Turkey’s 2015 National Coal Policy
Dear
Energy Professionals, Dear Colleagues,
In
this article, we will strive to evaluate the new lignite, hard coal
and/or imported-coal firing thermal power plants in our local market,
explain operational problems, and recommend that new coal firing
technologies be implemented for the best use and most efficient
application of local coal in the new thermal power plant investments
from 2015 onward.
Foreword
Whereas
coal constitutes a 25% share of the global energy supply market,
second only to petroleum, it is first in the global electricity
generation market, with a share of 40%. Locally, coal ranks first
with a 40% share in the primary energy generation market, but fourth
in the electricity generation market, with a 16% share. It is
foreseen that coal will come to increase its share in global markets
in the future thanks to new “Clean Coal Technologies”. As a
matter of fact, coal is the most important indigenous fossil fuel in
Turkey, therefore, with the best applicable use of advanced
technologies, it should be utilized countrywide for greater
electricity generation at a cheaper rate.
Reserves
and Mining
Turkey
has both hard coal and lignite deposits. The hard coal reserves are
mostly located in the western part of the country, in the Zonguldak
Basin, which has more than 1.6 billion metric tons of workable
reserves, 512 million tons of which are proven and about 80% of which
can be coked. Lignite deposits are widespread and plentiful
throughout the country: reserves are estimated at more than 14
billion metric tons, 7th
largest
in the world, most of which are economically mineable, though only
about 7% thereof have a heat content of more than 3,000 kilocalories
per kilogram (LHV). In 2012, around 68 million of metric tons of
lignite were produced annually. About 40% of the Turkey’s lignite
is found in the Elbistan Basin.
Production
and Consumption
The
Turkish Hard Coal Institute operates five underground mines in
Turkey, and is the only hard coal production entity in the country.
The two most important lignite fields in Turkey -the Afşin-Elbistan
and Sivas-Kangal coal fields- are owned by EÜAŞ and operated by
private companies under contract.
Even
though there is significant production of lignite and some production
of hard coal in Turkey, not enough coal is mined to meet domestic
demand.
As
a result, Turkey imports more than 25 million tons (2013) of hard
coal each year, mostly from Russia (33%), Columbia (24%), the USA
(14%), South Africa (11%), and Australia (5%) as of 2012. Imported
hard coal is used mainly for electric power steelmaking, and cement
production. About 75% of the Turkey’s lignite is used as a fuel
source for electricity generation.
Coal
Technology and Coal Markets
Seeing
that there is relatively little investment in coal fired power plants
in the global liberalized markets, or at least investment priority is
given to natural gas fired combined cycle power plants due to their
relatively cheap installation-costs and faster construction periods,
foreign dependency increases in countries which depend on imported
fuel. Demand for more natural gas has also triggered the demand for
more coal.
This
greater utilization of coal has also necessitated the application of
new coal technologies.We are now witnessing an obvious evolution in
clean coal technologies. When we look at the available technology and
new trends in market demand, the most important sector in the field
of energy revolves around the development of new technologies. It has
now become a new tendency for such leading technologies to be
developed and applied not only in the advanced countries, but also in
the developing countries, which are consuming more and more energy.
The
energy technologies of West European as well as North American
companies are becoming too expensive to export; soon these countries
will not be able to sell their products on the global market. Even in
their home markets, protective measures such as high import taxes and
strict labor codes will need to be implemented in order to avoid an
influx of cheap labor from abroad. In recent years, China, India,
South Korea, and many other Asian countries have increasingly come to
compete in the global energy markets.
The
companies in these countries already assert dominance in their home
markets with their self-made fabrications supported by advanced
technology and fabrication licenses. Although their products are
cheap, they have serious difficulties in fabricating the latest and
the most efficient designs in compliance with environmental standards
that are largely adopted across the globe. However, we can predict
that these companies will soon reach these targets complete with the
price advantage that they already possess in the first place.
We
need to reposition our local energy market in Turkey keeping these
new developments in mind. We have the engineering and intellectual
capacities as well as the market potential for local fabrication. We
must design, fabricate, construct, install, and operate our own
thermal power plants that fire our own indigenous fuel.
In
the past, we have prioritized attracting foreign investors that had
the financial capability to cover power plant investment projects
although their products were not the best of their kind, not the most
efficient, and not designed to incorporate the latest technologies
that would utilize our local coal. These plants have not been
suitable when it comes to using our local fuel, whether lignite or
hard coal, and hence they have aged quickly, very quickly, faster
than the acceptable market norms.
Reputable
western energy companies do not exist anymore, as they are either in
bankruptcy, or unable to compete with the market players beyond their
national borders. In recent years, Asian companies have presented
increasingly cheap offers in thermal power plant tenders. If such an
eastern company is prequalified in the pre tender procedure, western
companies certainly hesitate to participate in the process as, in the
end, it would be a waste of time and resources to go head on against
such competitive players.
In
this way, it is increasingly difficult to attract western
technologies although they may certainly be desired. Price is of
little importance to the new players; they are often unaware of the
prevailing market figures, and hence, quote extravagantly low prices.
Their labor costs for design and fabrication is extremely low. They
have seriously effective market policies that allow them to
infiltrate the global energy market.
It
is often forgotten, or ignored, that the best design which allows for
the use of local fuel is accomplished by tapping into one’s own
local engineering capital, namely, local engineering and construction
companies. Foreign contractors design the facility, commence
construction, engage in site installation, and then wait for the
guarantee period of 2-3 years to come to an end. Having fulfilled
their obligations they then leave the site. The local operator
remains behind, running the plant alone for the long term. It is very
difficult to pursue long term rehabilitation and programmed repair
works without the design/fabrication support of the original
equipment supplier. Therefore, local design and fabrication are
indispensable when it comes to long term operations.
Upcoming
Energy Crisis
We
all know that we are in the midst of an energy crisis; we lack a
sufficient energy supply. Our resources are unable to generate the
necessary amounts of energy. In other words, such a huge energy
demand is not able to be met by our limited energy supply.
Here,
the growing demand for renewable technologies, such as wind/solar,
cannot be fulfilled quickly. These technologies will only enter the
local energy market with time. Fast/easy/cheap solutions are not
available, nor are they practical or feasible.
We
must design our own thermal power plants, through the efforts of our
own design teams,to operate using our fuels that are available
locally, whether they be lignite or hard coal. We must fabricate the
necessary equipment by ourselves in our own fabrication shops. We
must take on site installation, and ultimately, operate the
facilities by ourselves. Our local engineers are capable of handling
the formulation and implementation of such plant designs.
However,
we need to create a positive investment climate in the local market
in order for this to be achieved. Local market forces should
facilitate that these activities can be handled independently, in
harmony with local investors, financial institutions, academicians,
engineers, engineering unions, and contracting service providers. We
need to take the initiative, not leave it to foreigners. We should
not employ foreign contractors just because their labor is cheap. Our
energy markets and our energy potential should be protected against
foreign domination and incursion.
How
to cover Project Financing
Financially,
we have serious reason to support such an end-goal. We have genuine
expectations that Turkey will have an electricity market based on
real costs. Seeing that crude oil prices are immediately reflected in
local petroleum byproducts, and that the consumers accept this burden
in their cost calculations, the same will similarly be applied in all
phases of the price structure of electricity generation.
When
we evaluate the projections for the supply and demand of electricity
for the next 10-15 years in Turkey, there are no new potential
primary energy resources that could reduce the ever increasing
prices. Hence, the short term electricity prices are expected to
hover in the range of US$ 0.16 - US$ 0.20 per kWh in our local
electricity market.
Considering
their rehabilitation and renewal costs, the newly privatized thermal
power plants will not help to reduce overall electricity prices in
the short and medium terms.
Currently,
more than 50% of the electricity generated in the local market is
dependent on imported natural gas. Due to delays in hydro and
coal-based power plant investments, those imported-natural gas firing
thermal power plants are operating at base load. Unfortunately, this
will increase the demand for more combined cycle power plant
investments.
Prevailing
Coal Prices on the Global Market
Thanks
to the latest developments in technology, coal fired thermal power
plants based on PC (Pulverized Coal) and CFB (Circulating Fluidized
Bed) designs have reached 46%efficiency, and beyond, with the
application of supercritical pressures and temperatures.
Imported
coal at the prevailing market price of US$ 57-71 per ton, or spot
price of US$ 4-5 per MMBtu, are now comparable with the prices of
natural gas, at US$ 11-14 per MMBtu,that is used in combined cycle
power plants generating electricity with 60% efficiencies. However,
imported coal is indexed to oil prices and there is no reason to
expect any drastic change in these price ranges in the medium and
long terms. Therefore, we should not expect any decrease in coal
prices any time soon.
In
any case, one should keep in mind that the raw coal price of our
local Afşin-Elbistan coal is less than US$ 1.80 per MMBtu as of
2014. Nonetheless, firing this coal in our thermal power plants
located there is not so easy; this is supplemented by the fact that
these plants are not so efficient. Specially tailored academic and
commercial methods need to be explored and enforced to amend these
deficiencies.
New
Technologies for Firing Difficult Coal
IGCC
(Integrated Gasification Combined Cycle), CFB, Oxy-fuel firing, and
underground gasification methods could be applied to our local coals
with low calorific values. CFB, for example, has proven to allow an
output of 165 MWe per unit.
Today,
energy security is a major parameter that qualifies a country as
independent. Energy security can only be achieved by a prudent
combination and management of local natural and socio-economic
resources in parallel with the implementation of the latest
technology.
It
is difficult to think that a country can protect its borders if its
energy investment policy is fully import-oriented. Turkey has many
energy resources but they are not easy to exploit. For example, hydro
power in Turkey, while exhibiting great potential, requires careful
and intelligent policies that take into account the impact of such
projects on the environment and on local rural and urban areas.
On
the other hand, our local coal mines have varying specifications,
even when they are located in the same basin. Therefore, for better
and more efficient firing of the available coal in these thermal
power plants, we need to apply more expensive and selective mining
techniques rather than our traditional, cheap mining methods. This is
an expensive investment that is only observable in a few private
operations in Turkey.
The
traditional mining method involves the extraction of coal complete
with a host of undesirable and unburnable materials such as sand,
ash, moisture, etc. All new imported-coal fired power plant investors
are major players in other sectors which are in need of cheap
electricity. Therefore, they consume almost 60-70% of electricity
generated within their own plants. The remainder is then sold on the
national market; and this is not a problem seeing that there is
always a need for more energy in our ever shrinking energy
environment. Generally, local investments are realized by methods of
“corporate finance”. Between 1993 and 2005, power plant projects
exhibiting an overall installed capacity of more than 4000 MW have
been realized. These natural gas firing, cogeneration plants pay for
themselves quickly, thus freeing up more money for the use in
further investments in new plants.
Conclusions
and Recommendations
The
energy policies of today’s administration prioritize the securement
of the best quality, most reliable electricity for the local market
at the cheapest rate. Considering this, the effective and rational
use of local fuel resources is of vital importance as domestic energy
planning is synonymous with planning for the future of the country,
allowing us to avoid any foreseen economic crises.
We
do not have the luxury to make mistakes in our energy policies, as
any misstep will have severe repercussions down the road. While
securing a steady supply of energy is the first priority, it is our
sincere and humble opinion that new investments based on
imported-coal are too risky. The construction of such facilities on
the coasts of the Black Sea adds to this risk due to the increased
coal prices on the world market and the limited routes through which
coal can travel in the ever-congested Turkish Channels. Furthermore,
Russian coal is not cheap and never has been.
We
must be very careful in issuing Environmental Impact Report
certifications as well as regulatory licenses. Plants should never be
placed on forested lands. Any new and significant increases in a
plant’s capacity and any fuel changes from local coal to imported
coal should be carefully evaluated. Seaports where the unloading of
cargo occurs should be carefully selected. The deep sea discharge of
thermal plant bottom ash should also be avoided.
A
Final Word
The
best price is not the best choice for the long term, consistent, and
cheap generation of electricity. Ankara, 31 March, 2015
Haluk
Direskeneli is a graduate of METU’s Mechanical Engineering
Department (1973). He has worked in public and private enterprises,
US-Turkish JV companies (B&W, CSWI, AEP, Entergy), and in
fabrication, basic/detail design, marketing, sales, and in project
management of thermal power plants. He is currently working as a
freelance consultant/energy analyst of thermal power plants, and
utilizing his basic/detail design software expertise for private
engineering companies, investors, universities, and research
institutions. He is a member of METU Alumni and the Chamber of
Turkish Mechanical Engineers Energy Working Group.
posted by yuvakuran at 11:01 AM
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