TECHNO - Economic Evaluation of Enhancing the Flexibility of Conventional Power Plants

  FCN E.ON ERC RWTH Aachen Increasing flexibility in conventional power plants

With the increase in the penetration level of renewable ener­gy resources conventional power plants are more and more required to operate as reserve to cover sudden fluctuations in the output of volatile power generation, i.e. wind and so­lar power. To survive the new market demands, conventional power plants should be altered in a way to work flexible and profitably. Therefore, this interdisciplinary work evaluates the possibilities of enhancing the flexibility of conventional po­wer plants from a technical and an economic perspective.

In recent years, some modern power plants (e.g. the newly-built gas-fired power plant Irsching Block 5) have experi­enced unfavorable conditions which have led to unprofita­ble operation. Identical reasons have led to the shutdown of two older gas-fired power plants. Also many other con­ventional steam power plants have problems with the fluc­tuating generation of renewable power plants and cannot adjust their power generation to match the demand as quickly as necessary. As the future price development can­not be perfectly forecast and renewable power plants gain in market power returns on new investments in conventio­nal technologies are highly uncertain.

As operating a power plant more flexible can improve its profitability, several ideas for increasing the flexibility of conventional gas-turbine and steam power plants will be analyzed within this project. On the management side, this leads to two possible actions. One can either decide to divest and liquidate the plant or to invest in technology that enables a more flexible operation to be able to enter a larger variety of markets. Real options analysis, which is a relatively new approach for evaluating investment projects with uncertainties, will be introduced and applied to the de­scribed problems.

In this project, two real options models will be studied in detail for conventional power plants. The first one is the disinvestment option, in which the optimal timing is an es­sential parameter for the maximal profit. The second option considers the chance of operating the existing power plant more flexible using additional components like power elec­tronic converters, storage systems or upgrades of existing components. This can have several effects. By being able to control the power plant more efficiently, markets whe­re ramp-up times are crucial might be entered more easily. Furthermore, when smaller amounts of power are required, the turbine can be adjusted quickly without substantial loss of the plant’s efficiency. As a limiting factor, the minimum feasible load levels need to be determined as well as the efficiency factors at several working points. The investment in upgrading equipment can be regarded as irreversible, jus­tifying the real options approach.