Now that the rates for the return of electricity have dropped lower than ever before, growers will have to make all possible efforts to achieve a profit on the imbalance market from their CHP. AgroEnergy is launching a new service that will allow growers to place bids directly on the control power market, which will enable them to trade actively through TenneT. This initiative would also allow growers to collectively offer emergency power.
Cogen Nederland, the Dutch association for the promotion of CHP, anticipates that the current capacity generated by CHP units will be reduced by fifty per cent in the next decade to come. With a rate of 3.6 cents per kWh and a peak rate of 4.8 cents for the next three years to come, the energy market is suffering tremendously. The peak price will barely cover the variable costs of a CHP unit. Nevertheless, Arjan van der Spek of Enova is convinced that the fifty per cent referred to above will probably not be achieved, taking into account that half of all growers deploy their CHP units for assimilation lighting for their own crops anyway. CHP is here to stay. With regard to the fifty per cent that would remain unused, growers will have to rely on returning electricity to the grid at the right moment. ‘They will have to actively make use of this option.’ There is, however ray of hope as opportunities on the imbalance market are likely to improve. The increasing number of wind turbines and solar panels has heightened the risk of imbalance problems in the supply of electricity. After all, no electricity will be generated when the sun doesn’t shine or there is no wind.
Power control under contract
‘Based on the by-the-minute forecast price, growers can adjust their CHP production upwards or downwards through the imbalance control platform’, explains Willem Bijlsma of Tenergy Services. ‘This will allow them to benefit from the higher rates arising from a shortage in electricity at a particular point in time. TenneT, however, determines its quarterly rates in retrospect; you can never forecast precisely how much you will earn. This is a drawback in passive participation on the imbalance market. Additionally, this supply option is gradually phasing out because TenneT prefers to regulate the supply of energy through contracts.’
TenneT contracts extra control power capacity for a sufficient supply of energy on the imbalance market. As TenneT concludes these contracts with large energy companies, and not with greenhouse growers (these parties being simply too small), AgroEnergy is developing a service that will let growers offer their CHP as control power capacity. This service will be launched on 1 October 2015. The collective power will than be offered to TenneT by means of a bid, provided that the capacity will amount to at least 5 MW. ‘Every grower can subscribe and decide for himself whether or not to participate’, explains Fieke Rijkers of AgroEnergy. ‘In the event that we are unable to supply the required 5 MW, Eneco will make up for the deficit. The biggest advantage for growers is that they will get the rate that has been fixed at that particular moment.’
Rijkers believes that growers will benefit in terms of security by collectively offering control power capacity rather than responding to the imbalance market without a contract. ‘This will provide growers a realistic alternative to earn some extra money on top of the long-term spark spread and trading on the Amsterdam Power Exchange (APX). As soon as TenneT gives the sign for delivery, participants will have thirty seconds to respond with an upwards or downwards revision. This will require some adjustments with regard to the necessary software.’
Making use of all the available options
Robert Willemsen of Powerhouse – a subsidiary of RWE – is wondering why a grower would allow his CHP unit to contribute to a pool, ‘particularly if a fine applies when you fail to respond in time.’ This is, however, not the case with regard to the product offered by AgroEnergy, taking into account that this concerns voluntarily offered control power capacity instead of a fixed contract with TenneT. His solution: ‘Make sure that you get the most out of your CHP unit and that you are using good software. For an optimum yield you have to make use of all the available options: the imbalance market, the APX and keeping a vigilant eye on the highs and lows: selling when the price is up and buying when the price is down. Not everyone will be able to do this equally well; it requires a lot of time and attention.’
Stijn Schlattman of Energy Matters argues for adequate compensation for flexible power supply to compensate for the fluctuations in the supply of wind and solar energy. ‘It is important that gas-fuelled engines are able to contribute to this. This will improve the case for gas engines and people may even begin to invest in new gas engines. Following on another two meagre years with a weak market and a low spark spread new opportunities are arising fro flexible CPHs. Until then owners of CHP units will simply have to muddle through.’
Contract for emergency power supply
TenneT contracts emergency power supplies to compensate for possible failures at power plants. This counters the considerable imbalance on the electricity grid. Back-up generators or CHP units that would otherwise be on stand-by could be used for this. The power generated by these, which is used once a month on average, must be continually available. Companies can register on an annual basis for a scalable emergency power supply of 350 MW, to be made available within ten minutes. This could be financially worthwhile, says Hendrik Koetsier of Energie365. Energie356 collects flexible power from companies for emergency power supply for TenneT. This flexible power supply is provided by companies with back-up generators. Koetsier has noted interesting opportunities for CHP units in this. However, the power generated by multiple growers would have to be offered collectively, because TenneT applies a 20 MW minimum. This would enable infrequently deployed CHP units to nevertheless bring up some cash. TenneT pays an annual availability compensation of over ten thousand euros per MW, plus a variable compensation for the electricity actually supplied. ‘Supplying emergency power could be interesting particularly in cases where a CHP unit generally doesn’t produce anything normally, while entering the imbalance and control power markets is a more obvious alternative for CHP units that are deployed on a regular basis. Emergency power is a better option for CHP units that are not deployed as frequently.’ The drawback is that the emergency power reserved for TenneT has to be continually available; a grower will neither be able to offer it on the imbalance market or the APX nor make use it for his own crops in peak periods.
Supplying emergency power is not a viable alternative for growers who make use of assimilation lighting, says Remco Wiegmink of NIFE-energieadvies. Chances are high that the emergency power will be demanded from the grower when he needs the electricity for his own crop. Besides this, the power may need to be delivered at times when there is no demand for heat. It is doubtful whether the yield for emergency power contributed by a CHP unit that would otherwise not be producing will be sufficient to cover such fixed cost items as gas power and transport. Growers switching to geothermal heat hardly ever offer the power generated by their CHP units on the imbalance market for this reason alone. Robert Willemsen of Powerhouse even considers participating in pools like this a ‘very dangerous’ option. ‘It is better to participate in the control power or imbalance markets by gearing the sale of your power to the opportunities that come your way.’
CHP yields only minimal returns in the horticulture industry. A new CHP unit is not profitable unless it is used for assimilation lighting for your own crops. Based on variable costs, if you already own a CHP unit selling power to the grid will barely be profitable. According to Schlattman of Energy Matters operating hours for CHP units are dropping as far as approximately 3200 hours a year. Fieke Rijkers of AgroEnergy understands the difficulties faced every day by growers placing a bid on the APX, in terms of calculation effort as well as time. ‘The automated BiedOptimaal system offered by AgroEnergy will take a load off their shoulders.’
Robert Willemsen of Powerhouse: ‘Growers who own a CHP unit that has not been written off yet will have to deploy their CHP unit very carefully in order for it to be profitable. If it does not operate for at least 4,000 to 4,500 hours it will be very difficult indeed to pay back your investment. On top of that, you can optimise short-term returns through the APX and the imbalance market. The price risk is, however, high. In fourteen years’ time I have never seen rates as low as they are now, with 3.6 cents per kWh and a peak of 4.8 cents for the next three years to come. The peak price is just enough to cover the variable costs of the CHP, so this will only be profitable with an old CHP unit. The problem is that you can’t simply shut down a CHP unit when you have taken out a 3,500-hour maintenance contract. In this case, your best bet is to deploy it as frequently as possible, if only to minimise your losses.’
Source: Tuinbouwteksten.nl/Theo Brakeboer. Photo: Mario Bentvelsen.