Tata Steel looks for quick sale of UK assets

The disintegration of Tata Steel has gathered pace since the story in the last edition of Combustion Industry News, in which Liberty House was to buy two of Tata Steel’s Scottish steelmaking plants. In the last few weeks, Tata announced it plans to sell all of its UK assets, which employ 15,000 people and are currently losing the company £1 million (€1.24 million/$US 1.41 million) per day. Formal sale talks opened last week, and it is understood Tata desires a quick sale. It marks a change in approach from Tata, which had been looking for a buyer for its Port Talbot steelworks (which employs 4,000) for eighteen months, but had intended to retain most of its other UK assets. The UK government has responded by trying to find a buyer for the assets, and says that several organisations have come forward, though the only one named so far has been Liberty House, whose head, Sanjeev Gupta, says that Liberty’s intention would be to retain all staff, transitioning the Port Talbot plant from blast furnaces to arc furnaces to recycle scrap steel. There have also been suggestions that the assets could be sold separately. The sale announcement came amidst a report in the Financial Times that the UK blocked attempts by other EU members (notably France and Italy) to make anti-dumping rules stronger and therefore offer greater protection to EU steelmakers. Axel Eggert, the head of the European Steel Association, said “The UK is the ringleader in a blocking minority of member states that is preventing a European Commission proposal on the modernisation of Europe’s trade defence instruments.” There are fears that a quick sale of Tata Steel’s assets may be a bad sale, with calls for the government to take Tata Steel into ‘conservatorship’, in which the government would take on the debts and daily operating expenses of the assets, while the existing corporate structure is maintained until a suitable buyer is found. The practice is used in the US for strategic assets with good long-term prospects facing short-term difficulties.

University of Oxford researchers find fossil-based power generation capacity built after 2017 would have to be ‘stranded’ to meet 2 ^oC target

The Financial Times has reported on and explored the ramifications of an article by academics at the University of Oxford, which finds that not only must the majority of fossil fuel reserves remain buried to achieve the goals of the Paris Climate Conference, but that new fossil-fuelled power generation capacity built after 2017 will also have to be ‘stranded’. The goal the researchers used was of a probability of 50% of keeping average global temperature rises below 2 ^oC, and they assumed that other sectors contributing to greenhouse gas emissions would reduce their emissions in line with such a goal. The conclusion that new fossil-fuelled capacity built after 2017 would have to be stranded comes from a further assumption that all generation capacity will serve its useful life. As it seems vastly unlikely that companies and countries, and possibly even citizens will accept such stranding, then alternative scenarios must be considered. The most likely appears to be the introduction of carbon capture and storage, which could be applied not only to power generation but to cement and steel making, as well as other heavy industries. However, CCS is still uneconomic and not widely proven. In parallel, there could be an even greater push for more renewables generation capacity to be installed in the short term – with costs for installation falling fairly quickly, this would be a fairly economic choice, but problems remain with integration into the grid, energy storage, and assurance of supply. Carbon markets could also help, but have so far proved relatively ineffective. A novel approach suggested by the Financial Times is a system of national caps on cumulative emissions, although agreeing such a system would likely be time consuming and politically fraught, and assuring the system once agreed would be difficult. Another alternative would be licensing of power plants to limit more polluting technologies and encourage less polluting ones, but would again require international agreements. The article concludes that immediate action is vital, and that more money should be spent on research and development. What the article does not mention, however, is that what might be more realistic is a medium-term overshoot of carbon emissions (above what is required for a below-2 ^oC goal), followed by technologies to remove carbon from the atmosphere to bring atmospheric concentrations down. This too, however, would come with consequences.

Investment in renewables double that of fossil-based power generation in 2015

The necessary sharp shift to renewables from fossil fuels appears to already be underway, according to a Bloomberg article. Globally in 2015, twice as much investment was made in wind and solar power generation than in fossil-based power generation. This came despite gas, coal and oil prices being at their lowest levels for years (with the expectation of them continuing to remain relatively low for years to come), which would normally encourage investment in fossil-based power generation. Trumping those economics are the economics of renewable power generation, the costs of which are falling rapidly as deployment (as well as research and development) increases. Each time deployed capacity of wind doubles, costs fall 19%, while for solar, the costs fall 24%. Meanwhile, however, coal is still being consumed in vast quantities. Consumption has been very gradually declining in OECD countries, and fell by 4% in China in 2015, but in non-OECD countries excluding China, consumption has been growing at around 10% over the last four years, reflecting the general trend of the developing world continuing to invest in fossil-based generation while the developed world turns more towards renewables (and gas). Overall, global coal consumption has increased by around 6% over the last five years. The wide-ranging article contains a number of interesting charts, including an animated one showing the huge increase in insolvency risk amongst oil and gas companies in 2015. Perhaps the most astonishing statistic, however, is that the UK now produces less power from coal than at any time since at least 1850.

Chinese-Bangladeshi joint venture signs deal to build coal-fired plant in south of Bangladesh

One developing country heavily investing in coal-firing is Bangladesh. After awarding major power plant contracts to Japanese and Indian companies over the last year, the Bangladeshi government appears to be appeasing its other regional power, China. A joint venture between China National Machinery Import and Export Corp and Bangladesh’s North-West Power Generation Co Ltd has signed an agreement to build a coal-fired, two-unit 1,320 MW power plant near the proposed sea port of Payra, 319 km south of Dhaka. The plant is to be operational by 2019, which would help to raise the country’s total generation capacity from the present 11 GW to the goal of 24 GW by 2021, as the country’s electricity demand grows at around 10% annually.

Four protestors die at construction site of another Chinese-Bangladeshi power plant

Meanwhile, another Chinese-backed coal-fired power plant in Bangladesh which commenced construction last month (also with the goal of being operational by 2019) has had construction temporarily halted following the death of four protestors at the site. Rival groups, for and against the plant according to their opinion on the amount of compensation offered, clashed at the site, with riot police firing weapons after coming under attack, according to Reuters. The plant, being built by Bangladeshi construction company S Alam for Chinese firm SEPCOIII Electric Power Construction Corp, is also a 1,320 MW plant, this time 265 km south-east of Dhaka. SEPCOIII does not wish for construction to recommence until the government has intervened to stop the violence, while protestors against the plant have given the government an ultimatum to cancel the project.

US District Court rejects case brought by Indian fishermen and farmers against World Banks’ International Finance Corporation

Fishermen and farmers from neighbouring India have had a bid to sue the World Bank’s International Finance Corporation for the damage they suffered after the construction of the coal-fuelled Mundra power plant, in coastal Gujurat, rejected. EarthRights International filed the claim on behalf of the fishermen and farmers in the US District Court of the District of Colmbia last year, claiming that the plant’s effluent cooling water harmed fish catches, while saltwater leaking from the plant made groundwater undrinkable and not suitable for irrigation. Air quality was a further complaint. The court rejected the case, brought on the grounds that the IFC had been negligent in financing and supervising the project, not because the damage did not take place, but that the International Finance Corporation was immune from legal action under the International Organizations Immunities Act. The Indians plan to appeal the ruling.

Long-delayed Batang plant to begin construction after Indonesian Supreme Court dismisses landholders’ objections on technical grounds

Across Asia, it appears, protest and objections to power plants are being quashed. This month the long-delayed, coal-fired, 2,000 MW Batang power plant is to begin construction in central Java, Indonesia, according to Japan’s Nikkei business daily. Building will commence after the Indonesian Supreme Court rejected on technical grounds a court case brought by landholders, removing the last legal opposition to the project. A ‘groundbreaking’ ceremony was held rather prematurely by President Joko Widodo last August.