Markets

Europe’s largest coal-fired power plant Drax has decided to stop burning coal at the Selby site as of March 2021, well in advance of the UK’s 2024 deadline. The operator said coal generation has been “challenging” amid falling power prices and rising fuel competition from cheap natural gas.

With U.S. election looming large in November, analysts say it is unlikely that President Trump will facilitate real breakthroughs on trade with China. Russia’s Gazprom might turn out to be the ‘laughing third’ as it ramps up deliveries to China through the 38 Bcm/y Power of Siberia pipeline.

Summer spot gas prices at the Dutch TTF trading hub are likely to plunge towards €9/MWh as the coronavirus outbreak in China effectively keeps displacing LNG cargoes to Europe. At these record low fuel prices, gas power plants with just 57 percent efficiency would be “in the money” for peakload power generation in most of 2020.

Abundant production and mild temperatures has left working gas in storage in the  Lower 48 states at 12 percent higher levels at the end of the winter heating season than the previous five-year average. Some 1,935 billion cubic feet (Bcf) of gas are forecast to remain in storage at the end of March, despite rampant pipeline gas sales to Mexico and LNG exports.

Though Chinese workers have returned to factories of Airbus, General Motors and Toyota in recent days, many remain shuttered due to coronavirus quarantine measures. The recovery of Chinese gas demand is likely to stay subdued well into March, Energy Aspects says, forecasting a drop in LNG offtake volumes at least until early April.

The OPEC+ alliance, dominated by Saudi Arabia and Russia, is reacting to the global coronavirus spread by considering additional cuts to oil and associated gas production. As an emergency measure, crude oil output could be cut by 0.6 million barrels per day (mb/d) on top of the 1.7 mb/d already pledged, in a bid to stabilize prices.

Energy intensity keeps falling in the United States, with the Government forecasting energy consumption will grow more slowly than gross domestic product (GDP) through 2050. In the AEO2020 High Economic Growth Case, more effective energy use of U.S. industry is set to lower energy intensity by 1.6 percent annually.

Asian markets will be able to absorb most of the global gas and LNG supply growth from the mid-2020s, as new supply slows from 30 million tons of new liquefaction capacity last year to less than 20 mtpa by 2025, Royal Dutch Shell said. Europe will hence cease to be a balancing market.

Gazprom’s latest international gas marketing strategy is refocusing the company’s remit on growth in Asia. Having just started pipeline gas deliveries to China, the Russian gas giant seeks to scale up LNG supplies to Asia-Pacific while trying to maintain its strong position in Europe.

The International Energy Agency (IEA) has urged German policy makers to promote the development of hydrogen technology and start importing LNG to advance its energy transition. The IEA lauded Germany’s “extraordinary progress with renewables,” but noted the “nuclear phase-out as well as higher electricity exports have offset some of the emissions benefits."

Not much unabated gas (without CCS) will be burnt in the European Union after 2040, as industry and transport sectors will be electrified to comply with low-carbon regulations, Energy Aspects finds. While Europe seeks to boost electricity in end-use sectors to 27 percent, and ultimately 30 percent, China and India just started on their electrification journey.

The Chinese Government is open to applications for tariff exemptions on several U.S. products, including crude oil and LNG, starting from March 2, 2020. The long-anticipated announcement was widely welcomed by traders, though there are concerns about long-term demand destruction due to the coronavirus outbreak.

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News in Brief

American ISOs to delay grid investments

March 27 – North America’s independent system operators (ISO) are considering delaying investments in grid upgrades and enhancement as electricity demand weakens due to industry shutdowns to contain the coronavirus pandemic. PJM Interconnection, the largest U.S. bulk power market which spans 13 Mid-Atlantic and Midwestern states, revised its daily forecast of about 100,000 MW of load but actual demand came in at 95,500 MW.

Wärtsilä starts combustion trials using ammonia

March 26 – The Finish technology group Wärtsilä has initiated combustion trials using ammonia in an effort to reduce emissions. Based on initial results, the tests will be continued on both dual-fuel and spark-ignited gas engines, followed by field tests in collaboration with ship owners from 2022, and potentially also with energy customers.

Xodus sees growth in cable services

March 25 – Xodus Group has stepped up services related to subsea power cables over the last twelve months. The number of new consulting assignments grew by more than 50%, resulting in more than 70 active work streams that are handled by more 30 permanent staff.

Electricity “more indispensible than ever”

March 24 – Disruptions caused by the coronavirus crisis lay bare how much modern societies rely on electricity, according to the International Energy Agency (IAE). Millions of people are mandated to stay home, causing a surge in teleworking, e-commerce and video streaming which pushes up domestic electricity use.

U.S. frackers cut Capex

March 23 – Sharp cuts in capital spending among Appalachian gas producers are now being replicated in other U.S. basis, with Energy Aspects anticipating the deepest impact on production and earnings to take place starting from the second half of 2020. So far, E&P companies just hedged 52% of this year’s expected production even though some Appalachian producers are seen “lock in some pure gas volumes at prices above the curve.”

EV makers face bankrupcy

March 20 – Electric vehicles (EVs) remain particularly exposed to the corona effect of supply-side constraints and demand erosion. Gigafactory facilities are likely to be delayed and fledging EV manufacturers could face bankruptcy, Wood Mackenzie warns. On the flip side, declines in EV sector demand may be gains for the stationary energy storage segment.

Manufacturing rebounds in Asia

March 19 – Asian-dominant supply chains for solar and energy storage are gradually rebounding after contractions in February. Moving forward, Wood Mackenzie expects near-term development activity and local logistics in leading European and North American markets will outweigh lingering supply issues.

Italy’s gas demand plunges

March 18 – Corona-struck Italy has seen demand for natural gas plunge 8% from the previous week, with similar declines likely in other EU countries as national governments impose lockdowns to contain the virus. Industrial demand is “particularly volatile,” while gas generators will bear the brunt of demand loss, Wood Mackenzie says, as a carbon price decline is bolstering thermal coal.

Nexif raises funds for Rayong CHP

March 17 – Nexif Energy, a joint venture between Singapore-based Nexif and Denham Capital, has raised project financing for the Rayong gas-fired cogeneration project in Thailand. The 92 MW plant is being developed project with Ratch Group, based on 25-year power purchase agreement with Electricity Generating Authority of Thailand (EGAT).

ADB provides $10m loan for Afghan IPP

March 16 – The Asian Development Bank (ADB) has agreed to provide $10 million in debt financing for a gas-fired power unit in Mazari Sharif with a capacity of nearly 60 MW. Phase-1 of the Independent Power Project (IPP) will get another $10 million loan from the Leading Asia's Private Sector Infrastructure Fund (LEAP).

IEA models 50% Carbon-Free Generation

March 13 – Analysts at the U.S. Energy Information Administration (EIA) have drawn up the 50% Carbon-Free Generation case - assuming a stark shift in state-level policies. In this event, the U.S. would have 19% more nuclear power generation, 10% more wind power and 17% more solar PV contribution than in its Annual Energy Outlook 2020 (AEO2020) reference case.

E-charging market to top $15bn by 2030

March 12 – By 2030, the U.S. market for energy-optimisation in support of charging electric-vehicles could be worth $15 billion per year, McKinsey finds. The consultancy expects high demand for home-charging appliances as residential power tariffs are comparatively cheap and most charging can happen overnight when off-peak electricity prices are lower.

Oversupply builds up

March 10 – Energy Aspects’ end-March forecast has added on another 100+ billion cubic feet of natural gas supply while demand remains subdued. In the U.S., the seasonal decline in heating degree days nearly halved the natural gas withdrawal rate. Gas-burn in the power sector and residential/commercial demand are forecast to fall by 1.7 billion cubic feet per day (bcf/d) and 4.0 bcf/d, respectively.

Small-scale LNG cuts cost for power plants

March 10 – Decentralized gas power plants in remote locations can source cheaper fuel from small-scale LNG regas terminals than from trucking the super-chilled gas across long distances. “Trucking LNG further inland would entail additional costs as well as logistical challenges,” IEA analysts noted. For example, a 100 MW baseload power plant would require, on average, around 20 daily deliveries from tanker trucks.

Abu Dhabi investor expands Uzbek CCGT

March 9 –Some key Uzbek energy infrastructure is being modernized with foreign monies. Abu Dhabi-based Mubadala Investment Company recently agreed with JSC Thermal Power Plants and the Uzbek government to acquire, finance, develop and operate the 1.7 GW Talimarjan Power Complex.

Oversupply keeps growing

March 6 – In its fourth quarter report, Awilco LNG warned that demand is now unable to keep up with strong gas production growth. Gas demand from China’s industry and power utilities, the world’s second largest LNG importer last year, has fallen by 10-14% thus far in 2020.

Simatic IOT2050 gateway launched

March 5 – Siemens’ newly launched Simatic IOT2050 links cloud, in-company IT and production. Energy companies, and others, can retrofit the solution in existing plants, where it then harmonizes communication between different data sources, analyzes the data, and passes it on for evaluation to a cloud.