The Economics of Large Diesel Engines for Electricity Supply

This study is an investigation of the economic potential and technical suitability of the large, slow-speed, two-stroke, marine-derived diesel engine for electricity generation in England and Wales. Technical characteristics of large diesels are examined, with emphasis on the ability of the engines to operate on alternative fuels, and their performance as electrical generators. The constraints of the electricity supply system are also assessed. Economic analysis is undertaken using discounted costs, the diesels being compared with other generating options against a wide range of background fuel scenarios and discount rates. An assessment of merit order potential and total costs is also made, together with an analysis of the changing economics of the electricity supply industry. Calculations are undertaken using a micro-computer-based simulation with spreadsheet software. Large two-stroke diesels are a technology of high efficiency and reliability which are currently neglected as a generating option. It is demonstrated that the engines have suitable technical characteristics provided adequate passive design measures are employed. Also, that such engines can exhibit resilience to future fuel price uncertainty by being able to operate successfully on alternative fuels. The diesels show superior economic qualities compared with other generating options, both in terms of investment criteria and high merit operation. The economic superiority is maintained against a wide variety of background conditions. In overall economic terms the engines are directly comparable with combined cycle gas turbines. However, whereas combined cycle plant is essentially large-scale technology, diesels in 40 MW unit sizes have the potential for providing smaller scale, high efficiency generation. Large diesels represent a sound investment for the electricity supply industry or private companies, and would be _ especially suitable for location in the South and South West where they would reinforce the existing network at minimal cost. The diesels provide a method of increasing supply security and diversity, are compatible with a cautious investment approach, and are appropriate for the new market conditions in electricity supply.