Fuel switching in power-plants: modelling and impact on the analysis of energy projects

In electricity markets, where conditions are uncertain, the choice of the best technology and the optimisation of production processes may not anymore be enough to ensure optimal investment yield of energy business plans. Providing some aspects of flexibility might enhance their financial performance; fuel switching may prove to be an alternative option, offering operational flexibility over time, as well as significant financial benefits. Traditional investment analysis methods are considered marginally useful to analyse this case. Instead, the recent tools of time-dependent investment analysis are more appropriate, since they are not inherently restricted to immediate, irreversible decisions. In the present work, a time-dependent computational model is presented and applied in the case study of the Greek Power Sector, in order to estimate the potential advantages of the fuel switching concept. Moreover, the optimal timing of switching is derived, to ensure increasing yields of an average-capacity power-plant. The results of the research indicate significant financial benefits anticipated in most scenarios from applying fuel switching, compared to single-fuelled electricity generation units. Security of fuel supply and enhanced flexibility may also be offered to the power plant since more than one technology and fuels may be engaged.