A Case or Two or Three For Floating Power Plants

1. Floating Power Plants: Challenges with power

In March 2011 an earthquake-generated tsunami devastated large lengths of the region’s coast. The disaster caused a meltdown at the Fukushima nuclear power plant, with Japans reaction being the shutting down of all of its nuclear reactors. Up until that time, nuclear supplied nearly one-third of the country’s electricity needs, which had to be taken over by oil and gas generation to sustain the low supply levels. Ironically, the mountainous island nation had few locations for fossil-fuel power plants that are safe against earthquakes and tsunamis, so this was not a feasible option for the country. Moreover, people don’t want to have a power station in their backyards; and backyards in Japan are small. There were clear challenges faced by the country.

Closer to home in Africa, power generation is arguably the biggest problem holding the continent back in its quest for growth and development, resulting in a vicious cycle of low investment, little public spending, poor growth, little job creation resulting a low tax base for governments to attract further investment. In general, power generation capacity in Africa is small, and with numerous problems caused by old and ageing infrastructure as well as large maintenance backlogs. These issues continually result in power supply interruptions which damage GDP and therefore hinder economic development. Part of the problem in increasing capacity is time to get power projects producing power; delays in land acquisition, approvals, environmental challenges and host of others result in low power generation capacity.

Russia, with the enormity of hinterland in the arctic regions under its possession, has been battling with the provision of power in numerous locations where large power plants are either too difficult to build, too expensive or not needed for long periods. Their main objective is the provision of power for oil and gas exploration. Other objectives include the supply of electricity and heat to the most remote regions, with the main objective of supporting growth and sustainable development.

2. Overcoming the challenges with Floating Power Plants

There are power supply issues in many parts of the world, under a host of different contexts. Floating power plants (FPP) offer a means to solve these problems, both in the first and third worlds. Placed in a marine environment, they don’t need land. They can be plugged into local grids and from the point of arrival of the FPP at the site they can provide power within weeks, far quicker than land-based power plants. By their nature, they are temporary and are highly advantageous in instances where short term demand exists. Cost-benefit analyses work in their favour, but only under very specific circumstances.

Furthermore, the demand for their services is growing. According to a new report by Market Research Future (MRFR), the global floating power plant market is projected to experience growth at a rate of 10.3% from 2017 to 2023. Factors driving the market demand include rising populations, rapid urbanization, rising demand for uninterrupted power supply, and lack of adequate lands for the construction of renewable energy plants. They estimate the market size to USD 1,7 billion by 2023. Today there are over 100 FPP’s deployed and operating around the world. The utilization rate of floating power plants is around 95% with only one or two power barges available in the global market at any one time. There is no oversupply of FPP’s, which indicates a potential for profitability from the FPP operator’s business perspective.

3. Technical aspects of Floating Power Plants

The capacity of individual ships and barges range from 45MW to 500MW. They can be run off a variety of fuels, including LNG, LPG, diesel, HFO and others, depending on the plant installed onboard. Current designs for new builds include fuels such as petcoke and nuclear fuels. This variation in fuel types makes them ideal to match fuel requirements with that of the host country. Owing to the high demand for low-cost flexibility, floating power plants are seeing a resurgence since their early days. Developments on the horizon suggest the future fleet could be far more diverse and include nuclear plants, combined cycle gas turbines, and liquefied natural gas (LNG) facilities. The use of LNG has cost advantages of other heavier fuels and emits fewer greenhouse gasses than coal and heavy oil. This is an advantage for some countries. Some FPP’s equipped with fuel storage onboard to maintain generation availability, which is arguably the most important attribute FPP’s can have. The power plant would be operated similarly to any land-based combined-cycle generating facility, with onboard operators performing similar functions. The multiple turbines, gas compressors and transformers built into the design provide a high degree of redundancy, which increases electricity availability. LNG FPP’s can be coupled with or equipped with onboard FSRU’s. FSRU’s have serval advantages over land-based regasification and storage facilities, namely faster to market, more flexible, and In most cases, more cost-efficient. Again a selection of the right piece of plant is very dependent on the client needs and the location. Small FSRU’s, suitable for the application of FPP’s are becoming more available today.

4. The Business and market for Floating Power Plants

There are several new builds currently underway, a large number of these with nuclear-generating capability. China and Russia seem to be leading the way on the nuclear front. New builds with fossil fuel generators are fewer. In June 2019, Kawasaki obtained approval in principle from DNV GL a newly developed LNG floating power plant based on its 2018 “Gas Power Plant” rules. Chiyoda is currently offering LNG powered floating plants in the small scale range using Gas/Diesel dual-fuel engine as well as a larger mid-scale Gas Turbine combined cycle. The technology appears then to be improving. Costs for nuclear driven FPP’s are in the order of US$250m – US$450m for 50-150MW installed capacity, while costs for fossil fuel-generated FPP’s are approximately 50% more expensive.

In some instances, existing ships are converted into FPP’s. There are cost advantages, which are overshadowed by longer construction timeframes. Converting a bulk carrier into a power station is a major undertaking and involves among other extensive works placing several generators into the cargo hold. Surveyors verify the conversion process, trials and testing phase, which enables them to deliver certification to applicable classification rules. FPP lifespans are generally between 25 and 50 years with between 4 and 12 yrs payback period. Financially, they provide reasonable returns to owners. In general, FPP’s are more expensive than other forms of electrical generation, hence cost per kWh is usually not their strong point. However, in certain instances, it is far cheaper than building large power stations in remotely accessed areas, specifically where either short term or immediate solutions are needed.

5. Site Selection and Engineering Aspects:

Where their long-term demand for a constant power supply, the FPP will be permanently located at one site over usually up to 3-5 years. In these circumstances, the facility will have a power purchase agreement in place between the FPP owner and client. FPP owners sometimes rely on the threat of moving their barges to another country as a means of extracting payments from customers who are reluctant to pay, which gives incentivise to keep the contract alive to both parties.

FPP’s can be permanently moored alongside wharves, jetties, quays, and, while still being a floating vessel, will not move from this location. Such barges are therefore exposed to wave movement and potential impact from other vessels. Several studies can be undertaken to determine the movements of the vessels under the wave and current action, as well as the requirements for moorings and the mooring specification. In some instances, special moorings have been created where the FPP is protected from passing marine traffic. An example of a special mooring is where a permanent “wet berth” is created with a locked gate enabling the power barge to be floated into the mooring; a dock is excavated, the barge is floated in and then sealed off from the watercourse, water is pumped out and the dock is filled to create a permanent land-based generating station, which can be refloated in the future and relocated to another site. The water level within the perimeter is then maintained to protect the barge form fluctuations.

qThe surrounding structure also protects from impact from other vessels. This setup achieves a more stable operating environment than say floating within a harbour basin, and eliminates most of the insurance risks of ‘perils of sea or water’. Most FPP’s in operation today are power barges and as such do not have their propulsion systems. These, of course, would have to be towed to the site. The selection of the power plant’s location also has to take other factors such as fisheries, mariculture, and main shipping lanes into account.

6. The Rationale for Floating Power Plants

Rather than providing advantages and disadvantages, to support the case for FPP’s, decision making is driven very clearly and simply by one of the following three key requirements:

1. Difficulties in acquiring suitable land for land-based plants
2. Short term and rapid increase in power demand
3. Short term and rapid decrease in power supply
4. Secure, cheap and long term fuel source.

The case for FPPS’ seems, therefore, in the right circumstances to be a very simple and strong one. However, in our imperfect world, there are challenges to be overcome:

1. Fuel may not be designated as an approved fuel source in the country’s integrated resource plan due to high levels of carbon. New mandates outlining the demand for clean energy sources and implementation of energy efficiency standards in industries are likely to elicit the floating power plant market demand over the forecast period. In these instances however LNG and LPG are cleaner alternatives than diesel and other HFO’s. Also, the FPP can be selected appropriately that it can run off the preferred fuel source.
2. In some cases, there are severe challenges in feeding into local power grids due to old obsolete substations and other electrical infrastructure. This can be overcome through technical means with the right expertise.
3. High new build and conversion of vessel costs may act as a growth deterrent. This is, however, substantially downplayed when the need for interim emergency power supply becomes a huge GDP growth impediment.

These challenges have been overcome in each country where FPP’s are currently operational. FPP’s, therefore, lend themselves to the solution of several serious problems. The case for FPP’s is therefore clear; operators can make profits while countries can obtain solutions to highly specific power supply problems.

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