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An exploratory study to increase the net present value for the hybrid boiler

Verschuur, P.G. (2019) An exploratory study to increase the net present value for the hybrid boiler.

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Abstract:Context: This study takes place within in Boiler Projects department of Stork Thermeq, Hengelo. This department developed a hybrid boiler which can run on traditional fuels, like coal or gas, but also electricity. Stork is the leading company concerning this technology. The engineers were able to decrease the changeover time to 10 seconds. But until now, sales disappoint. Problem explanation and goal of the study: The problem cluster provides insight into the causal relations between problems. The general problem is disappointing sales, caused by a low expected savings while using the boiler and an unknown product. The core problem comes up when following the problem cluster. It states: "Do opportunities exist to get electricity from a quicker market, to increase the NPV?". If so, the NPV will increase which may increase the interest of the hybrid boiler. The goal is to make sure the NPV is positive within four years to make sure the hybrid boiler outperforms a traditional boiler. A sub-goal is to obtain knowledge about the different markets for fuels and about boilers, to combine those in a model to calculate NPVs for the new ways of using the hybrid boiler. Research design: The main research question, which impacts the design, is: "Which business case for using the hybrid boiler has the highest NPV when functioning on a different market than the day-ahead market, for the designed powers of 10, 25, and 50 MW?". Three of the six sub-questions relate to an exploratory literature study, the others to the results of the hybrid boiler working on a particular market. In the end, a self-constructed model with data from TenneT generates NPVs for each business case. The literature study consists of information from the companies that regulate the markets and some articles. Results literature study: The literature study exists of two parts. The first part concerns the boiler. A traditional boiler is an industrial instrument with a couple of subparts with the goal of heating water until it becomes steam. The hybrid boiler is a system where a traditional boiler and an electrode boiler are parallelly connected. The electrode boiler provides opportunities like a stand-by function, but also restrictions like the conductivity of the water that goes in the system. The second part concerns both markets. The gas market is called the TTF, which enables a market participant to buy gas for two years upfront to tomorrow. Per period, different markets exist. The closer to real-time the market is, the more volatile the prices get and the lower the traded volumes are. The two factors that influence the The electricity market is more complicated than the gas market because of balancing. TenneT has the task of balancing the grid at all times. For this purpose, there are two closer to real-time markets than the intra-day market. Those are the imbalance and the reserve market. Each market has its technical requirements and pricing systems. The final markets used, are the imbalance, FCR and aFRR. Model: The model uses only three out of the six electricity markets that showed enough potential in their pricing and technical specifications. The data from TenneT show an opportunity to save money on fuel when the boiler switches from gas to electricity at the right time. The model uses different inputs per business case. The five variables are the gas price, electricity price at the imbalance and reserve market, carbon credit price, designed power, CAPEX and OPEX. The model calculates the NPVs per case, per designed power, per scenario. A difference in discount factor causes the need for different scenarios. Some assumptions simplify the model. Although some assumptions had to be made, the sensitivity analysis and a worst case scenario strengthen the results. Results: Making sure the hybrid boiler functions as an FCR reserve for TenneT gives the highest NPV. The high fee for passively having power available causes the FCR to be significantly the best. The initial investment is earned back within half a year, which results in a met goal. However, the discussion shows some developments which might influence the result in either positive or negative way.daily gas price are the weather and carbon credit costs.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:43 environmental science
Programme:Industrial Engineering and Management BSc (56994)
Link to this item:http://purl.utwente.nl/essays/77882
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