Bloomberg forecast of future energy sector estimates wind to become least-cost energy by 2026

Bloomberg New Energy Finance released their New Energy Outlook 2015 at the end of June, the organisation’s long-term forecast for the future of the energy sector. It estimates that by 2026, onshore wind will be the least-cost option for new generation capacity, switching to solar PV by 2030, and that by 2040, more than 54% of installed capacity in OECD countries will be renewable (small scale solar-PV dominating), with 46% globally. In the next 25 years there will be three times as much generation capacity (7,460 GW) added in non-OECD developing countries than in OECD countries. The share of fossil fuel power generation of total new capacity will fall from the current two-thirds to 44% by 2040, mostly being deployed in in developing countries, with 1,291 GW of coal-fired capacity being added and 1,359 GW of gas-fired capacity being added up to 2040 (casting some doubt on the transitionary role of gas in decarbonising the economy outside of North America). Carbon dioxide emissions from power generation are to peak by 2029 at 15.3 Gt/yr, easing gradually afterwards. The forecast also projects that electricity demand will exhibit stronger peaks as domestic demand grows, and observes that in OECD countries, the link between economic growth and electricity consumption appears to be weakening. An executive summary of the report is available from BNEF if an email address is provided.

Bill Gates outlines belief in innovation as key to low carbon future

In somewhat contrary news to the Bloomberg forecast, Microsoft co-founder Bill Gates, who has so far invested around $US 1 billion (€898 million) in renewable energy technology, has given his views on the best way to reach a low-carbon power generation sector in an interview with the Financial Times. He says that deployment of current technologies to get to near-zero emissions would come at a cost that would be “beyond astronomical,” and that the solution is research and development to bring into being technologies that would be affordable and reliable. Because of that, he called for governments to divert some of the money given in subsidies for renewable energies, presently totalling to around $US 100 billion per annum, to research and development, which receives only around $US 6 billion (€5.4 billion) per annum, so that the amount going to R&D is tripled. He himself has pledged to contribute around $US 400 million per year over the next five years to renewable energy technologies, but has rejected calls from environmental campaigners to divest from oil and gas companies, saying it would have little impact compared to R&D funding. He also pointed out that, in contrast to an industry like pharmaceuticals, there is little incentive for power companies to produce new technologies. “They’re supposed to provide power at a certain bid cost. Would they get rewarded if they had a breakthrough in technology? Not much.” To Mr Gates, this points to the need for government funding on the scale provided for the Manhattan Project and the Apollo Project. He sees the most promising technologies as being nuclear recycling (which uses depleted uranium as the fuel for a travelling wave reactor), solar chemical (which adapts the natural process of photosynthesis to make liquid hydrocarbons), and high-altitude wide power (involving kite-like devices deployed in the jet stream connected to the ground). The apparent disparity between Mr Gates’ views and the Bloomberg forecast may reflect an optimism on the part of Bloomberg, a lack of attention to the innovation that comes through deployment on the part of Mr Gates (and perhaps less expertise in the energy sector), or a combination of both.

LSE/ICL report urges more EU, member state, and private support for CCS development

Mid-June saw the release by researchers at the London School of Economics and Political Science and Imperial College London of a report titled ‘Bridging the gap: improving the economic and policy framework for carbon capture and storage in the European Union’. The gap referred to is that between the European Commission’s Energy Roadmap 2050, which calls for 11 GW of carbon capture and storage enabled power generation to be deployed by 2030 (estimated to cost €18-35 billion ($US 20-39 billion)), and funding provided to date. Collected funding until now from the EU stands at €1.3 billion ($US 1.45 billion), and apart from some exceptions, there is a dearth of policy commitments from individual member states to provide funding. The report finds the development of CCS sluggish within Europe as compared to the US, and concludes that a dedicated CCS policy should be made by the EC which increases research and development funding, allows for finance for early stage deployment, gives incentives per kilowatt-hour generated, sets mandatory deployment targets, and also encourages industrial CCS (e.g. for the cement and steel sectors). It recommends this is coordinated with more support from member states, and that legislation concerning transport infrastructure for CO₂ should be put in place. Finally, it says that the private sector, including private utilities, industries, and fossil fuel extractors should do more to support the development of CCS, as it is in their interests to do so.

US Supreme Court rejects EPA mercury rules on basis they did not consider costs of compliance

Late June saw the US Supreme Court reject federal Environmental Protection Agency rules limiting emissions of mercury and other toxic compounds from power plants on the basis that the EPA did not consider industry costs of implementing control measures when adopting the rules. The 5-4 majority opinion does not preclude the EPA from setting rules to limit mercury emissions, but leaves it to a lower court to decide how to progress the case. Given the ruling, and the EPA’s intention to limit emissions, however, it seems that the way forward would be to for the EPA to redraft the rules with more of an emphasis on cost-effectiveness. The successful challenge, which was brought by an alliance of 21 coal-friendly states along with a range of miners and utilities, was reflected in a stock price rise for companies such as Peabody Energy. The rules had been adopted in 2012 and came into effect earlier this year, and although the EPA had calculated that the annual costs to industry would be $US 9.6 billion (€8.6 billion), as opposed to a public health saving of more than $US 37 billion (€33 billion), the court did not feel the consideration given to industry compliance costs was sufficient. The ruling will give some hope to those wishing to challenge EPA rules for carbon emissions when they are adopted, but will also make the EPA more careful to include cost of compliance considerations when finalising draft rules.

Chinese cement sector undergoing consolidation

The Wall Street Journal has reported on the consolidation underway in China’s cement sector. While the world’s cement production is dominated by three firms that produce 71% of the output, in China there are 593 producers, the top three producing only 30% of output. Last year saw 12 Chinese mergers, and this year has so far seen three, with another recently announced, Anhuis Conch’s $US 200 million (€180 million) proposal to buy West China Cement. The Chinese government’s 2013 ban on new cement projects, designed to cool the growth in capacity, coupled with more stringent pollution rules has helped to create the push to merge, and the 20% cement price drop in China has also added to the momentum. It seems likely that further consolidation will be seen in the coming years.

China announces GHG targets in run up to Paris climate summit

Keeping with China, the national government has released its greenhouse gas emissions targets in the lead up to the UN climate summit in Paris, scheduled for late November/early December. The world’s largest emitter of GHGs aims to  reduce carbon emissions per unit of GDP by 60-65%, and stop the rise in total emissions by 2030. In addition, it aims to have 20% of its power generation from zero-carbon sources within the same timeframe, up from the 15% previously aimed for. The targets have in general been welcomed by environmental campaigners and analysts as a huge change in comparison to the approach China took to the Copenhagen climate talks in 2009.

Shell and SSE win planning permission for Peterhead CCS scheme

The Financial Times has reported on Shell and SSE’s progress in developing their Peterhead carbon capture and storage scheme, which will introduce capture technology to SSE’s 2,177 MW gas-fired Peterhead power plant in north-east Scotland.  Last month, Shell and SSE were awarded planning permission for the scheme, which will pipe captured carbon dioxide to Shell’s disused Goldeneye gas platform in the North Sea, using the CO₂ for the purposes of enhanced oil recovery. Shell and SSE are hoping to receive funding to help develop the project through the UK government, which has allocated £1 billion (€1.41 billion/$US 1.57 billion) to CCS projects, and which previously selected the Peterhead project for funding for front-end engineering design work. The only other bidder for the money is Drax, which is hoping to develop its Yorkshire plant to be CCS-equipped. If the Peterhead project goes ahead, Peterhead would become the world’s first large-scale CCS-equipped gas-fired power plant, and it is speculated that it might lead to other gas fields in the North Sea being reopened for enhanced recovery. Shell CEO Ben van Beurden has previously stated his belief that CCS is vital to a low carbon future.

Vattenfall divests from Nordjylland CHP-plant in Denmark

Vattenfall has announced that it has sold its Nordjylland CHP-plant in northern Denmark to district heating company Aalborg Forsyning for DKK 823 million (€110 million/$US 122 million). Nordjylland CHP-plant’s unit 3 is coal-fired, with an electricity generation capacity of 410 MW and a heating output of 490 MJ/s. The sale complete’s Vattenfall’s strategy to divest from fossil-fuel firing in Denmark, and follows the 2014 sale of Fyn Power Station and the 2013 sale of Amager Power Station. Aalborg Forsyning will take over operation of the Nordjylland plant at the start of 2016.