CleanCoal BF

01 KIC InnoEnergy · Clean Coal and Gas Technologies
Clean Coal and Gas Technologies
Future Energy Costs:

Coal and Gas Technologies
How technology innovation is anticipated to reduce
the cost of energy in Europe from new gas CHP plants
and coal plants retro-fitted with upgraded technology
BVG Associates
BVG Associates is a technical consultancy with expertise
in wind and marine energy technologies and other clean
energy systems. The team has deep experience of modelling
technology impacts on cost of energy for wind, marine and
solar energy systems. BVG Associates has over 150 combined
years of experience in the clean energy sector, many of these
being “hands on” with system manufacturers, leading RD&D,
purchasing and production departments. BVG Associates has
consistently delivered to customers in many areas of the clean
energy sector, including:
• Market leaders and new entrants in wind and marine
KIC InnoEnergy
renewables supply chain and UK and EU wind farm Clean Coal and Gas Technologies
development
• Market leaders and new entrants in clean energy component
design and supply
• New and established players within the clean energy sector
of all sizes, in the UK and on most continents, and Future Energy Costs:
Coal and Gas Technologies
• The Department of Energy and Climate Change (DECC),
RenewableUK, The Crown Estate, the Energy Technologies
Institute, the Carbon Trust, Scottish Enterprise and other
similar enabling bodies.
KIC InnoEnergy the cost of energy in Europe from new gas CHP plants
KIC InnoEnergy is the Innovation engine for sustainable
energy across Europe. The challenge is big, but our goal
is simple: to achieve a sustainable energy future for
Europe. Innovation is the answer. New ideas, products
and solutions that make a real difference, new businesses
and new people to deliver them to market.
At KIC InnoEnergy we support and invest in innovation
at every stage of the journey – from classroom to
customers. With our network of partners we build
connections across Europe, bringing together inventors
and industry, entrepreneurs and markets, graduates and
employers, researchers and businesses. Authors
We work in three essential areas of the innovation mix: Giles Hundleby, Director, BVG Associates
• Education to help create an informed and Bruce Valpy, Managing Director, BVG Associates
ambitious workforce that understands Kate Freeman, Junior Associate, BVG Associates
what sustainability demands and industry
needs – for the future of the industry. Coordination of the study
• Innovation Projects to bring together ideas, inventors
Marcin Lewenstein, Thematic Leader, Clean Coal and Gas Technologies, KIC InnoEnergy Poland Plus
and industry in collaboration to enable commercially
Jakub Miler, CEO, KIC InnoEnergy Poland Plus
viable products and services that deliver real results.
• Business Creation Services to help entrepreneurs
and start-ups who are creating sustainable Section 2 on coal and gas in the EU policy framework was commissioned by KIC InnoEnergy
businesses to grow rapidly to contribute and written by Maciej Bukowski and Aleksander Sniegocki of WiseEuropa, Warsaw.
to Europe’s energy ecosystem.

Together, our work creates and connects the building
blocks for the sustainable energy industry that Europe
needs. With our headquarters in the Netherlands, we
develop our activities through a network of offices
located in Belgium, France, Germany, the Netherlands,
Spain, Portugal, Poland and Sweden.
05
Executive summary
As an innovation promoter, KIC InnoEnergy is interested in evaluating the impact of innovations
on the cost of energy from various clean and renewable energy technologies. This analysis
is critical in understanding where the biggest opportunities and challenges are from a
technological point of view.
KIC InnoEnergy is publishing a set of consistent analyses of various technologies that help in the
understanding and definition of innovation pathways that industries could follow to maintain
the competitiveness of the European clean and renewable energy sector in the global market.
KIC InnoEnergy has developed credible future technology cost models for four renewable
energy generation technologies (onshore and offshore wind, solar photovoltaic and solar
thermal energy generation) using a consistent and robust methodology. The purpose of these
cost models is to enable the impact of innovations on the levelised cost of energy (LCOE) to be
explored and tracked in a consistent way.
This report documents the anticipated future cost of energy for new gas combined heat and
power (CHP) projects and coal plant upgrades reaching their financial investment decisions
(FIDs) in 2020 and 2025. It adopts the established modelling approach to explore the impact
of a range of technical innovations and other effects on baseline cases at the start of 2016. For
the coal plants, because these already exist, the model considers the impact of retro-fitting
technology innovations at different FID years to the existing infrastructure. A coal plant after
retro-fitting is referred to here as a clean coal plant.
The report also covers the role of the EU in regulating energy markets and in regulating emissions,
energy policy trends in the EU covering climate change and carbon dioxide emissions, energy
security and air quality.
Industry input has been provided by subject matter experts nominated by KIC InnoEnergy.
These experts provided input on innovations and their impacts, and review and challenge of
the modelling through the project.
Future Energy Costs: Coal and Gas Technologies 06 07 KIC InnoEnergy · Clean Coal and Gas Technologies
At the heart of this study is a cost model in which ‘elements’ of baseline Technology Types (the Gas CHP plant
power plants) are impacted on by a range of technology innovations. These Technology Types
are a 225MWe unit of a coal power plant (also capable of burning other fuels with appropriate
Figure 0.3 Anticipated impact of technology innovations for a gas CHP plant with FID in 2025, compared with
investment) and a 500kWe gas combined heat and power (CHP) plant. The levelised cost of
a baseline gas CHP plant with FID in 2016.
energy (LCOE) was calculated for projects reaching FID in 2016 (the baseline), 2020 and 2025.
The combined impacts of anticipated technology innovations over the period for these two
LCOE for a CHP plant with FID in 2016
Technology Types are presented in Figure 0.1 and Figure 0.2.
Improvements in combustion chambers for lean mixtures
Improvements in engine mechanical design
Improvements in use of alternative gaseous fuels in IC engines
Figure 0.1 Anticipated impact of all innovations for the gas CHP plant with FID
Improvements in power per cylinder from IC engines
2025 compared with FID 2016.
Improvements in thermodynamic cycles in IC engines
Improvements in structural materials
100 Improvements in ignition systems
75 5 other innovations
50
Source: BVG Associates 70% 75% 80% 85% 90% 95% 100%
25
0 Figure 0.3 shows that well over two-thirds of the LCOE savings anticipated in the gas CHP plant arise
-25 from innovations in engine design, fuels and combustion (the first four innovations in the figure).
% CAPEX OPEX Net AEP LCOE For the gas CHP plant, 12 technology innovations have the potential to cause a substantial
Source: BVG Associates reduction in LCOE through a change in the design of hardware, software or process. Technology
innovations are distinguished from non-technology innovations, which are addressed separately
as Other Effects. Many other technical innovations are in development and so some of those
described in this report may be superseded over time. Overall, however, we anticipate that the
Figure 0.2 Anticipated impact of all innovations for the coal plant compared at LCOE reduction shown will be achieved. In most cases, the potential impact of each innovation has
FID 2025 with baseline. been moderated downwards in order to give overall levels of cost of energy reduction consistent
with past trends. The availability of such a number of innovations with the combined potential to
30 reduce LCOE more than shown gives confidence that the picture described is achievable.
15 To calculate a realistic LCOE, costs for increasing emissions charging in excess of the baseline
values have been considered in addition to technology innovations. The effects of supply chain
0 dynamics, pre-FID risks, insurance, contingency or transmission have not been considered.
-15 Cost of finance is assumed to be at a fixed rate of 10% for all projects.
-30 Improvements in the combustion chamber for lean mixtures are anticipated to reduce LCOE by
about 4% in the period. Savings are due to innovations in combustion chamber shape and/or the
% CAPEX OPEX Net AEP LCOE
use of pre-chambers. These innovations drive LCOE down through increased AEP. These effects
Source: BVG Associates
make improvements in the combustion chamber for lean mixtures the largest contributor to the
overall reduction in LCOE.
The study concludes that LCOE savings of about 17% and 27% in 2025 are anticipated in gas Improvements in the engine mechanical design enable increased power output, utilisation and
CHP and coal plants respectively. With both Technology Types, numerous innovations generate AEP, which more than outweigh the CAPEX and OPEX increases required and are anticipated to
improvements in LCOE through changes in capital expenditure (CAPEX), operational expenditure reduce LCOE by about 3%.
(OPEX) and annual energy production (AEP).
Improvements in the use of alternative gaseous fuels are anticipated to reduce LCOE by about
3% in the period. Savings are due to OPEX reduction.
Innovations in power per cylinder from internal combustion (IC) engines are anticipated to As for the CHP plant, the effects of supply chain dynamics, pre-FID risks, insurance, contingency
reduce LCOE by about 2% in the period. Savings are due to innovations in the combustion air or transmission have not been considered. Cost of finance is assumed to be at a fixed rate of 10%
boosting system to enable increased fuel-air mass per cycle and increased AEP. for all projects.
Other innovations in other areas are anticipated to reduce LCOE by a further 5%, through a Introduction of thermal pre-treatment of biomass and waste-based fuels is anticipated to reduce
mixture of CAPEX and OPEX reductions, and AEP increases. LCOE by over 9% compared to the baseline plant in FID 2025. Savings are due to OPEX reductions
enabled by greater use of these cheaper fuels. This effect makes this the largest contributor to
There are innovations not discussed in detail in this report because their anticipated impact is still
the overall reduction in LCOE.
negligible on projects reaching FID in 2025. Among these are the use of liquefied natural gas fuel,
combined thermodynamic cycles, fuel-cell hybrids, alternatives to internal-combustion engines Introduction of hybrid fuel combustion is anticipated to reduce LCOE by nearly 6% compared
and advanced emissions treatment systems. The unused potential at FID in 2025 of innovations with the 2025 baseline plant. Savings are due OPEX reductions enabling further increase in the
modelled in the project, coupled with this further range of innovations not modelled, suggests use of cheaper fuels.
there are further cost reduction opportunities beyond 2025.
Improvements in fuel modification and switching are anticipated to reduce LCOE by nearly 6%
Coal plant compared to the baseline plant in FID 2025. Savings are due OPEX reductions through the use
of additives to reduce emissions and other combustion waste products and through enabling
further increase in the use of cheaper fuels.
Figure 0.4 Anticipated impact of technology innovations for a 225MW unit of a coal plant with FID in 2025.
Improvements in preventative maintenance are anticipated to reduce LCOE compared to the
LCOE for a coal plant with FID in 2025 without innovations baseline plant in FID 2025. Savings are due mainly to reduced OPEX and increased AEP through
Introduction of thermal pre-treatment of biomass and waste-based fuels the avoidance of unexpected failures and downtime.
Introduction of hybrid fuel combustion
Other innovations in other areas are anticipated to reduce LCOE by a further 8-9%, through a
Improvements in fuels through modification and switching
mixture of CAPEX and OPEX reductions, and AEP increases.
Improvements in preventive maintenance
Improvements in power plant start-up systems There are other coal plant innovations not discussed in detail in this report because their
Improvements in boiler flexibility anticipated impact is still negligible on projects reaching FID in 2025. Among these are the
Improvements in treatment of coal combustion byproducts physical pre-treatment of fuels and carbon-dioxide abatement methods. The unused potential at
9 other innovations FID in 2025 of innovations modelled in the project, coupled with this further range of innovations
LCOE for a clean coal plant with FID in 2025 with innovations not modelled, suggests there are further cost reduction opportunities when looking to 2030
and beyond, if coal plants are still a long-term part of the energy mix then.
Figure 0.4 shows that well over half of the LCOE savings anticipated for the clean coal plant in
2025 arise from innovations in the modification, pre-treatment and combustion of new fuels
(the first three innovations in the figure).
For the coal plant, 16 technology innovations were modelled as having the potential to cause a
substantial reduction in LCOE through an improvement in the design of hardware, software or
process. Technology innovations are distinguished from non-technology innovations which are
addressed separately in Other Effects. Many other technical innovations are in development and
so some of those described in this report may be superseded over time. Overall, however, we
anticipate that the level of cost of energy reduction shown will be achieved. In most cases, the
potential impact of each innovation has been moderated downwards in order to give overall
levels of cost of energy reduction consistent with past trends. The availability of such a number
of innovations with the potential to reduce LCOE more than shown gives confidence that the
picture described is achievable.
Glossary Table of contents

AEP. Annual electrical energy production. Executive summary 5
Anticipated impact. Term used in this report to quantify the expected market impact of a
1. Introduction 12
given innovation. This figure has been derived by moderating the potential impact through
the application of various real-world factors. For details of methodology, see Section 2. 2. Coal and gas policy in the EU 15
Baseline. Term used in this report to refer to “today’s“ technology, as would be incorporated
3. Methodology 24
into a gas CHP project with FID in 2016, or as exists in a typical coal plant today, (and in the
future if it remains unmodified). 4. Gas CHP plant 29
Capacity Factor (CF). Ratio of annual energy production to annual energy production if the 4.a. Baseline 29
power plant is generating continuously at rated power for the whole year (8,760 hours). 4.b. Innovations in fuel handling 32
CAPEX. Capital expenditure. 4.c. Innovations in the combustion system 33
FEED. Front end engineering and design. 4.d. Innovations in the energy conversion system 36
FID. Final investment decision, defined here as that point of a project life cycle at which 4.e. Innovations in emissions treatment 37
all consents, agreements and contracts that are required in order to commence project 4.f. Innovations in power plant operation, maintenance and service 37
construction have been signed (or are at or near execution form) and there is a firm 4.g. Summary of innovations and results 40
commitment by equity holders and in the case of debt finance, debt funders, to provide or
5. Coal power plant 43
mobilise funding to cover the majority of construction costs.
5.a. Baseline 43
Generic WACC. Weighted average cost of capital applied to generate LCOE-based
5.b. Innovations in fuel handling 45
comparisons of technical innovations.
5.c. Innovations in the combustion system 47
LCOE. Levelised cost of energy, considered here as pre-tax and real in start of 2016 terms. For
5.d. Innovations in the energy conversion (steam and electrical) system 49
details of methodology, see Section 2.
5.e. Innovations in emissions treatment 52
MW. Megawatt.
5.f. Innovations in power plant operation, maintenance and service 53
MWh. Megawatt hour.
5.g. Summary of clean coal innovations and results 55
OMS. Operations, planned maintenance and unplanned (proactive or reactive) service in
response to a fault. 6. Conclusions 59
OPEX. Operational expenditure.
7. About KIC InnoEnergy 60
Other Effects. Effects beyond those of power plant innovations, such as supply chain
competition and changes in financing costs. Appendix A. Further details of methodology 62
Potential impact. Term used in this report to quantify the maximum potential technical Appendix B. Data supporting tables 67
impact of a given innovation. This impact is then moderated through the application of
List of figures 70
various real-world factors. For details of the methodology, see Section 2.
List of tables 72
Scenario-specific WACC. Weighted average cost of capital associated with a specific
Technology Type and year. Used to calculate real-world LCOE incorporating Other Effects.
Technology Type. Term used in this report to describe a representative power plant (suited to
a given application) for which baseline costs are derived and to which innovations are applied.
For details of methodology, see Section 2.
WACC. Weighted average cost of capital, considered here as real and pre-tax.
WCD. Works completion date.
12 13 KIC InnoEnergy · Clean Coal and Gas Technologies
Gas combined heat and power experts

•
Dr. Eng. Jacek Kalina, Institute of Thermal Technology, Silesian University of Technology
•
Dr. Eng. Marcin Liszka, President of the Management Board, Exergon
•
Dr. Eng. Pawel Raczka, Department of Mechanical Engineering, Wroclaw University of Technology
•
Dr. Eng. Jakub Tuka, Chief Specialist for Energy Technologies, Exergon
Clean coal experts
•
Henryk Kubiczek, Vice Director of Research and Development, EDF Polska
•
Associate Prof. Dr. Eng. Halina Pawlak-Kruczek, Institute of Heat Engineering and Fluid
Mechanics, Wroclaw University of Technology
•
Associate Prof. Dr. Eng. Sylwester Kalisz, Institute of Power Machines and Equipment, Silesian
University of Technology
The study does not consider the relative market share of the two Technology Types considered.
The actual average levelised cost of energy (LCOE) in a given year and region will depend on the
mix of all projects with FID in that year.
1. Introduction 1.3. Structure of this report

Following this introduction, this report is structured as follows:
Section 2. Coal and gas policy in the EU. This Section describes the role of the EU in regulating
1.1. Framework
energy markets and in regulating emissions, energy policy trends in the EU covering climate
As an innovation promoter, KIC InnoEnergy is interested in evaluating the impact of visible
change and carbon dioxide emissions, energy security and air quality.
innovations on the cost of energy from various clean and renewable energy technologies. This
Section 3. Methodology. This Section describes the scope of the model, project terminology
type of analysis is critical in understanding where the biggest opportunities and challenges are
and assumptions, the process of technology innovation modelling, industry engagement, and
from a technological point of view.
the treatment of risk and health and safety.
KIC InnoEnergy is publishing a set of consistent analyses of various technologies, to define and help
industries understand the innovation pathways they could follow to maintain the competitiveness Section 4. Gas CHP plant.
of the European clean and renewable energy sector worldwide. In addition, it seeks to help solve Section 4.a. Baseline. This Section summarises the parameters relating to the baseline power plant
the existing challenges at the European level: reducing energy dependency; mitigating climate for which results are presented. Assumptions relating to this power plant are presented in Appendix A.
change effects; and facilitating the smooth evolution of the generation mix for the final consumers. The following five sections consider each element of the power plant in turn, exploring the
impact of innovations in that element.
With a temporal horizon out to 2025, this work includes a range of innovations that might
Section 4.b. Innovations in fuel handling. This Section incorporates fuel treatment and
be further from the market than normally considered by KIC InnoEnergy. This constitutes an
handling before and after arrival at the power plant, and includes all processes before combustion
approach that is complementary to KIC InnoEnergy technology mapping which focuses on
and the use of alternative fuels.
innovations reaching the market in the short/mid-term (up to five years ahead).
Section 4.c. Innovations in the combustion system. This Section incorporates the
combustion system itself, pistons, cylinder heads, fuel admission systems, the ignition system
1.2. Purpose and background
and the combustion control aspects of the control system.
The purpose of this report is to document the anticipated future cost of energy from two
Section 4.d. Innovations in the energy conversion system. This Section incorporates changes
Technology Types - coal plants with upgrades and new gas combined heat and power (CHP)
in other parts of the energy conversion system in the power plant and includes hybridisation
plants - reaching their financial investment decisions (FIDs) in 2020 and 2025, by reference to
with other energy sources, thermodynamic improvements and increase in power density.
robust modelling of the impact of a range of technical innovations and Other Effects on baseline
Section 4.e. Innovations in emissions system. This Section incorporates primary and
cases at the start of 2016. This work is based on methodologies established for KIC InnoEnergy
secondary (post combustion) emissions reduction systems and approaches.
by BVG Associates (BVGA) over four previous projects covering onshore and offshore wind, solar
Section 4f. Innovations in operation, maintenance and service. This Section incorporates
photovoltaic and solar thermal energy generation. The focus is on the EU market.
improvements for reliability as well as design and remote operation and diagnostics.
Industry input has been provided by subject matter experts nominated by KIC InnoEnergy, and Section 4.g. Summary of impact of innovations for clean gas. This Section presents the
who have provided input on innovations and their impacts, and review and challenge of the aggregate impact of all innovations, exploring the relative impact of innovations in different
modelling through the project. These subject matter experts are: elements of the gas CHP plant.
Future Energy Costs: Coal and Gas Technologies 14 15
Section 5. Coal power plant.

Section 5.a. Baseline. This Section summarises the parameters relating to the baseline power
plant for which results are presented. Assumptions relating to this power plant are presented in
the Appendix.
The following five sections consider each element of the power plant in turn, exploring the
impact of innovations in that element.
Section 5.b. Innovations in fuel handling. This Section incorporates fuel treatment and
handling before and after arrival at the power plant, and includes all processes before combustion
and the use of alternative fuels.
Section 5.c. Innovations in the combustion system. This Section incorporates the combustion
system itself, improvement in combustion control for start-up and output flexibility, hybrid fuel
combustion systems and combustion waste-heat recovery.
Section 5.d. Innovations in the energy conversion system. This Section incorporates
changes in other parts of the energy conversion system in the power plant and includes the
steam circuit, steam turbine, boiler and downstream waste-heat recovery.
Section 5.e. Innovations in emissions system. This Section incorporates primary and
secondary (post combustion) emissions reduction systems and approaches.
Section 5.f. Innovations in operation, maintenance and service. This Section incorporates
2. Coal and gas policy in the EU
improvements for reliability, preventative maintenance as well as remote operation and
2.1. Introduction
diagnostics.
European energy systems have entered a period of rapid transition. This transition is driven
Section 5.g. Summary of impact of innovations for clean coal. This Section presents the
by technological and policy responses to three major inter-connected challenges: avoiding
aggregate impact of all innovations, exploring the relative impact of innovations in different
dangerous climate change; ensuring energy security for the EU; and fostering economic
elements of the coal power plant.
competitiveness in the EU.
Section 6. Conclusions. This Section includes technology-related conclusions for both types Electricity generation based on fossil fuels is currently a significant element of most
of power plant. European energy systems, and for many countries domestic production of lignite, hard
coal, and natural gas still contributes to energy independence. In its current form, this
Appendix A. Details of methodology. This appendix discusses project assumptions and method of electricity generation is not consistent with the long-term goals of EU energy
provides examples of methodology use. policy. Coal- and gas-based power generation will have to undergo the greatest changes
Appendix B. Data tables. This appendix provides tables of data behind figures presented in as a part of energy transition in the EU, affecting both the technologies used and their
the report. roles in the system.
The EU policy framework sets the stage for this transition, both in short and long term. It is
thus important to take into account its current form and likely future evolution when exploring
the development of novel energy solutions based on fossil fuels. This will ensure that current
innovation effort will meet future market demand, not only in the EU, but also globally. Successful
implementation of new technologies in Europe provides an opportunity to lead by example
and develop products and expertise to sell in other markets.
This Section presents the EU role in regulating energy sector in the member states. Subsections
2.3 and 2.4 provide an overview of current legislative framework in this area and anticipated
future dynamics of the EU policy are covered in subsection 2.5. The Section concludes with a
discussion on implications for energy technologies based on coal and gas (subsection 2.6).
2.2. Coal and gas-fired plants in the EU energy system

The EU electricity production is diverse, with a limited share for each type of energy technology,
and the dependence on fossil fuels varies significantly by member state.
While numerous central European countries rely on domestic lignite deposits, natural gas and
Figure 2.1 Key European policy areas influencing the energy sector.
hard coal are vital elements of energy mixes across the EU. Only countries with a significant
hydropower potential and/or ambitious nuclear energy programmes have been so far able to
minimise their reliance on the fossil fuels to produce electricity. Stronger
EU competency
While new energy technologies based on wind and solar energy are being deployed in the EU,
so far the issue of supply variability has not been addressed. Thus, there is still a need for flexible Competition
back-up plants, which should be in line with climate and environmental objectives of the EU rules
policy.
While the EU as a whole imports most of the natural gas and hard coal it uses, the level of Energy
energy dependence also varies among the member states. Despite the phase-out of hard coal
Environment
mining in most of the EU (with Poland remaining the biggest producer), numerous European
/ Climate
countries such as Germany, the Czech Republic, and Greece rely on their domestic lignite
resources. Several member states have enough natural gas deposits to cover a significant
Stronger
part of domestic demand or even export the fuel abroad (for example, the Netherlands and
Member States’
Denmark). Thus, while renewables and energy efficiency are crucial for ensuring energy
Source: WiseEuropa
security for the EU as a whole, there is also a rationale for further development of coal and
gas technologies which will allow to use European indigenous fossil fuels in the cost-efficient
and sustainable way. As a result, the EU regulatory framework in the areas of energy, climate, environment and
competition define the prospects for the energy sector in Europe, as shown in Figure 2.1. Power
2.3. The EU role in regulating the energy sector generation from fossil fuels – notably hard coal, lignite, and natural gas – faces the greatest
The Lisbon Treaty, which came into force in December 2009, introduces shared competence challenges. In order to meet the stringent environmental targets, this part of the energy sector
in the area of energy policy between the member states and the EU. This means that both has to transform itself while facing ever more competitive pressure from low-carbon sources.
the states and the EU institutions have an impact on the regulations shaping the energy
sector. The specific provisions are given in article 194 of the Treaty for the Functioning of the 2.4. Key European regulations affecting coal and gas-fired plants
European Union.
2.4.1. EU emissions trading scheme
The EU’s aims in the energy sector are to: The EU Emission Trading Scheme (EU ETS) is a key instrument for achieving the long-term
•
ensure the functioning of the energy market greenhouse gas (GHG) reduction targets in the EU. By setting an absolute cap on the
•
ensure security of energy supply in the EU greenhouse gases emitted by the sectors covered (including power generation) and allowing
•
promote energy efficiency and energy saving and the development of new and renewable emitters to trade the resulting limited number of emission allowances, it creates the price
forms of energy, and signal to reduce GHG emissions. Gradually decreasing the total GHG limit by reducing the
•
promote the interconnection of energy networks. number of available emission allowances each year increases the pressure to lower emissions
from the energy sector over the long term. From 2013 to 2020, the cap is reducing by 1.74%
The Treaty assumes that the member states retain the right to determine their own energy
per year. From 2021 onwards, the annual reduction will rise to 2.2% in order to meet the goal
mix. The unanimous support from the states is required for environmental policies affecting
of 40% GHG cuts in the EU by 2030.
domestic energy use as well as energy taxation. Thus, while the EU institutions have a mandate
to pursue the development of single energy market and decarbonisation of the European In the short and medium term, the relevance of EU ETS as a driver of power sector decarbonisation
energy system, they cannot directly determine the energy choices on national level. In practice, is unclear, due to oversupply of allowances on the market. This has driven down the costs of
however, the European climate and environment protection legislation is a complex set of CO2 emissions and weakened the price signal to invest in low-carbon solutions. The EU has
rules that significantly limit viable energy options in accordance with the broader sustainable responded by pursuing structural reform of the system. Its key element – the market stability
development goals of the EU. Furthermore, the EU has an exclusive competence in the area of reserve (MSR) – will start operating in 2019. Each year, 12% of allowances in circulation will be
competition protection. This means that it has a final say on the state aid rules and is able to block removed from the market to MSR if the surplus of allowances is higher than a predefined level
domestic support schemes in the energy sector if they are seen as harming the competition on (833 million allowances). When the surplus falls below 400 million allowances (or their price rises
the internal market. Other areas of the EU intervention – such as R&D support or cohesion policy – sharply), 100 million allowances accumulated in the MSR will be released back to the market
may also influence energy sector by redirecting the public funds towards development of each year. Thus, the MSR is a quantity-based mechanism which aims to stabilise the price of GHG
preferred elements of the energy mix. emissions. It remains to be seen whether and to what extent this goal will be achieved.
The IED introduces the mandatory use of best available techniques (BAT), which means the
Figure 2.2 The role of the EU emissions trading system in stimulating
ones that offer the greatest (currently feasible) reduction of pollutant emissions and their
low carbon investments.
impact on the environment. The BATs are defined in BAT reference documents (BREFs),
which will become legally binding in the regulatory framework set by the IED. BATs for large
combustion plants will be applicable to coal- and gas-powered plants. They are expected
Price Funding for
Long-term GHG not only to tighten the existing standards (such as those for emissions of sulphur and
signal innovations
target visibilty nitrogen oxides), but also introduce new standards for substances previously not covered by
environmental regulations. This will result in further retrofit needs for existing power plants, as
well as increased investment costs.
Uncertain price developments

Table 2.1 EU air quality regulations for coal and gas-fired power plants.
Source: IED Directive, WiseEuropa
Low-carbon investment Regulation Timeline
Source: WiseEuropa
Industrial Emissions Directive (IED) Entry into force: 6 January 2011
EU ETS is also intended to provide a source of funding for low-carbon technologies. Regulations Compliance deadline for existing plants: 1 January 2016
state that at least half of the revenue from national auctions should be used for funding climate
IED derogations Transitional National Plans 1 January 2016 – 30 June 2020
change mitigation and adaptation measures. In addition, after 2020, 400 million allowances will
be used to create an innovation fund, which will support deployment of innovative low-carbon Limited life time derogation 1 January 2016 – 31 December 2023
technologies in the energy sector and wider industry. It will operate in a similar way to the
Small isolated systems 1 January 2016 – 31 December 2019
current NER300 programme, which is focused only on low-carbon energy generation.
District heating plants 1 January 2016 – 31 December 2022
EU ETS will finance a modernisation fund, which will support the energy sector transition in
member states with relatively low GDP per person. Most of these countries have already BAT conclusions concerning 4 years after publication
secured derogation for their energy sectors, allowing free allocation of allowances to electricity
Large Combustion Plants (LCP) Estimated compliance deadline: 2021
generators in exchange for investments to modernise and reduce carbon emissions. In principle,
all these funds may be used for the development and scaling up of technologies for low-carbon
production of energy from coal and gas technologies, including carbon capture and storage
(CCS) solutions. The current low price of allowances, however, does not provide an adequate Utilities that decide to invest in retrofitting existing coal- and gas-fired power plants face
price signal for this technology development as shown in Figure 2.2. Thus, while EU ETS reduces the risk of not recovering the costs of compliance to new air quality regulations. This is
incentives for the development of conventional coal- and gas-fired- power plants in the long due to two key factors. Firstly, revenues from the wholesale electricity market do not cover
term, it does not provide sufficient support for the development of clean alternatives based the fixed costs of conventional plants. While this issue may be eventually addressed by
on fossil fuels to proceed as quickly as it could. The result is investment uncertainty and slower the energy market reform, there is the second factor: unclear position of retrofitted power
progress in deployment of technologies including CCS in Europe. plants in the future merit order (supply curve) due to potential increases in the emission
allowance prices and further growth of renewables. The higher the variable costs of
2.4.2. Air quality
coal and gas plants relative to other installations in the system, the lower their capacity
EU climate policy is not the only driver of environmental regulations affecting the prospects of
utilisation. This, in turn, increases the cost of compliance to emission standards per unit of
coal- and gas-based power generation in the EU. Another important factor, especially in short
energy produced.
and medium term, is EU legislation related to air quality. The EU Industrial Emissions Directive
(IED) sets mandatory emissions standards for large industrial installations, including power plants, 2.4.3. State aid rules
as shown in Table 2.1. The standards concerning harmful substances such as sulphur or nitrogen The EU Guidelines for State Aid1 is the key document describing state aid rules related to the
oxides apply to existing installations from January 2016. Numerous derogations give utilities energy sector. From the perspective of coal- and gas-based generation, the two key chapters are
enough time to retrofit their power plants according to new rules, however. These include plants those related to generation adequacy (capacity mechanisms) and CCS support. While guidelines
that have a limited lifetime and are expected to be decommissioned at the latest by the end of for the latter are relatively clear, allowing both operating and investment aid for CCS if it covers
2023, small systems isolated from the energy network, and plants focused on providing useful
heat to public networks. The derogations end between 2020 and 2023. 1 Guidelines on State aid for environmental protection and energy 2014-2020, European Commission, 28 June 2014
the additional costs of the installation compared to conventional plant, the Commission’s The key unresolved question concerns the role of the system in the expected decarbonisation
approach to the generation adequacy is more nuanced. of Europe’s power system and industries. At the same time, the need for technology specific
policies for renewable energy systems, energy efficiency, nuclear or clean coal is often
underlined. In this context the Paris agreement should be seen as a confirmation rather than
Figure 2.3 EC approach to the capacity mechanisms assessment. an enhancement of European ambitions in the climate protection area. In the future, actions of
third parties including the U.S. and China may put additional pressure on Europe to adopt more
far-reaching commitments.
Preferred options Last resort option
The long-term viability of coal- and gas-based electricity generation depends on the
technological innovations allowing them to stay in the merit order not only if the EU ETS price
Interconnections
significantly increases, but also if even near-100% carbon emissions reductions targets are
Capacity
adopted. While the EU provided funding for pilot CCS projects, low ETS prices and investment
Demand side mechanisms
uncertainty have resulted in much slower progress than expected in this area. Various measures
response
to increase the pace of CCS development in Europe are considered for the near future, but no
actions have been undertaken up to date.
Reforming energy
only market On the other hand, without technologies such as CCS (and others such as carbon capture and
utilisation and CO2 enhanced oil recovery), achieving the EU climate targets for 2050 may be
Source: WiseEuropa either costly or technically not feasible, especially if process emissions in industry are taken
into account (such as produced from cement or chemical plants). The potential for achieving
“negative emissions” from biomass and CCS plants creates opportunities for future research and
According to the guidelines, various forms of capacity mechanisms (providing remuneration
innovations within this area.
to utilities for maintaining availability of power plant capacities in order to ensure security
of supply on electricity market) should be introduced only if other options for balancing 2.5.2. Energy security
supply and demand have failed, as shown in Figure 2.3. Specifically, this includes using the While the current EU framework prioritises renewables and energy efficiency as long-term
potential of interconnections between the national energy systems and providing incentives contributors to improved energy security, the role of indigenous fossil fuels (including
for electricity users to reduce their consumption at times of peak demand (demand side coal and shale gas) is also recognised by the Commission, provided their use is in-line with
response). Furthermore, before adding new mechanisms to the market, improvements to climate goals and environmental standards. There are major technological and geopolitical
the existing structure must be explored. One example is removing price caps on wholesale arguments for their continued use in the European energy system even if the ambitions
electricity markets, which should provide additional incentives to maintain existing power reduction targets are accepted.
plants and invest in new installations. From the point of view of coal- and gas-based power
Coal- and gas-fired power plants are still expected to contribute to security of supply,
plants this means that they will have to compete with alternative options for providing
providing necessary flexibility and predictability for the future energy system. This may
security of supply in electricity markets.
change if technological alternatives in the form of cost-effective energy storage are
developed. It is, however, considered unlikely that this will happen on a system-wide
2.5. Prospects for EU policy
scale before 2030. Therefore, the EU has undertaken numerous steps towards increasing
2.5.1. Climate policy after COP21 gas supply security, including supporting infrastructure developments, promoting
Since 2005 and the establishment of the ETS, the EU has demonstrated that it is strongly regional approaches to resolving gas supply distortions, and increasing the transparency
committed to its climate goals. The COP 21 Paris agreement has reinforced this commitment, of intergovernmental agreements in energy. On the other hand, coal supplies are
signalling that global and EU climate policy will be tightened over time. Although the considered secure despite the significant dependence of the EU as a whole on imports,
negotiations that concluded during COP21 took a bottom-up approach (each party thanks to the diversity in the potential suppliers and high market liquidity. Because of
declaring its own climate policy targets), the global policy shift towards decarbonisation that, domestic hard coal sources are not perceived by most of the parties (including the
has been confirmed. In consequence, calls for upward revision of EU climate and energy Commission and most member states) as a significant contributor to energy security for
targets for 2030 have re‑emerged. These calls have been largely ignored so far, as the the continent.
debate on climate policy within the EU remains largely driven by the internal discussions
2.5.3. Cost of energy, air quality and single energy market
on ETS reform.
Energy affordability is one of the core objectives of EU energy policy. However, it co-exists with
other goals, notably climate protection and security of supply.
This means that minimisation of energy costs is constrained by reaching other targets. In 2.6. Implications for coal and gas-fired energy technology
practice, this is seen in the EU preference for market-based mechanisms which are expected to development
allow cost-efficient achievement of sustainable, secure energy supply.
The European regulatory framework puts pressure in three ways on conventional coal- and
Two converging processes are visible: gas-based power plants:
1. Development of a new energy market design, and
2. Deepening energy market integration under the Third Energy Package.
• Increased costs related to climate and other environmental externalities
• Limited possibilities for receiving state aid, and
These are both intended to increase cost-efficiently the security of supply within the EU and – at • Increased competition on the single energy market.
the same time – support gradual decarbonisation of the European power system. A consequence
Global climate policy leads in the same direction. After the COP21 Paris summit in 2015, it
of these processes is likely to be that coal- and gas-fired plants will face more competition in
regained its momentum, casting doubts on the long-term prospects of unabated fossil fuels in
each market, through external energy supply and internally through higher levels of renewable
the global energy mix. These processes make conventional coal- and gas-based power plants
and increased demand response.
largely incompatible with the European and global climate policies in the long-term. Further
At the same time, clean coal technologies and CCS for gas are included in the long-term development of renewables and energy efficiency measures together with the increase of ETS
energy decarbonisation pathways by the EU and other international institutions, such as the allowance prices will gradually decrease the capacity utilisation factors of existing and planned
International Energy Agency (IEA). While more expensive than conventional coal- and gas- conventional coal- and gas-fired plants.
fired power plants, they significantly reduce the costs of the deep decarbonisation policies
At the same time, fossil fuel power plants have distinctive technological features that make them
in the energy sector and therefore remain an attractive alternative option as part of the
useful, elements of the modern energy systems. Therefore, the energy transition foreseen by
future power mix. In this context more innovative approaches to the integration of clean
European policy should not be seen as just a threat for fossil fuels, but also an opportunity to
coal and gas technologies with renewable generation are required in the longer term to
redefine the place of coal- and gas-fired plants in the broader energy system.
achieve least-cost operation of the whole energy system (for example to avoid very low
capacity utilisation rates at CCS plants). There is an urgent need for low-carbon innovations, as only affordable, near zero-emission
technologies are likely to secure market share for electricity production after 2030. Developing
An important element of EU energy and environmental policy is air quality. Policy focus in
solutions for near zero-emission fossil fuel plants will significantly decrease the cost of energy
this respect is gradually moving from industrial emissions (covered by IED) towards pollution
transition, stabilizing the energy system and providing much-needed security of supply.
from other sources, such as the transport and residential sectors. In this context, electrification
of transport and development of district heating may contribute to air quality improvement, Market liberalisation and integration mean that innovative coal- and gas-based solutions should
while at the same time increasing demand from the power sector. As such, this offers new address not only technical, but also market challenges, such as low capacity factors driving up
opportunities for fossil-fuel-based technologies, provided they are able to reduce their GHG the average total cost of electricity production. Developing affordable low-carbon options
emissions significantly. This again shows the importance of CCS and other clean coal and gas for fossil fuel use is also important from the global perspective. It will contribute to increased
technologies for their future in the EU energy system. ambition of climate policies beyond the EU, which is necessary to meet ambitious goals set by
the Paris agreement.
CHP production is one of the technological options, providing reduced fuel inputs and CO2
emissions. The use of CHP is promoted by the Energy Efficiency Directive, which requires
a cost-benefit assessment of CHP introduction whenever there is a potential for such
investment (usually when there is new investment or substantial refurbishing of power
plant, industrial facility or district heating network). Nevertheless, coal- and gas-based CHP
plants are under significant regulatory and market pressure. They face challenges related
both to electricity and heat production, such as low wholesale electricity prices, new
emission standards and the need to compete with distributed heat production, which is
often not subject to similar climate and environmental standards. Furthermore, in its Heating
and Cooling Strategy communication released in February 2016, the European Commission
focuses mainly on renewables-based CHP, such as biomass-fired or geothermal installations.
Nevertheless, there are potential synergies between CHP and CCS technologies which may
improve the competitiveness of coal- and gas‑fired plants because the unit costs of capture
and storage of CO2 are reduced, as the investment and operating burden is spread over
higher total energy production.
3.2. Project terminology and assumptions

3.2.1. Assumptions
A detailed set of baseline assumptions were established in advance of modelling. These are
presented in Appendix A, covering technical and non-technical global considerations and
power-plant-specific parameters.
3.2.2. Terminology
For clarity, when referring to the impact of an innovation that lowers costs or the LCOE, terms
such as reduction or saving are used and the changes are quantified as positive numbers. When
these reductions are represented graphically or in tables, reductions are expressed as negative
numbers as they are intuitively associated with downward trends.
Changes in percentages (for example, losses) are expressed as a relative change. For example, if
innovation reduces losses by 5% from a baseline of 10%, then the resulting losses are 9.5%.
3.3. Innovation impact modelling – gas CHP plant

3. Methodology The basis of the model is an assessment of the differing impact of technology innovations in
each of the power plant elements on the baseline power plant, as outlined in Figure 3.1. This
Section describes the methodology for analysis of each innovation in detail. An example is given
3.1. Scope of model in Appendix A.
The basis of the model is a set of baseline elements of capital expenditure (CAPEX),
The baseline power plant is defined in detail in Section 4.a, and represents a typical modern gas
operational expenditure (OPEX) and annual energy production (AEP) for two different
CHP plant for projects reaching FID at the start of 2016 that produces 700kW of heat and 500kW
representative Technology Types under given conditions, impacted by a range of
of electricity.
technology innovations. Analysis is carried out at two further points in time (years of
FID), thus describing various potential pathways that the industry could follow, each with Where an innovation changes electricity generation efficiency and therefore heat output, the
an associated progression of LCOE. The model has been successfully used in previous plant is scaled to deliver the same 700kW heat output as the baseline, as consistent heat delivery
projects delivered by BVGA for KIC InnoEnergy. is a priority for a CHP plant. This changes the electrical energy output, and it is assumed that this
can be supplied to the grid at commercial rates.
While the baselines each represent a relevant current plant, the innovation impact modelling
and moderation process results in an average impact on LCOE for projects with FID in the year
under consideration.
Figure 3.1 Process to derive impact of innovations on the LCOE. Note that
There is significant variability in costs between projects, due to both supply chain and Technology Type in this study means type of power plant.
technology effects, even within the portfolio of a given power plant developer. As such, any
baseline represents a wide spectrum of potential costs and it is accepted that there will be
Baseline parameters for given power plant
actual projects in operation with LCOEs significantly higher and lower than those associated
with these baselines. Anticipated technical impact of innovations
Revised parameters for given power plant for given Technology Type and year of FID
Note that the baselines and methodologies are slightly different for the gas CHP plant and the
coal plant, as described below. There are two reasons for this:
• CHP plants generate revenue from heat sales. The revenue from this is included by offsetting it
against fuel usage costs.
•
CHP plants are constructed as new projects at each FID year, while the coal plants are existing
infrastructure in most countries and are considered as such in this study. For the coal plants,
because these already exist, the impact modelled is that of retro-fitting technology innovations
at different FID years to the existing infrastructure, and assuming a fixed end of life in 2035. A
coal plant after retro-fitting is referred to here as a clean coal plant.
Figure 3.2 summarises this process of moderation. • The technical potential impact of one innovation is decreased by the subsequent introduction
of another innovation.
This commercial readiness is modelled by defining a factor for each innovation specific to
Figure 3.2 Three-stage process of moderation applied to the maximum potential
each year of FID, defining how much of the technical potential of the innovation is available to
technical impact of an innovation to derive anticipated impact on the LCOE.
projects with FID in that year. If the figure is 100%, this means that the full technical potential
is realised by the given year of FID. For some of the innovations modelled, it is anticipated that
Maximum technical potential impact of innovation
further progress will be made after the last year of FID modelled (2025).
under best circumstances
The factor relates to how much of technical potential is commercially ready for deployment in a
Commercial readiness commercial plant of the scale defined in the baseline, taking into account not only the offering
Technical potential impact for a given Technology
for sale of the innovation by the supplier but also the appetite for purchase by the customer.
Type and year of FID
Reaching this point is likely to have required full-scale demonstration. This moderation does not
relate to the share of the market that the innovation has taken but rather how much of the full
Anticipated technical impact for a given benefit of the innovation is available to the market.
Market share
Technology Type and year of FID
3.3.3. Market share
Each innovation is assigned a market share for each year of FID. This is a market share of an
innovation for a given Technology Type for projects with FID in a given year. It is not a market
3.3.1. Maximum technical potential impact share of the innovation in the whole of the market that consists of a range of projects with
different Technology Types.
Innovations are considered in clusters of similar technologies or impacts. Each of these may
affect a number of different costs, AEP or losses, as listed in Table 3.1. The maximum technical The market share may be impacted by factors such as the limited availability of low cost fuels,
potential impact on each of these is recorded for each innovation cluster. Where relevant and and takes into account the application of competing technology innovations.
where possible, this maximum technical impact considers timescales that may be well beyond
The resulting anticipated impact of a given innovation, as it takes into account the anticipated
2025, the final year of FID.
market share of this Technology Type in a given year of FID, can be combined with the anticipated
Frequently, the potential impact of an innovation can be realised in a number of ways, for example impact of all other innovations to give an overall anticipated impact for this Technology Type
through reduced CAPEX or OPEX, or increased AEP. The analysis uses the implementation and year of FID. At this stage, the impact of a given innovation is still captured in terms of its
resulting in the largest reduction in the LCOE, which is a combination of CAPEX, OPEX and AEP. anticipated impact on each cost and operational parameter, as listed in Table 3.1.
These impacts are then applied to the baseline costs and operational parameters to derive the
impact of each innovation on LCOE for each Technology Type and year of FID, using a generic
Table 3.1 Impact on cost of Impact on
weighted average cost of capital (WACC).
Information • Power plant development and balance of plant • Gross AEP, and
recorded for each • Fuel handling • Losses The aggregate impact of all innovations on each operational and energy-related parameter in
innovation. (%) • Energy conversion system Table 3.1 is also derived, enabling a technology-only LCOE to be calculated for each combination
• Emissions system of Technology Type and FID year.
• Power plant operation, maintenance and service
• Fuel usage, and 3.3.4. Treatment of Other Effects
• Emissions To derive a real-world LCOE, this ‘technology-only’ LCOE is factored to account for the impact of
various other effects, defined for each combination of Technology Type and year of FID as follows:
•
Scenario-specific WACC, taking into account risk beyond that covered by contingency
3.3.2. Commercial readiness •
Increasing costs over time for emitting pollutants (emissions costs in excess of the
In some cases, the technical potential of a given innovation will not be fully realised, even on a baseline costs)
project with FID in 2025. This may be for a number of reasons:
A factor for each of these effects was derived for each specific Technology Type and FID year, as
• A long research, development and demonstration period for an innovation presented in Appendix A.
• The technical potential can only be realised through a design’s ongoing evolution based on The factors are applied as follows:
feedback from commercial-scale manufacture and operation, or
• Scenario-specific WACC is used in place of the generic WACC to calculate a revised LCOE, and
• The emissions cost factor is applied to this LCOE to derive the real-world LCOE, for example, a
12.0% effect to account for emissions cost is applied as a factor of 1.120.
These factors are kept separate from the impact of technology innovations in order to clearly
identify the impact of innovations, but they are needed in order to be able to compare LCOE for
different years and Technology Types rationally.
The effects of changes in construction time or scheduling are not modelled.
3.4. Innovation impact modelling – coal power plant

The modelling for the coal power plant focuses on a single 225MW unit and is similar to that
described above, with three important differences:
•
Compared with the existing installed base, only a small number of new coal plants are
expected to be built in Europe in the period being studied and an alternative method for
setting capital cost baselines was needed. The capital cost baseline for this Technology Type
in 2016 is modelled as the market price for an existing power plant as it currently is. Capital
cost baselines for this Technology Type in 2020 and 2025 are also produced in the same
way assuming no innovations or other upgrades are implemented at earlier points in time.
4. Gas CHP plant
The CAPEX breakdown is modelled as a nominal split based on experience (rather than by
knowledge of the costs of components produced by the supply-chain as is the case for the
4.a. Baseline
gas CHP plant). The modelling process described in Section 3 is to:
•
The power plant is assumed to cease operation in 2035, so in 2016 its life is 19 years, in 2020 its •
Define a set of baseline power plants and derive costs, and energy-related parameters
life is 15 years and in 2025 its life is 10 years. for each
•
The innovations are modelled as being implemented (or retro-fitted) on this baseline power •
For each of a range of innovations, derive the anticipated impact on these same parameters
plant in 2016, 2020 or 2025. for each baseline power plant, for a given year, and
As a result of this approach, although the baseline LCOE increases, the impact of innovations in
•
Combine the impact of a range of innovations to derive costs, and energy-related
parameters for each of the baseline power plants for each year.
reducing the LCOE increases with time, as shown in Figure 3.3.
This Section summarises the costs and other parameters for the baseline gas CHP plant.
This baseline was developed by the subject matter experts in gas CHP systems.
Figure 3.3 Baseline LCOE for the 225MW unit of a coal plant and LCOE The baseline costs presented in Table 4.1 and Figure 4.1 and Figure 4.2 are nominal contract
with innovations. values, rather than outturn values, and are for projects with FID in 2016. As such, they
incorporate real-life supply chain effects such as the impact of competition. All results
80 presented in this report incorporate the impact of technology innovations only, except
for when LCOEs are presented in Section 4.g.3, which also incorporate the Other Effects
60 discussed in Section 3.3.4.
40
20
0
LCOE (€/MWh) Coal-16 Coal-20 Coal-25
•LCOE (With innovation) •LCOE (No innovation) Source: BVG Associates

Table 4.1 Baseline parameters for 500kW gas CHP plant with FID in 2016. Figure 4.1 Baseline CAPEX by element. Source: BVG Associates
Type Parameter Units 2016 FID

1,500
CAPEX Development €k/MW 244
1,000
Fuel handling 81
500
Energy conversion system 1,303
0
Emissions treatment2 0 CHP-16
€k/MW
OPEX Operations, planned and unplanned Maintenance €k/MW/yr 68
•Development •Fuel handling •Energy conversion system •Emissions treatment
Fuel usage cost (net of heat sales income) 2023
Emissions cost4 1
Figure 4.2 Baseline OPEX and net capacity factor.
AEP Gross AEP MWh/yr/MW 7,500
Losses % 2.5 250 100
200 80
Net capacity factor (%)

Net AEP MWh/yr/MW 7,312
OPEX (€k/MW/yr)
Net capacity factor % 83.5 150 60

100 40
50 20
The baseline plant is assumed to use a reciprocating, spark-ignited internal combustion engine 0 0
CHP-16
operating on natural gas from the pipeline grid. It is assumed to operate at 1500 revolutions
per minute, and use turbocharging, aftercooling and a lean-burn combustion strategy with an •OMS •Fuel usage •Emissions cost •Net capacity factor Source: BVG Associates
excess air ratio of approximately 1.5.1. The electrical rating is 500kW, and the heat output rating
is 700kW, which is typical for industrial and district heating sectors in Europe. 234
These baseline parameters are used to derive the LCOE for the baseline plant. The LCOE for the
Because CHP systems are sized to deliver a certain heat output, if innovations affect electrical
baseline power plant is presented in Figure 4.3
efficiency (and hence energy available as heat changes), then the unit would be re-sized to
keep heat output the same. Any extra electricity generated from this re-sizing would be sold
to the grid.
Figure 4.3 LCOE for baseline power plant with Other Effects incorporated.
CAPEX is assumed all to be in the year before start of operation. The value of the heat output is
calculated and used to offset the fuel OPEX. 100 100

80 80
LCOE (€/MWh)
60 60
40 40
20 20
2 For a CHP plant, the emissions treatment system is integral to the energy conversion system. The CAPEX for emissions treatment is 0 0
shown as nil and impacts on the cost of this system are modelled by changes in the CAPEX for the energy conversion system. CHP-16
•LCOE including Other Effects •Net capacity factor

3 After allowing for heat sales income of €247,000, based on 5,280MWh per year and €46.8/MWh price for the heat for the 500kW unit. Source: BVG Associates
4 Emission cost from a CHP plant depends on national regulations. In this case it is modelled as the same nominal value as used in
Poland for this plant size.

4.b. Innovations in fuel handling Practice today: Gas engines in CHP plants are designed for operation on natural gas and,
when demanded, are adjusted for operation on alternative gas fuels. This adjustment
4.b.1. Overview
is usually accompanied by engine derating and control problems due to variability in
Innovations in fuel handling and usage are anticipated to reduce the LCOE of gas CHP
the gas composition causing differences in fuel energy value and combustion flame
plants in 2025 by about 4% compared with the baseline 2016 plant. All the savings result
propagation rates.
from OPEX reductions.
Innovation: This innovation covers the development of reliable and effective gas engine
Table 4.2 and Figure 4.4 show that the innovation with the largest anticipated impact in technology for utilisation of coke oven gas, biomass gasification gas, and other industrial waste
FID 2025 is improvements in the use of alternative gaseous fuels in internal combustion gasses. Activities are focused on:
(IC) engines. • Effective and reliable fuel systems for low calorific and polluted gases (such as coke-oven gas,
blast-furnace gas, tail gas, tar-rich gas, hydrogen-rich purge gases, biogas)
• Power plant integration with electrolysis for hydrogen production and injection into
Figure 4.4 Anticipated and potential impact of fuel handling and usage innovations on LCOE the engine
for a project with FID in 2025. • Combustion of hydrogen and natural gas mixtures.
Commercial readiness: 70% of the benefit of these innovations is realisable in 2020, with 100%
•Anticipated •Potential Impact on LCOE realisable by 2025, because, although technology development is required, there is a strong cost
saving driver.
Improvements in use of alternative gaseous fuels in IC engines Market share: It is anticipated that this innovation will be implemented on 10% of plants in
Improvements in use of alternative liquid fuels in IC engines 2025, due to the limited availability of low-cost alternative gases.
0% 10% 20% 30% 40% 50% Improvements in use of alternative liquid fuels in IC engines
Practice today: Engines in the CHP sector almost exclusively run on gaseous fuels, due to poor
availability of low-cost liquid fuels.
Innovation: This innovation covers development of engines to use liquid fuels from
Table 4.2 Anticipated and potential impact of fuel handling and usage innovations for a project with FID in 2025.
biomass conversion processes. This includes bio-oils from pyrolysis, biodiesel, methanol
and ethanol. The innovation concerns combustion system development for full operation
Innovation Maximum technical potential impact Anticipated impact FID 2025
on the liquid fuel and for fuel mixtures (especially liquid biofuels and methanol mixed with
CAPEX OPEX AEP LCOE
CAPEX OPEX AEP LCOE gas in dual-fuel engines).
Improvements in use of alternative
realisable by 2025, as technology development will be complete, but not all manufacturers may
gaseous fuels in IC engines -16.0% 100.8% -15.5% 39.8% -1.6% 10.1% -1.6% 3.4%
choose to offer engines with liquid fuel capability.
Improvements in use of alternative Market share: It is anticipated that this innovation will be implemented on 5% of plants in 2025,
liquid fuels in IC engines -15.9% 48.6% -0.6% 19.6% -0.6% 1.7% 0.0% 0.7% due to the market being limited by the supply of such fuels.
4.c. Innovations in the combustion system

4.b.2. Innovations
Innovations in fuel handing and usage generally focus on the use of fuels other than network 4.c.1. Overview
natural gas (the normal fuel). A subset of the more important of these has been modelled here. Innovations in the combustion system are anticipated to reduce the LCOE of gas CHP
plants in 2025 by over 10% compared with the baseline 2016 plant. All the savings result
In addition, an innovation in the use of liquefied natural gas (LNG) as a fuel was considered.
from AEP increases.
Operation on LNG could reduce the LCOE in niche applications where the engine
otherwise uses diesel fuel, and in applications where the availability of low-temperature Table 4.3 and Figure 4.5 show that the innovations with the largest anticipated impact in FID 2025
cooling has significant benefit. In most applications, however, this innovation would are improvements in engine mechanical design and improvements in combustion chambers for
increase the LCOE from a baseline system operating on natural gas and so is not included lean mixtures. In both cases AEP increases far outweigh CAPEX and OPEX increases.
in the overall analysis.

Figure 4.5 Anticipated and potential impact of combustion system innovations on LCOE for a project with
Practice today: Mechanical design of modern gas CHP engines features reciprocating four
FID in 2025.
stroke multi-cylinder designs usually in vee or in-line configurations, constructed from a mix of
•Anticipated •Potential Impact on LCOE steels, cast iron and aluminium alloys.
Innovation: This innovation covers two areas:
Improvements in ignition systems
• Increase in power output through new configurations, such as opposed piston engines,
Improvements in engine mechanical design through new designs of pistons and cylinder heads enabled by new materials and design
Improvements in combustion chambers for lean mixtures methods, and
Improvements in combustion control • Improvement in utilisation by avoiding environmentally-driven downtime through development
Source: BVG Associates of better cooling enclosures for engine and generator and implementation of noise and
0% 2% 4% 6% 8% 10% 12%
vibration reduction systems.
realisable by 2025 onwards, as technology development will be piece-wise.
Table 4.3 Anticipated and potential impact of combustion system innovations for a project with FID in 2025.
Market share: It is anticipated that this innovation will be implemented on 70% of plants in
Innovation Maximum technical potential impact Anticipated impact FID 2025 2025, covering all but the lowest cost gas CHP systems.
CAPEX OPEX AEP LCOE CAPEX OPEX AEP LCOE
Improvements in ignition systems -12.0% -26.8% 22.4% 1.7% -6.0% -13.4% 11.2% 1.0%
Practice today: Today most engines with lean-burn technology operate with an air excess ratio
Improvements in engine mechanical design -4.0% -20.8% 20.2% 5.6% -2.8% -14.6% 14.1% 4.2% (lambda) in the range 1.3 to 1.7.
Innovation: An increase in excess ratio is beneficial but is only possible with advanced
Improvements in combustion chambers for lean mixtures 0.0% -15.6% 15.1% 5.6% 0.0% -12.5% 12.1% 4.6%
ignition technology, combustion control and combustion chamber design. This innovation
Improvements in combustion control -4.0% -7.7% 7.6% 1.4% -2.2% -4.3% 4.2% 0.8% focuses on the increase of combustion air excess ratio (up to 2.2) and specific power per
cylinder through the development of pre-chamber technology and/or shape optimisation of
the combustion chamber.
Commercial readiness: 70% of the benefit of these innovations is realisable by 2020 and 100%
4.c.2. Innovations by 2025, due to the availability of some technologies already and the expected progress of
Innovations in the combustion system span a range of technologies from ignition systems to development in this area by the engine manufacturers.
control and mechanical design. A subset of the more important of these has been modelled here. Market share: It is anticipated that this innovation will be implemented on 80% of plant in
2025, covering all but the lowest cost gas CHP systems, as it will generally be available with no
Improvements in ignition systems additional capital cost.
Practice today: Gas engines in CHP plants are usually spark ignited. Spark ignition is effective but
Improvements in combustion control
limits peak efficiency due to the tendency of the gas-air mixture to detonate. Dual fuel technology,
where a small injection of diesel is used to ignite the gas is available but not widely adopted due Practice today: Advanced combustion control techniques are used in large engines (multi-MW
to the higher price of diesel fuel and the additional complexity of a second fuel system. class). Smaller engines are usually controlled with conventional cylinder pressure and exhaust
Innovation: This innovation covers the improvement of engine ignition systems to support gas temperature measurements.
faster combustion and enable operation at higher efficiencies and with lower emissions. The Innovation: This innovation is aimed at meeting emissions regulations more effectively, with
innovation includes: better efficiency and reliability than other methods. The innovation covers three areas:
• Laser and other high-energy ignition systems for very lean air-fuel mixtures • Fuel-air mixture composition control (cylinder-by-cylinder)
• Development and implementation of homogeneous charge compression-ignition combustion • New valve designs and control of valve operation for increased volumetric efficiency, and
• Further development of dual-fuel technology using very small (pilot) quantities of diesel or alternatives. • Electronics and sensors for better control and increased efficiency at part load.
Commercial readiness: 30% of the benefit of these innovations is realisable in 2020, with 100% Commercial readiness: 20% of the benefit of these innovations is realisable by 2020, with 80%
realisable by 2025 after the development and commercialisation of some of the more advanced realisable by 2025 onwards, as some of the technology already exists, but will take time to adapt
systems is completed. and optimise for smaller engines.
Market share: It is anticipated that this innovation will be implemented on 50% of plants in Market share: It is anticipated that this innovation will be implemented on 70% of plants in
2025 and focused on the higher-cost systems in applications with higher utilisation. 2025, covering all but the lowest cost gas CHP systems.

4.d. Innovations in the energy Practice today: Gas engines in CHP plants use the Otto cycle, which is normal for spark-ignited IC engines.
conversion system Innovation: This innovation covers the implementation of modified thermodynamic cycles
such as the Miller cycle which can improve efficiency by changing the relative compression and
4.d.1. Overview expansion ratios in cylinders. This may be achieved by implementation of variable valve timing
Innovations in the energy conversion system are anticipated to reduce the LCOE of gas CHP systems supported by external air compression. Activities are focused on:
plants in 2025 by nearly 4% compared with the baseline 2016 plant. All the savings result from • Development of engine control maps for individual fuels, with adaptive adjustment to site and
AEP increases. fuel conditions, and
Table 4.4 and Figure 4.6 show that the innovation with the largest anticipated impact in FID 2025
• Variable valve timing.
is improvements in power per cylinder from IC engines.
realisable by 2025 onwards, because, although technology development is required, there is a
strong cost saving driver.
Figure 4.6 Anticipated and potential impact of energy conversion system innovations on LCOE for a project
2025, covering most gas CHP systems based on new engine designs.
with FID in 2025.
•Anticipated •Potential Impact on LCOE

Practice today: Engines in the gas CHP sector operate with a brake mean effective pressure
Improvements in thermodynamic cycles in IC engines (BMEP) of between 9 and 17 bar, which limits power per cylinder.
Improvements in power per cylinder from IC engines Innovation: This innovation covers increasing the power per cylinder by increasing BMEP
Source: BVG Associates through developments in three main areas:
0% 1% 2% 3% 4% 5% • Increased turbocharger pressure ratios and improved aftercooling
• New designs of heat exchangers, especially for intake charge cooling, and
• Multi-stage turbocharging.
This innovation is usually implemented alongside lean combustion and combustion control.
Table 4.4 Anticipated and potential impact of energy conversion system innovations for a project with FID in 2025.
Innovation Maximum technical potential impact Anticipated impact FID 2025 realisable by 2025 onwards, as technology development is ongoing currently.
2025, covering all but the lowest cost gas CHP systems.
Improvements in thermodynamic cycles in IC engines -4.0% -20.6% 16.0% 2.3% -1.6% -8.2% 6.4% 1.0%
Improvements in power per cylinder from IC engines -8.0% -26.8% 22.4% 3.2% -6.4% -21.4% 17.9% 2.6%
4.e. Innovations in emissions treatment
4.e.1. Overview
Innovations in emissions treatment generally focus on primary and post-combustion reduction
4.d.2. Innovations
methods and both approached have been considered. They would both increase the LCOE from the
Innovations in the energy conversion system span a range of technologies from thermodynamic
baseline system in the time period up to 2025, and so are not included in the overall analysis. Increases
cycle improvements to hybridisation and alternatives to the IC engine. A subset of the more
in the costs for emitting pollutants could, however, reduce the LCOE in applications in the longer term.
important of these has been modelled here.
Innovations for introduction of combined thermodynamic cycles and for fuel-cell hybrid power
systems were considered. These would increase the LCOE from a baseline system with a single 4.f. Innovations in power plant operation,
power unit and a single thermodynamic cycle and so are not included in the overall analysis.
maintenance and service
In addition, an innovation for use of alternatives to the conventional internal combustion engine
was considered. This would increase the LCOE from the baseline system in this time frame, and 4.f.1.Overview
so is not included in the overall analysis. Alternative prime movers, however, could reduce the Innovations in plant operation, maintenance and service are anticipated to reduce the LCOE of gas CHP plants
LCOE in applications in the longer term. in 2025 by over 2% compared with the baseline 2016 plant. Most of the savings result from AEP increases.
Table 4.5 and Figure 4.7 show that the innovation with the largest anticipated impact in FID 2025
is improvements in structural materials.
realisable by 2025, as technology development will continue.
2025, because improved materials are straightforward to adopt in many cases.
Figure 4.7 Anticipated and potential impact of power plant operation, maintenance and service innovations on
LCOE for a project with FID in 2025.
Introduction of remote control and optimisation
Practice today: Most gas CHP plants are controlled on-site, with remote monitoring (if present)
Improvements in structural materials limited to operational parameters.
Introduction of remote control and optimisation Innovation: This innovation covers three areas:
Improvements in lubricants and additives • Remote and automated diagnostic procedures for IC engines
Improvements in CHP module design for maintenance • Improved monitoring systems to support the transition from preventive maintenance to
condition-based maintenance, and
0% 1% 2% 3% 4% • Development of remote control software and procedures.
realisable by 2025 onwards, as technology and service development is ongoing currently and
market demand is high.
Table 4.5 Anticipated and potential impact of plant operation, maintenance and service innovations for a
project with FID in 2025.
2025, especially those plants with more than one gas CHP system on the same site.
Improvements in lubricants and additives
Practice today: Modern lubricants need changing at regular intervals and do not prevent
Improvements in structural materials -8.0% -10.7% 11.4% 1.7% -4.5% -6.0% 6.4% 1.0%
deposits in the engine which degrade performance.
Introduction of remote control and optimisation -1.6% 3.8% 0.0% 1.4% -0.8% 1.9% 0.0% 0.7% Innovation: This innovation covers three areas, which between them reduce OPEX and
downtime and increase reliability:
Improvements in lubricants and additives 0.0% 0.1% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0%
• Lubricating oil on-line condition monitoring
Improvements in CHP module design for maintenance 0.0% 1.2% 0.0% 0.7% 0.0% 1.2% 0.0% 0.7% • New lubricating oils, especially for non-natural gas fuels, and
Source: BVG Associates • Development of air filtration systems.
realisable by 2025 onwards. New technology development will be needed, but the pace of
4.f.2. Innovations development can be relatively fast.
Innovations in gas CHP plant operations, maintenance and service span a range of technologies Market share: It is anticipated that this innovation will be implemented on 100% of plants in
from materials, to lubricants and overall design. A subset of the more important of these has 2025, due to the ease of implementation.
been modelled here.
Improvements in CHP module design for maintenance
Practice today: Engines in the gas CHP sector have high maintenance requirements, which
Practice today: Cast iron of different grades is typically used in the main structure of an IC limit availability to around 92%.
engine with steel and aluminium also being used in other parts. Innovation: This innovation covers better design of the CHP module to shorten service and
Innovation: This innovation covers new materials: maintenance activities and extend availability, and includes packaging and design for better
• For extended lifetime of hot parts (such as the pre-combustion chamber, spark plugs and gas access to engine components (especially crankshaft, camshaft and cylinder heads).
injectors; these materials include steel alloys and ceramics) Commercial readiness: 50% of the benefit of these innovations is realisable in 2020, with 100%
• For better durability and reliability (materials here include steel and aluminium alloys, plastics realisable by 2025 onwards. Technology development is already underway and market demand
and composites), and is high for innovation in this area.
• For lower cost engine peripheral components (materials here includes composites, elastomers Market share: It is anticipated that this innovation will be implemented on 100% of plants
and plastics). in 2025.
4.g. Summary of innovations and results Figure 4.10 OPEX and net capacity factor for gas CHP plants with FID in 2016 (baseline), 2020 and 2025.
4.g.1. Combined impact of innovations

600 90
OPEX (€k/MW/yr)
Innovations across all elements of the gas CHP plant are anticipated to reduce LCOE by about
17% between projects with FID in 2016 and 2025. Figure 4.8 shows that although the CAPEX and 400
85
OPEX increase, there is a larger increase in AEP which is why the LCOE is reduced. 200
It is important to note that the impact shown in Figure 4.8 is an aggregate (as described in 0 80
Section 3.3.3) of the impacts shown in Figure 4.4 to Figure 4.7 and as such exclude any Other
CHP-16 CHP-20 CHP-25
Effects such as WACC and emission costs. These are discussed in Section 4.g.3.
•OMS •Fuel usage •Emissions cost •Net capacity factor Source: BVG Associates
Figure 4.8 Anticipated impact of all innovations for FID in 2025 compared with FID in 2016.
100 4.g.3. Levelised cost of energy including impact of Other Effects

75 In order to compare real LCOE at each FID date, Figure 4.11 also incorporates the Other Effects
discussed in Section 3.3.4. It shows that, despite the effect of emission costs, the LCOE for the
50 electrical power from the gas CHP plant reduces as the innovations identified have increasing
25 impact over time.
0
-25 Figure 4.11 LCOE of gas CHP plants with FID in 2016, 2020 and 2025 with Other
% CAPEX OPEX Net AEP LCOE Effects incorporated.
100 100

4.g.2. Relative impact of cost of each power plant element 80 80
LCOE (€/MWh)
In order to explore the relative cost of each gas CHP plant element, Figure 4.9 shows the cost of all
CAPEX elements and Figure 4.10 shows the same for OPEX elements and the net capacity factor. 60 60
These figures show the relative static development and fuel handling CAPEX. The increase in the 40 40
energy conversion system CAPEX is a result of investing to deliver higher efficiencies. The CAPEX
increases are exploited to deliver higher AEP. The fuel usage OPEX increases, but not as much 20 20
as AEP, and operations, maintenance and service (OMS) OPEX increases only by a small amount. 0 0
CHP-16 CHP-20 CHP-25
Figure 4.9 CAPEX for gas CHP plants with FID in 2016, 2020 and 2025. •LCOE including Other Effects •Net capacity factor Source: BVG Associates
2,000
1,500 The contribution of innovations to this LCOE reduction is presented in Figure 4.12. It shows that
well over two-thirds of the LCOE savings anticipated in the gas CHP plant arise from innovations
1,000 in engine design, fuels and combustion (the first four innovations in the figure), but innovations
500 in many other areas are also important.
0
€k/MW CHP-16 CHP-20 CHP-25
•Development •Fuel handling •Energy conversion system •Emissions treatment Source: BVG Associates
Figure 4.12 Anticipated impact of technology innovations for a gas CHP plant with FID in 2025, compared
with a baseline gas CHP plant with FID in 2016.

Improvements in ignition systems
5 other innovations
5. Coal power plant

5.a. Baseline
The modelling process described in Section 3 is to:
•
Define a set of baseline power plants and derive costs, and energy-related parameters for each
•
For each of a range of innovations, derive the anticipated impact on these same parameters for
each baseline power plant, for a given year, and
•
Combine the impact of a range of innovations to derive costs, and energy-related parameters
for each of the baseline power plants for each year.
This Section summarises the costs and other parameters for the baseline coal power plants. The
baselines were developed by the KIC subject matter experts in coal power systems, and relate
to subcritical conventional power plants suitable for retrofitting of technology to improve cost
of energy.
The baseline costs presented in Table 5.1 and Figure 5.1 and Figure 5.2 are nominal contract
values (or current asset values in the case of CAPEX), rather than outturn values, and are for
projects with FID in 2016, 2020 and 2025. As such, they incorporate real-life supply chain effects
such as the impact of competition. All results presented in this report incorporate the impact of
technology innovations only, except for when LCOEs are presented in Figure 5.3 and in Section
5.g.3, which also incorporate the Other Effects discussed in Section 3.3.4.
Table 5.1 Baseline parameters for 225MW unit of coal power plants from 2016 to 2025. Figure 5.2 Baseline OPEX and net capacity factor.
Type Parameter Units 2016 FID 2020 FID 2025 FID
200 80

CAPEX Development €k/MW 62 60 54
OPEX (€k/MW/yr)
150 60
Fuel handling 16 14 12
100 40
Energy conversion system 164 141 152
50 20
Emissions treatment 81 62 64
0 0
OPEX Operations, planned and unplanned maintenance €k/MW/yr 16 17 21
Coal-16 Coal-20 Coal-25
Fuel usage cost 156 128 94
Emissions cost (Polish market) 19 95 104 •OMS •Fuel usage •Emissions cost •Net capacity factor Source: BVG Associates
AEP Gross AEP MWh/yr/MW 6,000 5,000 4,000

The timing profiles of CAPEX and OPEX are presented in Appendix A.
Losses % 8.0 8.0 8.0
These baseline parameters are used to derive the LCOE for the three baseline plants. A
Net AEP MWh/yr/MW 5,520 4,600 3,680 comparison of the relative LCOE for each of the baseline power plants is presented in Figure 5.3.
Net capacity factor % 63.0 52.5 42.0 The LCOE increases with time for the baseline plants because of the anticipated reduction in AEP
Source: BVG Associates through reduced demand; increased emissions costs through regulation; increased OMS costs
as the plant ages; and reduction in remaining useful life of the plant.
The baseline is assumed to be a unit of a thermal power plant fired with pulverised hard coal
dust, producing 650t/hour fresh steam output at 130 bar and 540 °C, equipped with selective
Figure 5.3 LCOE for baseline power plants with Other Effects incorporated.
catalytic reduction treatment for oxides of nitrogen and wet flue-gas desulphurisation. The
electrical rating is 225MW, which is typical for a small single unit of a power plant in Europe. The 100
plant is also assumed to be capable of burning other fuels with appropriate investment.
80
Figure 5.1 Baseline CAPEX by element. 60
€k/MW 40
175
20
150
0
125
75
LCOE (€/MWh) • Coal-16 Coal-20 Coal-25
50
25 5.b. Innovations in fuel handling
0 5.b.1. Overview
Innovations in fuel handling are anticipated to reduce the LCOE of coal plants in 2025 by just
•Development •Fuel handling •Energy conversion system •Emissions treatment over 15% compared with the baseline 2025 plant. The majority of the savings result from OPEX
reductions (especially from the thermal pre-treatment of biomass and waste-based fuels).
Table 5.2 and Figure 5.4 show that the innovation with the largest anticipated impact in FID 2025 Market share: It is anticipated that this innovation will be implemented on only 40% of plants
is introduction of thermal pre-treatment of biomass and waste-based fuels, which improves the in 2025, because of limitations in applicability due to variations in local policy and regulations.
quality of the fuel and allows plants to use greater quantities of biomass and waste-based fuels
in place of higher cost fuels. Introduction of thermal pre-treatment of biomass and waste-based5 fuels
Practice today: In the limited proportion of applications using biomass and waste-based fuels,
these are are used without torrefaction or gasification.
Figure 5.4 Anticipated and potential impact of fuel handling innovations for FID in 2025.
•Anticipated •Potential Impact on LCOE • Thermal pre-treatment in the form of torrefaction which upgrades the properties of biomass
and biomass-derived waste fuels. This increases energy density, reduces fuel preparation costs
Improvements in fuels through modification and switching (grinding), reduces transportation costs and increases the amounts that can be used (which
Introduction of thermal pre-treatment of biomass and waste-based fuels also reduces emissions cost), but increases processing costs; and
0% 10% 20% 6% 30% 40%
• Gasification, which reduces pollutant emissions when using some solid fuels containing
harmful elements such as trace heavy elements and corrosion-inducers (potassium and
chlorine). Some of these harmful elements are retained in the gasifier rather than passing
through to the power plant, so that emissions costs are reduced and the gas produced is
easier to use than the solid fuel.
Table 5.2 Anticipated and potential impact of fuel handling innovations for FID in 2025. Commercial readiness: 40% of the benefit of these innovations is realisable in 2016, with 80%
realisable by 2020 and 100% by 2025.
CAPEX OPEX AEP LCOE CAPEX OPEX AEP LCOE 2025, because of limitations in applicability due to variations in local policy and regulations.
Improvements in fuels through modification and switching -2.6% 17.8% 0.0% 14.3% -1.0% 7.1% 0.0% 5.7%
Introduction of thermal pre-treatment of biomass and waste-based fuels -2.1% 33.6% 5.2% 31.0% -0.6% 10.1% 1.6% 9.6% 5.c. Innovations in the combustion system
5.c.1. Overview
Innovations in the combustion system are anticipated to reduce the LCOE of coal plants in 2025
© Michał Major - EDF

by just over 10% compared with the baseline 2025 plant. The majority of the savings result from
5.b.2. Innovations
OPEX reductions from hybrid fuel consumption and AEP increases (especially from power plant
Innovations in fuel handling include physical and thermal treatment of the fuel, blending and
start-up and boiler flexibility).
the use of additives. A subset of the more important of these has been modelled here.
Table 5.3 and Figure 5.5 show that the innovation with the largest anticipated impact in FID 2025 is
In addition, innovations for improvements in the physical pre-treatment of fuels were considered.
improvements in hybrid fuel combustion, which reduced OPEX by enabling use of lower cost fuel.
These would increase the LCOE from the baseline system in this time frame, and so are not
included in the overall analysis.
Figure 5.5 Anticipated and potential impact of combustion system innovations for FID in 2025.
Practice today: Fuel additives are used, but are limited to basic minerals such as kaolinite that •Anticipated •Potential Impact on LCOE
are targeted at reducing slagging and fouling. Fuel blending is practised, but limited to fuels that Improvements in power plant start-up systems
are not classified as waste. Improvements in boiler flexibility
• The use of advanced mineral or artificial additives which reduce ash deposition and influence emissions
Introduction of boiler waste-heat recovery systems
such as oxides of nitrogen and mercury, while also reducing high-temperature corrosion, and
• Blending of low quality fuels (including those classified as wastes) with primary fuels up to full Source: BVG Associates 0% 5% 10% 15% 20% 25%
replacement.
Commercial readiness: 80% of the benefit of these innovations is realisable in 2016, with 100% 5 Note that municipal solid waste and refuse-derived fuel are excluded from consideration here, due to the stringent emissions
realisable by 2020 onwards. regulations around incinerator plants that would then apply.
Table 5.3 Anticipated and potential impact of combustion system innovations for FID in 2025.
realisable by 2020 onwards, because most of the technology exists.
Innovation Maximum technical potential impact Anticipated impact FID 2025 Market share: It is anticipated that this innovation will be implemented on 50% of plants in
2025. At least this level of implementation will be needed to provide the flexibility for increasing
levels of intermittent renewables being added to the total electricity system.
Improvements in power plant start-up systems -3.3% 0.9% 3.0% 4.0% -1.7% 1.0% 1.5% 2.0%
Improvements in boiler flexibility -1.9% -3.0% 10.0% 3.7% -1.0% -3.4% 5.0% 1.9%
Practice today: Conventional coal combustion plants use a single combustion chamber with
Introduction of hybrid fuel combustion -5.8% 10.8% -0.2% 19.2% -1.7% 7.4% -0.1% 5.7%
air injected at multiple levels.
Introduction of boiler waste-heat recovery systems -10.3% 0.8% 1.0% 0.8% -7.2% 1.3% 0.7% 0.5% Innovation: The innovation is to produce an integrated boiler with innovations such as multiple
fuel feeds, combustion chambers and reactors that enable the burning of coal alongside low
grade fuels, wastes and biomass.
realisable by 2020 and 100% by 2025. The most cost-effective combustion technology will take
5.c.2. Innovations
this long to develop.
Innovations in the combustion system span a range of technologies from boiler start-up systems
Market share: It is anticipated that this innovation will be implemented on 30% of plant in 2025,
through to the use of combustion waste heat. A subset of the more important of these has been
the market being limited due to variations in plant preferences and availability of suitable fuels.
modelled here.
Introduction of boiler waste-heat recovery systems
Improvements in power plant start-up systems
Practice today: Typically, there is a cross-flow heat exchanger before the flue gas desulphurisation
Practice today: The first step in starting-up a power plant is heating the boiler. Heavy oil is
(FGD) plant where hot inlet flue gas heats the flue gas exiting the FGD. There is typically no
typically used in a system of oil burners to achieve this, due to its low cost. However, heavy oil
waste-heat recovery.
needs to be heated prior to use which causes delay and produces pollutants during start-up.
Innovation: This innovation is to use recovered waste heat from the boiler flue gas exhaust
Innovation: This innovation covers the use of advanced burner systems (including plasma
to heat cold combustion air before the boiler’s air pre-heater. It replaces the heat from turbine
burners and dedicated burners for fine, dried fossil fuel). It also includes combining these with
bleed steam and increases the output and efficiency of the power plant. The effectiveness of this
the replacement of heavy oil by coal slurry; liquid biofuel (such as glycerol, spent cooking oil
innovation rises with fuel water content (and is therefore higher for fuels such as raw biomass or
and alcohols) waste; or fine, dried fossil fuel; to reduce pollution, cost and increase the energy
lignite) because of the higher latent heat recovery from flue gas in a condensing heat exchanger.
production by reducing start-up delays.
realisable by 2020 onwards, as most of the technology already exists.
realisable by 2020 onwards after the commercialisation of plasma systems and the development
and testing of new burner systems is completed.
2025, because the increasing use of biofuels and wet lignite will make it increasingly attractive
to all but the oldest plant.
2025, the limitation being the large number of such plants with multiple individual boilers to
be modified.
Improvements in boiler flexibility

5.d. Innovations in the energy conversion
Practice today: Conventional power plants today can only operate efficiently between
(steam and electrical) system
© Paweł Wyszomirski - EDF
60% and 100% output, and cannot produce electricity in response to rapidly changing
5.d.1. Overview
loads efficiently.
Innovations in the energy conversion system are anticipated to reduce the LCOE of coal plants
Innovation: This innovation covers two areas that can enable efficient plant operation at below
in 2025 by about 3% compared with the baseline 2025 plant. The majority of the savings result
40% of maximum output and increase flexibility of response:
from a combination of AEP increases and OPEX reductions.
• Use of pre-dried coal and optimisation of the boiler-turbine system through electronic control,
which support reduced load operation, and Table 5.4 and Figure 5.6 show that the innovations with the largest anticipated impact in FID
• Addition of high temperature heat accumulation systems, which enable more flexible 2025 are improvements in waste heat recovery (which increases efficiency, raising AEP, while
operation during demand fluctuations from night to day. reducing fuel usage) and improvements in steam flow in turbines (which reduces fuel usage).
Improvements in materials in the boiler and steam circuit

Figure 5.6 Anticipated and potential impact of energy conversion system innovations for FID in 2025.
Practice today: Power plants operating with ultra-supercritical steam conditions use
•Anticipated •Potential Impact on LCOE advanced steel, but material failures are frequently reported. When existing plants are
modernised (including changing the superheater tubes in the boiler), this is generally done
Improvements in steam circuit design without increasing outlet steam temperature and pressure. Corrosion can also be a problem
Improvements in materials in the boiler and steam circuit for conventional power plants, especially with furnaces operated for low-emissions and when
Introduction of waste heat recovery biomass is co-fired.
Improvements in steam flow in turbines Innovation: This innovation covers the application of new steel alloys for high temperature,
Introduction of high temperature superconducting technology in power transformers and cables high pressure conditions and coatings for water-walls (evaporators). These will enable higher
efficiency through higher outlet steam temperature and pressure from the superheater, as well
Source: BVG Associates 0% 2% 4% 6% 8% 10%
as reduced failure costs.
realisable by 2020 and 80% by 2025, as new steel alloy development and demonstration will
Table 5.4 Anticipated and potential impact of energy conversion system innovations for FID in 2025. take time.
2025, as its use will primarily be focused on (the very limited numbers of) new plants, and newer,
CAPEX OPEX AEP LCOE CAPEX OPEX AEP LCOE existing plants which are operating at high capacity.
Improvements in steam circuit design -3.4% 2.4% 1.0% 2.3% -0.7% 0.5% 0.2% 0.5%
Introduction of waste heat recovery
Improvements in materials in the boiler and steam circuit -1.1% 2.6% 3.0% 4.9% -0.1% 0.3% 0.3% 0.5%
Practice today: Waste heat recovery is generally not incorporated in plant units as small as
Introduction of waste heat recovery -6.2% 4.0% 1.0% 3.2% -1.9% 1.2% 0.3% 1.0% 225MW today.
Innovation: The innovation covers the recovery of sensible and latent heat (heat of condensation
Improvements in steam flow in turbines -2.7% 3.7% 0.0% 2.6% -0.8% 1.1% 0.0% 0.8%
of steam in flue gas) which replaces the use of bleed steam for feed-water preheating. By
Introduction of high temperature superconducting directing bleed steam to the condenser, more power can be produced from the same amount
technology in power transformers and cables -3.8% 0.5% 1.1% 0.8% -1.1% 0.1% 0.3% 0.2% of fuel due to a 1.5% increase of power plant efficiency.
Commercial readiness: 80% of the benefit of these innovations is realisable in 2016, with
100% realisable by 2020, as the technologies exist, but experience of integration is a short-term
obstacle for a small number of power plants.
5.d.2. Innovations Market share: It is anticipated that this innovation will be implemented on only 30% of plant in
Innovations in the steam and electrical system include steam circuit and turbine flow 2025, due to the relatively high cost compared to the benefits.
improvements to materials, waste heat recovery and the electrical system. A subset of the more
important of these has been modelled here. Improvements in steam flow in turbines
Practice today: Steam flow in the turbine is continuously improving. The latest power
Improvements in steam circuit design
plants use new blade designs, new seals, valves, and new low-pressure outlet and condenser
Practice today: Current steam circuits are usually equipped with several steps of high and low designs.
pressure heat exchangers and a steam reheating system. Innovation: This innovation covers the continued development in all these areas, focusing on
Innovation: This innovation covers improved interconnection between stages, which increases increased efficiency and reduced OPEX.
heat transfer to useful parts of the cycle. It also includes additional heat recovery processes Commercial readiness: 50% of the benefit of these innovations is realisable in 2016, with 80%
such as organic Rankine cycle systems and heat pumps, as well as heat storage and improved realisable by 2020 and 100% by 2025. Much of the technology already exists for retrofitting and
processes for reheating of steam and preheating of feedwater. new technology will be developed as new plants are delivered.
Commercial readiness: 50% of the benefit of these innovations is realisable in 2016, with 100% Market share: It is anticipated that this innovation will be implemented on 30% of plants
realisable by 2020. The main barrier is limited experience of the integration of these systems. in 2025. It is unlikely to be higher because of the relatively high cost compared to the
Market share: It is anticipated that this innovation will be implemented on 20% of plants in 2025. benefits.
The limitation is the relatively high capital cost for the benefits delivered, making it attractive for
only a minority of plants.
Introduction of high temperature superconducting (HTS) technology in power 5.e.2. Innovations

transformers and cables
Innovations in the emissions treatment system span a range of technologies from pollutant
Practice today: Power transformers and cables mainly use copper as the conductor. Thermal control, through carbon dioxide capture and waste ash treatment. A subset of the more
management, electrical insulation and conduction materials significantly affect service lifetime important of these has been modelled here.
and reliability. Transformer efficiency can be as high as 99%.
In addition, an innovation in abatement methods for carbon dioxide was considered. This would
Innovation: The innovation covers use of materials with lower losses, specifically HTS technology
increase the LCOE from the baseline system in the time frame up to 2025, and so is not included
in transformer windings, transmission cables and fault current limiters. As well as reducing
in the overall analysis. Increases in the costs for emitting carbon dioxide, and significant reductions
losses, HTS technologies could reduce failures and maintenance costs in these systems, but also
in the cost of the technology could, however, reduce the LCOE in applications in the longer term.
introduce potential extra complexity.
Introduction of simultaneous pollutant control methods
50% realisable by 2020 and 100% realisable from 2025, as the technologies exist, but require
development and commercialisation during this period. Practice today: Current pollution control happens in series. First, oxides of nitrogen
Market share: It is anticipated that this innovation will be implemented on 30% of plant in 2025. are managed through combustion control, followed by selective catalytic or non-
Implementation is limited due to the relatively high cost compared to the benefits achievable catalytic reduction in the exhaust stream. Then sulphur oxides are removed in a wet or
over the remaining life. dry process using calcium-based sorbents. Finally, dust is removed using cyclones and
electrostatic filters.
Innovation: This innovation covers simultaneous reduction of all pollutants in the exhaust,
5.e. Innovations in emissions treatment using hybrid methods, sorbents and oxidisers in wet scrubbers.
5.e.1. Overview realisable by 2020 and 100% by 2025, the only barrier being the driver of emissions legislation to
Innovations in emissions treatment are anticipated to reduce the LCOE of coal plants in 2025 deliver the final developments required.
© Michał Major - EDF

by nearly 2% compared with the baseline 2025 plant. The savings result from OPEX reductions. Market share: It is anticipated that this innovation will be implemented on 40% of plants in 2025,
assuming all plants using coal only (rather than a coal-biofuel mix) will need this technology to
Table 5.5 and Figure 5.7 show that the innovations with the largest anticipated impact in FID
meet emissions regulations by then.
2025 is improvements in the treatment of coal combustion byproducts, which extracts revenue
from part of the waste products and hence reduces OPEX.
Improvements in treatment of coal combustion byproducts
Practice today: The byproduct from boilers fired with hard coal is ash with a carbon content below 5%,
Figure 5.7 Anticipated and potential impact of emissions treatment innovations for FID in 2025. which can be used by the cement industry. Pulp water from the ashes is used to refill mine workings.

Innovation: This innovation covers the production of artificial zeolites, geopolymers and
cenospheres, and vitrification of fly ash, to produce useable output and eliminate landfill disposal.
Introduction of simultaneous pollutant control methods Commercial readiness: 70% of the benefit of these innovations is realisable in 2016, with 90%
Improvements in treatment of coal combustion byproducts realisable by 2020 and 100% by 2025. Vitrification technology already exists, while production of
zeolites is in the industrial testing phase, and will take until the latter stages of the period to be
0% 1% 2% 3% 4% 5% fully commercially ready.
Market share: It is anticipated that this innovation will be implemented on 60% of plants in 2025
(the majority of hard coal fuelled plants), due to its relatively wide applicability and its benefits.
Table 5.5 Anticipated and potential impact of emissions treatment innovations for FID in 2025.
Innovation Maximum technical potential impact Anticipated impact FID 2025 5.f. Innovations in power plant operation,
CAPEX OPEX AEP LCOE CAPEX OPEX AEP LCOE maintenance and service
Introduction of simultaneous pollutant control methods -2.9% 2.2% 0.0% 1.3% -2.0% 1.5% 0.0% 0.9%
5.f.1. Overview
Improvements in treatment of coal combustion byproducts -0.8% 2.3% 0.0% 1.7% -0.5% 1.4% 0.0% 1.0% Innovations in plant operation, maintenance and service activities are anticipated to reduce the
LCOE of coal plants in 2025 by nearly 5% compared with the baseline 2025 plant. The majority of
the savings result from an increase in AEP and a reduction in OPEX.
Table 5.6 and Figure 5.8 show that the innovation with the largest anticipated impact in FID The application of this solution is limited by factors including the age of the distributed control
2025 is improvements in preventative maintenance, which reduces unexpected failure and lost system, the condition of instrumentation and control equipment and the condition of boiler as
generation time as well as reducing OPEX. well as the strategy of the plant operator.
Improvements in diagnostics and measuring systems

Figure 5.8 Anticipated and potential impact of power plant operation and maintenance innovations for FID in 2025.
Practice today: Coal plants use extensive sensors, measurements systems and diagnostic tools
• Anticipated •
Potential Impact on LCOE to support monitoring and control of the power generation process.
Innovation: This innovation covers the development of advanced sensors and diagnostic
Improvements in control systems systems to improve and extend the inputs to the control system. Innovations include:
Improvements in diagnostic and measurement systems • Thermal stress monitoring systems, which provide detailed information about dangerous
Improvements in preventive maintenance stress in critical components and enable prediction of the remaining life of components, and
Source: BVG Associates • Advanced sensors to measure qualitative process parameters such as flame quality, combustion
0% 2% 4% 6% 8% 10% processes, emissions systems efficiency and byproduct quality.
realisable by 2020, because new sensors and measurement and diagnostic systems are already
Table 5.6 Anticipated and potential impact of power plant operation and maintenance innovations for FID in 2025. in use in other industries, and others are currently in the later stages of development.
2025, because the additional benefits are easiest to achieve in conjunction with those plants
CAPEX OPEX AEP LCOE CAPEX OPEX AEP LCOE undertaking improvements in the control system.
Improvements in control systems -2.8% 2.8% 0.0% 1.8% -1.1% 1.1% 0.0% 0.7%
Improvements in preventative maintenance
Improvements in diagnostic and measurement systems -3.0% 3.7% 0.0% 2.6% -1.2% 1.5% 0.0% 1.0%
Practice today: 70% of coal plants have been in operation for 20 years or more, and their
Improvements in preventive maintenance 3.8% 1.9% 5.0% 6.9% 1.5% 0.8% 2.0% 2.8% average life is 45 years. Their integrated maintenance strategy combines regular planned
Source: BVG Associates overhauls with emergency action if equipment fails between overhauls. Basic IT systems and
remote monitoring systems inform asset management.
Innovation: This innovation covers preventative maintenance algorithms, which provide
5.f.2. Innovations information about failure in advance, and new maintenance strategies based on operational
Innovations in the operations and maintenance of plants cover a range of technologies from conditions, device conditions and their remaining estimated life.
control and sensor systems and algorithms to maintenance processes. A subset of the more Commercial readiness: 60% of the benefit of these innovations is realisable in 2016, with 90%
important of these has been modelled here. realisable by 2020 and 100% by 2025, as the development of models of system condition and
remaining life needs until the end of the period.
Improvements in control systems Market share: It is anticipated that this innovation will be implemented on 40% of plants in
2025, because new working practices will be limited by strong dependence on local conditions
Practice today: Most of the distributed control systems (DCS) installed on older power plants
and the operator of the plant.
use conventional control algorithms, implemented when the boiler was originally commissioned.
During the life of the plant, control hardware and user interfaces have generally been upgraded,
but control algorithms have not usually changed.
Innovation: This innovation covers advanced process control methods including neural network,
5.g. Summary of clean coal innovations
fuzzy logic, computational models and other advanced, multidimensional algorithms. These
control innovations may target any part of the power generation process; however the main
and results
focus is the combustion stage, where improved control will improve efficiency and reduce OPEX.
5.g.1. Combined impact of innovations
Innovations across all elements of the 225MW unit of the coal plant are anticipated to reduce
100% realisable by 2020, because new control ideas and innovations can be implemented
LCOE by around 27% for projects with FID in 2025. Figure 5.9 shows that the savings are
independently of the original manufacturer of control system without significant cost.
generated through OPEX savings and an increase in AEP, which significantly outweigh some
Market share: It is anticipated that this innovation will be implemented on 40% of plants in 2025.
CAPEX increases.
It is important to note that the impact shown in Figure 5.9 is an aggregate (as described in
Figure 5.11 OPEX and net capacity factor for 225MW unit of a clean coal plant with FID 2016, 2020 and 2025.
Section 3.3.3) of the impact shown in Figure 5.4 to Figure 5.8 and as such excludes any Other
Effects such as WACC and emission costs. These are discussed in Section 5.g.3.
200 80

150 60
OPEX (€k/MW/yr)
Figure 5.9 Anticipated impact of all innovations on the coal plant.
100 40
30 50 20
15 0 0
0 Coal-16 Coal-20 Coal-25
-15
•OMS •Fuel usage •Emissions cost •Net capacity factor Source: BVG Associates
-30
% CAPEX OPEX Net AEP LCOE
5.g.3. Levelised cost of energy including the impact of Other Effects
In order to compare LCOE, Figure 5.12 also incorporates the Other Effects discussed in Section
3.3.4. It shows that, while baseline LCOEs increase due to higher emission costs and a lower
capacity factor, innovations deliver greater reduction from these baselines over time. By 2025,
5.g.2. Relative impact of cost of each power plant element
innovations are reducing the baseline by 27%.
In order to explore the relative cost of each clean coal plant element, Figure 5.10 shows the cost
of all CAPEX elements and Figure 5.11 shows the same for OPEX elements and the net capacity
factor. These figures show the relative stability of development and fuel handling CAPEX and
Figure 5.12 LCOE for 225MW units of clean coal plants with FID 2016, 2020 and
the changes in the cost of the energy conversion system CAPEX. Emissions treatment CAPEX
2025 with Other Effects incorporated.
reduces slightly over time. Fuel usage and net capacity factor drop together as demand for coal
power reduces over the period, but the costs for emitting pollutants increase due to regulation.
80
Figure 5.10 CAPEX for 225MW unit of a clean coal plant with FID in 2016, 2020 and 2025. 60
40
250
200 20
CAPEX (€k/MW)
150
0
100 LCOE (€/MWh) Coal-16 Coal-20 Coal-25
50 Source: BVG Associates
0
• LCOE (With innovation) • LCOE (No innovation)
The contribution of innovations to this LCOE reduction is presented in Figure 5.13. It shows
•
Development • Fuel handling •
Energy conversion system • Emissions treatment that innovations associated with fuel type, pre-treatment and handling (the first three
innovations in the figure) have the biggest effect on LCOE, but innovations in many other
areas are also important.
Figure 5.13 Anticipated impact of technology innovations for a 225MW unit of a coal plant with FID in 2025.
LCOE for a coal plant with FID in 2025 without innovations

Introduction of thermal pre-treatment of biomass and waste-based fuels
Improvements in preventive maintenance
Improvements in power plant start-up systems

Improvements in boiler flexibility
Improvements in treatment of coal combustion byproducts
9 other innovations
LCOE for a clean coal plant with FID in 2025 with innovations
6. Conclusions
In both the gas CHP and coal Sections of this report, we considered a large number of innovations
with the potential to reduce LCOE by FID 2025. The common major theme in both cases is
reducing the part of OPEX relating to the cost of the fuel used per MWh of electricity produced,
though this is achieved through different methods.
In the case of the gas CHP plant, reduced fuel OPEX is achieved through innovations that
improve the electrical output achieved per unit of fuel consumed. The four major innovations
here are in engine mechanical design and in boosting systems, which both help increase power
density, in lean combustion, which helps increase thermal efficiency and in the use of alternative
gaseous fuels, which reduces OPEX.
In the case of the clean coal plant, reduced fuel OPEX is achieved through innovations that
enable the use of lower cost fuel and waste products. The three major innovations here are
thermal pre-treatment of biomass and waste-based fuels, hybrid fuel combustion, and fuel
modification (with additives and higher proportions of waste-derived fuel).
Improvements in operations also deliver significant savings, and include innovations in
preventative maintenance, start-up and operational flexibility, and in treatment and disposal of
the byproducts of solid-fuel combustion.
In total, for both Technology Types, nearly 40 different innovations were identified and their
potential to impact LCOE in the conditions modelled was evaluated. Of these, 28 innovations
made a positive contribution to reducing LCOE and have been presented here in detail. Some
of the other innovations could have a small impact in the timescales of this study, but have
significant potential to impact LCOE over longer timescales or different conditions (for example
where emission costs are much higher).
Figure 7.1 KIC InnoEnergy partners over Europe.
© NASA Earth Observatory image by Robert Simmon

7. About KIC InnoEnergy
KIC InnoEnergy is the Innovation engine for sustainable energy across Europe. The challenge is
big, but our goal is simple: to achieve a sustainable energy future for Europe. Innovation is the
answer. New ideas, products and solutions that make a real difference, new businesses and new
people to deliver them to market.
At KIC InnoEnergy we support and invest in innovation at every stage of the journey – from classroom
to customers. With our network of partners we build connections across Europe, bringing together
inventors and industry, entrepreneurs and markets, graduates and employers, researchers and businesses.
We work in three essential areas of the innovation mix:
•
Education to help create an informed and ambitious workforce that understands what
sustainability demands and industry needs – for the future of the industry.
•
Innovation Projects to bring together ideas, inventors and industry in collaboration to enable
commercially viable products and services that deliver real results.
•
Business Creation Services to help entrepreneurs and start-ups who are creating sustainable
businesses to grow rapidly to contribute to Europe’s energy ecosystem.
We are headquartered in the Netherlands, and manage our activities through offices across
We are committed to ensuring security of supply in the face of a growing population. We need Europe in Belgium, France, Germany, the Netherlands, Poland, Portugal, Spain and Sweden.
to reduce carbon emissions while remaining competitive with the rest of the world. And we
Supported by the EIT
must decrease the cost of energy to boost enterprise and ensure that no one is left in fuel
KIC InnoEnergy was established in 2010 and is supported by the European Institute of Innovation
poverty. To achieve this, we focus our activities around eight thematic areas:
and Technology (EIT) to address this challenge. Like all Knowledge and Innovation Communities
• Energy Storage established by the EIT, KIC InnoEnergy brings together the three elements of the so-called
• Energy from Chemical Fuels Knowledge Triangle - higher education, research and industry – to tackle some of the biggest
• Sustainable Nuclear and Renewable Energy Convergence challenges facing Europe today.
• Smart and Efficient Cities and Buildings
For more information on KIC InnoEnergy please visit:
• Clean Coal and Gas Technologies
www.kic-innoenergy.com
• Smart Electric Grid
• Renewable Energies, and
• Energy Efficiency
Appendix A Fuel usage The fuel usage OPEX cost element starts once the plant is operational. It includes: €/MW/yr
Further details of methodology • Cost of annual fuel used
• Fuel delivery cost to site
Assumptions that are relevant to this study are provided below. These apply both to the coal and gas CHP plants unless • Benefits from the CHP heating water. These are modelled as a fuel usage OPEX reduction.
identified otherwise.
Emissions cost The emissions cost element starts once the plant is operational. €/MW/yr
It includes costs due to emissions of:
A.1 Definitions
• CO2
Definitions of the scope of each element are summarised in Table A.1, below.
• NO
• SO2
Table A.1 Definitions of the scope of each element. • Hg, and
• Particulates.
Parameter Definition Unit
It also includes the cost of consumable emissions treatment materials such as lime and urea.
CAPEX
AEP
Development The development CAPEX cost element includes development and consenting €/MW
Gross AEP The gross AEP element is the gross energy produced in an average year, MWh/yr/MW
work up to the point of works completion date and includes:
based on the realistic annual operating cycle. It excludes losses other than losses
• Internal and external activities such as environmental surveys and engineering
implied by the baseline thermal efficiency.
and planning studies
• Cost of the buildings and associated infrastructure for the plant Losses The losses element includes: %
• Cost of construction • Life time energy loss from plant start-up and shut-down
• Project management (work undertaken or contracted by the developer up to WCD), and • Losses in converting generator output between the generator and the grid connection
• Other administrative and professional services such as accountancy and legal advice. and metering point, and
The development cost element excludes: any reservation payments to suppliers; • Losses due to lack of availability of the plant.
construction phase insurance and suppliers own project management. Transmission losses beyond the grid connection and metering point are excluded.
Fuel handling The fuel handling CAPEX cost element includes all of the machinery associated €/MW Net AEP The net AEP averaged over the plant life at the grid MWh/yr/MW
with pre-processing the fuel before combustion. It includes additional CAPEX for fuel connection and metering point.
pre-treatment off-site.
Energy conversion The energy conversion system CAPEX cost element includes all of the machinery €/MW
system used to convert the fuel to electricity. This includes:
• Combustion chamber in the case of the coal plant
• Internal combustion engine in the case of the gas CHP plant
• Steam system.
• Turbine
• Generators, and
• Transformer & switchgear.
Emissions treatment The emissions treatment CAPEX cost element includes all of the machinery €/MW
system used to treat the emissions after combustion and dispose of the combustion
by products such as ash.
OPEX
Operation, planned The operations and planned maintenance OPEX cost element starts once €/MW/yr
and planned the plant is operational. It includes:
maintenance • Operational costs relating to the day-to-day running of the plant
• Condition monitoring
• Planned preventative maintenance, health and safety inspections
• Any benefits from new revenue streams enabled by new investment such
as the sale of value-added combustion byproducts. These are modelled as an
OMS OPEX reduction.
A.2 Assumptions Fuel usage. The baseline assumptions are:

Baseline costs and the impact of innovations are based on the following assumptions. • The engine operates at an average electrical efficiency of 36.08%, and consumes 1,069,05 m3
of gas at a cost of €0.3256 per m3 (total €348,064) to produce 3,750MWh of gross AEP
Global assumptions
• Heat production is 5,280MWh per year (net), at a value of €46.8/MWh.
• Real (end 2015) prices
• Commodity prices fixed for average of 2015 Emissions costs. The baseline assumptions are:
• Exchange rates fixed for average of 2015 • Emissions costs are based on the Polish system of €0.000465 per m3 of gas used.
Gas CHP plant assumptions Coal plant assumptions
General. General.
• A 700kW thermal output, with electrical output determined by the relative efficiency of fuel • A 225MW unit of a thermal power plant
energy to heat and electrical outputs • Operational until 2035, so in 2016 life is 19 years, in 2020 life is 15 years and in 2025 life is 10 years
• Operational life of 15 years • The capital cost baseline in 2016 is modelled as the market value of an existing power plant as
• FID is one year before start of operation, and all CAPEX takes place in this year it currently is.
• AEP and OPEX are assumed to be level annual amounts throughout the operational life • Capital cost baselines in 2020 and 2025 are produced in the same way assuming no upgrades
• Development and construction costs are funded by the project developer, and are implemented.
• Construction is contracted on an EPC basis. • CAPEX breakdown is modelled as a nominal split based on experience
• Innovations are modelled as upgrades implemented (or retro-fitted) on the baseline power
Development. The baseline assumptions are:
plant in 2016, 2020 and 2025
• The site is suitable for development for a CHP plant, without special remedial or preparatory
• FID is one year before start of operation, and all CAPEX takes place in this year
works required
• AEP and OPEX are assumed to be level annual amounts throughout the operational life
• The site is within 100m of roads suitable for delivering the components, plant and equipment
• Development and construction costs are funded by the project developer, and
required for the site
• Construction (implementation of upgrades) is contracted on an EPC basis.
• The grid operator provides an on-site substation at no cost to the project, or access to an
Development. The baseline assumptions are:
existing substation within 100m
• The site is suitable for implementation of upgrades, without special remedial or preparatory
• The user of the heat output provides an on-site connection to take and return the hot water
works required
produced by the CHP system, and
• The site has existing roads suitable for delivering the components, plant and equipment
• No problems in obtaining consents are encountered.
required for the site
Fuel handling. The baseline assumptions are: • The existing on-site substation can withstand any increases in power output that result from
• An on-site connection to the natural gas grid is provided by the gas grid operator innovations, and
• The gas supplied has properties that remain within the requirements of the engine at all times, • No problems in obtaining consents are encountered.
and Fuel handling. The baseline assumptions are:
• Fuel handing equipment comprises pressure and temperature regulation systems including • A conventional system using pulverised hard coal dust.
controls and sensors.
Energy conversion system. The baseline assumptions are:
Energy conversion system. The baseline assumptions are: • A boiler producing 650 tonnes / hour of fresh steam at 13MPa and 540 °C
• The prime mover is a four-stroke, spark-ignited natural gas engine that is turbocharged, • A multi-stage steam turbine and 3-phase AC output from electrical alternators at 16kV, and
aftercooled, and operates at a lean air-fuel ratio of 1.5:1, and a brake mean effective pressure of • Electrical output is 225MW.
15 bar
Emission treatment system. The baseline assumptions are:
• Emissions control is included within this system as part of the control strategy and as a catalyst
• Selective catalytic reduction treatment for oxides of nitrogen and wet flue-gas desulphurisation
in the exhaust system
• The engine operates at a fixed speed of 1500 or 1800 revs / minute (depending on grid OMS. The baseline assumptions are:
frequency), and is connected to a 3-phase electrical AC alternator operating at 600V • On-site service support is available with 7-day, three-shift working, and
• A step-up transformer connects to the local distribution grid at between 4kV and 13kV • The plant can be remotely monitored via a SCADA system.
• Electrical output is 500kW and heat output is 700kW, and
Fuel usage. The baseline assumptions for the 225MW unit are:
• As innovations are implemented, heat output is kept constant. This means that if efficiency
• In 2016, the plant consumes 615,100 tonnes of coal at a cost of €57/tonne (total €35,061,000) to
improves and heat output per kW of electricity reduces, a larger system is specified, with
produce 1,350,000MWh of gross AEP
higher electrical output.
• In 2020, the plant consumes 525,000 tonnes of coal at a cost of €55/tonne (total €28,874,000) to
Emission treatment system. The baseline assumptions are: produce 1,125,000MWh of gross AEP
• The emissions treatment system is incorporated into the energy conversion system, and no • In 2025, the plant consumes 425,000 tonnes of coal at a cost of €50/tonne (total €21,250,000) to
additional cost is required produce 900,000MWh of gross AEP
Emissions costs. The baseline assumptions are:
OMS. The baseline assumptions are:
• Emissions costs are based on an average of the Polish and Czech systems for pollutants and
• Local service support is available with 7-day working within ‘office hours’, and
Synapse Energy Economics 2015 CO2 price forecast (mid case).
• The plant can be remotely monitored via a SCADA system.
A.3 Other Effects

Emissions costs that all plants are required to spend, but that will not lead to gains in LCOE, are
included as Other Effects for the CHP plant. The percentage change in LCOE appropriate for the
Appendix B
Data supporting tables
emissions regime beginning in each of 2016, 2020 and 2025 are calculated and then applied to
the LCOE after all of the technology effects.
Table B.1 Data relating to Figure 4.1.
Table 5.6 Anticipated and potential impact of power plant operation and Element Units Value
maintenance innovations for FID in 2025.
Development €k/MW 244.4
FID year Emissions WACC
Fuel Handling €k/MW 81.5
2016 0.0% 10%
Energy conversion system €k/MW 1,303.4
2020 4.3% 10%
Emissions treatment €k/MW -
2025 6.2% 10%

Element Units Value
Operations, planned and unplanned maintenance €k/MW/yr 67.5
Fuel usage cost (net of heat sales income) €k/MW/yr 201.9
Emissions cost €k/MW/yr 1.0
Net capacity factor % 83.5

Element Units 2016 2020 2025
Development €k/MW 244.4 244.4 244.4
Fuel handling €k/MW 81.5 81.4 81.4
Energy conversion system €k/MW 1,303.4 1,524.4 1,786.2
Emissions treatment €k/MW - - -

Operations, planned and unplanned maintenance €k/MW/yr 67.5 63.1 63.6
Fuel usage cost (net of heat sales income) €k/MW/yr 201.9 296.4 400.5
Emissions cost €k/MW/yr 1.0 1.2 1.3
Net capacity factor % 83.4 83.4 83.3
Table B.5 Data relating to Figure 4.11. Table B.9 Data relating to Figure 5.10.
Element Units 2016 2020 2025 Element Units 2016 2020 2025
Net capacity factor % 83.4 83.4 83.3 Development €k/MW 65.7 65.8 58.7
LCOE including Other Effects €/MWh 66.3 61.4 58.5 Fuel handling €k/MW 18.9 19.9 17.5
Energy conversion system €k/MW 206.7 192.2 212.0
Emissions treatment €k/MW 79.5 58.7 59.3
Innovation Value
LCOE for a gas CHP plant with FID in 2016 100% Table B.10 Data relating to Figure 5.11.
Improvements in combustion chambers for lean mixtures 3.7% Element Units 2016 2020 2025
Improvements in engine mechanical design 3.4% Operations, planned and unplanned maintenance €k/MW/yr 14.0 14.4 18.1
Improvements in use of alternative gaseous fuels in IC engines 2.8% Fuel usage cost (net of heat sales income) €k/MW/yr 162.9 138.8 103.2
Improvements in power per cylinder from IC engines 2.2% Emissions cost €k/MW/yr 12 42 40.0
Improvements in thermodynamic cycles in IC engines 0.8% Net capacity factor % 67.4 58.5 47.1
Improvements in structural materials 0.8%
Improvements in ignition systems 0.8%
5 other innovations 2.4% Table B.11 Data relating to Figure 5.12.
LCOE for a gas CHP plant with FID in 2025 83.2% Units 2016 2020 2025
LCOE with no innovation €/MWh 41.5 60.1 72.3
LCOE with innovation €/MWh 39.5 46.8 52.7
Development €k/MW 62.2 60.4 53.5 Table B.12 Data relating to Figure 5.13.
Fuel handling €k/MW 15.5 14.5 12.2 Innovation Value
Energy conversion system €k/MW 164.4 140.7 152.2 LCOE for a coal plant with FID in 2025 without innovations 100%
Emissions treatment €k/MW 81.1 62.1 64.0 Introduction of thermal pre-treatment of biomass and waste-based fuels 7.4%
Introduction of hybrid fuel combustion 4.4%
Improvements in fuels through modification and switching 4.4%
Table B.8 Data relating to Figure 5.2. Improvements in preventive maintenance 2.2%
Element Units 2016 2020 2025 Improvements in power plant start-up systems 1.6%
Operations, planned and unplanned maintenance €k/MW/yr 15.6 16.7 21.1 Improvements in boiler flexibility 1.5%
Fuel usage cost (net of heat sales income) €k/MW/yr 155.8 128.3 94.4 Improvements in treatment of coal combustion byproducts 0.8%
Emissions cost €k/MW/yr 19.3 94.9 104.5 9 other innovations 4.6%
Net capacity factor % 63.0 52.5 42.0 LCOE for a clean coal plant with FID in 2025 with innovations 73.0%
List of figures
Number Page Title Figure 4.11 41 LCOE of gas CHP plants with FID in 2016, 2020 and 2025 with Other
Effects incorporated.
Figure 0.1 06 Anticipated impact of all innovations for the gas CHP plant compared
with FID 2016. Figure 4.12 42 Anticipated impact of technology innovations for a gas CHP plant with
FID in 2025, compared with a gas CHP plant with FID in 2016.
Figure 0.2 06 Anticipated impact of all innovations for the coal plant compared with
FID 2025. Figure 5.1 44 Baseline CAPEX by element.
Figure 0.3 07 Anticipated impact of all innovations for the gas CHP plant with FID in Figure 5.2 45 Baseline OPEX and net capacity factor.
2025, compared with FID in 2016.
Figure 5.3 45 LCOE for baseline power plants with Other Effects incorporated.
Figure 0.4 08 Anticipated impact of technology innovations for a 225MW unit of a coal
Figure 5.4 46 Anticipated and potential impact of fuel handling innovations for FID in
plant with FID in 2025.
2025.
Figure 2.1 17 Key European policy areas influencing the energy sector.
Figure 5.5 47 Anticipated and potential impact of combustion system innovations for
Figure 2.2 18 The role of the EU emissions trading system in stimulating low carbon FID in 2025.
investments.
Figure 5.6 50 Anticipated and potential impact of energy conversion system
Figure 2.3 20 EC approach to the capacity mechanisms assessment. innovations for FID in 2025.
Figure 3.1 25 Process to derive impact of innovations on the LCOE. Figure 5.7 52 Anticipated and potential impact of energy conversion system
innovations for FID in 2025.
Figure 3.2 28 Three-stage process of moderation applied to the maximum potential
technical impact of an innovation to derive anticipated impact on the Figure 5.8 54 Anticipated and potential impact of power plant operation and
LCOE. maintenance innovations for FID in 2025.
Figure 3.3 29 Baseline LCOE for the 225MW unit of a coal plant increases, but the Figure 5.9 56 Anticipated impact of all innovations.
impact of innovations in reducing LCOE also increases.
Figure 5.10 56 CAPEX for 225MW unit of a clean coal plant with FID in 2015, 2020 and
Figure 4.1 31 Baseline CAPEX by element. 2025.
Figure 4.2 31 Baseline OPEX and net capacity factor. Figure 5.11 57 OPEX and net capacity factor for 225MW unit of a clean coal plant with
FID 2015, 2020 and 2025.
Figure 4.3 31 LCOE for baseline power plant with Other Effects incorporated.
Figure 5.12 57 LCOE for 225MW units of clean coal plants with FID 2015, 2020 and 2025
Figure 4.4 32 Anticipated and potential impact of fuel handling and usage innovations
with Other Effects incorporated.
on LCOE for a project with FID in 2025.
Figure 5.13 58 Anticipated impact of technology innovations for a 225MW unit of a coal
Figure 4.5 34 Anticipated and potential impact of combustion system innovations on
plant with FID in 2025.
LCOE for a project with FID in 2025.
Figure 7.1 61 KIC InnoEnergy partners over Europe.
Figure 4.6 36 Anticipated and potential impact of energy conversion system
innovations on LCOE for a project with FID in 2025.
Figure 4.7 38 Anticipated and potential impact of power plant operation, maintenance
and service innovations on LCOE for a project with FID in 2025.
Figure 4.8 40 Anticipated impact of all innovations for FID in 2025 compared with FID
in 2016.
Figure 4.9 40 CAPEX for gas CHP plants with FID in 2016, 2020 and 2025.
Figure 4.10 41 OPEX and net capacity factor for gas CHP plants with FID in 2016, 2020 and 2025.
Future Energy Costs: Coal and Gas Technologies 72
List of tables
Number Page Title
Table 2.1 19 EU air quality regulations for coal and gas-fired power plants.
Table 3.1 26 Information recorded for each innovation.
Table 4.1 30 Baseline parameters for 500kW gas CHP plant with FID in 2016.
Table 4.2 32 Anticipated and potential impact of fuel handling and usage innovations
for a project with FID in 2025.
Table 4.3 34 Anticipated and potential impact of combustion system innovations for a
project with FID in 2025.
Table 4.4 36 Anticipated and potential impact of energy conversion system
innovations for a project with FID in 2025.
Table 4.5 38 Anticipated and potential impact of plant operation, maintenance and
service innovations for a project with FID in 2025.
Table 5.1 44 Baseline parameters for 225MW unit of coal power plants from 2016 to
2025
Table 5.2 46 Anticipated and potential impact of fuel handling innovations for FID in
2025.
Table 5.3 48 Anticipated and potential impact of combustion system innovations for
FID in 2025.
Table 5.6 54 Anticipated and potential impact of power plant operation and
maintenance innovations for FID in 2025.
Future Energy Costs: Coal and Gas Technologies
the cost of energy in Europe from new gas CHP plants
© KIC InnoEnergy, 2016
ISBN 978-94-92056-05-4
Future Energy Costs: Coal and Gas Technologies report is a
property of KIC InnoEnergy. Its content, figures and data may
only be re-used and cited with a clear reference to
KIC InnoEnergy as a source.
The document is also available in an online format on the
KIC InnoEnergy website: www.kic-innoenergy.com
For more information about the report, please contact:
polandplus@kic-innoenergy.com
Future Energy Costs: Coal and Gas Technologies 76
KIC InnoEnergy SE
Kennispoort
John F. Kennedylaan 2, 6th floor
5612 AB Eindhoven
The Netherlands
info@kic-innoenergy.com
www.kic-innoenergy.com
EUROPE · BENELUX · FRAN C E · GE R MA NY · I B E R I A · POLAND PLUS · SWEDEN
KIC InnoEnergy is supported by
the EIT, a body of the European Union

CleanCoal BF

Uploaded by

Copyright:

Available Formats

You might also like

CleanCoal BF

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CleanCoal BF

Uploaded by

Copyright:

Available Formats

01 KIC InnoEnergy · Clean Coal and Gas Technologies

Clean Coal and Gas Technologies

Future Energy Costs:

to Europe’s energy ecosystem.

Glossary Table of contents

Gas combined heat and power experts

1. Introduction 1.3. Structure of this report

Section 5. Coal power plant.

2.2. Coal and gas-fired plants in the EU energy system

Uncertain price developments

3.2. Project terminology and assumptions

3.3. Innovation impact modelling – gas CHP plant

3.4. Innovation impact modelling – coal power plant

•LCOE (With innovation) •LCOE (No innovation) Source: BVG Associates

Type Parameter Units 2016 FID

Net capacity factor (%)

Source: BVG Associates

Net capacity factor (%)

•LCOE including Other Effects •Net capacity factor

Improvements in use of alternative gaseous fuels in IC engines

4.c. Innovations in the combustion system

Improvements in engine mechanical design

Improvements in thermodynamic cycles in IC engines

•Anticipated •Potential Impact on LCOE

4.g.1. Combined impact of innovations

Net capacity factor (%)

100 4.g.3. Levelised cost of energy including impact of Other Effects

Net capacity factor (%)

LCOE for a CHP plant with FID in 2016

5. Coal power plant

Net capacity factor (%)

AEP Gross AEP MWh/yr/MW 6,000 5,000 4,000

Figure 5.1 Baseline CAPEX by element. 60

© Michał Major - EDF

Improvements in boiler flexibility

Improvements in materials in the boiler and steam circuit

Introduction of high temperature superconducting (HTS) technology in power 5.e.2. Innovations

© Michał Major - EDF

•Anticipated •Potential Impact on LCOE

Improvements in diagnostics and measuring systems

Net capacity factor (%)

LCOE for a coal plant with FID in 2025 without innovations

© Paweł Wyszomirski - EDF

Figure 7.1 KIC InnoEnergy partners over Europe.

© NASA Earth Observatory image by Robert Simmon

A.2 Assumptions Fuel usage. The baseline assumptions are:

A.3 Other Effects

Table B.2 Data relating to Figure 4.1.

Table B.3 Data relating to Figure 4.9.

Table B.4 Data relating to Figure 4.10.

EUROPE · BENELUX · FRAN C E · GE R MA NY · I B E R I A · POLAND PLUS · SWEDEN

You might also like