Deputy Editor Tim Probert reviews developments in the European power industry since the POWER-GEN Europe conference and exhibition in Milan last June.

The twelve months since the previous POWER-GEN Europe show have been dominated by two things: the credit crunch (which later evolved to downturn and then recession) and climate change.

The two are not mutually exclusive. More than most industries, the increasingly political power sector has been given a huge boost by governments looking for a way out of one of the worst economic slumps in history. Green jobs, green manufacturing and green technology are on the lips of virtually every European finance minister trying to build his way out of the downturn.

The European Union (EU) has been quick to pump prime the power industry. In January, PEi reported that the European Commission were pouring some €3.5 billion ($4.6 billion) into the sector, including €500 million for offshore wind projects, €1.75 billion for gas and electricity interconnection projects and €1.25 billion for carbon capture and storage (CCS).

2009 – the year coal went clean?

Several CCS projects have been announced or commissioned in Europe since last year’s show in Milan. New projects announced include the €1 billion, 650 MW demonstration project at Vattenfall’s Jaenchswalde lignite burning plant in Brandenburg, Germany. This represents somewhat of a holy grail for the burgeoning CCS sector – a commercial-scale plant and a huge step up from the Swedish firm’s 30 MW pilot plant at Schwarze Pumpe, Germany, which was commissioned on 9 September 2008.

There has also been major progress in carbon sequestration. Last June, GE and Schlumberger signed an alliance that would see the latter provide expertize for storing the greenhouse gas at least a kilometre underground. In the UK, transmission system operator National Grid unveiled plans for a £2 billion ($2.9 billion) carbon pipeline network, which would pipe carbon dioxide emissions from power and industrial plants to storage sites in disused gasfields in the North Sea.

Last month, the UK made a historic CCS breakthrough by giving the go-ahead to a new fleet of coal fired power plants on the condition that they, at least partially (no less than 400 MW), capture and store carbon emissions. Such plants would be allowed to operate until 2025, when they would have to be fully fitted with CCS.

But perhaps the most important news for CCS came from outside Europe. In April, new US President Barack Obama’s administration’s plans to decarbonize the power industry were given a fillip by the Environmental Protection Agency’s ruling that carbon dioxide is a pollutant. The EPA said that they would only target carbon emissions from transport, the ‘endangerment fining’ could, in time, open the way for a series of taxes and regulation on the power industry.

Also in April, PEi reported that China was close to imposing a carbon tax upon its coal industry. Beijing’s finance ministry is set to announce its plans in the coming months, in time for December’s United Nations Framework Convention on Climate Change’s conference in Copenhagen, where nations will design a successor to the Kyoto Protocol.

Dr. Fatih Birol, in an exclusive interview with PEi in the January issue, argued passionately for OECD and non-OECD nations to thrash out a framework for a global carbon market. With political will seemingly sitting around the table, from the US to Europe and Asia, the prospects for such a framework appear reasonably good.

Nuclear ambitions

The so-called nuclear renaissance continued apace. Several European nations came out as born-again atom smashers. Having announced last year that Italy was to reverse a 20-year ban on nuclear power, Prime Minister Silvio Berlusconi signed an accord in February with French President Nicolas Sarkozy. The agreement saw utilities ENEL and EDF form a 50-50 joint venture to carry out feasibility studies on building a fleet of four of Areva’s European Pressurized Reactors.

Sweden drew surprise from some quarters when it announced in February that it was to reverse its pledge to phase out nuclear energy. While the Scandinavian nation is considered to be one of the most progressively ‘green’ nations, with one of the lowest carbon footprints in the EU, nuclear power supplies around half its energy and replacing it with renewables would be costly and fraught with hazard.

The news put pressure on the German government to implement a similar volte-face on atomic energy. Germany also relies heavily on nuclear power – about a third of its electricity generation is atomic – and many are now calling for nuclear to play an ongoing part in the country’s energy policy. A particularly hot political potato, the nuclear debate is sure to feature in the run-up to the federal election in September.

Dash for gas?

Despite the increasingly low carbon leanings of the European power industry, however, natural gas remains the fuel of choice for much of the continent. Almost two-thirds of new power generation capacity installed in Europe between 2000-2007 is fuelled by gas and, despite vast subsidies for renewables, an abundance of new gas plant was ordered in the past 12 months.

Indeed, the economic downturn has seen the price of gas and other commodities slide, making renewable sources less cost-effective. The prospects for offshore wind farms in particular have been hit hard by the downturn; Shell, BP and other major players have announced their withdrawal from such projects in recent months.

Last summer’s invasion of Georgia by Russia, and the latter’s dispute with Ukraine in January, however, laid down in stark terms the dangers of being over-reliant on one source of energy. The need for a balanced, low carbon energy mix has never been greater.