Towards a decarbonized power sector

Deputy Editor Tim Probert talks to Magued Eldaief, GE Energy’s managing director for the UK and executive director for infrastructure accounts à‚— spanning a number of GE infrastructure businesses that include energy, oil and gas, and water. The 44 year-old Egyptian discusses carbon capture and storage, gas turbine efficiency, nuclear power and wind power.

PEi: Countries across the globe have been hit by the economic downturn, and GE itself has not been unaffected. Are you concerned that the recession is destroying demand for electricity?

Magued Eldaief, GE Energy’s managing director for the UK.
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Eldaief: I am not worried. To a large extent, of course, electricity demand growth follows GDP, but fundamentally demand will be strong in the long- term. From our standpoint, we still see demand for power and energy fundamentally strong.

There might be some softness here and there but again the good news is that there are some countries and regions that have been less impacted and will continue to invest. We’ve won some big orders in the Middle East, in Iraq and Saudi Arabia, and other developing markets are also helping us. GE itself has not been immune to the credit crunch.

Everyone is managing as best they can, but some can manage better than others.

PEi: Interest in carbon capture and storage (CCS) has never been greater, but how interested are GE’s customers in adopting the technology?

Eldaief: You can’t look at CCS on its own; you must look at CCS as part of an overall portfolio of options that a utility of other customers would want to pursue. So how does CCS compare with renewables, as an example to nuclear, over the longer-term, and what is the cost differential between all these different technologies?

And, underlying all of that is the policy that would give me the comfort and the certainty to make an investment of the next 30 to 40 years. Our customers have to be able to have the right framework in terms of business and technology proposition that would allow them to invest.

We know how to capture carbon dioxide and we’ve been doing it for a very long time. The challenge is to do that on a commercial scale, on a large scale, to be able to bring the costs down. From a technology perspective, I think the different pieces are there; it’s a matter of integrating them all into a financial viable model that my customers will want to invest.

PEi: Can CCS ever be viable without huge subsidies?

Eldaief: That was the same question when we started off with wind. Wind started off very high up the cost curve, but as people started investing in the technology, as more wind turbines were built, as the supply chain developed, the cost of wind came down significantly. Where you have well-located wind farms, you don’t need subsidy.

The vision for new technologies, as far as GE sees them, is that they will follow the same path as wind in terms of the development of the technology. What helped wind become mainstream was that you had a support mechanism that allowed you to continue to invest in the technology in wind farms in the business to move it forward and bring the costs down.

So that’s why when we talk about support for CCS, we want to see investments in large-scale commercial projects in order to really drive the technology forward in a big way, and so that we can look at the challenges of building, not a pilot plant, but a 600 MW plant, in order to demonstrate the technology.

What will give CCS the push are incentives for companies like GE to develop the technology and for utilities to invest in the technology, because for their long-term business strategy, profitability, expansion and growth, they will need to adopt technologies that allow them to sequester carbon and meet all of the challenges that we are all facing.

PEi: What will be more viable, pre- or post-combustion carbon capture technology?

Eldaief: We need both pre- and post-combustion carbon capture technologies. We need post-combustion for retrofitting existing power plants, but my view for pre-combustion is that we should look seriously at IGCC because it is proven and we have a lot of experience with it.

We know that IGCC not only captures carbon effectively and cost-effectively, but that it also helps with other pollutants like SOx and NOx. It can also reduce water usage by 30 per cent, which is not something that we talk much about today, but it will be of increasing concern in the future.

For new build, IGCC will be a cost-effective option because, unlike post-combustion, the technology has already been developed. GE has 13 IGCC plants around the world that have been operating successfully, with 3 GW of gas turbines running on syngas.

We bought the gasification business from Chevron Texaco and we will continue to invest in it, because we believe that it will be one of the key low carbon technology options.

Having said that, there is no silver bullet. Each of customers has a different portfolio mix: some are more dependent on coal, some on gas, but everyone is seeking to diversify and could ultimately have a portfolio that by 2020 will meet the targets set in the countries they do business. From a GE perspective, we have to be in position to offer our customers a range of options depending on what makes sense for them.

We like the Hatfield IGCC project in the UK. GE is not supplying the gasifier but the gas turbines that will be fuelled by the syngas. We like the project for a number of reasons. First of all, it is pretty advanced in terms of its development: the Section 36 planning permission, the grid connection, siting, permitting, the Front End Engineering and Design (FEED) study à‚— much of this is already in place. We also like Hatfield because that area (Northeast England) is one of the largest emitters of CO2 in Europe and there are number of other facilities such as steel mills that could feed into a CO2 pipeline network. Using existing infrastructure, the CO2 could be pumped into depleted oilfields offshore in the North Sea. Having a number of entities as part of a broader plan makes projects like Hatfield more viable. The UK CCS competition precluded pre-combustion carbon capture, but in all fairness to Powerfuel, they still continue to invest in the project.

PEi: Do you favour carbon taxes or carbon trading?

Eldaief: We need all measures! The EU ETS has not given enough support. We need clear targets, we need a cap-and-trade system, we need subsidies, but we also need to make sure that we’ve got some certainty in terms of the outlook for the carbon price. Ultimately, that will be the underpinning of a successful low-carbon economy.

One way to do that is set a floor (reserve price) for the carbon price auctions. We need a predictable price of carbon that’s high enough to maintain and sustain the level of investment needed for low carbon technologies.

Schematic diagram of possible carbon capture and storage systems. Source: Cooperative Research Centre for Greenhouse Gas Technologies (CO2CRC)
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PEi: Is there a dash for gas in the European power sector?

Eldaief: There’s no question that there’s heightened sensitivity to go for a dash for gas as a result of lower gas prices. They are off their peaks, so that could encourage more gas build, but the reality is that if there is a dash for gas, gas prices will go up.

What I see and hear from my customers is that they are taking a balanced view. Energy security aside, everyone is saying that they need to be dependent on indigenous fuel, strategically from a country perspective. The UK, for example, has abundant reserves of coal, so we need to figure out what to do with coal in a clean way.

Gas has to be part of the energy mix and so do renewables. There may be some short-term pulls, but everyone is taking a balanced view of a diversified energy mix in the long term.

PEi: Is Shell’s withdrawal from London Array offshore wind project indicative of the technology’s cost-effectiveness?

Eldaief: You cannot say that the decision of Shell to pull out of London Array means that offshore wind is uneconomical. Everyone is going to pick and choose where they put their resources. Having said that, there are challenges.

There’s no question that offshore wind is going to be much more expensive than onshore. However, Round 3 of the UK’s offshore wind programme saw a lot of interest à‚— 40 bids. I would say that there are a lot of people that are optimistic about the prospects of offshore wind. GE and others are going to have to work at offshore wind being as economical as onshore.

PEi: What more can be done to ensure renewable energy targets are met?

Eldaief: It is of fundamental importance to harness economies of scale. So, for example, every project developer of offshore wind farms should not bury his own transmission line.

There has to be a grand vision, a master plan, as to how power infrastructure is built à‚— whether it’s carbon transportation or transmission infrastructure from offshore wind farms à‚— with the simple objective of making projects economical and to attract more investment to it. This means government support.

In the UK, the government has consulted companies as to how best the country can meet its 2020 targets. GE has been consulted a number of times on CCS and nuclear power to get our view on what it would take to execute and implement the targets that are being set.

There has to be political will and I think there is. The question is making sure that everyone rallies around the targets and their implementation. Setting up these big plans and implementing them is not easy for anyone.

PEi: The climate change agenda has given the nuclear power industry a massive boost. How is GE gearing up for the so-called nuclear renaissance?

Eldaief: We are very much dependent on our customers picking our reactor technology. In the UK, there will be obviously be a number of new reactors sites controlled by EDF that go with Areva, but there are a number of other sites. There are customers interested in some of these sites being offered. The UK government is very concerned that there is more than one reactor supplier.

Elsewhere, we are looking at a number of countries that have plans to develop nuclear power. Turkey is one, and we also actively looking at the Middle East. There is plenty of demand growth for power and water out there, and a number of projects that GE are involved with are 2 GW+.

PEi: We have talked solely about new plant with regards climate change à‚— how can your customers lower their carbon footprint of their existing equipment?

Eldaief: One way is to see how they could optimize their existing assets to be more efficient. For example CHP is one such thing. If you have a machine that is not capturing all the back-end energy you could retrofit CHP, but you would have to look very closely at the economics. Again, are there incentives that would drive you to make that investment?

Another way to improve efficiency is by demand-side management in terms of the load curve. Smart grids will also lead to a more automated, effective grid infrastructure with reduced losses and an improved flow of power à‚— particularly important with the addition of intermittent renewables and small-scale feed-in tariffs.

PEi: A number of gas turbine manufacturers are marketing gas turbines with the capability of achieving 60 per cent thermal efficiency in combined-cycle operation. How does GE, who installed the world’s first such turbines (Baglan Bay, Wales), intend to keep ahead of the game?

Eldaief: Efficiency is extremely important. You look at the economics of running a power plant and you look at the worth of one point of efficiency to a customer when you have high fuel prices. We will continue to push the envelope with our gas turbines.

Basic material science is very important, for example, to push the temperature envelope of the some of the materials and coatings we use on our equipment. We are uniquely placed to continue this, because of our aircraft business à‚— that is what they do!

We also have the luxury of a research and development network around the world, in India, China, Germany and the US, developing materials that can withstand higher temperatures, pressures and so forth.

GE’s ethos is all about efficiency, reliability, availability and flexibility. These are the key four attributes for customers. Ultimately the customer has to plug all these into his model and see whether GE equipment makes sense for him, or does someone else’s? Over the years, GE has developed good technology and lot of customers would vouch for that. That is why they keep buying GE.

Customers want equipment that will run and last for a very long time. This is especially important in an environment where customers operate their power plants up and down, perhaps firing them up in the morning and shutting them down at night. You need durable equipment to do that.

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