• Combustion Industry News

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      Patrick Lavery

      Combustion Industry News Editor

Business Trends

Low US energy prices are continuing to attract European industry across the Atlantic, as a recent decision by German carmaker BMW has shown. The company has selected a site in the state of Washington to build a $US 100 million (€77 million) carbon fibre factory, where panels can be produced to be shipped to Europe for assembly of vehicles. The difference in energy cost is estimated as being a multiple of around six, with the available hydro-electrical power costing $US 0.03 (€0.02) per kilowatt-hour at Moses Lake, Washington. On average, last year, gas prices were recorded as four times lower in the US than in Europe, with electricity costs in the US being around half those in Europe. A recent Accenture survey showed that 58% of business leaders were pessimistic that European industry will be cost-competitive with the US and China from an energy standpoint in three years’ time. Peter Löscher, chief executive of Siemens, has been reported as saying “The shale agenda should be an enormous game changer [for the US]. And Europe has no big game changer at this point in time.” Wolfgang Eder, chief executive of Voestalpine, has been even more outspoken: “The exodus has started in the chemical, automotive and steel industries. If Europe doesn’t change course, that process will accelerate and at some point not be reversible.” However, the economics are not as straight forward as electricity prices, with taxes, levies, import duties, transportation costs, and labour all having to be considered, which means the real picture is more grey.

The Financial Times has reported on the energy problems currently being experienced in Egypt. The instability in the country over the past two years has meant that investment in new power generation infrastructure has been low, and consequently there is now insufficient capacity to meet demand, especially as the northern summer approaches and air conditioners are switched on. Recently a gas exporter, Egypt has become an importer, as production decreases and domestic consumption increases.  At the same time, the country has had a foreign currency crisis, making it more expensive to import fuels, or even to buy oil produced domestically by international firms. Neighbours Qatar and Libya are assisting, providing friendly-terms for gas and oil imports, but the assistance is short term, while senior managers at the country’s industrial plants recognise that a long-term energy strategy is required. Around 20% of state expenditure is spent on fuel subsidies, which are seen by economists as inefficient, and there is international pressure to end them, with an International Monetary Fund loan dependent on their reform. This is expected to have the effect of increasing electricity prices, which will enable more fuel to be imported.

The UK has also been experiencing energy security problems, with what has been described as a ‘perfect storm’ of circumstances affecting supply in March. Problems at the Nyhamna gas processing plant in Norway meant that supply from the North Sea was disrupted, while a water pump failure meant a brief shutdown of the UK-Belgium Interconnector gas pipeline. Reserves would normally have comfortably covered this set of circumstances (although the UK has a relatively small storage capacity), but a long, cold winter had meant that reserves were unusually low, and, moreover, LNG imports had also been low leading up to March. The net result was, according to the Financial Times, that the UK had only six hours’ supply remaining. However, according to the National Grid, the UK should not be overly concerned, as the previous decade has seen large investment in building a range of means to import gas, and the March ‘perfect storm’ showed that the UK could cope with unusual circumstances.

Peru will launch a round of energy concessions worth $US 3 billion (€2.31 billion) in the coming month, as the country seeks to meet rising demand for electricity. The concessions are for 1000 MW of hydroelectric, 300 MW of renewable, and 800 MW of dual gas/diesel-fired power generation capacity, which the country projects it needs to avoid power shortages in the years to come (it estimates it needs an additional 500 MW per year). The projects are to be distributed geographically across the country, which has traditionally had power plants built in its central region. Separately to the round of concessions, a tender for a 2,000 MW gas-fired plant for the country’s south has just been released, which will further geographically diversify power generation.

Legislation and Regulation

On 22 May, eight European energy companies released a joint statement calling on EU leaders to develop a revitalised energy policy. The eight – Enel, Gasterra, GDF Suez, Iberdrola, ENI, RWE, E.ON and Gasnatural Fenosa – called for regulatory certainty to maintain the attractiveness of investing in the European energy market, and hence securing energy supplies. The statement identified four main areas requiring rework – an improved market design (to reward stand-by capacity), a carbon market able to support climate-friendly technologies (with stable post-2020 greenhouse gas emissions targets), a ‘more sustainable’ approach to the promotion of renewables, and a strengthening of the policy framework to stimulate investment in technologies such as energy storage, new renewables, carbon capture and storage, smart grids and meters, and shale gas. The statement described the status quo as ‘simply not an option’.

China’s economic planning ministry is behind a push to introduce a carbon cap by 2016, when its next five-year plan begins. The cap would be nationwide on total emissions; a spokesman for the National Development and Reform Commission, Mr Jiang, said that the system would be more effective in reducing emissions than the current targets of lowering its carbon intensity. The cap would be tied to the country’s existing cap on coal consumption. While currently a matter for debate, the carbon cap policy could be adopted officially before the 2015 UN climate talks in Paris, which would be seen as a major step towards a global agreement on carbon emissions. The move is also seen as a response to domestic problems with air pollution. More details about the system, and how it would be enforced, will be of interest to many around the world.

Research, Development and Technology

SaskPower, the Canadian energy company, has recently been showing journalists the progress at their Boundary Dam Unit 3 project, which is described as the  world’s first commercial-scale, post-combustion, clean-coal power project. The $CAN 1.14 billion ($US 1.1 billion/€840 million) facility is designed to have a carbon removal rate of 90% from the flue gas of the 147 MW plant, with the captured CO2 being used at an enhanced oil recovery (EOR) site around 60 km from the plant. The company hopes that the EOR will make the operation as a whole either cost-neutral or profitable. The plant is supplied by a coal mine situated only 13 km away, making fuel supply as well as carbon delivery both relatively close (and presumably more economic) in comparison to other CCS projects. Of the 147 MW of gross power, 11 MW will be used in running the power plant, 15 MW in compressing the CO2, and 12.4 MW in running the auxiliary equipment of the capture plant. The net output will therefore be 100 – 115 MW. The plant will also capture 100% of SO2 and will convert it to sulphuric acid for sale to the market. The CO2 absorption unit is amine-based and is separated by a concrete wall and ceramic tiles from the SO2 absorption unit so that there is no cross-contamination of solvents between the two units. The captured carbon will also be able to be stored in a 3.4 km deep well if for some reason it is not required for EOR. Progress on the plant is running to schedule, with the capture facility 80% complete, and the plant 30-50% complete. Commercial operation is to begin in April 2014.

Company News

Tanzania has signed an agreement with Japanese firm Sumitomo Corp for the building of a 240 MW gas-fired power plant, to be located in the outskirts of the capital, Dar es Salaam. Tanzania has struggled with power outages in recent times, and he plant is seen as a step in addressing the problem, which has effected economic growth. The cost of the plant has been given as $US 414 million (€319 million), and finance will be provided by a range of Japanese institutions.

In other Japanese news, steelmaker Kobe Steel has announced it is to close one of its blast furnaces and associated upstream equipment at its Kobe Works plant, in western Japan. The move is designed to restore the profitability of its iron and steel business, which is current loss-making, and the closure will take place in April 2017. It follows Nippon Steel and Sumitomo Metal Corp’s announcement in March that it would mothball a blast furnace at its Kimitsu steel mill in 2016, and delay the start-up of a new blast furnace at its Wakayama plant. Japanese steelmakers have been facing fierce regional competition from South Korean and Chinese steelmakers.