Cost Analysis and Development Strategies for China’ Natural Gas Power Generation Industry Under the Situation of Energy Price''''s Reformation 1876 6102 © 2016 The Authors Published by Elsevier Ltd This[.]
Available online at www.sciencedirect.com ScienceDirect Energy Procedia 104 (2016) 203 – 208 CUE2016-Applied Energy Symposium and Forum 2016: Low carbon cities & urban energy systems Cost analysis and development strategies for China' natural gas power generation industry under the situation of energy price's reformation Naiping Zhua,Qi Zhaoa,Lixin Tianb*,Qing Zhanga a School of Finance&Economics,Jiangsu University,Zhenjiang,Jiangsu,212013,China bEnergy Development and Environmental Protective Strategy Research Center of Jiangsu University,Zhenjiang,Jiangsu,212013,China Abstract Driven by Chinese government, China's natural gas power generation industry has to deal with the energy price's reformation, the price of natural gas, electric power and some other energy source will be made by market instead of government In recent years, China's natural gas power generation industry has made an unprecedented progress in the development of improving the energy structure and promoting Green Economy greatly By establishing the cost estimation model of natural gas power generation and using the method of analysis for sensitivity factor, we think that the prime cost of natural gas is high in aspect of energy source cost However, from the point of view of carbon emission cost, the cost of natural gas power generation is lower than coal power generation On the other side such as power generation equipment, most of constant costs has been spent on imported power generation equipment Therefore, Chinese natural gas power generation industries should work together with the China government for reducing the price of natural gas, realizing the gas turbine home-made, establishing the natural gas storage system and finally stabilizing natural gas supply © 2016 The Authors Published by Elsevier Ltd This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) © 2016 The Authors Published by Elsevier Ltd Peer-review under responsibility the scientific committee the Applied Energy Symposium and Forum, CUE2016: Low carbon responsibility of of CUE Selection and/or peer-reviewofunder cities and urban energy systems Keywords:price reformation;power generation;cost price of natural gas;sensitivity analysis 1.Research background and literature review Corresponding author Tel.: +86-(0)-18801584660 E-mail address: tianlx@ujs.edu.cn 1876-6102 © 2016 The Authors Published by Elsevier Ltd This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) Peer-review under responsibility of the scientific committee of the Applied Energy Symposium and Forum, CUE2016: Low carbon cities and urban energy systems doi:10.1016/j.egypro.2016.12.035 204 Naiping Zhu et al / Energy Procedia 104 (2016) 203 – 208 Natural gas power generation has been widely used in other countries, and it started late in China At the beginning of the twentieth century, the Chinese government began to seek ways to expand the natural gas power plant, although the price of natural gas was not determined by the market economic system, but controlled by the government at that time, so the success rate was not high Until 2010, the government proposed industrial policy of natural gas power generation technology, natural gas price reform and carbon trading, China's new opportunity for natural gas power generation appeared again In 2014, the office of the State Council issued the energy development strategy action plan (2014-2020), the core of this action plan will promote energy price reform, which means that the price of natural gas power generation is no longer subject to government constraints, but decided by the market economy reform In summary, China's total natural gas supply may reach 132 billion m3 in 2015, such as the forecast consumption amounted to 231 billion m3, needing 90 billion m3 of natural gas imports to fill the gap The 18th National Congress mentioned: achieve market diversification reform and promote energy price mechanism Energy prices mainly refers to oil, natural gas and others, which also means that China will expand the market for natural gas Natural gas power generation can not be completely replaced mainly due to the high cost of power generation, so adjusting the prices of natural gas is the most important problem to solve If we can develop a reasonable market price mechanism, then the market will become the main power generation industry in China in the future Zhang Yan (2014) argues that research on the natural gas industry should be based on natural gas power generation industry chain, not only from the cost analysis of all aspects of natural gas price formation mechanism, but also taking into account the natural gas power generation as an important strategic energy sector where natural gas industry development has been significantly affected by government policy Apergis.N et al (2015) used the panel co integration technic to analyze the long-term dynamic causal relationship of the renewable energy’s per capita consumption level, per capita real gross domestic product (GDP), per capita carbon dioxide emissions and long-term oil price of 11 South American countries The finding was that long-run elasticity estimated positively correlated, per capita real GDP, per capita carbon emissions and oil prices show significant; the promotion of renewable energy output growth and the curb of carbon emissions have a positive role Hammoudeh Shawkat et al (2015) analyzed the correlation between natural gas and other energy price, electricity price and carbon emissions by using nonlinear autoregressive distributed lag (NARDL) model, and found that carbon gas prices and electricity prices have symmetrical effect, natural gas price and carbon price are negatively correlated whereas electricity price and carbon price are positively correlated The analysis of influence factors of the cost of natural gas power generation Greens environmental protection and Low-carbon energy conservation are the theme of our nation To get a result, for meeting the requirement of air pollution control, natural gas power generation industry develops rapidly among electric power industry in China, but the high cost becomes a big stumbling block during its development According to the analysis, the cost of natural gas power generation is two to three times more expensive than of coal power generation and many electric power industries depend on government grants for preserving development In the aspect of the cost of environment protection, there is an advantage that natural gas power generation has little pollution, and it reduces the cost a lot for managing the environment However, the total cost of natural gas power generation mainly depends on the price of natural gas, so the price of natural gas is the primary influencing factor In recent years, natural gas prices have been in a state of fluctuation and we can not steady the prices Natural gas prices were adjusted four times but finally in 2013 our government did not make a reasonable price for it Besides the natural gas price, there are some other influencing factors which effect the cost of natural gas power generation, such as gas turbine working efficiency, operational methods, annual utilization hours, funds for construction and lending rate etc Next, we will study some main factors like natural gas price, environmental cost and gas turbine working efficiency which influences the cost of natural gas power generation by establishing a model and using method of sensitivity analysis Gas generation cost estimation model 205 Naiping Zhu et al / Energy Procedia 104 (2016) 203 – 208 3.1 The natural gas power plant with a total investment cost The total investment cost of natural gas power stations mainly consists of three parts which are the natural gas power station’s static investment costs, financial costs (Mainly refers to interest expense)and maintenance costs The static investment costs are calculated by the cost of power plant unit capacity and installed capacity In order to reflect the total investment cost of the whole life cycle of the whole process we can convert it into present value Specific formula can be expressed as: (1) TCR (UI u K FC MC˅u˄P / A, i, n˅ Wherein, TCR is the present value of the natural gas power plant with a total investment cost (yuan); UI is the per unit capacity cost (Yuan / kW); K is the installed capacity of power stations (kW), FC is the financial cost (yuan); MC is the operation and maintenance costs (yuan); P/A is annuity present value coefficient;i is the discount rate (%); n is the period of the power plant put into operation (Year) 3.2 The depreciation cost of natural gas power plant with a total investment According to the particularity of the cost of natural gas, this model uses the strategy of Operating hours sharing fixed costs The formulas of depreciation cost about power plant with a total investment can be expressed as: COD TCR u (1 M ) n u EH SUI u (1 M ) n u T u (1 G ) (2) Wherein, COD is the depreciation costs of power plant with a total investment (yuan / kWh); SUI is the unit dynamic investment costs of power plant (yuan / kW); M is the net salvage value; G is the plant power consumption rate (%); T is the unit annual in operating hours number (h);n is the period of the power plant put into operation (Year) 3.3 The fuel costs of natural gas power plant The fuel costs of natural gas power plant include not only the price of natural gas, but also power generators efficiency and other factors According to the conversion of KWH electricity output = 3.6 MJ, the equation of fuel costs about natural gas power plant can be expressed as: COF ((1 u 3600 / 4.1868) / Q) / K u Pgas (3) Wherein, COF is a power plant fuel costs (yuan / kWh); Q is a natural gas heat (Kcal / m3); K is a heating unit efficiency (%); Pgas is natural gas market price (yuan / m3) The fuel costs of gas-fired power generation includes not only raw natural gas prices but also water and material costs Relative to the price of natural gas, the proportion of water and material costs is not big According to relevant project data , it shows that the sum of both about 0.008 yuan / kWh Combining equation (1) to (3), the formula of natural gas cost can be expressed as: (4) COE COD COF 0.008 Among them, the COE is the natural gas power generation cost (yuan/kWh) Related parameters and index values of the cost of natural gas The model which is used to calculate the cost of natural gas involves many parameters and indicators in order to calculate the value of economic indicators more accurately The paper-related parameters and indicators were determined as follows: Table Related parameters and index values of the cost of power Related parameters and index Values 2.0 G Power consumption rate of plant ˄%˅ 5.0 Net residual value rate M ˄%˅ Calorific capacity of natural gas ˄Kcal/m ˅ Q 8600 206 Naiping Zhu et al / Energy Procedia 104 (2016) 203 – 208 Repayment period˄a˅ 15 Depreciation period˄a˅ 20 5.94 Loan interest rate i ˄%˅ 10.0 Return on investment˄%˅ 25 Proportion of registered capital˄%˅ Note: Data from "thermal power engineering quota design reference cost index (2013 level)" The selection of natural gas combustion equipment directly affects the cost of power generation So selecting the model of the gas turbine is an important prerequisite for the sensitivity analysis of the natural gas power generation China currently has four levels for 6B, 6F, 9E and 9F We have selected 9F model as the research object for the sensitivity analysis of factors which affect the natural gas price From the model of the gas turbine, we know the power supply efficiency of 9F model is 55.4%, the static unit cost is 3282 yuan/kW, and the dynamic unit investment SUI=3548 yuan/kW which is selected to calculate the power generation cost of the power station Analysis of the factors affecting the cost of natural gas power generation 5.1 The impact of natural gas prices From the model above, as well as the relevant reference data, we select the price of local natural gas in Beijing as reference The selected range is from 1.5 yuan /m3 to 2yuan /m3, and the range of the annual operating hours is from 2500h to 4000h Calculation results of natural gas power generation cost are as follows: Table2 Index Natural gas price (yuan/m3) Power generation cost Annual utilization hours 1.5 1.6 1.7 1.8 1.9 2.0 Power generation cost Dynamic unit investment cost SUI=3548 yuan/KW 2500 3000 3500 4000 0.348 0.366 0.384 0.402 0.420 0.438 0.336 0.354 0.372 0.390 0.408 0.426 0.328 0.346 0.364 0.382 0.400 0.459 0.322 0.340 0.358 0.376 0.394 0.412 We use the standard coal price at 650 yuan/t of coal-fired power for case to calculate, then per unit cost of coal-fired power plant is about 0.31yuan/kWh When the price of natural gas is selected from 1.5 to yuan/m3, and the annual operating hours is 3500h, the per unit cost of fuel is corresponding to the range of 0.33-0.46 yuan/kWh Obviously, compared with the cost of fuel, the per unit cost of natural gas is higher than the thermal power generation of 0.01-0.14 yuan/kWh According to this result, we find that the cost of natural gas can not be competitive with the cost of coal power generation From this we can find that in the power market, the primary problem of the formation of the competition between natural gas power station and coal power station is the fundamental difference of the fuel cost, in other words, reducing the price of natural gas 5.2 The impact of environmental cost factors From table the comparison table data shows that the pollutant emissions from coal power plant is 3430902t/ years, the pollutant emissions of the gas power plant is 1242291t/ years, the proportion is 2.8:1.Coal power generation discharges a large amount of pollution, especially carbon dioxide, accounting for 86% of the total emissions China is currently biased in favor of the control after generation, and implementing the policy of the first emission after governance makes the cost of pollutants become a part of the power generation By comparison, we find that the pollutant of the natural gas power generation is less than half of the coal-fired power plant, which is in line with the national environmental policy Therefore, from the view of environmental cost of pollutants, gas power generation has obvious advantages 207 Naiping Zhu et al / Energy Procedia 104 (2016) 203 – 208 Table3 Comparison of pollutant emissions from natural gas and coal power generation Pollutant Coal fired power plant Gas power Power generation mode plant˄t/year˅ ˄t/year˅ Sulfur dioxide Nitrogen oxides Carbon dioxide Dust Residue Particulate matter Total 8,043 5,056 2,942,375 125ˈ000 350,000 428 3,430,902 971 1,241,292 0 21 1,242,291 5.3 The impact of the efficiency of the gas turbines in natural gas power station Improving the working efficiency of natural gas turbine is the key way to reduce the total cost of power generation and improve the economic operation Generally speaking, the “E” type of turbine efficiency is lower than that of the “F”type by 5%-6%.Referring to the formula(3) above, under the same capacity, when the price of natural gas is 1.8yuan/m3, then COF 0.18 / K According to the formula (4),when the efficiency of the turbine increases by 5%-6%,the cost of power generation can be reduced by about 8% As the gas turbine technology we selected from abroad have advanced large capacity and high parameters, the price of the natural gas appears higher than the coal If we can import advanced core technology of gas turbine, and produce our own gas turbine brand, it will also save a lot for natural gas power generation Effective Strategies on Natural Gas Development 6.1 Transform “governmentalization ” to “ marketization ”to reduce natural gas price The Party Central Committee proposed on the 14th National Congress that China should build a socialist market economy and under macro-control of the socialist country, making the resource allocation become fundamental Since then, CPC’s 15th National Congress and 16th National Congress further proposed that “ to strength the role of market in allocating resources ”.The Third Plenary Session of the 18th Central Committee of CPC pointed out that the key point of comprehensive deepen reformation is the reform of economic structure And the core problem of economic structure reform is to deal with the relationship between government and the market, and to make the market play a decisive role in the resource allocation and let the government a better job The miracle of China’s rapid economic growth in the last 35 years is thanks to the market reformation, it becomes the irrefutable fact Today, on the new start point of economic structure reform, the gradual deepening reform and the clear pace can be seen clearly From the 14th to the 18th National Congress, China has been emphasizing that “let the market play a basic role in allocating resources widely and greatly” Therefore, China has decentralized to the market, and this can stimulate economy becoming more lasting, having more profound vitality, effectiveness and competitiveness 6.2 Realizing the localization of gas turbine The development of natural gas power generation has been constrained by many factors Macroscopically speaking, Gas source and gas prices are undoubtedly stumbling blocks in the face of natural gas power generation But at the same time, we can’t ignore the gas turbine of power generation equipment So in the case of keeping the natural gas price remaining constant, improving the efficiency of gas turbine is an effective way to reduce the cost of natural gas At present, China has not fully mastered the key technology of gas power generation, so all gas equipments are imported, and imported equipments are expensive, resulting in high total cost of power generation So if we can develop advanced gas turbines, using our own gas turbine power for generation, we will improve the overall efficiency and reduce the cost In the “gas power generation safety supervision report” issued by National Energy Board at the beginning of this year, it shows that some domestic large manufacturing enterprises are only able to manufacture and assemble a simple gas generating set They have not yet achieved a breakthrough 208 Naiping Zhu et al / Energy Procedia 104 (2016) 203 – 208 success in the key technologies such as the manufacturing of overall thermal component material, and need to develop continually 6.3 Establishment of natural gas reserve system, stabilizing gas supply At present, the effective capacity of underground gas storage of natural gas in China is only about 12% to the annual consumption, it is much less than the level of 20% in Europe and America and also has a considerable gap to average level of 12% in the word Therefore, this is the main reason for the "gas shortage" in China in recent years We should establish a natural gas reserve system to ensure that natural gas can be supplied for a long time The system mainly includes the following aspects: Based on the system of market diversification reform, to encourage more investors to invest in the construction of natural gas storage facilities; In order to prevent the phenomenon like “gas shortage”, natural gas production and supply enterprises as well as urban fuel gas companies should establish a seasonal gas storage; The State should establish a natural gas emergency gas storage as a strategic resource reserve in respond to unexpected events Acknowledgements This paper is supported by the China National Natural Science Foundation(No.51276081 and No.71371081),China Postdoctoral Science Foundation (No.2013M541622),Jiangsu Planned Projects for Postdoctoral Research Funds (No.1202036C)and Students' Scientific Research Funding Projects of Jiangsu University(No.14C084) References [1] Fredrich Kahrl,Junfeng Hu,Gabe 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academic publications, in which there are about papers indexed by SCI or EI or CPCI-SSH ... COF 0.008 Among them, the COE is the natural gas power generation cost (yuan/kWh) Related parameters and index values of the cost of natural gas The model which is used to calculate the cost. .. 5.3 The impact of the efficiency of the gas turbines in natural gas power station Improving the working efficiency of natural gas turbine is the key way to reduce the total cost of power generation. .. that in the power market, the primary problem of the formation of the competition between natural gas power station and coal power station is the fundamental difference of the fuel cost, in other