INTERVIEW

Christopher Neal   Last month the World Bank released its report ‘Sustainability for all – Global Tracking Framework, which has as one of its objectives the doubling of the share of renewable power generation in the global energy mix by 2030.
Christopher Neal

It’s a report that looks set to be keenly discussed at the World Energy Congress in Daegu, South Korea, next month.

PEi spoke to Christopher Neal of the World Bank’s Sustainable Energy Department and put it to him that the doubling of renewable power was an ambition that seems to be out of step with economic realities, especially when, to put it crudely, so many national economies are ‘broke’.

Just a fortnight ago the Czech Republic announced it was removing subsidies for renewable power, while ahead of Germany’s elections, Chancellor Merkel served notice of her intent to reduce the subsidy available for renewable power. In the short term, such happenings might suggest doubling renewables’ strength is not realistic.

“You’re right to say that the current environment, with announcements being made by European countries in the context of the economic slump, is not encouraging, but I think the longer term view is probably more positive”, says Mr Neal, adding that the report launched by Ban Ki-moon was designed to drive the initiative, making progress measurable, and targets achievable.

“In order to be able to double the share of renewables in the global energy mix and track, it you need a baseline, then agree on definitions and define current status. It’s the first in a series that will come every two years, put together by 15 agencies led by the World Bank.”

“Initially it was found that 18 per cent of global energy is renewable and that includes biomass and hydropower. Doubling it to 36 per cent by 2030 is very ambitious and where you really see the ambition is partly about mobilising the investment to do it.”

A key element of the bank’s approach is in helping to remove the barriers that currently exist in hampering renewable energy potential in various parts of the world.

The retreat from coal investment by bodies such as the World Bank and European Investment Bank is one aspect, as that funding that might have at one time gone into fossil fuels is now much reduced to those generators, available only under limited circumstances.

The signals being sent by the banks are strong in terms of the overall global shift towards a greener future.

“The energy sector directions paper – discussed by the World Bank’s board in July – specifies that the World Bank will provide financing for greenfield coal only in rare circumstances and subject to strict criteria. The language being used reflects an emerging consensus and also reflects the orientations that are expressed in the sustainable energy for all initiative as well. If you want to double renewables then implicitly you think that’s a good thing to do and, indeed, it’s part of the bank’s climate agenda too.” Neal says it isn’t only an environmental factor that informs the institution’s thinking – there is also a market element in that countries that have a high reliance on coal face generally fewer obstacles in getting financing because the technology for using coal is well understood.

“It’s commercialised, and lower in cost than others, so the case for the bank getting involved is not as strong as in some other areas in the energy sector where there are more obstacles to getting financing.”

By way of example Neal points to under-utilised resources that could transform much of Africa from an environmental and economic perspective.

“We are looking to mobilise and exploit some of the geothermal potential in the Rift Valley area of East Africa, which lies under 13 countries in that geographical region. Hydropower is another one; less than 10 per cent of hydropower potential in Africa is exploited at present and that tends to be more difficult to find financing for in the longer term and these are areas where we are focusing our efforts.”

While Europe’s dysfunctional carbon trading system’s problems are well documented, Neal is glass-half-full about the prospects for similar schemes as well as the European initiative itself.

“I think it’s interesting what you say about the Czech Republic and Germany also and the subsidies being dropped left and right, however China is launching a carbon market, and there are carbon markets being developed in subnational governments, for example California, Quebec, Chile, Brazil, Costa Rica and Colombia are all developing some sort of carbon market, or emissions trading or other forms, such as carbon taxes in places like Turkey, South Africa and Mexico.”

China often gets a bad press, not unlike what the USSR received during the Cold War era, however the statistics compiled by the World Bank offer a balanced view of its record in promoting renewable power generation.

“The global tracking framework report- looks at where the largest renewable investment is being made, specifically which countries are spending the most on renewable energy and efficiency and China leads the pack in both.”

“There is often a very negative narrative about China’s role in terms of carbon footprint – and justifiably so in one sense, as its grown more than any other country – but everything China does the magnitude is always bigger in its impact than what anyone else does.”

“The fact remains it has also done more in terms of energy efficiency and renewable energy expansion than any other country in the world.”


EUROPE

Europe hit by more gas plant closures

Statkraft

Statkraft has decided to shut down two gas-fired power plants in Germany, just six years after they were commissioned.

The Norwegian firm has cited unprofitability for the decision to close 1200 MW of combined capacity, putting the Knapsack and the Herdecke plants in a ‘wet reserve’.

It comes not long after the decision earlier this year to close the 510 MW Robert Frank gas-fired plant in southern Germany.

Statkraft investor relations vice-president Yngve Froeshaug said: “Short-term power prices have continued to fall [in Germany], worsening the margin between power and gas prices. Due to this, our gas power plants in Knapsack and Herdecke, for the time being, are out of production – that is, in wet reserve.”

‘Wet reserve’ means the plants could be restarted in a relatively short time “in case market conditions change” Froeshaug added.

• Germany’s RWE is to close up to one fifth of its gas-fired power capacity as low demand and a surge in renewables have made the plants unprofitable.

The country’s second largest utility has decided to take 954 MW of gas-fuelled power offline until the end of 2014. RWE will idle two gas turbines with a generation capacity of 272 MW each at its Weisweiler power plant. The utility will also mothball its 410 MW Gersteinwerk-F gas plant for all of next year, as well as another 410 MW gas unit at the Gersteinwerk-G site, which will be offline from April 1, 2014, until the end of that year.

• Meanwhile, Finland’s Fortum has decided to close down a 750 MW coal-fired power plant near Helsinki.

The ageing plant has long been a loss maker and been deployed purely as a back-up power facility to the Nordic grid in recent times.

The decision will lead to a loss of 90 jobs, with a dozen employees taking a retirement option. The move is prompted partly due to falling electricity prices in Europe, driven by Germany’s shift toward renewable energy.


International

Coal decommissioning market to hit $5.3bn

Coal decommissioning

Greater environmental regulations and increasingly competitive renewable energy generation will lead to a surge in growth in power plant decommissioning in the coal-fired power sector in Europe and the US.

A report predicts that the market for demolition and environmental remediation services is set to expand as EU and US shut coal plants, reaching $5.3bn between 2013 and 2020, as a result of continuing plant closures.

The new research from analyst firm Navigant Research predicts that the “coming wave of retirements offers significant opportunities to the companies that will carry out the decommissioning processes”.

The report estimates the market for decommissioning in Europe and the US will grow from $455m in 2013 to $1.3bn in 2016, before declining rapidly as the current fleet of ageing plants are closed.

The largest sector of the market is expected to focus on environmental remediation, which Navigant said will typically prove more complex and costly than demolition, the costs of which will be partially offset by the value of the scrap materials that are collected.


UK and China to lead ten-fold global offshore wind surge

Africa’s largest gas-fired power plant at The global offshore wind market will thrive throughout this decade, with its capacity rising from 5.5 GW last year to 51.2 GW in 2020, according to a new report.

The analysis from research firm GlobalData states that the UK will lead the way in new installations, yet it adds that by 2020 China will be the largest wind power market, as it attempts to reduce its carbon footprint while increasing electricity production in rural areas.

According to the report, China has doubled its cumulative wind capacity every year between 2006 and 2011, growing at a compound annual growth rate of 76 per cent from 2006 to 2012.

GlobalData says that China, along with the US, Germany, UK, Italy, Spain and India, accounted for 74 per cent of global installed wind capacity last year.

The report says that the success of the Chinese wind power market can be attributed to a combination of market guidance and government encouragement, after the Chinese government introduced a number of financial and regulatory initiatives to promote renewable energy sources.

GlobalData’s power sector analyst, Swati Singh, said: “Supportive government policies that include an attractive concessional program and the availability of low-cost financing from government banks are the main reasons for the growing wind power market in China.”


AFRICA

Tender issued for Botswana power plant

In an effort to address power shortage problems, the government of Botswana has issued a tender notice inviting bids to develop a 300 MW coal-fired power plant.

The Ministry of Minerals, Energy and Water Resources said the government wants the plant to deliver power to the grid by 2016 and by 2019 at the latest.

This year, Botswana was hit by power cuts after the new 600 MW Morupule B power station was beset by difficulties and failed to go into operation.

With the deadline for submissions slated for November, the government expects to determine its IPP procurement process from January 2014.


MIDDLE EAST

Iraq to import gas from Iran to run Baghdad plants

Baghdad plants

Iraq is to import gas from Iran to fuel two power plants in Baghdad.

The two countries signed a four-year deal that will see Iraq buy around 850m cubic feet a day of natural gas, which will be used to generate 2500 MW of power for the plants.

The gas will be imported via a $342m, 140-mile pipeline that is currently being built and is due for completion in two months.

The deal is believed to be worth $3.7 billion a year to Iran and was signed in Baghdad by Iraqi electricity minister Kareem al-Jumaili and Iranian oil minister Rostam Qasemi.

Iraq’s own gas fields are underdeveloped and the country currently cannot produce enough gas to power its gas plants.

The International Energy Agency last year predicted Iraq will need cumulative energy investment of over $530 bn by 2022 – more than $25 bn per year and a significant step up from the estimated $9bn it invested in its energy sector in 2011. The IEA added that “catching up and keeping pace with rising demand for electricity is critical” for Iraq.

“Power stations in Iraq produce more electricity than ever before but prolonged power cuts are still being experienced on a daily basis in many parts of the country.”


MIDDLE EAST

Clean coal power plant for Dubai

As part of its strategy to get 12 per cent of its power capacity from coal, Dubai is planning to build a 1200 MW clean coal-fired plant.

State-owned Dubai Electricity and Water Authority is seeking bidders to build what would be the first such project of its kind in the Gulf Arab region.

The utility has issued a request for tenders for the plant, which will be built in two phases to generate 600 MW each when completed in 2020 and 2021 respectively, a statement from Dewa said yesterday.

The move is part of an emerging trend whereby Gulf nations are looking to diversify their energy mix to preserve oil and gas reserves for export, which generate significant sums for their economies.


LATIN AMERICA

Cemig to invest $621m in Brazil’s Renova Energia

Brazil’s Energetica de Minas Gerais (Cemig) has agreed to invest around $621 million in renewables developer Renova Energia.

The investment is being made as part of the company’s strategy to focus on wind power technology, along with other utilities, including CPFL Energia and Tractebel Energia.

Cemig is expected to be a part of a controlling group, along with Light Energia and RR Participacoes, that will hold a 51 per cent stake in Renova Energia, following the completion of the agreement.

Analysts say the Brazilian utilities are planning to focus on wind power technology, which is expected to complement hydroelectric projects in the country’s power generation mix.

The wind power facilities are expected to cater to the electricity needs of the country, during the dry season.


Court blocks bid by Endsea Chile to build 740 MW coal plant

Endesa Chile is to appeal against a court decision to reject its plans for a $1.4bn coal-fired power plant in the Atacama region of the country.

The 740 MW plant, which was intended to support the Chilean mining sector in the region, was rejected by a local court.

The decision follows a Chilean ministerial committee’s decision to also appeal the court’s ruling last week. The ruling voided the committee’s approval to construct the Punta Alcalde project, effectively blocking development of the plant.

Endesa said it has “decided to appeal to the Supreme Court to seek ratification of the ministerial committee’s decision.”

The Punta Alcalde project, with two 370 MW units, would cover more than 10 per cent of the current electricity demand on Chile’s largest power grid, the central SIC.


CFE’s financial woes worsen as half-year losses hit $2.8bn

Mexico’s state-owned power company CFE (Comision Federal de Electricidad), has reported net losses of up to $2.8bn in the first half of 2013, as operating costs climbed.

The latest losses are almost triple those that CFE suffered during the first six months of 2012, when they were in the region of $1bn.

In the quarterly report supplied to the Mexican Stock Exchange, CFE attributed the higher operating costs to more reliance on fossil fuel-based generation.

According to BNAmericas, in the first half of this year, CFE reduced hydropower output to 7.76 TWh compared to 16 TWh a year ago, as part of it efforts to return dams to normal water levels, which are still low since a severe drought last year.

This resulted in the company having to resort to more thermal generation to meet demand.


NORTH AMERICA

EDF to pull out of US nuclear market due to shale boom

French power company EDF is to withdraw from the US nuclear market because of the way shale gas has altered the American energy sector.

Instead, EDF will focus on developing its renewables business in America. However, the company has stressed that its nuclear intent elsewhere in the world – particularly the UK – remains strong.

Henri Proglio   EDF chief executive Henri Proglio said the prospects for nuclear power in the US had been dealt a major blow by the “true revolution” of shale gas, which he said had “completely reshaped the landscape of electric power generation in favour of gas”.

He said the “spectacular fall of the price of gas in the US, which was unimaginable a few years ago, has made this form of energy ultra competitive vis-a-vis all other forms of energy”.

“The circumstances for the development of nuclear in the US are not favorable at the moment. We are a major player in nuclear, but we are not obsessed by nuclear. Our development in the US will focus on renewable energy – that will be our vector of growth in the US.”

EDF is to pull out of Constellation Energy Nuclear Group (CENG), which it half owns as a joint venture with US energy company Exelon. CENG operates five US nuclear plants with a total capacity of 3.9 GW.

It has agreed a put option that allows it to sell CENG to Excelon between 2016 and 2022,at which time it will also receive an exceptional dividend from CENG of $400m.

Proglio was speaking as EDF unveiled its half-year results, which he said showed a “good operating performance”.

EBITDA was €9.7bn, up 6.9 per cent on last year, of which 6 per cent was organic growth. On the back of the results, EDF has revised up its operating performance targets for the year to 3 per cent of organic growth.


NORTH AMERICA

New clean coal technology approved for US project

Hamon Research-Cottrell, a subsidiary of Hamon Corporation, has received full notice to proceed with the engineering, procurement and installation of a Regenerative Activated Coke Technology (ReACT) system at the 321 MW Wisconsin Public Service Weston coal-fired power plant unit 3 in the US.

ReACT is an integrated multi-pollutant control technology that removes SO2, NOx and mercury from coal-fired plants by adsorption with activated coke to attain emission levels found at the best controlled coal-fired plants.

This system will reduce plant SO2 emissions by more than 90 per cent, mercury by 90 per cent or more, and NOx by more than 20 per cent.

This technology simultaneously controls multiple pollutants using only a fraction of the water that conventional wet scrubbers demand, while producing a saleable sulfuric acid by-product commonly used in the fertilizer, paper-making, and many other industries.

Engineering and procurement activities have already commenced and the project is expected to be completed and in service by December 31, 2016.


GE plans to turn down the tubine volume

GE

GE is exploring the possibility of increasing the power generation capacity of its wind turbines while reducing noise levels.

The company, through its Global Research Unit, is working alongside the US Department of Energy’s Sandia National Laboratories.

GE said its scope of work was focused on advancing wind turbine blade noise prediction methods by performing tests on airfoil level acoustic measurements in wind tunnels.

Field measurements have also been done to validate acceptable noise levels, and noise-reducing operating modes were deployed in the control system.

The company expects a one decibel quieter rotor design may increase the energy from by a turbine by 2 per cent a year.That increase will add up to 5 GW of wind power, given that around 240 GW of capacity is set to be installed globally in the next five years.


Asia Pacific

Mitsubishi Heavy to build 977 MW power plant in Thailand

Mitsubishi Heavy Industries (MHI) has received a full-turnkey order for the construction of a 977 MW gas plant from Khanom Electricity Generating Co, an independent power producer in Thailand.

The gas-turbine combined-cycle (GTCC) plant will comprise two trains of a 488.5 MW power-generation unit, with both blocks slated to go on-stream in June 2016.

MHI and Kegco, a wholly owned subsidiary of Electricity Generating, also concluded a long-term service agreement for the plant, but MHI has not disclosed the value of the contract.

Once the GTCC power plant, which will be in Nakhon Si Thammarat’s Khanom district, is completed, its output will be supplied to the Electricity Generating Authority of Thailand under a long-term power purchase agreement.

The plant will have dual-fuel specifications enabling both natural-gas and diesel combustion, and will consist mainly of two Mitsubishi M701F5 gas turbines, two steam turbines and two generators.

Civil and installation work at the construction site will be handled by Sino-Thai Engineering and Construction.


Wartsila wins first contract in Australia

Wartsila

Gas engine supplier Wartsila has signed a ten-year service agreement with Australia’s Energy Developments to maintain the remote 53 MW McArthur River Mine gas-fired power plant, which is under construction in the Northern Territory.

The contract marks Wartsila entry in the Australian power market.

The McArthur River Mine plant is being built to power the McArthur River zinc mine and is currently projected to start operations ahead of schedule before the end of this year.

Energy Developments has signed a 20-year electricity supply agreement to sell the power plant’s entire output to McArthur River Mine. The mine is currently in the midst of a $360m expansion that will increase zinc production twofold, while prolonging the mine’s lifetime until 2036.


Clarke breaks into Bangladesh with Orient Power stake

Clarke Energy has acquired the Bangladesh arm of Orient Power Systems and GE Jenbacher has appointed Clarke Energy as distributor and service provider for Jenbacher gas engines in the country.

Bangladesh, with its large domestic reserves of natural gas, has been an attractive proposition for Clarke, and in a statement the company pointed out that it “offers great opportunities for reciprocating gas engine technology, particularly for the independent power producer and captive power plant segments”.

Jenbacher has a successful track record in Bangladesh with over 450 gas engines installed to date in the country, each with an electrical output of between 0.3-4.4MW.

This installed base helps to maintain stable power supplies for the population and industry.

The acquisition’s focus will be to develop an advanced service infrastructure with in-country parts stockholding, further train and develop the Bangladesh service team and to expand Jenbacher’s installed base in this significant gas to power segment.


Fears for renewable investment in Australia

Australia

The renewables sector in Australia fears a A$4bn ($3.6bn) loss in investment should the coalition win this month’s federal election.

The coalition’s climate change plan is also $4 billion short of the funding required to meet its promised 5 per cent cut in greenhouse emissions by 2020, according to independent think tank The Climate Institute.

Big investors are planning for the impact if opposition leader Tony Abbott axes the carbon price and dismantles the clean energy finance system. They expect that about $4.1bn in private funding would be funnelled away from large-scale renewable power, starving the sector of capital due to regulatory uncertainty and a lack of returns, according to sources in the carbon finance sector.


China pulls plug on coal plant over pollution concerns

China has responded to civic concerns about air pollution and decided to scrap a 2000 MW coal plant on the coast of the South China Sea, 50 km from the major city of Shenzhen.

Some 43 members of the city’s People’s Congress petitioned the administration to cancel the project and not to allow the construction of any new coal-fired power plant anywhere within the city’s borders.

The administration reacted only a few weeks later, asking Shenzhen Energy Group to stop the power plant construction.

This is the first project to be cancelled in China mainly on the basis of concerns about air pollution.

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