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Examples of cogeneration projects implemented in Asia 69

Estimated Savings with the Cogeneration Case

Annual cost with the existing case

Annual cost with the cogeneration case

Net annual saving

Percentage annual saving

52,271.00

33,462.00

18,809.00

36 per cent

Based on the preliminary analysis, further optimization studies were conducted byconsidering nine different cases involving different capacities and numbers of majorequipment. The most optimum scheme retained for actual implementation is shown in Figure2.1. It consists of 3 gas turbines (including one spare), each with an ISO rating of 25 MW; adouble-extraction condensing steam turbine for producing medium and low pressure steam;and 3 heat recovery steam generators (including one spare), each with a capacity to generate136 ton of steam per hour at 105 Bar and 510°C.

Figure 2.1 Cogeneration scheme implemented at the petrochemical complex

Atmosphere

FD Fan

AirFD Fan

AirFD Fan

GT-1

GT-2

GT-3

STG

C

PRDS

PRDS

PRDS

HRSG -1

HRSG-2

HRSG-3

Gas/LSHS/HSD/PG

Gas/LSHS/HSD/PG

Gas/LSHS/HSD/PG

Air

HSD/Gas

Air

HSD/Gas

Air

HSD/Gas

SVH

To deaerator

SM

SL SVHto process

plant

SVH: 108 barSH: 42 barSM: 19 bar

SL: 3.5 bar

SH

Atmosphere

Atmosphere

Atmosphere

G

G

G

G

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70 Part II: Cogeneration experiences in Asia and elsewhere

2.2.2 Details of the cogeneration system

The gas turbines with an ISO rating of 25 MW are capable of producing 20.7 MW at the site.Since the gas supplier could not guarantee lean gas supply, dual fuel configuration (lean gasas well as high-speed diesel) was specified for the gas turbines. This was further altered to

allow simultaneous firing of liquid and gas in such a manner that the gas gets a preferenceand the liquid fuel meets the balance requirement.

A 25 MW capacity steam turbine generator was selected with the option for extractingmedium pressure steam at 19 bar and low pressure steam at 3.5 bar. The condenser wasdesigned for generating up to 20 MW of power without any steam extraction. The heatrecovery steam generators (HRSG) have the option for auxiliary firing with multi-fuel option.High-speed diesel is used as a start-up fuel and the lean gas is supplied as the main fuel withlow sulphur heavy stock as the alternate liquid fuel. By-products available from the gascracking unit such as pyrolysis gasoline and off gas can also be fired. In order to allow theHRSG to operate as a conventional boiler when the associated gas turbine was not operating,a forced draft fan for supplying combustion air is installed with suitable dampers and safetyprotections so that the boiler can run without exhaust from the gas turbine. This change overscheme was well designed and tested and works satisfactorily at present.

In order to maximize the heat extraction from the exhaust gases after economizer and toincrease the overall efficiency of the HRSG, a separate low-pressure water coil was installedin exhaust gas path. Such an arrangement allowed to generate hot water which, whenflashed, gives low-pressure steam that is used for deaeration of boiler feed water. Thisfeature helps to reduce the steam demand for the deaerator by 4 ton/hour.

2.3 Cogeneration in a Textile Mill

Encouraged by the Thai Government policy on industrial cogeneration and sale of excesselectricity to the utility grid, a synthetic fibre manufacturing industry decided to explore theopportunity for cogeneration. The factory was particularly susceptible to any unintendedshutdown due to power interruption while led to high restarting costs. In addition, the factoryhad a generating capacity to meet only 15 per cent of its demand and the existing dieselgenerators were over 20 years old and were expensive to maintain. A techno-economicfeasibility study was first undertaken to identify the best cogeneration scheme in line with theGovernment’s newly announced power buy-back option.2

2.3.1 Existing energy situation of the factory

The production processes in the factory required steam at two different pressures, 56 bar and

12 bar, respectively. The total demand of steam was 101,120 tons of steam per annum,giving an average of about 11.5 ton/hour, though the maximum and minimum demands wereof the order of 17 and 9 tons/hour, respectively. To meet these demands, 4 boilers wereemployed with the following capacities:

- two boilers producing steam at 60 bar, each with a generating capacity of 7 tons/hour,

- two others operating at 12 bar and generating 15 tons of steam per hour each.

Heavy fuel oil used as fuel in the boiler was purchased at a price of US$ 0.12/litre.

2 P. Srisovanna, “Case study of cogeneration in textile sector”, ESCAP South-East Asia Sub-regionalSeminar on Promotion of Energy Efficiency and Pollution Control through Cogeneration, Hanoi, 10-11November 1998.

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The total electricity demand of the factory was 59,000 MWh/year, with an average demand ofaround 6.7 MW. The actual demand varied between a minimum of 5.9 MW and a maximum of8.9 MW. About 1 MW of electricity representing 15 per cent of the total demand was self-generated, using more than 20 years old diesel generators.

Four alternatives were considered during the feasibility study and compared with the existingsituation: (1) Back pressure steam turbine, (2) Gas turbine, (3) Combined cycle, (4) Dieselengine. In all cases, the criteria set was to meet the peak steam demand of the factory, i.e.,17 tons/hour.

2.3.2 Option 1: back pressure steam turbine

The proposed option is schematically shown in Figure 2.2. This option was found to be notattractive due to the need for extracting steam at two different pressures. The varying demandof steam at these pressures will lead to quite unfavourable steam turbine operation. In steammatching option, the net output would be only 0.8 MW, which is less than the current standbyneeds.

Moreover, the unavailability of a suitable standard turbine will lead to high installation cost andwill be more difficult to operate in practice. Considering 40 per cent of custom duty and tax,the investment was calculated as US$ 7,500/kW. The annual maintenance cost wasestimated as 3 per cent of the investment, i.e., US$ 180,000/year.

Figure 2.2 Steam turbine cogeneration option for the textile mill

2.3.3 Option 2: gas turbine

The schematic diagram of this option is shown in Figure 2.3. The system included a dieselfired gas turbine with heat recovery steam boiler and an option for auxiliary firing to meet thevarying steam demands. A boiler bypass would allow the gas turbine to run at full load, andthe auxiliary firing option with heavy fuel oil will let the boiler run at full load even when the gas

turbine is shut down. The net output of the alternator would be 4.7 MW, and assuming a 90per cent availability factor, the cogeneration plant was capable of providing 58 per cent of thepower needs of the factory, the rest being purchased from the utility grid.

Steam: 100 bar/450 oC

12.73 t/h (11.47 MW)

12 bar/237 oC6 t/h (4.84 MW)

56 bar/380 oC5.5 t/h (4.79 MW)

Steam: 12 bar/237 oC

1.23 t/h (0.99 MW)Steam to Process

Electricity800 kW

Boiler η= 90%

ST

Fuel

10.6 MW

Water: 70 oC

11.5 t/h,(0.94 MW)

1 3 0

c C ,

1 2 . 7

3 t / h ,

( 1 . 9

3 M W )

G

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Figure 2.3 Gas turbine cogeneration option for the textile mill

The investment, including the custom duty and tax, amounted to US$ 1,617/kW. The annualmaintenance cost was taken as 2.5 per cent of the total investment, i.e., US$ 190,000.

The main drawback of this option was the high price of diesel oil required in the gas turbinethat led to a long payback period. The cost of diesel oil is US$ 0.19/litre as compared withUS$ 0.12 /litre for heavy fuel oil. Moreover, the former has a lower heating value as comparedwith the latter (36 MJ/litre versus 39.1 MJ/litre).

2.3.4 Option 3: combined cycle

As can be seen in the schematic diagram of this option in Figure 2.4, this is a combination ofthe first two options. As a result, the combined power generation from the gas turbine and

steam turbine reaches 6.8 MW. This allows the plant to be self-sufficient during 93 per cent ofthe year. The investment cost, including taxes, was computed as US$ 2,000/kW and theannual maintenance cost was taken as 2.5 per cent of the investment.

As in the previous case, the main disadvantage of this system is the need for diesel as fuel,which has a much higher cost when compared with heavy fuel oil.

2.3.5 Option 4: diesel engine

This configuration consists of a diesel engine with heat recovery steam boiler with auxiliaryfuel firing option, as shown in Figure 2.5. The investment cost, including taxes, was estimatedto be US$ 1,500/kW. This option provided the best economic result for the factory. Though the

possibility of using 2 diesel engines for generating more power and selling to the utility gridwas explored and led to higher economic returns, the factory management was interested inthis alternative.

Exhaust18.8 kg/s

545oC

SupplementaryFiringFuel: 200 kW

56 bar/271 º C5.5 t/h,

(4.26 kW)

Fuel16.7 MW

4700 kW

Water: 70 oC11.5 t/hr

(0.94 MW)

Air

C T

12 bar/188 º C6 t/h,

(4.64 kW)

Steam56 bar/271º C1.05 t/h,

(0.81 kW)

Water120 º C12.55 t/h (1.76 kW)

160 oC

H

RSG

G

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Figure 2.4 Combined cycle option for the textile mill

Figure 2.5 Diesel engine cogeneration option for the textile mill

G

G

GExhaust36.2 kg/s

456 oC

Fuel21.6 MW

6000 kW

Water: 70 oC11.5 t/hr

(0.94 MW)

Air

C GT12 bar/237 º C

6 t/h (4.84 kW)

Water120 º C12.5 t/h

(1.75 kW)

800 kW H R S G

56 bar/380 º C5.5 t/h (4.79 kW)

Steam toProcess

100 bar/450 º C12.5 t/h (11.26 kW)

1 2 b

a r / 2 3 7oC

1 . 0

t / h ( 0 . 8

1 M W )

ST G

G

Exhaust450 oC

56 bar/271º C5.5 t/h,

(4.26 kW)

Fuel31.0 MW

2 × 6350kW

Water

70 oC11.5 t/hr

(0.94 MW)

12 bar/188 º C6 t/h,

(4.64 kW)

Steam56 bar/271º C0.43 t/h,(0.34 kW)

Water130 º C11.93 t/h (1.81 kW)

170 oC

H R S G

Cooling Water5.5 MW Water: 110 oC

11.5 t/hr(1.47 MW)

DIESEL

ENGINEAir Cooler T

o P r o c e s s

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2.3.6 Comparison of the different options

Table 2.2 summarizes the results of the analysis of the 4 options considered. As it can beseen from the payback periods calculated, the diesel engine option has a clear edge over theothers. The results could however have been quite different had natural gas been available at

the site at a reasonable price.

Table 2.2 Comparison of the cogeneration options retained for the textile mill

Alt. TechnicalOption

PowerOutput

PercentageDemand Met

Investment + 40Per Cent Taxes

MainFuel

PaybackPeriod

(MW) ( per cent) (106 US$) (Year)

1 Steam turbine 0.8 10 6.0 HFO 20

2 Gas turbine 4.7 60 7.6 Diesel 20

3 Combined cycle 6.8 80 13.6 Diesel 20

4A4B

4C

Diesel engineDiesel engine

Diesel engine

12.78.7

6.4

160120

80

12.610.4

9.6

HFOHFO

HFO

66

6

On the basis of the analysis and in order to minimize the investment, the factory decided topurchase a new diesel generator of 5 MW capacity and operate it along with the existinggenerator to meet all the low-pressure steam demand of the factory. The existing high-pressure boiler met the demand for high-pressure steam.

2.4 Cogeneration in a Paper Mill3

Cogeneration is widely used in paper mills around the world. Steam generated is used atdifferent pressures and temperatures for cooking of chips in digesters in the pulping processand for drying of paper in paper machines. In addition, some amount of steam is used forconcentration of black liquor in multiple effect evaporators.

A small paper mill in India with an installed capacity to produce 60 tons of writing, printing andduplex quality paper per day, uses agro-industrial residue based cogeneration to meet all theprocess energy requirements. Waste paper is mainly used as the raw material and a smallquantity of pulp is produced from bagasse, the residue from the cane sugar mills.

2.4.1 Existing energy supply facility

Steam demand of about 7 tons/hour at 4 bar is met by two boilers, each with a capacity toproduce 6-7 tons of steam per hour, using coffee and rice husk as fuel. The utility grid metelectricity demand of about 2,500 kVA. During power interruptions, a stand-by diesel generatorset with an installed capacity of 1,525 kVA was used to take care of the essential powerneeds.

Frequent power cuts, lasting for as much as 25-30 per cent of the year, forced the factorymanagement to look for an alternative economic source of power than the stand-by dieselgenerator. Coinciding with the plan to increase the production capacity to 100 tons of paperper day, a study was conducted to assess the viability of cogeneration. With the expansionplan of the factory, the process steam demand was estimated as 13 tons/hour and the powerdemand was expected to increase to 2,700 kW.

3 M.M. Patel and P. R. Raheja, “Case study presentation on cogen project and benefits at South IndiaPaper Mills”, paper presented at the CII Energy Summit ’96, Chennai, 11-14 September 1996.

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2.4.2 Economic evaluation of cogeneration options

Four different options were considered for comparing with the present case, as follows:

1. Use of low pressure boilers for process steam only , and no power generation on site;

2. Use of a high pressure boiler and a back pressure turbine to meet 30-40 per cent of thepower demand;

3. Use of a high pressure boiler of a higher capacity, a back pressure turbine and anadditional condensing turbine, or a single extraction-condensing turbine to meet 60-70 percent of the power demand;

4. The same as (2), but all the power needs of the factory are met in this option.

2.4.3 No power generation

To meet the increased steam demand of digesters and for availing stand-by capacity, it wasproposed in this case to replace an old boiler by a new fluidized bed combustion boiler havinga capacity to produce 10 tons of dry saturated steam per hour at 10.5 bar. Entire powerrequirement was to be met by the purchase of power from the utility grid, the diesel generatorcontinuing to provide the back up in case of power outages.

2.4.4 30-40 per cent power generation

The erratic power supply of the utility makes it absolutely necessary to have at least acapacity to self-generate 30-40 per cent of the power need (600-700 kW) to avoid productionlosses. Though a diesel generator is available, the power generated from this unit is quiteexpensive and the maintenance cost of this unit is expected to mount with time.

As there was a need to acquire a new boiler, this option considered the option of generatingsteam at 42 bar and 440°C. The steam could be supplied to a back pressure turbine togenerate around 30-40 per cent of the power demand of the factory, and the steam leavingthe turbine at a pressure of 4 Bar can be sent to fulfil process heating needs.

The initial investment as well as the operating cost of this system was found to be lower thana diesel engine. The fuel used in the boiler is cheap and available in abundance. Moreover,only the incremental cost of fuel required generating the same quantity of steam at higherpressure and temperature was considered, which is only 20 per cent higher. The cost ofpower generation worked out to be 36 per cent lower than that with the diesel generator.

From the practical side, a smaller size would mean the use of inefficient single stage turbineand low voltage generator. This may lead to large imbalance in the system due to variations inthe process steam and power demands. The system balance can be achieved only byoperating the system at low plant load factor, thereby compromising the overall efficiency andproductivity of the factory.

2.4.5 60-70 per cent of power generation

At this level of power generation, higher productivity can be guaranteed with practically noproduction losses. Installation of a higher capacity (14 tons/hour) and higher pressure (42 barand 445°C) boiler was considered. As much as 6-7 tons/hour of steam could be used in theback pressure turbine and match the process steam demand. The remaining high-pressure

steam can be sent to a condensing turbine for additional power generation. The latter will alsoassure to absorb the fluctuations in the process steam demand, without affecting the poweroutput adversely. Further, the use of a single multistage backpressure cum condensingturbine will assure increased power output and higher system efficiency.

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Though the initial investment becomes higher due to the higher boiler capacity and largerturbine and generator, condenser, etc., it can be justified by the higher efficiency and plantload factor. Moreover, the cost of additional fuel will be marginal. The power generated wouldbe adequate to handle all the critical loads whereas the non-critical loads can draw powerfrom the grid. Thus the plant productivity will no longer be affected by the utility power outages.

2.4.6 Full power generation

As there was a need to include installation and management of the fuel and ash handlingsystem, cooling water circuit for the condenser, and power interfacing and distribution, onemore alternative was included to further increase the boiler and turbine capacities to meet allthe heat and power needs of the factory. Though the investment required was higher, powergeneration cost became much lower compared with that of the utility or the diesel generator,mainly due to the low fuel cost. In addition, the option to avail full depreciation of theinvestment in the first year made the economic viability of the project particularly attractive.Hence the factory management retained this last option. The details of the economiccalculations for this alternative are summarized in Table 2.3.

Table 2.3 Technical and economic parameters of the cogeneration facility

Description Units Values

Power plant capacity

Cogeneration plant power consumption

Net power output for the factory

Working hours

Plant load factor

Annual electricity generation

Annual fuel (rice husk) consumption

Annual fuel use for process steam

Annual net fuel supply for cogeneration alone

kW

kW

kW

Hours/year

per cent per annum

106 kWh

tons/year

tons/year

tons/year

2,000.00

350.00

1,650.00

8,760.00

0.80

11.56

30,000.00

12,000.00

18,000.00

Investment on the cogeneration facility

Cost of electrical modernization

103 US$

103 US$

2,000.00

286.00

Price of electricity purchased

Avoided cost of electricity generated

US¢/kWh

103 US$/year

9.43

1,090.00

Cost of fuel

Cost of fuel for cogeneration

Operation and maintenance costs

US$/ton

103 US$/year

103 US$/year

22.86

411.00

114.00Annual cost saving

Gross payback period

103 US$/year

Year

565.00

4.00

It is expected that when the mill capacity is increased to 100 tons/day of paper, the samecogeneration plant will operate with 20 tons/hour of inlet steam to provide 12-13 tons ofprocess steam per hour at 4 bar and generate around 2,700 kW of power.

A desuperheater was added near the paper machine to reduce about 100°C of superheat ofthe process steam extracted from the turbine. Compared with the earlier process linepressure of 7-8 bar, the present system operates at 5 bar pressure, thus the steam

consumption is reduced and the power output from the turbo-generator is increased per ton ofsteam. In order to extract the maximum benefit from the cogeneration system and to make

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the system more flexible and cost effective, the turbo-generator is run in parallel with the utilitygrid.

2.5 Cogeneration in a Palm Oil Mill

The palm oil industry is one of the major energy consumers of energy. This industry alsogenerates vast amount of biomass such as mesocarp fibre, shell, empty bunches, fronds,trunks and palm oil mill effluent, which can be used as the main source of fuel forcogeneration with a capability to meet all the electricity needs of the factory. A crude oil andpalm kernel producing plant in Malaysia decided to install a cogeneration plant to meet all itsenergy requirements, thus improving the efficiency, competitiveness, reliability, flexibility andease of operation.4

2.5.1 Production process of the factory

The ripe palm fruit bunches are subjected to steam-heat treatment for a period between 75 to

90 minutes in a horizontal sterilizer where saturated steam at 3 bar and 140°C is used as theheat medium. These are then fed to a rotary drum stripper to separate the fruits from thebunches and the fruits are sent to a digester. Digestion involves mashing of fruits understeam heated conditions using direct live steam injection. Twin screw presses are used topress out the crude oil from the digested mash under high pressure.

The crude palm oil consisting of a mixture of palm oil (35-45 per cent), water (45-55 per cent)and fibrous materials is sent to clarification tank which is maintained at about 90°C toenhance oil separation. The skimmed clarified oil is then passed through a high-speedcentrifuge and vacuum dryer. With the introduction of a cogeneration plant, excess thermalenergy and electricity are used in a kernel crushing plant. Both palm oil and palm kernel oil aresold to palm oil refineries and oleochemical factories for further processing.

During steady plant operation, almost 5 tons/hour of palm shell was available with twodifferent moisture contents, 8.3 per cent and 16 per cent respectively. Likewise, 11.55tons/hour of palm fibre was discarded with two different moisture contents, 19.25 per centand 30 per cent respectively. These residues were previously burned off in oversized andinefficient boilers in order to overcome the waste disposal problem.

2.5.2 Technology adopted for cogeneration

The cogeneration system adopted to reduce the overall energy bill by simultaneousgeneration of heat and power. A backpressure steam turbine system was adopted as thesimplest configuration for achieving the highest efficiency and maximum economy.

A water tube boiler is installed with a capacity to generate 35 tons of steam at 23 bar. The fuelsupply and combustion rate is controlled as a function of the airflow rate, by manual orautomatic adjustment of the fuel conveyor. Steam from the boiler is passed through a backpressure turbine to generate 1,200 kW of electricity, meeting all the electricity needs of thefactory as well as the worker’s residential quarters. The steam leaving at 3 Bar is used as theprocess heat for sterilizer, digester, crude oil tank, clarification, oil storage tank, kernel dryersand other applications (see Figure 2.6).

4 L. Low, “Investing in cogeneration for efficiency, competitiveness, reliability and ease of operation atKilang Sawit United Bell”, Paper presented at the Cogeneration Asia ’97 Conference, AIC Conferences,Singapore, 25-26 November 1997.

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Figure 2.6 Steam turbine cogeneration in the palm oil mill

The total investment cost of the cogeneration plant amounted to US$ 523,000 and the annualcost savings expected from the self-generated electricity is estimated as US$ 243,700. Thefactory expects to recover the investment within 3 years after the commissioning of thecogeneration plant.

Encouraged by the results, the company plans to achieve a ‘zero waste’ level in the factory.There is a plan to fully exploit the excess energy by generating up to 2.5 MW of electricity andintegrating the operation of downstream activities such as the kernel crushing plant andmedium density fibreboard project.

2.6 Cogeneration in an Industrial Estate

The Thai Government policy of initiating and decentralizing economic development has led tothe successful creation of several industrial complexes away from the capital. Theseindustrial complexes require considerable amount of reliable power and process steam. Manyindustries inside these complexes are excellent customers of large-sized cogenerationplants. One such 300 MW gas-fired cogeneration power plant was launched in Map Ta PhutIndustrial Estate as early as in 1994.5

5 Y. Le Scraigne, “The first IPP project developed in Thailand – The Map Ta Phut cogeneration plant”,Paper presented at the 1994 Cogeneration Conference, AIC Conferences, Bangkok, 20-21 June 1994.

Sterilizer Digester Crude Oil

Tank

Clarification

(Oil Room)

Oil Storage

Tank

Kernel

Dryer

Hot Water

for Boiler

Back to Pressure

Receiver Distributor

350 psig

BOILER Turbine #1

Turbine #2(Future)

1,200 kW

Power Supply to Mill

Supply to other

integrated activities to

harness excess energy

Exhaust: 45 psig (3 bar)

P. Shell

P. Fiber

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2.6.1 Description of the cogeneration project

The cogeneration project was developed in two identical phases. Taking the environmentalconcerns into consideration, natural gas-fired combined cycle cogeneration option wasretained which minimizes the level of exhaust emissions and reduces the cooling water

requirement by half in comparison with a conventional power plant. Each phase included 3gas turbines (35 MW each), a heat recovery steam generator (HRSG) to recover heat fromthe flue gases of the gas turbines, a steam turbine of 50 MW capacity, and the auxiliaryequipment necessary to produce and distribute the generated electricity and steam toindustrial customers and the utility grid (see Figure 2.7 for details). In each phase, 150 MW ofelectricity and 145 tons/hour of process steam were generated at two different pressuresrequired by the industries: 60 tons/hour at 52 bar and 425°C, and 85 tons/hour at 19 bar 250°C. The high pressure steam is taken directly from the boiler. The medium pressure steam isbled off the steam turbine, with a back up provided by the high pressure steam supply througha turbine by-pass fully equipped with a pressure reducing and desuperheating station.

Figure 2.7 Combined cycle cogeneration (Phase 1) at the Industrial Estate

The cogeneration plant assures electricity, steam and demineralized water supply to severalpetrochemical and downstream industries. Customers have signed long-term contracts totake or pay for a minimum off-take quantity of steam. The steam price has three components:capacity, energy and transportation. Steam is supplied to the customers with an availabilityguarantee. A part of the electricity generated is sold to the customers whose price hascapacity and energy components, the remaining amount is sold to the utility grid according to

the tariff set for small power producers.

Fuel: 100%11.7%: 3×15.1 MW

88.3%: 3×114.6 MW

Air

HP Steam:

6.8%: 26.3 MW

MP Steam:13.9%: 53.8 MW

Stack

8.8%, 34.3 MW

Electricity

27%: 3×35 MW 12.3%: 47.8 MW

Cooling Water

31.2%%: 121.4 MW

238.7MW

61.3%

64.2%

3 ×83.5 MW

C T

HRS

Water

Comb.

G

G

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Natural gas is used as the main fuel for which a long-term agreement has been signed withthe Petroleum Authority of Thailand. Distillate oil can be used as a back-up fuel.

In line with the incentive policies of the Board of Investment, certain privileges were granted tothis project, such as:

- import duty exemption or reduction on imported machinery;

- corporate income tax exemption for 8 years, and further reduction of 50 per cent for 5more years;

- double deduction from taxable income of electricity, water and transport costs for 10 yearsfrom the date of first sales;

- deduction from net profit of the costs of installation or construction of the project’sinfrastructure facilities;

- exemption of personal income tax on dividends to shareholders.

2.6.2 Choice of the cogeneration plant

The choice of technology is primarily based on the consideration that both steam andelectricity can be supplied with high efficiency and reliability. During the plant operation, thereis practically no SOx emission and the NOx level is reduced to 50 ppm (with 15 per cent O2)with steam injection.

The major advantages of this configuration are:

- low capital cost: approximately three-fourth that of a conventional power plant of the same

output;

- short gestation period: two-third of the power available with gas turbines within 12 to 15months, and remaining one-third is available with steam turbine within 18 to 20 months;

- low operating and maintenance costs; competitive operating costs and higher availability,particularly in comparison with coal fired thermal steam power plants;

- higher efficiency: electrical efficiency of 45.14 per cent in combined cycle mode, andglobal efficiency of almost 70 per cent in cogeneration mode;

- flexibility of operation: ensured by the modularity of the plant, gas turbine exhaust by-pass,steam turbine by-pass system, and the option of auxiliary firing on HRSG which allowssome decoupling between power and steam generation.

The gas turbines are installed outdoor. The unit is capable of being operated at full load within16 minutes. Each unit consists of the following components:

- air inlet module with filter, silencer and ducts;

- gas turbine and auxiliary equipment package;

- generator package with load gear, exciter and coolers;

- exhaust module with ducts, bypass stacks, silencer and expansion joints;

- control components with option for local operation;

- medium voltage compartment with circuit breakers and auxiliary transformers.

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The gas turbine consists of a 17-stage compressor, combustion system with 10 individualcombustors, a 3-stage turbine, air systems, lube oil system common to gas turbine andgenerator, cooling water, and fuel systems. It is equipped with a steam injection skid for NOx

emission, acoustical enclosure for noise reduction, silencing equipment on inlet and exhaustducts, and a CO2 fire protection system.

The HRSG is of simple and proven design. It has a low thermal inertia to allow fast start-upand rapid load swings, high resistance to thermal shocks, low exhaust gas pressure drop,high heat recovery, and high reliability and maintainability.

2.6.3 Financing of the project

Most of the difficulties encountered in financing large-scale power projects are avoided as theproject is of a reasonable size. The financeability of the project is enhanced by thecommitment and references of the project sponsors as well as the quality of the customers.The project sponsors have large experience in energy projects. The industrial clients aremostly very much capital intensive and are able to take long term off-take commitments.

The electric utility plays an important role by purchasing surplus electricity, thus providingstable and additional revenue to the project. Also, back-up electricity is provided from the grid,ensuring that availability targets of the industrial users can be achieved.

The Government has demonstrated a clear policy for privatization of power generation alongwith accompanying regulations and incentives.

The equipment suppliers provided necessary confidence and guarantees to the lenders andguarantors on the following:

- project investment cost control, by accepting the construction of the plant for a fixed andfirm price;

- completion on time, by accepting liquidated damages, for failures to meet targetedcompletion date;

- plant performance in terms of availability and reliability, by accepting liquidated damagesfor failure to meet targeted figures.

In addition, there was the advantage of reduced interest during construction due toprogressive investment and short gestation time, and the ability to generate income after onlya year of signing the contract when the plant started operating in open cycle.

The debt-equity ratio of the project was 3:1. During the financing arrangement, maximumflexibility in the choice of currency and the type of interest rates were offered to thedevelopers. The subsidized loan included a 10-year loan term from the commissioning date ofthe project. Local financing could be made available to cover other investment costs.

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