European micro-CHP market threatened by ‘mixed policies and fickle’ support

The European micro-CHP market is being threatened by “a mixed policy outlook and fickle government support” according to a new report.

Analysts at consultants Frost & Sullivan said that “favourable government policies, financial backing and aggressive promotion will be necessary to kick-start the market”.

In its report, Opportunities in the European Micro-CHP Market, Frost & Sullivan found that Germany has made the greatest progress with the technology. As well as reactivating micro-CHP subsidies, last year the government announced €20m ($26m) of funding for micro-CHP and mini-CHP.

There have also been very positive developments in the UK. Denmark, Italy, France, Poland and the Czech Republic are “smaller, emerging markets”, but the sector faces “an uphill struggle” in the Netherlands and Belgium.

Frost & Sullivan’s energy analyst Neha Vikash said: “Currently available incentives are inadequate to promote the transition of the micro-CHP market from pre- to mass commercialisation. Policy makers need to realise the benefits that this technology can deliver on a large-scale, both at EU [European Union] and regional levels.”

She added: “Stronger policies supporting micro-CHP are critical to driving higher volumes. Sales will remain uncertain without financial backing.”

Vikash said that the key factors that will enable mass volume uptake are government support and companies’ strategic will to promote micro-CHP.

“The technology will perform or perish depending on the grants available,” she stressed.

“The challenge facing the industry’s growth at this juncture is regulatory rather than technical.


Vattenfall could axe 2500 staff to save $703m

Swedish energy giant Vattenfall could axe up to 2500 staff by the end of 2014 as the company seeks to cut costs by a staggering SEK4.5bn ($703m).

The warning came from Vattenfall chief executive Oystein Loseth and his deputy Ingrid Bonde when they spoke at a meeting with the Vattenfall European Works Council.

Oystein Loseth   Loseth said the company was facing low electricity demand, an oversupply of CO2 emission allowances, production overcapacity and low electricity market prices.
Vattenfall boss Oystein Loseth
Credit: Vattenfall

“This new reality requires efforts in further improving our efficiency and strengthening our financial position,” he said.

Ingrid Bonde   Bonde added that Vattenfall now has to adapt to the “greatly changed market situation” through divestments, a decreased investment plan, staff reductions and a “focus on operational excellence”.
Loseth’s deputy Ingrid Bonde
Credit: Vattenfall

“We also have to continue evaluating our assets. We have recently announced the potential divestment of our Danish thermal business and the evaluation of a sale of our share of the lignite power plant Lippendorf in Germany. Other initiatives, which are currently being further explored, include potential divestments of non-core assets and the evaluation of strategic alternatives for underperforming generation assets.”

Warning of impending job cuts, Loseth said: “We cannot see that synergies and savings have been fully realised yet in our staff and support functions. We see a strong potential for cost improvements in these areas, which will require staff reductions in all countries we operate in.”

The job cuts will mainly affect employees currently working in Berlin, Hamburg and Cottbus. The total reduction of staff in Germany is expected to be roughly 1500 by the end of 2014.

In Sweden, a headcount reduction of around 400 is expected, with about 500 jobs going in The Netherlands and 50 in other countries.

“I would like to emphasise that Vattenfall wants to achieve potential headcount reductions in a socially responsible manner and in close cooperation with the employee representatives of the affected units in all countries,” Loseth said.

He added that 2012 “was a tough year for the entire European energy sector and the industry is facing substantial challenges. Demand is still low as a result of the economic recession. At the same time, new capacity is being added, especially in renewable energy production, which has led to low prices. What used to be considered ‘normal’ no longer applies. This is the new normal.”


RWE hopes to raise €4.6bn from sale of oil and gas business

RWE
RWE recorded better-than-expected 2012 results
Credit: RWE

Germany’s second largest utility RWE is to sell its oil and gas business in a bid to cut its debts.

The company revealed that it hoped to raise around €4.6bn ($6bn) from the sale of its exploration and production arm RWE Dea, which would “take considerable pressure off future capital expenditure and therefore make an essential contribution to improving RWE’s financial headroom”. The company currently has debts of €33bn.

News of the planned disposal came as RWE unveiled its 2012 results, which were better than expected.

The group’s earnings before interest, tax, depreciation and amortisation were €9.3bn and its operating result was €6.4bn, both up 10 per cent on the previous year.

RWE is still adjusting from the decision taken by the Merkel government in 2011 to withdraw from nuclear power, however its 2012 results were boosted by its profitable fleet of lignite plants, which helped to lift the group’s electricity generation by 10 per cent to just over 227 billion kWh.

In Germany, RWE’s operating result was up 10 per cent to €4.6bn and earnings from power generation increased 13 per cent to approximately €3bn.

In the Netherlands and Belgium, business decreased 7 per cent to €228m, while in the UK the operating result rose a healthy 34 per cent to €480m.

RWE’s renewables division, RWE Innogy, saw a slight improvement with an operating result of €183m, but the company cautioned that “the development of growth projects is still very cost-intensive. This is contrasted by the positive impact of the commissioning of new generation capacity.”

RWE chief executive Peter Terium said: “We are a company that has to work hard for its future and we will face the challenges created by the transformation of the German energy market.”

He said the group’s target to become “more sustainable, more robust and more international” will remain but will have “to be pursued more slowly due to the limited financial headroom”.


Europe faces €1trn cash crunch that could derail green agenda

The European power sector is facing a double whammy of a capacity and investment crunch which could jeopardise its security supply and derail its low-carbon agenda.

That is the stark warning in a report which puts a €1trn ($1.3trn) price tag on the new infrastructure needed to maintain Europe’s energy supplies.

Analysts at US-based consultancy IHS say the investment climate deteriorated over the last year as several countries faced a double-dip recession, while the financial strength of utilities weakened because of higher debt levels and weaker credit ratings.

“Europe’s energy sector faces a large and pressing investment challenge,” said Michael Stoppard, co-author of the report The Energy Investment Imperative: Toward a Competitive and Consistent Policy Framework.

“Today the required investment is lacking. However, because of the long lead time to develop energy assets, it is imperative that the right investment framework be put in place as soon as possible to ensure long-term stability of Europe’s energy system,” he added.

IHS has calculated that investment of around €750bn is needed over the next ten years for power generation, €90bn for transmission lines and about €150bn for new gas supply and transmission capacity.

The report notes that Europe is due to close around a quarter of its fossil fuel power generation capacity by 2023 to meet tighter environmental rules, while the rapidly expanding renewables sector needs back-up supply and better grid interconnections.

This means that “new approaches to corporate and project finance will be needed to attract institutional investors, and regulators will need to take major steps to reduce uncertainty for these investors” noted IHS.

“The current market structure is unlikely to attract the necessary risk-bearing investment,” said Fabien Roques, head of European Power Research the report’s co-author.

“Premiums to cover significant regulatory and market risks threaten to drive up the costs of capital in an already capital-intensive industry.

“National reforms to implement capacity mechanisms risk undermining progress so far with market integration at the European level. Unless the investment framework is fixed urgently, Europe will fail to deliver on its low-carbon agenda.”


SEE pulls plug on participation in UK-Norway interconnector project

UK utility SSE has pulled out of a project to build a subsea electricity link between Scotland and Norway.

The company said it would no longer have any “financial involvement” in the 1400 MW NorthConnect project.

The companies withdrawal decision is part of its plan to ditch international investments and concentrate on the UK and Ireland.

In a statement the company added that its decision was also taken because of the “lack of short-term clarity on the regulatory regime surrounding interconnectors”.

The other backers of NorthConnect – Vattenfall and Norwegian companies E-CO Energi, Agder Energi and Lyse – remain committed to the project, and said in a statement that the decision by SSE does not affect the deliverability of the scheme.


Poland’s renewable progress at risk

Alstom
2012 was an “exceptional year for Polish wind energy”
>Credit: Alstom

Poland made great strides in 2012 in uplifting its renewable power capacity, however a leading industry spokesperson says that if transparency and regulation are not agreed on soon, that positive momentum could be lost.

Katarzyna Lukasik of the Polish Wind Energy Association told Power Engineering International: “There is a lack of relevant legal regulations enabling stable development of the sector. “In recent months the mood among investors has been awful.”

She said 2012 “was an exceptional year for Polish wind energy – not only in terms of another record in installed capacity growth”.

“Green energy production from wind turbines also grew very positively,” she added, before warning: “Despite that significant growth of the wind energy sector in recent years it may be very difficult to meet our targets – in particular from a 2020 perspective.”

Considering Poland’s huge, long-term, concentration on coal-fired power generation, the strides made recently in stimulating renewable growth have been relatively impressive. Poland has the second highest coal power dependency in the world, with the source representing 90 per cent of its power generation.

Lukasik fears that the government’s lack of speed in introducing new energy legislation may see a loss in impetus for the long neglected green energy sector’s progress in the country.

“The climate amongst investors is now dominated by the RES Act. For the wind energy sector here, a lack of transparent long-term regulations is proving the major barrier to the quick development of new investment.”

The European Commission has referred Poland to the European Court of Justice for failure to implement directives aimed at getting the country compliant with emissions targets set at Lisbon in 2009. The country may end up paying fines of up to €85,000 ($110,000) per day, once a ruling is handed down.

The Polish government is now scrambling with domestic legislation aimed at somehow avoiding the punitive fines coming its way if targets are not met.

There is no doubt that Poland possesses great capacity potential should regulations favour renewable development over the next decades. The independent Renewable Energy Institute states that the true market potential of wind in Poland by 2020 amounts to around 11.5 GW onshore and 1.5 GW offshore.

According to Lukasik, “the figures are much higher than assumed in the Polish National Renewable Energy Action Plan. In the long term, the industry may substantially increase its share in the national energy mix.”


GE signs pact to overhaul energy on Sakhalin Island

GE is to help overhaul the energy system on Sakhalin Island, the largest island in Russia.

The US engineering giant signed a memorandum of understanding (MOU) with the Sakhalin provincial government to develop power generation projects using a range of technologies, including aeroderivative gas turbines, coal gasification, gas engines and wind power.

Darryl Wilson, president of aeroderivative gas turbines for GE Power & Water, said the deal “opens the way for several local power companies on Sakhalin to start working with GE to develop specific projects based on LM aeroderivative gas turbines and other GE equipment”.

Sergey Hotochkin, Sakhalin deputy prime minister, said: “A reliable local supply of electricity is critical to the future economic growth of this region and to the quality of life of our citizens. In addition to addressing the region’s need for more power, the MOU with GE supports the Russian government’s initiative to modernise the country’s energy infrastructure.


AFRICA

Kenya in $6m renewables investment

Kenya’s state-owned utility Kenya Power is spending $6.4m on developing off-grid renewable power projects.

The solar and wind projects will complement diesel generation in the North Eastern and Rift Valley, which are not connected to the national grid.

Kenya Power’s deputy manager in charge of off-grid stations, Henry Gichungi, said the company has so far commissioned eight solar and wind projects with a total installed capacity of 1 MW.

He explained that plans are already underway to being another 2.3 MW on line.

“Kenya’s geographical location astride the equator gives it a unique advantage for a solar energy market. The country receives good solar [radiation] all year round coupled with moderate to high temperatures, which makes it a conducive market for solar,” he added.


MIDDLE EAST

Libya sitting on solar goldmine

QCells
Solar power could transform Libya’s energy
Credit: QCells

Libya could generate around five times the amount of energy from solar power than it currently produces with crude oil, according to new research.

The data was released by the UK’s Nottingham Trent University and comes as many countries in the Middle East are looking to deploy renewables in an attempt to preserve their own domestic fossil fuels for export.

The university’s study found that oil-rich Libya could generate enough renewable power to meet its own electricity needs and a “significant part of the world energy demand by exporting electricity”.

With 88 per cent of its landmass desert, Libya has an average daily solar radiation rate of about 7.1 kWh per square metre per day and even more in its southern region.

Researchers at Nottingham believe that if the country used just 0.1 per cent of its landmass to harness solar power, it could produce the equivalent to almost 7 million barrels of crude oil per day in energy. Considering Libya is said to produce about 1.41 million barrels of crude oil per day, that is a solar statistic worth some serious thought.

Dr. Amin Al-Habaibeh from the university says that “although Libya is rich in renewable energy resources, it is in urgent need of a more comprehensive energy strategy. It is difficult to break the dependency on oil and natural gas, not just in terms of the country’s demand for it, but also in terms of the revenues it generates.

“Renewable energy technology is still in its early days in Libya and a clear strategy and timetable is needed to take it forward. In particular, work needs to be done to develop the skills and knowledge needed to install and maintain renewable energy systems.”

And it is not just solar that is there for the taking in Libya. Exposed to dry, hot and prolonged gusts of wind, its potential for wind farms is also extensive. “Wind energy could play an important role in the future in meeting the total electric energy demand,” added Ahmed Mohamed, a PhD student from Libya who worked on the university project.

“Several locations, including a number along the coast, experience high wind speeds which last for long periods of time.

“If Libya could harness only a tiny fraction of the renewable energy resources it has available in the form of solar and wind power, not only could it meet its own demands for energy, but also a significant part of the world’s demands by exporting electricity.

“The availability of renewable energy could provide a good complement to meet peak loads and current energy demand, and this in turn can be a good reason for encouraging wind and solar energy projects in Libya.”


ASIA

India will depend on coal for 20 years warns minister

World Coal Association
India’s coal dependency set to last
Credit: World Coal Association

India will remain heavily dependent on coal for the next 20 years despite its plans to boost the use of hydro, nuclear and renewable power, according to the head of the country’s coal ministry.

S. K. Srivastava, secretary at the Ministry of Coal, said the federal government predicts that 52 per cent of India’s total power generation will come from coal in 2030 – at the moment the figure is 57 per cent.

He told reporters at a conference that India’s capacity is set to hit 700 GW by 2030, and 365 GW would be derived from coal power.

Srivastava also revealed that the government wants to allocate more coal mines to power companies in order to raise the production of coal. He said 17 new coal blocks will be handed to state-run companies by the end of April.


INTERNATIONAL

World Bank launches $500m geothermal power initiative

World Bank
Geothermal could be a “triple win for developing countries” says World Bank
Credit: World Bank

The World Bank has launched an ambitious initiative to mobilise $500m of investment into geothermal energy for renewable power generation.

The Global Geothermal Development Plan was launched at the Iceland Geothermal Conference in Reykjavík by World Bank managing director Sri Mulyani Indrawati, who called on donors, multilateral banks, governments and the private sector to help better manage and reduce the risks of exploratory drilling to bring geothermal energy “into the mainstream”.

He said: “Geothermal energy could be a triple win for developing countries: clean, reliable, locally-produced power. And once it is up and running, it is cheap and virtually endless.”

Many developing regions are rich in geothermal resources, including East Africa, Southeast Asia, Central America, and the Andean region. At least 40 countries have enough geothermal potential to meet a significant proportion of their electricity demand.

Some, such as Kenya and Indonesia, are developing their geothermal resources, but with only 11 GW of geothermal capacity worldwide, a global scale-up has yet to happen.

The World Bank says that a key obstacle is the initial test drilling phase for geothermal projects, which is expensive and risky. Proving the viability of a single steam field can cost up to $25m, and if a site has no potential, this investment is lost.

The World Bank and Iceland are already working together to support surface exploration studies and technical assistance for countries in Africa’s Rift Valley.

Mulyani added: “Until now, our work has been at the country and regional levels. These efforts are important, and should continue. But a global push is what is needed now. Only a global effort will put geothermal energy in its rightful place – as a primary energy source for many developing countries. Only a global effort will pool resources to spread the risk effectively. It will let us learn from each other, from our failures and successes, and apply that learning.”

The Global Geothermal Development Plan’s initial target is to unlock $500 million worth of investment. Donors can participate by helping to identify viable projects and through bilateral assistance, as well as existing channels such as the Climate Investment Funds or the Global Environment Facility. The bank will convene donors later this year to discuss the financing of specific geothermal projects.

The bank’s financing for geothermal development has increased from $73m in 2007 to $336m last year, and now represents almost 10 per cent of its total renewable energy lending.


LATIN AMERICA

Rolls-Royce wins Mexican power deal

Global power systems firm Rolls-Royce has been awarded a contract to supply a conglomerate with on-site power equipment at its processing plants located in Veracruz, Mexico.

Marcelo Garza of Mexican textile and chemicals conglomerate CYDSA said: “The proven efficiency and high power output of the Rolls-Royce Trent 60 industrial gas turbine will enable us to meet the increased power requirements of our processing plants.

“In addition, the ability of Rolls-Royce to deliver the equipment in a very tight timescale is critical to helping us meet our growth objectives.”

Under the terms of the contract, awarded by engineering contracting companies OHL and Sener, the Trent 60 unit will be installed for duty in a combined heat and power configuration to provide process steam and electricity for CYDSA’s processing plants, with excess electrical power sold to Mexico’s national grid.

Incorporating an AC generator and associated control systems, the Trent 60 will feature WLE (wet low emissions) technology, utilising water injection during combustion to reduce emissions and boost performance, and inlet spray intercooling to reduce energy requirements during compression, resulting in higher power and efficiency levels.


Diesel gensets set for growth despite gas competition

Annual installations of diesel generator sets will reach 82 GW of capacity by 2018 according to new research.

Analysts at Pike Research claim that although diesel gensets face increasing competition from natural gas configurations, they are poised for continued growth in most regions of the world.

“Distributed generation has the advantage of going on line more quickly than traditional large centralised power stations, reducing demand pressure on the electrical grid and the inefficiencies that are common in centralised power generation, transmission, and distribution,” said research analyst Dexter Gauntlett.

“Comprising a number of specialised segments spanning power classes, applications, and end-use customers, this market offers a rich ecosystem of opportunities for market participants.”

The report suggests that while the diesel genset market continues to experience steady growth, a boom in unconventional gas resources and tightening regulations targeting stationary generator emissions signal a “turning point in the industry”.

“Many companies are shifting or expanding their focus to natural gas gensets and offer diesel-to-gas conversion kits, reflecting recent fuel cost trends favoring natural gas in the North American market,” states Pike.


US ‘more progressive’ than Europe on renewables says study

Vattenfall
Europe should look to US for renewables example says GlobalData
Credit: Vattenfall

The US has “a more progressive renewable support policy than Europe”, where there is “a perversity from heaping the whole cost of renewable subsidies onto the consumer”.

That is the verdict of Jonathan Lane, head of Consulting for Power and Utilities at consultancy GlobalData.

He claims that the US federal support scheme for renewables, the production tax credit, is much more efficient that European models, in which “subsidies are loaded onto customers’ electricity bills, usually through a tax or sometimes via an electricity retailer obligation”.

He said: “While this approach confers the advantage of keeping tax subsidies out of the electricity sector, with the competitive market setting the price for consumers, the reality is that it is government intervention pushing prices upwards.”

Lane argues that “as energy prices become more politically charged across the world, Europe should take a look at the US”.

He states that there is a “perversity from heaping the whole cost of renewable subsidies onto the consumer”.

“Germany has over 1 million solar installations and 42 per cent of the final electricity bill is tax. Italy has 300,000 installations and 35 per cent of the bill is tax. In effect, those that cannot afford solar panels are subsidising those that can. This can’t be considered fair, and complaints are getting louder. “

He adds that the reason that governments subsidise renewable generation “is a social good – aimed at reducing carbon emissions and reducing fossil fuel import dependency – and it makes far more sense for these goals to be delivered via general taxation.

“Under the US system, those most able to pay for renewables do so, while under the European system those least able to afford it pay.

“Something needs to change, and quickly.”

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