Case 2, VEKS' Annual Review 2017
An increased life expectancy of 10, 20 or 30 years? Two units? One unit? A brand new unit? Replacement of biomass?
Plenty of known factors and unknown quantities were to be coordinated in a joint strategy for Køge CHP plant (KKV). The strategy covers how Køge CHP Plant is developed in the best way to contribute to VEKS’ future district heating supply - now, in the near future and in the long run. Strategy KKV 2040 is a decision and investment strategy for the years ahead in terms of how VEKS will ensure the best possible value of this particular asset - KKV - in Køge harbour.
Køge is not an island where all flows are led. Therefore, Strategy KKV 2040 is based on the basic assumption that the green transition in Denmark and Europe will continue combined with both increased electrification and an increased integration of the electricity markets across frontiers.
These external political preconditions must be added to the basic conditions which a 20-30-year old plant actually lives with in the daily operation.
Køge CHP plant was originally an industrial CHP plant. The primary job was to produce steam to the neighbouring industrial enterprise Junckers Industrier and to take and burn sawdust, wood dust and excess wood chips from the production of wooden floors in return. Each year, Junckers Industrier takes 180-190TJ process steam from Køge CHP plant.
The decentralised plant consists of two units fired with wood chips where unit KKV7 was commissioned in 1986 and unit KKV8 in 1998. Unlike many other wood chip fired plants, Køge CHP Plant is not equipped with flue gas condensation. It is a method optimising the utilisation of energy in the flue gas which alone collects more district heating, not electricity. All things considered, the flue gas condensation increases the plant’s efficiency between 15 and 18%.
In May 2012, VEKS took over Køge CHP Plant to supply the VEKS system. The plant started delivering district heating to VEKS Transmission in December 2013. VEKS Transmission resold the heat to the newly established Køge District Heating on the same conditions as VEKS’ other customers.
Since the beginning of 2015, Køge CHP Plant has also sent heat to all VEKS’ customers in Vestegnen when a new transmission line to Køge was put into service. Since the produced district heating from Køge CHP Plant is low, the plant contributes positively to the VEKS community.
Why not let the plant keep on running?
The short answer is that there is room for improvements which will result in an even better economy. At the same time, future legal requirements will tighten up the limits of the plant’s emissions to the environment (see box about BREF). Moreover, VEKS wants to increase the efficiency of the plant by way of flue gas condensation to reduce the production costs.
As things are, the fuel’s way from the loader’s picking up from the pile at the site through the production line and all the way into the fuel chamber of the boiler requires many resources. At the same time, old plants typically have a relatively low efficiency combined with a high share of overhead costs. Therefore, it is crucial for the business economics that the plant has as many annual running hours as possible.
The external consultants have contributed to the development of Strategi KKV 2040 in close cooperation with the internal project group at Køge CHP plant. The group included both young and experienced employees within economy, technique and operation as well as people who have lived with the plant in Køge for a long time. The project was initiated several years ago but developed into also testing VEKS’ new organisation which became effective in the middle of August 2017. In this connection, VEKS established a Plan and Project Department which has worked closely together with the employees of Køge CHP Plant in connection with this project.
Workshops defined the method and laid down references to other scenarios. Important elements in the data analysis were the plant’s history, legal requirements, operating results, electricity calculations in general and expenses from the budget 2017-2022. It was all held up against: What if we did not have KKV?
The strategy has exploded the myth of “a slow settlement” or even “a slow destruction” of Køge CHP Plant as the plant is sustainable - also in the long run.
The analysis focused on improving the economy provided that the plant lives up to future emission requirements - and at the same time increase the efficiency through flue gas condensation.
Moreover, the analysis has gone through more long-term technology screenings of alternative heat supply from the KKV site at Køge Harbour.
The development of Køge CHP Plant describes the analysis in three scenarios:
- A. Continued operation at KKV7 till 2030 - KKV8 until 2040. Investments to live up to the BREF emission requirements.
- B. Phasing out of KKV7 from 2022 - KKV8 will operate until 2040.
- C. Phasing out of KKV7 from 2022. Establishment of flue gas condensation plants on KKV8 in 2022 which will be operated until 2040.
Scenario C is markedly better from a financial point of view compared to the two other scenarios. The effort is not profitable when it comes to extending the service life of KKV7 beyond 2022. By then the unit will be approx. 35 years old and the heat production costs of KKV7 will be higher than the heating price that VEKS can obtain from other producers towards 2030. The load distribution in the Copenhagen area is affected considerably by the fact that the system is supplied with low-cost heat from bioblok4 of Amager Power Plant which will be put into operation in 2020.
But can KKV8 stay the course?
KKV8 holds the field
The conclusions of the strategy project clearly indicate that Scenario C makes really good sense: Continued operation of KKV8 combined with developing the plant by establishing flue gas condensation. This solution seems to have a very positive business case in relation to the VEKS system. Moreover, continued operation is also a condition as VEKS is contractually linked to Junckers until 2027 by producing process steam and taking dust and wood chips. The analysis also showed that Køge CHP Plant can also provide efficient steam to Junkers after 2027 provided that Junkers is interested in a continued delivery.
The analytical work of the project group is now replaced by an actual business case, both to establish flue gas condensation and to meet the other requirements to the service life extension of KKV8. Moreover, action plans should be worked out and financial calculations should be made with a view to phasing out and scrap KKV7.
The final decision regarding further initiatives relating to Køge CHP Plant will fall into place in the spring of 2018.
With the recent lowering of the electricity charge, the financial conditions have been optimised in order to establish a seawater heat pump. But a lower grid rate will help improving the economy further. However, if the conditions are changed, the heat pump will really be a competitive alternative to building a new chip wood fired plant. VEKS’ site at Køge Harbour is situated in close proximity to the sea and strategically it is therefore centrally positioned because the distance from the plant to Køge District Heating is short - through VEKS Transmission.
Whether VEKS enters the heat pump project in Køge will moreover be part of the future VEKS strategy project “More own production”. This project analyses the best future-oriented alternatives if we are to depend less on biomass, switch on more power to the district heat or...