ABB, Alstom, Areva, Asia, Australasia, EDF, EnBW, Enel, Europe, GDF Suez, General Electric, Latin America, Middle East & Africa, North America, RWE, Siemens

The ups and downs of 2009: Review of the Year

Issue 1 and Volume 18.

Hannah Flynn, Contributing Editor

 

The year started in the throws of the worst recession in decades, and ended with talks of ‘green shoots’ and the Copenhagen climate summit. The tumultuous year was not easy for the industry, and resulted in a few casualties and many losses. Here we review the ups and downs of 2009.

 

Caution within the industry meant 2009 was not a particularly active year. However, some companies made the most of the rapidly changing legislation that affected renewable energy and nuclear development, as well as carbon capture development.

 

Business in 2009

 

In Italy, Enel and EDF signed agreements to create a 50/50 consortium to investigate the feasibility of developing a minimum of four nuclear reactors, just months before a law was passed in October, which overturned a 22-year ban on nuclear power plants in the country. They also agreed to put a plan in place to extend Enel’s participation in France’s new nuclear programme and to provide construction and operation services to their new European Pressurized Water Reactor (EPR) at Penly near Dieppe in France.

It was a good year for German utility RWE, which took over Dutch utility Essent in September, after facing opposition from the Dutch government, which is a 31 per cent shareholder in the Dutch utility. RWE fully acquired Essent for €9.3 billion ($13.5 billion), including €1.1 billion of debt, but the deal did not include Essent’s 50 per cent stake in the Netherlands’ Borssele nuclear plant.

At the time RWE said it would set aside €950 million as it continues to seek acquisition of the nuclear power plant stake, while Essent appealed against an injunction from a Dutch court which barred RWE from acquiring the stake. In the same month, RWE decided to create a new company that would have transnational responsibility for building new power stations.

In July, RWE realigned its transmission grid company RWE Transportnetz Strom, and renamed it Amprion, so that it could operate more independently in the future. The ultra-high voltage grid is being managed directly by the CEO’s division. In December, RWE and E.ON launched a nuclear power joint venture in the UK named Horizon. The 50/50 joint venture aims to develop around 6000 MW of new nuclear capacity in the UK by 2020. Earlier in the year, the company secured development land in south Gloucestershire.

E.ON was also involved in a generation capacity swap with GDF Suez, which was finalized in September. The agreement meant Electrabel and GDF Suez acquired 860 MW of conventional power plants and 132 MW hydroelectrical capacity from E.ON, and E.ON acquired the 556 MW Langerlo coal and biomass fired plant, as well as the 385 MW Vilvoorde gas fired power plant. E.ON also acquired 770 MW capacity from drawing rights from power stations with delivery points in both Belgium and the Netherlands.

 

Project and contracts – Coal

 

Coal experienced increasing controversy during 2009. German coal fired plants encountered opposition from a public concerned about the environmental impact of the plants, and the year ended with plans for a 900 MW coal fired combined heat and power (CHP) plant being abandoned. The project, which was jointly pursued by EnBW and Switzerland-based BKW FMB Energie, was pulled because of the loss of a potential partner that had agreed to buy long-term heat from the steam generated at the CHP plant.

President Obama was one of the many heads of state to attend the COP-15 conference, but the meeting failed to reach a consensus on emission reductions Source: Getty Images

Companies dealt with the rising controversy differently. Drax power station in the UK announced three biomass projects in September, one to be built at its current site in North Yorkshire and two others at different sites, alongside plans to co-fire biomass with coal. GE Energy announced that its proposed project in Australia could produce 400 MW, while capturing 90 per cent of carbon dioxide (CO2) emitted using integrated gasification combined-cycle (IGCC) technology. The plant is expected to be ready for commercial operation in late 2015, early 2016.

The year ended as E.ON shelved plans in October for a new 1600 MW coal fired power station at Kingsnorth, UK. E.ON cited the recession and said it would review the plans in two to three years if demand recovered. E.ON had been short-listed for funding from the European Energy Programme for Recovery Fund, but lost out on €180 million to Powerfuels’ 900 MW IGCC plant in Hatfield, UK.

 

Project and contracts – GaS

 

The credit crunch hit the construction of a combined-cycle gas turbine in Rotterdam, the Netherlands, delaying development by nearly two years. Eneco Holding, which is building the plant with DONG Energy, blamed the delay on a lack of transport capacity to the grid, as well as the financial crisis. The project is now scheduled to go online in 2011.

South Korean president Lee Myung-Bak and the UAE’s Sheikh Khalifa bin Zayed Al Nahyan sign a nuclear deal Source: AFP

However, several large contracts were signed in 2009, with GE Energy being awarded a contract for nearly $1billion to provide 30 frames 7EA gas turbines to Saudi Electricity Company’s Riyadh PP10 project.

This trend continued in the UK in April, with Alstom winning a contract for €1 billion from RWE npower for the design and construction of a gas fired combined-cycle power plant in Pembrokeshire, Wales. The plant will be the country’s largest, with an output of 2 GW, when completed. A week before it cancelled plans for the Kingsnorth coal fired power station E.ON announced it would be converting the decommssioned High Marnham coal plant in Notttinghamshire, England into a 1600 MW combined-cycle gas fired plant.

 

Project and contracts – Nuclear

 

Significant changes in policy for nuclear power in many countries characterized a rise in planned nuclear power plants. The first nuclear power plant to be approved in the US state of Florida for 33 years was given the go ahead in September. The last remaining decision from the Nuclear Regulatory Commission is expected by early 2012.

The site assessment of Jordan’s first nuclear power plant began in October after it signed a $12 million contract with Tractabel Engineering to conduct site assessment work. The plant is expected to initially generate 750-1100 MW and will be operational by 2020.

The Indian state of Gujarat approved a 600 MW nuclear power plant in November and it is expected that a memorandum of understanding will be signed following government approval. However, RWE withdrew from the Belene nuclear project in Bulgaria, citing the economic crisis. The German utility was to hold 49 per cent in the project.

The end of the year saw contracts signed for the biggest nuclear power project in the Middle East. The United Arab Emirates (UAE) chose a South Korean-led consortium for a $20 billion contract to build and help run four nuclear power reactors.

 

Projects and contracts – Renewables

 

The increasing demand for utility-scale renewables was recognized with the launch of the Desertec Industrial Initiative (DII) in May. The initiative comprises of the Desertec Foundation, which will develop renewable energy in the Middle East and North Africa region (MENA), alongside trans-Mediterranean transmission lines to Europe, estimated to cost over $400 billion. It is expected to provide Europe and the MENA region with 15 per cent of their power requirements by 2050. DII was set up in October and includes, amongst others, ABB, Abengoa Solar, Deutsche Bank, E.ON, MAN Solar Millennium, M+W Zander, RWE, Schott Solar and Siemens Energy.

Siemens Energy in particular expanded its renewables sector in 2009. Its most significant move was in October when the company announced it had acquired Israel-based Solel for $418 million. Solel produces solar receivers for concentrating solar thermal power plants, which are expected to account for a significant part of the development by the DII.

Earlier in the year, Siemens acquired a 28 per cent stake in Italy-based Archimede Solar Energy SPA, which is another solar receiver producer. In April, the Germna power OEM signed an agreement with Denmark-based DONG Energy for the supply of 500 wind turbines with a total capacity of 1800 MW to be deployed in DONG’s northern European offshore wind farms.

Solar power continued to grow in October with a memorandum of understanding signed by First Solar with the Chinese government to build a 2 GW solar power plant. The plant, which is expected to begin construction this year, will be the world’s largest solar power plant.

In the same month, BrightSource appointed Bechtel as the contractor for its 440 MW Ivanpah solar power facility in California, USA. Construction of the facility, which consists of three solar thermal power plants, is expected to begin in early 2010.

Growth in the South American markets was signaled in December when Siemens Energy secured its first Latin American wind turbine supply order, with a $270m deal for the Los Vergeles wind farm in Mexico.

 

Projects and contracts – T&D

 

Transmission and distribution (T&D) was in the spotlight as new power plants, both renewable and conventional, were planned and came online in 2009. In February, the European Union (EU) announced a total of €1.75 billion would be earmarked for gas and electricity interconnection projects.

Plans were finalized for the world’s longest transmission link in September, with ABB winning orders worth over $540 million from the Abengoa Group. The project will link two new hydropower plants with Sao Paulo, Brazil, over a distance of 2500 km. While, Siemens Energy was appointed by Transpower New Zealand to increase the capacity of its existing high voltage direct current link between New Zealand’s North and South Islands.

In November, Areva announced it would enter exclusive negotiations with French bidders, Alstom and Schneider Electric, following their €4.1 billion bid for the T&D arm of the state-owned nuclear group. However, the French bid was not the highest and the French government appeared to delay a decision in order to give Alstom and Schneider time to revise their offer.

Paris had forced Areva to sell the business to fund a €10 billion investment programme. It is likely the decision will also prove controversial because it splits the world’s third largest supplier of T&D in two. Schneider would take the medium voltage distribution arm, while Alstom intends to take the high voltage business.

Desertec envisages an interconnected Europe and MENA region, with power generated from renewable energy sources Source: DII

In that same month, E.ON sold its domestic long distance power grid to the Netherland’s state owned grid operator TenneT for €1 billion, with effect from 1 January 2010. The deal covers 10 700 km of high voltage power lines. The move follows E.ON’s claims the grid was a vital part of its business, until it decided to sell it in 2008 following changes in regulation and reported pressure from the European Commission (EC).

 

Policy & regulation – Conventional

 

Many countries were considering the logistics of carbon capture and storage (CCS) schemes in 2009. At the beginning of the year in February, the EU announced plans to pump €1.25 billion into CCS projects at power stations including Huerth and Jaenschwalde in Germany, Eemshaven and Rotterdam in the Netherlands, Belchatow in Poland, Compostella in Spain and Kingsnorth, Longannet, Tilbury and Hatfield in the UK.

This was followed by an announcement in the UK that National Grid was drawing up plans for a new business unit that would focus on the development of pipelines to take carbon dioxide (CO2) emissions from UK power stations to geological formations below the North Sea. In May, UK utilities also looked at the feasibility of shipping CO2 cargo carriers in the interim, while the pipeline was developed.

The German government approved a draft legal framework for CCS in April, a month after Siemens Energy and E.ON announced plans to build a pilot carbon capture plant at E.ON’s Staudinger plant in Germany.

More significant investment in CCS was announced in June when state-owned Japan Bank offered loans to companies that bought IGCC power plants from Japanese manufacturers. In that month the US Department for Energy (DOE) said it would make $1.4 billion available for projects to advance technologies for carbon capture from a range of industrial facilities, including power plants.

Standards were then unveiled in October for CO2 pipelines, by independent risk management organization DNV, as an extension of existing pipeline standards. At the end of the year, the International Energy Agency concluded CCS will require $42 billion investment by 2020, and proposed 100 CCS projects were needed. South Korea also announced it planned to spend $1.2 billion on CCS R&D.

Nuclear phase-out had been planned across Europe, but many countries delayed the start of their plans, some of them blaming the recession. Belgium, for example, delayed the start of progressive phasing out of its nuclear power by ten years, until 2025. Under a law passed in 2003, seven of Belgium’s reactors were scheduled for shutdown between 2015 and 2025.

Sweden announced in February it was revoking a 1980 referendum decision to phase-out nuclear power, and scrapped a ban on building new nuclear plants. In May, the UK government identified 11 sites for new nuclear plants, and in December approved ten locations as suitable sites. The UK government also gave the green light for the construction of a ‘deep geological repository’ for the permanent disposal of the 200 tonnes of high-level nuclear waste, which will be produced annually by the ten reactors.

However, in Germany the issue of nuclear power phase-out was a hot election topic, with the incoming political party promising to delay the phase-out in order for Germany to hit its carbon reduction targets. In May, Germany’s 17 remaining nuclear power plants were told they could produce 1241 TWh electricity between then and 2021, as they had already produced 53 per cent of the total power allowance allotted to them in 2002 when the country’s nuclear phase-out was agreed.

Carbon trading was under discussion at the Copenhagen climate summit in December, but in April the director-general for Environment said the EC would not interfere in the EU’s emissions trading scheme (ETS). A price floor for the EU ETS would be a policy decision, he said.

 

Policy & regulation – Renewable energy

 

The International Renewable Energy Agency (IRENA) was launched at the beginning of 2009 to promote the use and development of renewable energy. Though it was initially set up without the UK or the USA, both countries joined later and the IRENA currently has 137 countries as signatories, as well as the EU.

In Asia, China selected 294 solar projects in the country to subsidize as it works towards hitting its ambitious aim of10 GW of renewable energy production by 2020. The government said it will subsidize at least half the investment cost. The Philippines Department of Energy announced it expected to sign more than 80 new contracts for renewable energy projects by the end of 2009.

The year ended with the much anticipated United Nations’ conference at Copenhagen in December, with many hoping for a Kyoto-style consensus to shape globaly environmental policy. The countries involved failed to come up with a binding agreement, and instead signed the Copenhagen Accord, which ‘recognized’ the scientific case to keep global warming below 2 °C, but did not include any emissions targets.

It also pledged $30 billion a year to a fund for poor countries to adapt to climate change from 2010-2012, and $100 billion a year by 2020. The fund became active this month.

After the conference, discussions began to hold another meeting that would aim to reach an agreement on emissions reduction. In December, President Nicholas Sarkozy of France announced intentions to invite countries that had signed the accord to a meeting this spting. It is expected the meeting’s goal will be to reach an agreement involving a 50 per cent reduction in emissions by 2050.

 

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