UK government releases implementation plan for end of unabated coal firing
The UK government has released its implementation plan for the ‘end of unabated coal’ in England, Wales and Scotland, which provides more detail on the aim to close coal-fired plants not equipped with carbon capture and storage by 1 October 2025. The plan rules out forcing CCS to be retrofitted to existing aged plants, instead pursuing implementation through emissions limits, with the 2025 limit to be 450g CO2 per kWh, roughly the same as an unabated gas-fired power station. This appears a sensible decision, as projections indicate that by 2025 there will only be one coal-fired plant still operating anyway, given the current age of the eight remaining coal-fired plants in operation, most being around 50 years old. Forced CCS would make the remaining plants close sooner, giving the UK less standby capacity as it transitions to a different power generation makeup. Coal-fired plants co-firing with biomass will have their emissions intensities calculated using the coal portion plus any net emissions from the biomass (which may prove a controversial calculation). The implementation plan does not include any additional constraints on coal firing before 2025, as there are already a number in place – a limit of 1500 hours of annual operation under the Industrial Emissions Directive, and the carbon price (which will remain at its current level until 2025) – to go together with the poor economic outlook for coal firing. Some critics have said the plan does not place enough pressure on coal, given that plants will still be paid to provide standby capacity, but the government argues, reasonably, that this is necessary to ensure an “orderly transition” to a lower-carbon power sector. While some headlines have described the plan as the end of coal firing entirely by 2025, it should be noted that the plan does allow for CCS-equipped coal firing. Nevertheless, the fall of coal in the UK is remarkable, as made evident by the fact that it was the top source of power generation as recently as 2013.
US EPA 2018 priorities sure to influence combustion industry
The head of the US Environmental Protection Agency, Scott Pruitt, has outlined his agency’s priorities in 2018 during an interview with Reuters. Those related to power generation are to replace the Obama administration’s Clean Power Plan (the agency is currently receiving input about what should replace it), review rules regarding biofuels, and possibly revise some rules relating to the protection of waterways (which may affect cooling water intake and release). A draft of a replacement to the Clean Power Plan will be released prior to a final rule, both this year. In addition, the EPA plans to host a public discussion on the science of climate change some time during the year, which is sure to attract attention.
Trump administration’s plan to compensate nuclear and coal power generation rejected; Commission will make its own investigation into grid resilience
In further news of the Trump administration, the Energy Secretary Rick Perry’s proposed rule to compensate coal-fired and nuclear power generators for providing standby capacity has been rejected by the Federal Energy Regulatory Commission, which found the current means of compensation is adequate. It also concluded that the proposed rule, though technically fuel-agnostic, was unduly biased towards coal and nuclear power generation, as the rule was based on a power generator keeping more than 90 days’ worth of fuel onsite, something that is unfeasible for gas- or oil-fired plants. Despite rejecting the rule, the Commission did note that grid resilience is an important goal, something which it will investigate in a broader sense as a priority. The rejection will be a blow to the Trump administration (particularly as it had chosen the majority of the members of the Commission), but it might be that more reasonable measures result from a more extensive investigation, which will be based on submissions from regional transmission organisations.
UK government energy projections show need for only a small number of new gas-fired stations as renewables become more widespread
In further UK news, the Carbon Brief website has analysed government energy and emissions projections to conclude that the country will only need a small number of new gas-fired power plants over the next two decades to meet required demand, with the majority being built over the next four years. These figures are vastly different to the projections of the previous two years; last year, it was predicted that demand for gas would be twice as high by 2035, which was already half as much as that predicted the year before. In place of gas is renewables with battery storage, with renewables expected to be the largest source of power generation by 2020, and the shift is driven largely by the cost of renewables falling faster than expected. Carbon Brief, however, describes the methodology behind the predictions as “opaque”, with a freedom for information request for the details denied last year, meaning some caution should be exercised when reading the figures. Nevertheless, the analysis is detailed and interesting, as is the prediction that indicates that the UK will slightly miss its carbon-equivalent emissions reductions target of 57% by 2032 from 1990 levels, instead achieving 54%.
Hydrogen energy storage gaining increased interest
Hydrogen as means for storing green energy has been receiving more attention in recent months, as an article by the Financial Times demonstrates. Intermittent solar and wind power generation can be used to electrolyse water to produce hydrogen (and oxygen), the former which can be stored for later use when, for instance, winds are low at night. Two means for using the hydrogen are in fuel cells or via combustion, the first being explored more for transport and the second more for power plants. Hydrogen storage allows for greater energy intensity compared to battery storage of electricity, meaning that, for transport, larger vehicle ranges are possible (as well as larger vehicles, such as trucks, airplanes and even ships), which has convinced Toyota to continue with the development of fuel-cell powered cars. A chief competitor to hydrogen for transport, Tesla owner Elon Musk, has argued that electrolysis to make green hydrogen makes little sense as there are energy losses in the conversion, but this criticism must be partly the product of competitive tension. On the combustion side, hydrogen offers a zero carbon option without the need for carbon capture and storage, as companies such as Vattenfall’s Dutch subsidiary Nuon has been exploring along with Gasunie and Statoil. Gasunie’s involvement in green hydrogen has recently expanded to involve a potential project with Dutch paint manufacturer Akzo Nobel, in which the two companies will build a green hydrogen plant, some of product of which will be used at one of Akzo’s paint factories. As the Akzo CEO told Reuters, “This technology has enormous potential.” The proposed plant would use 20 MW of electricity to electrolyse water, making up to 3,000 tonnes of hydrogen gas annually, and a positive investment decision will be made if enough buyers can be found for the product.
China’s push to reduce air pollution sees imports of LNG rise 27%
China’s push to reduce air pollution in its cities resulted in a 27% increase in gas imports last year, to a record amount of 68.57 million tonnes. The surge comes at the expense of coal, which Chinese authorities have been encouraging industry and householders to burn less of. The transition was not entirely smooth – additional imports of LNG were required because national production and distribution infrastructure could not always cope, and some household boilers had not been converted to fire gas before the supply of coal was reduced. The additional imports pushed Asian gas prices up to their highest level in three years, and they may continue to rise if the government keeps up the push, to the extent that China may overtake Japan as the world’s largest buyer of natural gas.
Chinese ‘carbon trading’ system to be performance based
Keeping with China, and a blog post by Harvard energy economist Robert Stavins has looked at the carbon trading market that the country is poised to announce this year. The market, which would be the world’s largest at around 150% larger than the size of the EU ETS, is likely to be somewhat different from the European market in that it will not be a trade in carbon dioxide emissions permits by volume only, but in emissions per electricity output (known as a tradable performance standard). Under such a system, the government will set a benchmark emissions rate per unit of electrical output (with different benchmarks for different types of generation), assign permits accordingly to each facility depending on its output, and then allow facilities to trade. This approach aims to reduce negative effects on the economy by rewarding greater output, though it has the downside of having a smaller effect on marginal production costs, therefore sending less of a price signal to consumers. Such performance standard trading systems have been put in place before, as in the case of the US leaded gasoline phasedown in the 1990s, as the blog describes. The Chinese system will start with the electricity generation sector but may be expanded to include building materials, iron and steel, non-ferrous metal processing, petroleum refining, chemicals, pulp and paper, and aviation. When and how permits will decrease under the system, how permits will be priced, monitoring and enforcement, and a range of other issues remain publicly unknown at present, but whatever system is finally put in place (operation is unlikely to commence until 2020), it is sure to be of global significance.
Statoil becomes an energy company rather than an oil and gas company
Statoil CEO Eldar Sætre has used an interview with Energy Voice to describe the transition that the company is taking from being an oil and gas company to being an energy company. By 2030, the company sees itself investing 15-20% of its capital budget in renewables, and for those investments it expects to achieve a return on investment of 9-11%. Apart from oil and gas, it also aims to continue and expand its role in the development of carbon capture and storage, with Mr Sætre saying that the future “has to be” low carbon. Statoil is one of the ten members of the Oil and Gas Climate Initiative, which has established a US$1 billion (€818 million) investment fund, half of which will be devoted to CCS. In addition, the company is advocating for a price on carbon and more alignment between the 40 or so different carbon pricing systems that are in place globally at the moment. Oil and gas in the North Sea will continue to play a large role for the foreseeable future, and Statoil continues to invest in exploration and production, hoping to ride out the cyclical nature of the industry.
E.ON agrees price for sale of Uniper stake to Fortum
E.ON has confirmed that it will sell the remaining 47% of Uniper that it owns to Finnish power company Fortum. The sale is reportedly against the wishes of Uniper’s leadership, and the price per share (€22.00) was lower than the current market price (€25.85), but E.ON had agreed to the sale under the conditions back in September last year, and will still make around €3.76 billion (US$4.61 billion) from the deal. The sale now depends on Fortnum being granted antitrust approval, which expects to receive sometime this year. If it does indeed proceed, E.ON will be able to define itself as a “new energy” company.
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