Economic Impact of Dual Fuel for Gas Turbines Studied

Issue 8 and Volume 108.

An analysis of dual fuel capability highlights the economic advantage of providing combined-cycle power plants with the ability to operate on both natural gas and liquid fuel. Results of the study show that dual fuel capability has the potential to boost combined-cycle profits up to 43%. The study was conducted by Cape Cod, Mass.-based Fern Engineering for a client interested in learning more about the economic incentive of adding liquid fuel burning capability to gas turbines that currently burn only natural gas.

The study considered two generic combined-cycle power plants located in Massachusetts: a 293 MW Siemens Westinghouse W501F and a 130 MW GE Frame 7EA. Both the W501F and the 7EA were assumed to originally be equipped to burn only natural gas fuel. Fern then analyzed the economic impact of adding the capability of burning distillate No. 2 fuel oil to both plants.

“I see two main reasons why very few of the new gas turbines installed in recent years are equipped with dual fuel capability,” says Jeff Phillips, vice president and project manager of dual fuel analysis for Fern. “First, emissions regulations in several states limit the number of hours that a gas turbine can run on liquid fuels, so rather than investing in dual fuel firing equipment, the turbines were configured to run only on natural gas. Secondly, back at the 1980s, a large number of cogeneration plants were installed with dual fuel capability. But because natural gas prices remained relatively low from the mid-1980s until 2000, that capability was rarely used and it didn’t seem worth the expense for these newer units.” He says that rationale is no longer as valid as it once was considering current higher gas prices.

The main element of modifying a gas turbine for dual fuel capacity is replacing the existing nozzles with dual fuel nozzles. The nozzles contain three passageways: one for natural gas, one for liquid fuel, and one for atomizing air needed to boost the pressure high enough to break apart the jet of liquid fuel into fine droplets. “You’ll also need to install equipment to handle the liquid fuel supply: tanks, pumps, control valves,” says Phillips, “and you’ll need to modify the control system to accommodate the dual fuel firing.” A switchover from natural gas to liquid fuel firing should be possible within about one minute.

The analysis revealed that during a recent 12-month period, a W501F with access to only natural gas would have generated $19.8 million in gross profits while a W501F with dual fuel capability would have generated $27.0 million in gross profits, a profit increase of approximately 36%. In the same way, dual fuel capability on the smaller 7EA would have increased profits by approximately 43%, from $6.0 to $8.6 million.

“This study has undoubtedly brought to light the potential savings a gas turbine plant owner can garner by adding the capability of burning fuel oil,” states Phillips. “I cannot think of any other action a gas turbine plant owner could take in the short term that would have as dramatic an impact on profit as this.”

The hour-by-hour dispatch analysis was based on spot market prices for distillate No. 2 fuel oil and natural gas fuel and included the cost of delivery to Massachusetts in the assessment of the two fuels. In addition, the analysis was carried out utilizing the wholesale electricity prices from the ISO New England real-time market from March 1, 2003 to February 29, 2004. Although the analysis applied to New England, Phillips believes the general results would hold for New York and other regions along the eastern seaboard as well, but not to as great an extent. “Because New England is at the end of the natural gas pipeline network in the U.S., it is more susceptible to higher prices,” notes Phillips. “Distillate fuel oil is often cheaper than natural gas in the Northeast, and transportation costs only add 2.5 cents per gallon. Conversely, on the West Coast, natural gas is almost always cheaper than distillate fuel oil, so dual fuel capability is less attractive.”

Although he is unsure about how popular dual fuel conversions will become in New England, Phillips thinks there will be several such retrofits. “The biggest potential stumbling block is emission regulations,” he says, “because they can limit the amount of time a facility can operate on liquid fuel. This can affect the economics.” He says many sites are restricted to 30 days per year operating on liquid fuel. “From our analysis, it is possible to get about 90% of the total economic benefits by selectively operating on the 30 days most favorable to liquid fuel firing. Such selective operation is not always possible, however. Owners may be better served negotiating more flexible operating scenarios with regulators.”