For component suppliers in the global power sector, it is crucial to know where the industry is headed in the medium-to-long term and which technological, regulatory and resource issues are most likely to affect them. Tildy Bayar spoke with Jose Larios, President Power & Energy at SPX Flow, about the changing energy landscape and his company’s strategy to address it
“One thing about energy predictions is certain: they will be wrong. At least in absolute terms and within a specific time window.” So wrote José Larios, President Power and Energy at global valve and pump manufacturer SPX FLOW, on the occasion of the International Energy Agency’s (IEA) release of its 2016 Energy Outlook.
“However,” he continued, “the macro factors driving [energy sector] predictions remain very valid.” Larios, who is based in the US, keeps a close eye on power sector developments around the world in order to align SPX FLOW’s business with evolving technology needs. His business designs new valves and pumps in a symbiotic relationship with its customers, which include the major nuclear plant developers as well as utilities in the coal and gas power spaces.
PEi spoke with Larios about the changes driving the global power sector and the corresponding strategies behind SPX FLOW’s core businesses in the nuclear, gas and coal power sectors.
Q: What is your view of nuclear power’s place in the global power mix?
Each country and region has a different approach to selecting their own individual power mix, but there are around four to five key critical elements that countries take into account. Energy security; emissions policy or public health policy; population growth and the need for infrastructure, in particular for power generation; and finally, technology innovation. It’s also very important that power projects create jobs and leverage the local supply chain.
In India there is huge population growth, a huge infrastructure need, a supply chain installed and a large manufacturing infrastructure available. India could leverage its significant nuclear capabilities to build something like 18 reactors. China is similarly developing a number of reactors in a bid to tackle emissions concerns.
In Europe, public safety concerns are seeing a big growth in renewable energy with a lot of subsidies. Whereas nuclear is becoming important for the UK where the energy security and industry creation issues have become more prominent.
So if you put all of these countries and approaches together, the share of global nuclear will increase because of the scale of the opportunity provided by China and India, and what the UK wants to develop. Through technological improvements the sector will also grow to be safer than it ever has been. And with the development of new technologies like small modular reactors (SMRs) you don’t need huge infrastructure projects. SMRs have the potential to be more efficient and can deploy quickly to more remote places.
Q: What are the most pressing concerns for the nuclear power sector right now?
In nuclear, the most important topic is always public safety for sure. This comes in many shapes and forms, but the first is how to address the post-Fukushima world. In existing or new designs, everything revolves around safety – which leads to new technology, new activities and upgrades on fleets around the world.
Each part of the world is doing its own assessment of how to respond to the post-Fukushima world, and each has developed a different set of principles that suits their philosophy and the types of plants already installed.
SPX FLOW is deeply involved in technology development to address safety concerns. We’re delivering TWL emergency reactor cooling pumps in order to make sure all plants in Japan can operate under the new post-Fukushima safety regulations. We’re working too with our customers in France to develop safety pumps and valves for post-Fukushima upgrades.
We’re also implementing and developing technology for new reactor designs in China. We are involved with all the industry players in understanding how we can keep developing and delivering the most advanced safety pumps and valves.
From new big reactors to SMRs, the nuclear sector is investing more in new technology than the rest of the power and energy world. There are a lot of things on the radar in the nuclear sector, notably around fuel and scale. The trick for all players in the industry is meeting the evolving needs of the industry as well as being cost-effective. Understanding the right equation, figuring out the right size, technology and cost for plants in the future is the same in the UK, China or India. Everyone needs an economic model that works.
Q: What is your view of the coal and gas power sectors?
Understanding the mix for energy companies around the world is key: how much of their old nuclear they keep running at a high cost, how much they replace with new nuclear, or with combined-cycle plants (CCPs) like in the US. The big challenge for power companies is finding the right mix of technologies and being flexible.
Customers worldwide tell me that it is hard to predict what the profitability for each of these technologies will be in 10 years’ time. So, they need a flexible portfolio which can expand and contract as time evolves, rather than just concentrating on one technology.
Gas will become a very important source in the mix because of its availability globally. In terms of cost, looking at prices in both the US and Asia, gas is extremely competitive so you can build combined-cycle plants at very low cost. Renewables will grow too in countries where the government and the public are willing to make heavy investments in subsidies until the industry becomes profitable in the long term.
I see coal being drastically reduced in the global power mix. From 2014-15, in the UK alone, coal went from close to 30 per cent to closer to 25 per cent of the energy mix, that is a very short period of time. Coal will be limited to a few areas of the world that are less concerned about emissions and have plentiful coal resources. But there are less and less of those in the world.
Companies have challenges in understanding what their mix should be. We’re helping them by expanding our product portfolio and working with them to reduce the cost of the overall ecosystem, not only the equipment. We provide, for example, pumps for CCPs. We work with our customers to design pumps and valves that help increase profitability and reduce noise levels, which are now a concern.
We have established a global network of service centres that can meet customers’ servicing needs and reduce downtime, our local workforce can respond and work in a timely and efficient way whenever there are planned maintenance cycles.
In North America, with the recent addition of a significant number of plants, it becomes very important how fast utilities and EPCs can build plants and put them to work. As an equipment provider it’s very important that we develop products quickly, products that need less engineering every time to bring down costs and meet regulatory needs.
In the US, in the past years, noise levels have become a huge issue. Now regulators are more stringent, so our job is to make sure current designs help our customers achieve overall noise levels.
Q: What are your key markets for 2017 and beyond?
In the nuclear sector, we’re concentrating on France and Japan where we are delivering post-Fukushima safety solutions to both fleets. We’re focusing on fast-growing markets, notably China where close to 20 plants will be built as well as SMRs.
India is growing significant power capabilities and is attracting attention from foreign investors too, with EDF and Westinghouse announcing projects with the Indian government for newer-design reactors. The UK is investing in developing a new generation of nuclear power and construction of Hinkley Point C is already underway.
In the coal and gas markets, combined cycle plants in the US is a big area of focus for us. The presence of cheap gas gives a huge advantage to utility companies that have CCPs as part of their portfolio. We supply all types of pumps and valves for that market.
We also work a lot in Spain, supplying valves and pumps in the local power generation market, as well as supplying Spanish EPCs which are very active building plants in Latin America and other parts of the world.
Globally, the Middle East is very important in terms of pure power generation and also in terms of generation attached to oil and gas infrastructure. For example, countries like Saudi Arabia build significant infrastructure for downstream oil and gas, which requires its own power generation.
Q: How do you see the future for small modular nuclear reactors, or SMRs?
SMRs will not be developed in just one country, but certainly a critical development is the UK’s research programme launched with £250 million ($307 million) behind it. This is going to generate a tremendous amount of interest in SMRs and we are part of the discussions with all players in that space. Meanwhile, China wants to develop more than 20 SMRs which will require new investments and similar technological innovation.
One drawback of nuclear has always been the huge investment needed for any government or utility to build a nuclear power plant, whereas SMRs are a lot more accessible, plus you can deploy them in more remote places. As an equipment provider it’s exciting to develop new technology and we’re in the early stages of discussions with projects around the world.
The key challenge for the nuclear industry is finding which designs are going to deliver on safety, cost, and quick implementation in the field. I don’t think all of these technologies will progress forward, so as an industry we’ll have to develop them enough to make projects commercially viable.