Replacing Norwegian Co-Generation

Power Plants with CHP Plants in

Germany 2013
Replacing Norwegian Co-Generation Power
Plants with CHP Plants in Germany
Energetic and Economic Feasibility

TPG 4140 - Natural Gas Robert Borrmann

Christina Penke

Kai Zhang

Arne Rawert

Matias Vikse

19.11.2013
Abstract

This project report analyzes the possibility to replace co-generation power plants in Norway
with CHP plants in Germany. The issue was addressed based on a report written in 2007 that
found the concept to be energetically viable. Through our calculations, we could confirm
this assessment. Additionally, the economic analysis showed that the analyzed scenarios of
operation were better to the simple operation of a gas plant in Norway. Scenarios reached
from the simple sale of gas in Germany in return for purchased electricity to the operation of
a CHP plant in a German metropolitan area with return of electricity to Norway either from
this plant or from other sources. However, the operation of gas plants is currently not
feasible in either country which explains the lack of investments in such projects. Our
findings therefore suggest that, given positive future developments in the competitiveness
of gas power plants, it will make more sense to build these in Germany, even when this
means that investments already made in Norway have to be written off.

i
Table of Contents
1 INTRODUCTION 1

2 ENGINEERING THEORY 3
2.1 COMBINED HEAT AND POWER PROCESS 3
2.2 BRAYTON AND RANKINE CYCLE 4
2.3 THE COGENERATION PLANT AT KRST 6
2.4 COMPRESSION AND EXPANSION OF GAS 6
2.5 PIPELINE TRANSPORTATION SYSTEM 10
2.6 TRANSPORT OF ELECTRICITY 12

3 ASSUMPTIONS 14

4 RESULTS FROM APPLIED CALCULATIONS 17

4.1 PRESSURE LOSSES 17
4.2 CALCULATING THE AMOUNT OF ELECTRICAL AND HEAT POWER 19

5 ECONOMIC ENVIRONMENT AND THEORY 22

5.1 ECONOMIC ENVIRONMENT 22
5.2 VALUATION THEORY 23

6 ECONOMIC EVALUATION OF SCENARIOS 24

6.1 GENERAL CONCEPT AND ASSUMPTIONS 24
6.2 SCENARIO 1 25
6.3 SCENARIO 2 25
6.4 SCENARIO 3 26
6.5 SCENARIO 4 26

7 INTERPRETATION AND OUTLOOK 28

8 CONCLUSIONS 29

REFERENCES 30

APPENDIX 32
TABLES 32
FIGURES 36

ii
List of figures

Figure 1 Comparison of power generation and cogeneration [1] ............................................ 3

Figure 2 Brayton cycle .............................................................................................................. 5
Figure 3 Rankine cycle .............................................................................................................. 5
Figure 4 Compressor stages [7] ................................................................................................ 8
Figure 5 An overview of Europipe II [9] .................................................................................. 11
Figure 6 Cross section of a pipeline [8]................................................................................... 11
Figure 7 Break-even point between using HVAC and HVDC [10] ........................................... 12
Figure 8 p/V and T/S-diagram of Brayton cycle.................................................................... 366
Figure 9 h/s-diagram of Brayton cycle.................................................................................. 366
Figure 10 p/v-diagram of Brayton cycle ................................................................................. 377
Figure 11 T/s-diagram of Brayton cycle ................................................................................. 377
Figure 12 Standing-Chart........................................................................................................ 388
Figure 13 Pressure losses from Krst to Dornum ................................................................ 399
Figure 14 Pressure losses from Dornum to Hamburg .............................................................. 39
Figure 15 Flowchart for the cogeneration plant at Krst [7] ................................................. 40

List of tables

Table 1 Pressure losses and static pressure between Krst and Dornum .................................... 322
Table 2 Pressure losses and static pressure between Dornum and Hamburg................................. 322
Table 3 Gas composition .................................................................................................................. 322
Table 4 Calculation of the friction factor 4....................................................................................... 322
Table 5 Power used in the intermediate compressor at Dornum ................................................... 322
Table 6 Calculation of density .......................................................................................................... 333
Table 7 Power losses in the pipeline ................................................................................................ 333
Table 8 Assumptions for Economic Analysis .................................................................................... 333
Table 9 Calculation for Scenario 2 ................................................................................................... 344
Table 10 Scenario Analysis Spreadsheets.35
Table 11 Cost overview...................................................................................................................... 355

iii
Table of Symbols

Symbol Description Symbol Description

A* area at sonic T temperature

conditions

d diameter v specific volume

f friction factor U velocity

l length W work

mass rate x percentage

M Molecular weight y mole fraction

MVe Market Value Z gas factor

Equity
MVd Market Value Re cost of equity
Debt
p pressure Rd cost of debt

P Power ratio of specific

heat of a gas at a
constant pressure
to heat at constant
volume
R gas constant density

Re Reynolds number efficiency

t taxrate roughness

iv
1 Introduction

Gas plays an important role in the Norwegian economy. It is one of the central drivers
behind the economic growth in the country in the past decades, and even surpasses oil in
production since 2010. On the other hand, the Norwegian electricity market is dominated by
hydropower, and the capacity of pump storage plants indicates that electricity gained from
gas powered plants is no necessity. Large CHP plants that make optimal and efficient use of
the energy in the gas are not an option within Norway, as the demand for district heating is
not sufficient in this not so densely populated country.

Therefore, a report in 2007 [1] looked at the possibility of replacing Norwegian gas powered
plants with CHP plants in Germany. The electricity would be returned to Norway, while the
heating energy could be used in German cities such as Hamburg. Although the report found
the concept to be energetically viable, there have been no developments of such projects in
reality.

The aim of this work is to recalculate the energetic viability under todays circumstances, and
to add an economic standpoint on the competitiveness of the approach. Ultimately, the goal
was to find a concept in which a Norwegian gas powered plant could be replaced by a CHP
plant in Germany with both energetic and economic benefits.

We have several parts to get a better understanding of our project. In Chapter 2 basics of
thermodynamics and combined power plants are described. Here we also take a closer look
at the theory behind electricity distribution in HVDC cables, and look at the theory behind
gas compression. To do the calculations several assumption are necessary, which can be
found in Chapter 3. The economic environment analysis is followed by performing a power
analysis, which is explained in details in chapter 5 and 6.

In this analysis, we consider four different scenarios. The first scenario analyzes the
possibility of merely selling the gas in Germany and purchasing electricity on the market
there. In the next scenarios, the complexity rises as firstly the operation of a CHP plant in
Hamburg is considered, which would provide heating energy to the city while returning all
the electricity it generates. Subsequently, we analyzed and discussed the possibility of

1
opening up to the German electricity market as well by detaching the generation of
electricity in the CHP plant from the return of electricity to Norway both time-wise and in a
latter scenario also geographically.

2
2 Engineering Theory

2.1 Combined heat and power process

Combined heat and power (CHP) is a system of integrated technologies in order to produce
electricity as well as useful heat. The sequentially or simultaneously generate of useful
energy (mechanical and thermal) is also named cogeneration.

In this process fuel (in our case natural gas) is burned in a gas turbine which drives a
generator to generate electricity. The exhaust gas feeds a heat recovery steam generator.
The steam is used in a steam turbine to generate power as well. Additionally steam can be
extracted for industrial process usage or hot water production.

The comparison of pure power generation and cogeneration of power and heat is shown in
Figure 1.

Figure 1 Comparison of power generation and cogeneration [2]

You can see that the electrical efficiency of cogeneration (57 %) is lower than electrical
efficiency of power generation (48.5 %). However additionally to the electrical power the
amount of heat power (41 % of fuel energy) can also be used, so barely any energy gets lost
to the condenser (0.5 % vs. 33 %). A common CHP system requires about 75 % the fuel
energy compared to separate heat and power systems [3]. This leads to the most important
advantage of CHP since primary fuel assumption is reduced. Less primary fuel comes to

3
reducing energy costs and to fewer emissions for the same amount of energy output.
Particularly considering rising energy prices a high efficiency is considerable. Furthermore
due to the greenhouse effect and the payments for CO2 emissions the use of natural gas is
desirable. Nevertheless there are also a few limitations regarding CHP. Linked to relative
newness of this technology the capital costs of CHP installations are very high although the
price of CHP units is beginning to fall. Furthermore maintenance costs are more expensive
than of common power plants. Another problem due to CHP is the simultaneous electrical
and heat demand. In the summer months less heat is used than in the winter months while
the demand of electricity is fairly constant.

A CHP plant consists of several units. Afterward the most common parts are described.

The gas turbine is fed by large amounts of compressed intake air. While adding the air to the
combusted gas it is rapidly expanding. This rotates the turbine blades which drive an
electrical generator to produce electrical energy. Exhaust gas of the gas turbine passes a heat
recovery boiler. As fuel light oil and natural gas can be used. This part of a CHP plant can be
described by depicting it as a Brayton cycle (see chapter 2.2).

In a steam turbine various fuels are burned in a boiler to produce high-pressure steam. This
passes through a steam turbine to generate power. Furthermore parts of the steam can be
extracted for industrial use. The steam turbine is basically a Rankine cycle which is explained
more in depth in chapter 2.2.

2.2 Brayton and Rankine cycle

The Brayton cycle is where the natural gas is combusted. The air is compressed before
entering the combustion chamber. Then fuel is injected and combusted, raising the
temperature and thus the enthalpy. In the case of the gas power plant at Krst, they use
natural gas as the fuel for the Brayton cycle. After the combustion chamber, the air is
expanded and energy is extracted in the turbine. Because of the high temperatures after the
gas turbine, there are essentially a lot of heat energy that is lost if we do not combine it with
the Rankine cycle considered next.

4
 Qin
Compressor
Turbine
Heat exchanger
Ein G Eel
Generator

Heat exchanger

Qout
Figure 2 Brayton cycle

The Rankine cycle is a closed cycle, which uses water vapour as medium. If we combine the
Rankine cycle with a Brayton cycle, one can use the heat after the gas turbine to heat the
boiler. If the temperature after the turbine is too low, additional fuel can be burnt before the
boiler. [4] In the boiler, the water is heated to the saturation temperature, and vaporized [5].
After the boiler, water vapor is sent through a turbine where shaft work is generated to
electrical energy. Once the vapor is through the turbine, the water is sent through a
condenser, before it is pumped back into the boiler.

Turbine

Superheater Eheat
Generator

Boiler
Qin

Hot Water

Ein Pump Condenser

Qheat
Cold Water

Figure 3 Rankine cycle

5
Even though the processes at Krst and in a general CHP power plant are more advanced
than the processes explained here, the Brayton and the Rankine cycle are still fundamentally
involved. For a simplified flow chart of the power plant at Krst see figure [15].

2.3 The Cogeneration plant at Krst

To serve as a basis for our comparison analysis, we are going to consider data from the gas
power plant at Krst, Naturkraft. Naturkraft gas power plant was initiated in 2007, and is a
joint operation between Statoil and Statkraft who both own 50 % each [6]. The gas power
plant at Krst is essentially a combined cycle power plant [6], which is basically a
combination of the Brayton and the Rankine cycle explained earlier.

The gas power plant at Krst has the one of the highest efficiencies currently available on
the market. Also it has a filter that reduces NOx emissions to below 5 ppm [6]. Power plants
that use natural gas as fuel result in the lowest emissions of the fossil fuels and are therefore
considered as a natural transition between a fossil fuel based era, and an era of renewable
energy.

Despite the growing demand for electricity, the power plant at Krst is mostly dormant.
According to the yearly reports from 2012 [6], this was due to a combination of high
precipitation (resulting in lower prices of electricity), and a high demand of natural gas in
Europe.

2.4 Compression and expansion of gas

Each receiving terminal has a requirement of gas specifications to ensure interchangeability

between the different suppliers. These specifications are presented in what is called a gas
contract. In this contract there are also certain limits to the gas pressure at the receiving
terminal. This pressure, together with the requirements of receiving temperature and
hydrocarbon dew point ensures single gaseous phase in the terminal. It is essential to meet
the specifications given in the gas contract, as failing to do so results in large fines, and the
need to buy substitute gas from the spot market.

6
For calculating the ideal work output in the expanders or ideal work input in the compressor,
we use equation (1) below. This equation is for isentropic expansion and compression.

[( ) ] (1)

For the ideal power output or input we use equation (2) below. This equation is also for
isentropic expansion and compression.

[( ) ] (2)

At the processing facility we have two main types of compression of natural gas, namely
export compression and recompression [7].

Recompression is used in the process of separating the sales gas from condensate. In order
to meet the sales gas specifications we have to process the gas and alter the phase envelope
such that it meets the contract. This involves separating NGLs from the sales gas, and
requires sending the gas through separators. Separation of NGLs is achieved by expansion of
the gas and then removal of the condensate. When the phase envelope satisfies the gas
contract, the gas has to be recompressed and rejoined with the rest of the sales gas.

The type of compression we are concerned with in this project is export compression. There
will be pressure losses in the pipelines due to friction. Thus the gas has to be compressed to
ensure that the gas at the receiving facility is at the specified pressure level. The power
needed for compression depends on gas properties such as temperature and pressure at
process and receiving terminal. It depends also on pipe dimensions such as the diameter and
the roughness (see chapter 4.1).

There are different types of compressors, but the most common are centrifugal compressors
and reciprocating compressors. Centrifugal compressors are similar to radial pumps and are
primarily based on Francis runners. In centrifugal compressors there are several Francis
runners in series, to achieve a high compression ratio. This type of compressor can be used
for high flow rates. However, due to compressibility effects and the phenomenon called
choking, the mass rate through the compressor is limited to the mass rate at sonic velocities.

7
 ( )
( ) (3)

Where A* is the area at sonic conditions. P0 is the stagnation pressure. T0 is the stagnation
temperature. The following illustration is taken from the radial compressor at the
cogeneration power plant at Krst. The red lines are marking the different compressor
stages.

Figure 4 Compressor stages [7]

Reciprocating compressors are also called piston compressors and consist of a moving piston
in a cylinder. These pumps achieve high compression rates, but are restricted to low mass
flows. However, due to their more crude and simplistic form, they are cheaper than
centrifugal compressors.

For a compressor we can calculate the work input, by dividing equation (4) with the
compressor efficiency. This is due to the fact that compression of the gas is not isentropic as
a result of friction in the compressor. The amount of work needed to compress the gas is
therefore higher than in the ideal scenario.

(4)

To calculate the real power needed in the compressor we divide equation (5) by the
efficiency.

8
 (5)

Turbine expanders are based on a series of Francis runners coupled together in series.
Between the runners there are stators directing the flow to the runner. These stators go by
the name of guide vanes. Number of stages in the expander varies with the amount of
expansion desirable. In a gas turbine and turbo expanders, the turbine and the compressor
are often on the same shaft, so that some of the energy output from the expander is used
for compressing the gas.

Due to friction in the turbine, the gas is not expanded isentropically. Since the equation for
the work and power output given above is for the ideal case, we have to multiply these two
equations with the efficiency to get the real output. See the two equations below.

(6)

(7)

9
2.5 Pipeline transportation system
The pipelines in the North Sea are all operated by Gassco. Gassco is a state owned company
established after EU-regulations prevented the field operators from controlling the pipeline
transportation system. However, Gassco is only in charge of operating the pipeline
transportation system. The owner of the entire system is another state controlled company
called Gassled.

Gassled was established in 2002 and own the entire pipeline transportation system. Gassled
is joint owned company, but through Petoro A/S and Statoil, the Norwegian state has a
majority of the shares. Because of this majority of shares, the Norwegian state can set tariffs
for transporting gas. These tariffs can only be altered or set by the Norwegian parliament.

Extensive and elaborate transportation system is needed from producer to customers, and
the pressure loss is the critical joint for the whole transportation system. Pressure drop
occurs in all piping systems because of elevation changes, turbulence caused by abrupt
changes in direction and friction in the pipe and fittings [9]. In addition, the pressure losses
are dependent on the mass rate, and thus also on the velocity of the fluid. For horizontal
pipelines the pressure losses are calculated by using the following equation:

( ) ( )
(8)

The following map shows Europipe II from Krst to Dornum which is the pipeline that is
considered in this analysis.

10
Figure 5 An overview of Europipe II [9]

The pipeline we focus on from Krst to Dornum has a diameter of 42 , and the length is
658 km. The technical capacity of the pipeline equals 71.2 MSm3. The outside of pipe is
coated with bitumen for insulation. Outside the bitumen coating, there is concrete and cast
iron so to increase stability and provide weight.

Figure 6 Cross section of a pipeline [8]

11
2.6 Transport of electricity
In all four scenarios, we are considering transporting electricity back to Norway. It is
therefore necessary to consider the technology needed for transferring electricity, and to
generate values of power losses due to transportation.

High voltage alternating current or HVAC is the most common mean of transporting
electricity. However at longer distances the losses due to capacitance will dominate the
power transfer in the cables. Therefore, at longer distances we mostly use high voltage
direct current or HVDC. According to Figure 7, for sea cables we have a break-even distance
of about 50 km between HVAC and HVDC, which means that for distances exceeding 50 km,
HVDC would be more economical. Since we are looking at the case of transferring electricity
from Hamburg to Norway, we are restricted to using such HVDC cables where losses due to
capacitance are non-existent. To find out how much power we could transfer in one HVDC
cable, we went to ask Frank Mauseth, associate professor in the department of electric and
power engineering. He told us that the NorNed cable could supply a total of 700 MW, which
is 270 MW more than the total production capacity at the power plant at Krst.

Figure 7 Break-even point between using HVAC and HVDC [11]

12
Normally, HVAC needs three cables for transferring electrical energy. This is due to the
reliance on symmetrical properties of the alternating currents. The use of exactly three

cables with a phase shift of allows for the least amount of cables [11].

In HVDC cables however, we need at most two cables, which decreases the building costs
enormously for long distance cables. However, the need to convert HVAC to HVDC before
transferring the energy calls for converter stations that are expensive indeed. According to
Frank Mauseth, such converter station presents half of the total costs for cables such as
NorNed.

Even though HVDC cables have no losses due to the capacitance in the cable, there are still
losses that need to be taken in to account.

For the most part the losses are due to the resistance in the cables. However there are also
some losses in the converter stations and in the transformers.

To be able to perform energetic feasibility tests on our scenarios, an estimate of the losses in
electrical energy transfer would be needed. According to Frank Mauseth, the NorNed cable
had 2 % resistive losses, and we could assume an approximate of 0.5 % losses in the
transformers and also additional 1 % losses in the converters. However, to be on the safe
side we are going to set our resistive losses to 3 %, and assume that our cable will be less
sophisticated. To be on the safe side, we decided to also increase the losses in the both
transformers by 0.1 %.

13
3 Assumptions

In order to make the project realizable, we had to make some assumptions and
simplifications of problem. In this chapter we will present all the assumptions we have made
in this project.

We are looking at a scenario of using combined heat and power in Hamburg, Germany.
However, the closest receiving terminal for natural gas to Hamburg is at Dornum from
Europipe II. To be able to calculate the total pressure losses from Krst to Hamburg, we
assumed an extension of Europipe II from Dornum to Hamburg. At Dornum the gas will be
recompressed so that the pressure at Hamburg is the same as the pressure in the land
terminal of Dornum. The length of Europipe II is 658 km while we found the distance in the
extension of the pipeline to be 195 km. Additionally we assumed horizontal pipelines to
simplify the problem at hand.

Since the cogeneration plant Krst is situated along Europipe II, the gas has already been
compressed before entering the power plant. This means that the power used to compress
the gas after processing at Krst, need not be considered.

In the calculations of power needed for compression, and the power generated from
expansion, we considered only the amount of gas that was intended for the cogeneration
plant at Krst. This means that we are considering the same mass rate of 16 kg/s (see
reference) for gas, for each of these equations. As a part of this assumption, we also expect
our combined heat and power plant to have a feed gas intake mass rate of 16 kg/s which
corresponds to 1.78 MSm3/d.

For our calculations of pressure losses in the pipelines, we had to find a density . This is
dependent on the pressure and temperature in the pipeline. However, we do not possess
sample points for these variables, and therefore had to assume on some values. The seabed
temperature in the North Sea is about 5 C, and we assumed the gas would be cooled down
relatively fast, and thus assumed an average temperature of 6 C.

In the calculation of the pressure losses we also needed a value for the Darcys friction factor
f. If we assume turbulent flow in the pipelines, this friction factor is dependent on the

14
roughness of the pipe , the diameter and the Reynold number Re [12]. We then used the
spreadsheets on the course homepage to calculate the friction factor. These spreadsheets
use the Haaland equation below.

(( ) ( ) ) (9)

In the recompression of the gas at Dornum, we had to find efficiency for the compressor, so
to calculate the total amount of power used for compression. Also we had to find the total
amount of power generated from expanding the fuel gas before the combustion chambers.
To be able to get the efficiencies, we first had to decide upon which type of compressor and
expanders we would use. We concluded that the compressors and turbine expanders used in
our project should be radial as this is the most common type in use today, beacause we have
high flowrates. We got efficiency of 85 % for the compressor, and 80 % efficiency for the
expander. 1

We also expand the fuel gas before it is injected into the combustion chamber at
Naturkrafts power plant. Thus we also need to assume a temperature out of the processing
plant at Krst. Here we expected a relatively high temperature due to heating of the gas
during processing. We finally settled on a temperature of 80 C as the inlet temperature to
the expander.

In Dornum, the gas is recompressed before it is being sent further down to Hamburg. Before
the compressor, we expect the gas to have been warmed up slightly. Thus we assume an
inlet temperature to the compressor of about 9 C. We also assume no changes in the
temperature from Dornum to Hamburg, so the temperature to the inlet of the expander in
Hamburg will also be 9 C.

For the combined heat and power we had to find out the percentage of ideal total power
generated as electricity, and the percent of total power distributed as heat. We found a
figure where the electrical efficiency is 48.5 % and the heat output is 41 % of the ideal total
power. We decided to use these values in further analysis (see Figure 1).

1
Values recieved by email from Olav Bolland

15
For transport of electricity, we had to get some estimates on resistive losses in the HVDC
cable and also losses in converters and transformers. We assumed that the total resistive
losses were 3 %, the losses in the converter stations were at 1 % each and the losses in the
transformer stations at 0.6 % each. Therefore we assume total losses of about 6 %. These
values are given by Frank Mauseth and are rough comparisons to the NorNed cable in use
today.

We also did make some assumptions regarding the combined heat and power plant in
Hamburg. To be able to compare this with the cogenerated power plant at Krst, we
assumed that the amount of gas injected into both combustion chambers is the same. In
addition we assumed that the pressure of this fuel gas is the same for both cases. Therefore
we can assume that the ideal power output we can get from both power plants is the same.

To reduce vibration and noise problems, we must try to keep our average velocity small
compared to the maximum velocity. Based on the information provided by
Sletfjerdings(1999) [9] that the average velocity should be about 10-20 % of maximum
velocity, we finally settled at an average velocity at 15 % of maximum velocity.

16
4 Results from Applied Calculations

4.1 Pressure losses

From the Haaland equation and using the spreadsheets provided on the website [13] we
found the friction factor to be equal to 0.01718. See Appendix(Table 4).

Based on the gas composition, the H2S was neglected in the gas compositional calculation
since the amount of H2S was quite small compared to the other components.

We assume the gas that is exported is identical in all cases. The following mixture rule
applied to get the molecular weight of mixture gas.

(10)

Where Mi is the molecular weight for pure component i, and yi is the mole fraction for the
component i. The gas composition in Europipe II was provided to us by Silje Aamot Haga
[14], and can be found in the appendix.

We calculated the molecular weight of the gas to be 18.667 kg/kmol by using spreadsheet.
This spreadsheet is also found in the appendix.

For the calculation of density we used the equation of state:

(11)

Calculations of the gas density require finding the average Z-factor. For the Z-factor, we first
need to calculate the pseudo reduced pressure and temperature and eliminate the effects of
CO2 and N2. Afterwards Standing-Chart can be utilized for determination of the Z-factor. To
calculate the pseudo critical temperature and pressure, the following two equations can be
used:

(12)

17

(13)

The Wichert and Aziz corrections are given when CO2 and H2S non-hydrocarbons are present:

(14)

( )
(15)
( )

(16)

(17)

[( ) ( ) ] ( ) (18)

Where is the error caused by CO2 and H2S, and are mixture pseudocriticals
based on Kays mixing rule. The variables and are pseudo reduced pressure and
temperature, and and are the critical temperatures and pressures [15].

After we have found the Z-factor from the chart, we calculated the density to be
159.082[kg/m3]. See Table 7 for spreadsheet of calculations.

The output pressure at Europipe II is 89 bar.

To calculate the pressure losses in Europipe II and in the extension of the pipeline from
Dornum to Hamburg, we used the equation(19). See reference [8]

( ) ( ) (19)

Gas velocity shall not exceed limits which may create noise or vibration problem. According
to Norwegian standards, the maximum velocity should be kept below [16].

18
 ( ) (20)

If this maximum velocity exceeds 60 m/s, the NORSOK standard says that we should set the
maximum velocity to 60 m/s. With a of 159.082 kg/m3 we calculated a maximum velocity
of:

(21)

According to Sletfjerdings (1999) see reference [5], the average velocity in the pipelines
should be kept within the range of 10- 20 % of the maximum velocity. We thus set an
average velocity of 3 m/s which corresponds to approximately 15 % of the maximum velocity
calculated.

After calculating the average velocity, we calculated the pressure losses in the pipelines for
different lengths of the pipe. From the pressure losses we could generate values for the
required pressure at Krst, to meet the specified pressure at Dornum. The pressure was
calculated to 168.28 bar. In the same manner, we calculated the pressure at Dornum after
compression to be 118.18 bar. For all values in our calculations of pressure losses see table
7. Figures 13 ad 14 are depicting the pressure distributions in the two pipelines.

4.2 Calculating the amount of electrical and heat power

To calculate values for the electrical power and heat supply of a cogeneration plant, several
process values are needed. We denote the ideal power output from both power plants as
Pgas. Based on the assumption that the fuel gas pressure and temperature are the same for
both power plants, this Pgas is the same. The ideal power we can extract from the gas is given
by the equation(22), where Pout is the power output of the power plant and tot is the total
efficiency of the power plant.

(22)

19
At the cogeneration plant at Krst, the fuel gas is injected into the combustion chamber is
at a pressure of approximately 17 bar [16]. Therefore the fuel gas needs to be expanded
from 168.28 bar, which is the pressure at the entrance to Europipe II, to 17 bar. This
expansion will also generate power and we denote this power output as Pex. Pex is given by
the equation for ideal expansion times the efficiency for turbine expander ex.

( [( ) ]) (23)

By using spreadsheets, we calculated the power generated from the expander to be 5.57
MW. We then use this value to find the total power from fuel gas.

Then the total real power output from the fuel gas is given by equation (24), where Pout=430
MW is the power generated in the power plant and Pex=5.57 MW is calculated above.

(24)

After the gas has arrived at Dornum, it is recompressed to 118.18 bar (see table 5) The real
power needed to recompress it would then be a part of the power losses. The equation we
used is the following [6].

[( ) ]
(25)

We calculated the power needed in the compressor to be 0.858 MW.

We also have an expansion of the gas at Hamburg before the CHP plant. In our analysis we
have set the pressure at Hamburg to 89 bar, and therefore the fuel gas has to be expanded
to 17 bar before the combustion chamber. As before mentioned we assume an expander
efficiency of 85 %. From equation (25) we calculate the power generated from the expander
to be 3.05 MW.

When it comes to calculate the electric power output and heat generated in the combined
heat and power plant, we use equations below. In these equations the Pgas is the same as in
above calculations, and the xel and xheat are the percentages of electric power and heat [2].

20
 (26)

(27)

The power losses in the HVDC cables are calculated by using the percentages provided to us
by Frank Mauseth. Thereafter, we used equation (28) to calculate the total power loss in the
transport of electricity.

( ) (28)

Where xconverters is the percentage of power lost in the converter stations, xtransformers is
percentage loss in the transformers, and xcable is the percentage loss in the cable. The power
losses in the HVDC cables are therefore:

( )

The net generated power for the CHP option is therefore found by summing the different
power outputs and subtracting by the different power inputs. We found that the CHP option
resulted in a net generated power of:

(29)

The power output from the cogeneration plant at Krst alone is the Preal =435.57 MW. Thus
we see that even though we have transported the gas all the way to Europe, it is still
energetically feasible.

21
5 Economic Environment and theory

5.1 Economic Environment

To start with a general look at the European energy market, Energy consumption is
produced from oil (35 %), gas (27 %), coal (16 %), nuclear (13%) and in increasing part of
renewable energy of roundabout (10 %) [19].

Taking a further look on the electricity market we have a liberalised market. But the
electricity net is more or less separated between the single European states. The system
doesnt allow really big electricity exports. But of course some electricity can be sold to the
exchange. The biggest player in Europe is the EEX in Leipzig. There electricity from Germany,
France, Austria, Swiss, Netherlands and Belgium is traded. Most contracts are traded on
daily or hourly basis. For our price estimation we used this data from EEX. Next to this it is
possible to sell long-term contracts for 5 or 10 years but this contract have mostly bilateral
character so the market is really illiquid for longer periods [20].

The buying and selling of future energy amounts is realised by future contracts. This is a
standardized contract between two parties to buy or sell a specified asset of standardized
quantity and quality for a price agreed upon today (the futures price or strike price) with
delivery and payment occurring at a specified future date, the delivery date. In general there
are two main reasons to buy future contracts. First is to hedge price risk. For example an
electricity producer wants to invest in production facility and to be able to better plan his
investment decisions he can hedge the electricity price, so he is able to avoid price
volatilitys. Another reason to buy future contracts is just speculating on future price
development. This is seldom in electricity markets because for most markets like EEX you
have to be a producer to get a licence to trade on the exchange [20]. Now we want to take a
further look to Norway, the electricity net is complete government owned; there are
different companies own the net, but all are government property. So we have no liberalised
electricity system.

In Germany the net is owned by four different competitors EON, RWE, Vattenfall and EnBW.
City nets are owned by different smaller companys mostly called Stadtwerke. In our
scenarios there is a big importance for heating energy in Germany. There are heating
systems in nearly every big town in Germany. They are mostly owned by firms who own the

22
power station and the heating system. In the last years there was bigger political rumour
around them.[20] Especially in Hamburg there was decided by referendum that the city
should buy back her heating system. Because there is no free market for heating energy it
was difficult for us to find a price. Thats why we calculated the minimal necessary price. This
price also should be lower than 1/3 of the retail price which is roundabout 8,7 cent/kwh.

In general there is a actual problem of profitability of gas fired power plants a few were shut
down in Germany, especially RWE reduces it capacity heavily[21]. Also the power station in
Krst runs very seldom. Operating costs halved from 2009 to 2012[22].

5.2 Valuation Theory

To evaluate the different scenarios we choose the Free Cash Flow Method, this is a very
common method to valuate companys and investment decisions. The method simply arrives
at the enterprise value by discounting all future free cash flows with the WACC (= Weighted
Average Cost of Capital) and adding up the present values of all years. So WACC can be seen
as the minimum interest rate for investment projects. Tax deductibility of interest is
excluded from free cash flows, because it is seen as a reduction of cost of capital. As a result,
after-tax WACC is used as discount rate. It is calculated with the following formula [17]:

( ) (26)

In the next step had to calculate the FCF. Therefore we use the EBIT path.

(27)

In our valuation we assumed a lifetime of the project of around 20 years. Now we can easily
forecast the cash flows for the next 20 years. Because of the long lifetime of the project the
expectations of inflation and regulation are highly relevant. Normally you add a terminal
value to the Net Present Value. The Terminal value is calculated by multiple the last FCF with
the growth rate +1 and divided the result by the WACC minus the growth rate. In our case
terminal value has no use because of the lifetime expectancy of 20 years

23
6 Economic Evaluation of Scenarios

6.1 General Concept and Assumptions

To evaluate the economic feasibility of replacing Norwegian co-generation gas power plants
with CHP plants in Germany, we have created four scenarios with different levels of
complexity. Common to all scenarios is the shutdown of the gas power plant in Krst, the
transport of the gas to Germany through the existing pipeline Europipe II and the return of
electricity to Germany through a HVDC cable that has to be built. Depending on the scenario,
the capacity of this cable varies.

The objective is to find a model in which the savings on operational costs of the Krst plant
in addition to revenues on usage or sale of the gas in Germany would exceed spending
necessary for the gas and electricity transport and further investments in Germany. The
calculations are based on the amount of gas that would be used in the Krst plant, so no
additional gas purchase is necessary. However, in order to receive an equivalent amount of
430 MWel from Germany, additional power has to be purchased on the German spot market.

The assumed values for the named expenditures and savings are shown in table 11.
Explanations to the estimates can be found in the appendix.

As the cable costs are split into costs for the converter station and the actual cable, we have
divided the costs into a fix part for the stations and a variable part for the cable. This
assumption means that a cable with twice the capacity would not cost twice the money as
the planning and building costs would likely remain about the same, while material costs
would rise according the capacity. A cable of the originally needed capacity of 430 MWel
would cost EUR 250 m + EUR 500.000 * 430 = EUR 465.000.000. With estimated operational
costs of 5 % (including electricity losses) and a time span of 20 years, annual costs for the
cable would amount to about EUR 25.000.000.

At the operating pressure of Europipe II, the gas volume needed per year would be around
3.000.000 m3. At 0,06 EUR/ m3, gas transport from Norway to Germany would amount to
EUR 180.000 per year. These estimates seem fairly low, but as the main work of compressing
the gas to the necessary pressure is done before entering the pipe, costs should not be much
higher.

24
6.2 Scenario 1

For scenario 1, we forego the possibility of operating another power plant in Germany
replacing the Krst plant. Instead, we merely transport the gas to Germany in return for
electricity by selling gas and purchasing electricity on the market. At the current gas prices in
Germany of EUR 26 per MWh and electricity prices of around EUR 40 per MWh, this option
would be economically better than keeping up the operation of the Krst plant.

However, as infrastructure at Krst is already in place and the construction of the HVDC
cable and its operation would impose high investment costs, replacing the already existing
plant could prove to be a bad decision after all. It would therefore make sense to improve
the alternative scenario by adding another step of the value chain to the model.

6.3 Scenario 2

In order to improve the economic viability, scenario 2 adds the operation of a CHP plant in
the German city of Hamburg. Hamburg features a large district heating system, into which
the heat generated in the gas plant could be released. However, the system is currently
owned and operated by Vattenfall, and it was not possible to find out compensation for the
heat release into the system. Therefore, we are calculating a fictional heat price that would
be necessary to generate profits from the whole project under the given investment costs.

As retail prices of heat in Hamburg are around EUR 0,087 / kWh, the value should be
significantly below that to enable an economically viable performance under this scenario.
As the CHP plant generates less electricity than the Krst plant and we have additional
losses of electricity in the HVDC cable, an extra purchase of electricity is needed. Taking into
account energy intake from the compressors of about 1 MW and output of 8 MW from gas
expanders at the end of the pipeline, the overall residue of 80 MW is reduced to a necessary
purchase of 73 MW. The heat energy that is released into the Hamburg district heating
system amounts to about 280 MW.

25
At similar operation costs to the Krst plant and additional investments of EUR 330 m split
over 20 years, the breakeven point would be reached at a price of 0,0278 EUR/ kWh,
resembling about a quarter of the retail price. Again, this alternative seems economically
viable compared to the operation of the plant at Krst, but additional measures can further
improve the performance.

6.4 Scenario 3

As Germany is shifting towards renewable energies, the electricity price in Germany

becomes less and less stable. Prices vary at a broad range with price differences of over 50
EUR/ MWh within one day. This is the result of lacking capacity of energy storage in
Germany. Norway on the contrary has a lot of storage capacity, especially through pumped-
storage hydropower plants. For scenario 3, we therefore increased the capacity of the HVDC
cable, enabling transmission of additional electricity in times of low prices. In return, an
equal amount of electricity from the CHP plants can be sold on the German spot market
during hours of high prices.

Our calculations were based on several model weeks. We assumed a fixed price of converter
stations for the HVDC cables regardless of their capacity, while raising the cable price itself
linear with increasing capacity (see appendix). Calculations showed that an increase of cable
capacity by 50 % would be most economic, enabling sale of electricity in Germany for 8
hours, while an additional 50 % of the CHP plants capacity would be purchased in the
remaining 16 hours each day. Overall, these measures lead to an additional profit of about
EUR 8 million per year.

6.5 Scenario 4

As in the previous scenario, scenario 4 opens up even further. As one of the prime
challenges Germany faces is the lack of power lines on land to connect the large energy
consuming centers in the West and South of the country with the energy producing North, it
is likely that extra incentives will be developed to generate electricity in the South.

26
For the usage of Norwegian gas in Germany, this could mean that the most efficient way
would be to set up a CHP plant further south, e.g. in metropolitan areas like Munich or
Rhein-Ruhr area, where the most efficient gas powered plant in the world is currently in
planning in the city of Dsseldorf.

As this is yet to happen, however, an economic analysis is not yet possible.

27
7 Interpretation and Outlook

The analysis shows that all scenarios are energetically favourable to the operation of a gas
powered plant in Germany. Economically, the less complex scenarios are at least equal to
the operation. As we have not included any building costs for the Krst plant, this means
that there certainly is an economic and energetic case against more gas powered plants in
Norway.

As for the detailed design of the alternative concept, many assumptions had to be made that
might impair the validity of the calculations. However, there is strong reason to believe that
the original plan of constantly returning all electricity to Norway from a CHP plant in
Hamburg can be improved strongly by adding the option of decoupling the electricity
generation of the plant and the return of energy to Norway.

It is therefore likely that further analysis would show that the most efficient and most
economical way of designing this idea is the operation of a CHP plant in a large urban center
further away from the coast, while the returned electricity is generated in offshore or
onshore wind farms in Northern Germany.

In the next years we will see an increase in CO2 certificates prices. The majority of the EU
States decided to postpone the sell of 900 million. So there will be artificial scarcity and
prices will increase.[22] Statoil expect an increase from the todays 4,80 EUR/MWH to 25
EUR/MWH in end of 2020[26]. This will be a plus for Gas plants in comparison to coal plants
because there CO2 emission is approximately 345 kg/MWH (55 % efficiency) Coal plant is
about 842 kg/MWH (38 % efficiency)[26].

28
8 Conclusions

By performing power analysis we found out that it is energetically feasible to replace the
cogeneration plant at Krst with combined heat and power in Europe, and then send back
the electricity. In total we get power of 435.57 MW at Krst. In comparison we get 627.5
MW from the CHP, which makes it energetically feasible to send the gas to Germany.

The economic analysis of different scenarios showed that the energetically feasibility can
also be transformed into economic feasibility. However, their expected return is not high
enough to justify large investments at the moment, especially as the economic and political
situation in Europe in general and in the energy sector in particular remains volatile. Our
calculations suggest that the strongest economic performance could be expected when the
CHP plant in Germany also contributes to the German electricity market. Decoupling the
generation of power in the CHP plant and the return of electricity to Norway both time-wise
and geographically seems to be an economically beneficial step, but it imposes more
interactions with different actors that raise the complexity of the whole concept.

There is strong indication that the operation of gas powered plants in Norway is neither
energetically nor economically efficient, however, evidence and a suggestion as to the
detailed elaboration of an alternative concept would require detailed information by
companies carrying out the different steps of the value chain that we were not provided
with.

Future trends give reason to believe that the competitiveness of gas plants especially in
Germany will be increased through market and political developments such as higher prices
for CO2 tariffs. Current problems with the profitability of gas plants both in Germany and
Norway suggest that there need to be further economic improvements. As this paper has
indicated, unless the situation in Norway improves dramatically, there should not be more
investments in gas powered plants in Norway, but instead companies should look to
Germany or similar countries to operate CHP plants there.

29
References

[1] Hkon Gjone, Jrgen Klev, Jrgen Tellefsen, Tord Tremoen, Magnus Valmot (2007):
CHP-kraftverk i Europa til fordel for gasskraftverk i Norge, Semester Project TEP4140,
NTNU.
http://www.ipt.ntnu.no/~jsg/undervisning/naturgass/oppgaver/Oppgaver2007/07Gj
oneKlevTellefsenTremoenValmot.doc, retrieved on Oct 10, 2013.

[2] Olav Bolland, Industrial Process and Energy Technology, Lecture slides TEP4185,
NTNU 2012

[3] Centre for Energy

http://www.centreforenergy.com/AboutEnergy/Electricity/Generation/Overview.asp
?page=1 ,12.11.2013

[4] Olav Bolland, Gas-fired power generation, Lecture slides TPG4140, NTNU 2013

[5] Moran, Michael; Shapiro, Howard N. ; Boettner, Daisie D.; Bailey, Margarete
B,. Fundamentals of engineering thermodynamics. Wiley&Sons, 2010.

[6] Naturkraft, http://www.naturkraft.no, 15.11.2013

[7] Jon Steinar Gudmundsson, Natural Gas Compression, Lecture slides TPG4140, NTNU,
01.10.2013

[8] Stein Espen Be (personal communication, 21.10.2013), Operations Manager,

Naturkraft A/S

[9] Jon Steinar Gudmundsson, Natural Gas Pipelines and Wells, Lecture slides TPG4140,
NTNU, 04.09.2013

[10] Gassco http://www.gassco.no/wps/wcm/connect/Gassco-EN/Gassco/Home/norsk-

gass/ 12.11.2013.

[11] Frank Mausath, Electrical circuits, Lecture slides TFE4112 , Assistant Professor at
Institute of Power Electronics, 17.04.2013

[12] Cengel,Yunus A.; Cimbala, John M.; Fluid Mechanics, McGraw Hill, 2010

30
[13] Jon Steinar Gudmundsson, Density, Viscosity and Flow in Pipelines and Wells,
Spreadsheet for TPG4140, NTNU, 12.11.2013

[14] Silje Aamot Haga (personal communication, 21.10.2013), Senior Engineer, Gassco

[15] Whitson, Curtis H., and Michael R. Brul. Phase behavior. Richardson, Tex.: Henry L.
Doherty Memorial Fund of AIME, Society of Petroleum Engineers, 2000.

[16] NORSOK P-001 (1999)

[17] Stein Espen Be, Krst gas fired power plant, Lectures slides TPG4140, NTNU
15.10.2013

[18] Berk:Corporate Finance. Bosten: Pearson, page 439, 2007

[19] European Parliament http://www.europarl.europa.eu/news/de/news-

room/content/20130318STO06602/html/Der-Energie-Mix-der-Zukunft-Erneuerbar-
effizient-und-CO2-arm 15.10.2013.

[20] Hans Petter Wenngren, Guest lecture, Head of Finance Tronder Engergy

[21] Energienetz Hamburg eg. http://www.energienetz-hamburg.de/pressemitteilungen/

22.9.2013

[22] Author unknown; http://www.angelfire.com/ultra/omshome/powercycles.htm ;

19.11.2013

[23] ARD: http://www.tagesschau.de/wirtschaft/rwe-schliesst-kraftwerke100.html

16.11.2013

[24] Naturkraft; annual report 2012 http://www.naturkraft.no/wp-

content/uploads/2013/07/130712-130712-%C3%85rsrapport-2012.pdf

And annual report 2012

[25] ARD: http://www.tagesschau.de/wirtschaft/emissionshandel156.html; 16.11.2013

[26] Magnus Smistad, Vanessa Wottrich, Statoil Market Analysis, Natural Gas, Lectures
slides TPG4140, NTNU 05.11.2013

31
Appendix

Tables

Table 1 Pressure losses and static pressure between Krst and Dornum

Table 2 Pressure losses and static pressure between Dornum and Hamburg

Table 3 Gas composition

Component CO2 C1 C2 C3 i-C4 n-C4 i-C5 n-C5 C6+ N2 H2S Total

Mole 2.24 89.84 6.30 0.72 0.06 0.07 0.01 0.01 0.01 0.75 1.45 100.00
Fraction % ppm

Table 4 Calculation of the friction factor

Reynolds number Re 124667

Diameter [m] 1.0668
Roughness [mm] 0.0351
Friction factor 0.01718

Table 4 Power used in the intermediate compressor at Dornum

32
Table 5 Calculation of density

Table 6 Power losses in the pipeline

Table 7 Assumptions for Economic Analysis

Average Price (EUR/MWh) 1. 2. 3. 4.

24 h 31,4
12 h 22,8 40
8h 18,55 32,77 42,88
6h 15,58 30,02 35,27 44,72

Data
Pel (MW) 430
Cable Cost / MW 500
Hours of Transport per day 24
Energy amount to Nor (MWh) 10320
Inflation 2%
Spread Development 0%
Opex 5%
Cable Cap Cost Increase Index 100%
WACC 6%
Converter Station Price 250000

33
Table 8 Calculation for Scenario 2

Trade
Cable Cable Hours Full Trade
Cable Amount Profit
Cap Prize of Spread Trade Profit Sum
Capacity of Sales year
Index (TEUR) Spread hours day
(TEUR)
-
1 430 -465.000 0 0 0 0 0 0 1.029.914
1,5 645 -572.500 8 vs 16 17,22 8 2800 48 17.599 -840.407
1,5 645 -572.500 6 vs 12 21,92 6 2100 46 16.802 -859.776
12 vs
2 860 -680.000 12 17,2 12 4200 72 26.368 -865.447
2 860 -680.000 8 vs 8 24,33 8 2800 68 24.865 -901.950
2 860 -680.000 6 vs 6 29,14 6 2100 61 22.336 -963.409
-
3 1290 -895.000 16 vs 8 19,275 16 5600 108 39.398 1.025.037
- -
4 1720 1.110.000 18 vs 6 21,09 18 6300 133 48.496 1.280.168

34
Table 10 Scenario Analysis Spreadsheets

Scenario 1
Gas revenue 88
+ OPEX Karst 13
./. OPEX Pipeline 0,1
Gas Sale in Germany ./. CAPEX HVDC 20
./. OPEX HVDC 11
./. Electricity Purchase 70
Sum 0

Scenario 2
Heating Revenue 86
+ OPEX Karst 13
./. OPEX CHP 12,5
./. CAPEX CHP 16,5
CHP Plant, Full Return of Elect ./. OPEX HVDC 20
./. CAPEX HVDC 20
./. OPEX Pipeline 2
./. Electricity Purchase 28
Sum 0

Scenario 3
Heating Revenue 71,6
+ OPEX Karst 13
+ Electricity Sale 15
./. OPEX CHP 12,5
./. CAPEX CHP 16,5
CHP Plant, Return 16 Hours, Sale 8 Hours
./. OPEX HVDC 20
./. CAPEX HVDC 25
./. OPEX Pipeline 0,1
./. Electricity Purchase 25,5
Sum 0

Table 9 Cost overview

OPEX at Krst EUR 13.000.000,00

HVDC Converter Station EUR 250.000.000,00
HVDC Cable EUR 500.000 / MW capacity
Pipeline Costs EUR 0,06 / m3
Electricity Price Germany EUR 40 / MWh

35
Figures

Figure 8 p/V and T/S-diagram of Brayton cycle [22]

Figure 9 h/s-diagram of Brayton cycle

36
Figure 10 p/v-diagram of Brayton cycle

Figure 11 T/s-diagram of Brayton cycle

37
Figure 12 Standing-Chart

38
Figure 13 Pressure losses from Krst to Dornum

Figure 14 Pressure losses from Dornum to Hamburg

39
 Auxiliary Produced eletric
Boiler Generator with Eletric switch energy
cooling system system

Emission
monitoring

Condenser
Gas treatment Steam
Gas Turbine HP HRSG and
station turbine
evacuation

Sea
water Cooling
water

HVAC Water
system steam cycle

Lube oil
system Chemical Demineralisation of
injection water

Figure 15 Flowchart for the cogeneration plant at Krst [8]

40