Dear Energy Professionals and Colleagues,
In this article, we tried to evaluate the hard coal, lignite, and imported coal-firing new thermal power plants in our local market. We also explained the operational problems and advised new coal-firing technologies regarding their best use and efficient application with available local as well as international financing in the new local thermal power plant investments.
Whereby in global energy supply markets coal has a 25% share, second only after petroleum, coal is the primary resource with a nearly 40% share in electricity generation. In our local market, coal has a nearly 40 percent share in primary energy generation, but it is fourth with about a 20 percent share in electricity generation as of 2011. It is predicted that coal will have a larger share in the future global market thanks to new “clean coal technologies.” As a matter of fact, coal is the most important indigenous fossil fuel, therefore it should be widely utilized countrywide for cheap and more electricity generation with the best applicable use of advanced technologies.
Reserves and Mining
Turkey has both hard coal and lignite deposits. The hard coal is mostly located in the western part of the country, in the Zonguldak basin, which has more than 700 million metric tons of workable and proven reserves, about 80% of which can be coked. Lignite deposits are widespread and plentiful; reserves are estimated at 12 billion metric tons, the seventh largest in the world, most of which is economically mineable, though only about 7 percent has a heat content of more than 3,000 kilocalories per kilogram (LHV). About 40 percent of the Turkey's lignite is in the Elbistan basin which starts from Konya Karapinar and covers the Adana Tufanbeyli, Elbistan and Sivas Kangal basins.
Production and Consumption
The Turkish Hard Coal Institute operates five basic underground mines in Turkey, and is the only hard coal production entity in the country. The two most important lignite fields in Turkey -- the Afsin-Elbistan and Sivas-Kangal coal fields -- are owned by EÜAÞ and operated by private companies under leasing contracts. Even though there is significant production of lignite and some production of hard coal in Turkey, not enough coal is mined to meet demand.
As a result, Turkey imports more than 16 million tons of hard coal each year, mostly from Australia, the United States, Columbia, South Africa, and Russia. Imported hard coal is used mainly for electric powered steelmaking and cement production. About 75% of Turkey's lignite is used as a fuel source for electric power production
Coal Technology and Coal Markets
As there is relatively little investment in the global liberalized markets, or investment priority is given to natural gas fired combined cycle power plants due to their relatively cheaper installed cost and fast construction periods, foreign dependency is increased in countries which depend on imported fuel. Demand for more natural gas also triggered the demand for more coal.
More coal utilization required better, new coal technologies to be applied. We now have a new, obvious evolution in clean coal technologies. When we look at available technology and new trends in market demand, the most important sector is the one involving new technology developments for energy. The new tendency is for state-of-art technology to be developed and enforced not only in the advanced countries, but also developing ones which are consuming more and more energy.
European as well as North American companies are now too expensive to export energy technologies. Soon in time these countries will not be able to sell their products in the global markets. Even in their home markets, they will be in need of protecting themselves with high import taxes and labor codes to avoid an influx of cheap foreign labor. In recent years, China, India, Korea, and all Eastern countries have set very competitive prices in the global energy markets.
They already cover their own home markets with their own fabrications supported by advanced technology and fabrication licenses. Although they are very cheap, they have serious difficulties in fabrication of the fastest, latest, and most efficient designs in compliance with environmentally-friendly solutions of the latest international trends. However, we shall soon see that they will accomplish all these prime targets with the price advantage.
We need to reposition our local energy market by keeping in mind these new technological as well as commercial developments. We have engineering and intellectual as well as market potential for local fabrication. We must design our own thermal power plants to fire our own indigenous local fuel, support fabrication in our plants, construction, site installation and operations by ourselves.
As a member of a local mechanical engineering chamber (MMO), we sincerely believe in our local engineering design and fabrication capability. We know that all engineering studies cover the same curriculum, same programs in thermodynamics, heat transfer, gas turbines, and power plant design courses, with the same terminology such as enthalpy, entropy and exergy.
We have world class teachers and academicians whose reputations are reinforced with their world-class technical papers. We are sure that our young engineers are all brilliant with the capability to make necessary power plant designs as long as we support them with necessary software, hardware and scientific funds to continue their work. We need to allocate more funds to support MSc, PhD and postdoc works, and that course of action has to be accepted as long-term national policy.
Only by employing such a national policy to support local technology can we reach the necessary advanced level of design, fabrication and construction in our own thermal power plants. Similarly, we should be doing the same for designing and locally fabricating our own wind turbines as well as hydro turbines to respond to ever-increasing local energy demand.
In the past, we put more priority in buying foreign investors since they had the financial capability to cover the overall power plant investment projects, although their products were not the best of their kind, not the most efficient, nor designed with the latest technology to utilize our local available coal. Their plants were not suitable to use our local fuel, lignite or hard coal, and hence they aged fast, very fast, faster than the acceptable market norms.
Those reputable Western companies do not exist anymore. They are either bankrupt or unable to compete with the available market players beyond their national borders.
In recent years, Eastern companies also have cheap prices in thermal power plant tenders. If you prequalify a Far East company in your pre-tender procedures, Western companies certainly hesitate to participate in the tender since it would be a waste of time to compete with those cheap players.
So you cannot attract Western technologies although you certainly wish to have them. Price is not of prime importance for the new players. They do not even know the prevailing market figures, and hence they quote unexpected ultra-low prices. Their labor cost for design and fabrication is very low. They have serious market policies to invade the global energy markets.
It has been long ignored that the best design with which to use your local fuel can be accomplished by your own local engineering capability, by your own local engineering, procurement and construction (EPC) companies. Foreign contractors make the design, handle construction, site installation, wait for the guaranteed period for 2-3 years, complete their responsibility and leave the site. The operator stays alone by itself in the long run.
It is too difficult to make the necessary long-term rehabilitation and programmed repair works without the local design and fabrication support of the original equipment supplier. Therefore local design and fabrication are indispensable for long-term operation.
Upcoming Energy Crisis
We all know that we are in the middle of a global energy crisis; we have a lack of sufficient energy supply. Our resources are limited in generating the necessary energy. Facing such a great energy demand, our resources will not be sufficient to generate the necessary energy supply.
With new renewable technologies, such as wind or solar, we cannot respond to and fulfill the growing prevailing demand very fast. They can only enter the local energy market with some more time. Fast, easy and cheap solutions are not available, nor practical or feasible.
We need to have long-term energy strategies. Local engineering, design and fabrication must have their shares in our national priorities.
We must design our own thermal power plants based on our own design teams to best fit our local available fuels, indigenous lignite or hard coal. We must fabricate them ourselves in our own shops. We must conduct the site installation by ourselves, and operate them. Our local engineers are capable of handling such general plant designs.
However, we need to create such an investment climate in the local market. Local market forces should possess a firm instinct in handling all these activities to carry them out by themselves, in harmony with local investors, financial institutions, academicians, engineers, engineering unions, and engineering and contracting services. We should not leave the initiative to foreigners.
We should not leave the contracting services to cheap foreign labor just because they are very cheap. Our energy markets and our energy potential should be protected against foreign domination and invasion. We are pleased to see that the political authorities have recently taken necessary measures to fulfill these expectations.
How to Cover Project Financing
Financially, we have serious reasons to support such decisions. We have serious expectations in the local market that of having an electricity market based on real cost. Since crude oil prices are immediately reflected in the local petroleum byproducts, and consumers accept having such a burden on their cost calculations, similarly the same will be applied in all phases of price structure in electricity generation.
When we evaluate the electricity supply and demand projections for the next ten to fifteen years, there is no new potential primary energy resource to reduce the ever-increasing prices, and hence the short-term electricity prices are expected to float in the range of $0.16-0.20 per kWh in our local electricity market.
Financial costs, rehabilitation and renewals of the new privatizations of the thermal power plants cannot reduce the electricity prices in the short and medium terms.
We are entering a difficult age for local coal operations in available local coal basins. We shall need more investments and applications of more modern technologies and machinery in the coal mines. These expenses will be added to the cost structure of the final electricity prices.
At this time, more than 50% of electricity generation in the local market is dependent on imported natural gas. Due to delays in investments of hydro and coal-based power plants, we have base loads in those imported natural gas firing thermal power plants. Unfortunately, that will increase the demand for more combined cycle power plant investments.
Prevailing World Coal Prices
Thanks to the latest developments in technology, PC (pulverized coal firing) and CFB (circulating fluid bed) design coal fired thermal power plants have reached or even exceeded 46 percent efficiency with the application of supercritical pressure and temperatures.
Imported coal at the prevailing $4.50 per MMBtu spot prices are now comparable with $12+ per MMBtu natural gas prices in combined cycle power plant electricity generation with 60 percent efficiency.
However, the imported coal is indexed to oil prices and there is no reason to expect any drastic change in price ranges in the medium and long terms for any more advantage in coal prices.
In any case, one should keep in mind that the raw coal price of our local Afsin Elbistan coal is less than $2 (two) per MMBtu as of 2010, although firing in the thermal power plant is not so easy for our major coal, and plant efficiency is not very high. Specially tailored academic and commercial methods are to be explored and enforced.
New Technologies for Firing Difficult Coal
IGCC, CFB, oxy-fuel firing and underground gasification methods are also applicable for low calorific value local coals. CFB is proven technology up to 165 MWe per unit outputs for our low LHV lignites.
IGCC (integrated gasification combined cycle) coal firing can also be employed with careful academic investigations. There is great potential in its application.
Today, energy security is the major parameter in qualifying a country as independent. Energy security can only be achieved by an intelligent combination and management of natural and socio-economic local resources and implementation of the latest technology.
It is difficult to think that a country can protect its borders if its energy investment policy is fully import-oriented. Turkey has many energy resources but they are not easy to exploit. Hydropower in Turkey needs careful and intelligent policies taking into account its impact on the environment, agriculture and densely inhabited regions. Therefore IGCC, CFB and oxy-fuel plants can be considered multi-fuel or fuel flexible.
On the other hand, our local coal mines have varying specifications even in the same basin. Therefore we need to apply expensive selective mining methods rather than our cheap traditional mining for better and efficient firing of the available coal in the thermal power plants. That is an expensive investment that we have only made in a few local private applications.
The traditional method is supplying mined coal as received with all the undesired unburnable sand, ash, moisture, etc. All new imported coal fired power plant investors are major players in other sectors which are in need of cheap electricity. They will consume almost 60-70 percent of generated electricity in their own plants. Remaining potential will be sold in the national market and that is not a problem since there is always a need for more energy in our shrinking environment.
Generally, local investments are realized by “corporate finance” methods. Between the period of 1993-2005, we have realized energy power plant investments exceeding an overall 4000 MW installed capacity. Those natural gas firing cogeneration plants repay themselves fast and create more money for further investments in new plants.
However, we do not have the investment environment for “non-recourse” project finance to secure “off taker” contracts with local or international financial institutions. Therefore it is too difficult to find the necessary project financing for mega projects such as Afsin Elbistan. We have lost time in the past and continue to lose more, and are unable to recover fast in due time.
Conclusions and Recommendations
Today, in the administrations’ energy policies, the first priority is in securing the cheapest, good quality, reliable and uninterrupted electricity generation in the local market; so effective and rational applications of local fuel resources are of vital importance. Therefore the energy planning is also the planning of the future of the country in order to avoid any foreseen economic crises.
There is no comfort or luxury in making mistakes in energy policies. Any mistake is paid back drastically and severely. Securing energy supply is the first priority. It is our sincere and humble feeling that new investments based on imported coal are too risky.
Their construction on the Black Sea coast is more risky, due to increased prices in the world markets and limited coal routes through ever congested Turkish channels. Russian coal is not and has never been cheap. Local coal resources should have the first priority in exploitation for the thermal power plants. Private and even public capabilities are both to be encouraged.
We need to encourage the local engineering capabilities, and openly discourage foreign labor. Foreign labor is a loss of national income. There is no value added income generation in the local market by foreign labor. We must reduce our dependency on imported energy, whether it is coal, natural gas, oil, equipment, project finance, or cheap labor.
We must be very careful in the evaluation of environmental impact assessment (EIA) reports and certification as well as in regulatory licensing. Plants should never be placed on forest or agricultural land. Any new and exaggerated capacity increases or fuel changes from local coal to imported coal are to be evaluated carefully. Available unloading seaports are to be carefully selected. Deep sea discharge of bottom ash should be avoided.
Last but not least, we need to allocate more funds to support MSc, PhD and postdoc works, and that course of action has to be accepted as long-term national policy. We must form more research institutes to conduct more research on the exploration, application and best use of local coal.
The best price is not the best choice for long-term stable and cheap electricity generation.
Short Resume of the Author
Haluk Direskeneli, Ankara-based energy analyst.
Haluk Direskeneli, is a graduate of the METU Mechanical Engineering department (1973). He worked in public, private enterprises, U.S. Turkish JV companies (B&W, CSWI, AEP, Entergy), and in the fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as a freelance consultant and energy analyst with thermal power plant basic and detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of the Chamber of Turkish Mechanical Engineers (MMO) Energy Working Group.
Afsin-Elbistan’s Latest Status - Draft Report
