Europe’s power sector in critical shape and needs total market overhaul
The European Union’s decarbonisation strategy has all the right intentions but it is taking the wrong path to that destination.
That was the view of Fabian Roques, senior director at consultancy HIS CERA, who was speaking at the Plenary session of POWER-GEN Europe and Renewable Energy World Europe.
He told the audience of power sector professionals: “It’s not the end point – it’s how we get there. It’s about how we define a sustainable trajectory.”
Critical of the Brussels move in pushing renewables on to the system, Mr Roques said he had participated in a study of the European thermal power sector and found that the results indicated the huge losses faced by utilities, costs that were needless, given that Europe had better choices in how to reach its objective.
“We did a plant-by-plant analysis and found that 200 GW of the 220 GW of thermal power plants in Europe are losing money or barely recovering operation costs.”
“What is best for renewables is to have a sustainable policy, not destroy value. An alternative policy can lead to the same outcome. There is a time element to the industry, and forcing change into the system compromises value. This industry has long lead times.”
Meanwhile, RWE Technology chief executive Michael Fubi revealed: “From a position where we had a share price of €95 it is now down to €26, so we have lost 75 per cent of its market value.”
Mr Fubi added that the company spent €12bn in power plants that have under present conditions now proved nearly redundant.
“I regret some of that investment. There is too much capacity in the market and we cannot afford to maintain a plant that is used for only a couple of hundred hours a year. It’s cash negative.”
Getting to the nub of what was disagreeable about how politicians were pursuing its clean power agenda, he added: “Decarbonisation is not bad news, its expensive news.”
Don’t skimp on R&D spend warns Energy UK boss
Money that has in recent years been spent on the manufacture on new forms of decarbonisation would have been better spent being ploughed into R&D for those projects.
If that had happened, said Angela Knight, chief executive of trade body Energy UK, then some of those low carbon solutions might have had a smoother road to commercialization.
Speaking at the conference session called Focus on Growth Markets at POWER-GEN Europe, Ms Knight said: “In most parts of industry, if you want to bring in a new product or service, you get your R&D done and bring it to market.
“But in energy we have had to foreshorten the R&D process and some of the technology does not quite perform.”
She said that the rush for renewables of recent years had now resulted in several issues – not least ones of transmission – and she added that in some European countries “a pause is necessary”.
Country co-operation vital to revive Europe’s energy sector say ministers
Investment in the European power market is flat-lining and the only way for the region to pull itself out of this mire is for cross-state co-operation.
That was the message from the speakers at the Keynote conference session which opened POWER-Gen Europe and Renewable Energy World Europe.
The European energy crisis “does not know national boundaries” said Reinhold Mitterlehner, Austria’s Federal Minister for Economy, Family and Youth.
This sentiment was echoed by Turkey’s Deputy Energy Minister Hasan Murat Mercan: “No country is independent in the field of energy. No country can deal with the problems on its own.”
Mr Mitterlehner highlighted the seriousness of a landscape that is seeing “gas plants shut down and coal plants running on full throttle”.
“The situation is extremely serious and corrective action is needed,” he added.
And he warned that without that action, the consequences for Europe would be dire: “Without industry we have unemployment and Europe will be unable to keep up with international competitors.”
Russia’s Deputy Energy Minister Yury Sentyurin highlighted the energy co-operation programmes his country was working on with Norway, Poland, Lithuania and Germany, while Marc Hall, Director for Energy at Wiener Stadtwerke stressed that co-operation was vital because there was no one-fit solution to Europe’s energy woes.
Phillipe Cochet, President of Alstom Thermal Power, presented a view on the energy crisis from the perspective of an equipment manufacturer, and stressed that “no two nations faced the same challenges” and urged policymakers to “urgently work” of a framework to bring together – and in turn invigorate – the industry, and pressed them to “do it fast”.
Siemens chief Balling calls for change in market mechanism
Speaking at POWER-GEN Europe and Renewable Energy World Europe, Lothar Balling was keen to point out the persistent drawback of over-dependence on renewable power, without complemetary fossil fuel back up.
He highlighted “apparently unpredictable political interventions, especially in Germany, in the areas of renewable subsidies and capacity markets. As a result, investment risk is increased at a time when yield expectations are only moderate. This kind of climate does not encourage new investments in the power market for very efficient, low-emission, and highly flexible plants.”
“It does not surprise, that the eight most important senior executives of European energy companies have publicly spoken with one voice, for the first time in history, issuing a dramatic appeal to governments to create a European energy policy.”
Siemens have within the last year brought into commercial operation three combined cycle power plants in Germany, the Netherlands and France at Knapsack, Hemweg 9 and Toul respectively with the highest performance data in terms of CO2 emissions, flexibility, and fuel efficiency. However these achievements are not being favoured by the current market mechanism.
“All of them are either threatened with shutdown or are working at very low operating hours – because market conditions are not sufficiently supportive of these high-efficiency and clean back-up power sources.
In what he called “a market poisoned by uncertainty”, Mr Balling added that a message has been sent that it is not worth investing in new-build gas-fired generation. He disagreed and said that the current prediction for Germany is that by 2022 about 12-17 GW of capacity will need to be built to replace nuclear and fossil plants removed from service – in spite of a tremendous addition of “unpredictable” renewable generation.
“New forces are storming the power supply market and forcing out conventional plants,” he said. “But these plants are still needed to compensate for weather-induced loss of renewable generating capacity.
“What is needed is a redistribution of roles. It is time to fight against the trend that has existing plants being displaced from the market by fluctuating energy sources.”
GDF takes stake in $212m South African wind farm
GDF SUEZ has taken a 43 per cent stake in a 94 MW wind farm in South Africa.
The €160m ($212m) West Coast One wind project is located 130 km north of Cape Town and is owned by a GDF SUEZ-led consortium. Asset management group Investec owns 34.5 per cent, South African investment company Kagiso Tiso Holdings has a 20% interest and the remaining 2.5 per cent will be allocated to a community trust.
The consortium was selected as preferred bidder for this project in May 2012 and signed a 20-year power purchase agreement with South African state utility Eskom. The wind farm is expected to be operational in 2015.
GDF SUEZ chairman Gerard Mestrallet: “West Coast One demonstrates our growth ambitions in fast growing markets, and supports South Africa’s objective of increasing the contribution from renewable power in its generation mix.”
IEA bids to keep climate goals alive without harming economic growth
The International Energy Agency has today urged governments to put in place four energy policies that it claims will “keep climate goals alive without harming economic growth”.
|Speaking in London, IEA Executive Director Maria van der Hoeven (pictured) said: “Climate change has quite frankly slipped to the back burner of policy priorities. But the problem is not going away – quite the opposite.”|
The IEA wants to see a global temperature increase of no more than 2°C by 2020, but Ms van der Hoeven said the figure was more likely to be between 3.6°C and 5.3°C.
Yet she stressed that “much more can be done to tackle energy sector emissions without jeopardising economic growth – an important concern for many governments”.
Last year in the US, a switch from coal to gas in power generation helped cut emissions by 200 million tonnes (Mt), bringing emissions back down to mid-1990s levels. Meanwhile, China experienced the largest growth in CO2 emissions (300 Mt), “but the increase was one of the lowest it has seen in a decade, driven by the deployment of renewables and improvements in energy intensity”, says the IEA.
The IEA wants to see four measures put into policy by governments worldwide:
- Targeted energy efficiency measures in buildings, industry and transport;
- Limiting the construction and use of the least-efficient coal-fired power plants;
- Actions to halve expected methane (a potent greenhouse gas) releases into the atmosphere from the upstream oil and gas industry;
- Implementing a partial phase-out of fossil fuel consumption subsidies.
Offshore wind innovations risk being trapped on the drawing board
The UK is at risk of allowing innovations in offshore wind development to grind to a standstill because of a lack of suitable demonstration sites.
The stark warning was issued by independent energy business advisors The Carbon Trust, which claims that potential breakthroughs to slash the cost of offshore wind could remain stuck on the drawing board because Britain has nowhere to demonstrate new lower-cost foundations with more powerful offshore wind turbines.
The Carbon Trust believes that the situation has become so critical that without an urgent solution, many of new cost-saving innovations will not be available in time for the next major rollout of wind projects, which is expected to deliver up to 18 GW of new capacity by 2020.
The trust claims that offshore wind costs can be cut by up to a third but states that this will not happen unless new innovations are properly tested in situ to provide developers and financiers with technical assurance before undertaking major multi-billion pound procurement programmes.
Phil de Villiers, head of offshore wind at the Carbon Trust, said: “At present we have a Catch 22. We have the technology but we have no way of proving that it can work at scale because we currently have no suitable offshore demonstration sites in the UK ready to use.
“The bottom line is that unless we sort this issue out in the next few months we could be putting at risk the mass rollout of major new cost saving technologies which, in turn, can help reduce the overall offshore wind build bill by billions of pounds.”
Severn Barrage “no knight in shining armour for UK renewables”
Plans for a £25bn ($38bn) tidal barrage across the longest river in Britain have been slammed by members of the UK Parliament’s Energy and Climate Change Committee as economically, environmentally and publicly unacceptable.
The proposal is to build the 18 km-long barrage across the Severn between England and Wales.
It was originally to be built with public money but was vetoed in 2010 by the then energy secretary Chris Huhne, who said there was no strategic case for the project.
It was then picked up by private consortium Hafren Power and it was these revised plans analysed by the energy committee.
The barrage would have 1026 very-low-head bi-directional turbines, generating approximately 16.5 TWh/year on both ebb and flood tides. Hafren believes that renewable tidal power from the scheme could provide energy for up to 5 per cent of the UK’s electricity needs, but the committee found a lack of clarity in Hafren’s proposals.
Committee chairman Tim Yeo said: “It became clear during the course of this inquiry that more detailed, robust evidence about Hafren Power’s proposal and claims is needed. We cannot recommend the Hafren Power scheme as currently presented to us.”
He said the committee remained unconvinced that “the economic case for the proposed barrage is strong enough”.
He said that the project “is likely to require a very high level of support over many years” and he did not “believe at this stage that the barrage would be competitive with other low-carbon technologies”.
Yeo also said that Hafren Power had “failed to answer the serious environmental concerns about a potential barrage adequately” and stressed that “far more detail and evidence is needed before their project could be regarded as environmentally acceptable”.
He emphasised that the UK needed innovative solutions to help it hit it decarbonisation targets and tidal energy was “a vast resource which remains largely untapped”.
However, he added that tidal and marine projects “must demonstrate their economic, environmental and technological credentials and their ability to gain stakeholder support” and said that the Hafren Power proposal had failed to achieve this and therefore was “no knight in shining armour for UK renewables”.
Dr Stephanie Merry, head of marine renewables at the UK’s Renewable Energy Association, said: “The Severn Estuary clearly has tremendous potential for helping to decarbonise our electricity system and increase the supply of home-grown, renewable energy, boosting our energy security. However, it is clear that significant questions over the economic and ecological viability of the barrage project remain.
“The potential for marine energy in UK waters is significant – whether wave, barrage, tidal lagoon or tidal stream – and every effort should be made to bring forward economically and ecologically sound marine energy projects.”
Vattenfall is Facebook’s friend for data centre
Facebook has opened its new data centre at Lulea in northern Sweden and signed up Swedish state-owned utility Vattenfall to a five year agreement to provide renewable power to the site.
The electricity is provided through hydroelectric power from the Lule River and the social networking giant, which claims the facility is one of the world’s most efficient and sustainable data centres, said: “Not only is it 100 per cent renewable, but the supply is also so reliable that we have been able to reduce the number of backup generators required at the site by more than 70 per cent.”
In addition the building will use excess heat generated by the power to keep the Facebook office warm.
Floods push hydropower up political agenda
Flooding in south-eastern Europe has pushed hydropower development and its role in managing water flows to the top of the political agenda this month.
With multiple deaths reported, the Danube, the Elbe and other major rivers in the region have seen Austria, Germany and the Czech Republic all affected by rising water levels. Thousands of people have been evacuated in the Czech Republic where a state of emergency has been declared and Germany’s Chancellor Angela Merkel has promised €100m to support flood affected areas.
Floodgates on a system of nine dams called the Vltava Cascade in the Czech Republic were opened on Monday in a bid to stop flood defences failing in Prague. The projects in this system include the 120 MW Lipno 1, the 364 MW Orlik plant and the 144 MW Slapy project.
The capacity of these Vltava Cascade power stations represents more than 17 % of the total installed capacity of utility group ČEZ.
Wartsila gets fourth R&D loan from bank
The European Investment Bank has granted a €150m ($200m) loan to Finnish engineering company Wartsila to finance the company’s power plant research, development and innovation (RDI) activities in several European countries.
Jonathan Taylor, the bank’s vice-president, said the loan would “bring substantial benefits to the energy sector”, which he said was a “central consideration for the EIB’s involvement in RDI projects”.
The loan is the fourth the bank has awarded to wartsila, the first being in 2003.
Raimo Lind, Wartsila’s senior executive vice-president, said the loan was “an important building block in the long-term funding of investments in research and development work”
Wartsila has research centers in Finland, Italy, Switzerland, the UK, the Netherlands, Norway, and Spain. In 2012, the company’s total R&D expenditure was €188m, which represents four per cent of the company’s net sales.
Wärtsilä’s R&D activities employ more than 800 specialists globally.
Asia Pacific in line to lead geothermal boom says report
More than 4 GW of geothermal power capacity are expected to come online worldwide between now and 2018, according to a new report.
The study by Navigant Research reveals that at the moment there are 56 projects in either active drilling or construction stages and all are in the US, the Philippines and Indonesia.
And Mackinnon Lawrence, principal research analyst with Navigant, says that the 4 GW figure could be just the tip of the iceberg: “This total includes only projects in advanced stages of development. A significant, though mostly unconfirmed, amount of capacity remains locked up in early-stage projects. As a number of these projects are further developed and their resource potential confirmed, the long-term pipeline – 2017 and later – is expected to expand proportionally.”
Navigant states that although the US leads all regions with the largest number of projects in the pipeline, the Asia Pacific has the most reported capacity under development, with a reported 7.4 GW currently in the pipeline, representing 40 percent of the global capacity under development.
Latin America and Africa account for a combined 3.8 GW of additional capacity under development, equal to 20 percent of the global pipeline.
Iraq unveils $620bn power programme
Iraq plans to invest $620bn in its energy infrastructure over 20 years in a bid to massively boost its power sector.
The country’s Integrated National Energy Strategy was unveiled in Baghdad by Thamir Ghadhban, a former oil minister and the head of Prime Minister Nuri al-Maliki’s advisory committee.
He said: “The strategic goals of the plan are to meet local energy needs, maximise government revenues, encourage economic diversification and improve the standard of living and create jobs.”
Iraq aims to increase oil production to 4.5 million barrels per day by 2014, and double that amount by 2020, enabling it to meet all its domestic energy requirements by 2022.
analyst quoted in Bloomberg.
There is also speculation that delaying completion may prompt the government to build more natural gas-fired plants.
Brazil expects to build 38,375 MW of capacity through 2020 and large hydroelectric plants will account for 68 per cent of that, according to the nation’s energy plan through 2020.
Protests against Brazilian hydropower prove costly
Indigenous community protests are having an expensive impact on hydroelectric power projects in the Amazon region of Brazil.
The developers “claim that the invasions raise the projects’ costs, and in fact it does, and can even cause the stoppage of works,” Energy Minister Edison Lobao told reporters in Brasilia.
Indigenous groups say the plants threaten the local environment. The conflict between developers and local tribes will become more pressing with about 10 new hydro projects planned in the Amazon region with more than 10,000 MW of capacity over the next decade,
Work delays on a project as big as Belo Monte, which will be the world’s third-largest hydropower plant when complete, may cost as much as $1.4m a day, according to an analyst quoted in Bloomberg. There is also speculation that delaying completion may prompt the government to build more natural gas-fired plants.
Brazil expects to build 38,375 MW of capacity through 2020 and large hydroelectric plants will account for 68 per cent of that, according to the nation’s energy plan through 2020.
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