• Combustion Industry News

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      Patrick Lavery

      Combustion Industry News Editor

Shell CEO calls on energy industry to inform public fossil fuel use inevitable part of 21st century

The CEO of Shell, Ben van Beurden, has called upon the energy industry to be “the contrarian in the room” on the realities of the current and future energy mix during the Offshore Northern Seas Forum, attended by the King of Norway as well as the prime minister. The thrust of his argument was that the various realities of worldwide energy use– broken into power generation, transport, industry and buildings – make a full and rapid transition to renewable energies impracticable. His examples included the difficulty for highly densely populated areas to have enough space to produce energy from renewables, the fact that long-distance air and heavy road transport have no alternative to fossil fuels for the time being, that iron, steel and cement require the high temperatures only (currently) produced using fossil fuels, and that buildings, too, would face difficulties. Mr van Beurden went as far to say that with energy demand increasing rapidly it will be “a major challenge for the share of renewables in the energy mix to grow sufficiently” – presumably sufficiently to meet the targets of the Paris Climate Conference of 2015. In light of this, he argued that it falls to the energy industry to make society as a whole aware of the fact that hydrocarbon use – and carbon emissions – will be an inevitable part of life in the 21st century, even if not entirely welcome. Only by being realistic, Mr van Beurden argued, can the necessary energy transition can be efficiently and effectively undertaken.

China moving to close smaller power plants to combat overcapacity

The Chinese government’s plan to limit overcapacity in the power generation sector appears to be moving forward, as a report from Reuters has described. Smaller capacity power plants (less than 600 MW) will be targeted for widespread closures, as will those with poor environmental performance, through what appears to be a round-about mechanism of depriving such plants of customers, forcing them to close through economic pressure. The report quotes Zhang Shumin, chief economist of one of China’s largest five state-owned power generation companies, China Guodian Corp, as saying that “Thermal power plants will face difficulties in operating in the next three to five years, even edging to bankruptcy, especially for the small plants and those that fail to meet environmental standards.” Around 75% of China’s power plants are coal-fired, but they are currently being underutilised due to overcapacity and a sluggish economy. Guodian would try to move workers from any closed power plants to its wind power sector.

Gas firing continues to grow at expense of coal in the US

Gas firing, particularly in combined-cycle gas fired plants, is continuing to grow in the US as coal firing shrinks, according to recent data released by the U.S. Energy Information Administration. Both gas and coal prices fell over the last year, but with gas dropping by 14%, and coal by ‘only’ 8%, there was increased economic pressure for power producers to switch to gas. In the same period, coal-fired generation capacity fell by 5% (with utilisation at 60.6%), while gas-firing rose by 2.3% (with utilization rising from 61.8% in June 2015 to 64.4% in June 2016). Nearly all additional gas-fired capacity was in large combined-cycle power plants, and the EIA expects this trend to continue over the year to come, with another 13,700 MW of gas-fired capacity to come online, an increase of 3.1%. Only a significant rise in gas prices, unmatched by a coal price increase, would disrupt this trend.

Pakistan looks to floating LNG terminals to solve energy supply shortage

The Wall Street Journal has looked at how Pakistan is trying to solve its acute energy supply shortage problem, as the country begins to use floating LNG terminals to import fuel. Floating terminals, which dock at ports and deliver LNG into piped networks over moderately long time frames, cost around half  that of land-based terminals, and have the advantage of being movable. The first was introduced in Pakistan last year, with another planned to come online within two years, but it is estimated the country requires four more terminals (each of which can supply between 0.6 and 0.8 billion cubic feet of gas per day). Demand for energy in Pakistan is currently outstripping supply by around 20%, a gap which is projected to rise to around 25% in the next two years – Pakistanis currently enjoy around eight hours of electricity per day, but that is falling. The investment in floating terminals is being matched by investment in terrestrial pipelines and distribution networks, and it is estimated that, all going to plan, around US$15 billion (€13.4 billion) worth of investment will be made. Some doubts about the overall effectiveness of the plan have been made, based on other problems within the country – poor equipment maintenance and theft causing up to 30% of losses in transmission and distribution.

Modelling found to be overestimating some companies’ carbon emissions

In a news story on the periphery of the combustion industry, analytics company MSCI has found that many companies are overestimating their carbon emissions by using inaccurate models. The finding came from comparison of previous estimates from models by companies against their newer calculations and measurements. In some cases, models had been overestimating emissions by as much as 50% or more. The discrepancies are partly the result of models failing to take into account carbon-efficiency steps that companies have implemented, the fact that ethe lectricity which companies purchase has been generated in less carbon-intensive ways, and/or on the other hand the introduction of carbon pricing. The complexity of carbon emissions estimation, and the ability for a company to switch practices in short timeframes and radically alter their emissions, creates a headache for investors wanting to assess companies based on their emissions. As Asha Mehta, head of environmental, social and governance issues at financial asset management firm Acadian told the Financial Times, “Identifying current emissions is just the first step in dealing with carbon risks in a portfolio.”

BP doubles down on Chinese shale gas

BP has redoubled its interest in shale gas in China by agreeing a second exploration deal with China National Petroleum Corporation for a 1,000 square kilometre area in Sichuan province, in the south-west of the country. While other oil and gas companies such as Shell and ConocoPhillips have retreated somewhat from investing in Chinese shale gas because of high exploration costs (due in part to more complicated geology), BP is taking on the challenge as it seeks a growth path after the disaster of the Deepwater Horizon oil spill. BP’s strategic alliance with China National Petroleum Corporation (CNPC will have operational control of the shale gas exploration) commenced last year, after the state visit of Chinese president Xi Jinping to London. With China keen to be more energy independent, and with it holding the world’s largest shale gas reserves, the opportunity for BP does indeed seem large, though potentially risky.

Enea considering purchase of Engie’s Polaniec power plant

Enea, Poland’s third-largest energy utility, has expressed its somewhat lukewarm interest in buying Engie’s Elektrownia Polaniec power plant in southern Poland. The plant is coal-fired, with eight units each of a capacity of 225 MW, opened between 1979 and 1983 and refurbished in the mid-1990s. Engie is looking to sell its Polish assets as it raises revenue to move into more renewable energies, while Enea is looking to expand its total generation capacity, including the option of building a new plant in addition to the purchse of Polaniec.

Samsung pulls out of coal-fired power plant project in Kazakhstan

Samsung C&T Corp and Samsung Engineering Co have decided to cancel a US$2.50 billion (€2.23 billion) project to build a thermal power plant in Kazakhstan, according to Reuters. The 1,320 MW coal-fired Balkhash Thermal Power Plant project was first announced in December 2014, but regulatory problems coupled with the low oil price have persuaded Samsung to pull out.

Coal-fired capacity in Colorado to be closed

The Nucla Station and its associated coal supplier, New Horizon Mine, both in south-western Colorado, USA, are to close by 2022, with Unit 1 of the coal-fired Craig Station to close in 2025. The closures are the result of a settlement that Tri-State Generation & Transmission, the owners of the plants and mine, made with the state of Denver after environmental group WildEarth Guardians brought a lawsuit against Denver and its plans to comply with federal haze rules under the Clean Air Act. For the town of Nucla, with 93 of the 700 population employed at the plant and mine, the closures will have an enormous impact. Town trustee Dorothy Reed told the Wall Street Journal “Nucla’s liable to dry up and blow away. The power plant and coal mine, that’s about all we got.”