Nigel Blackaby, Features Editor
The Pécs power plant in Hungary is being refurbished with the conversion of its coal fired units into gas and biomass fired units. Under the Kyoto Protocol, the plant will generate carbon dioxide emission reduction certificates, the value of which has offset the cost of the refurbishment.
Later this year, Hungary will be welcomed into the European Union as part of the first “wave” of eastward enlargement. The prospect of membership has meant many changes for Hungary, not least for the electric power industry, which saw the introduction of market liberalization measures in 2003 and which needs to quickly diversify away from its thermal and nuclear-based generation mix, if it is to meet a challenging renewables target.
Hungary’s Pannonpower Group is addressing this issue at its Pécs power station through a gradual conversion from coal to gas firing. In the case of one of its units however, the refit will see wood chips replacing coal as a fuel source. What is even more notable is that part of the finance for this aspect of the project has been achieved under an emissions reduction initiative under the Kyoto Protocol on global warming.
Pannonpower owns and operates the Pannon Thermal Power Plant that supplies both power and heat to the city of Pécs. Located 40 km from the Croatian border, Pécs is the regional centre of southern Hungary. The Pécs coal fired plant sells base load electricity to the MVM Rt. (Hungarian Electric Works Inc.) with the thermal energy being used by Pétáv Kft, the Pécs district heating supplier. Thermal energy, in the form of hot water and steam, is supplied to both households and industrial companies in Pécs for the purpose of heating, domestic hot water supply and industrial processing. It is the second largest district heating system in Hungary.
Figure 1. Boiler No. 10 is to be converted to biomass firing
As a traditional coal fired power plant Pécs is a significant emitter of carbon dioxide (CO2). Under the Kyoto Protocol, Hungary has committed to a CO2 emissions reduction target of six per cent by 2010. It also will have to comply with the EU directive requiring member states to generate 12 per cent of their electricity from renewable energy sources by 2010. Presently, a mere 3-3.5 per cent of power is produced this way in Hungary. To achieve this, Hungary has implemented a national environmental protection programme. Against this background, Pannonpower took the decision to undertake a gradual conversion of Pécs to natural gas and biomass fuels. The refurbishments are expected to result in thermal efficiency at Pécs rising by some eight to nine per cent as well as an improvement in the operating record.
Two of the boilers at Pécs will undergo a conversion to natural gas fuel by the end of 2004. The current coal-dust fired No. 10 boiler is to be reconstructed to switch to biomass firing and will consume 320 000 t of wood chip a year, saving around the equivalent amount in fossil fuel. As a consequence, emission levels will fall considerably and will remain within the new limits. The refurbishment not only involves the reconstruction of the No. 10 boiler but also an investment in a fuel preparation and storage facility. Using this facility, wood fuel that arrives at the plant will be chipped in preparation for input into the boiler. Construction of this pre-processing plant commenced in November 2003 and both the gas and biomass developments are due to be completed by the autumn of 2004 with operations commencing in the autumn. Pannonpower has established a new company called Pannongreen Ltd., to undertake the project and operate the new block. The majority of the works are being carried out by regional subcontractors through the Transelecktro-Kraftszer consortium – winners of the public tender. A Finnish firm is supplying the 10 m-long steel components of the biomass fired boiler bed.
The new biomass unit will have a capacity of 50 MW, making it the largest in Hungary and among the largest in Europe. While the refurbishment is taking place, power production is being maintained through the operation of Pécs’ fourth unit.
The switch to gas firing will ensure lower emissions of nitrogen dioxide (NOx) and sulphur dioxide (SO2). The wood chip fuel is practically sulphur-free with NOx and CO2 emissions below the required limits. The technology conversion will eliminate the environmental hazards of coal dust pollution and sludge storage. The city of Pécs should enjoy a considerable improvement in the air quality and the less frequent occurrence of smog. The Environmental Protection Authority will monitor emissions from the new blocks online.
Pannonpower has entered into agreements with two local suppliers of wood chips but is considering adding further regional suppliers of suitable biomass materials. It hopes that the power plant’s changed fuel requirements may trigger new local agricultural activity and employment. The sourcing of wood for fuel will not have any impact on the sustainable sylviculture of the forestry in the region. It is planned that 90 per cent of biomass fuel will be hardwood, with at least 75 per cent of this being oak. Longer timbers, representing 70 per cent of wood used, will be transported by rail with the remainder by road. As the timber arrives it will be loaded directly onto a conveyor belt feeding the chipping machine. Two chipping machines will produce on average 625 t/day of matchbox-sized chips.
The No.10 coal-dust fired boiler unit was built in 1985 and operated at 540ºC, with nominal steam production of 220 t/h, nominal live steam pressure of 981 Mpa and a boiler efficiency of 82-83 per cent. The biomass conversion requires cutting the ash hopper and closing it with a diaphragm (membrane) component, installation of air nozzles and a multipart fluid air distribution box. Due to the increase in air pressure, two new air ventilators will be added and minor adjustments will be needed to optimize the feedwater preheating and overheating surface proportions.
Four 12-15 MWt capacity special gas burners will be added to the sidewalls for boiler start-up and new dispersers will be installed to convey the wood chips.
The live steam parameters of the transformed, bubbling fluid boiler remain unchanged (live temperature 540ºC, live steam pressure 99 bar). The nominal capacity will decrease due to the transformation of the combustion system (185 t/h, that can be overloaded up to 200 t/h capacity). The steam produced in the boiler moves to the existing, but upgraded, steam turbine and produces electric power through the turbine driven generator.
Figure 2. Biomass firing will enable a significant reduction in emissions
Pannonpower’s budget for the total refurbishments is a of HUF15bn ($72.5m). Of this capital expenditure, around HUF9bn was required for the construction of the biomass fired block. Bank financing was obtained for this element, while the remaining HUF6bn was funded from corporate group revenues. In January 2004, the project was awarded a HUF400m government subsidy through the Ministry of Environment Protection and Water Affairs. The UK and international law firm of CMS Cameron McKenna advised Pannonpower on the financing of the gradual refurbishment of Pécs. Istvan Kovari, a partner at CMS Cameron McKenna in its Budapest office said, “One of the units will be converted to a renewable unit, which means that biomass, mainly wood chips, will be used as a fuel, making the station more environmentally friendly and thus creating emission reductions.”
CMS Cameron McKenna’s London office advised on the sale of the CO2 emission reductions for the first commitment period under the Kyoto Protocol through the Joint Imple-mentation (JI) mechanism. Under JI, the investor receives the benefit of emission reductions resulting from the project in the form of credits in return for funding the project. The emission reductions arising from the Pécs refurbishment were sold to the Prototype Carbon Fund, a $180m World Bank initiative, which works with public and private sectors to support emission reduction programmes. Participants in the Prototype Carbon Fund receive a pro rata share of the emission reductions which they can use to set off against a company’s or country’s climate change commitment. CMS Cameron McKenna also advised on the implications for the transaction in relation to the EU Greenhouse Gas Emissions Allowance Trading Scheme, and the draft linking directive.
There have been two other transactions as a result of Hungarian emissions reduction projects. AES Borsodi sold 700 000 t of CO2 arising from a coal-to wood chips switching at its Kazincbarcika plant covering the period 2008 to 2012 to Dutch state-owned emissions dealer Senter. The other arrangement was a voluntary offset deal in which the sponsors of the COP9 (climate change) conference in Milan bought emission reduction units to offset 8000 t of CO2 emissions from the developers of a biomass fuelled power plant in Mátészalka in eastern Hungary.
The Pécs fuel conversion is one of only a few projects utilising the JI mechanism that have proceeded to this stage of development, bringing about a reduction in climate change at a reasonable cost to the benefit of both Hungary and the developed economies providing finance.