Innovation in Global Power - Parsons Brinckerhoff

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Renewables – The Risks, Concerns and Potential • Contractors. Lenders will consider the reputations and financial strength of the principal contractors when assessing risk of default in relation to any function that is material to the project’s success. • Security of cash flow. Lenders will analyse all factors that may have a bearing on the project’s ability to maintain a comfortable cash flow beyond the prospective term of the borrowing. Such factors include, for instance, the security of the fuel supply and contingency arrangement for alternative fuel • Statutory authorizations. Lenders will check on all factors affecting the consents and permits necessary for the commencement and continuation of the project. Success in structuring and obtaining finance is closely linked with developers’ ability to identify risk, design technical solutions and allocate contractual responsibility. Often developers seek expert advice in each relevant field early on so that there is a coherent strategy from an early stage. Some of the relevant issues that relate to risk analysis include: • Financial model. A crucial test is how the economics of a project stand up to the perceived areas of risk. Any prospective lender will want to see a financial model that shows how the sensitivities of the various parameters at risk affect the project economics. • Contractual framework. The contractual framework will need to take account of the risk factors that are relevant to the specific features of the project. Setting up this framework involves careful planning on the identity of the contracting parties and assessment of their capacity to discharge their obligations, the scope of the positive obligations under each contract and the effect of limitations of liability. • Financial structure. A detailed evaluation of the capital requirement and the balance between equity or “risk” capital and loans will be required. The proposed “gearing” will http://www.pbworld.com/news_events/publications/network/ indicate the potential reward for the providers of equity and be an important indication of the way in which the developers have considered the allocation of risk. Lenders gain confidence in developers if the proposed financial structure takes them into account. • Insurance. Lenders will require that the insurance cover is planned for many of the areas of perceived risk with reference to the specific detail of the project. Specialist insurance brokers can assist in creating an effective insurance programme. Conclusions Translating thermal conversion research into a full-scale, practical, process plant in which technical risks are understood and can be quantified is bound to be a difficult task, but every new development has to start somewhere. The commercial world of electricity supply, in which the thermal conversion process hopes to find an application, is changing rapidly, and the support and sustenance that prototype processes might have received in years gone by from central authorities are now vanishing. The requirements today are generally for tried and tested, reliable and easily maintained technology capable of providing a supply of electricity using indigenous fuels. Advanced technologies, not long out of the research stage, are unlikely to satisfy such demands. The drive to use more non-fossil fuels in electricity production to meet climate change accords is likely to change these requirements, however, and provide the stimulus to technological development of new thermal conversion processes. The financing of such projects will require intensive analysis of the intrinsic technical risks of the process. The satisfaction of such a risk analysis will require the production of comprehensive data (and its intensive scrutiny) on operational performance and design, particularly in relation to scaling-up from the test-bed to the turnkey, commercial, installation. Ian Burdon is responsible for directing all activities within PB (Power) on sustainable energy developments, including renewable energy, energy from waste, advanced energy technologies, such as gasification and pyrolysis, and low and zero-carbon “clean” energy technologies. He has had an involvement as either project manager or project director on a wide variety of renewable, waste and other energy projects. Ian is active in the affairs of the Institution of Engineering and Technology, the Institution of Mechanical Engineers, the Association for Consultancy and Engineering and the Environmental Services Association. He maintains close contacts with developers and banks involved in energy projects for which he often acts as technical advisor. Note: This article was based on a paper about thermal conversion technologies for use in waste management that was for presentation at the Chartered Institution of Waste Management annual conference, Torbay, UK, June 2008. Copies are available from the author. Acknowledgements: Thanks are due to the directors of PB’s power specialists for permission to publish this article. It is emphasized that the opinions expressed are entirely those of the author and in no way reflect the corporate attitudes or views of PB. PB Network #68 / August 2008 50
http://www.pbworld.com/news_events/publications/network/ Renewables – The Risks, Concerns and Potential Realising the Power Potential From Hot Rocks By Allan Curtis, Brisbane, Queensland, 61 7 3854 6852, curtisAl@pbworld.com Australia is one of many nations that have made commitments to reduce greenhouse gases and change to more renewable energy sources. Hot dry rocks has the potential to make a very significant contribution to these aims, but also presents many engineering challenges. PB has developed designs to accommodate the very severe conditions surrounding hot rocks and maximise the power that can be produced. Figure 1: Heat map of Australia. Hot rocks have been investigated as an energy resource for approximately thirty years; but their exploitation for power generation had been hindered until recently by the many significant drilling challenges associated with very deep drilling, being able to achieve a sufficiently high flow of water through the rocks by hydraulic fracturing, and high pressures and temperatures for pumping. Now, the world’s first high temperature hot dry rock development is nearing completion at Soultz in Southern France. It is expected to produce about 1.5 MW using an organic Rankine cycle plant. (The thermodynamic Rankine cycle converts heat into work.) Tapping into Australia’s Hot Rocks Australia has considerable quantities of deeply buried radiogenic (hot rock) granites. Figure 1 shows the potential resource at 5000 m (16,400 feet) below ground. As can be seen, there are large areas where rock temperatures exceed 250°C (482°F), but they are all in remote areas far from populated areas (Figure 2). Geodynamics Ltd, which focuses on developing renewable geothermal energy generation from hot rocks, has geothermal rights to approximately 2000 km 2 (772 square miles) of land near Innamincka in the Cooper basin where, to date, it has drilled three wells. Testing on its Habanero 1 well has revealed that granites at about 4200 m (13,800 feet) below ground contain super-pressured saline water (brine) and yield well head pressures and temperatures of approximately 33 MPa and 250°C (4,790 psi and 482°F). The presence of brine came as a surprise to Geodynamics, but it avoids the need to locate a source of water that can be injected down into the high temperature zone. The potential demand for injection water would have presented a significant problem in this water-starved area of Australia. Geodynamics has just completed drilling Habanero 3 with its new drilling rig, which allows them to drill a 215 mm (8.5-inch) hole up to 6000 m (19,700 feet) deep. This new well, the largest one of this depth drilled onshore in Australia, will enable circulation testing, which will prove (or disprove) the resource and enable Geodynamics to evaluate equipment for full scale power plant development. At the measured brine temperatures and the anticipated heat extraction rates, the expected net power output from the 2000 km 2 that Geodynamics has rights to is in the order of 10 GW. PB’s Role: Power Production Technologies Geodynamics is seeking to complete the engineering and detailed costing for a nominally 50 MW power plant by the end of 2008, with an objective to have the plant operational by Figure 2: Cooper Basin location. 51 PB Network #68 / August 2008
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