IEA releases World Energy Outlook 2015 ahead of Paris Climate Conference
The International Energy Agency has released the 2015 edition of its World Energy Outlook in the run-up to the Paris Climate Conference, which begins later this month. Amongst its key points are that use of low-carbon energy sources is increasing rapidly, such that there may be signs that carbon emissions are decoupling from economic growth, and that the current national pledges for the Paris conference will lead to an inadequate slowing in the growth of greenhouse gas emissions. GHG emissions will not peak in 2030, and the pledges, if met, would likely result in a 2.6oC average global temperature rise by 2100 (and 3.5oC by 2300).
Much of the focus of the report is on desired outcomes from the Paris conference, with the IEA proposing a ‘bridging strategy’ that would aim to achieve a peak in global GHG emissions by 2020. The strategy would include increasing energy efficiency; reducing the use, and banning the construction of ‘least-efficient coal-fired power plants’; phasing out fossil fuel subsidies to end users by 2030; reducing methane emissions from oil and gas production; and increasing investment in renewable energies from the $US 270 billion (€251 billion) in 2014 to $US 400 billion (€372 billion) in 2030.
In a prediction which seems to be much on everybody’s mind at present, the report also forecasts that the oil price will rise only gradually until 2020, reaching $US 80, up from this year’s price, which it takes as $US 55 per barrel. As Reuter’s John Kemp has pointed out, however, there is no evidence that anyone can predict the oil price in five years’ time; in the 2010 edition of the WEO, the 2015 oil price was predicted to be $US 100.
Having input into a workshop that informed the report were representatives from EDF, ENGIE, Shell, Enel, and E.ON, amongst various NGOs, governmental organisations, and others.
Obama administration rejects Keystone XL pipeline
The Obama administration has finally given a decision on the Keystone XL pipeline, rejecting the proposal to build a pipeline from the Alberta tar sands region of Canada through to Steele City, Nebraska. In rejecting the decision, Mr Obama said that “this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others.” He went on to say that the State Department, which formally made the decision, found that the pipeline would not make a lasting, meaningful economic contribution to the country, not lower gas prices, and not improve energy security. The rejection of the pipeline did, however, symbolise the USA’s commitment to leadership in acting on climate change, according to Mr Obama’s remarks. Environmental groups have greeted the news with elation, as the Keystone XL pipeline was regarded not only as a symbol but a grave environmental risk, whereas the American Petroleum Institute pointed out that five reviews over the last seven years had concluded that the project would in fact help lower fuel prices. The president of the API, Jack Gerard, said the rejection was an “assault on American workers, and politics at its worst,” while the CEO of TransCanada said that the reviews had shown the project would not significantly increase greenhouse gas emissions. Meanwhile, new Canadian Prime Minister Justin Trudeau said that the relationship between Canada and the USA was much bigger than one project, a position predicted in an article covered in the last edition of the Combustion Industry News.
Hillary Clinton proposes economic regeneration of US coal communities as coal declines
Hillary Clinton has written an opinion piece in the Charleston Gazette-Mail, a newspaper in the US coal-mining state of West Virginia, pledging a $US 30 billion (€28 billion) plan to revive ‘coal communities’ within the US. Ms Clinton described coal as a “20th century energy system [that] is not coming back – because of the shale boom, because of low-cost renewable energy, and because of the growing imperative to combat climate change.” Her plan consists of increasing federal investment in infrastructure, including clean-energy generation; funding research and development in universities; incentivising start-up companies; and at the same time ensuring that coal companies facing or experiencing bankruptcy provide health cover to current and former employees. It appears likely that Ms Clinton will secure the chance to become the Democratic presidential candidate at the 2016 presidential elections.
UK government receives stand-by generation bids for a total of 1.5 GW of flexible diesel generation
A combination of factors has led to an unusual situation in the UK in which there have been applications for the standby generation capacity auction for up to 1.5 GW of small-scale ‘flexible’ diesel-fired capacity. Easier shipping for oil rather than gas (for both technical and political reasons) means that the low gas prices in the US have not reached across the Atlantic. The mismatch of low oil prices and higher gas prices, coupled with lower capital costs for diesel-fired capacity, has encouraged a flurry of diesel-fired capacity applications to the capacity auction. It is now anticipated that the UK will spend up to £436 million (€615 million/ $US 661 million) to add the diesel-fired capacity over the next year. The unfortunate irony is that UK energy policy has been designed to institute a reduction in carbon emissions (as well as security of supply), but diesel is only slightly less polluting than conventional coal-fired power generation, while the gap between electricity supply and demand is forecast to be only 5% this year. As the Financial Times reports, even some solar-power developers have submitted applications for compensation to install diesel-fired capacity, after subsidies for solar-power were reduced. Ed Davey, the former energy secretary under whose tenure the current capacity market was set up, has said “The government has got to take measures to stop it, because it is extraordinarily counterproductive and absolutely was not what was intended by the capacity auction. We don’t want diesel plants being built anywhere.” There have also been calls to halt the auction altogether, though the energy department have released a press statement supporting the use of small-scale flexible diesel generation.
DuPont opens largest cellulosic ethanol plant in the world, but industry will need support
DuPont has used the opening of a new ‘second generation’ cellulosic ethanol plant in Iowa, USA, to say that it believes the oil price needs to be around $US 70-80/barrel for biofuels to be competitive. Du Pont’s $US 225 million (€210 million) plant is the largest of its type in the world, and uses agricultural wastes such as corn/maize cobs, leaves and husks to produce the fuel, thus circumventing the objection to first generation biofuels that fuel crops replaced food crops, raising food prices. The advanced enzymes required to break down the celluloids in agricultural wastes have only been commercially ready for the last few years, with two plants in Europe being opened in the last year, one owned by Spain’s Abengoa and one jointly by Poet and Royal DSM, a Dutch company. The Financial Times has compared Du Pont’s $US 70-80/barrel estimate to the current sub-$US 50/barrel price, and the lack of expectation that prices will increase dramatically, to suggest that cellulosic ethanol will require policy support for several years to come.
Shell pushes ahead with campaign to buy BG
Royal Dutch Shell’s campaign to buy BG has continued, with Shell’s management increasing by 40% to $US 3.5 billion (€3.26 billion) its estimate of annual savings to be made by merging the two companies’ operations and administrations. Some of Shell’s shareholders are reported to be sceptical that, with the current low oil price, the $US 61 billion (€56 billion) price for BG represents value, which has prompted the latest update from Shell’s management. The savings would lower the ‘break even’ oil price for the company from $US 70/barrel to the mid $US 60s, according to Shell CEO Ben Van Beurden, although that may not be so inspiring to investors, considering oil futures are trading at under $US 60 for the period up until 2017. Shareholder unease is not yet rife; according to the Financial Times, one major shareholder has suggested that only if the oil price dropped to around $US 40/barrel would most shareholders balk at the terms of the deal, though as the deal moves closer, investors may begin to show more concern. The buy-out must still pass regulators in China and Australia, and is expected to take around a year in total to be approved.
Fortum to supply Krakow power plant with low-NOx burners and boilers
Fortum is to supply low-NOx burner and boiler technology to one of EDF’s plants near Krakow in Poland. The renewal of the plant, scheduled for 2016-17, is aimed at lowering NOx emissions so that they comply with the EU’s new emissions limits. Fortnum has a history of working with the Krakow plant, having first worked on it in the mid-1990s, and the next project will bring Fortum’s total combustion technology-related service agreements and deliveries to Poland to around €130 million ($140 million).