Unlike the rest of the SEE region, Croatia possesses no coal mines that could support the operation of a larger coal-fired power plant. However, it is eager to add to its portfolio a unit of 500 MW net capacity. This unit is to be fuelled by imported fuel. There are a few drawbacks regarding this type of technology. It has a highly unfavourable environmental impact and is socially rather unacceptable. In addition, the unpredictable nature of the carbon market might also present a deal-breaker for this type of projects. On the other hand, new generation capacities are needed in order to keep pace with the demands of the electricity sector, as a major part of the thermal generation set in Croatia is unable to successfully compete on the market. Eastern Europe and the Balkans might continue to hold an important role in the future of coal power generation as there are plans to build more than 10 GW of new coal-fired generations plants. However, this data should be taken with a certain dose of reserve. First of all, European energy utilities are, for the most part, simply replacing, or planning to replace, their ageing coal-fired generation sets. Secondly, the already mentioned difficulties regarding investments in coal-fired units proved to be too challenging for a number of projects as several of them have encountered problems that led to delays or even abandonment due to technical, legal and/or financial/economic matters.
The referent scenario of Promed model practiced in Electrical faculty of Zagreb showed a rather interesting result confirming the current troubled status of electricity generation through the use of traditional sources. Expert analysis showed that the main problem of an IPP based on coal is not the obligation to purchase emission allowances, but the overall state of the electricity sector. The mentioned stagnation/drop of consumption along with the EU support to renewable energy sources resulted in a highly unfavourable situation for the thermal sector with significantly decreased electricity prices.
Taking into consideration the uncertainties regarding the referent scenario, a sensitivity market analysis has been conducted. Five major factors were taken into consideration: EUA prices, fuel costs, hydrology, demand and the impact of renewables. The analysis took into consideration a variation of EUA prices from 0-40 €/tCO2 ,fuel prices from -20% to +20%, pessimal and optimal hydrological conditions based on historical conditions, electricity consumption variation ±10% . The last of the sensitivity cases involved the use of renewable sources assuming their production from 1000 GWh to 4000 GWh, or, in other words, 6%, 11%, 17% and 22% of the annual overall Croatian consumption respectively. The coal unit is not significantly influenced by this growth and still achieves a stable dispatch. Analysis showed that the unit can also bare a heavy burden imposed by the EU ETS (even up to 40 €/tCO2) – despite the lower dispatch, higher electricity prices result in higher profits.
What the analysis pointed out is the significant dependency of the coal unit on hydrological conditions and consumption. However, in both cases, the unit’s performance was stable even under highly unfavourable conditions. On one hand, this goes to prove the necessity of new base load capacities in the Croatian electricity generation portfolio. On the other hand (and as explained in the following text), coal generation proved unfeasible under current market conditions raising concerns whether this type of technology really is the solution to the Croatian generation mix problem. One additional finding of the market analysis was the high influence of falling demand on electricity prices. Raising the demand for 5% caused the prices to soar over 10 €/MWh proving the crucial influence of demand on forming successful development strategies.
With the current market conditions considered, the presumed LCOE of the IPP on coal would equal 55.27 €/MWh. Investment, O&M, fuel and CO2 costs contribute with 34%, 9%, 43% and 14% respectively However, profits present only the difference between variable costs and the average marginal price on the market. When investment costs are added into the equation, a difference of 71.9 M€ surfaces causing the coal based unit, at present market conditions, unfeasible. For example, considering the referent scenario, if the IPP would compete on the electricity market without having a beneficial power purchase agreement (PPA), it would achieve a deficit of over 55 M€ during the course of a year. Although this does not necessarily mean that the project would generate such losses during its entire lifetime, it does reveal the current negative climate regarding this type of generation. The average marginal price is calculated to equal 41.7 €/MWh. This price reveals why a coal based IPP would have trouble achieving economic balance.
New entrant coal unit would achieve dispatch in the Croatian system even with having a LCOE higher that the marginal price. Compared to other thermal units, it would not only have much lower variable costs, its LCOE would be lower than the variable costs of most units of the Croatian thermal generation set. , transmits Serbia-energy.eu
