• Combustion Industry News

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      Patrick Lavery

      Combustion Industry News Editor

Business Trends

The Japanese cabinet has given approval to the splitting up of the country’s power generation, distribution and retail businesses, which is to begin in 2015 and take five years. Currently, Japan has 10 regional power companies that generate, distribute and sell electricity, but each of these is to be split into three separate entities, while at the same time the path is to be cleared to allow competition within each region. It marks the largest shake up of the Japanese power sector since the 1950s, and comes after the Fukushima nuclear disaster weakened the lobbying power of the current utilities, according to the Financial Times. Electricity prices have risen steeply since the disaster, but even before it Japanese electricity prices were twice as expensive as those in the US and three times as expensive as those in South Korea. The restructuring and inclusion of competition is designed to lower electricity prices and aid Japanese industry.

Thailand is experiencing an energy shortage, according to a report from Reuters. Gas supply from Myanmar, which provides one-fifth of gas used in Thailand, has temporarily been halted for maintenance work, meaning Thailand’s demand for electricity has been outstripping its ability to generate it. Some factories have had to agree energy saving measures with the government so that general power outages can be avoided. While the current shortage is only short term, the difficulty in securing additional generation capacity points to a future of energy shortages for the country. LNG import prices are relatively high, while coal is ~25% cheaper but politically unpopular because of pollution problems in the 1990s. The country currently generates around 70% of its power from gas, 80% of which is domestic, but there are fears that domestic production will not be able to satisfy future needs, with gas demand forecast to grow 44% in the next 20 years. On top of this, Myanmar’s domestic demand is expected to surge with economic growth. Renewable energies are another alternative, and the plan is to increase its share of power generation from 18 to 25% over the next decade. However, a large hole remains, and Thailand is promoting the installation of an Association of South East Asian Nations (ASEAN) power grid so that electricity imports are made easier. An outstanding energy security issue will remain, though, and coal seems the most likely fit to increase domestic energy generation, if political opposition can be quelled through assurances and demonstration of pollution control.

Jordan appears to be experiencing an even more severe energy crisis, as another report from Reuters describes. Fuel prices have risen dramatically (as much as 600%) after a gas pipeline from Egypt was sabotaged two years ago, and with the country importing 97% of its fuel needs, the cost of doing so is now equivalent to about 15% of gross domestic product. The government’s capacity to afford additional fuel imports is reported to be at its limit. At the same time, growth in electricity demand is at 7%, and investment in new power plants is not quite keeping up with this increase. These two problems combined has pushed the government to manage demand. It plans to distribute energy saving light bulbs, and is considering energy efficiency measures for transportation, but there is still a prospect of electricity rationing, particularly after the influx of 460,000 refugees from the Syrian conflict (equivalent to around 7.5% of the Jordan’s population). Price increases are also on the agenda, which are unpopular politically (there were street protests last year after a fuel price increase), but which may also improve the chances of private investment in power generation capacity. The heavy costs of fuel importation mean that solar power generation is now comparably cheaper than fossil-based electricity. Jordan’s financial situation is somewhat precarious – a $US 2 billion/€1.56 billion International Monetary Fund loan was requested last year, with the fuel price increase as a condition.  However, wealthy Gulf states contributed a $US 5 billion/€3.9 billion fund to promote the country’s economy and stability, and it is through this fund that Jordan might procure solar power generation. In the long run, Jordan hopes to discover domestic oil shale and natural gas reserves.

Jordan is one country in which the IMF has made an end to fuel subsidies a condition for the granting of a loan. A Financial Times report has described how the IMF is considering a global push to end fuel subsidies, which it says encourage the use of energy inefficient technologies, raise power costs for industry, and reduce domestic power generation. Some of these effects result in higher greenhouse gas production than would be the case without the subsidies, and the IMF suggests that eliminating $US 480 billion (€374 billion) of direct subsidies, mostly in developing countries, would result in a reduction of 1 to 2% in global carbon emissions. While this is one of the goals of the IMF, another is the fiscal stability of the subsidising country, as 20 countries spend more than 5% of their GDP on energy subsidies. It would prefer to see instead direct financial payments to the poorest citizens of a country, which often do not benefit from subsidies because they consume little fuel, and believes this to be a means of making an end of fuel subsidies politically palatable.

Energy provider Centrica is planning to become the first UK company to import LNG from the USA, having signed a deal with Cheniere Energy Partners to import 1.75 million tonnes of LNG annually for 20 years, starting in 2018. The deal is still subject to regulatory approval and financing, but would take gas from Cameron Parish, Louisiana, to the UK, where it would be enough to power around 1.8 million homes. UK Prime Minister David Cameron welcomed the deal, stating “Future gas supplies from the US will help diversify our energy mix and provide British consumers with a new long-term, secure and affordable source of fuel.” With the unconventional natural gas boom in the US, the deal is likely to be the first of several between the US and the UK. Gas prices in the US are around $US 4/million BTU (€3.11), whereas in the UK they stand at around $US 10/million BTU (€7.79). The UK already imports gas from Norway, the Netherlands and Qatar.


The European Commission has called for a debate on requiring coal and gas companies to install carbon capture equipment as part of proposals for 2030 EU climate targets released for consultation in early April. The EU’s 2050 energy roadmap suggests that 2030 targets should include a 40% reduction in emissions from 1990 levels, and forcing coal and gas companies to install carbon capture equipment in new plants may contribute to achieving such a target. In doing so, the hope would be that the plants would be ready to ‘plug in’ to carbon storage or utilisation systems as they develop. A separate proposal is to require coal and gas companies to contribute financially to the deployment of carbon capture and storage technology. The EC climate commissioner, Connie Hedegaard, has acknowledged that the 2030 targets will be more difficult to agree than the 2020 targets due to the European economic situation. The EC plans to have an agreed framework in place which includes feedback from consultation by the end of the year; the consultation period is three months.

Research, Development and Technology

BP and ConocoPhillips have invested in Texan company Skyonic’s $US 125 million (€97 million) commercial-scale plant to convert carbon dioxide into by-products including sodium bicarbonate and hydrochloric acid, which is in demand in the shale fracking industry. The patented technology has been proven at the pilot scale, and the new plant is also backed by a $US 25 million (€19 million) grant from the Department of Energy. It will be built close to a San Antonio cement factory and use flue gas from the cement making process as a feedstock, with construction to begin this month. In a sobering assessment, an analyst at Bloomberg New Energy Finance said of the venture “It will likely face the same cost and project development barriers that continue to trouble other carbon capture technologies.”

Company News

The Financial Times has reported that BP has put its US wind power assets up for sale, as it focuses on its core oil and gas business. While the company previously saw wind and gas power generation as good compliments to each other, and added its last new wind farm as recently as the end of 2012, its executives have decided that they can offer shareholders better returns from oil and gas. This follows chief executive Bob Dudley’s statement in March that BP had “thrown in the towel on solar” (having tried to make money out of it for 35 years) and last year’s cancelled $US 300 million (€234 million) advanced cellulosic ethanol plant in Florida, USA, as a general retreat from renewable energies. BP is the 12th largest owner of wind power generation in the US, with a net capacity of 1.6 GW, which is valued at around $US 1.5 billion (€1.17 billion).

Reuters has reported from close sources that the investment committee of Poland’s largest power utility, PGE, has advised its board to pull out of a project to build a $US 3.56 billion (€2.77 billion), 1.8 GW coal-fired power plant in Opole, in the south of the country. It is thought that sluggish economic growth, resulting in weaker demand and lower electricity prices, and therefore a lower expected return on investment, was behind the advice. The plant had been planned as a replacement for aging generating capacity, and local construction companies had keenly been awaiting the news of the plant’s go-ahead. An official statement has not yet been made.