British companies are at the forefront of the development of wave and tidal technologies but this young industry desperately needs funding if its dream of commercialisation is to be realised. PEi examines the state of the industry and some of the most promising power generation devices.

Nigel Blackaby, Features Editor

Russia’s renewable energy resources are vast and as yet little exploited. The country’s substantial fossil fuel stocks have served to overshadow the potential that renewable energy offers. Of these resources, geothermal energy represents a substantial proportion with usual ecnomic estimates of geothermal resources at 115 million tonnes of coal equivalent (mtce) out of total renewable sources in Russia of an estimated 275 mtce.

Figure 1. The site of the Mutnovsky geothermal power station
Click here to enlarge image

The Kamchatka Peninsula and the Kurils Islands, on the far eastern edge of the Russian Federation, hold the richest geothermal resources in the country. In Kamchatka, there are 150 thermal springs groups and 11 high temperature hydrothermal systems. Exploration of geothermal fields in Kamchatka started in the1950s, since when about 400 boreholes have been drilled. Studies have shown that the geothermal reservoir is adequate to ensure the operation of a geothermal power plant with more than 300 MW total capacity. The first geothermal power station in the region, Pauzhetskaya, with an installed capacity of 5 MW, was built in 1967, and it is still in operation with current capacity of 11 MW. A 12 MW geothermal station, Verkhne (Upper) Mutnovskaya, was also built in the Mutnovsky geothermal field, and this is also still operating.

Geothermal projects

The Mutnovsky geothermal field is located south of the city of Petropavlovsk-Kamchatsky, the administrative centre of the Kamchatka region. In 2001 the first stage of the 50 MW Mutnovsky geothermal power project, located about 120 km from Petropavlovsk-Kamchatsky, was constructed. The plant consists of two 25 MW units and when the second unit was built in 2002 it became the largest geothermal installation in Russia.

The project is owned and operated by the Russian joint stock company Geotherm SC (Geotherm) as an independent power project (IPP) and cost a total of $150.2 million. It was among the first IPPs in Eastern Europe and operates in accordance with a power purchase agreement (PPA) selling electricity to a single client, the power distribution company Kamchatkaenergo. Geotherm’s only fixed assets are the concession to exploit the Mutnovsky geothermal field and the 12 MW Verkhne-Mutnovskaya power plant.

Power generated from the Mutnovsky resource is transported along a purpose built 220 kV transmission line to the Avacha substation, a distance of 90 km, where it connects to the Kamchatka electricity grid. Given its remote location, the Kamchatka grid is not connected to the rest of the Russian power network and so the region relies on electricity generated locally, mostly by oil fired CHP plants, using imported fuel.

Project Finance

The majority of the finance for the project resulted from a loan from the European Bank for Reconstruction and Development (EBRD), the single largest investor in Central and Eastern Europe. The project fitted the EBRD’s remit to develop the private sector in emerging democracies with an eye to sustainable energy initiatives. The EBRD provided a $99.9 million sovereign loan to the Russian Federation, which was then lent to Geotherm, with a fifteen year maturity (including a five-year grace period). Other finance came from RAO Unified Energy Systems of Russia, the Kamchatka Regional Administration (Kamchatka Oblast) and Kamchatskenergo SC. Loans represented 65 per cent of the project budget with shareholders providing 35 per cent.

The project originally involved the construction of a geothermal power plant of 44 MW total capacity at the Mutnovsky geothermal field. Through the efforts of engineers on the project, this was expanded to 50 MW. The EBRD employed a team of international consultants from WestJEC in Japan and New Zealand’s GENZL, along with Russian company Nauka, to carry out a feasibility study of the project, prior to agreeing the investment. The environmental benefits included the option to close an old oil fired combined heat and power plant in Petropavlovsk. Since road and transmission infrastructure was largely already in place, there would be limited environmental impact outside the site as a result of the construction.

Figure 2. Due to the conditions, all plant and equipment are located inside.
Click here to enlarge image

Procurement of all goods, works and services for the project was undertaken using international competitive tender procedures in accordance with EBRD rules. A total of 14 tenders were issued including three main engineering, procurement and construction (EPC) contracts. These were awarded to GUP VO Technopromexport for the power plant, OCS Kamchatskagropromstroi for the fluid collection and disposal system and the Vostokgeologia GP Mutnovka consortium for the well drilling. Although Russian companies handled the construction of the power plant, steam field facilities and drilling works, foreign subcontractors participated in the project. Siemens supplied a teleperm ME distributed control system (DCS) and 220 kV gas insulated switchgear as well as providing training to Russian staff, while Alstom were responsible for relay protection equipment. The US firms Psychrometric Systems and Cameron supplied mechanical draft cooling towers and well head equipment, respectively.

Site conditions

The geothermal field is located 800m above sea level. A 130 km long road was built to connect Petropavlovsk-Kamchatski and the site. The nearest village is 50 km from the power plant.

Climate was a key factor in the design of the power plant and continues to be a challenge for plant operators. Winters are long with frequent snowstorms and average snow cover height is 4m, reaching 17 m in valley areas. Due to the severe climatic conditions all plant and equipment are located indoors, including steam field equipment such as wellheads, separators, control valves and silences. Buildings on the site are all fully heated using geothermal fluids and are connected with elevated bridges to avoid operating personnel having to venture outdoors in winter. The power plant and steam field facilities are designed to allow for unmanned and remotely controlled operation with the DCS linked by satellite to Petropavlovsk-Kamchatsky and Moscow.

Click here to enlarge image

Today, the total electricity generation capacity based on geothermal energy in Kamchatka is 73 MW, accounting for a quarter of the region’s power supply. The use of geothermal has reduced the region’s dependence on expensive imported fuel. In late 2002, AO Kamchatsenergo paid 5750 roubles ($182) per tonne of black oil, which is the highest price among the plants within RAO UES. By using geothermal energy, Kamchatskenergo’s imports of fuel oil have fallen by 90 000 tonnes, down from 480 000 tonnes previously demanded for power generation.

In addition to the economic benefits, geothermal based electricity generation has improved the ecological situation in the region. Emissions of greenhouse gases (GHG) and local pollutants are estimated to have fallen: CO2 by 1.6 million tonnes per year, nitric dioxide by 8 thousand tonnes per year, sulphurous anhydride by 11 thousand tonnes per year and ash by 650 thousand tonnes per year. The additional installed capacity in the region will enable environmentally damaging old fossil fuel fired plants to be decommissioned including the oldest combined heat and power plant in the city of Petropavlovsk.

Independence compromised

The Mutnovsky geothermal project established the first independent power producer in the region, very much in line with the objectives of Russia’s reform programme for its electricity sector. Subsequent events have however caused the ownership to vary from its original model, with RAO UES now the majority shareholder. The local shareholder, Kamchatka Oblast faced mounting debts from oil imports and Kamchatskenergo have suffered a loss of revenues as a result of a change in VAT rules. In both cases they were unable to meet their obligation to the project and RAO UES stepped in to provide finance and take over the shareholdings.

The ERBD was not unhappy about the involvement of RAO UES at that stage and remain positive about the project. This was despite Geotherm having to accept a lower tariff for the plant’s output after the local regulator and Kamchatskenergo sought revisions to the agreed tariff calculation methodology just before construction was completed. Grzegorz Zielinski, associate banker with the EBRD’s Power & Energy Utilities Division, who has been closely involved with the project said, “The Mutnovsky Geothermal power project has been a success. We have a state-of-the-art power plant producing clean energy that has prevented the blackouts previously commonplace in the region.” Mutnovsky was the first major renewable energy project for the EBRD and so far is the only geothermal electricity investment the bank has made.

Future expansion

Geotherm has plans to further increase geothermal capacity in Kamchatka over the next few years. The potential capacity of the Mutnovsky field alone is estimated at 300 MW. A business plan has been prepared for the next phase of the development; most likely an additional 100 MW located on two adjacent sites and connected by short transmission line to the existing 50 MW plant. In parallel, Geotherm is expanding the 3 x 4 MW Upper Mutnovsky plant by adding a fourth unit.

The EBRD has reviewed the proposals for the next phase of expansion at Mutnovsky but has declined to participate at this stage. “We looked at the business plan and although we liked the proposals, the financial condition of Kamchatskenergo meant that we could not go ahead privately without a sovereign or RAO UES guarantee,” said Zielinski.