Germany agrees plan to close some coal generation but compensate utilities for providing standby capacity
Following last month’s rumours of a deal involving the German government and the coal-firing industry, Reuters has reported on a deal having officially been made this month. Around 2.7 GW of brown coal-fired power generation is to be shut down before 2020, but retained as reserve generation capacity, in order to meet the country’s CO2 reduction targets. At the same time, power generators will be compensated for providing standby generation capacity in a long wished-for mechanism to correct a market failure, and there will be support for combined heat and power generation, as well as more investment in energy efficiency initiatives. The deal is less threatening to coal-firers than had been anticipated, with a proposal to put a charge on future coal-fired electricity dropped. The deal has been welcomed by business groups but criticised by environmental groups who claim it was too soft on coal-firing. Vice Chancellor and Economy Minister Sigmar Gabriel said of the deal “We are sending an international signal to show we are achieving the switch to renewables in a highly industrialised country.”
Gas-firing surpasses coal-firing in the US for the first time in history
An article in the Financial Times has reported on data from researchers SNL Energy that in April of this year, for the first time in history, more gas was burned to produce electricity than coal in the USA. Low gas prices, falling in line with oil prices, meant that 31% of electricity was sourced from gas-firing as compared to 30% for coal-firing. In 2010, coal accounted for 45% of generation, and since then there has been a gradual though uneven decline as gas supplies have increased and regulation of coal-firing has tightened. In the last year, gas prices have fallen from around $US 4.00/MMBtu (€3.69) to around $US 2.80/MMBtu (€2.58). Meanwhile, coal production is expected to fall 7% this year as coal-fired generation is shrinks by 12.9 GW, after a fall of 3.3 GW in 2014, meaning the trend is in fact accelerating. The shift from coal to gas is perhaps best illustrated by the falls in the share prices of heavily coal-reliant companies, including Peabody Energy, which has fallen 98% since 2011, Arch Coal (99.2%) and Alpha Natural Resources (99.6%). With such a trend, and gas prices expected to remain low, there seems little prospect of a revival in coal-firing in the US.
Chinese steel demand expected to decline while Indian demand rises, but news may not be all good for Indian producers
Financial ratings agency Moody’s released their projections for the steel industries in India and China in mid-July. It expects demand in India to increase in the region of ~5% in the coming year as the economy grows at around 7.5% and spending on infrastructure is increased under the Modi government, in contrast to China, where demand is expected to drop as the economy slows amidst a glut of steel supply. The projections follow suggestions in late June that India could raise steel tariffs to limit steel imports, following a jump by 72% in steel imports in the 2014-15 financial year (which in India ends in March) and signs that imports were continuing to rise in the new financial year. Indian steel firms, however, believe that higher tariffs may not assist them, as free trade deals with Japan and South Korea will still allow tariff-free imports from those countries, both major steel producers. Sajjan Jindal, chairman of JSW Steel, told Reuters “I don’t think any more duty increase is likely to happen, and actually, that is not even helping, because 50 percent of the imports is coming from [free trade agreement] countries.”
Rabbit gut microbes to help ArcelorMittal produce bioethanol from carbon monoxide
ArcelorMittal is to spend €87 million ($US 95 million) on a waste carbon monoxide-to-bioethanol system at its steelmaking plant in Ghent, Belgium. The unit will use a microbe found in the gut of rabbits as a catalyst in a bio-catalytic process to convert the waste gas into the saleable product rather than simple flare it, and will thus reduce carbon dioxide emissions from the plant if the installation is successful. The microbe was discovered by researchers in New Zealand and commercialised by LanzaTech, and has been tested in multiple Chinese steelmills, including one owned by Baosteel, but the installation at ArcelorMittal’s Ghent plant will be at a scale 30-times larger, producing around 47,000 tonnes of ethanol a year. If successful, ArcelorMittal will roll out the technology across its European steelmaking plants, which could produce up to 10% of Europe’s demand for the fuel. As such, the technology is seen as a promising alternative for producing biofuel, as Europe looks for means of production that do not compete with food crops. ArcelorMittal received €10 million ($US 11 million) from the EU to assist with the project.
Talen Energy Corp looks to buy US power plants
Talen Energy Corp, which began trading shares in June after inheriting the generation capacity of PPL (Pennsylvania Power and Light) and of Ney-York based Riverstone Holdings, has said it is looking to buy gas, coal and nuclear power plants in the USA to add to its initial 15,320 MW. In particular, Talen is interested in Luminant, the Texas-based generation arm of bankrupt Energy Future Holdings, and the unregulated Ohio plants of American Electric Power. Interestingly, the company sees potential in buying coal plants as valuations are low due to a combination of challenging conditions, and believes it can add value to them by building pipelines (where necessary) to be able to convert them into gas-fired plants at some point in the future, with gas prices expected to be low for years to come as the shale-gas industry continues high production. As a first step in this strategy, it plans to spend close to $US 100 million (€90 million) to provide gas to the coal-fired, 1,411 MW Brunner Island plant in Pennsylvania. It will be interesting to see how successful the strategy will be.
Alabama Power, US EPA and Department of Justice reach Clean Air Act settlement
Late-June saw the US Environmental Protection Agency and the Department of Justice reach an agreement with Alabama Power to resolve a 16-year dispute regarding alleged violations of the Clean Air Act. The case originated over a belief on the part of the EPA that Alabama Power had breached the New Source Review provisions of the Act by modifying four of its plants in a manner that increased pollution. While Alabama Power maintains it never breached the Act (the modifications being maintenance that allowed operating hours to increase), it says it wished to have the case closed, and has therefore agreed to retire three coal-fired units (Units 6 and 7 at Plant Gorgas, and Unit 3 at Plant Barry), convert four to fire gas (Units 1 and 2 at Plant Barry, and both units at Plant Greene), and modify other units at three power plants to meet emissions standards for SOx and NOx. In addition, Alabama Power will pay a $US 500,000 (€457,000) fine and outlay $US 1.5 million (€1.37 million) on installing electric vehicle charging infrastructure. The settlement must still be approved by a District Court.
San Miguel seeking $US 400 million for construction of a coal-fired plant in Philippines
San Miguel Corporation, the Philippine conglomerate known globally for its beer, has requested a $US 400 million (€360 million) loan to finance the construction of a 300 MW coal-fired power plant to be built in Bataan province, around 50 km west of Manila. While no further details are available at present, the move fits in with San Miguel’s strategy of diversifying its business into power generation, mining and telecommunications.
Samart planning to expand its waste-to-energy business
Another Asian firm looking to further diversify into power generation is Thai mobile-phone company Samart Corp, which is planning to build five waste-to-energy plants this year. The company already owns and operates a 16 MW garbage-fired plant in Cambodia, and expects that its new plants will be 10 MW each. It has already secured a deal to run a plant in the northern Thai province of Chiang Mai, and hopes others will soon follow.