinces is close to the limit of what can be known. When the energy market realises that there is a pending physical limit in the supply of hydrocarbons, at an affordable price, the only reasonable certainty is that prices will be highly unstable, and with time, escalate to a new plateau represented by the much higher cost of producing environmentally and technically acceptable liquid fuels from oil shale, tar sands, bitumen and coal and the delay in reaching that change-over. When this happens, there will be a step-change upward in specific CO 2 emissions. That is also likely to impact price, if global warming remains an international concern. The expected price increase of fossil derived fuels, driven by increased World demand, even affecting coal in , will make alternatives, such as wind power and energy storage more economic. US cents/000 cu ft January 1998 March 1998 May Supply unconstrained US Gas Prices, July 1998 September 1998 November 1999 January 1999 March 1999 May 1999 July 1999 September 1999 November 2000 January 2000 March 2000 May 2000 July EIA, July, September Power Sector 2000 November 2001 January 2001 March 2001 May 2001 July 2001 September Commercial Sector Supply constrained 2001 November 2002 January 2002 March 2002 May 2002 July 2002 September 2002 November 2003 January 2003 March 2003 May 2003 July 2003 September 2003 November The current behaviour of the US gas market, during recent, relatively mild, supply constraint, gives some guidance about future global energy price volatility when all HC supply becomes physically constrained. Led by the US, there is intensive effort to develop a hydrogen economy. Every major motor manufacturer and most large energy companies are involved in this effort, 9 Leading among these is Matthew Simmons, an energy adviser to President Bush, 10 Oil-based Technology and Economy - Prospects for the Future Teknologirådet, København og Ingenieur Foreningen 7

8 A significant fraction of the future vehicles will be energized by hydrogen fuel cells whose ultimate cost will depend on the volume of sales achieved. Most of the World s effort into hydrogen manufacture is based on the gasification of coal or, most often, the reformation of natural gas. The flaw of depending on natural gas should be clear, by now. The feedstock is likely to become both expensive and scarce as the present efforts to rep. Gas reformation produces a mole of CO 2 for every two moles of H 2, requiring that the CO 2 be sequestered in one way or another. The process degrades the original energy resource by up to 20% and the need to sequester the resulting CO 2 is rarely costed, let alone high-lighted by the proponents of gas reformed hydrogen. West Denmark, almost alone in the World, possesses a significant surplus of renewable energy capacity. The investment costs for wind turbines are substantial, but the short-term marginal generation cost of wind energy is close to zero, making electricity generation from wind turbines marginally profitable even in periods with very low electricity prices. The substantial share of non-controllable and only partly predictable wind power results in highly fluctuating electricity spot prices. In this system - if in any - the production and use of hydrogen by electrolysis could become a truly sustainable and competitive option. The whole of Denmark uses roughly 200 PJ of energy per year in its transport system. Of this, about 194 PJ comes from hydrocarbons, the remainder being electricity for trains. If, as widely reported, hydrogen vehicle consume half the specific energy of the internal combustion engine, the energy of the hydrogen needed to replace today s use of hydrocarbons would require roughly 40 TWh of electricity. The output of wind energy from West Denmark s generators during 2003 was 4.4 TWh. This is a small but significant fraction of the long-term goal of achieving an emission-less transport fleet in Denmark. 1.3 SWOT Analysis (strengths, weaknesses, opportunities, threats) Strengths The development of a real hydrogen infrastructure needs to be started well ahead of the coming crisis in the supply of low cost hydrocarbons. This project contains all the features that are needed to address the strategic threat posed by the coming peak oil crisis. Denmark already has already made the investment in surplus renewable energy to generate significant quantities of hydrogen for transport applications. Denmark s investments in widely distributed, decentral, power stations create the possibility for a national infrastructure at locations where the capital cost will be minimized by the already installed distribution equipment... where there is a high qualified staff The renewable power is available and mechanisms are in place to secure that hydrogen will only be generated from this renewable power, whether that is from hydro or wind. At the times when most renewable energy is available, the spot prices are low, ensuring that the energy cost of hydrogen will be minimized. The availability of renewable energy should ensure a capacity utilization of at least 4,200 h/y and this utilization could be better in many years. Built in sufficient numbers, soon enough, the participation of large numbers of electrolysers in the market should have the effect of balancing the grid and off-setting inter-connector congestion. The study has received help and advice from many Danish companies and institutions who generally favour the implementation of its recommendations. It is likely to be a politically popular development Weaknesses The hydrocarbon shortage may not materialize, endangering the quality of the investment West Denmark may have sunk in alternative energy sources. 8

9 It still might be shown that so-called global warming is not occurring on the scale widely publicized and/or that the Kyoto process is in any case the wrong response, in which case the reduction of CO 2 from the transport sector will cease to be a public objective. Even if both the foregoing objections are discounted, better and cheaper ways may be found for manufacturing hydrogen for the transport sector, taking away the first mover advantage which the scheme s early implementation might otherwise have given Denmark. The transport industry may abandon its quest to develop hydrogen fueled vehicles Opportunities National: If none of the weaknesses materialize, then Denmark has the chance to lead the World in the development of a hydrogen infrastructure, the commercialization of hydrogen fueled vehicles and the development of associated technologies and services. Industrial: The industrial companies involved in the project can benefit from first mover advantage in the development and sale of commercial equipment, ahead of global rivals. Regional: Ringkøbing Amt is already the capital of Danish wind and a focal area for wind generator development. The development of a regional infrastructure for transport hydrogen and its use is likely to attract interest and attention from all over the World, in turn, attracting entrepreneurs, manufacturers and service companies wishing to benefit from the World s first renewables based hydrogen infrastructure. International: Develop links with other pre-commercial hydrogen infrastructures, like the California Fuel Cell Partnership, the Norwegian Hydrogen Council, The European Fuel Cell Technology Platform etc. Threats The first mover advantage may already be lost to the The California Fuel Cell Partnership 11 which is committed to promoting fuel cell vehicle commercialization as a means of moving towards a sustainable energy future, increasing energy efficiency and reducing or eliminating criteria pollutants and greenhouse gas emissions. California does not have a surplus of renewable electricity. Indeed, it has barely enough power for its peak needs. For those genuinely wishing to see that the hydrogen economy will not be developed from a platform of fossil fuel, the Californian effort, simply by being successful and spectacular, may divert attention and resources away from the more serious effort to develop hydrogen from renewable resources. The Danish Treasury obtains a large benefit from the taxation of petrol and electricity. During 2003, the revenues were 12 o Petrol: DKK 10.4 billion o Electricity: DKK 8.3 billion Because the project will require special fiscal treatment to succeed, its success might be misunderstood as endangering important revenues for the Danish Government 13. The development of sufficient renewable energy resources to impact Denmark s almost total dependence upon hydrocarbons for transport may be seen as too ambitious and too large for a small country like Denmark to undertake itself and the project shelved for these reasons. 1.4 Recommendations As the first part of the next stage of this work, we propose that we study the construction of a significantly sized demonstration unit, with an up-grade to a commercially operating hydrogen filling station and the launching of a local, hydrogen transport system. The study will require the active support of vehicle manufacturers and at least one energy company that is motivated by the long term development of the market for delivering transport hydrogen. In order to for the project to attract the considerable investments implied by this ambitious plan, it will be necessary for the Danish Government to ensure that the investing participants will receive sufficient fiscal incentives for the project Danmarks Statistik, In fact, the proposed scale of the project, over a period of ten years, would hardly be noticeable to tax revenues. If, because of its success, World events etc. the pace of development were to increase, the Government can always re-impose taxes at a level which would not destroy investor expectations. 9

10 to succeed commercially. Therefore, prior to the study commencing, Energistyrelsen will need to obtain the willingness of the Danish Government to consider granting the demonstration project such fiscal incentives. If the study shows that these conditions can be met and that a sufficient number of new partners are willing to support the project with the means necessary for its success, we recommend that the 500 kw prototype, high-pressure, unit presently (2004) being tested by Electrolysers A/S be studied as suitable for this purpose. If it is, a negotiation should be opened with Electrolysers A/S to design, cost and install a complete, working, demonstration plant at Ringkøbing Fjernvarmværk. The demonstration would be in two parts. FIRST STAGE (2005) 1. The eventual ability of the electrolysers to bid competitively into the regulating market 2. Using energy purchased with renewable energy certificates 3. Thus proving that a Nation-wide network of electrolysers can deliver hydrogen with low energy costs in the long term 4. The ability of a large network of electrolysers to assist in grid frequency stabilisation The use of hydrogen spiked into large gas engines in a manner that is flexible and economic, without derating The use of locally available hydrogen to demonstrate a wider use of stationary, PEM fuel cells of the type built by IRD A/S The other, possible synergies obtainable from an electrolyser operating together with a local power plant, including other business 17 SECOND STAGE (2006) 1. The upgrade of the electrolyser to a hydrogen filling station, on a commercial basis 2. The identification of pre-commercial and commercial, hydrogen-powered vehicles suitable for operating in the local area, having a high rate of utilization 3. Assessment of the costs of operating hydrogen powered vehicles, served by a hydrogen filling station on a commercial basis Development of fiscal rules for extending the use of hydrogen within Ringkøbing Amt, laying down the foundations for encouraging the development of a hydrogen infrastructure on a Nation-wide basis A novel, research related development 15. A novel, research related development 16. A novel, research related development 17. Possible research related developments 18. A novel, research related development 19. A novel, research related development 10

11 2. Strategisk teknologiudvikling ved afslutningen af den billige olies æra Sålænge produktionen kunne følge med efterspørgslen kunne OPEC - d.e. Saudi Arabien - holde råolieprisen indenfor det tilstræbte bånd på $ per tønde. Den nuværende råoliepris omkring $ 40 per tønde betyder, at markedet er anstrengt, og med en forbrugsstigning på mere end 2% om året bliver det ikke mindre anstrengt i de kommende år. Vi er således inde i slutfasen af den billige olies æra. En sammenhængende teknologisk udviklingsstrategi for vores energisystem i dets helhed bør derfor stå højt på den politiske dagsorden. Centralt i udformningen af en sådan strategi står spørgsmålet om, hvorvidt brint som energibærer til transportmidler skal integreres i de nye energisystemer. I december 2003 afholdt Teknologirådet og Ingeniørforeningen i Danmark (IDA) en international konference i København om Oil Demand, Production and Cost - Prospects for the Future. Som baggrundsmateriale for konferencen blev der fremlagt en foreløbig udgave af udredningen Oil-based Technology and Economy - Prospects for the Future. Den endelige udgave, med tilføjelser af yderligere information, som konferencens talere formidlede, blev udgivet af Teknologirådet og IDA i april 2004 ( og ). Udredningen fremdrager den helt afgørende betydning, olien som et unikt, lethåndterligt brændstof med stor energitæthed har haft for den civil- og militærteknologiske udvikling og dermed for udviklingen af fysiske infrastrukturer og hele den økonomiske udvikling i det 20. århundrede, for på den baggrund at formidle erkendelsen af de altomfattende konsekvenser af en fortsat stigning i det globale olieforbrug lige indtil olieproduktionen topper og derpå begynder at falde. Nye oplysninger, fremkommet i artikler, der er offentliggjort, efter udredningen var færdiggjort, accentuerer den situationsbeskrivelse, der gives i udredningen. Det påpeges i udredningen, at den optimisme, som kommer til udtryk i den hyppigt fremførte sentens, at Stenalderen sluttede ikke på grund af mangel på sten, og olie-alderen vil ikke slutte på grund af mangel på olie (sidst fremført af Institut for Miljøvurderings direktør Bjørn Lomborg i DR1 Søndagsmagasinet d. 16. maj), forudsætter troen på, at nye, ikke-oliebaserede teknologier i stort omfang vil erstatte benzin-, diesel- og jetmotorer såvel som oliefyr før oliemangel bringer verdensøkonomien i krise. Denne tro bestyrkes imidlertid ikke af den kendsgerning, at olieforbruget fortsat stiger, nu langt hurtigere end hidtil forudsat i det Internationale Energi Agenturs (IEA) prognoser. IEA forudsatte i World Energy Investment Outlook 2003 (November 2003) en stigning i det globale forbrug på ca. 1.6% p.a. frem til IEA forudser nu en global forbrugsstigning på i gennemsnit 2 mio. tønder/dag eller ca. 2.6% i indeværende år (New York Times, 14. maj), en stigning som hovedsageligt skyldes et økonomisk opsving i USA og en meget stærk vækst i Kina s forbrug (p.t % p.a. imod IEA antagelse om 3% p.a. i gennemsnit frem til 2030). Det betyder, at verdensøkonomien bliver stadigt mere afhængig af tilstrækkelige olietilførsler - i takt med, at reserverne udtømmes. Selvom det er åbenbart, at en krise kun kan afværges ved at sørge for at behovet for olie topper før olieproduktionen topper, er der ingen tegn på politisk erkendelse af denne for verdensøkonomien afgørende betingelse. Tværtimod bliver samfundene overalt i verden mere og mere afhængige af olie - flere benzin- og dieselbiler, mere flytrafik, flere motorveje, flere lufthavne. Problemet vokser sig større og større efterhånden som tiden skrider frem mod det tidspunkt, hvor olieproduktionen ikke længere kan følge med. Den tid, der er tilbage bliver afkortet i takt med den øgede forbrugsstigning. Og der er stadigt flere tegn på, at der er tale om år, ikke årtier. Produktionskapaciteten De meget store fund af lettilgængelige oliefelter i 1960'erne og fundene i Nordsøen i 1970'erne og 1980'erne har hidtil gjort det lukrativt for de nationale og private olieselskaber at øge produktionen i takt med forbruget. Selvom råolieprisen har været svingende, har deres investeringer haft relativt korte tilbagebetalingstider. Reservetilvæksterne har været tilstrækkelige til at kompensere for forbruget, sådan at forholdet mellem reserver og årligt forbrug (R/P forholdet) op igennem 1990'erne har ligget nogenlunde konstant på omkring 40 år. IEA forventer imidlertid, at hvis forbruget stiger med 1.6% p.a. - hvilket som sagt er en betydeligt mindre stigning, end den der i dag er udsigt til - vil R/P forholdet i 2030 vil være faldet til kun 20 år (World Energy Investment Outlook 2003), hvilket indikerer, at produktionen til den tid vil være faldende. Der er således også ifølge IEA med udgangen af 1990'erne sket en drastisk ændring af situationen. Der skal større og større investeringer til for at tilvejebringe den produktionsstigning, der skal til for at dække det voksende forbrug. For at dække en forbrugsstigning på 2% p.a. frem til 2030 skal produktionskapaciteten forøges med 66%. I mange områder, herunder Nordsøen, er produktionen imidlertid allerede i tilbagegang. Produktionen i USA er blevet 11

12 halveret, efter at den toppede i I 2002 kom 29% af den globale olieproduktion fra områder, hvor produktionen falder med skønsmæssigt ca. 4% p.a. (Petroleum Review, April 2004). Med en forbrugsstigning i de kommende år på 2% p.a. (0.6% mindre end den forventede stigning i år) betyder dette, at produktionen i de områder, hvor der endnu er mulighed for øget produktion, skal forøges med 4.5% om året, dvs. at deres produktion skal forøges med 57% i løbet af de næste 10 år. Det er overordentligt tvivlsomt, hvor vidt dette kan lade sig gøre. Og hvis det er muligt, er det ikke sikkert, at olieselskaberne i tide vil foretage de investeringer, der skal til for at opnå en så stor vækst i produktionen. De private såvel som de nationale olieselskaber har til formål at tjene penge - ikke at sikre tilstrækkelige forsyninger til at dække en hurtigt voksende efterspørgsel til en lav pris. Mellemøsten Det er en helt afgørende forudsætning for en sådan produktionsstigning, at produktionen fra de gamle, store oliefelter i Mellemøsten - især i Saudi Arabien - kan forøges eller i hvert fald ikke begynder at falde. IEA forudsætter således i World Energy Outlook 2002, at produktionen i OPEC landene i Mellemøsten vokser med 3% p.a. fra 2000 til 2030, sådan produktionen stiger fra 21 mio. tønder/dag i 2000 til 51 mio. tønder/dag i Der hersker imidlertid begrundet tvivl om, hvorvidt denne forudsætning holder. I oliefeltet Yibal i Oman, hvor trykket i 30 år blev opretholdt ved injektion af vand, og hvor der i 1990 blev udlagt vandrette boringer, indtrådte der i 1997 et helt uventet fald i produktionen, og en kraftig indsats med de nyeste udvindingsteknikker har ikke kunnet bremse faldet (Petroleum Review, April 2004). Der er tegn på, at det samme kan ske i verdens største oliefelt, Ghawar feltet i Saudi Arabien, hvor trykket også opretholdes ved vandinjektion, og der også i stor udstrækning er udlagt vandrette boringer. Da produktionen i Ghawar toppede i 1998 var vandindholdet i den udvundne olie ca. 50%, og er i dag nærmere 60% (ASPO Newsletter, May 2004, Ikke desto mindre udtalte den Saudi Arabiske olieminister i et interview med Oil&Gas Journal (April 5, 2004), at Saudi Arabien er i stand til at forøge sin produktionskapacitet fra den nuværende 10.5 mio. tønder/dag til 15 mio. tønder/dag, og at en kapacitet på mio. tønder/dag vil kunne opretholdes i endnu 50 år. Dermed imødegik han den analyse Matthew Simmons, præsident for Simmons&Company, verdens største energi-finansieringsbank, fremlagde på en konference afholdt af Center for Strategic and International Studies, Washington DC, d. 24. februar Simmons gjorde gældende, at landene Mellemøsten ikke længere vil være i stand til at stabilisere olieprisen ved øge deres produktion, når produktionen i andre lande falder midlertidigt (Venzuela, Irak) eller varigt (Nordsøen bl.a.). Simmons frygter, at vi kan komme til at opleve et fald i Mellemøstens produktionen på 30-40% indenfor de næste tre til fem år. I en artikel i Oil&Gas Journal (April 26, 2004) skriver A.M. Samsam Bakhtiari, Directorate of the Iranian National Oil Company, at hans modelberegninger tyder på, at den globale olieproduktion vil toppe omkring , og han citerer det Saudi Arabiske olieselskab Saudi Aramco s vicepræsident for olieefterforskning, Abdullah Al- Seif, for i December 2003 at sige, at der (i Saudi Arabien) årligt skal tilvejebringes ny produktionskapacitet på 800,000 mio. tønder/dag for at opretholde den nuværende produktion på 10 mio. tønder/dag, idet produktionen i de eksisterende felter falder med 5-12% om året. Der er således flere professionelle analyser, der indikerer en drastisk revision af de hidtidige prognoser for Mellemøstens olieproduktion. Det er ikke sandsynligt, at den af IEA forventede stigning på 3% om året vil blive realiseret. Hvis det kun lykkes at fastholde produktionen på det nuværende niveau, vil den globale efterspørgsel hurtigt overstige den globale produktionskapacitet. Den øvrige verden Der findes stadigt nye oliefelter rundt omkring i verden. I udgjorde nye fund i gennemsnit ca. 10 mia. tønder/år, medens forbruget androg ca. 27 mia. tønder/år. Der er på dybt vand - ned til 3000 meters dybde - i den Meksikanske Golf, udfor Brasilien, langs Afrikas vestkyst og omkring Australien fundet reserver på mia. tønder, og Deutche Bank skrev i en rapport i 2002, at olie på dybt vand er olieindustriens mest lovende reservepotentiale. Danmarks og Grønlands Geologiske Undersøgelser (GEUS) har på grundlag af sandsynlighedsberegninger udført af US Geological Survey udtrykt forventninger om, at der ved Østgrønland kan findes 47 mia. tønder. Spørgsmålet er om og hvornår, der er olieselskaber, som vil investere i efterforskningen. Alt i alt kan reserverne på dybt vand måske komme op på mia. tønder i løbet af de næste år, svarende til det globale forbrug i 3-5 år. Da det vil tage mange år at frembringe denne oliemængde, vil disse fund ikke væsentligt 12

13 udskyde det tidspunkt, hvor den globale olieproduktion topper, men kun kunne dæmpe det efterfølgende fald en smule. De centralasiatiske lande omkring det Kaspiske hav er ét område, hvor der måske i de kommende år kan opnås en produktionsstigning svarende til den ovenfor nævnte stigning på gennemsnitligt omkring 4.5% p.a., der skal til for at kompensere for den faldende produktion i andre områder. IEA anslår en stigning på 4.1% p.a. frem til Men da udgangspunktet i 2000 er relativt lavt, ca. 1.6 mio. tønder/dag, når produktionen under IEA s forudsætninger kun op på 5.4 mio. tønder/dag i Ifølge IEA s fremskrivninger i World Energy Outlook 2002 vil den samlede olieeksport fra Rusland og de centralasiatiske republikker i 2030 andrage ca. 8 mio. tønder/dag, mod ca. 46 mio. tønder/dag fra Mellemøsten. Rusland og Centralasien vil således ikke kunne kompensere for en stagnation eller et fald i produktionen i Mellemøsten. Ikke-konventionel, syntetisk olieproduktion Hvis den potentielle syntetiske olieproduktion på basis af bitumen fra tjæresand, olieskifer, kul og naturgas medregnes i opgørelsen af verdens oliereserver, vil der være olie nok til at dække et stigende forbrug mange år frem. Et fortsat stigende olieforbrug kombineret med en kraftig forøgelse af CO 2 -udslippet ved syntetisk olieproduktion indebærer imidlertid, at bestræbelserne på at begrænse CO 2 -udslippet definitivt må opgives. Af de store forekomster af tjæresand i Canada og Venezuela kan der udvindes bitumen, som ved hydrolyse med brint fra naturgas kan omdannes til råolie. Det Canadiske potentiale anslås til 174 mia. tønder. For at udvinde denne bitumen og omdanne den til råolie skal der imidlertid bruges en meget stor mængde naturgas - svarende til omkring 80% af de samlede nuværende naturgasreserver i USA og Canada, hvis der bruges naturgas til at dampe bitumen ud af tjæresandet. Under alle omstændigheder andrager energiforbruget til produktionen 25-30% af energien i den udvundne olie. Dertil kommer et meget stort vandforbrug, som sænker grundvandsspejlet i store områder omkring minerne. Ved produktion af syntetisk olie på basis af naturgas (GTL: Gas to Liquids) forbruges ca. 45% af den tilførte naturgas i produktionsprocessen. IEA anslår i World Energy Outlook 2002, at olieproduktion fra tjæresand og naturgas i 2030 vil andrage henholdvis 9.9 og 2.3 mio. tønder/dag, dvs. at den ikke-konventionelle, syntetiske olieproduktion vil udgøre i alt 12.2 mio. tønder/dag eller ca. dobbelt så meget som der i dag produceres i Nordsøen. Ved en forbrugsstigning på 2% p.a. vil denne forøgelse af den ikke-konventionelle produktion kunne dække 22% af forbrugsstigningen. Vel at mærke under den forudsætning, at der ikke gennemføres nogen begrænsninger af CO 2 -udslippet. IEA s fremskrivninger indebærer en forøgelse af det samlede globale CO 2 -udslip på 60-70% frem til Nye udvindingsteknologier Teoretiske analyser af den fremtidige udvikling af olieproduktionskapaciteten som f.eks. den af EUkommissionen fremlagte rapport World energy, technology and climate policy outlook (WETO, 2003) bygger på den antagelse, at kapaciteten vil blive forøget i takt med den stigning i råolieprisen, som sker, når efterspørgslen overstiger kapaciteten. Ikke så meget fordi øget efterforskning vil føre til flere nye fund, men først og fremmest fordi det bliver økonomisk attraktivt investere i avancerede udviklingsteknologier, som gør det muligt at forøge udvindingsgraden i eksisterende oliefelter. Den amerikanske oliegeolog M. King Hubbert, der opnåede berømmelse ved i 1956 at forudsige, at USA s olieproduktion ville toppe i 1970, hvilket den gjorde, sagde i 1982: If oil had the price of pharmaceuticals and could be sold in unlimited quantities, we probably would get it all out except the smell. I praksis er der imidlertid grænser for, hvor stor en del af olieforekomsten (oil in place), der kan udvindes. Og som nævnt ovenfor (Yemen, Saudi Arabien) kan opretholdelse af produktionen ved hjælp af avanceret udvindingsteknologi (vandrette boringer, opretholdelse af trykket ved vandinjektion) føre til bratte, geologisk bestemte produktionsfald. De teknologier, der anvendes til at forøge udvindingsgraden (under fællesbetegnelsen EOR: Enhanced Oil Recovery), bringes i anvendelse, når produktionen fra et oliefelt begynder at falde. I de fleste tilfælde opnås ikke en forøgelse af produktionskapaciteten, men kun en opbremsning af produktionsfaldet og således en øget produktion over oliefeltets levetid efter at produktionsfaldet er indtrådt - med mindre der som i det ovenfor beskrevne eksempel 13

14 (Oman) indtræder et uventet, brat produktionsfald. Risikoen for sådanne bratte fald kan imidlertid i almindelighed forventet at være mindre, når trykket opretholdes ved injektion af gas eller CO 2, end når det sker ved injektion af vand. Den gennemsnitlige udvindingsgrad for verdens oliefelter er i dag ca. 30%, varierende over et interval fra 3% til 80%. Francis Harper (Exploration consultant. Former Manager, Reserves and Resources at BP, UK) vurderer på grundlag af hidtidige erfaringer, at det kan være muligt at forøge den gennemsnitlige udvindingsgrad med 1/6% eller højst 1/4% om året. Dvs. at det vil tage mellem 4 og 6 år at forøge den gennemsnitlige udvindingsgrad med 1%, og derved opnå en global reservetilvækst på ca. 33 mia. tønder, svarende til godt ét års forbrug på det nuværende forbrugsniveau. Den reservetilvækst, der kan opnås ved at forøge udvindingsgraden, må derfor forventes at ske i en langsom takt og således at medvirke til at dæmpe det årlige produktionsfald efter at den globale produktion er toppet. Den vil ikke væsentligt udskyde det tidspunkt, hvor produktionen topper. Strategisk teknologiudvikling Det fremgår af det foregående, at vurderinger af olieforsyningssituationen i de kommende år er overordentligt usikker, men at en stagnation i den globale olieproduktionskapacitet efterfulgt af et permanent fald, muligvis afbrudt af kortvarige stigninger, ikke bør komme som en overraskelse. Den seneste stigning i råolieprisen til mere end $ 40 per tønde på det amerikanske marked skyldes dels en mindre formindskelse af OPEC-landenes produktionskvoter, dels genopfyldning af olielagre samtidigt med begyndelsen af den amerikanske feriesæson, hvor benzin- og dieselforbruget stiger. Det kan imidlertid vise sig, at det hurtigt voksende olieforbrug i USA, i Kina og i andre asiatiske lande medfører, at råolieprisen forbliver høj og måske stadigt stigende. Det vil vise sig i løbet af de næste år. Den alvorlige risiko opstår, hvis råolieprisen igen falder til mindre end $ 30 per tønde og forbliver på det niveau i flere år, sådan at de økonomiske vilkår for udvikling af nye teknologier til erstatning af de oliebaserede igen forringes. Sålænge olieprisen er lav bliver den globale økonomi stadigt mere teknologisk afhængig af billig olie. Når olieprisen så igen stiger, måske til $ 50, 75 eller 100 per tønde, bliver den økonomiske recession i de olieimporterende lande endnu kraftigere, end den ville være på det nuværende forbrugsniveau. Et land, som under disse usikre vilkår, hvad angår råolieprisens udsving i de kommende år, formår at udvikle teknologier, som formindsker samfundsøkonomiens olieafhængighed og nedbringer CO 2 -udslippet, vil opnå åbenbare fordele både i kraft af det teknologiske forspring, der således tages, og i kraft af en mindre sårbarhed, når den globale økonomi skal tilpasse sig høje oliepriser. Det bør derfor vække til eftertanke, at forventninger til økonomisk vækst først og fremmest baseres på forventninger til vækst på højteknologiske områder som bioteknologi og IT-teknologi, medens udvikling af de basale energiforsyningsteknologier og infrastrukturer, som udgør grundlaget for samfundets funktioner på alle områder, og som rummer store potentialer for eksport af viden og teknologi, ikke har opnået en tilsvarende høj prioritet. Der kan ikke herske tvivl om, at nye energisystemer, der kan dække samfundets behov med et stærkt reduceret forbrug af fossile brændsler - specielt olie - og dermed ned et væsentligt formindsker CO 2 -udslip, vil være overvejende elektriske og elektrokemiske systemer, hvori transportmidler indgår som integrerede enheder. Disse systemer vil på energikilde- og forsyningssiden være karakteriseret ved relativt store investeringer i infrastrukturkapital (vindmøller, solceller, elektrolyseanlæg til brintproduktion, brintlagrings- og distributionsanlæg til forsyning af køretøjer, naturgasdrevne brændselscelle kraftvarmeværker i små og større størrelser, varmepumpeanlæg, m.fl.) og relativt små variable driftsomkostninger. På forbrugssiden skal der gennemføres omfattende energieffektivitets-forbedringer, både hvad angår bygningers varmeforbrug, el-apparater og transportmidler. Vores nuværende energisystemer er blevet til under økonomiske vilkår, som er bestemt af lave priser på fossile brændsler, især lave olie- og gaspriser. Det nuværende enorme fossile brændselsforbrug er således bestemt af de energiforsyningsteknologier, de bygningskonstruktioner, de el-apparater, de transportmidler og de fysiske infrastrukturer, det under disse omstændigheder har været økonomisk hensigtsmæssigt eller muligt at bringe i anvendelse. Der er ikke tale om at erstatte de mængder af fossile brændsler, der i dag forbruges, med vedvarende energikilder. Det er i praksis umuligt. Der er tale om at udvikle nye energisystemer, som er økologisk og økonomisk bæredygtige under de nye økonomiske vilkår, der bestemmes af fremtidige høje olie- og naturgaspriser. Det kan ikke med nogen sikkerhed forudsiges, hvad råolie- og naturgasprisen vil være om ét, to eller ti år. 14

15 Men hvis olieprisen forbliver lav indtil den globale olieproduktion topper, hvilket efter al sandsynlighed vil ske inden 2025, så vil de investeringer med lang levetid, der betinget af de lave priser foretages i perioden indtil priserne stiger, være fejlinvesteringer, som yderligere forstærker den økonomiske recession, der afstedkommes af prisstigningerne. I denne slutfase af den billige olies æra bør udformning af en sammenhængende teknologisk udviklingsstrategi for vores energisystem i dets helhed derfor stå højt på den politiske dagsorden. Centralt i udformningen af en sådan strategi står spørgsmålet om, hvorvidt brint som energibærer til transportmidler skal integreres i de nye energisystemer. 15

16 3. Danish Wind Carpet Behaviour, Challenges & Solutions Recent Wind Development, West Denmark 3.1 Short Analysis Denmark built its wind capacity in order to substitute fossil fuels and meet its Kyoto obligations. Last year the wind carpet produced a record 4.36 TWh in West Denmark in a year with poor wind resources (77% of normal). MW estimate 3 TWh 2 1 It might be noted that fossil fuel consumption and CO 2 emissions have also risen during the last 2 years, although for different reasons. MWh per h 0 2,500 2,000 1,500 1, ,000-1,500-2,000-2,500-3, capacity, MW Output, TWh Wind - Net Exchange, January, Wind production, MWh per h Net exchange, MWh As a consequence of the energy agreement in March, 2004, wind capacity will grow by a further 700 MW from now until 2008, mostly in West Denmark 20. It is axiomatic that wind power is produced when the wind blows, not when power is demanded. In the absence of solutions that can store energy 21, the present arrangement is that the electricity, surplus to the immediate needs of Denmark, flows to the much larger power systems of neighbours. While it is obviously not possible to identify which electrons flowing though the system, originate in particular power plants, it is possible to review the data and look for patterns of system behaviour. 54 charts, such as January 2003, have been drawn between January 2000 and June Note the almost mirror reflection which occurs in many of these charts. These demonstrate that there is a clear relationship between wind carpet output and net power flows. When wind power enters the Danish system, there is usually a net flow from Denmark to Germany, Sweden and Norway. Some might say, in effect, that wind power is being exported When power flows from West Denmark to Norway and Sweden, if it is not immediately consumed, hydropower production is curtailed. It is not possible to say if it is cheap or not, that depends on the difference in spot prices between periods of storing and retrieving of energy In this way, Danish wind power is stored in the Scandinavian reservoirs and released when demand and price make it attractive for the hydro generator to release water for power production. Obviously the value added of this arrangement is usually enjoyed by the hydro generator. 16

17 140.0% 120.0% 100.0% 80.0% Wind as % Local Demand This is not surprising, as since 2002, quite often, due to wind capacity growth, Danish wind output exceeds Danish demand, often by large amounts. Since November 2002, large wind outputs have often resulted in zero price events, to the detriment of all Danish generators. 60.0% 40.0% 20.0% 0.0% -20.0% A dramatic example is shown in the chart (January 2003 Prices), when, despite record high prices in Nordpool, due to the lack of water in the reservoirs, there were frequent zero price events when the interconnectors were congested by excessive output in West Denmark. DKK/MWh January 2003 Prices Wind power alone was not the only cause of this effect. The conditions under which the decentralized power stations were originally planned and financed encouraged (and subsidized) maximum output, even when the spot price in the market was below the cost of fuel. The combined effect of so much power output at times of high wind output resulted in a deterioration of the generators prices from 2000 thro DK-West System During 1999 through the early part of 2002, Nordpool and West Denmark prices were well aligned. This is shown in the price duration chart. However, as capacity in both the decentral and wind sectors increased, all West Denmark spot prices declined relative to Nordpool s. 17

18 DKK per MWh (10.0) (20.0) (30.0) (40.0) MWh Spot Price Development with respect to Nordpool Price MW 1943 MW 2316 MW 2374 MW Wind Capacity Wind power prices were especially badly affected. The most negative effects of this for Danish windmill owners were disguised by a general rise in the price of power from But it is in the nature of wind power which is produced according to weather conditions, not power demand, that the market value of wind power will usually be less than the power produced when the market wants it. (50.0) (60.0) (70.0) Central Plant MWh price difference Decentral plant MWh price difference Wind Output MWh price difference This may change when externalities, like CO 2 emissions are internalized in the energy prices when CO 2 emissions begin to be traded in Measures Adopted to Counter Zero Price Events From January, 2005, all decentralized power stations larger than 10 MW, with a collective capacity of 758 MW, will operate according to market conditions. The effect of the decentral power plants going onto the market should result in the following effects: 1. Reduce excessive and wasteful power production 2. thus reduce unnecessary CO 2 emissions.. 3. free up interconnector capacity at times of high wind output, 4. prevent zero and ultra-low power price events Furthermore, on 27 May, 2004, an agreement was made with the Danish Government to change the law that effectively prevents the use of electricity to provide heat at Danish combined heat and power stations % 25.0% 20.0% Average Load Factor, 2000 thro 2003 This new arrangement is intended to increase the opportunistic use of electricity, at any time when the electricity price is very low. This is often simultaneous with a high wind production and the proposal is to make it attractive for generators to invest in and use resistance heaters and heat pumps at both central and decentralized power stations. 15.0% 10.0% 5.0% 0.0% West Denmark wind turbines Jan Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Therefore, some district heating can now be provided by electricity when power is cheap enough on the spot market to make it attractive to turn off thermal units. The pattern of wind production, during the last four years (Average Load Factor, ), shows that most wind is generated in the winter, when heat is most often required Jyllands Post, 28 May, 2004 and widely reported. The proposals for implementing this change are still being studied by the Government of Denmark. 23 From 2000 thro 2003, wind loads were especially high in June when district heating loads are usually very low 18

19 These two arrangements, combined, are highly cost effective and will almost certainly have a fast and beneficial effect on the so-called wind overflow problem and therefore for Danish Society 24. However, it must also be mentioned that: 1. A fraction of all district heat is lost in its transmission between the power station and its customers, creating an inevitable and significant waste of high tech wind power that might be better used directly by heat consumers. 2. If the heat were instead produced by heat pumps, which deliver 2 4 units of heat for every unit of power consumed, the objection to energy inefficiency is largely removed. However, the capital costs are much greater and their widespread use would have proportionally less effect on soaking up cheap power (MW). 3. There is little requirement for heat during the summer months, when the wind still blows. The average load factor of the West Danish wind carpet during June ( ) is actually equal to the average for the year. Furthermore, while both these simple arrangements may bring about large, short term, economic improvements for those generators not protected by subsidy, they do not address the challenges of pending hydrocarbon fuel shortages nor do they accelerate Denmark s preparation for a post-hydrocarbon economy. The demand for transport fuel, by contrast, is more or less independent of the season, making transport hydrogen from renewable energy an attractive option when hydrogen vehicles become commercially available. Eltra has recommended that the only reliable way to document the consumption of electricity generated from renewable energy is by way of tradable "Renewable Energy Certificates". Clearly, these can only be obtained for power that is truly renewable. In the next section, we assess whether, following the implementation of the measures just described, there will be enough available, CO 2 -free electricity to justify the investment in a hydrogen infrastructure? 24. In 2003, the PSO support for wind generators in West Denmark was DKK 1.8 billion. The value of the power exported during periods of very high wind loads, which can be attributed to wind generation, was DKK 0.78 billion, a negative flow of DKK one billion, paid by Danish consumers. 19

20 3.3 How much wind for CO 2 -free hydrogen production? MWh per h MWh per h ,000 2,000 1,000 - (1,000) (2,000) (3,000) Load Duration of wind output and net exchange, actual 2000 & likely "2008" Resistance heating takes up most power peaks CO2-free energy for hydrogen production Likely effect of reducing 748 MW of non-economic decentralized production Net Exchange Actual Wind Output, 2000 Wind Output, "2008" 50 per. Mov. Avg. (Net Exchange) Load Duration of wind output and net exchange, actual 2003 & likely "2008" Resistance heating takes up most power peaks Wind production "2008" Wind production, MWh per h CO2 free energy for hydrogen production Likely effect of reducing 748 MW of non-economic decentralized production Net exchange, MWh 50 per. Mov. Avg. (Net exchange, MWh) Based on an equal or similar wind profile to normal wind years, but adjusted according to the higher generation from offshore wind turbines, wind power output will rise from around 4.4 TWh in 2003 to around 5.5 TWh 25, following the planned capacity increase to 2700 MW. Taking into account the proposed changes to install resistance heating, will there be enough wind power to justify such a large investment? In these charts, a (hopefully) realistic forecast for a future, 2008, wind load duration and net system power exchange durations have been drawn for 2 years, being 2000 which was very wet and spot prices were low and 2003, when, due to a shortage of water in the Scandinavian reservoirs, there was a high net export of power to Norway and Sweden and prices were very high. The large, clear area under the wind production curves, and over zero net trade gives a measure of how much wind output coincides with net power exchange. By this measure, it can be said that 84% of the wind output during 2003 was surplus to Denmark s demand at the times it was generated. This amounted to roughly 3.6 TWh. In 2008, given similar net trade as occurred in 2003, most of the power produced by the extra capacity will also be surplus to Denmark s internal requirements, unless a change occurs in the pattern of consumption. From a much smaller wind capacity in 2000, the equivalent figure for wind energy that was surplus to local demand at the time it was produced, was around 44% of the wind power generated, or 1.5 TWh. The predicted load duration profile for a capacity of 2700 MW (2008) shows that had this wind capacity been in place at the time, the proportion of wind (CO 2 -free) energy being available for electrolysis would obviously have been much greater even during a year of almost neutral net power flows. We can therefore conclude that large volumes (MWh) of CO 2 -free wind energy may still be in the system at relatively low electricity prices in Hydrogen can be manufactured to replace transport hydrocarbons from this. The basis economic model assumes that the electrolysers will be utilised at least 4,200 h/y. This also looks feasible from both the foregoing charts. This is because, when the reservoirs are full, the power from these can also carry renewable energy certificates. 25 Peter Jørgensen, ELTRA 20

21 Crucially the measures described in section 2 are designed to affect opportunistic MW demand which will rise to lop West Danish power production peaks at times of high wind output. Almost 800 MW of CHP production will be removed at these times and up to 500 MW (say) of resistance heating will free up further capacity on the interconnectors, combining to reduce net flows at times of peak wind output by around 1,300 MW. These measures will typically operate during short periods, when the market spot price is less than, say, 12 øre/kwh. Unless, by then, the CO 2 penalty weighs more on the generator than the consumer, and providing the price of gas is still unconstrained by supply, when the market spot price exceeds 12 øre/kwh (or thereabout), it will be more economic for the thermal plants to return to fossil fuel operation. 21

22 3.4 West Denmark within Scandinavia Exchange with Neighbours As mentioned, West Denmark s 2008 wind power capacity will be about 2700 MW. MWhe 6,000,000 4,000,000 2,000,000 - (2,000,000) (4,000,000) (estimate) West Denmark s inter-connector capacity is now 2760 MW (export) and 2380 MW (import). Thus it can be seen that the interconnectors can still become bottlenecked in periods of very high wind output and net trade. The chart shows that there were large differences in the balance of power flows between 2000 and (6,000,000) Norway exchange Sweden Exchange German exchange 2000 was a very wet year with very low spot prices in Nordpool, while the dry year of 2002 produced record high spot prices in the winter of The norwegian power balance Were these typical of what must be planned for or were they exceptional? Norsk Hydro s Torgeir Nakken undertook a survey of the Scandinavian power market in order to better understand how West Denmark s much smaller power market may be impacted by events outside it. He found that since 1933, the years 2000 and 2002 were extreme was a record wet year and the second half of 2002 was a record dry year. 2001, also, was clearly among the wettest years, historically. Source: Statkraft The very low prices in 2000 resulted in a record of TWh of power being consumed in Norway, during Statnett Norwegian Production & Consumption TWh Production TWh Total Consumption TWh The record high prices during the winter of resulted in a sharp drop in demand of 10.5 TWh from the peak, by 2003, taking Norwegian demand down to the level last seen in If the loss of demand represents demand destruction, then it would be reasonable to expect that when normal years return, Norway would retain its net export capacity. This would have the effect of moderating prices in the Nordpool area. Mr Nakken s analysis suggested that this is not the case and that demand growth will recommence, also in Sweden, when 22

23 Swedish Energy consumption in selected months normally wet years return. Consumption GWh January March October Summary Norwegian Reservoir, August, 2004 inter-connector capacity. As this report is being completed, in the summer of 2004, Nordpool spot prices are surging toward NOK 300 per MWh. It appears that the reservoirs are low, even while Norwegian imports are high. Norwegian demand is about the same as it was in Three especially dry years out of four may be insignificant in the historical context. But if Scandinavian demand is being destroyed by an exceptionally long run of high spot prices, caused by an extended drought, lower prices in some future year, when the rains return, may result in uncomfortably low spot prices for Danish generators. As we have seen, these could impact the average prices for wind power more severely than for the thermal generators, who only generate power according to demand. All economically viable and strategically desirable methods are needed for consuming the growing peaks of West Danish wind power output, within West Denmark, to address the increasing bottleneck caused by constrained As we have seen, resistance heating will be especially cheap to install and use. Heat pumps, costing more, will add more value to the power used but will consequently have a reduced MW effect in soaking up cheap power. Demand side management, coupled with modern communications could have a beneficial effect for industry and domestic consumers alike. For example, large industrial cold stores could be operated more according to price signals than they do already. When the technology is available and economic, Danish consumers could operate their home appliances in much the same way. Hydrogen, manufactured for road transport can also address the desirability of increasing West Denmark demand at times of peak wind power outputs, thus playing an early role in grid balancing. This balancing role will increase as the number and capacity of electrolysers increases. It is against this background, that the proposal for the installation of electrolysers at the decentral power stations was proposed. 23

24 4. Electrolysis at West Denmark s Decentral Power Stations 4.1 Introduction Behind the idea of installing the electrolyser at a district heating power station is that in almost every town or village in Western Denmark, such a power station already exists. Each of the coloured spots in the map of West Denmark represents one or another type of these power stations. Most are driven by high efficiency gas engines. Ringkøbing Heat and Power is typical of many 26. They are modern and well managed by professional staff that have a high level of education, so understand how to adapt their plants to deal with new commercial and technical developments and challenges. Ringkøbing All the power stations are connected to the distribution grid, so reducing the capital cost of any new electrical installation. Because most of the wind generators are connected into the distribution grid, this feature also minimizes the power loss from the distribution grid to the HV transmission system. It is foreseen that the owners of the electrolysers will eventually operate in the downward regulating market. Until hydrogen vehicles become commercially available, the hydrogen is used as a fuel gas at these power stations, which can also host stationary fuel cells or deliver hydrogen to local, stationary fuel cells. As vehicles become available which can use hydrogen, the electrolysers will be upgraded to hydrogen filling stations. In the first instance, the vehicles will typically be heavily used, locally based, public service units like buses, taxis and delivery vans. As more electrolysers are installed, a hydrogen infrastructure becomes established. The power stations can still make use of any hydrogen that is surplus to transport requirements. 4.2 Electrolyser Arrangement The generic arrangement, prior to upgrading and applicable to all power plants is illustrated in the block diagram. The diagram illustrates the new, high pressure (30 bar) electrolyser that is currently entering commercial service. Electricity is used by the electrolyser to split water. The hydrogen will be dried and scrubbed of electrolyte and transported to the pressurized gas storage system. In most cases, the oxygen will be vented to atmosphere. 26. The generic arrangement, shown in this chapter and studied for its economic possibilities, should not be confused with the proposal to build a demonstration plant at Ringkøbing, having a smaller electrolyser but still commercial in scale. 24

25 The storage tank is connected with a gas mixing station where it is mixed into natural gas from the main gas transmission system. The gas mixture, with up to 20% hydrogen, is consumed by the power station. The heat generated by electrolysis will be transferred to the town district heating system, maximizing total system energy utilization. Electrolysis is optimized at 80 o C while return water from the district heating system is typically in the range 30 o (winter) 40 o C (summer). The project focuses on Ringkøbing Fjernvarmværk which recently installed a Wärtsila 20V34 SG gas engine with an output of 8 MW. At the time of installation, this was the largest gas engine of its type in the World. The project has been fortunate in obtaining the full support of Wärtsila Diesel 27. Although hydrogen has a high calorific value by weight, it is the Nature s lightest element. Consequently, on a volumetric basis, its calorific value is about 27% that of natural gas, at MJ/Nm 3. Accordingly, the calorific value of the gas/hydrogen mixture will be less than that of pure natural gas. An example is shown in the chart below (left) where 20% hydrogen in the mixture results in lowering the LCV of the fuel gas from 39.7 MJ/Nm 3 to MJ/Nm 3. Unless the gas mixture is pressurized, the engine using the mixture will be de-rated in proportion to the reduced calorific value of the mixture. The relationship between gas calorific value and rating is illustrated in the diagrams below. These show that if 20% hydrogen is mixed into the fuel gas, the feed pressure of the mixture into the engine must be raised from 4.2 bara over atmospheric to 4.35 bara to avoid derating. Operating conditions at Ringkøping FV for Wärtsilä motor W 20V34 SGB Wärtsilä 34SG - B, NOx = 500 mg/m 3 N Derating constant (K 5 ) 1,05 1,00 Natural gas flow: When LHV is Nm3/h 39,7 MJ/Nm3 0,95 0, % content of Natural gas 0,8 Nm3/h natural gas LHV is 39,7 MJ/Nm3 20 % content of hydrogen 0,2 Nm3/h hydrogen gas LHV is 10,8 MJ/Nm3 0,85 0,80 0,75 0,70 LHV(MJ/m 3 N ) Calculation of LHV for the gas mixture when operating at max 20 % hydrogen (0,8 x 39,7) + (0,2 x 10,8) = 33,92 MJ/Nm3 The pressure of the gas mixture must be 4,35 bar a to avoid derating of the motor 0,65 0,60 0,55 4,20 4,30 4,40 4,50 4,60 4,70 4,80 Gas mixture 80/20 % Gas Feed Pressure [bar a] The requirement for raised pressure can be accommodated differently in different parts of the West Danish gas distribution network but only by the addition of an additional blower at Ringkøbing which is at the end of a long transmission system. NOTE There is no compelling reason for testing the process against a mixture of 20% by hydrogen. This is generally foreseen as a maximum condition for this application. If the project is realised, it is believe that this will be the first time that a unit can burn a mixture with hydrogen and avoid de-rating. 27. A fuller description of the V34SGB engine system is available as a separate document. 25

26 Power Supply System (3,5 MW unit) High voltage 3,72 MW Transformer Rectifier Power to Electrolyser 3,5 MW 140 V DC 25 ka We have estimated the following losses in the system: Transformer (2%), Rectifier (3%) and bars/cables (1%) The mass flow and energy balance of the Calculation electrolyser are shown in the foregoing, simplified, block diagrams. Calculation of efficiencies Energy consumption for the electrolyser only: 4,1 kwh/nm3 Losses in transformer, rectifier and bus bars: 6 % Overall energy consumption for the electrolyser: 4,35 kwh/nm3 Energy possible to recover by cooling water: 1 kwh/nm3 Low Heat Value for Hydrogen: 3,0 kwh/nm3 High Heat Value for Hydrogen: 3,54 kwh/nm3 From this balance, it has been calculated that the system as a whole will consume 4.35 kwh per Nm 3 hydrogen and this energy consumption has been used in assessing system economics. Energy efficiency for electrolyser only (LHV): 3,0/4,1 = 0,732 Overall energy efficiency (LHV): 3,0/4,35 = 0,69 Energy efficiency for electrolyser only (HHV): 3,54/4,1 = 0,863 Overall energy efficiency (HHV): 3,54/4,35 = 0,814 Calculation of efficiency by heat recovery Energy efficiency for electrolyser only (LHV): (3,0 + 1)/4,1 = 0,976 Overall energy efficiency (LHV): (3,0 + 1)/4,35 = 0,92 Scope of Supply and Price Scope of Supply Prices Norsk Hydro, working together with Wärtsila, have priced out the delivery of a standard electrolyser installation at Ringkøbing. Their price for a unit that will operate at a normal rated consumption capacity of 3.11 MW is NOK 23 million (about DKK 20.7 million). Transformer Rectifier Control panel incl. PLC and instrumentation Water treatment plant for Feed Water Electrolyser Storage vessels 6 units of 25 m3 Estimated price for the plant with Scope of Supply as described is NOK 20,8 MNOK Estimated price for building 2 MNOK Total estimated price for 715 Nm3/h plant installed and commissioned is 22,8 MNOK Thus, the use of a budget, capital estimate of DKK 8 million per MW, which assumes the total cost of a 3.11 MW unit at a power station like Ringkøbing, would be DKK 24.9 million is felt to be satisfactorily conservative. 26

27 4.4 Upgrade to Hydrogen Filling Station (by Andres Cloumann, Norsk Hydro Electrolysers) DESCRIPTION OF THE PLANT The hydrogen will be generated in the previously described electrolyser by splitting of water into hydrogen and oxygen. The gases are generated at a pressure of 30 bar g. Oxygen will be vented to atmosphere. To operate the electrolyser DC voltage is required. A specially designed transformer is therefore necessary to step down the incoming AC voltage to fit the required input voltage for the rectifier for the actual electrolyser capacity. The simplified Flow Chart below shows the main components and equipment necessary for the Hydrogen Fuel Station. TR/RE EL/ES SEPARATOR BT HC GS CELL BLOCK DE/DR DP GD TR/RE: EL/ES: DE/DR. BT: HC: DP: GS: GD: Transformer/Rectifier Electrolyser Cell Block/Electrolyser Electrolyte System Deoxidizer/Dryer Buffertank High Pressure Compressor Distribution Valve Panel Gas Storage Gas Dispenser Downstream of the electrolyser gas purification equipment is included for removal of traces of both oxygen and moisture in the gas. Traces of oxygen are removed by a deoxidizer, which is a catalytic reactor. Traces of water moisture are removed by passing the gas over a water vapour adsorbent. The adsorbent has limited adsorption capacity and consequently a twin tower dryer is used. A High Pressure Compressor is included from an approved supplier delivered as a complete skid mounted package including a complete instrument package to ensure safe and reliable operation. High pressure gas storage suitable for the fuelling station capacity, is also included. To avoid pressure fluctuations in the system a suction buffer is included upstream of the compressor. Downstream of the compressor a storage system is included. The storage system comprises of three independent storage banks, each equipped with it's own pressure relief devices and pressure monitoring instruments. Three storage banks are necessary to provide a three stage "de-canting" sequence to provide adequate pressure to ensure that the on-board vehicle storage tank reaches the optimum fill pressure within the required time. (photos show the new hydrogen filling station in Reykjavik, Iceland) 27

28 To be able to transfer high pressure gaseous hydrogen from the fuel station storage banks to the storage tank on-board the vehicle a Fuel Gas Dispenser is necessary. The Fuel Gas Dispenser is a "stand-alone" unit that provides the mechanical interface between the hydrogen fuel station storage banks and the vehicle together with necessary safety features and metering equipment. The safety features includes a "break-away" device that isolates and ventilates the supply of hydrogen gas to the dispenser in the event that the vehicle drives away with the dispenser unit still connected to the vehicle. The mechanical dispenser-tovehicle connection is designed with an integral safety feature in form of physical, dimensional design that allows only the correct size connection to be used for the relevant pressure class of the vehicle on-board fuel tank. The dispenser unit has also it's own PLC unit to provide metering of the hydrogen gas fuel supplied to the vehicle, pressure monitoring and communication with the fuel station control system. Maximum utilisation of the storage volume and the three stage decanting sequence system is provided through a Hydrogen Fuel Distribution Panel. The purpose of this panel is to safely transfer high pressure gaseous hydrogen from fuel station production equipment to the fuel station storage banks and from the fuel station storage banks to the hydrogen gas dispenser. This module control both the routing of hydrogen gas from the hydrogen production plant to correct fuel station storage bank and the routing of hydrogen gas from the correct storage bank to the dispenser. The gas distribution valve panel consists of manual isolation valves, non-return valves and pilot-air operated shutoff valves. The plant is delivered complete with an integrated PLC system for safe and unattended operation. Necessary gas quality analysers and gas detectors are included PLANT DIMENSIONS The plant will be containerised and delivered in the following units: Container 1 This container includes transformer/rectifier, electrolyser and gas purification equipment. Dimensions: 8,8 x 2,55 x 3,0 m (L x W x H) Container 2 This container includes buffer tank, high pressure compressor and gas distribution valve panel. Dimensions: 6,0 x 2,5 x 2,2 m (L x W x H) The dimensions for the containers are preliminary at this stage. The gas storage consists of 3 separate vessels each with a volume of 0,75 kbm (actual volume). Both the dispenser and storage vessels are free standing units. The hydrogen filling station can be located on the ground or on the top of the roof of a building. Dimensions of the total plot plan is approx: 15 x 13 m (L x W). There exist very few rules and guidelines for this type of plants at the moment. The dimensions of the plot plan may therefore be subject to changes due to requirements specified by local authorities. 28

29 4.5 Stationary Fuel Cell (by Laila Grahl-Madsen, IRD) In stationary applications, there is a growing market for combined heat and power systems especially systems with a high net power output. Up to 100 kw, the competing technologies are gas engines, Stirling engines, and microturbines in combined heat and power systems. Fuel cell technology offers the next generation of CHP product providing significantly higher fuel to electrical conversion efficiencies, lower emissions, and lower noise operation. Indeed these competing technologies could be viewed as facilitating market entry for fuel cell CHP units. Above 100 kw the competing technologies are diesel and natural gas engines as well as gas turbines. Fuel cell technology offers clear advantages in terms of lower maintenance, higher efficiencies, and lower emissions. Above10 MW fuel cells face a severe competition from gas turbines, with investment costs of 900/kW and high electrical efficiency. Today the most severe competition in Europe is from the existing infrastructure: the power grid, and conventional heating. Fuel cell technology offers the keystone to a new decentralized Energy Economy. CHP and trigeneration (power, heat, and cooling) will become important in the developed world. High efficiency Fuel Cell-Micro-CHP appliances for domestic and small commercial use could reduce the consumption of fossil fuels by up to 50% and hence the emission of CO 2 by up to 50%..Such FC-Micro CHP-appliances in the 1-5 kw-class (e.g. IRD Fuel Cells A/S, Sulzer-Hexis, Baxi) and in the 5 kw class (e.g. Vaillant) have already shown the validity of the concept. But all teams are faced with big challenges concerning the cost and the design of key components, as well as the robustness, durability and reliability of the entire system. In a broad variety of sectors technological breakthroughs are necessary in the near term to achieve competitive components and products for the worldwide mass-markets. A virtual power plant would be created by combining a large number of such units. It will require significant development to improve cost and reliability for small domestic fuel cells to become competitive. Low investment costs are essential and also low running costs as the competition is severe. Safety issues and easy maintenance are important. Stand-alone units working on pressurized or liquefied gases can offer an important application in remote areas. R&D and demonstration on FC generators will go hand in hand for the next decade to accelerate the experience exchange between sciences, engineering, and the "real world" in which the fuel cell technology needs to prove its competitiveness. 29

30 5. ECONOMIC ASSESSMENT 5.1 Assumptions A spreadsheet calculation has been written to assess the economics of making hydrogen in the decentralized power stations. The results are based on the following assumptions. 1. The Danish State recognizes that it is desirable to pursue the twin goals of a post hydrocarbon, energy economy and the minimization of CO 2 emissions and is willing to provide strong fiscal incentives. 2. Therefore, for the purpose of this analysis, all electricity purchased is at spot prices, in the free market, but tax-free for the purpose of hydrogen manufacture. 3. The value of the hydrogen is also realized without tax. 4. All costs associated with hydrogen production are met within the operation and such production is not subsidized. 5. The power is purchased by the electrolyser host at times when the spot price is low, preferably accompanied by renewable energy certificates and is therefore regarded as CO 2 free. 6. The power is purchased during the roughly 4,200 hours when the downward regulating market is in operation and the spot price of the energy purchased is reduced by the downward price deduction applying in that market. 7. The downward regulating market will increase, not decrease, by volume as the wind carpet grows further and the inter-connectors are more frequently bottle-necked 8. The overall energy consumption for hydrogen manufacture is 4.35 kwh per Nm The total capital cost of the electrolysis system is DKK 8 million per installed MWe of normal power consumption capacity MW of such capacity will be built in ten years (see chart) and the whole investment will be paid off 30 years after the construction of the first unit. 11. The normal operating and maintenance expenses are 1% per year of the capital cost. 12. The operation of the plant is covered by the existing power station personnel; no extra staff are foreseen as necessary. 13. Every ten years, the cell membranes will be replaced at a cost that is 30% of the original capital cost. 14. No inflation. 15. Capital investments paid in cash 16. IRR is calculated on a pre-tax basis Cumulative MW of Electrolysers Entering Service The construction of 100 MW capacity, costing DKK 800 million and its pay off will be within the period , as shown in the chart. MW

31 5.2 Main Results The price of hydrogen is calculated from: The energy cost, based on spot price, Capital expenses for recovering the capital employed and generating an overall profit. All the operating and maintenance expenses are capital related and have thus been attributed under this heading. Cost of Hydrogen DKK per GJ Hydrogen LCV 12%IRR on electrolyser investment Price of natural gas at DKK 2.275/Nm3 (57 kr per GJ) Expected range of energy costs in downward regulating market Capital cost of hydrogen DKK/GJ LHV Spot price of power, øre/kwh Cost of Hydrogen, DKK per GJ Hydrogen, LCV 6% IRR on electrolyser investment Energy cost of hydrogen DKK/GJ LHV Expected range of energy costs in downward regulating market Price of natural gas at DKK 2.275/Nm3 (57 kr per GJ) Spot price of power, øre/kwh Capital cost of hydrogen DKK/GJ LHV Energy cost of hydrogen DKK/GJ LHV These charts show that in the base case, the capital charge is the most significant cost of making hydrogen. Even though Denmark is politically stable and the project is likely to receive wide-spread public and Governmental support, most private investors, in the view of Incoteco (Denmark) ApS, would require a project IRR of 12%. If the investment is made by the public sector, the requirement for IRR is reduced to 6%. In this case, the Capex element of the hydrogen manufacture is reduced to DKK 85/GJ. As mentioned, these returns are achieved with an utilisation rate of the electrolysers of 4200 h/y. The numbers show that it is quite impossible for the hydrogen to displace even taxed natural gas, at around DKK 58/GJ, economically. The energy cost of the hydrogen depends on how the power is bought. If the electrolysers can participate in the regulating market, the cost of energy used will reflect the deduction from the spot price, in that market. 31

32 1 Incoteco (Denmark) ApS EFP We analysed the downward regulating market during the years, 2000 through We found that, during these years, the energy prices and corresponding energy cost of hydrogen would have been as follows Average spot price, DKK øre per kwh (West DK) Average cost of energy in the downward regulating market, DKK øre per kwh Energy cost of hydrogen, DKK per GJ Hours of downward regulation From the foregoing table, it can be seen that as wind development has grown, there appears to be a slight increase in the number of annual hours of this market. MWh per h Balancing inside West Denmark 505,000 MWh downward 541,000 MWh upward Regulating Power, 2003 Note very wide 1000 Regulation under 100 MW range, 800 gives high capacity factor -800 to MW Some of these downward regulating events may be reduced in the short term by the measures currently being taken. Nevertheless, as more wind power capacity is added, the predictable output of the decentral power stations will be replaced by a growing capacity of unpredictable, rapidly changing, wind power output at levels which might cause bottle-necking at the inter-connectors. To the hours of operation in the downward regulating market are others when there is high wind output and no downward regulating market but the spot price is very low Regulating power - downward regulation, MWh/h Regulating power - upward regulation, MWh/h During the record wet year of 2000, for example, the West Denmark spot price was below 10 øre/kwh for over 4000 hours. During the record high price year of 2003, there were still 1000 hours when the West Danish spot price was under 15 øre/kwh. 32

33 During such periods, there is no reason why the electrolyser should not benefit opportunistically from low spot prices, as it is likely that renewable energy certificates will accompany such power, almost certainly wind power from Denmark, or, in the case of 2000, hydro power from Sweden or Norway. DKK per Nm3 How Capex Cost of Hydrogen varies with Capacity Utilisation % IRR 6% IRR Increased capacity utilisation, above 4200 hours per year, therefore looks feasible and would have a profound effect on the ability to produce hydrogen economically. If the price received for hydrogen justifies it, increased utilisation will actually have the benign effect of enabling its operator to purchase higher cost renewable energy tol produce hydrogen. As the wind capacity increases, and despite the changes taking place, we have already seen (that there will be a growing number of hours in every year when wind power is likely to cause low spot prices. 5.3 Conclusions Economic Analysis 1. In the configuration proposed, and if the electrolysers can participate in the regulating power market, hydrogen can be generated economically in the range of DKK per GJ, before taxes. 2. It is therefore not economic to invest in this configuration for the purpose of replacing taxed natural gas, at current and near-term future prices, which are in the range DKK 55 65/GJ. 3. If fiscal measures are adopted which encourage the use of hydrogen for transport, the configuration can most likely deliver hydrogen at costs competitive with taxed motor fuel at today s price of DKK 250 per GJ. The additional costs of upgrading the proposed configuration into a hydrogen filling station and the extra operating costs that may be needed to run such a filling station have not been calculated, so this assumption needs verification. 4. The economy of converting to hydrogen vehicles will even better if, as widely reported, the specific energy consumption of a hydrogen vehicle is half that of vehicles powered by the internal combustion engine. This claim, by the proponents of hydrogen transport, also needs verification 33

34 6.1 Introduction 6. Other Methods for Storing Energy The terms of reference for the study required us to look briefly at other ways that might store over-flow wind energy. Energy Storage Technologies - Applications Discharge time Minutes Hours High Speed Flywheels Flow Batteries NAS Lead Acid Batteries Low-Speed Flywheels Power Quality Bridging Power PHS CAES Energy Management Seconds SMES 1 kw 10 kw 100 kw 1 MW 10 MW 100 MW 1 GW System Power Rating A large number of energy storage options are being developed. The well developed and fully commercial pumped hydro storage (PHS), is clearly unsuitable for consideration within West Denmark. Compressed air energy storage (CAES), possibly in Danish salt caverns, is technically feasible and will likely become economically feasible, as one of a large number of options, if wind developments cause further congestion on the inter-connectors. During the course of the study, we became aware that there is an on-going dialogue between DONG and ELTRA about this option and saw no serious purpose in under-taking an independent review. However, at a cost reportedly in the range of 1000/kW, this is likely to be of great interest to West Denmark in the future. It is true that sodium sulfur (NAS) batteries are being developed commercially in Japan but it was felt that the high temperature of their operation (over 400 o ), would, in the end, become a fatal flaw for its widespread use in Denmark. Flywheels provide very limited storage at very high cost and while they have a power quality function in standby diesel type situations, they are not suitable for wide-spread MWh storage in Denmark. 34

35 Generic Flow Cell Representation P C S Flow batteries, at a suitable scale for MWh, appeared to be the only remaining technology worth pursuing as a viable comparison with hydrogen for the purpose of energy storage. However the use of electrolysers to store energy as hydrogen for transport fuel is evidently different from the use of electricity storage systems. ELECTROLYTE (1) A N O D E C A T H O D E ELECTROLYTE (2) Of the remaining flow battery developments, following the collapse of the Regenesys developments, only Vanadium Redox and Zinc Bromine 28 stay in play. We were fortunate to obtain the cooperation of VRB Energy 29, of Canada in assessing this technology for West Denmark. VRB-ESS Basics: Eoc dependant on concentration Electron shells Current collectors V depends on concentration 23 P 28 N V 5 + V 2+ Proton Exchange membrane The VRB process uses the unique quality of vanadium which is that the valence electrons exist in more than one shell. The energy is stored chemically in different ionic forms of vanadium in a dilute sulfuric acid electrolyte. The electrolyte is pumped from separate plastic storage tanks into flow cells across a proton exchange membrane where one form of electrolyte is electro-chemically oxidized and the other is electrochemically reduced. This creates a current that is collected by electrodes and made available to an external circuit. The reaction is reversible, allowing the battery to be charged, discharged and recharged. The technology has been around for seven years and the current references are shown in the following table:

36 Place Application Specifications Start of Operation Kashima Kita Power Station Japan Load leveling 200kW x 4h 1996 Office building Osaka Load leveling (demo) 100kW x 8h 2000 Japan Sanyo Semi-conductor Factory Japan 1) Voltage sag protection 3000kW x 1.5 sec 1500kW x 1h 2001 Wind power station Hokkaido Island Japan Dunlop Golf Course Japan 2) Load leveling Stabilization of wind turbine Output (field test) Load leveling (Photovoltaic hybrid system) 170kW x 6h kW x 8h 2001 University Japan Load leveling 500kW x 10h 2001 Stellenbosch University South Africa Electric Power Research Institute - Italy PacifiCorp United States Hydro Tasmania Australia Load leveling 250kw x 2h 2001 Peak shaving 42kW x 2h 2002 End of line peak shaving, load leveling Stabilization of wind turbine output VRB-ESS Wind-Diesel Installation in Tasmania 250kW x 8h Feb kW x 4h Nov 2003 VRB declares itself ready to deliver commercial equipment at a scale of 10 MW. Beside energy storage, it can act in UPS mode as well as power conditioning, having a speed of response under 1 milli-second. It is designed to operate at distribution voltages with a return efficiency in the range of 80%. The technology has no emissions and generates no waste. The VRB technology is at a scale that is suitable for wide-spread application in wind intensive systems, such as Denmark s. 36