• Combustion Industry News

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      Patrick Lavery

      Combustion Industry News Editor

North America in midst of second shale revolution, according to Financial Times opinion piece

The Financial Times has published an opinion piece which describes the current state of the North American shale industry as being a “second shale revolution”. The first revolution began a decade ago, when operations rose from insignificant to large within a small number of years, with high coal and gas prices driving the shift. As production increased, both gas and coal prices fell, and oil prices followed suit. This led to OPEC, in particular Saudi Arabia, to flood the oil market in the hope of driving North American producers out of business, but this backfired, pushing North American producers to further technological innovation which reduced their production costs – the second shale revolution. The average break-even cost for oil production from shale is now at a highly competitive US$50 per barrel, and further reserves have been found, meaning that the North American industry will continue to challenge OPEC producers. Output of both oil and gas is beginning to rise again after a dip last year. Shale gas prices are falling, putting further pressure on coal producers in the US, causing a headache for the new federal administration’s aim of assisting the domestic coal industry. Gas exports are expected to rise, creating market pressure on producers in other countries. The piece also opines that greater domestic security of energy supply may make the US less prone to interventions in foreign conflicts.

South Australian government announces energy strategy as rising gas prices described as “public policy fail of epic proportions”

Energy policy in Australia has continued to be a topic of hot domestic debate, with the government of South Australia, the state which has experienced various blackout events over the past six months, announcing a AUD$550 million (US$424 million/€394 million) plan to improve the situation in the state. It consists of a new 250 MW gas-fired power plant (at AUD$360 million/US$277 million/€258 million) for back-up generation and AUD$150 million for a 100 MW battery storage facility to help provide continuity of supply from intermittent power generation from wind and solar power. While the state government has previously denied that the high proportion of renewables in South Australia’s energy mix (which last year stood at around 45%, in comparison to an Australian average of 15%) poses operational and strategic problems for the state, the contents of the plan indicate otherwise. While South Australia’s wind farms perform well (generating 33% on average of their installed capacity, as opposed to average European rates of around 23%, due to South Australia’s proximity to the ‘Roaring Fourties’), the proposed spend on storage significantly boosts the total cost of installed capacity, and the installation of a backup gas-fired plant demonstrates a recognition that the energy mix is unbalanced. The launch of the plan came days after Elon Musk had proposed to install a 100 MW storage facility within 100 days or provide it for free. The South Australian government’s move has angered the federal government, which, apart from being on the other side of politics, argues that it is a move away from the Australia-wide energy market which has been in place for 20 years. At the same time, the Australian Energy Market Operator has also attracted criticism for its handling of South Australia’s energy problems. Meanwhile, there is debate over the free trading of natural gas, with export to foreign markets raising domestic prices at a time when there are widespread complaints about electricity prices, with one respected commentator describing the situation as “a public policy fail of epic proportions.”

Pakistan to hugely develop its coal-fired power generation sector

Bloomberg has looked at the development of coal power generation sector in Pakistan, where a US$55 billion (€51 billion) economic partnership with China is in the early stages of transforming the industry. Currently, coal-firing accounts for only 0.1% of Pakistan’s power consumption, but with the country long crippled by power shortages – it is not uncommon for power in the major cities to be out for 12 hours – that are thought to reduce economic growth by a few percentage points each year, the country is now turning to coal. A huge lignite field in the Thar Desert in in the south-east of the country is being turned into a mine to fuel 1.3 GW of power generation capacity in a US$3.5 billion project, which will be accompanied by a US$3 billion upgrading and extension of the national transmission network. It is estimated that coal could account for 24% of the country’s energy supplies by 2020, with at least another two large coal-fired projects being planned. Looking further, the secretary of Pakistan’s Ministry of Water and Power, Mohammad Younus Dagha, told Bloomberg that the Thar Desert has the potential of fuelling 15 GW of generation capacity within 10 years. Such an increase would reduce the current reliance on imports of oil and gas, while also bucking the worldwide trend away from coal firing.

Dayton Power & Light to close two coal-fired plants in Ohio

US company Dayton Power & Light has announced it will close two coal-fired power plants in Adams County in the south of the state of Ohio by June next year, saying that beyond that date they will not be economic to operate. The two plants have a combined capacity of around 3,000 MW, and employ 490 people. Dayton Power & Light held negotiations with the Public Utilities Commission of Ohio and a range of other stakeholders about the question of if power prices could be raised to cover upgrades to the plant, with the outcome being that they could not. A spokesperson for the environmental group the Sierra Club said that the two closures would put the total number of coal-fired power plants planned for retirement across the US at 250, while a local community leader said the closures would be “absolutely devastating to our community”. In 2015, 17 GW of coal-fired power generation capacity in the US was closed, followed by 14 GW last year, and the decline of the coal industry became a significant issue during last year’s presidential election.

Unit International Energy and SK Group to build 5 GW of gas-fired capacity in Iran

Turkish firm Unit International Energy has partnered with South Korea’s SK Group in order to build around 5 GW of gas-fired power generation capacity in Iran, in a contract worth around US$3.6 billion (€3.3 billion). Five new plants will be built, making it Iran’s largest ever private energy project, and the Korean government sees it as a springboard for future collaboration between Korea and Iran. The first two plants (a 1,200 MW plant in Saveh in central Iran and a 800 MW plant in Zahedan, near the border with Pakistan) are planned to be built in just two and a half years, starting in January 2018, with testing to be carried out in 2020. Both SK Group and Unit International are expected to share operational duties.

DONG Energy looks to build on wind energy success while focusing combustion expertise on biomass and energy-from-waste

The Financial Times has reviewed the transformation of DONG Energy, the majority state-owned power company of Denmark. From its inception in the early 1970s as an oil and gas company, in the last decade it has shifted away from fossil fuels towards renewables, and plans to close its last coal-fired generation capacity by 2023. In 2006, wind power assets constituted 16% of its asset base; in 2015, that had risen to 75%, making it the world’s largest offshore wind company. In the coming four years, it will double down on its wind power strategy, with plans to add more capacity than it has installed in the last 25 years. DONG is not turning its back on combustion, however, as it innovates in the fields of energy-from-waste and biomass combustion.

Wood Group to buy Amec Foster Wheeler

Wood Group has agreed a deal to buy Amec Foster Wheeler for US$2.7 billion (€2.5 billion). The merger will see an expansion of Wood Group’s capabilities, with a large range of industrial service offerings, including in combustion. Amec Foster Wheeler itself is the merger of Foster Wheeler and Amec, which took place in 2014. Wood Group’s chairman, chief executive and chief financial officers will take the same roles at the newly merged company.

CoGen and Peel Environmental planning a further 105 MW of EfW capacity as Protos biomass plant nears commissioning

CoGen, the UK energy-from-waste company, has announced that it is discussing with Peel Environmental the possibility of installing energy-from-waste facilities with a combined output of 105 MW across the UK. The two companies have been collaborating on a range of projects, including a 21.5 MW biomass combustion facility at Protos, a new industrial zone near Ellesmere Port in Cheshire in the north of England, which is due to be commissioned later this year. The plant at Protos is designed to process around 170 megatonnes of recovered waste wood annually, and has been built at a cost of £100 million (US$125 million/€116 million).