Three Amigos announce clean energy and environment cooperation and goals

Canada, the USA and Mexico – the ‘Three Amigos’ – have announced a joint effort to clean up their power generation sectors, with the headline being a goal that their combined region will produce 50% of its power through ‘clean’ generation by 2025. With ‘clean’ defined as solar, wind, hydroelectric, nuclear, and carbon capture and storage-enabled power generation, Canada currently sits at 81% clean generation, the USA around 33%, and Mexico around 20%, the weighted average being around 37%. The three countries plan to reach the 50% goal through existing initiatives such as the Clean Power Plan in the US, but in addition by increasing international grid interconnectedness (presumably to allow a balancing of fluctuating renewable energy production) and by putting in place support mechanisms for clean power generation innovation. On top of these actions, the North Americans will also act introduce more extensive energy efficiency measures, and share geospatial data about their energy infrastructure. Mexico is to join US and Canadian efforts to reduce methane emissions from oil and gas extraction. While much of the joint plan seems to be the continuation of existing plans, it is interesting in a political aspect that clean includes fossil fuel firing.

IEA calls for governments to halve air emissions

The International Energy Agency has called for governments to adopt a strategy to halve air pollutant emissions, with director Fatih Birol saying that clean air is a basic human right, one that most of the world’s population lacks. The strategy involves switching to cleaner fuels, instituting better energy efficiency, more widespread application of air pollution control technologies, and improving cooking facilities (which in the developing world lead to indoor air pollution), as well as setting goals and policies and instituting monitoring regimes. The agency estimates that this would add around 7% to the world’s energy expenditure up until 2040, with the benefit of 3 million fewer deaths per year. Of the 7% additional expenditure, around US$4.8 trillion (€4.3 trillion) would be spent on air pollution control technologies in power plants, other industry, and vehicles. The problem of air pollution is a grave one, with 80% of monitored cities around the world exceeding the safe levels set by the World Health Organisation.

Brexit puts much-needed investment into power sector into doubt…

Following the 51.9% majority vote in favour of leaving the European Union in the UK’s Brexit referendum, there has been some examination given to the implications for infrastructure projects in the UK. While additional airport capacity and the High Speed 2 railway line linking the north and south of the UK are both in some doubt, there are also implications for the power generation sector. Bloomberg asked where the UK will find the £100 billion (€120 billion/US$134 billion) estimated to be required to ‘keep the lights on’ after 2020, as International Energy Agency director Fatih Britol suggested it would be more difficult to find investment, due to higher uncertainty. That sentiment was echoed by Professor Paul Younger at the University of Glasgow, who said “We were already fearing severe problems of grid control in coming winters. The challenges just got a whole lot worse.” With much turbulence immediately following the Brexit result, these are valid questions.

…and also puts Tata Steel business sale and continuity at risk

Meanwhile, there are questions about government support for the steel industry. Tata Steel had announced in March that it intended to sell its UK steelmaking assets, but incentives offered by the UK government since then had led the company to stall the sale process. The prospect of the loss of access to the EU single market, which accounts for 25% of Tata UK’s sales, means a reconsideration of the sale of the assets, but such a sale would now likely result in a lower price, as business prospects are more uncertain. The coming months should bring somewhat more definition not only to the potential Tata sale, but more widely to how Brexit will affect UK business prospects.

Federal judge rules that Obama administration does not have power to set stricter methane rules for fracking

A federal judge in the US state of Wyoming has ruled that the Obama administration does not have the power to set stricter standards for fracking, in a move welcomed by industry groups such as the Independent Petroleum Association of America. Faced with a hostile Congress, the Obama administration has been trying to implement environmental policy through issuing regulations to existing laws (rathing than having new laws agreed), in so doing bypassing Congress. The strategy appears to have backfired in regards to fracking, with U.S. District Judge Scott Skavdahl – appointed by Mr Obama – finding that implementing rules through existing law was “in excess of its statutory authority and contrary to law.” The ruling does not mean fracking is unregulated; rather, regulation remains in the hands of US states. However, it does pose a potential problem for Hilary Clinton, if she were to win office – Ms Clinton has vowed to take a stricter approach to environmental regulation, even without support of Congress.

New pan-African power venture looks to raise finance through bonds

The Financial Times has reported on a new venture on the part of a Nigeria-based development organisation, Africa Finance Corporation, and South Africa’s Harith General Partners, to pool their assets in order to create a pan-African energy company. With the total power generation capacity of the 48 sub-Saharan countries, including South Africa, being less than that of Spain, there is a huge lack of generation capacity across the continent. The joint venture (unnamed in the FT article) is hoping that by creating a large entity with numerous assets, it is able to attract finance through issuing bonds, rather than the traditional means of raising private equity. The critical difference is that by issuing bonds (a promise to repay the bond price plus an additional percentage, without the bond holder having any ownership), the company will pledge to pay back a return on investment over a shorter period than if finance was secured through equity (where investors will own a portion of the company and receive a proportional return on any profits). This is critical because private investment typically wishes to make a return more quickly than public investment. It will be highly interesting to see if the approach works.

GE expecting huge growth for digital division

Following the news item in the last edition of the Combustion Industry News about GE’s release of its Digital Power Plant software for increasing the efficiency of (physical) power plants, the Wall Street Journal has run a more general story on GE’s push into ‘digital’. The company began that push in 2011, when it hired its first software engineers, opening an office in Silicon Valley, and now has 28,000 people working in its digital division (8.5% of its 330,000 employees worldwide). This year, the digital side of the business is expected to generate US$6 billion (€5.4 billion) in revenue (against last year’s total revenue of US$108.8 billion), but GE projects that will grow to US$15 billion (€13.6 billion) by 2020 – an astonishing rate of growth. The Chief Executive, Jeff Immelts, refers to GE now as “the digital industrial” company, and believes that it is in a race with other digital companies to become the dominant force in the industrial sector, as industry looks to become more efficient during times of slow economic growth. As a measure of the potential of digital, GE estimates that applying its software to its own operations will save it around US$1 billion (€0.9 billion) per year.

Seven Generations mulls move to LNG export and power generation

Bloomberg has reported on Canadian gas producing firm Seven Generation’s mulling of a move to expand its operations into LNG export and power generation. As Canadian gas producers as a group face lower exports of gas to the US, Seven Generations CEO Pat Carsons believes that broadening the range of operations the company is involved in will provide it with the opportunity to continue to grow. Seven Generations has been Canada’s best performing energy stock over the past year, increasing its output amidst the general downturn, and this performance has given the company a recognition which it hopes to leverage in its expansion. The company may commit to one or more projects ‘soon’, with start-up to occur within three to seven years. If the company does expand into power generation, it will become an uncommon combination of producer and user of gas.