1. The Combined Heat & Power (CHP) story - Baltics

2. 2
Content
CHP – energy for the future
Sustainability
Global potential
Pricing
Fortum – Next Generation Energy Company
Fortum’s vision for the future
A
C
D
E
F

3. CHP – energy for the future
3

4. 4
CHP – a simple and safe technique
with great benefits

5. 5
Economically
viable in
small scale:
Electricity
One plant
– multiple products
Renewables
competitive to
fossil fuels
Fuel flexibilityEfficient use
of resources
Large global
potential
Main advantages of CHP
Overview

6. 66
Main advantages of CHP
Efficient use of resources
Losses 25 Losses 48
CHP production
75% efficiency
Separate production
52% efficiency
Fuel
100
Fuel
100
Electricity 25
Heat 50
Electricity 17
Heat 35

7. 7
Main advantages of CHP
Economically viable in small scale
with potential for economy of scale
CHP

8. 8
Non-renewable
Forestry biomass
Agro biomass
Bio oilsWaste
Main advantages of CHP
Fuel flexibility

9. 99
Main advantages of CHP
Renewables competitive to fossil fuels
• Reduced environmental impact
• Avoids cost of CO2 emissions
• Reduces transportation and shortage risks
• Offers a more stable and competitive price

10. Chapter 2
Sustainability
10

11. March 2009
0
10
20
30
40
50
60
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
TWh
2006 After
investment
programme
2007
Consistently towards CO2-free energy production
Fortum’s electricity production in the Nordic countries
2008
Hållbar utveckling 201011
Other production
(Peat, gas, coal, other)
CO2 -free production
(nuclear, hydro power, and bio mass)

12. Researching new fuels
12
• Bio-fuels, residual products, waste
• Low cost, abundant, sustainable
• Meeting plant specifications
• Bio-fuels needs to fulfil EU-criteria
• Fuels for electricity needs to qualify for
• green certificates
• chemical legislation

13. Research and progress bio-fuels
13
Residual products
from biodiesel
Lignin
Animal oilsPellets
Pine tar oilPyrolitic oils
Olive stones
Salix

14. 14
Secure Security of supply
Sustainable
Simple Competitive
Meets the demands of customers and society

15. 15
The sustainable waste
• Enables a more sustainable society
• Local fuel from recycled materials
• Turns cost into commodity
• No need for landfill
• Reduces methane by reducing landfills

16. European Commission climate targets
16
20-20-20 until 2020
Reduce
green house
gas emissions
with
20 %
Increase
usage of
renewable
energy to
Increase
energy
efficiency
and energy
savings with
20 % 20 %

17. Chapter 3
Global potential
17

18. 18
China
Russia
India
Europe
North America
Global demand for 4,800 GW new capacity until 2030
18
Source: IEA WEO 2009, reference scenario
Primary energy demand 2007-2030
Electricity consumption growth 2007-2030
Electricity capacity additions
2008-2030 (GW)
China
Russia
India
Europe
North America

19. 1919
CHP meets
the global challenges
Organic growth
potential in
emerging markets
Significant growth
potential globally
Enables the use of local
fuels (bio, waste)
Synergy opportunities in
the growing bio energy
and bio fuel markets
EU’s LCP Directive to
drive new CHP
investment potential
further
CO2 issue will increase
CHP’s Competitiveness

20. 20
Estimated distribution
of potential increase
Small scale CHP >100
Desalination >250
Industrial CHP >500
District heating >500
>1,350
An average CHP plant equals 2 TWhe
Main advantages of CHP
Large global potential for CHP
Heat
Elec-
tricity
2,000 TWhe
1,000 large plants
Today
>3,350 TWhe
1,675 large plants
Tomorrow
CHP output
(approx. distribution)

21. 21
Supply – demand balance of
solid biomass Current Potential
Wood
Agro
Estimated bio fuel potential
by 2020
(TWh fuel)
869
193
Source: Pöyry analysis 2010

22. 22
Current EU target
Estimated waste to energy
potential by 2020
Waste incinerated
today and potential
26 311
1000 tn/a
73 035

23. Chapter 5
Pricing
23

24. 2424
Heat pricing
Regulatory
approval of heat
prices from ex ante
to ex post
Protection
towards
excessive heat
prices
Different
regulators
approach
Most common
approach - cost
based pricing
District heating pricing approaches vary in different European countries

25. 2525
Heat pricing
Incentivizing
productivity
improvements and
investments
Simple, straight
forward and high
quality
DH competitive
with alternatives
over time
DH competitive
with alternatives
over time
Promotion of alternative based pricing based on several advantages

26. 2626
Heat pricing
• Provides incentives for energy efficiency actions
• Secures reasonable returns on invested capital
• Market prices for both heat and electricity
• fair for customers
and companies,
• allows to cover
costs of necessary
investments
• sustainable in a long
term
• predictable and do
not create additional
costs
The most important aim of DH industry is to create a pricing approach that is:

27. 2727
Energy efficient buildings and district heating
• Important with understanding of global system
perspective.
• Promotion of alternative space heating solutions will
decrease the potential for energy efficient CHP
production.
• Decreasing heat demand will reduce heat sales specially
during spring and autumn time. Peak hours will
decrease and respectively share of fixed costs will
increase.
• Any measures leading to increased condensing
electricity production or heat-only production should be
carefully considered.
• Obligatory connection to district heating is not
recommended

28. Chapter 6
Fortum – Next Generation
Energy Company
28

29. 29
Fortum’s emissions among the lowest in Europe
Source:
PWC & Enerpresse, Novembre 2010
Changement climatique et Électricité
g CO2/kWh electricity, 2009
Average 346 g/kWh
0
200
400
600
800
1000
1200
DEI
Drax
RWE
CEZ
SSE
EDP
Enel
Vattenfall
E.ON
Dong
UnionFenosa
GDFSUEZEurope
Iberdrola
Fortumtotal
EDF
PVO
Verbund
FortumEU
Statkraft
41155
CO2-free electricity production 2010
•66% of total electricity production
•86% of electricity production in the EU
• The majority of the capacity of the ongoing
investment programme in the EU is CO2-free.
Source:
PWC & Enerpresse, Novembre 2010
Changement climatique et Électricité, Fortum
Note:
Fortum’s specific emission of the power generation in 2010 in the EU were 84 g/kWh and in total 189 g/kWh,
86 % (91 %) emission free in EU and 66 % (69 %) emission free overall.
Figures for all other companies include only European generation.

30. Mission
3030
Our mission and strategy
Strategy
Create solid earnings
growth in Russia
Leverage the strong
Nordic core
Build platform for
future growth
Competence in CO2 free nuclear, hydro and energy efficient CHP production,
and operating in competitive energy markets
Fortum’s purpose is to create energy that improves life for
present and future generations. We provide sustainable
solutions that fulfill the needs for low emissions, resource
efficiency and energy supply security, and deliver excellent
value to our shareholders.

31. 31
CHP cornerstone of Fortum’s strategy
31
• Corner stone in Fortum’s strategy
• Competitive
• Resource efficient
• Has potential for further growth
• Will enable the sustainable society

32. 32
CHP is part of Fortum’s past,
present and future strategy
Kuusamo
Uimaharju
Joensuu
Nokia
Suomenoja
Kirkniemi
Naantali
Kauttua
Tartu
Jelgava Ganibu
Pärnu
Klajpeda (under construction)
Częstochowa
Świebodzice
Brista
City KVV6/Stockholm/ CHP
Hässelby
HögdalenCity KVV1/Stockholm
Bytom
Zabrze

33. 33
Cases
(3/4)
Pärnu, Estonia
• Fueled by local bio fuels such as chips, wood
residues from local industries, and peat
• Provides the City of Pärnu with district heating
• Constructed without accidents
• Benifits local industry

34. Fortum Klaipėda

35. CHP – a simple and safe technique
with great benefits

36. Overview
• At the moment ”Fortum Heat Lietuva” owns 95% of ”Fortum Klaipeda” shares, other 5 % - AB
Klaipėdos energija
• Total planned investment - EUR 130 million
• Power plant capacity for heat power will consist of 50 MW from fuels incineration plus 14 MW
during Winter time from flue gas condenser. It planned to produce 140 GWh of electricity and
about 380 GWh of heat power

37. Overview
• Capacity – 50 MW of heat and 20 MW of electricity
• Klaipėda CHP plant will use biofuels as well as municipal and
industrial waste as fuel, producing both heat energy that will be
supplied to Klaipeda city, covering 40% of Klaipeda’s heat
demand, and electricity that will be sold in the national grid
Klaipeda CHP plant will use the latest available technologies
that will secure maximum efficiency of fuel consumption as well
as from flue gas cleaning
• Planned commissioning – 2013
Annual reduction
of CO2
emissions - by
96000
tons

38. Steam boiler of a grate type 85MW
• Steam pressure - 47 bars, temperature - 400º C,
• Steam generation capacity - 105 t/h
• Steam turbine and generator 20MW
Annual output will be generated:
• about 400 GWh thermal energy
• about 140 GWh electrical power
Fuel types which are being used at CHP
• Biomass fuel (wooden chips) - 75’000 tons
• Public utilities waste - 115 -130’000 tons
• Industrial waste - 50’000 tons
Public utilities waste from Klaipėda region after the primary
screening on the locations of their collection or after the secondary
screening
Fuel types

39. Benefits for Klaipėda region
• Reduces dependence on imported fuels (natural gas) when
supplying heat to Klaipeda city, whereas 40% of heat from total
needed for the city will be produced in this CHP plant.
• Reduced dependence on imported fuel (gas)
• More stable heat tariff
• Reduced expenses for construction of new waste dumps and
management of the existing ones since the amount of waste
reduces by 4 to 5 times as a result of waste burning process
• Reduced impact on the formation of the greenhouse gas effect
since the gas originating from waste dumps (shale gas) has a
much greater impact on the increase of the greenhouse effect
than CO2 gas

40. Construction in Klaipėda

41. 41
Great business opportunities for
the CHP business
• CHP especially suitable in densely populated
areas
• 40 % of EU’s energy is used for heating
• Demand for electricity will increase when
replacing other types of energy
• Demand for heating is expected to decrease
only very slow
• Even small CHP plants more and more
profitable in the future

42. 42
Continue to strive for
resource efficient carbon
free production
What does Fortum want?
Push the development towards
the sustainable society Continue the integration
towards a European market
R&D on sustainable
energy sources

43. Chapter 7
Fortum’s vision for the future
43

44. 4444
* CCS decreases plant output (energy efficiency), while at the same time reducing CO2 emissions dramatically.
If applied to bio-CHP, “negative” emissions = removing CO2 from the atmosphere
** Extremely low utilization (<5%) of uranium energy content in LWR with final deposition of spent fuel.
However, huge improvement potential both with CHP mode and Generation IV (breeder) technologies
Towards a solar economy
High
Low
Finite Infinite
Efficiency
Resources
Condensing
CHP
Solar
Coal
IGCC CHP
Coal CHP
CCGT CHP
CCS *
Bio fuels
CHP
Nuclear
tomorrow**
Nuclear
today **
Coal
condensing
Gas
condensing
CCS *
Solar
CSP
Hydro
Photo-
voltaic
Osmosis
Wind Wave
Large CO2 emissions Zero emissions

45. 4545
Fuel flexibility enables transition towards
solar economy and sustainability
• CHP a driving force away from fossil fuels
• Renewable local fuels are advantageous over
fossil fuels
• Reduced environmental impact
• Fuel flexibility enables the use of local fuels and
renewable fuels
• Reduces the need for fuel transportations

46. Smart Heat – a research project for the sustainable
energy system of the future
46
Electricity, heat, cooling, and
gas in one integrated system where
we always make use of surplus energy
The sustainable energy
system of the future We use energy that would otherwise
be lost, and use it when it is needed
1. Enables more solar and wind power
2.
Increased integration between the
heating and electricity systems
1. Heat and cold storage
2. Increased share of local production
in buildings
3. Smart grids
4. Electric vehicles and bio gas
vehicles
We make use of all local energy
1. Recycling turns household waste
into electricity, heat, and biogas
1
2
3
4
5
6
7
7
2
1
5
6
3
4

47. Pyrolysis could be a fast track for fuel switching
47
• Oil is produced by low oxygen burning
• Pyrolysis can be obtained by utilising the heat from
existing CHP-plants
• Fortum is part of a R&D consortium which has
piloted a CHP-integrated production method
• Next step will be a construction of a demo-plant
• Pyrolysis oil can replace heating oil in existing heat
boilers
• Pyrolysis oil can be upgraded into traffic fuels or
value-added bio chemicals.