China accelerating power generation capacity expansion despite overcapacity

The Wall Street Journal has reported on the increased pace of power plant construction in China, even as demand for power falls. Investment in fossil-fired power plants rose 20% in the last year, after almost net flat growth between 2011 and 2014, while utilization of power plants has been falling since 2011. The increased investment means that by 2020 (according to projections presented in the article), many provinces in the country will have excess power generation capacity of more than 20%, with Shanxi having more than 50% (the excess being roughly equivalent to Turkey’s total power generation capacity in 2011). China’s total power generation capacity outstripped that of the USA in 2011, and is now around 50% higher, an indication of the incredible rate of growth in thermal power generation capacity; in the next two years, an extra 200 GW is expected to be added, mostly coal-fired. This is despite the fact that permits for new coal-fired power plant projects in oversupplied regions were banned in the last year – approvals prior to the ban were many, and remain valid. The expansion amidst current oversupply may upon first consideration be perplexing, but an examination of the causes is revealing. Provincial officials are under pressure to help boost economic activity as China’s economy falters, credit is cheap, coal prices are low, and electricity prices, controlled by the state, have not been reduced, meaning that stations can make a profit even while operating fewer hours. What is looming as a result of such excess capacity is a painful ‘correction’ for owners – there are government plans to allow large electricity users to negotiate prices, which may lead to them falling, and new nuclear and renewable capacity will also come online, with lower operating costs. Perhaps the coming years will see calls for greater export of electricity to China’s neighbours.

US steel sector reviving after protectionist moves by federal government

The US steel sector has bucked the worldwide trend, raising output by 2.5% in the last year even as global output fell 0.5%, with higher tariffs on imports given the credit for the revival of the industry. The government moved last year to introduce duties on imports from China, Brazil, India, Japan and other countries, such that this year imports have fallen by 29%, and prices for the U.S. benchmark hot-rolled coil index have risen by more than 60%. While steelmakers are happy (and their stock prices have risen), automobile makers and other steel users have complained that they have been put at a competitive disadvantage by the moves, though their strong demand for steel suggests that they are not struggling overly. The strength of US steel sector will be looked at with envy by steelmakers in Europe, though benchmark prices across the Atlantic have also risen this year, by 34%. The protectionist policies by the US, seemingly successful for the time being, will further raise debate during the USA’s election year, in which trade policies are a major talking point.

Iran and Turkey set to sign deal for 5 GW plant to be built in Iran as first step in closer power ties

The Iranian and Turkish governments will soon sign a deal for Turkish firms to build a 5,000 MW power plant in Iran, at a cost of around US$3 billion (€2.66 billion), according to Reuters. While the article does not mention the fuel, with Iran’s oil and gas resources, and the international agreement against development of the nuclear sector in Iran, it seems likely that it is to be gas fired. The location was also not specified, but as greater electricity trading between the two countries was also discussed, it would be logical for the plant to be built somewhere close to their shared border. Further talks regarding future power cooperation between the two countries are to come.

Archer Daniels Midland ethanol plant to be world’s first major BECCS facility

Carbon Brief has reported on the development of a world-first major bioenergy with carbon capture and storage (BECCS) project being installed by agribusiness giant Archer Daniels Midland in Decatur, Illinois, USA. A pilot plant was installed and operated between 2011 and 2014, capturing one million tonnes of CO₂ from an ADM ethanol plant (which turns corn into biofuel), storing the CO₂ in a sandstone layer overlain by three layers of dense shale. ADM has now won US$141 million (€125 million) in funding from the Department of Energy to help finance a US$208 million (€185 million) expansion of the capture and storage facility to demonstrate its commercial potential, increasing the capture from around 1,000 tonnes to day to around 2,500 tonnes per day. While this does not size the CCS facility to capture CO₂ from the entire waste gas stream of the plant (and thus make the entire plant carbon negative), it does offer the appealing prospect of biofuel production being net carbon negative: carbon is sucked up by the corn during growth, removed and stored via CCS during processing into ethanol, and released when the fuel is burned, but that released is less than the total consumed by the crops and removed during processing. It is sure to become a more talked-about means of combatting climate change in the future.

ETI calls for ‘template’ CCS-enabled gas-fired plant designs

The British Energy Technologies Institute has issued a call for partners to submit proposals for a ‘template’ CCS-equipped combined-cycle gas-fired plant. The template – an outline scheme and design – would be used to estimate costing and develop a business case for such a plant, which the ETI then hopes will encourage investment in building them. While a more comprehensive call was put out by the ETI in June of last year, it was cancelled following the UK government’s decision to cancel its £1 billion CCS competition, which would have sponsored at least one major CCS installation.

ETI report suggests deployment of three industrial-scale CCS-enabled plants could reduce UK CCS costs by 45% 

The call for proposals comes after the ETI last month released a report which suggested that CCS installation costs in the UK could be lowered by as much as 45% if a demonstration plant and then three full-scale CCS-equipped plants were built in the kingdom. It set the levelised cost of electricity from the demonstration plant at around £150/MWh, from the first full-scale plant at around £106/MWh, the second at around £91/MWh, and the third at £78/MWh. Interestingly, the cost savings do not come from technological progress, but from economies of scale, more efficient building practices, the sharing of pipeline and storage infrastructure, and from reducing the perceived project risk – as more plants are built, financiers become more sure that they are dependable, and reduce the interest rates on loans for the projects. In contrast, the same report estimates that increasing the efficiency of carbon capture technology – i.e. improving the technology itself – would only cut costs by around £10/MWh. The report is a powerful argument for reinstating the cancelled UK government CCS competition, and also suggests that similar cost reductions could occur in other countries deploying CCS.

Shanxi to establish US$1.5 billion fund for clean coal investment

The Chinese province of Shanxi (mentioned above) is to set up a US$1.52 billion (€1.35 billion) investment fund for clean coal utilisation, inviting bids from across China. The money is to be used mainly to clean up the coal industry of the province, from the coal chemical industry to coalbed methane drainage and utilization, carbon trading and emission reductions, and carbon capture and sequestration.

Jera to buy stake in Petronas’s Borneo LNG assets

Jera Co Inc, the joint venture between Tokyo Electric Power Co. and Chubu Electric Power, is negotiating with Malaysia’s Petronas to buy a stake in some liquefied natural gas assets in Sarawak on the island of Borneo, according to the Wall Street Journal. Petronas, like most oil companies around the world, is not experiencing the best of financial times, and the reported ~US$200 million (~€179 million) income from the sale would be welcome, while for Jera it represents value while market prices are low. Jera, which was formed to give Tepco and Chubu more bargaining power – in July it is expected to become the biggest single buyer of LNG –  recently signed a new supply deal with Qatargas Operating Co.

GE to move gas engine plant from US to Canada to access export financing agency

GE has announced that it will move a gas engine manufacturing plant which employs 350 people from Waukesha in the US state of Wisconsin to Welland, Ontario, Canada. GE had said in September last year that it would move to Canada, without knowing where, the decision being forced by the failure of the US Congress to renew the authorisation for the Export-Import Bank, the US government facility for financing overseas projects. Such an export financing agency is required for bidding on international projects, which GE wishes to pursue; GE will now use an available Canadian agency. Since GE made the Welland announcement, US President Barak Obama has reauthorized the Export-Import Bank, but it appears the action has come too late.