EUROPE

UK paves way for 37 GW of new gas plants and kickstarts shale gas regime

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The UK government has left the way open for 37 GW of new gas-fired power stations after it published its Gas Generation Strategy.

Gas should have been part of the government’s long-awaited Energy Bill (see feature p12), but Chancellor George Osborne wanted to keep it separate as he is a strong advocate for gas and wants to give it a regime of new incentives.

As well as laying the foundations for at least 27 GW of new plants ” and up to 37 GW ” the strategy also includes a pledge to look at further measures to encourage gas storage, which will be published in spring 2013; the establishment of an Office for Unconventional Gas and Oil, designed to push forward in particular the exploration of shale gas; and a commitment to support the development and commercialisation of carbon capture and storage.

The strategy was enthusiastically greeted by the gas industry and engineering groups.

Vesa Riihimàƒ¤ki, president of Wärtsilä Power Plants, said: “We welcome the government’s announcement of continued support for gas generation in the UK, and hope that now the focus can shift to the important and necessary role that flexible gas generation can play in a largely decarbonised UK electricity system in future.”

George Grant, chairman of UK gas company Stag Energy, said the strategy “goes some way to removing the government’s ambivalence on the symbiotic role that gas must play with renewables to secure affordable electricity supplies during what will be a long-term transition to a low carbon economy”.

However, he added that “the devil is in the detail, and without appropriate detail, it will be difficult if not impossible for independents such as Stag Energy to raise the level of equity and debt finance to fund the investment required and thus make the generation market more competitive”.

“If independent players and new entrants are to be able to create more competition across the gas to power chain and help provide security of energy supply, there is an urgent need now for clarification on the operation of the proposed capacity market to support independent investment in new gas generation. We also urgently want the introduction of measures to support new investment in UK-based gas storage to ensure security of gas supply and to protect consumers against possible volatile movements in the future price of gas.”

Tim Fox, head of energy and environment at the Institution of Mechanical Engineers, said the strategy “provided some very welcome clarification as to the role of gas in bridging the looming energy gap mid-decade”.

“It is sensible for the UK to invest in gas-fired power plants at this point in time as they are cleaner than coal, needed to back up intermittent renewable energy sources, and can be built quicker with much lower up-front costs than nuclear plants.”

He added that the setting up of the new Office for Unconventional Gas was “positive, as fuels like shale gas and coal-bed methane could play a useful role in meeting energy demand, as well as having the potential to create thousands of high-skilled engineering jobs and export services over the next decade”.

Ben Warren, environmental finance partner at Ernst & Young, said the strategy “clearly demonstrates the increasingly important role that gas-fired plants will play in the UK’s energy mix, particularly in the country’s efforts to address security of energy supply and to make a cost effective contribution to lower emission power production”.

Regulation is stalling power investment, say European energy bosses

Almost 100 per cent of energy leaders surveyed for a new report believe that future European power generation is at risk because vital investment will not materialise.

In the survey by trade association Eurelectric, 44 out of 45 bosses said the €1trn investment by 2020 that the International Energy Agency says is essential will not occur because of volatile national and European regulation.

Eurelectric Secretary-general Hans ten Berge said the results of the study “paint a deeply troubling picture of the current state of power sector investments in Europe. While it is true that this trend is not the same across all of Europe, business leaders overwhelmingly feel that a poor investment climate is leaving them trapped in a vicious circle in which changing regulation decreases the attractiveness of utilities,” he said. “This deters investment and leads to yet more volatile regulation, as policymakers desperately try to ensure that the necessary investment takes place.”

Other reasons highlighted by the report ” called Powering Investments: Challenges for the Liberalised Electricity Sector ” for the troubled investment climate include higher borrowing costs as a result of the sovereign debt crisis, continued distortions in wholesale and retail energy markets, and various national ad-hoc taxes on utilities.

Eurelectric states that the biggest obstacles to investment could be overcome if policymakers provide greater policy consistency and prioritise long-term strategic thinking over short-term interventionism, the report concludes.

David Porter, who chaired the group that produced the report, said: “There is a converging view that energy companies, together with pension funds or private equity firms, would be able to raise the necessary funds if a sound framework was set.

“Utilities have traditionally been regarded by investors as a ‘safe bet’, but although they now manage their business risks very well, the political and regulatory risks that they face are often unmanageable and investors can see this. European and national policymakers should try to restore stability through improved consistency and co-ordination.”

Eurelectric is calling on governments to rapidly implement EU legislation towards completing an integrated European energy market and believes that the European Commission should encourage greater alignment between EU and national energy policies. “Instead of adopting an interventionist targets for everything approach, policymakers should set a broad framework that allows the market to work, thereby encouraging those investments that make the most economic sense and reducing the costs of the low-carbon energy transition,” it states.

Gazprom revives German power plan

OAO Gazprom is reviving plans to build a gas-fired power plant in Germany, its largest export market.

Gas from the Nord Stream pipeline reaches northeast Germany at the state of Mecklenburg-Vorpommern, where authorities have asked Gazprom to participate in building gas-fired plants, reported Bloomberg.

A Gazprom Export official confirmed his company’s interest in the power project to the news agency.

Gazprom supplies about a quarter of Europe’s gas but faces competition from liquefied natural gas, Norwegian gas and cheap US coal, amid calls for discounts on its oil-linked prices.

E.ON plans to build and operate a combined heat and power (CHP) plant in the town of Lubmin, near Nord Stream’s entry point, through a joint project company with Gazprom’s Wingas GmbH venture, E.ON spokesman Alexander Ihl told Bloomberg.

The Mecklenburg-Vorpommern region has revealed plans to build three gas-fired generating units totalling up to 3450 MW.

E.ON eyes Turkey with $2bn Enerjisa deal

de Rivaz
EDF boss de Rivaz: ‘life extension does not replace need for low carbon power’

E.ON is taking a half share in Turkish power company Enerjisa as it targets emerging markets such as Turkey and Brazil to offset slow growth in its home market of Germany and other parts of western Europe.

The €1.5bn ($2.0bn) transaction is an asset swap with Austrian utility Verbund, which will trade its 50 per cent stake in Enerjisa for full ownership of eight Bavarian hydro plants totalling 351 MW it operates with E.ON.

The German utility last month issued a profit warning for 2013, with surging renewables capacity undermining its revenue from gas fired power stations in Germany.

E.ON expects Enerjisa to increase its stake in the fast-growing Turkish electricity market from about 4 per cent up to 10 per cent, said E.ON CEO Johannes Teyssen. Enerjisa aims to raise its generating capacity from 1.7 GW to about 5.2 GW in 2015 and then 8 GW in 2020, with E.ON investing about €200m ($260m) a year, he said.

Enerjisa Chairman Selahattin Hakman said Enerjisa plans to invest in the Turkish government’s asset sales in power grids and power plants. The venture will bid in a government auction for the operational rights to the Gediz power grid in western Turkey, he said.

The deal is scheduled to close in the first quarter of 2013 and is subject to an antitrust review, according to the companies.

EDF extends life of UK nuclear plants by seven years

EDF Energy has extended the operating life of two of its UK nuclear power stations by seven years.

Hinkley Point B and Hunterston B are now expected to remain operational until at least 2023. The decision follows five-year extensions to two other plants, Heysham 1 and Hartlepool, announced in 2010.

EDF Energy chief executive Vincent de Rivaz said: “This decision will provide low carbon energy to keep the lights on in the UK and it will safeguard jobs at the plants, in the UK nuclear industry and its supply chain. It follows a thorough review of safety over the lifetime of each of the plants.”

“Extending the plants’ lives also brings significant training and employment opportunities for a new generation of nuclear engineers and operators as we seek to develop the UK’s position as a primary source for skills and expertise in the industry.

He added that “life extension does not replace the need for new low carbon generation. Even as we agree to extend the life of our existing plants, we are moving forward with plans to create the next generation of nuclear power stations.”

EDF Energy said today it expects an average seven-year life extension across all its advanced gas-cooled reactor plants and a 20-year extension for Sizewell B, the only pressurised water reactor in the UK.

Austria leads for renewables investment

Austria has topped the Energy Investment Map as the leading country for renewable investment among 14 European nations studied by UK firm PA Consulting Group.

First place was awarded through assessing the business case and risk assessment factors for ten technologies. Austria’s lead reflected its wind, hydro and biomass investment opportunities.

Norway and Denmark took second and third positions thanks to their commitment to onshore wind. Sweden was placed fourth with a high renewable index score for hydro power. The UK came fifth and Germany sixth.

But PA Consulting concluded that France, Ireland, Finland and Spain are all “falling short” due to their low or inexistent feed-in tariffs.

AFRICA

Sasol fires up 140 MW on-site gas plant

Energy and chemical company Sasol is now testing an on-site 140 MW gas-fired combined heat and power plant at its facility at Sasolburg in South Africa’s Free State.

The plant is described by the company as South Africa’s largest gas engine plant. It replaces coal-derived grid power and is due to hit full capacity by year-end. Sasol plans to raise its on-site capacity to 60 per cent of its demand by 2013 and aims to cut its emissions by 15 per cent from a 2005 baseline by 2020.

“Sasol partners with government to deliver solutions and this latest investment is part of our significant capital expenditure programme in South Africa,” said Sasol New Energy’s managing director, Henri Loubser

Sasol is a signatory to the South African Energy Efficiency Accord, an agreement between government and industry to take voluntary measures to increase energy efficiency.

ASIA

China dominates wind turbine blade market

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China is dominating the wind farm rotor blade market, with more than three times the number of installations of its closest rival, the US.

According to new research, China held a massive 59 per cent of market share in 2011, with 37,385 installations. The US accounted for 18 per cent of the market with 11,085 while India was in third place with an 11 per share.

Analysts at Global Data who carried out the study predict that global cumulative wind power installed capacity will “show steady growth until the end of the decade”, increasing from 238,600 MW last year to 658,449 MW by the end of 2020.

It also notes that blades for offshore wind farms will take a far greater slice of the market. In 2011 blades destined for offshore wind farms accounted for just 1 per cent of the global market ” by 2020 this will rise to 11 per cent, says Global Data.

Tamil Nadu prepares 1 GW solar auction

India’s southern state of Tamil Nadu plans to auction 1 GW of solar power capacity next month, said the state electricity utility.

Developers may submit bids for projects of 1 MW or more by January, according to a tender document from the Tamil Nadu Generation and Distribution Corp. Those offering to sell solar power at the lowest rates will win and will sign 20-year power-sale contracts with Tamil Nadu Generation and have 10 months to build the plants or face penalties.

Developers will be responsible for laying power lines from their project to the nearest substation at their cost and for obtaining land for their projects.

Meanwhile, India has set a goal of 9 GW of grid-connected solar plants by 2017, more than eight times its current capacity, in a recently released draft policy. Plans include auctioning 1650 MW of PV capacity by the central government in the next financial year, grants to cut project costs, and loosening curbs on the purchase of equipment from overseas, according to the draft published on the website of the Ministry of New and Renewable Energy. The policy would for the first time fund the solar industry with direct grants covering as much as 40 per cent of the upfront cost of building projects.

Mitsubishi Heavy and Hitachi fuel power units to merge

Mitsubishi Heavy Industries and Hitachi Ltd are to combine their fossil fuel power businesses to take on larger foreign rivals.

Mitsubishi will take 65 per cent and Hitachi 35 per cent in a new company that can face up to competitors such as Siemens AG and General Electric Co, which are bagging contracts even in Japan.

Hitachi chief executive Hiroaki Nakanishi said the alliance was necessary due to a challenging global economy and competition from established operators as well as emerging rivals in China and India.

While fossil-fuel fired generation in Japan has benefited from a post-Fukushima backlash against nuclear, bids on gas turbine projects are now open to foreign players.

GE and Toshiba Corp recently triumphed over Mitsubishi Heavy for a Chubu Electric Power Co contract for expanding a gas turbine combined cycle (GTCC) plant. The merger deal will complete by January 2014 and, at least for now, excludes the firms’ nuclear power businesses. Talks between the companies on merging infrastructure businesses had been called off more than a year ago.

International

Technology to help triple renewables’ venture funding

Renewables
Renewables’ venture funding is poised to triple

Venture capital funding market for renewable energy projects will triple by 2020 due to positive regulatory policies and technological innovations, according to Frost & Sullivan.

Venture Capital Funding in Renewable Energy in Europe finds that Europe and North America have seen the greatest deal activity.

But investors are now looking at South Asia and the Asia-Pacific as emerging regions of renewable development.

Frost & Sullivan financial analyst Vinod Cartic said that “2011 was a stellar year for renewables deal-making with the number of deals rising by two thirds year-on-year, although total deal value went down by one third”.

“Europe, in particular, followed by the Asia-Pacific region, led this trend towards more but smaller deals. This was in contrast to North America, which had fewer deals of larger individual values.”

He added that “newer technologies such as thin-film solar and advanced biofuels such as cellulosic biofuels and biofuels from algae are among the most pursued green energy technologies”.

Investments in sustainable energy have also broadened to include energy storage, energy efficiency and Smart Grid technologies.

SOUTH AMERICA

GE clinches $394m Brazilian deal for 230 wind turbines

GE has won a $394m deal to provide 230 turbines to Brazilian wind farm developer Renova Energia.

Renova Energia will deploy GE’s 1.68-82.5 wind turbines at its Alto Sertàƒ£o II Wind Farm, which it started building in November 2011.

Alto Sertàƒ£o II comprises 15 parks with a total installed capacity of 386 MW and will serve the cities of Caetité, Guanambim and Igaporàƒ£, in the southeast of Bahia state.

Renova Energia’s legal and purchasing director, Luiz Freitas, said: “Scale and efficiency are increasingly important factors in the wind power segment and they have created a new scenario, which is more complex and which requires internationally recognised partners such as GE.

“This contract is the result of the value generated by a joint Renova and GE team in the pursuit of state-of-the-art wind power technology in Bahia.”

NORTH AMERICA

US could cut power plant pollution by 26 per cent, says NRDC

President Barack Obama could cut greenhouse gas emissions from US power plants by 26 per cent by 2020 without introducing new laws, according to the Natural Resources Defense Council (NRDC).

NRDC’s plan puts pressure on the administration to issue new rules. President Obama could use his authority under the Clean Air Act to clamp down existing polluters in a cost-effective way, the NRDC said in its report.

Under the plan, the Environmental Protection Agency (EPA) would set guidelines for existing power plants that reflect a state’s specific mix between power sources such as coal, gas and oil.

EPA Administrator Lisa Jackson triggered an outcry among environmental groups earlier in the year by stating the agency had no plans to move ahead with emissions rules.

NRDC director David Doniger said the US could take “a big bite” out of carbon pollution without new legislation.

MIDDLE EAST

Saudi Arabia details 27 GW nuclear and wind plans

Saudi Arabia plans to produce 18 GW from nuclear plants and 9 GW from wind by 2032.

The country also plans to generate 1 GW from geothermal energy sources and 3 GW by turning waste into a fuel, said Khalid al-Suliman, vice-president at the King Abdullah City for Atomic and Renewable Energy.

Officials are considering selling solar power to the European Union during winter seasons through Turkey and the agency has completed feasibility study for the project.

Meanwhile, Qatar will issue a tender in early 2014 for the construction of an 1800 MW solar power plant that is set to cost between $10m and $20m.

“We need to diversify our energy mix,” said Fahad Bin Mohammed al-Attiya, chairman of the Qatari organisers of climate talks in Doha

Qatar is believed to be the world’s highest per capita greenhouse gas emitter.

Clinton backs Westinghouse bid for Czech $10bn nuclear project

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Clinton: encouraging diverse energy sources

Westinghouse was given a boost in its bid for a $10bn expansion of Temelin nuclear power plant when US Secretary of State Hillary Clinton spoke to the Czech Republic government.

Mrs Clinton asserted that the Czechs need to reduce dependency on Russia for their fuel supplies.

“We are encouraging the Czech Republic to diversify its energy sources and suppliers,” Clinton said.

“Given how long-term and strategic this investment is, the Czech people deserve the best value, the most tested and trustworthy technology, an outstanding safety record, responsible and accountable management.”

The Czech Republic gets 60 per cent of its oil, 70 per cent of its natural gas and all of its nuclear reactor fuel from Russia. That leaves the NATO member highly susceptible to economic and political pressure from Moscow.

AFRICA

ABB clinches $225m South African solar deal

ABB
ABB will build two solar plants in Limpopo.

ABB has won contracts worth around $225m for two turnkey photovoltaic power plants to be built in Limpopo, South Africa.

The two plants will have a generating capacity of 33 MW and 31 MW and will be among the first utility-scale PV projects to be built in the first phase of the South African government’s long-term renewable energy programme.

The orders came from two special purpose entities, Core Energy and Erika Energy, whose primary stakeholders include solar giant Sun Edison.

Power from the plants will be fed into the transmission grid via a new high-voltage substation. Together, the plants, which are due for completion in 2013, will generate 130 GWh per year.

Brice Koch, head of ABB’s Power Systems division, said: “Our vast experience in supplying high-efficiency PV power plants, combined with our local capabilities and presence, will enable us to deliver best-in-class solutions and support the country’s vision to integrate renewable energies.”

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