• Combustion Industry News

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    • Post Author

      Patrick Lavery

      Combustion Industry News Editor

Business Trends

There have been various reverberations of the shale revolution in numerous countries recently. Tokyo Electric Power Co (Tepco) has announced it is to buy 181,000 tonnes of liquefied petroleum gas (LPG) from US firm Enterprise Production Partners over the next three years, in what The Wall Street Journal describes as a sign that the US shale revolution is moving beyond oil and natural gas. After the Fukushima nuclear disaster, Tepco has been seeking alternative energy supplies for its thermal power plants, and the rise in fracking in the US seems a natural fit. The deal signifies the confidence Tepco has that LPG, a separate product from the fracking process to natural gas and oil, will be produced steadily and cheaply over the coming years. Meanwhile, the cheaper price of natural gas in the US has been a factor in Chesapeake’s decision to sell a stake in an oil and gas field to China’s Sinopec for around $US 1 billion (€770 million). A bigger deal was the purchase of Nexen, which has access to Canada’s oil and gas fields, and the UK’s largest North Sea oil field, by China’s Cnooc (China National Offshore Oil Corp), for $US 15.1 billion (€11.62 billion). Both Cnooc and Sinopec are state-owned. A major additional piece of news has been the Canadian government’s decision to allow Shell to set up an LNG export plant in British Colombia, which will allow the export of the cheap energy present in North America to Asia. Finally, a slight price increase in natural gas in the US (as demand rises as companies shift to using it) has resulted in a national increase in coal burning (coal prices dropped due to lower demand).

Reuters has carried a report into developments in Morocco, detailing how the North African nation is seeking to generate more of its own power. Morocco is currently extremely energy poor, importing up to 95% of the power it consumes. Solar, wind and coal-fired power generation are all being extended in an effort to reduce this dependence and improve the economy. In 2007, the government formulated a $US 9 billion (€6.93 billion) plan to deploy a huge amount of solar power, but the global financial crisis drastically reduced the state’s ability to fund the scheme. However, a $US 1 billion (€770 million) contract was awarded to Saudi International Company for Water and Power to build a 160 MW solar photovoltaic power farm in September 2012, and a 300 MW farm is also planned. Meanwhile, state power company ONEE has installed 250 MW of wind turbines, and there is an agreement for GDF Suez, in conjunction with Nareva Holding (which is controlled by Morocco’s royal family), to establish another 300 MW, which would be Africa’s largest wind farm. Further to that, ONEE plans to build a further 850 MW of wind farm capacity, though financing is currently a problem. On the side of coal-fired power generation, Abu Dhabi National Energy Co has obtained $US 1.4 billion (€1.08 billion) to increase its plant in Jorf Lasfar from 1356 MW to 2056 MW, and to build an additional 350 MW plant in Jerada. The deployment of solar and wind energies and their economic effectiveness will be keenly watched by other North African nations.

India is facing a prolonged shortfall in power supply, according to the government’s economic survey. It states “Resources currently allocated to energy supply are not sufficient for narrowing the gap between energy needs and energy availability.” However, the survey did note that the shortfall had narrowed from 13.7% in 2007 to 9% in 2012, with 55 GW of generation capacity being added in that time. In the first nine months of the current fiscal year, 9.85 GW of capacity has been added, against a fiscal year target of 17 GW, suggesting the gap may indeed be widening once again. Land and environmental permits have proved a barrier to many large scale projects in India.

Legislation and Regulation

In Germany, the effect of the shale revolution is also being felt, with a new proposal from the government to ban fracking in any national park or conservation area, and near any water supply, but to allow it otherwise subject to an environmental impact study. It is seen as an effort to appease both those objecting to, and those in favour of fracking, allowing the door to be kept open for Germany to produce what might be cheap domestic natural gas in the face of rising electricity prices for industry. Chancellor Angela Merkel has so far been doubtful of fracking, as is much of the German public; the environment minister was in favour of a full ban, while the economics minister was in favour of allowing fracking. German reserves are not believed to be large in comparison with other European countries such as Poland or Ukraine. German carbon-equivalent emissions rose 1.6% in 2012, the first rise in years.


In late February, EDF announced that it is to sue 17 protestors who last year climbed the chimneys of its West Burton gas-fired power station to protest against the UK government’s gas-reliant future energy strategy. Four others will also be sued, with EDF seeking damages totalling £5 million (€5.74 million, $US 7.46 million). British environmental commentator George Monbiot has speculated that the move is designed to discourage any potential future protesters by bankrupting this set of protesters, and raised the prospect of the move backfiring by losing the company customers.

Company News

RWE’s chief financial officer, Bernhard Guenther, has stated that the company expects to have a lower total CO2 output in 2013 than in 2012, as some more polluting power plants are retired and its brown coal-fired power plants are modernised. Despite this, the company expects to buy more CO2 permits this year than last, as free permits are reduced within the EU Emissions Trading Scheme (ETS).  In 2012, RWE’s total CO2 output was 179.8 million tonnes.

One plant RWE expects to shut down its 2000 MW Didcot A coal-fired plant in the UK on 22 March, the day it is projected to finally run out of permissible operating hours under the EU Large Combustion Plant Directive. The directive compels highly polluting plants to close by 2015 or upon the completion of 20,000 operating hours after January 2008, unless they are fitted with higher-level pollution control equipment, and RWE took the strategic decision to retire the plant rather than modify it. While cheap coal resulted in use of the fuel being at a 16-year high in 2012, RWE’s decision to accumulate the operating hours sooner rather than later may have been influenced by the fact that Britain’s carbon floor price (of £16/€18.5/$US 24 per tonne of CO2) is due to come into effect next month. The floor price is designed to give stability to the EU ETS carbon price, which since the beginning of the global financial crisis has not served its purpose of promoting the rise of clean power generation.

Mississippi Power has won an approval from state regulators to increase power prices by 15% in order for the company to recover its expenditure on the coal gasification plant it is building in Kemper County, Mississippi, USA. The new 582 MW plant will become one of only two integrated gasification combined cycle (IGCC) plants in the US, and is designed to run on low quality lignite. The project has suffered a cost blow out from $US 2 billion (€1.54 billion) to $US 3.5 billion (€2.69 billion), resulting in the request for the rate increase. Southern Co., which owns Mississippi Power, hopes to sell its IGCC technology globally, although it is unclear whether ratepayers, having helped fund the demonstration of the technology, will receive returns from any future sales. Mississippi Power had requested a 21% increase in rates.

American Electric Power made an agreement with the US Environmental Protection Agency in early March to make pollution cuts by retiring (or switching to natural gas) two coal-fired units at its Muskingum River power plant in Ohio, as well as its Tanners Creek power plant in Indiana. As part of the deal, AEP will be allowed to use equipment at its Rockport power plant (also Indiana) that does not reduce SO2 emissions as much as the EPA had originally sought. However, more stringent conditions were placed on 16 other power plants.