Scaling Up

By Siàƒ¢n Green

Low electricity prices and rising natural gas prices mean that cogeneration schemes in Europe have fallen on hard times. However, power developer InterGen is showing that economies of scale can keep the industrial power dream alive.

In August 2002, power project developer InterGen started construction on Rijnmond, a combined cycle cogeneration project near Rotterdam, the Netherlands. The 800 MWe plant is expected to come on line in late 2004 and is one of several large-scale projects that are signalling a revival in the cogeneration market in Europe.


The Dutch power market has a number of features which make it attractive to independent power producers
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Liberalization of Europe’s power market has driven electricity prices down in many countries, and this, coupled with rising natural gas prices, has made it hard for cogeneration plants to be competitive and for new cogeneration projects to get off the ground. In the short term, there seems little prospect of a recovery in the ‘spark spread’, especially in countries such as the UK.

Some developers, however, are pressing ahead with key projects, including InterGen with Rijnmond in the Netherlands, and Immingham CHP LLP, which is developing a 730 MW CHP plant in the UK. Immingham will be constructed alongside Conoco’s Humber refinery and will be the largest CHP plant in the UK.

Size matters

In spite of a poor spark spread, such large-scale cogeneration projects can be profitable, says Mark Somerset of InterGen. “Where we are able to benefit is our size,” says Somerset. “We are a very large plant ” 800 MW electrical capacity ” and that gives us very good economies of scale. We are very efficient in terms of the efficiency of the combustion turbine, and that means we can produce steam at low prices.”

In contrast, a lot of other cogeneration schemes in the Netherlands are suffering, says Somerset. This is due to the fact that these plants are relatively small compared to Rijnmond and were built prior to liberalization at a time when Holland was trying to encourage cogeneration.

“A lot of cogenerators in Holland are really struggling at the moment,” notes Somerset. “They were established on the basis of high guaranteed electricity prices and subsidies as part of the Dutch move to encourage cogeneration. This was a very successful way to kick-start the cogeneration market but when the energy markets liberalized and electricity prices started to fall, the cogenerators lost their guaranteed rates. In addition, gas prices rose so they were squeezed from both sides, and they don’t have the economies of scale that big projects have.”

The scale and efficiency of the Rijnmond plant will therefore help to make it competitive, and for InterGen, the project represents an opportunity to expand within Europe. The company originally started its European business in the UK with the Rocksavage independent power plant which entered operation in mid 1998. “The UK was one of the first markets in the EU to liberalize and there were market structures in place that were favourable for the development of independent power projects,” explains Somerset.


InterGen is aiming to complete the Rijnmond plant by late 2004
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“Having established ourselves in the UK we wanted to expand onto the continent, and the Dutch market has a number of features which makes it attractive for independent power projects,” continues Somerset. “For example, the regulatory regime is relatively open, transparent and non-discriminatory, so access to the high voltage grid is on an open regulated basis; there is also a wide availability of gas, which favours CCGT technology.

“And because the market is dominated by gas generation ” not coal or nuclear ” then we felt that if we could land a good gas deal and implement the latest technology, then we would be able to develop a competitive IPP.”

The steam factor

The location of the plant ” at the Nerefco site in the Rijnmond area of Rotterdam ” was chosen for its proximity to a major steam customer, i.e. the Shell refinery. According to Somerset, it was important for InterGen to demonstrate to the authorities that the plant would generate steam as well as power in order to obtain its environmental permits.

“What takes a lot of time in the Netherlands is obtaining the environmental permit,” explains Somerset. “Electricity is the dominant output of the plant but we have also contracted for selling steam which supported the obtaining of the environmental permit. The Netherlands has a large cogeneration sector and it is unlikely now that an electricity-only generator would obtain an environmental permit.”

The Rijnmond plant will sell up to 125 t/h of medium pressure steam to the Shell refinery. Shell currently generates its own steam on-site but the Rijnmond plant will improve the reliability of the Shell steam system. Shell invited InterGen to make a bid for supplying steam to the refinery. The initial term of the steam contract runs to 2007. The plant is capable of supplying up to 350 t/h of steam, as well as hot water for the nearby district heating system.

The entire electrical output from Rijnmond will be bought by Nuon, one of the largest power and water utilities in the Netherlands. The two companies signed a power purchase agreement in July 2001 worth around €3 billion. Nuon will purchase the full output for a period of 15 years.


The Rijnmond plant is being built on the site of a former refinery, and land remediation had to be carried out
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InterGen was expecting to close the financing on Rijnmond at the end of September. The €625 million project will be financed on a non-recourse basis with a debt/equity split of 70/30. Construction on the plant began on 19 August 2002.

Building Rijnmond

The engineering, procurement and construction (EPC) for the project is being undertaken by a consortium of Bechtel ” a joint owner of InterGen with Shell ” and Turkish company Enka. Bechtel and Enka already have a history of working together, most recently on building 3800 MW of CCGT capacity in Turkey which is just coming into operation. “They will therefore transfer that working relationship and those skills to Rijnmond,” comments Somerset.

Operation and maintenance of the Rijnmond plant will be carried out by a subsidiary of InterGen, although the company has already secured a long-term maintenance agreement with Siemens for the gas turbines.

Rijnmond will be equipped with two Siemens V94.3A2 combustion turbines operating on natural gas and a Standard Fasal heat recovery steam generator supplying steam to a triple pressure Alstom steam turbine. The plant will be connected to the local grid at 150 kV via three underground circuits to the Waalhaven substation.

Cleaning up

Before construction could begin on the plant, land remediation and clean-up of the site had to be carried out, a process which took four months between May and August 2002. The plant is situated on a site previously leased by refining company Nerefco, which until 1997 operated a refinery at the location. Nine large crude oil storage tanks, in use since the 1950s, were located where the Rijnmond plant is being built, and extensive clean-up was necessary in order for InterGen to obtain a building permit.

“We have a very cooperative land owner in the Municipality of Rotterdam and its agent, the Port of Rotterdam,” says Somerset. “They were very cooperative because they see this project as being a major regeneration of a brownfield site.

“The regeneration factor has always been a strong feature for the authorities, the land owner and the local community. It sounds good and it looks good.”

The Rijnmond plant is due to be completed 27 months after construction start, but this may be achieved earlier. The plant could therefore be on-line as early as September 2004.

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