Ron Miller, Principal at Reliant Energy Solutions LLC, asks what is the first thing we evaluate when looking at power supply alternatives for an industrial client with a large power requirement? Is it 1) site, 2) engineering, procurement, and construction companies, 3) independent power producers, 4) turbine vendors, 5) grid connections, or 6) fuel supply, logistics, and infrastructure?

“In my evaluations of power supply alternatives for industrial companies with special emphasis in developing countries, there is one over-riding conclusion: reliable fuel supply drives the energy generation economic engine.

“Evaluating several different fuels including LNG, natural gas, diesel, heavy fuel oil, and LPGs among others, the best project outcomes are those where fuel supply, pricing, logistics, and infrastructure is given an extensive amount of time during the analysis stage.

“I assessed the 20-year costs of generating power from multiple fuels and placed each fuel’s costs into three separate net present value (NPV) buckets of 1) capital, 2) operating and maintenance, and 3) fuel. Within a range of 65% to 85% for all fuels, fuel cost was the largest component of the NPV of power generation costs.

“So if 65% to 85% of your final power generation cost is one item, shouldn’t you spend a corresponding amount of time in your analysis stage fully understanding this key determinant for a successful power project? In developing countries where power generation infrastructure may not exist or does not exist at the same level as is found in North America and Europe, fuel analysis becomes even more important.

“One of the key questions for fuel importation in developing countries is the draft at existing ports to allow larger vessels to dock at the jetty. Can larger ocean-going tankers dock at the port for off-loading, or is the port’s draft too shallow, thus forcing a Single Point Mooring (SPM) system or Conventional Buoy Mooring (CBM) system to be constructed at substantial capital expense?

“Once fuel can be imported, sufficient onshore storage capacity should exist, or must be built to off-load the entire fuel cargo from the larger ships. Additionally, the throughput capacity of the pipeline from SPM/CBM must allow a rapid unloading of the fuel from ship to shore to eliminate steep demurrage costs for the project.

“Availability and reliability of fuel supply plays a much larger share of concern in developing country power projects than in the rest of the world. Consequently, analysing multiple fuel supply alternatives with their attendant pricing, availability, and off-loading, storage and logistics capabilities is essential. Although optionality in the fuels that the selected generation equipment can accept may reduce the efficiency with a higher heat rate, the risk of no fuel for the facility and its huge opportunity costs for the industrial company can be substantial. For developing countries, it is better to plan that there will be a fuel interruption and a need for fuel supply options as that may become the norm rather than the exception.

“For countries without a transmission grid, the obvious solution for a power requirement inland is to transport fuel. However, in those applications where a reasonably-reliable grid exists, we must evaluate which is cheaper: transporting fuel over the highway system with its inherent costs, long supply chain, and liability risks, or transporting electrons overhead?

“A power generation fuel supply checklist is as follows:

1. How will fuel physically be imported into the country and/or made available to the power generation facility?
2. Has the required capacity planning for each step along the fuel supply chain been completed to ensure adequate capacity exists?
3. What are the multiple fuels that will allow the power generation facility to reliably produce power for the term required, and can they be accessed?
4. Does the power generation equipment offer flexibility in the fuels that can be used?
5. How easily will the new facility be able to move from the primary fuel to the ‘Plan B’ fuel in case of a fuel supply interruption or a price spike?

“By understanding the critical nature of reliable fuel supply and how it economically drives the power generation engine, the high opportunity cost of no power production due to a lack of fuel can be avoided. A more holistic evaluation of the entire power generation process with special emphasis on fuel supply can yield better and more profitable long term results and truly harvest the ‘gold’ for a successful power project.”

Picture courtesy of Synchrotech Controls, specialising in providing remote site power generation.