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We submit the paper in the context of globalization and the Caucasus as a particularly good fit where the combination of the size of the theoretical questions and the very actual challenges facing the region may be fitting the innovative effort characterization of the question we propose in this essay.
Nurali YUSIFBEYLI
D.Sc. (Tech.), director, Azerbaijan Scientific-Research and Design-Prospecting Power Engineering Institute
(Baku, Azerbaijan).
Valekh NASIBOV
Ph.D. (Tech.), head of Energy Security Laboratory, Azerbaijan Scientific-Research and Design-Prospecting Power Engineering Institute
(Baku, Azerbaijan).
Rena ALIZADE
Lead engineer, graduate student at Energy Security Laboratory,
Azerbaijan Scientific-Research and Design-Prospecting Power Engineering Institute
(Baku, Azerbaijan).
FACTORS AFFECTING THE SCALE AND PATTERN OF GENERATION CAPACITY EXPANSION AND AZERBAIJAN’S ENERGY SECURITY
Abstract
T
his article examines the factors affecting the development and use of modern energy technologies. The authors
attempt to analyze the mutual influence of current generation capacity expansion and Azerbaijan’s energy security.
I n t r o d u c t i o n
Among the problems addressed as part of systems research in the electric power industry, projecting the development of energy facilities (generation capacity expansion) is the most difficult and,
THE CAUCASUS & GLOBALIZATION
at the same time, the most crucial problem.1 Generation facilities are the most capital-intensive and take the longest time to build, which is why the decisions on their construction should be made long before there is demand for their products.
A shortage of generating capacity can cause serious threats to energy security such as premature wear of generation equipment, unacceptable power grid overload, increasingly short supply of electricity to consumers, social tensions, etc.2
Some Features of Azerbaijan’s Energy Security
In the modern world, energy security issues are a major focus of attention due to increasing energy consumption throughout the world. Economic development has now reached a level where the energy sector plays a key role in terms of its influence on such components of the economy as the social, environmental, information and other spheres of life in the country.
It is known that the main goal of the entire electric power industry is to provide consumers with energy under different conditions, while energy security reflects the extent to which this goal has been achieved to date and the accuracy of short-term and long-term forecasts given the identification of threats in each element of the power supply cycle. As a component of national security, energy security is defined as “the assurance that energy will be available in the quantities and qualities required under given conditions.”3 That is why energy security issues are of current importance to all countries regardless of their energy resource endowments.
Depending on the energy resource endowments of different countries, the range of energy security problems, their importance and priority change accordingly, especially when it comes to estimating future levels of energy security. Azerbaijan has sufficient recoverable reserves of oil (one billion tons) and natural gas (about two trillion cubic meters) and is thus fully provided with energy resources, producing and exporting oil, gas and electricity; it has the potential to enhance both its own and European energy security.
At present, there are no major threats to Azerbaijan’s own energy security: neither its citizens nor the country’s economy as a whole experience a serious energy shortage due to the impact of negative natural, anthropogenic, socioeconomic, foreign-policy or other factors.
The country’s main fuel and energy resources are oil and natural gas, while the share of other, alternative energy sources is insignificant. In 2009, oil production in Azerbaijan exceeded 56 million tons, with about 6 million tons refined for domestic use and the remaining 50 million tons exported to the world market. Natural gas production is around 27 billion cubic meters (bcm), of which more than 8 bcm is exported. In the near future, when the second phase of the Shah Deniz gas field comes on stream, the amount of exported natural gas will increase significantly.
The country’s government attaches great importance to increasing natural gas exports to world markets. Azerbaijan President Ilham Aliev said at the 39th World Economic Forum in Davos: “We plan to at least double gas production in the next five years, but existing markets have yet to manifest themselves. It is very important to have a clear understanding of what our potential markets actually are.”4
1 See: E.S. Pirverdiyev, A.M. Gouseinov, N.A. Yusifbeyli, “Development of Azerbaijan Power System and Trends for Energy Security Indicators,” ICTPE-2008 Fourth International Conference on Technical and Physical Problems of Power Engineering, 4-6, September 2008, University of Pitesti, Pitesti, Romania, 2008.
2 See: V.V. Bushuyev, N.I. Voropai, A.M. Mastepanov, Yu.K. Shafranik et al., Energeticheskaia bezopasnost Ros-sii, Novosibirsk, 1998, p. 302.
3 Energy Dictionary, World Energy Council, Jonve Sl, Paris, 1992, p. 635.
4 Bakinski rabochi, 31 January, 2009, available at [www. br.az/index.php?year=2009&month=01].
In order to operate effectively in the world energy market and ensure our national economic interests, we should develop energy security indicators in all sectors of our fuel and energy complex:
(a) in the production, processing, transportation, storage and consumption of oil and natural gas; and
(b) in the production, transportation, distribution and supply of electricity.
In conditions of sufficient fossil fuel reserves, the most interesting problems in ensuring longterm energy security are those related to the development of the electric power industry, a key sector of the fuel and energy complex (FEC). Its development is determined by the phased implementation of the State Program for the Development of the Fuel and Energy Complex in the Azerbaijan Republic in 2005-2015.5
Factors Affecting the Scale of Generation Capacity Expansion
Capacity expansion planning is an integral part of energy security, and the solution of the overall problem depends in varying degrees on the accomplishment of this key task. In this process, high demands are made on full and adequate presentation of the factors affecting the scale and pattern of generation capacity expansion.6 This includes:
■ the power industry’s responsibility for reliable power supply to consumers throughout the territory of the republic; a balance between capacity and power at all points of electricity consumption;
■ use of different types of energy resources under different methods of electricity production. Differences in the composition of power plant equipment lead to widely varying performance indicators for different technologies (capital intensity, efficiency, construction time, etc.);
■ inventory of cogeneration capacity in order to develop heat balances in determining the most promising lines of power capacity expansion;
■ dynamics of deterioration and obsolescence of existing power plant equipment. This determines the required scale of power plant upgrades presented as various options for the reconstruction of existing or the construction of new plants;
■ interfuel substitution possibilities at existing thermal power plants. In the immediate future, this is assessed as potential for substitution, and in the long term, as a basis for ensuring a rational balance between different types of modern power plants (using gas, fuel oil, nuclear power, hydropower, alternative energy sources);
■ strong impact of fuel prices on investment decisions for the development of different types of generation; price changes can lead to changes in project effectiveness;
■ the need to meet structural requirements for greater diversification of the use of various energy resources. These requirements are determined by national and regional energy security conditions, environmental standards and obligations;
5 See: Newspaper Azerbaijan, 14 February, 2005 (in Azeri).
6 See: A.M. Gouseinov, N.A. Yusifbeyli, I.A. Aqasiyev, Participation of Azerbaijan in Eurasian Energy Union. AEC-8, Irkutsk, 200В.
THE CAUCASUS & GLOBALIZATION
■ economic constraints determined by the financial capacity for developing the sector as a whole and its various components. In the general case, economic constraints on the financial feasibility of development options for the sector are determined by a detailed forecast of its financial and economic condition.
There are many influencing factors, and the uncertainty of quantitative changes in these factors in the near future, let alone in the longer term, significantly complicates long-term capacity expansion planning.7 That is why a very important task is to identify the most influencing factors and estimate the probable range of changes in their quantitative indicators. In our opinion, the greatest influence on the long-term generation capacity structure is exerted by the following group of factors8:
■ domestic demand for electricity and electricity consumption patterns (peak loads);
■ amounts and regimes of electricity exports and imports;
■ dynamics of heat consumption and related dynamics of new cogeneration capacity;
■ dynamics of existing power plant capacity;
■ long-term performance indicators and operating characteristics of different types of generation sources;
■ forecast prices for various fuels and resource constraints on their use.
The impact of each factor on long-term generation capacity values differs.
The problems of determining the scale and pattern of generation capacity expansion should be addressed sequentially.
In Azerbaijan, the main factors determining the scale of generation capacity expansion are as follows:
—projected dynamics of existing power plant capacity;
—projected installed capacity requirement.
Long-term projections of existing power plant capacity are based on two main factors:
(a) the technical condition of equipment beyond its useful life;
(b) the relative effectiveness of modernization of existing equipment (life extension) and its replacement with technically advanced equipment.
These two factors differ significantly depending on the type of power plant.
Due to the long service life of hydraulic structures (over 100 years) and their high share of total cost of hydroelectric power plants (over 80%), HPPs have long life cycles and the costs of restoring and replacing outdated HPP equipment are not very high. That is why hydroelectric plants in Azerbaijan’s power system will be kept in operation for a long time through life extension measures.
The technical feasibility of continued exploitation of outdated equipment at existing thermal power plants (TPPs) is established based on the results of systematic technical diagnosis of the state of each generating unit. The obsolescence of TPP equipment is assessed by comparing the effectiveness of modernizing it (life extension) and that of replacing it with technically more advanced equipment.9
7 See: L.S. Beliaev, S.V. Podkovalnikov, V.A. Saveliev, L.Yu. Chudinova, Effektivnost mezhgosudarstvennykh ele-ktricheskikh sviazei, Nauka, Novosibirsk, 2008, p. 235; L.S. Beliaev, Problemy elektroenergeticheskogo rynka, Nauka, Novosibirsk, 2009, p. 295.
8 See: A.A. Khorshev, Obosnovanie ratsional'nykh napravleni razvitia generiruiushchikh moshchnostei EES Ros-sii na dolgosrochnuiu perspektivu, Abstract of thesis for the degree of candidate of economic sciences, Moscow, 2007.
9 See: Procedural Guidelines for Projecting the Development of Power Systems. Approved by the Ministry of Energy of Russia (Order No. 281 of 30 June, 2003).
The impact of the projected installed capacity requirement on the scale of generation capacity expansion is considered using three electricity consumption scenarios: minimum (pessimistic), baseline (normal) and maximum (optimistic).10
These forecasts are made taking into account the following basic components:
■ maximum domestic consumer demand;
■ electricity exports (imports);
■ required power reserve—this reserve is used during both overhauls and unanticipated increases in power consumption;
■ power limitations and underutilization of TPP and HPP capacity during peak load periods. The table shows the wear rate of generating equipment at existing power plants over the long term.
Table
Wear Rate of Generating Equipment, %
Year Wear Rate
2005 28
2010 13
2015 23
Fig. 1 shows the wear of generating equipment at existing power plants and electricity consumption forecasts for three development scenarios over different time periods.
Figure 1
Installed Capacity Requirement
MW
—•— maximum scenario —■— baseline scenario
A minimum scenario —»— median line
—•— existing plant capacity
10 See: State Program for Regional Development in the Azerbaijan Republic in 2009-2014, May 2009.
THE CAUCASUS & GLOBALIZATION
The difference between the installed capacity requirement and the capacity of existing power plants can be presented as the demand for new capacity for each type of forecast.11
According to our estimates, by 2020 the increase in the installed capacity requirement in Azerbaijan’s power system will amount to 70-80% of the total demand for new capacity, while capacity retirements will amount to only 20-30% of the total new capacity.
Once the range of possible values of the demand for new generating capacity is determined, it is necessary to determine the structure of this capacity, i.e., the ratio between different types of power plants.
The Impact of Electricity Consumption Patterns and Operational Constraints of Power Plants on the Choice of Generation Capacity Structure
A wrong choice of the structure of generating capacity can cause the following threats to energy security: technological constraints on electricity output during off-peak night hours in winter, underutilization of the systemic effects of parallel operation of power systems, inefficient use of power plant capacity, short supply of electricity to consumers, etc.12
The following factors have the greatest impact on the structure of generating capacity:
—the size of the various parts (slices) of daily and annual load curves and operational constraints on the use of different types of generating capacity in different load slices; this factor determines the acceptable ratio between peaking, intermediate and baseload generation;
—the relative efficiency of various energy sources (given the uncertainty of their performance indicators and fuel prices); this factor determines the efficiency of the use of different types of generation in each load slice;
—various resource constraints.
Of all the factors listed above, the greatest impact on the structure of generating capacity is exerted by the size of the various parts of the daily load curve. An analysis of its peaking, intermediate and baseload segments in Azerbaijan’s power system shows that the ratio between them is 3:20:77. This ratio characterizes the demand for the respective capacity.
Another important factor is the technical capability to use different types of generation in the daily load schedule. In this case, an analysis is made of the load curve for a winter working day corresponding to the peak load period (annual peak load). The capacity utilization requirements during annual peak demand (evening) and off-peak night hours are verified for the same day:
■ hydropower plants, gas turbine plants and small thermal plants may vary their power output in the range of 0% to 100%;
■ nuclear power plants must operate at 100% capacity round the clock;
■ tjermal plants on winter working days may reduce capacity utilization to not less than 85-90%;
■ condensing plants, to not less than 50%, and combined cycle plants, to 35%.
The different technical characteristics of different types of power plants and the possibilities of their use significantly complicate the choice of generation capacity structure.
S.A. Sovalov, Rezhimy iedinoi energosistemy, Energoatomizdat, Moscow, 1983, 384 pp.
11
12 See: E.V. Bykova, Metody raschota i analizparametrov energeticheskoi bezopasnosti, Kishinev, 2005, p. 150.
An assessment of the efficiency of different types of generation takes into account the time of their operation in the respective slices of the annual load duration curve. In these slices, the duration of the use of installed capacity is distributed as follows: baseload (duration 6,200-6,500 hours per year); intermediate load (4,000-4,100 hours per year); peak load (not more than 1,500-1,700 hours per year).
Fig. 2 shows the transition from the daily load curve to an annual load duration curve for Azerbaijan’s power system:
■ Slice 1 shows the number of peak load hours and the amount of peak power generated during the year;
■ Slice 2 shows the annual amount of power corresponding to intermediate generation;
■ Slice 3 shows the amount of baseload power generated during the year.
Figure 2
Transition from Daily Load Curve to Annual Load Duration Curve
According to these load slices, the ratio of power output turns out to be similar to the 3:20:77 capacity ratio. An analysis of load curves for winter working days in recent years shows that the said ratio is steadily maintained (with minor deviations), and it can be assumed that this ratio will be maintained in the future as well, so that the structure of generating capacity should also be maintained at 3:20:77.
C o n c l u s i o n
Thus, one of the most important indicators for the long-term energy security of the Azerbaijan Republic is the state of development of the electric power industry, where the scale and pattern of generation capacity expansion over different periods is of crucial importance.
In the conditions of the Azerbaijan Republic, attention should be focused on energy security objectives such as power output forecasting for different periods, capacity expansion planning and choice of the future structure of generating capacity.
