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On the price chain-part 3 TPP AES GALABOVO

On the price chain-part 3 TPP AES GALABOVO

Installed capacity and generation

TPP AES Galabovo, known in the past as TPP “Maritza Iztok 1” is the most efficient and clearest electricity plant with combustion of lignite coals in Bulgaria. Building the plant AES has performed the largest foreign investment up to now in the country at total value above EUR 1.3 bln.

Total installed capacity of the plant is 670 MWt, ensured by two units with 335 MWt each.
TPP AES Galabovo has been put in operation but it still does not work at full capacity. When this happens then the plant will have potential to generate 6 mln MWh annually under 90% utilization of available capacity.
For the annual period July 2011-June 2012 ( data source: Decision on availabilitybySEWRC) the plant is ready to generate (availability) 3451 thousands MWh . The planned generation is significantly less – 2133 thousands MWh. The generated electricity will be purchased by NEK and will participate in its quota for supplying the regulated market. The rest availability of 1318 thousand MWh will be purchased by ESO for cold reserve (1023 thousand MWh) and for ancillary services (295 thousand MWh).
Long-term power purchase agreement (PPA)

According to 15-year signed contract, the whole produced electricity and availability are sold to NEK. The sales are carried out at two-component fixed price. The contracted fixed prices for energy cover the variable generation cost, main are those for fuels and the price for availability cover the fixed costs of the plant plus defined rate of return.
The contracted prices for availability and energy escalate periodically according to price formulas, included in the PPA. Energy component changes mostly under fuel price impact. Availability component changes under impact of inflation and exchange rate.
The plant uses lignite coals from Mini Maritza Iztok supplied relating to long term Fuel Supply Agreement (FSA). The price of lignite coals is not under regulation however SEWRC assesses the reasonability of requests for price increase of local coals on the grounds of coal market trends.
Tariff structure and actual prices
The last published prices by SEWRC for TPP AES Galabovo has been dated since 2009 and are respectively:
·        price for energy – 40,00 BGN/MWh
·        price for availability– 64,76 BGN/MWh
Taking into consideration these prices and the pointed above quantities for energy and availability which the plant will provide to NEK and ESO, we can calculate that the whole price is BGN 148.78 per MWh. As intensive the availability is used for generation as the whole price will be lower. For instance, if we suppose that the above mentioned annual availability of 3451 thousands MWh for July 2011 –July 2012 will be used fully for electricity generation then one MWh will cost the purchaser BGN 104.78 or cheaper by around BGN 40.

At the beginning of 2013 the price of generated energy will increase due to implementation of new European emissionс trading scheme.  It requires “the polluter”, in this case TPP Galabovo, to buy allowances for all emitted GHG through particularly organized auctions. By emissions factor of 1.1 t CO2/MWh and price of 15 euro per ton CO2, the price of generated electricity will increase by 32 BGN/MWh.
The PPA will probably be updated in a proper way that the plant will be able to participate in the free electricity market. At the same time the investor’s interests have to be guaranteed through mechanism, compensating the differences between fixed and market prices (alias stranded costs).
Competitive positions

Lignite plants have chances for competitive positions in comparison with new nuclear capacities, if the following conditions are available:
–        Intensive use of availability
–        Relatively low prices of СО2 emission allowances


When talk about new gas plants the range of price electricity produced by them may vary in exclusively high spreads depending on the gas price. Therefore appropriate comparison between them and coal plants is not possible. Furthermore, such comparisons are not necessary because the lignite and potential new gas plants will operate on different regimes and on different segments of load diagram, thus they do not be subject of straight competition.

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