|One of two Breitener Energetica plants serving the city of Manaus in Brazil that were converted from heavy oil to natural gas Source: GE Jenbacher|
Soaring electricity demand is making many Latin American countries look into diversifying their generation mix away from hydropower – in particular, many smaller nations are turning to distributed generation using gas engines.
David Flin, UK
South America’s GDP is increasing at twice the average rate of the rest of the world and demand for power is mirroring this growth. However, alongside this expansion, many countries in the region have pledged to reduce greenhouse gas emissions. These factors make for an interesting market.
In Central and South America, total electricity generation is about 1000 TWh/year, and this is expected to increase to 1800 TWh/year by 2035. The vast majority of power generation in the region comes from hydropower, which accounted for nearly two-thirds of the region’s total net electricity generation in 2007.
The five countries with the greatest electricity production – Brazil, Venezuela, Paraguay, Columbia and Peru – generate 65 per cent of their electricity through hydropower plants. The International Energy Agency estimates that natural gas fired generation in Central and South America will increase by an average of 2.2 per cent a year, and that natural gas will take an increased share of total electricity generation, rising from 22 per cent in 2007 to 29 per cent in 2035.
The many factors driving the market for gas engines include: a growing population; rising per capita power consumption; and a need for distributed generation options, said GE’s Jenbacher unit. But national rates of development reflect differences in the cost of electricity, regulatory incentives for distributed generation and cogeneration, fuel availability, and the extent and reliability of transmission and distribution (T&D) systems.
“As the economic climate improves following the global turndown, we are seeing an evolving need for regional power to accommodate growth in select markets,” said Mike Devine, gas product marketing manager for Caterpillar. “The growing appetite for power is causing utility prices to escalate rapidly, especially during peak load hours, so many gas gensets are being used in peak shaving activities. We are also seeing increasing interest in combined heat and power applications where it is financially viable, and low-energy applications are also growing in popularity. The interest in low-energy gas power is mostly coming from landfills, although there is also growing interest from wastewater treatment plants and biogas installations.” Mexico is currently showing far more interest in agricultural biogas than South America, he added.
GE Jenbacher sees biogas, landfill and associated petroleum gas applications as still evolving in the region. But, as a general rule, the regulatory environment still needs to be improved to incentivize a larger adoption by project developers, in the company’s view.
Brazil is the largest economy in the region. About 85 per cent of its electricity comes from hydropower but it is keen to develop other forms of generation to increase its energy security, especially during times of drought. Brazil’s National Energy Plan aims for 54 GW of installed capacity of non-hydropower by 2017.
Brazil also has a goal of reducing its greenhouse gas emissions in 2020 by between 36–39 per cent from projected amounts under its current energy mix.
The Brazilian government has so far been relatively unsuccessfully in its attempts to attract substantial investment into natural gas fired power plants – mainly due to concerns over the security of natural gas supplies and over costs exceeding those for hydropower.
Imported Bolivian natural gas has met much of Brazil’s gas demand, but Bolivia’s energy sector nationalization has jeopardized foreign investment in natural gas production, leading Brazil to look towards liquefied natural gas (LNG) imports. Brazil has invested heavily in LNG infrastructure, and its third LNG regasification plant is scheduled for completion in 2013.
Brazil still has plans to continue expanding its hydropower capacity, including construction of two plants on the Rio Madeira in Rondonia: the 3.2 GW Santo Antonio and the 3.3 GW Jirau facilities, which are scheduled for completion in 2012–2015. But natural gas is forecast to be Brazil’s fastest growing source of electricity, rising by 7.2 per cent per year on average until 2035.
Argentina and Chile
Several other nations in Central and South America have been trying to increase the amount of natural gas used in their generation fuel mixes by expanding both pipeline and LNG supplies.
Chile, for example, relies on Argentina for its natural gas supplies. But since 2004 Argentina has restricted its exports after failing to meet its own domestic demand, leading Chile to initiate two LNG regasification projects. The Quintero facility became operational in June 2009 and Mejillones was completed at the end of 2010.
Colombia has Latin America’s second largest reserves of coal, falling just behind Brazil. Most of this coal is clean burning with a sulphur content of less than 1 per cent. In 2008, Colombia was the fourth largest coal exporter in the world. Drummond, the country’s second largest coal producer, sees huge potential for developing coal bed methane (CBM), which could dramatically increase Colombia’s use of gas. Drummond has signed contracts with Ecopetrol to extract CBM from its La Loma and El Descanso mines.
Peru’s share of electricity generated from natural gas has climbed after government incentives to lessen the impact of fluctuations in the hydropower supply prompted substantial private investment in gas fired power plants. But the more ambitious growth targets have been missed, partly due to disputes over power exports.
A transmission line connecting Peru and Ecuador was built in 2003, but it has been rarely used because the two countries have failed to agree on a price for the electricity. In addition, plans to export electricity to Chile from gas fired plants along the border have faced political resistance because of territorial disputes.
Venezuela’s electricity consumption expanded at more than twice the rate of installed capacity during the 2000s, leaving the Venezuelan power grid stretched by the end of the decade. A drought in 2009–2010 caused major power supply problems, as 70 per cent of the country’s electricity came from hydropower. Investment in gas-fired capacity has risen to reduce this reliance on hydropower.
Regional environmental variation
While the market for gensets powered by low-energy fuels is substantial, the market for engines using pipeline gas remains limited in certain regions, according to Caterpillar. Some areas that historically had little or no emissions oversight have implemented tight emission restrictions, driving up the cost of ancillary equipment and limiting gas engines’ economic viability in some cases.
Many countries want to cover more and more of their energy needs through renewable energy, and therefore make more use of waste gases, said GE Jenbacher. The regulatory landscape can vary widely. Flaring associated petroleum gas (APG) is forbidden under some jurisdictions but not all. Where flaring is not permitted, using it to generate electricity is indirectly incentivized. In the past, little use has been made of APG. Increasingly stringent environmental regulations in Ecuador, Argentina and Colombia have placed a growing importance on the use of APG as a new source of fuel.
Landfill gas is yet to be seen as a rich power generation source, but governments are looking into this issue. Interest is growing in Brazil, Chile and Peru for landfill gas applications, producing greener power while minimizing land and water pollution. The lifespan of dumpsites is also extended by three to five times.
Several countries are attempting to meet their environmental commitments by replacing heavy fuel oil generation with cleaner burning natural gas engines – one example is detailed in the sidebar on p.32. Conversion projects are popular in the region. In addition to the GE Jenbacher project, Wärtsilä has won several contracts. Three conversional projects in Brazil – all to supply the city of Manaus – enable users to switch between heavy fuel oil and gas operation, providing fuel flexibility.
The growth of the biofuels industry in the region, particularly in Brazil, has increased opportunities for using waste gases to generate electricity. The use of CBM and APG is also climbing, and is set to grow even further as environmental regulations tighten, and operators need to dispose of these gases. CBM looks set to be especially significant in Colombia, where coal production has surged, soaring from 32.8 million tonnes in 1999 to 72 million tonnes in 2009. A rising proportion of coal will also come from underground mines, rather than surface deposits.
The Mining Department at Colombia’s National University estimates that Columbia has 3000 underground mines, which generally have only basic ventilation systems and no methane drainage systems. Many reports of methane explosions date back to the 1970s. Extracting coal mine methane (CMM) presents a significant opportunity for cost-effectively improving safety and raising energy production.
Brazil is also investigating the development of CBM, and has started a programme of test wells in the Paraná Basin coal beds.
Why gas engine technology
GE Jenbacher sees the main reasons for the popularity of gas engine technology in Latin America as: high efficiency; the ability to offer cost-effective power across a wide variety of applications; viability in a variety of environments, differing by temperature or altitude, for instance; robustness and mobility; and the ability to relocate.
Efficiency appears to be one of the main areas of interest. High-efficiency cogeneration projects are very attractive to clients in the region through their capacity to use up to 90 per cent of the energy contained within their fuel.
Electricity from pipeline gas often increases power supply, rather than displaces other forms of supply, according to Caterpillar. As power demand escalates, the grid is expanding in many areas, and gas engines can help bridge the gap quickly and at a relatively low cost.
Gas engines can also turn waste into energy with low emissions, making it a very attractive technology on environmental grounds, said GE Jenbacher. For example, coal mine gas can form explosive mixtures with air so using gas engines to help degasify coal mines improves mine safety, while at the same time generating power and mitigating greenhouse emissions by capturing methane.
The use of gas engines to provide distributed power is on the increase for various reasons that depend upon the context. The cost of installing a grid can be prohibitive and some industrial users are keen to have a reliable reserve of power, particularly if demand grows faster than capacity, reducing the reserve margin.
The future of gas
Traditionally, the market for gas engines grows whenever an economy strengthens and the availability of gas expands. In addition, countries in Latin America need to complement hydropower to safeguard the levels of their reservoirs, according to GE Jenbacher. T&D structures in Brazil, Argentina and Colombia fail to meet the countries’ entire needs and long distances along with environmental restrictions make construction of a complete T&D grid prohibitively expensive. In particular, Brazil‘s many challenges include a growing population and the need to process rising quantities of waste. Waste regulations against the alternative use of sources of biogas also brighten the outlook for gas engine technology in the region.
Differences in the growth of the gas engine market can usually be attributed to environmental factors, such as climate and altitude, as well as regional codes and emissions regulations, along with the availability of gas supplies, said Caterpillar.
Latin America is no different from the rest of the world in terms of demands for technological development. Customer demands are focused on continued increases in fuel efficiency and lower operating costs, as well as the ability to use more difficult fuels.
The situation regarding fuel flexibility is less clear. GE Jenbacher believes that higher fuel flexibility is always of interest to customers. But Caterpillar said that, for the most part, fuel flexibility was not in the first priority of requirements for their customers in the region.
The major suppliers of gas engines generally agree that efficiency, reliability and the ability to cope with varied environmental conditions such as temperature and altitude are the principal drivers in the region. The development of carbon credits is likely to have a positive effect on gas engine use. In particular, low energy fuels should benefit.
Overall, Latin America’s rapid economic growth and desire to curb a heavy dependence on hydropower are driving great interest in the use of gas engines for both central power and distributed power generation in the region.
Amazon power project uses gas engines
Breitener Energetica, an independent power producer, converted its UTE Mattos and UTE Fran heavy fuel oil plants to use natural gas. The company installed 46 GE Jenbacher gas engine gensets – 23 at each site – to generate a combined 120 MW for the Amazon city of Manaus, Brazil’s second largest city.
The natural gas is delivered by a new pipeline connecting the oil and gas fields of Urucu in northern Brazil with the city of Manaus. Wagner Silva, CEO of Breitener Energética, said: “Brazil is facing a daunting challenge of minimizing the impacts of energy production while also meeting the demands for electricity in growing cities like Manaus.”
The project is part of Brazil’s efforts to reduce its greenhouse gas emissions by between 36 per cent and 39 per cent from projected amounts in 2020.
Mexican landfill project
A 12 MW project in Mexico is being used to convert gas from the Simeprode landfill near Monterrey into electricity. This electricity is used to support the solid waste facility’s operations as well as Moneterrey’s light-rail system during the day and city street lights at night.
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