The European power industry continues its revolution

European Union’s climate goals heavily rely on the successful commercialisation of CCS technology Source: Doosan Power Systems

As POWER-GEN Europe celebrates its 20th anniversary, Nigel Blackaby, its conference director, considers the trends that have shaped the European power industry over the past two decades and how current developments might influence its evolution in the next 20 years.

à‚  Significant transformation has epitomised the power industry over the past two decades. As the sector strives to balance the needs of consumers, governments and the environment, few could have predicted the shape of the current energy mix and even fewer would have thought we would still be so reliant on fossil fuels. Looking back, industry commentators agree the most significant trend has been the industry’s shift from being largely state-owned, centrally controlled and dominated by large integrated companies to that of a liberalised environment.
Nigel Blackaby, conference director, POWER-GEN Europe

The deregulation that began in the early nineties, led primarily by the UK and Norway, has since spread throughout Europe. Some would suggest this has led to lower prices for the consumer and the introduction of efficiencies into the marketplace. Others would argue that energy costs for end-users have actually risen in real terms, that there continues to be a lack of true competition, and that wider market uncertainty still hampers long-term investment in plant and infrastructure.

Certainly further deregulation, the ‘green agenda’, the integration of renewables into the electricity system, plus new uses of electricity such as electric vehicles, bring fresh challenges, but they also create exciting new opportunities, as do increasingly rapid advances in plant, storage and Smart Grid technologies. As always, huge questions remain over the future of nuclear energy and other fossil fuels that have an impact on the environment. The choices we make about these technologies and the way in which we manage the whole electricity infrastructure, potentially impacts the global economy and our way of life.

Market liberalisation

The unbundling of generation, transmission, distribution and supply (retail), as well as the creation of energy trading markets have driven efficiencies into the marketplace, primarily in respect of technology efficiencies and lower wholesale prices via energy trading. Specifically, combined-cycle gas turbine generation has continued to blossom, with major advances in both efficiency and size.

Gas turbine technology provides a means of constructing power plants in a relatively short time and at much lower cost, with a lower environmental impact and increased efficiency of fuel conversion into electricity. At the same time, the change in the marketplace and introduction of competition have accelerated its adoption, since new investors look for propositions with shorter lead times, greater certainty of outcomes and easier permitting.

This boost was critical in redressing the effects that the stagnation in power consumption of the late 1980s and resulting over-capacities had in directing investment away from infrastructure towards mergers and acquisitions. Indeed, many utilities delayed investment in new plant until the impact of liberalisation became clear and a number of equipment manufacturers suffered as a result. That said, investment decisions continue to be clouded by a myriad of factors today.

Investment decisions

In unbundled markets, companies must consider their investments carefully because every plant has a technical life of 40″50 years, meaning there is always the risk of a competitor emerging with a better technology. The climate debate has added to this uncertainty, with the landmark Kyoto agreement of 1997 and the European Union’s (EU) 20-20-20 targets established in 2007″08 driving a major and long-lasting shift in focus to addressing concerns around carbon dioxide (CO2) and other greenhouse gas (GHG) emissions.

Carbon reduction and renewable energy legislation has been enacted in the majority of European countries, prompting an increase in the number of wood and biomass burning plants, as well as greater interest in carbon capture and storage (CCS) technology. The major players have programmes to develop green energy production and have accepted they must now build power plants on the basis of clean power. The utilities are increasingly recognising renewables, especially wind and solar, as being the way forward.

However, regulatory boundaries continue to change in respect of GHG emission restrictions, emission limits and carbon pricing; the cost and availability of fuels; and the opposing positions being taken on the development of nuclear since Fukushima. Some would argue that nuclear has not been a realistic alternative since the disasters at Harrisburg (Three Mile Island) in the US and Chernobyl in the Ukraine, that coal is cheap but dirty and that despite gas turbines (and combined-cycle) having developed to high efficiency and capacity, the historical rise in the cost of oil, and as a consequence gas, has countered these benefits to some degree.

Likewise, although shale gas is having a major impact on lowering gas prices and ensuring security of supply, especially in the US, it is facing significant opposition in Europe because of concerns surrounding the environmental impact of ‘fracking’. It is argued that if shale gas projects were properly executed, there would be minimal impact, making development of standards a priority and work has already been started in the US by the Environmental Protection Agency.

The evolving energy mix

Moving forward, the industry must look much more closely at the energy mix, because each type of fuel resource will have its place and there will no doubt be other technologies emerging. Wave and tidal power, for example, could be complementary, as will energy storage via improved battery technology and pumped hydro. Both storage and conversion of whatever the end product might be will be hugely important because renewables, such as wind and solar, introduce an increasing amount of non-synchronous energy into the electricity system. This creates operational issues in the form of frequency stability, voltage stability and provision of reserve.

Several pumped storage plants are being constructed in countries such as Switzerland, Germany and Austria, for example, while most countries are looking at how to address the need for large-scale storage. In a fully sustainable world, natural gas and biogas will offer the most economical solution for peaking power, covering contingency demand and for bridging seasonal differences. For the time being, there is a sufficient supply of natural gas to act as a buffer.

There is also the issue of expanding the grid and deploying new transmission lines to accommodate renewables, especially offshore renewables, such as wind, which are traditionally located some distance from the load centres. Obtaining the necessary permits and public acceptance is currently proving difficult.

Similarly, doubts persist as to whether CCS is a realistic option, given public opposition to transporting CO2 via pipeline and storing it underground. Using excess energy from solar or wind to transform CO2 into methane could provide a viable alternative. Meanwhile, flue gas cleaning and other emission reduction technologies will remain an important aspect of the clean energy mix.

Building a flexible and sustainable system

Another key development will be the Smart Grid, which is currently undergoing a tremendous amount of development work, and will be extremely important to the operation of electricity systems in the future. There will also be parallel development of wind, solar and wave, as well as geothermal and storage. Of course, the financial crisis of the past three or four years has meant not just a slowdown in electricity demand, but has led to a reduced appetite for investment in renewables. Nevertheless, the long-term outlook for renewables is good and there is optimism that the EU’s 2020 renewables target can be met.

For some countries with hydropower, wind and solar energy, a decarbonised power industry is entirely possible. But for others, such as the UK, Germany and the Netherlands, it remains a much more distant prospect. That does not mean the industry cannot reduce the use of fossil fuel to a large extent. Natural gas will be required as a buffer for times when there is little wind or solar energy available, while development of coal fired plants incorporating CCS will need to advance if the industry is to able to utilise the large reserves of coal that remain in an environmentally acceptable way. However, this technology is taking longer to bring to market than originally envisaged.

The UK’s Ferrybridge pilot carbon capture plant Source: Doosan Power Systems

In essence, what is needed is system flexibility in terms of both fuels and outputs. This means that alongside the rapid expansion of renewable power generation, gas fired power plants will be essential in meeting demand for power by delivering the necessary level of system flexibility and the ability to respond rapidly to changes in demand. This can be achieved using modern gas fuelled equipment such as fast-responding, fuel-efficient gas engines, together with combined-cycle gas turbine plants. Cleaner thermal power plants will be used to handle baseload demand. There is also likely to be major investment in high voltage grids over the next 10″15 years as European nations move towards a single integrated system that is much better connected and enables cross-border transmission of electricity.

Given the scale of the challenges and complexities faced, against a backdrop of greater demand for energy from emerging markets and a gradual rise in economic activity globally, it is more important than ever that all stakeholders pull together to find a solution to delivering a secure, sustainable and least-cost electricity system. This will mean increasing the efficiency of renewables, as well as the efficiency of coal and gas fired plants, retrofitting where possible and replacing where necessary. This also means maintaining plant fired by brown coal for baseload, while migrating towards gas fired power plant for medium load.

Ultimately, all investments in the European power sector are long-term and will feed through to the consumer. Therefore clarity regarding long-term strategies of regulators together with improved transparency for consumers must be achieved. Moreover, both government and industry must re-evaluate the challenge of better communicating the need for technology development in general ” including nuclear, shale gas, CCS and coal ” to gain public acceptance of the necessity of these technologies, alongside renewables, as being key to sustaining our way of life and preserving the planet.

About POWER-GEN Europe 2012

Now in its 20th year, POWER-GEN Europe, which is co-located with Renewable Energy World Europe and Nuclear Power Europe, offers the largest and most comprehensive conference and exhibition for the European electricity and power technology sectors.

The combination of conferences and exhibitions across the entire spectrum of power generation is unique and is serving the vital move towards integrating the traditional fossil fuel and fast-growing renewable generation sectors. The show is being held from the 12 to 14 June 2012, and is taking place at KoelnMesse, Cologne, Germany.

For more information, please visit the POWER-GEN Europe website at

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