LNC - Linc Energy

[Jonathan111]

I have been following this stock for a while, it is really based on the news, couple month ago they release the JORC code with good result and the price went up, they do have more confirm resources however without selling it, it won't have any help to the company, what i believe is until the coal sale confirm, the price will just go up and down with news regardless of what technology they have.

http://www.abc.net.au/news/stories/2010/02/06/2812195.htm?section=australia


http://www.cabinet.qld.gov.au/MMS/StatementDisplaySingle.aspx?id=68399


Palmer, Bligh in $69b China coal deal

Queensland billionaire Clive Palmer has signed a deal to sell millions of tonnes of coal to China in what's believed to be Australia's largest export contract.

Mr Palmer says the $69 billion, 20-year offtake deal was signed last Friday with China Power International.

Another $8.6 billion agreement was signed with the Metallurgical Corporation of China to build the project in central Queensland.

Mr Palmer's Resourcehouse wants to develop a 40 million-tonne-a-year thermal coal mine in the Galilee Basin, near Alpha, west of Emerald.

"That's the biggest coal mine in the world in one go I think you'll find," Mr Palmer said.

"This is really a great time for the state.

"You know, things have been a bit quiet lately and it's good to see that we can revitalise the economy."

Queensland Premier Anna Bligh says the project will boost the state's economy.

"What the signing of this contract with the Chinese company means is that Australia's largest single export deal ever signed will be happening right here in Queensland," Ms Bligh said.

Four underground mines and two open cut mines will be developed, as well as a new coal port at Abbot Point, near Bowen.

A new 500 kilometre rail line will be built to link the mine and the terminal.


Jobs target

Mr Palmer says the project will create jobs.

"It'll create 7,000 jobs, I believe during construction and operations, and they'll be direct jobs," he said.

Ms Bligh says it helps reach her election promise to create 100,000 new jobs.

"We've already seen 30,000 jobs created in the last couple of months." she said.

"We still have some 98,000 jobs to go to reach that target, because for some time last year we went backwards."


Differences aside

Mr Palmer is suing the Queensland Premier over comments she made about his links to the Liberal National Party.

He is a large financial backer of the party but he says they have put their differences aside for the project.

"You've got to understand the Premier is a very compassionate, caring person who cares about the future of Queenslanders and about jobs," he said.

But he is still suing Ms Bligh.

"Life's got to be interesting hasn't it," he said.

Ms Bligh says the defamation suit will be solved by lawyers.

"But neither Mr Palmer or I are going to let any of those issues get in the way of jobs for Queenslanders," she said.

The State Government could reap up to $500 million a year in royalties, dependent on the price of coal.

"That is a huge boost and a massive shot in the arm for the Queensland economy and it's great news for central Queensland and regional Queensland," Ms Bligh said.

The mine is expected to be fully operational by 2014.

 

[The Dealer]

http://www.bloomberg.com/apps/news?pid=20601087&sid=apRfDMJCCsyU&pos=4

The deal got amention on Bloomberg as well. Too bad they didn't name Linc to add some spice.

 

[Coal Face]

Fuel Cell Power Station

The Power Station is likely to be built with AFC Energy fuel cells, this will make it THE cleanest and most efficient power station in the world, 99% CO2 capture, no NOx or SOx, yet giving near double the output power of an IGCC. Current press quotes are of 60% system electrical efficiency and they are working on catalysts to increase that, so it would be possible(unlike any other power station?) to very cheaply upgrade the power station in 2/5/7 years to maybe 65% then 70% efficiency(this type of fuel cell has reached this level in the lab many years ago). Also if you add CHP to the equation it will give a combined efficiency of over 90%, which is unbeatable.

Double power equals double revenue, yet consumes no more syngas than they would in an IGCC.

Contrary to posts here it won't cost the earth either, the cost is on target to be £300 per KW in Q1 2011. That's about 20% of the cost of an IGCC with CO2 capture and way less running costs, no downtime, etc.

Also if Linc want to they can choose the AFC Energy ESCO (Energy Supply Company) option, whereby a company is setup probably as a JV between AFC and Linc, this company takes out a 10 year leasing agreement for the fuel cell power station, the leasing company pays AFC for the power station so Linc need no initial cash to pay for it. The ESCO buys the hydrogen from Linc and sells electric to the grid. AFC and Linc share the revenue from the electric. The power station pays for itself in 2 years with no gov't subsidies. If it gets subsidies(as its green/clean use of hydrogen and gives CHP energy) it could potentially pay for itself in ONE YEAR.

On top of that lot a 1GW(what Linc are looking at) will produce 2.5Bn litres of pure(deionized) water, this will be worth as much as one-third of the value of the electricity it produces. 1GW produces 8760GW/h per year. At 17.13c per KW/h is AU$1,500,588,000. One third of that is AU$500,196,000. At todays exchange rate of 1.80470 is £277,162,963. Not bad income, for just the water.


Quote from businessgreen.com coverage:
AFC said that the cells will last 10 to 13 years and can be sited anywhere, adding that for a 1,000MW power station they would produce over 2.5bn litres of clean water a year.


This is from the AFC/TNE project in Scotland, how environmentally friendly does this sound:
“If we did build a power station, it wouldn’t involve chimneys and boilers,” he said.
“In fact it would look more like a garden centre. It would be a glass building with fuel cells. There would be no chimneys and no smoke.”
The operation would involve extracting syngas—a gaseous mixture rich in hydrogen—from the coal seams, removing the sulphur and heavy metal elements and separating off the hydrogen content, which would be channelled into fuel cells for conversion into electricity.

As I can't post links yet, please search google for "AFC ENERGY" and read their announcements and broker notes. I now own AFC and Linc stock. AFC are listed on AIM in London, ticker AFC.

 

[Coal Face]

There is a video of Peter Bond on abnnewswire.net from the Limelight Series event, with a transcript. The link is on the top-left of the ABN homepage.

Here's a couple of good bits from the transcript:

Brian: What percentage would be used say for gas that goes into a power station to generate electricity as opposed to making diesel fuel on the other side?

Peter: If you have a gas to liquids plant, a large UCG operation that is making the gas from the underground coal and you have committed to a very large gas to liquids plant, which is the plant that makes it into diesel, that is like the size of an oil refinery, that takes your priority. So what you do is feed most of the gas through that. About 75% - 80% of the gas you put through that will turn into a liquids product. There is a percentage of gas left over that you would feed into the power station. So, it's about somewhere in the 75-80% would go to gas to liquids and 20-25% would go to power generation.


Brian: With the government looking at a fixed reduction of CO2 reduction of 5% by 2020 at the moment, the use of this sort of technology has the potential for Australia as a nation to push that number way higher. It's pretty significant, isn't it?

Peter: There is a number of ways, if you started to use our gasification process to feed gas fired turbines and using some of the other technology that we have access to, by using gas turbines, you are going to drop the CO2 footprint by 25-35% straight away. If you are using fuel cells in some of those applications you are going to drop by 85-90% because there is still some footprint and then you have the synthetic fuels production where the great benefit for that is because Australia has gone past "peak oil", every year that goes past we are importing more oil, and we have to pay for that , we have to physically write the cheque to the overseas countries to buy that oil. So the coal we export, the wheat we export, the iron ore that we export, etc. that is going towards paying for the oil we consume, and some of the other commodities, but every year that goes past we are basically just exporting our wealth to pay for the right to drive our cars. Now if you can produce the oil in this country and retain the wealth in this country, by doing something like we are doing with gas to liquids, then you don't have to write that cheque, the wealth stays in the country.


So any project using coal to make fuel is open to 20%-25% of its gas going to fuel cells. This adds in another market for AFC fuel cell power stations. 20% to 25% in Lincs case is a 1000MW power station.

Also, using turbines only reduces the overall GTL plants' CO2 emissions by 25% to 35%, but by using AFC fuel cells the overall GTL CO2 emissions are reduced by 85% to 90%, a staggering difference. In effect they are cleaning up the GTL emissions as well as providing double the power of a turbine.

I hope my two posts today answer your questions on the power station plans.

 

[Coal Face]

Just a quick post to confirm the 1GW fuel cell power station:

"We are going to have a significant amount of surplus hydrogen as a by-product at Orroroo and it is an ideal location for a couple of fuel cells,'' Mr Bond said.

"We will still have the gas to liquid plant at Orroroo but as part of making the gas for that plant we will end up with a large surplus supply of hydrogen and this is an ideal use for it.''

Mr Bond said the hydrogen could be used to fire a power station near the coal plant, with the electricity produced feeding into the main power grid.

"We would build the power station close to the site in a convenient location just adjacent to where we produce the gas, we would put the fuel cell containers within a couple of kilometres of the field and run a transmission line to the main grid.

"We could easily produce 1000 megawatt hours for the next 60,70, 80 years,'' Mr Bond said.

adelaidenow.com.au/business/mining/linc-energy-teams-up-with-uk-firm/story-e6fredhu-1225808685416?from=public_rss

 

[Smurf1976]

Re: Fuel Cell Power Station

On top of that lot a 1GW(what Linc are looking at) will produce 2.5Bn litres of pure(deionized) water, this will be worth as much as one-third of the value of the electricity it produces. 1GW produces 8760GW/h per year. At 17.13c per KW/h is AU$1,500,588,000. One third of that is AU$500,196,000. At todays exchange rate of 1.80470 is £277,162,963. Not bad income, for just the water.

17.13c per kWh??? 4 cents is about the upper limit for baseload electricity.

A plant of that size would come close to running all of SA in the middle of the night, meanwhile other plants will remain online to avoid shutdown costs and there's limited ability to export to Vic without new transmission infrastructure. So a routine overnight price collapse, possibly below zero, is certainly not out of the question. More transmission to Vic would fix it, but that's not there now...

Even asssuming no maintenance outages, realistic gross revenue for such a power station is somewhere around $350 million a year.

What the water is actually worth in that location I really don't know but I'd assume it would be determined by the marginal operating cost of the new desal plant under construction in SA during dry years, and by the marginal cost of water from the Murray during wet years.

 

[Coal Face]

Re: Fuel Cell Power Station

17.13c per kWh??? 4 cents is about the upper limit for baseload electricity.

Of course baseload is cheaper but it only supplies 9% of power and low carbon energy is NOT that cheap. Low carbon energy gets a premium price and Gov't subsidies. On top of this they want to switch from the current dirty coal power stations to clean coal to reduce CO2 emissions, and you wont find anything cleaner than the fuel cell power station, fact. Quoting baseload price is misleading and irrelevant.

The observation that supposed baseload coal-fired power stations supply 91 per cent of all electricity consumed ABOVE base load requirements underlines the fact that the term baseload has no relevance in discussion of the supply of electricity
aph.gov.au/library/pubs/rp/2008-09/09rp09.htm


The Queensland Renewable Energy Plan (QREP) which was released in June 2009, has been established to increase the deployment of renewable energy infrastructure in Queensland. The Queensland Government estimates that successful implementation of the QREP will help leverage up to $3.5 billion in new investment, create up to 3500 jobs and reduce greenhouse gas emissions by more than 40 million tonnes by 2020.
dme.qld.gov.au/Energy/renewable_energy.cfm

Electricity generation in Australia is dominated by coal-fired power stations, which contribute one third of Australia’s net greenhouse gas emissions. Significant change in the coal-fired energy sector will be required to substantially reduce emissions. The options are to introduce ‘clean coal’ technologies including geosequestration of CO2
aph.gov.au/library/pubs/rp/2008-09/09rp09.htm

In 2004, coal burning in Australia produced about 200 million tonnes (Mt) of CO2 equivalent emissions, or about 35 per cent of the nation’s total greenhouse gas emissions. About 180 Mt came from electricity generation plants
aph.gov.au/library/pubs/rp/2008-09/09rp09.htm

A plant of that size would come close to running all of SA in the middle of the night, meanwhile other plants will remain online to avoid shutdown costs and there's limited ability to export to Vic without new transmission infrastructure. So a routine overnight price collapse, possibly below zero, is certainly not out of the question. More transmission to Vic would fix it, but that's not there now...

That's rubbish and distorting the need for electricity in the region. Here's my proof:
"Queensland currently has a generation capacity of more than 10,000 megawatts (MW). Since 1998, $4.7 billion or 75 percent of new generation investment in the National Electricity Market has occurred in Queensland. Additionally, by 2015 approximately $12 billion more will be invested in more than 10,000 megawatts (MW) of new generation capacity across the National Electricity Market. Given the high quality and low cost of Queensland fuel sources, and their proximity to load growth, a significant proportion of this investment is expected to occur in this state."
dme.qld.gov.au/Energy/generation.cfm

So please tell us why they would are installing 10GW of NEW power locally if they don't need it? Tell us why after all the market research Linc have done they would build a 1GW power station if it wasn't required and thus they could not sell the electricity.

Also read theoildrum.com/pdf/theoildrum_4508.pdf

Even asssuming no maintenance outages, realistic gross revenue for such a power station is somewhere around $350 million a year.

What a load of rubbish! do you really think Linc have their research and sums wrong, and would put in a power station costing c£40,000 per 50KW(or c£20,000 per 50KW under ESCO) if it was never going to reward them financially, let alone pay for much of the future GTL construction? Please tell us why Peter Bond is going to build the power station 2 years ahead of the GTL commissioning, when Linc have said in the Limelight event they will because "Selling electricity quickly into the grid would be an instant money earner".

What the water is actually worth in that location I really don't know but I'd assume it would be determined by the marginal operating cost of the new desal plant under construction in SA during dry years, and by the marginal cost of water from the Murray during wet years.

Exactly which rock do you live under? ever heard of the drought? climate change that will make droughts in the years ahead last longer and be worse? that regions population growth causing a housing shortage? popluations expected to rise globally by +3Bn by 2050?



Deionised water can be consumed(so long as you take mineral suppliments or its treated first) but 99.99% of it is currently sold to industries such as pharmaceutical and cosmetics, but loads more too and the price in those industrial uses is way higher(I have seen it at 15x the price AFC have quoted) for what the fuel cell water will be, extremely pure.

Today, deionized (Dl) water has become an essential ingredient in hundreds of applications including: medical, laboratory, pharmaceutical, cosmetics, electronics manufacturing, food processing, plating, countless industrial processes, and even the final rinse at the local car wash.
myronl.com/applications/diapp.htm

The South East Queensland Water Crisis. South East Queensland is currently experiencing the worst water shortage in over 100 years
mta.qld.edu.au/water_essay.pdf

independent.co.uk/news/world/australasia/australias-epic-drought-the-situation-is-grim-445450.html

energyfutures.qld.gov.au/climatesmart_2050.cfm

 

[basilio]

Hold on Coal face. I wouldn't be quite so harsh with your attacks on Smurf.

I agree that AFC is exciting. It seems to have very good legs and very well could be a game breaker in our current power supply system. Certainly worth a close look

Just be nicer not to run over people too quickly on these forums. Smurf actually does knows a fair bit about the power industry and I'm sure is open to new ideas.

Thanks.

 

[basilio]

There is a Limelight power point presentation on the Linc website. It was used in Sydney and I'm pretty sure was repeated in Melbourne.

Check it out.

http://www.lincenergy.com.au/presentations.php

Also found the Dec 9th announcement of the deal with AFC. Excellent detail.
http://www.lincenergy.com.au/pdf/asx-196.pdf

 

[awg]

Of course baseload is cheaper but it only supplies 9% of power and low carbon energy is NOT that cheap.

Hold on Coal face. I wouldn't be quite so harsh with your attacks on Smurf.)

Good to see a well researched reply Coal Face.

Smurf does know his stuff, maybe hasnt researched this particular matter to the extent you may have, nor have I, and I am glad you have presented the material.

One thing I will say as a long term LNC enthusiast, they have the most promising sounding announcements of any Co I have ever seen.

Would be excellent if they deliver

 

[Smurf1976]

I won't enter a personal debate and will simply post some facts from which people can draw their own conclusions. I am a long term holder of LNC by the way.

If you run any power station, regardless of technology or size, on a 24/7/365 basis (apart from maintenance shutdowns, breakdowns etc) then you will necessarily receive the time-weighted (not volume-weighted) average electricity price for your production. That applies whether it's coal, natural gas, nuclear or any other constant (baseload) source of electricity.

"Baseload" simply means that generation / consumption which is constant, effectively the minimum load on the system that is routinely reached. The type of generating plant generally used for such applications is that with the lowest operating cost which, in general, also means a high capital cost. It also includes any plant with inflexibility in operation that doesn't facilitate rapid changes in load. So nuclear and coal plants are commonly used for baseload operation - they are cheap to run, expensive to build and not well suited to rapid changes in output.

Even taking baseload as only 1000MW (versus the 4000MW peak loading on the system) in SA then baseload is still fully two thirds of total electricity consumed in SA. Baseload generation absolutely dominates total generation just about everywhere, indeed SA with its roughly 65% (of all electricity generated) figure is incredibly low by world standards due to it having one of the world's peakiest electricity demands.

Practial baseload in Queensland or Tasmania, for example, is 80% of all electricity generated. Even moreso in Tassie during Summer, when it's close to 90% since there's simply no such thing as a peak at that time of year in Tas and not a lot of daily variation overall (very different during Winter though).

Simple maths explains this. If you have 1000 MW going constantly, plus another 3000 MW on top of that which is variable but only averages about 500 MW, then the constant 1000 MW load is by definition the majority (two thirds in this case) of total production over the year. That's where most of the generation actually occurs and it's where most of the fuel is burnt. Obviously I've rounded these figures but they're close to the actual.

"Intermediate" or "shoulder" means that variation in demand above baseload which is routine, generally every business day. It is generally supplied from natural flow hydro, pumped storage, gas or older (higher operating cost) coal-fired plant. Gas, natural flow hydro and coal are the predominant means in Australia, with gas the predominant means in SA.

"peak" is the generation / demand that doesn't happen very often and is generally influenced by seasonal factors such as air-conditioning or heating loads. It is most commonly supplied from natural flow hydro, gas, oil or pumped storage with gas, natural hydro and pumped storage being predominant in Australia although we do use some oil at true extremes of demand. Whilst some peaking generation will operate regularly, it is very unusual to actually need to run all of it - if it happens then either it's well over 40 degrees, there's snow on the ground or other power stations have broken down.

Following relates to demand rather than generation. I'm posting this to illustrate the overall extent of the market.

In South Australia there's a bit over 1000 MW (1 GW) baseload and about 500 MW intermediate load that occurs most days. Plus another 2500 MW peak load that only occurs when it's either hot (common in SA) or on a lesser scale when it's very cold.

Certainly it's possible to send energy from SA to another state (in practice Victoria) but the capacity of present transmission infrastructure is limited. Usable capacity is influenced by a lot of circumstances, but 420 MW is the realistic limit under present arrangements (unless more infrastructure is built etc).

So if 1000 MW is added to SA generation capacity then to a very large extent it simply displaces existing generation. Sure, we do need to add more capacity incrementally as peak loads increase, but I very much doubt that LNC would be intending peak load operation given the nature of their proposed plant.

I am not saying there is anything "wrong" with LNC building a 1000 MW power station in SA. But to be adding that much capacity and selling it at 17 cents / kWh just isn't going to happen when you realise that existing power stations have ongoing operating costs under one fifth that price.

I just can't see any realistic scenario of prices averaging 17 cents per kWh over the long term unless we're talking about some sort of natural disaster wiping out power stations etc or taxation. If prices did go that high, every man and his dog will be rushing to build a wind farm at half that cost. Likewise we'll see an exodus of energy-intensive industry, the economy fall in a hole and so on.

Average electricity prices for 2009-10 financial year to date as follows. All prices are in cents per kWh.

SA 6.023, Vic 3.188, NSW 5.250, Tas 2.629, Qld 3.845

Average for 2008-09 financial year:
SA 5.098, Vic 4.182, NSW 3.885, Tas 5.848, Qld 3.400

Average for 2007-08 financial year:
SA 7.350, Vic 4.679, NSW 4.166, Tas 5.468, Qld 5.234

Average for 2006-07 financial year:
SA 5.161, Vic 5.480, NSW 5.872, Tas 4.956, Qld 5.214

Average for 2005-06 financial year:
SA 3.776, Vic 3.247, NSW 3.724, Tas 5.676, Qld 2.812

 

[Smurf1976]

Actual data from the week 24th to 30th January inclusive from AEMO.

NSW - baseload for the week was 71.4% of average load (total generation).

Qld - 74.2%

SA - 67.9%

Vic - 75.1%

Tas - 84.6%

These figures are quite simply the % of total load that is accounted for by constant running at the minimum load level for the week. Now, you build power stations based on the long term not just one week, but they are representative of the situation.

These figures won't change at all with a change of generation technology since they are a function of the load, not the means of generation. If minimum load in the middle of the night (baseload) is 80% of average load then it is 80% of average load no matter what sort of generation you are using.

As for prices, in SA they averaged 2.609 cents per kWh for the week with a range of 5.707 down to -1.052 (yes, prices do go negative at times due to power stations wanting to avoid shutdown costs).

As I said, I'm not against the LNC project at all and I'm a holder of LNC shares. But to base any assumption on an electricity price of 17 cents per kWh is effectively speculation over inflation rather than something which can be achieved right now.

 

[Dukey]

I won't enter a personal debate and will simply post some facts from which people can draw their own conclusions. I am a long term holder of LNC by the way.

If you run any power station, regardless of technology or size, on a 24/7/365 basis (apart from maintenance shutdowns, breakdowns etc) then you will necessarily receive the time-weighted (not volume-weighted) average electricity price for your production. That applies whether it's coal, natural gas, nuclear or any other constant (baseload) source of electricity.

"Baseload" simply means that generation / consumption which is constant, effectively the minimum load on the system that is routinely reached. The type of generating plant generally used for such applications is that with the lowest operating cost which, in general, also means a high capital cost. It also includes any plant with inflexibility in operation that doesn't facilitate rapid changes in load. So nuclear and coal plants are commonly used for baseload operation - they are cheap to run, expensive to build and not well suited to rapid changes in output.

Even taking baseload as only 1000MW (versus the 4000MW peak loading on the system) in SA then baseload is still fully two thirds of total electricity consumed in SA. Baseload generation absolutely dominates total generation just about everywhere, indeed SA with its roughly 65% (of all electricity generated) figure is incredibly low by world standards due to it having one of the world's peakiest electricity demands.

Practial baseload in Queensland or Tasmania, for example, is 80% of all electricity generated. Even moreso in Tassie during Summer, when it's close to 90% since there's simply no such thing as a peak at that time of year in Tas and not a lot of daily variation overall (very different during Winter though).

Simple maths explains this. If you have 1000 MW going constantly, plus another 3000 MW on top of that which is variable but only averages about 500 MW, then the constant 1000 MW load is by definition the majority (two thirds in this case) of total production over the year. That's where most of the generation actually occurs and it's where most of the fuel is burnt. Obviously I've rounded these figures but they're close to the actual.

"Intermediate" or "shoulder" means that variation in demand above baseload which is routine, generally every business day. It is generally supplied from natural flow hydro, pumped storage, gas or older (higher operating cost) coal-fired plant. Gas, natural flow hydro and coal are the predominant means in Australia, with gas the predominant means in SA.

"peak" is the generation / demand that doesn't happen very often and is generally influenced by seasonal factors such as air-conditioning or heating loads. It is most commonly supplied from natural flow hydro, gas, oil or pumped storage with gas, natural hydro and pumped storage being predominant in Australia although we do use some oil at true extremes of demand. Whilst some peaking generation will operate regularly, it is very unusual to actually need to run all of it - if it happens then either it's well over 40 degrees, there's snow on the ground or other power stations have broken down.

Following relates to demand rather than generation. I'm posting this to illustrate the overall extent of the market.

In South Australia there's a bit over 1000 MW (1 GW) baseload and about 500 MW intermediate load that occurs most days. Plus another 2500 MW peak load that only occurs when it's either hot (common in SA) or on a lesser scale when it's very cold.

Certainly it's possible to send energy from SA to another state (in practice Victoria) but the capacity of present transmission infrastructure is limited. Usable capacity is influenced by a lot of circumstances, but 420 MW is the realistic limit under present arrangements (unless more infrastructure is built etc).

So if 1000 MW is added to SA generation capacity then to a very large extent it simply displaces existing generation. Sure, we do need to add more capacity incrementally as peak loads increase, but I very much doubt that LNC would be intending peak load operation given the nature of their proposed plant.

I am not saying there is anything "wrong" with LNC building a 1000 MW power station in SA. But to be adding that much capacity and selling it at 17 cents / kWh just isn't going to happen when you realise that existing power stations have ongoing operating costs under one fifth that price.

I just can't see any realistic scenario of prices averaging 17 cents per kWh over the long term unless we're talking about some sort of natural disaster wiping out power stations etc or taxation. If prices did go that high, every man and his dog will be rushing to build a wind farm at half that cost. Likewise we'll see an exodus of energy-intensive industry, the economy fall in a hole and so on.

Average electricity prices for 2009-10 financial year to date as follows. All prices are in cents per kWh.

SA 6.023, Vic 3.188, NSW 5.250, Tas 2.629, Qld 3.845

Average for 2008-09 financial year:
SA 5.098, Vic 4.182, NSW 3.885, Tas 5.848, Qld 3.400

Average for 2007-08 financial year:
SA 7.350, Vic 4.679, NSW 4.166, Tas 5.468, Qld 5.234

Average for 2006-07 financial year:
SA 5.161, Vic 5.480, NSW 5.872, Tas 4.956, Qld 5.214

Average for 2005-06 financial year:
SA 3.776, Vic 3.247, NSW 3.724, Tas 5.676, Qld 2.812

Smurf - as you know,I have a passing interest in this topic... do you know what might account for the large variations in av price in Qld particularly and other states to a lesser extent in the figures you posted above. 05-06 = 2.6c ; 07-08 up to 5.2c/kWh.... seems a huge variation?

 

[Smurf1976]

do you know what might account for the large variations in av price in Qld particularly and other states to a lesser extent in the figures you posted above. 05-06 = 2.6c ; 07-08 up to 5.2c/kWh.... seems a huge variation?

The prices I posted were averages for the year. The electricity market itself sets a new price every 30 minutes based on trading and those prices can and do vary hugely. The absolute limits are -$1 to +$10 per kWh, either of which is extreme.

Main reasons, apart from normal supply and demand economics which affects electricity as it does every other industry, for the recent variations relate to coal prices and the drought (which affects coal-fired generation as well as hydro).

Qld in recent years there have been actual cuts in coal-fired output due to the drought. Units were actually shut down completely due to limited water availability. It's been a very real threat in NSW and Vic too. Meanwhile those states as well as Tasmania have suffered reduced inflows to hydro-electric schemes.

If you have a physical constraint on plant operation (in this case water) then you still need to be able to maintain production at times of peak demand (otherwise the lights will go out...). So what happens is that such plants offer higher prices, deliberately trying to price themselves out of the market so as to conserve remaining water for use when prices are at very high levels.

Now, when you get that happening at the same time in Tasmania, Queensland and to some extent NSW, meanwhile there's a hydro plant in Vic with literally no water at all, then it comes down largely to supply and demand. Consumption is unchanged but there is less competition to supply it and so prices go up. All of a sudden, generators are no longer focused only on costs but also have to deal with a physical limit on operation - hence they'll try to only sell at high prices and let someone else gain market share at other times.

Hydro generation deals with that all the time but it's not normal with coal or gas to be limited in operation. But certainly with hydro, the price the generation is offered for is basically set with reference to expected market prices so as to achieve pre-determined water release volumes over a given period. You only have a limited resource, and hydro plant can stop and start very quickly. So you try and sell that water at the best (electricity) price you can get. But bring a flood and then you just run 24/7 (otherwise the dams will overflow) and take whatever price you can get...

Also there are different costs of production from different sources. Gas-fired generation, for example, can't possibly offer competitive prices at off-peak times since operating costs are much higher with gas than with coal. But if the market is tight then there's not much choice - during the height of the drought there were a few gas-fired peaking plants running all day.

It's very common that spot prices sit around the marginal cost of either a particular large power station or a generic technology type. Off-peak prices often hover around the marginal cost of generation from black coal in NSW and Qld. Intermediate prices often hover around the marginal cost of generation from gas in SA and Vic. Peak prices, expecially during Winter evenings, often top out at about the cost of running kero/diesel generation.

And on top of all that, good old supply and demand both legitimate and through gaming the market. The former is pretty simple - if demand is high and supply is tight and you own a large power station then, even at risk of losing some volume, you can hike prices to ridiculous levels.

Gaming is a bit different and is basically an exploitation of the technical limits of rival generating companies. You offer a low price, possibly even negative, and force others off-line (generally a financial decision rather than technical) when demand is low and price forecasts for the next few days are also low. Then when that's done, you just wait until demand is near its' daily peak and suddenly revise all your pricing to ridiculous levels knowing that rivals can't possibly ramp up production quickly. Instant windfall...

There's a lot of differnt approaches to this gaming of the market but a very key one is mainaining the impression of you being a danger to rivals, someone who can send the price wherever they like but in a manner that nobody can predict. Beyond that, there's lots of actual strategies going on. Selling forward large volumes during high price periods, then using your own production to crash the market at those times so as to cover what is effectively a short position, is another one that comes to mind. Lots of games in this industry...

 

[basilio]

Really, really fascinating stuff Smurf... I sort of knew a bit about how the power industry worked but your explanations are very scary in their implications.

The clearest point is that one of the most vital industries our country has is largely a big poker game. Trying to bluff competitors with tactics, tricks whatever.

Another critical issue is just how water dependent our supply system is. I think this fact has been overlooked in many discussions but the amount of water that power companies require is a huge factor in the resource costs we currently face to keep our society going. And as water supplies tighten even further with global warming and population growth this can only get dramatically worse.( That factor alone should be a significant element in the opportunity for AFC's fuel cell.)

Also noticed the difference between actual production costs and what the punter pays. Certainly tells us about how profitable this system is for those in the middle.

This also calls into question the idea that LINC or indeed any other UCG company can simply start up a power plant and pull in heaps of dollars. I just can't see how the current players will countenance such a situation. In that context we can see the huge conflict between current self interest by companies with enormous amount of sunk capital in plant and practically free coal versus disruptive new technologies that are clean, produce valuable by products and are seemingly quite cost competitive.

On current indications the planet and the people will go to hell before the power companies let go of their positions...

This possibly means that in the current situation the original GTL market still makes the most sense for LINC. There will be a rapidly rising demand for diesel as oil supplies slump and there will be no way entry into market will be as controlled.

________________________________________________________________

But a big question remains.. Given the structure of the power industry, how on earth will we ever reorient our electricity generation system to pollution free technologies at the speed required to half tackle global warming? And does any government have the wit and the courage to recognise the situation and do whatever it takes to give us a chance of survival?

 

[Smurf1976]

Some practical examples.

Let's say that I own a small (50MW) diesel-fired gas turbine plant (there are a few significant diesel plants in the market, primarily in SA and Qld but also NSW).

Now, my 50MW plant (located anywhere on the main grid) is too small to meaningfully alter market prices except on rare occasions. So what I'll do is simply offer my production to the market at any price that is above my operating cost (primarily fuel given that diesel is a relatively expensive means of generation). My plant will sit idle almost all the time, but it will be running flat out during price spikes and the average price I receive will be well above the 5 cents or so average market price. I might average 50c or even $1, versus fuel costs of 25c, but I'll produce very little power over the year. All my profit will be made in just a few hours each year. If we don't get any really hot days in Summer or other things (eg breakdowns at major power stations) sending prices up, the plant could sit idle for months.

...

Now for a 300 MW gas-fired open cycle (intermediate, peaking) plant in Qld, NSW, Vic or SA. At this level there will be times I can affect the market price and I will make my offers accordingly. But other times there will be too much competition at around the same price for me to have any pricing power - take it or leave it.

So I'd offer a bit above marginal operating cost most of the time (which will mean the plant sits idle since coal and gas combined cycle are cheaper) but I could reasonably expect my plant to run fairly often during Summer and again during mid-Winter. I'll get an average price that's a bit above the average in the market, perhaps around 8 cents over the long term. If the market gets tight enough, I'll put my prices up to very high levels to take advantage of it - but I won't be able to do that very often with only 300 MW.

...

Now for a 2500 MW coal-fired plant in Victoria.

In short, all I have to do is routinely offer my minimum technically viable output (around 1500 MW assuming it's brown coal being used) at a price that keeps the plant running efficiently - I'll literally pay the market to take it if need be since I don't want the plant shut down thus missing higher prices and costing a fortune to restart.

But if I have 2500 MW then quite often my power will genuinely be needed, I've got 25% of the entire state's generating capacity after all. And the moment it does get tight, you're going to pay, pay and pay again - I'll charge whatever I like up to the cap ($10 per kWh) even if that means I lose a bit of volume. Heck, I'll even create a few mysterious technical problems that just happen to always occur at times of high demand and force my output down if I need to in order to create a tight market. If I get really brave, I'll just dump steam straight into the condenser (total waste of fuel burned) in order to get output down below normal minimums (it's the boilers that need to keep running at fairly high output). And if anyone gets too keen on competing, well with cery cheap coal I can always offer very low prices and just run flat out, thus keeping prices low.

These are all hypothetical power plants, but they are based on what really does happen in practice.

Personally I'm not at all keen on this system of running the power industry since it does directly lead to inefficient use of resources and higher CO2 emissions than would otherwise occur. Also it's seen market prices averaging higher than they really needed to - you can build new baseload generation in Australia for no more than 4 cents per kWh using black coal or gas.

But it's the system we've got...

Look at the situation in Tasmania right at this moment. 37% of load being supplied from Victoria where the price is just 2.458 cents. No way could we build new generation in Tas for that price, so with hydro storages at just 40% it makes sense to buy as much as we can get when it's that cheap rather than building something new here.

Overall, the fundamental characteristic of the market nationally is of low prices (below long term cost of production) the vast majority of the time but with the occasional spike to very high levels bringing in the $ to the generation industry. It works very nicely if you just want cheap baseload power that might be interrupted (by cost) every now and then - exactly what Tasmania is doing in preference to building more generation locally since with a storage based hydro system, that the cheap supply from Vic is intermittent doesn't matter at all. It's all system yield no matter when and how it arrives.

As for LNC, fundametally their competitive edge is in gas production, not electricity or even diesel per se. They seem to have a cheap means of getting gas, that is their competitive edge. Anyone can buy natural gas and produce diesel or electricity with it, but if LNC gan produce their own syngas and do it cheaply then that's where their advantage is. Long term, I can see them selling syngas via pipeline direct to major industry etc too.

One obvious point is that if LNC can supply combustible gas at significantly below the price of natural gas, then there will be plenty of existing large natural gas consumers wanting to switch. Sure, a pipeline network will need to be built, but the demand would surely be there.

So should LNC go into the power industry? If they can do it profitably then why not? But the decision should be based on market pricing and costs of their competitors, not speculation that we're about to see prices more than triple when there is no fundamental reason why they ought to (unless LNC knows something the rest of the industry doesn't...).

Oil is a bit different, there are fundamental reasons for prices to trend upwards assuming global demand does rise and there are no major surprise discoveries. But even there, I doubt that LNC would be assuming an oil price several times higher than that at present - it would be an outright gamble to build the plant if it's only viable at $300 per barrel or something like that.

 

[Dukey]

certainly is interesting smurf... seems crazy! has this situation only come about since privatisation of the old state Electrical companies... or was it like that before?

Basilio has a good point about how can smaller CSG/UCG gas fired elec producers fit into this game played by the big boys... apart from simply being eaten by them (ie taken over/bought out) or partnering - supply agreements etc?

=======
EDIT: looks like you already may have answered.

 

[Coal Face]

Some good replies to my posts from yesterday, but questions still remain so lets ad it all up:

Australia:
1) has huge CO2 emissions, 90% of it comes from coal power
2) will do everything possible to cut those CO2 emissions before the whole country is frying
3) has increasing power needs
4) needs to preserve/increase water
5) has an increasing population
6) in Queensland, plans to ban any new 'dirty coal' plants
7) unlikely to be able to build any new nuclear power plants for 30 years

Coal Power:
1) must be done with CCS
2) must have nearly if not zero emissions to be accepted by the people
3) uses 2.2Bn gallons of water per annum for a 500MW plant(plus mining water)
4) loses 25% of its efficiency when CCS is added
5) increases water usage by 23% when CCS is added
6) IGCC Capital costs are estimated at about US$3,300/kW.
7) overall system efficiency of coal+IGCC is only 35% to 38%
8) many coal power stations cannot have CCS retrofitted
9) the cost of retrofit on many other coal power stations is inhibitive
10 coal power with CCS added is not clean at all
11) power prices will have to rise dramatically to pay for CO2 reduction measures because the carbon price wont get close to mitigating it until at least 2030


AFC Fuel Cells
1) Produce 2.5Bn litres of water for 1GW of power
2) already provide 99% CCS as part of the process
3) do not lose efficiency with CCS added as it's already in the loop
4) do not need more water when CCS is added as it's already in the loop
5) can supply pure water for the UCG steam injection resulting in no draw on local/regional water supplies for the UCG/GTL plant
6) offer 60%+ system efficiency, rising with fuel cell electrode development
7) Payback in 2 years with a 10-13 year lifespan
8) Under ESCO the power station is profitable from the outset

Conclusions
1) Australia has stopped or will stop building dirty coal power stations
2) Australia will bring in CO2 emissions legislation that many coal power staions can never be brought in line with, so they will have to shut down and be replaced by new clean power
3) Australia will decommission all dirty coal power stations(rather than add CCS) and replace them with clean/renewables power stations, so as to reduce CO2 emissions to the max
4) Australia will give high subsidies to renewable/green/clean power such as that coming from Linc via fuel cells so as to increase the rate of change to CO2 reduction
4) electric prices will have to rise to pay for the new low-CO2 power and people will have to live with it(pay up or burn up)
5) AFC fuel cells offer the highest CO2 capture, the least water use, the highest efficiency, the lowest environmental impact, this is why Linc will use them and they will be able to say "we have the cleanest coal power on earth and it's highly profitable".


QUEENSLAND will ban new coal-fired power stations except for those that can be fitted with clean coal technology.
The move institutionalises the technology in the nation's major coal-producing state.

The biggest loser in Queensland from an emissions trading scheme may be the state government, as it owns every coal-fired power station in the state.
Some are old, such as the Swanbank plant near Brisbane, which was built in 1972 and may have to be replaced if a strict emissions regime is introduced.

"Unfortunately there are a number of power stations already existing in Queensland, including some owned by the government, which were built many years ago before our understanding of what CO2 emissions were doing to the climate, which will be very difficult, in some cases to the point of impossibility, to retrofit," Ms Bligh said.

State miners welcomed the move, with Queensland Resources Council chief Michael Roche saying the main challenge facing the industry was to implement clean coal technology.
theaustralian.com.au/business/news/queensland-to-clean-up-coal-fired-power/story-e6frg90f-1225764557523


CLEAN coal power stations are not viable until the carbon price reaches a minimum of $60 a tonne - a level the Australian government does not anticipate until almost 2030 - according to an audit by the Rudd government's own global carbon capture and storage institute.

Coal power plants are among the other 55 planned commercial scale projects.
But the report finds that the cheapest CCS technology - oxyfuel combustion - only becomes viable at a carbon price of about $60 a tonne. Another technology, integrated gasification combined cycle, becomes viable at about $80 a tonne and a third - natural gas combined cycle - at about $112 a tonne.
theaustralian.com.au/business/news/clean-coal-strategy-not-viable-for-20-years/story-e6frg90f-1225792279353


[FONT=Arial,Helvetica,Geneva,Verdana,SunSans-Regular]A typical 500-megawatt coal-fired power plant draws about 2.2 billion gallons of water each year from nearby water bodies, such as lakes, rivers, or oceans, to create steam for turning its turbines. This is enough water to support a city of approximately 250,000 people.[/FONT]

[FONT=Arial,Helvetica,Geneva,Verdana,SunSans-Regular]When this water is drawn into the power plant, 21 million fish eggs, fish larvae, and juvenile fish may also come along with it -- and that's the average for a single species in just one year. In addition, EPA estimates that up to 1.5 million adult fish a year may become trapped against the intake structures. Many of these fish are injured or die in the process.[/FONT]
ucsusa.org/clean_energy/coalvswind/c02b.html


Fact cheet on clean coal and IGCC
energyjustice.net/coal/igcc/factsheet.pdf

 

[Smurf1976]

certainly is interesting smurf... seems crazy! has this situation only come about since privatisation of the old state Electrical companies... or was it like that before?

It's an outcome caused by the nature of the market rather than who owns the power stations (though it wouldn't happen if there was only one owner either public or private).

If you want maximum efficiency then you prioritise operation according to that objective. That was the way just about every electric utility in the world used to do it - maximise use of the most efficient plant they had, minimise use of the oldest and least efficient.

Then it all changed and it all became about money. Now we end up running old open cycle gas turbines whilst new combined cycle units (with literally half the CO2 emissions) within walking distance sit idle. That's not sensible, but it's how the game works. Even worse when plant is deliberately run inefficiently to reduce output so as to force higher cost plant online and prices up. At the extreme, that's a 100% waste of the fuel being burned in those less efficient plants at the time.

Worth noting that Qld and NSW both now have average emission levels (per unit of output) that are above what could be achieved using 100% coal-fired generation, from the actual plants those states have, if they were simply operated at maximum efficiency. And yet we've got Swanbank E, Yabulu etc (gas) and the Snowy Hydro in those states.

Bottom line is that if you want maximum technical efficiency and minimum fuel use then you have to run the power plants as a team to meet total system load, not in competition with each other based on fictional pricing. Sure, compete based on actual costs by all means, that's only sensible. But this competing based on fictional pricing that changes all the time means we end up running inefficient plants flat out while efficient ones dump steam due to lack of load and everything is operated less efficiently with regular operating changes every time the fictional prices change.

Trouble is, you actually do need that flexible market if energy-constrained generation like hydro and wind is to be integrated into it. But it doesn't work for coal and gas.

Ultimately, it's another example of sound engineering abandoned in favour of something the bankers can play with in order to shuffle money about.

 

[Coal Face]

Conference date

5th-annual-coal-to-liquids-and-gas-to-liquids-conference

Tuesday 16th February 2010


12.20

The progress of UCG to GTL: Growth & potential

• Linc's commercial path in SA and the United States
• Linc Project updates
• Opportunities and development challenges
• Case studies in Australia and overseas

Justyn Peters, General Manager, Government and Environmental Affairs, Linc Energy

http://www.iir.com.au/informa-confe...s-and-gas-to-liquids-conference-P10R06/agenda


Interesting to note that Liberty Resources are also looking at Hydrogen energy, I wonder if Linc might operate a fuel cell power station for Liberty, as Linc do have exclusivity to AFC fuel cells for 2 years(they can extend this to perpetuity).

4.30

Creating cleaner energy - Hydrogen fuel and other options

• UCG to Hydrogen energy
• Transport fuels
• Transporting energy from production to market

Peter Sallans, General Manager UCG, Liberty Resources