Business Trends

Dr Rajeev Gautam, CEO and president of UOP, a subsidiary of Honeywell, has given an interview to Hydrocarbon Processing outlining the impacts and implications he foresees from the US natural gas boom.  Most fundamentally, he sees the use of unconventional natural gas extraction spreading to other areas of the world, including China, which has the world’s largest potential for shale gas production, though because of quality differences, costs in other regions are currently twice or three times higher.  Nevertheless, says Dr. Gautam, the cost of production will fall, and the supply of cheap natural gas will help deliver a range of products, such as propylene and ethylene, to a growing population.  He refers to an estimate that there is 250 years of natural gas reserves available in the world.  Improvements to the extraction technology will mean light crude will also be obtained, which will necessitate refining changes and increase the range of products generated.  He expects that, because of their generally smaller nature, extraction and refining rigs will need to be more mobile and flexible to economically exploit reserves. In addition, gas clean-up technology will need to adapt, as will gas transport infrastructure.

China is pushing to diversify the range of ways it generates power. Having already established solar and wind power generation, it is now also promoting energy from solid waste, and using waste heat to generate electricity. One company deploying technology to do the latter is Shanghai Shenghe New Technology Resources, which uses a water-ammonia mixture to capture heat from processes such as oil refining, cement manufacture, and thermal power generation. Electricity from waste heat attracts a feed-in tariff of ¥1.36/kWhr ($US 0.22, €0.16), similar to that for wind and solar power generation. The practice in most Chinese industry to date has been to use waste heat in-house, but with more efficient industrial processes, steel and cement producers, amongst others, are finding they now have surplus waste heat and are beginning to generate electricity to send to the grid. With so much manufacturing occurring in China, the waste heat to electricity sector has a vast potential.

E.ON has given an indication that it is considering shutting down its gas-fired Irsching power plant, in Bavaria, Germany, one of Europe’s most modern power plants, as circumstances make it uneconomic to run.  As the Financial Times reports, the company is finding that gas-fired plants across Europe, and to a lesser extent coal-fired ones, are less becoming competitive compared to renewable power.  In Germany in particular, wholesale energy prices have plunged, while price support for renewable power has continued, making them more financially attractive. However, conventional power generation is required to be on standby for times of reduced renewable power generation, which has led conventional power generators such as E.ON to ask for “fair rules” to reward them for doing so. For E.ON, though, current circumstances will force gas-fired power plant closures. CEO Johannes Teyssen said “We can’t just continue operating conventional plants in the hope something will change.”  However, a separate article in the Financial Times, a few days later, reported on the increased use of coal in Europe in 2012, driven by cheaper US coal prices forced down by the US natural gas boom.

Economic circumstances may favour a change to biomass firing as a partial solution for European power generators. Consultants Bain & Company recently released a report forecasting growth in the biomass sector of 9-10% per year until 2020. Drax, the UK power generator, is one company in the process of a conversion to biomass, with its first converted unit due to be operational by this year, and its third by 2016, in total generating 2000 MW of power. While it already co-fires coal and biomass, these three units, once converted, will run wholly off wood pellets. Although there is criticism that biomass firing is not carbon neutral because of the energy used in harvesting the transporting the wood, Drax argues that the wood they use is essentially waste from sustainable forestry, which would not be used otherwise, and therefore presents a clear environmental benefit. An operational challenge, however, comes from securing feedstocks, which currently are subject to significant price fluctuations. Both Drax and RWE are responding to this challenge by building feedstock plants of their own.

A knock-on effect of Drax’s switch to wood pellets has been the Port of Tyne’s announcement that it is investing £180 million/€213 million/$US 284 million in new handling, storing and transport infrastructure for wood pellets. Already the world’s largest handler of wood pellets, taking imports from Canada and the US which are bound for Drax, it is in talks with other power generators in the area over its plans, and says that the recently announced UK government support for biomass power generation has given it added confidence. It is in the process of finding a partner for its expansion, which is its largest ever single investment in port infrastructure.

Legislation and Regulation

The US state of Arizona has filed a lawsuit against the federal Environmental Protection Agency over its plans to force three coal-fired power plants in the state to install selective catalytic reduction to control their NOx emissions. The EPA had proposed the measures for the Apache, Cholla and Coronado plants in December of 2012, with the purpose of reducing haze in the Grand Canyon and other national parks. The Arizona attorney general, Tom Horne, responded with the lawsuit on behalf of the Arizona Department of Environmental Quality, which had developed its own plan to reduce emissions in 2011. Mr Horne said “This is an absurd action that would significantly raise utility rates for most Arizonans without providing any benefit to anyone.”

Environment

US carbon emissions have fallen to their lowest levels since 1994, according to a report by Bloomberg New Energy Finance. Emissions have fallen by 10.7% since 2005, the drop being attributable to a range of causes, including further deployment of renewable energy, better energy efficiency and less carbon-intensive transport, but mostly the tendency to switch to natural gas rather than coal, a consequence of the rise of fracking. The US administration has targeted a fall in emissions of 17% from 2005 levels by 2020. There are some concerns that carbon emissions are being exported to Europe through cheap US coal.

Research, Development and Technology

Technology Centre Mongstad, the Norwegian state-sponsored research centre, has announced the formation of an international network of carbon capture and storage research facilities. The group is to share research facilities in an effort to spur development by extending the range of experiments researchers can perform, at the same time reducing costs. The founding members are CO2 Technology Centre Mongstad (Norway), National Carbon Capture Center (Alabama, US), Southern Company’s 25 megawatt CCS demonstration facility (Alabama, US), SaskPower, J-Power (Japan), ENEL Engineering and Research (IT), E.ON (Germany) and Doosan Power Systems (UK). Tore Amundsen, Chairman of CO2 Technology Centre Mongstad, said: “This is absolutely the right time to launch this knowledge sharing network. Every day, in test centres around the world, we see advancements in CCS technology with new experiences, lessons and solutions being developed. However, this knowledge is often not shared because there has been no appropriate forum for doing so. This network will change that for the benefit of everyone.”

Researchers at the University of Toronto and the University of St Francis Xavier are developing a cost-effective sensor capable of detecting a single molecule of CO₂. Using funding from the Carbon Management Canada, the researchers are working on nanowire transistor technology, which will have a much greater sensitivity and accuracy than existing technologies. It is seen as a key complimentary technology for capture and storage research, being able to map, at nanoscale, temporal and topographic distributions of molecules.

Company News

The Financial Times has reported on the rocky times South African power utility Eskom has been experiencing of late. Strikes have interrupted the building of a $US 10 billion/€7.48 billion coal-fired power plant in Limpopo, and the relationship between the union and Eskom further deteriorated when it was revealed that Eskom had contracted a private firm to spy on union members. At the same time, Eskom was sponsoring lavish breakfasts for associates of South African president Jacob Zuma, with the money alleged to have come from the company’s energy efficiency budget. Finally, Eskom has been criticised for its plans to increase electricity costs by 16% per year over the next five years, which is says is necessary to cover projected costs.  Public hearings are currently being held by the National Energy Regulator of South Africa.

US based companies Summit Power Group and The Linde Group have announced that they will jointly develop gas-fired power plants capable of capturing up to 90% of produced CO₂. The cooperation is something of a natural fit – Summit already has low-carbon gas-fired projects in development (including the Texas Clean Energy Project and the Captain Clean Energy Project in the UK), while Linde specialises in engineering, operations and maintenance. They plan to develop plants typically sized at 250 MWe, and have in mind sites located close to industry that have favourable geological conditions for carbon storage.