Drax opens biomass handling facility as demand for wood pellets increases

The new biomass handling facilities for the Drax coal/biomass-fired power plant in Yorkshire, England, was opened by the UK Energy Secretary, Ed Davey, in early December, with Drax declaring itself Britain’s largest renewable electricity generator. While the carbon neutrality of wood pellet firing is disputed, it currently qualifies under UK and EU rules as renewable. Drax is confident it is a low-carbon option in comparison to coal-firing, and thus is a longer-term, strategic option for the company. The ongoing project to convert three of the six units at the plant to fire wood pellets has also led Drax to being an international expert on the handling of the fuel. The fire in the wood pellet hoppers at RWE’s Tilbury power plant last year showed just how combustible the pellets are (100 times more than coal, according to the Financial Times). A Drax spokesman said: “You have to treat this stuff like gunpowder. We’ve spent 10 years trying to work out how to handle it.” Biomass firing is on the rise in Europe, as countries work to meet their 2020 renewable energy quotas, and this has led to Europe consuming more than a third of the world’s supply of wood pellets (and also to concerns about energy security, with around 25% of this 12 million tonnes/annum being imported from North America). It is estimated that there is now 23 GW of biomass-fired electricity generation in Europe. Interestingly, rising worldwide demand for pellets has not been matched by an increase in supply, meaning pellet prices have risen. This could change next year when the EC refreshes its rules surrounding wood pellets, which will give certainty to potential wood pellet suppliers, and spur investment in supply capacity.

Investment groups buying up European power plants as utilities divest

Reuters has reported on how opportunistic investors have increasingly been buying up European power plants from loss-making European utilities. In the latest such move, Australian investment group Macquarie has purchased the 832 MW gas-fired Severn power plant in Uskmouth, Wales from Danish utility DONG for £305 million ($US 501 million/€364 million), meaning a pre-tax loss of around $US 74-92 million for DONG. With many European utilities making a loss because of low energy prices and relatively high gas costs, a strategy of divestment has often been employed, creating a buyer’s market, and investment groups see good long-term prospects in their purchase. Many of the plants changing ownership are gas-fired, suggesting that investors believe gas-plants will recover their profitability in the future, possibly through payments for keeping capacity online, or perhaps through a rise in European shale-gas production.

South Africa considering sites for carbon storage pilot project

South Africa is advancing its plans for a pilot carbon storage project in line with the government’s South African CCS Roadmap, which was finalised in 2012. With a 197 million Rand ($US 19 million/€13.8 million) government grant allocated for its development, those involved are now examining two potential sites: the onshore segments of the Zuzuland Basin (in the province of KwaZulu-Natal) and the Algoa basin (in the Eastern Cape province), selected to provide relatively easy access for inspections as the pilot proceeds. The Roadmap identifies the role of the pilot project, designed to store between 10,000 and 50,000 tonnes of CO₂, with injection commencing in 2017, as giving experience and technical expertise to South African engineers and scientists. Rigorous monitoring will be implemented to provide data for analysis. If the pilot storage project is successful, it will be followed by a demonstration-scale capture and storage project (100,000 tonnes storage) by 2020, and finally a full-scale commercial project (1,000,000 tonnes storage) by 2025, both probably using offshore storage sites.  South African carbon emissions are due to rise next year with the opening of two new coal-fired power plants, but the government has a longer-term target for emissions reductions of 34% by 2020 (based on 2009 levels) and of 42% by 2025, meaning CCS will be a vital technology for the country.

British parliamentarians vote down amendment to toughen emissions rules; new bill expected to spur new investment

British members of parliament have voted to reject an amendment which would have applied emissions performance standards used for new coal plants to established plants, possibly requiring them to be fitted with carbon capture and storage technology or be shut down. The vote was something of a strategic relief in terms of energy generation capacity, as if older coal plants were shut down in addition to the planned closures of retiring nuclear plants, the UK would have faced an “even tighter energy squeeze,” in the words of the Reuters report. The bill is likely to be reworked in the hope that a compromise might be passed, with supporters of the bill saying it will lead the UK to a lower-carbon economy faster, and critics saying that it will raise domestic and industrial energy prices by 4-6% and lead to blackouts. Regardless, the uncertainty regarding the new law will delay new investment in the power generation sector, meaning that the predictable energy squeeze that will be tightest around 2015-16 may be extended. However, the government is confident that when the new bill is eventually passed, it will trigger a major wave of investment in new capacity.

Kuwaiti government signs first public-private partnership deal

The Kuwaiti government has signed its first public-private partnership to develop a new power plant, according to the Financial Times. Facing widespread summer blackouts which were cutting workdays short in 2010, the government invited private companies to build, own and operate power plants, hoping it would end the culture of poor maintenance and result in significant additional generation capacity, which had not increased greatly since the 1980s. Early December this year saw the first tangible fruits of the invitations, a deal with private companies to develop a 1,500 MW plant at the Al-Zour North industrial centre, due to come online in two years. It will represent a 10% increase in the country’s total power generation capacity. With power consumption growing at 7% per year, the country will be glad that more public-private deals are in the pipeline.

Japanese companies show greater readiness to purchase from new power providers

In Japan, a November-December poll has suggested that 22% of companies would consider buying electricity from new providers, as plans progress to create a national grid operator by 2015 and liberalise the power market, shaking the hold of traditional regional power suppliers. The figure is an enormous increase from the figure of 5% in September of this year, and it is suggested the rise may be the result of the growing anti-nuclear sentiment in the country, as revelations about radiation from the Fukushima Daiichi nuclear plant emerge. Power costs in Japan have risen 30% since the Fukushima disaster, and 120 companies have registered with the government to become new power providers.

Report points to economic potential of shale gas in Europe

A report by Poyry and Cambridge Econometrics, commissioned by the International Association of Oil and Gas Producers (OGP), has estimated the economic potential of a developed shale gas industry in Europe to be between €1.7 and 3.8 trillion over the years 2020 to 2050, creating around 500,000 to 1 million jobs.  The EU affairs director of the OGP stated “While it may not be a game changer as in the United States, shale gas development in Europe could take full advantage of the lessons learned.” With strong resistance to shale gas on environmental grounds throughout Europe, it remains to be seen how far development will go.

ArcelorMittal closes Florange blast furnaces; pushes CO₂ research

ArcelorMittal has closed the blast furnaces at its Florange steelmaking plant in north-eastern France, having announced the intention of doing so last year. Diminished worldwide steel demand in the order of 30% compared to pre-financial crisis levels precipitated the move. The furnaces are being mothballed rather than dismantled, giving ArcelorMittal the option of reviving the furnaces in the future, though the mothballing will last at least six years. The Florange plant will be a centre of research into CO₂ reduction in steelmaking processes, and there will be some investment in the hot strip mill for making high strength steel for the automotive industry. The 290 affected workers will have the option of remaining within the company

NRG Energy to close two Maryland plants as emissions rules loom

US power company NRG Energy has announced its intention to close two of its coal-fired power plants in the state of Maryland in 2017, citing tighter air emissions regulations. The Dickinson plant (built between 1959 and 1962, having three 182 MW units) and the Chalk Point plant (built between 1964 and 1965, having  a 337 MW unit and a 341 MW unit) would be uneconomic to upgrade to meet new emissions limits, given the shale gas boom and resulting cheap energy supplies in the US.