Steam Pricing : Site Utility Systems

Lecture 14
Steam Pricing*
*Smith R and Varbanov P, July 2005, Chem Eng Progr, 29-33.

L14 - 1
Utility Systems (v3.0)
Site utility systems
POWER
Fuel
Air
Fuel
COND
HIGH PRESS
MED. PRESS
LOW
Fuel
Fuel
PROCESS A
PROCESS B
PROCESS C
COOLING WATER
REFRIGERATION
Realistic steam prices are necessary...

L14 - 2
PRESS
Why is a steam price needed?

Steam
Process
A
Power
Steam
Process
B
Power
:
:
:
Site utility system
(steam cost for Process A)
(steam cost for Process B)
Costs for the provision of heat and power to be allocated

to the different business on the site
L14 - 3
Why is a steam price needed? (continued)

Site Process
Site utility system
HP steam
VHP
T1
QP
T2
HP
T3
MP
LP
HP steam
Saving of QP
It saves steam,
BUT
how much money?
Surplus of QP
An economic basis is required to assess changes to the

steam system.
L14 - 4
Why is a steam price needed? (continued)
Steam
Utility company
Process
A
Power
Purchase
from the 3rd party
Straightforward. But, is the price fair ?

The purchaser should be in position to assess this.
L14 - 5
Complexities of Steam Pricing
VHP
Fuel
T1
T2
HP
MP
Power
LP
Power tariffs usually vary

with day, week and/or
season.
Fuel tariffs vary with the
season.
L14 - 6
Different cost implications for each path

Minimise cost ? Maximise power ?
Many structural options
Complex configurational interactions
How do we set a price for steam ?

Let us look at simple method first.
L14 - 7
Simple Enthalpy-based Method

Cost of High Pressure Steam
Fuel1
GT
Fuel2
Fuel3
HRSG
Boiler
m1
COSTHP =
m2
HP
L14 - 8
3 (fuel cost)i
3mi
< As a first approximiation,

take the cost of the fuel for
the HP steam generation
< Other costs can be
included: power for steam
generation, costs for water
and treatment chemicals,
labour costs, etc.
Simple Enthalpy-based Method (cont)

Cost of Low Pressure Steam
f1
GT
f2
HRSG
f3
Boiler
m1
m2
hHP
HP
hLP
LP
COSTLP = COSTHP ( hHP hLP )

i
L14 - 9
(fuel
cos t )i
fi NCVi
Simple Enthalpy-based Method (cont)

Steam pricing based on enthalpy difference is only reasonable
when power generation is not economic or required. (e.g. small
systems)
There exists significant potential for power generation in utility

systems.
< Energy extracted from steam as power is usually more expensive than heat.
Steam pricing must recognize the potential for high pressure steam
to generate power in the utility systems !!
L14 - 10
Consideration of Power Generation
HRSG Boiler
GT
HP
Power generation can be

estimated using isentropic
efficiency model
T1
LP
COSTLP = COSTHP - PROFITPOWER GENERATED
?
L14 - 11
When power generation is estimated from simple

model or structure...
Configurations
T1
T1
T1
T2
......
T1
Performance of steam turbine
<
<
<
<
0.85
0.42
W min
W max
W (MW)
Nonlinear efficiency trend

Full load vs. Part load ?
Existing vs. New equipment ?
Constraints
(e.g. min. and max. Flowrate)
Still power generation has not been properly reflected

in steam pricing....
L14 - 12
A more fundamental approach is needed.
Modelling and Optimisation of Utility Systems
L14 - 13
Modelling and Optimisation of Utility Systems

First, a simulation model is required to analyse a utility
systems. The model should be able to:
< consider part-load performance of equipment
< simulate the complete mass and energy balance
< predict power generation, fuel requirements, water requirements,
etc, for any condition
< consider the operating constraints
Optimisation of utility systems
L14 - 14
A fundamental approach (modelling and

optimisation of utility systems) is now applied.
Case 1:
Setting steam prices for fixed process loads
L14 - 15

Step 1: Optimise for the current demands
HRSG
Boiler
HRSG
Boiler
Optimisation
- Current demands
- Current flows
L14 - 16
allows economics
to be evaluated
more precisely
in the next steps...
- Current demands
- Optimal flows

Step 2: Obtain the amount of power generated
HRSG
Boiler
VHP
POWERVHP-HP
HP
POWERHP-MP
MP
POWERMP-LP
LP
Optimised site utility system
L14 - 17
calculated from optimisation

Step 3: Steam pricing for each steam level
HRSG
Boiler
VHP
3 (fuel cost)i
3mi
HP
COSTHP = COSTVHP - PROFIT power VHP-HP
MP
COSTMP = COSTHP - PROFIT power HP-MP
LP
COSTLP = COSTMP - PROFIT power MP-LP
Optimised site utility system
L14 - 18
COSTVHP =
< Now cost incorporates the

performance data and
constraints associated with
acutal system, rather than
some idealised model.
Case Study
Initial settings for the utility system
Natural Gas
Fuel Oil
Coal
Current: 200.0
Min: 50
Max: 250
Boiler 1
Current: 99.8
Min: 40
Max: 180
Boiler 2
Current: 209.5
Min:
115.0
Max:
335.0
T4
Current : 44.0
Min:
15.0
Max:
75.0
2.0 t/h
LP Vent
HRSG
Current:
25.6
VHP (101 bara, 530EC)
Current : 95.9
Min:
60.0
Max:
165.0
Current : 51.9
Min:
30.0
Max:
90.0
GT
18 MW
20.0
T6
0.0
HP (41bara)
Current: 35.5
Min:
15.0
Max:
65.0
T5
54.5
5.0
MP (15 bara)
Current : 20.0
Min:
20.0
Max:
20.0
T7
Current : 65.0
Min:
40.0 CW
Max:
75.0
L14 - 19
55.9
Current: 65.0
Min:
30.0
Max:
70.0
0.073 bara
Current: 109.0
Min:
60.0
Max:
150.0
1.0
LP (3 bara)
128.0
Flows in th-1
Case Study
Site configuration data
Fuel 1
solid (coal)
NHV [kJ/kg] 28000
Cost [$/t]
65.0
[$/kWh] 0.0084
Ambient temperature
BFW temperature
CW temperature
Site power demand
Min power Import
Max power Import
L14 - 20
EC
25
EC
110
EC
25
MW 68
MW
0
MW 50
Fuel 2
liquid (fuel oil)
40000
120.0
0.0108
Fuel 3
gaseous (natural gas)
52000
220.0
0.0152
Min power Export

Max power Export
Unit Power Cost (Import)
Unit Power Value (Export)
Unit CW Cost
MW
MW
$/kWh
$/kWh
$/kWh
0
50
0.05
0.05
0.005
Case Study
Existing steam system at its optimised conditions
Coal
Fuel Oil
Current: 250
Current: 65.0
Min: 50
Max: 250
Boiler 1
Current :105.0
Min:
60.0
Max:
165.0
Natual Gas
Min: 40
Max: 180
Boiler 2
HRSG
Current:
25.5. t/h

Current: 215.5
Min:
115.0
Max:
335.0
T4
Current : 15.0
Min:
15.0
Max:
75.0
T6
20.0
0.0
HP (41 bara)
Current : 90.0
Min:
30.0
Max:
90.0
Current: 59.5
Min:
15.0
Max:
65.0
T5
54.5
0.0
MP (15 bara)
Current : 20.0
Min:
20.0
Max:
20.0
7.1
GT
18 MW
LP Vent
Current: 40.9
Min:
30.0
Max:
70.0
T7
Current : 75.0
Min:
40.0 CW
Max:
75.0
Current: 115.1
Min:
60.0
150.0
55.9
0.0
LP (3 bara)
128.0
0.073 baraMax:
Flows in th-1
L14 - 21
Case Study
Steam prices
Priced based on
ideal steam turbines*
Priced based on
actual steam turbines
Base case Optimised
Base case Optimised
Steam
Level
Priced based
on Enthalpy
difference
VHP
8.32
8.32
7.94
8.32
7.94
HP
7.78
5.17
4.78
5.78
5.32
MP
7.26
2.21
1.83
3.34
2.61
LP
6.54
-1.47
-1.86
0.17
-0.55
Negative steam cost can happen if fuel is

relatively cheap and/or power is relatively
expensive.
(Cost in $/t)
*An isentropic efficiency steam turbine model is used, assuming 85% isentropic efficiency and 95%
machine efficiency.
L14 - 22
Steam Pricing
Case 2:
Setting steam prices for changes in steam load
A project for reduction in energy demand
< e.g. retrofit of a heat exchanger network for increased heat recovery
A project involving an increase in heat demand as a result of

commissioning of new plant or expansion of an existing plant.
L14 - 23
Implications of energy (steam) reduction

Let us suppose the decrease in HP steam demand from the process
Retrofit
HP Steam
HP Steam
VHP
T1
QP
T2
HP
T3
MP
LP
Surplus of QP
L14 - 24
Impies that, if all other process

steam loads are constant, and
boiler load unchanged, there is a
surplus amount of Qp steam
available in the utility system
What can we do with surplus QP ?
Fuel
saving
Save it
(reduce
boiler load)
Heat
surplus
(Qp)
Use Qp
more efficiently
L14 - 25
Extra
power
What are the effects on the utility system of saving

Qp amount of surplus steam?
Boiler load
reduced
Boiler
VHP
T1
QP
W
reduced
T2
W
reduced
HP
Reduce HP steam
required by process
Reducing HP steam use

in a process can either;
Reduce power produced from
T1 and boiler steam load
OR
Reduce power produced from
T2 and boiler steam load
So, saving steam will result in power penalty as reduced flow through turbines.
May need to import power to make up deficit.
L14 - 26
Alternatively, how do we use the heat surplus more

efficiently?
Boiler
VHP
T1 W
T2
reduced
Reduce HP T3 W
steam use
increased
QP
W
increased
HP
MP
LP
CW
Reduce HP steam use in process

Reduce power produced by turbine T1
DO NOT reduce boiler steam load, BUT
Pass boiler steam through turbine T2 and T3 to produce additional power
L14 - 27
How do we set a price of steam for changes

in steam loads?
VHP
T1
QP
T2
Different options
HP
T3
MP
LP
CW
Different cost
implications
Steam costs obtained from the model for the existing steam
loads cannot be used to provide steam costs for an increase or
decrease of steam demands.
L14 - 28
Marginal Cost is used as an indicator for

steam pricing
Marginal Cost
Pr Header
Cost
=
m Header
! )Cost: change in the site cost

(operating)
! )mHeader: change in the header
mass balance
! Pr Header: Marginal price of steam in
such a header
Marginal steam price is related to steam flows.

The steam balance of a header may be changed by:
< Increase / Decrease in process steam demand
< Increase / Decrease in process steam generation
< Switch a process demand from one steam main to another
< Change in the utility system, e.g. shutdown of a boiler, steam turbine, etc.
L14 - 29
Stepwise Optimisation Procedure

START
Optimise the operation under current process
steam demands
For each header:

Calculate marginal price of steam Pr(hdr)
For the header with highest Pr(hdr):
Decrease process steam demand
until change in marginal price or constraint
YES
Further demand
decrease possible
?
NO
END
L14 - 30
Allows true steam

prices to be
obtained
Implicitly
determines the
most beneficial path
trade-offs
Exhaust the path
capacity / limitation
Case Study Revisited

GT
Boiler 1
Boiler 2
HRSG

20.0
T6
T4
HP (41bara)
54.5
T5
MP (15 bara)
55.9
T7
LP Vent
LP (3 bara)
128.0
CW
Now the steam loads on the various steam headers

are varied.
L14 - 31
Marginal Steam Prices for the Case Study

Marginal Cost ($@t-1)
MP Steam
HP Steam
Saving LP steam has no

value.
10
8
6
Step change:
4
2
0
0
20
40
60
Steam Savings (t@h-1)
L14 - 32
80
Further saving in steam

along the path in the utility
system is restricted by a
constraint, typically a lower
bound on a flowrate.
Indications for potential
modifications to the utility
system
Marginal Steam Prices for Changes in

Process Steam Loads
When the process steam load changes, the cost of steam
depends on:
< the costs for fuel and power
< the utility configuration
< equipment performance
< the constraints within the utility system
Steam savings in pricing does not represent the feasibility of

steam saving within the processes.
< The results can be used for What if analysis.
(i.e. What would be the economic consequences of eventual steam savings
in processes?)
Marginal steam pricing provides a strategy for energy

conservation on the site without modification to the utility system.
L14 - 33
Summary
Fundamental approach is required to allocate realistic steam

costs to an integrated utility site.
A simulation and optimisation model for the existing system is
needed to obtain:
< Steam prices for existing steam loads
< Marginal steam prices when the steam loads are changed.
L14 - 34

Steam Pricing : Site Utility Systems

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Lecture 14

*Smith R and Varbanov P, July 2005, Chem Eng Progr, 29-33.

Utility Systems (v3.0)

Site utility systems

Realistic steam prices are necessary...

Utility Systems (v3.0)

Why is a steam price needed?

Site utility system

(steam cost for Process A)

(steam cost for Process B)

Costs for the provision of heat and power to be allocated

Utility Systems (v3.0)

Why is a steam price needed? (continued)

Site utility system

An economic basis is required to assess changes to the

Utility Systems (v3.0)

Why is a steam price needed? (continued)

Straightforward. But, is the price fair ?

Utility Systems (v3.0)

Complexities of Steam Pricing

Power tariffs usually vary

Different cost implications for each path

Utility Systems (v3.0)

How do we set a price for steam ?

Utility Systems (v3.0)

Simple Enthalpy-based Method

Utility Systems (v3.0)

< As a first approximiation,

Simple Enthalpy-based Method (cont)

COSTLP = COSTHP ( hHP hLP )

Utility Systems (v3.0)

Simple Enthalpy-based Method (cont)

There exists significant potential for power generation in utility

Utility Systems (v3.0)

Consideration of Power Generation

Power generation can be

COSTLP = COSTHP - PROFITPOWER GENERATED

Utility Systems (v3.0)

When power generation is estimated from simple

Performance of steam turbine

Nonlinear efficiency trend

Still power generation has not been properly reflected

Utility Systems (v3.0)

A more fundamental approach is needed.

Modelling and Optimisation of Utility Systems

Utility Systems (v3.0)

Modelling and Optimisation of Utility Systems

Optimisation of utility systems

Utility Systems (v3.0)

A fundamental approach (modelling and

Utility Systems (v3.0)

Setting steam prices for fixed process loads

Utility Systems (v3.0)

Setting steam prices for fixed process loads

Optimised site utility system

calculated from optimisation

Utility Systems (v3.0)

Setting steam prices for fixed process loads

COSTHP = COSTVHP - PROFIT power VHP-HP

COSTMP = COSTHP - PROFIT power HP-MP

COSTLP = COSTMP - PROFIT power MP-LP

Optimised site utility system