Abstract
The increasing demand for energy on a global scale, as well as the social pressure related to counteracting the effects of climate change, has created favourable conditions for the transformation of energy sectors towards the possession of low-emission generation sources. This situation, however, requires investment actions in order to modernise the existing power and CHP (Combined Heat and Power) plants and construct new units. These issues, together with the climate and energy policy pursued by the European Union, are the main reasons for the emergence of various governmental mechanisms supporting the replacement of old coal power units with highly efficient cogeneration units based on gas turbines and other units. The support may take different forms. This article discusses two examples of mechanisms available on the Polish market, i.e., (i) the capacity market and (ii) promoting electricity from high-efficiency cogeneration in the form of individual cogeneration premium. The purpose and novelty of the analysis was to identify the pros and cons and the key parameters which determine the advantage of a given mechanism. Both these mechanisms have been characterised and then compared via the example of a planned cogeneration gas unit (an open cycle gas turbine—OCGT). This assessment was made using discount methods based on the FCFF (free cashflow to company) approach. The analysis did not bring forward an unequivocal answer as to the absolute advantage of any of the solutions, but it was able to point out significant problems related to their practical use.
Highlights
The systematic increase in energy demand observable at the global level [1,2,3], combined with more and more widespread discussion and initiatives to counteract the negative effects of climate change, has created favourable conditions for a transformation towards sustainable, low-emission energy systems.Over the last few years, several studies have been developed to deal with changes in the energy industry
The second part presents the results of the scenario analysis for the fluctuating aforementioned support mechanisms, taking into account the technical and economic assumptions electricity price assumed by the regulator to establish the individual cogeneration premium (ICP) and the future changes in electricity presented above
Due to the inability to apply for ICP, the revenues in this mechanism would be zero, and the results should be the same as in the no-support scenario
Summary
The systematic increase in energy demand observable at the global level [1,2,3], combined with more and more widespread discussion and initiatives to counteract the negative effects of climate change, has created favourable conditions for a transformation towards sustainable, low-emission energy systems.Over the last few years, several studies have been developed to deal with changes in the energy industry. One of the most interesting that increases the awareness of the inevitability of these changes is the works of Falcon et al [4] describing the most effective mix for energy transition in the biofuel industry. Another important work is the one by Owen et al [5], taking up the subject of the finance gap for the energy sector transition. Tombs [6] in his work presents a discussion concerning the vision of the energy sector in the future.
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