Regulation & Policy

The German renewables energy surcharge (EEG) has swept a record payout into the coffers of wind, solar, biomass and hydropower producers. Proceeds totaled 27.5 billion Euros 2019, triple the amount paid in the previous year which sparked anger amongst end-users who have to pay the EEG surcharge with their electricity bills.

Utilities, trade unions and Germany’s federal and regional policy makers have agreed a landmark €40 billion deal to phase out all coal-fired power plants by 2038. The latest coal exit adds to the earlier agreed nuclear exit, under a scheme to compensate electric utilities, workers and coal-mining regions.

Self-reliance of German electric vehicle produces needs to increase substantially, according to government advisors. "If the need to import battery cells and e-cars grows in line with the roll-out, effects on the employment would be significant," analysts noted. Under the most pessimistic scenario, there could be up to 410,000 fewer jobs in the sector by 2030.

Germany’s second largest utility RWE could receive up to two billion Euros in compensation for closing its lignite power station under a coal exit agreement currently drawn up by the economy ministry. The Czech energy holding EPH, however, is asking for significantly more compensation for its power assets in eastern Germany than the government is willing to pay.

Adani Power and NTPC, two of India’s largest power producers, have pleaded to the government in Delhi to extend the deadlines of retrofitting coal power stations by two to three years. High costs for retrofits and India’s continued reliance on cheap thermal coal now needs to be weighed up against rampant air pollution.

The stark gap between government pledges to reduce emission and the lack of far-reaching actions heralds a growing regulatory risk. According to Fitch Ratings, energy-intensive industries, thermal power producers and the transport sector can be hit by a sudden rise in more stringent climate rules.

‘Wider Access’ – the latest project launched by National Grid ESO to increase accessibility to the UK balancing  mechanism – is already attracting new market entrants. Aggregated power units, notably hybrid and battery-based units, are increasingly being dispatched in this regulated market, providing the grid operator with much-needed flexibly.  

While global climate talks in Madrid ended with lackluster results, German lawmakers agreed to raise the entry-level price for CO2 emissions from the buildings and transport sector from 10 Euros to 25 Euros starting from 2021. Thereafter, it will rise to 55 Euros by 2025, with state revenues to be used to lower the renewables levy on consumers' electricity bills.

The new President of the European Commission, Ursula von der Leyen, has come forward with an ambitious ‘EU Green Deal’ that seeks to outdo the ‘Green New Deal’ proposed by the U.S. Government. The European Green Deal envisages Europe to become “climate-neutral” by 2050, which requires a 55% cut in greenhouse gas emissions by 2030, replacing the current 40% goal.

Efforts to develop Vaca Muerta, Argentina’s vast shale reserves in northern Patagonia, have slowed as national energy companies await direction from the incoming President. Alberto Fernández, who will take office on December 10, has yet to decide whether to keep focused on pushing up domestic oil and gas production and LNG exports.

Electricity prices have fallen in the course of Germany's Energiewende while taxes and levies increased substantially. Cheap renewable electricity floods the market, benefiting mainly large and energy-intensive industrial companies because many can source their electricity at wholesale prices.

German Chancellor Angela Merkel has said she disapproves of the European Investment Bank’s (EIB) decision to ban funding for natural gas projects by the end of 2021. Speaking in Parliament, Merkel said Germany would rely on gas as a bridging technology as it exits both nuclear and coal.

New EU-wide emission rules for large combustion plants, known as BREF, will take effect in 2021. Rising carbon prices - last seen trading at €25.01 per ton, combined with falling renewable energy costs will likely make European utilities opt for closing coal plants, instead of retrofitting them.

The European Network of Transmission System Operators for Gas (ENTSOG) has listed 17 renewable Power-to-Gas (P2G) projects to be built by 2025, and 19 such projects by 2032. For the first time, ENTSO’s latest development plan includes P2G and acknowledges them as ‘Projects of Common Interest’.

Germany first major climate law passed Parliament on Friday and is now being debated by the Bundesrat. The federal state council needs to give consent to parts of the reforms, notably tax support of energy-efficient modernisation of buildings, the rise in commuter allowance related to a new national CO2 price on transport emissions, and a cut in VAT tax on train tickets.

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News in Brief

Wärtsilä wins contract in Barbados

Jan 24 – Barbados Light & Power Company Ltd (BLPC) has contracted Wärtsilä to fast-track the supply of a 33 MW flexible power plant, as an EPC project. The plant, set to run on four Wärtsilä-32 engines, will be built at a site adjacent to BLPC’s 10 MW solar photovoltaic plant at Trents, St. Lucy, located on the northwestern coast of Barbados.

Azito power plant takes FID

Jan 23 – Globeleq and IPS have reached financial close on a 253 MW expansion of the Azito gas-fired power plant near Abidjan. An MXL3 upgrade will boost the capacity of the combined-cycle plant from 460 MW currently to 713 MW, equaling about 30 percent Ivory Coast’s total capacity installed.

Climate risks become urgent

Jan 22 – Adaptation to climate change is now “urgent,” McKinsey claims, suggesting there would be “many adaptation opportunities.” Climate science shows that the risk from further warming can only be stopped by achieving zero net greenhouse gas emissions through renewable built-out and energy storage.

India’s electricity demand may triple, IEA finds

Jan 21 – Energy demand in India is set to double by 2040, and its electricity demand may triple, according to the International Energy Agency (IEA). Oil consumption in India is seen grow faster than that of any other major economy, making energy security a key priority, the IEA said in its first in-depth review of India’s energy policies. Amid strong growth, renewables now account for almost 23 percent of India’s installed capacity, while energy efficiency improvements helped avoid 15 percent of India’s additional energy demand, oil and gas imports, and air pollution.

Regulators approve CCGT in Wisconsin

Jan 20 – State regulators have approved a permit for Dairyland Power Cooperative to build a $700 million combined-cycle gas power plant in northwestern Wisconsin. The Nemadji Trail Energy Center will produce 625 MW and is scheduled to begin operations by 2025.

ExxonMobil enhances turbine oils

Jan 17 – New high performance turbine oils, developed by ExxonMobil Lubricants, are  entering the market which are formulated to prevent build-up of lacquer, varnish and deposits. The oils are designed to protect against thermal and oxidative degradation, one of the root causes of deposit build-up.

Wärtsilä signs O&M deals in the Bahamas

Jan 16 – Following the commissioning of a Wärtsilä-built 132 MW power plant in Bahamas in December, the Finish manufacturer now signed a two-year operation and maintenance (O&M) accord with the plant owner, the Bahamas Power and Light Company (BPL). Wärtsilä will transition, train, and develop the owner’s Bahamian work force and provide key performance guarantees.

China, S'Korea curtail coal to tackle air pollution

Jan 15 – Beijing city government’s aggressive approach to tackling air pollution is working and South Korea’s spring coal-fired curtailments show some success in cutting seasonal emissions. According to Wood Mackenzie, this should benefit LNG, particularly while spot prices remain low.

Sri Lanka at brink of power shortages

Jan 14 – Sri Lanka could face power cuts by March, after plans for a large-scale coal power plant were been cancelled just prior to start of construction, and a tender for a 300 MW diesel plants ended up in court. On the demand side, pressure is building up as the region is moving into the dry season in February and March. Weather warnings say the island is likely to receive lower than average rainfall in the first quarter of 2020.

Caterpillar’s new genset comply with UK & German grid codes

Jan 13 – Caterpillar Inc. has launched a series of new generator sets that comply with the new G99 United Kingdom, VDE-AR-N 4110 German and Belgium C10/C11 grid codes. The following gensets – G3500H, CG132B, CG170, and CG260 (rated from 280-4,500kVA) – have been verified to be able to accommodate different reactive power modes, active power functions, and connection conditions for normal operation or reconnection after mains decoupling.

Transneft launches battery-based power supply for ILI tools

Jan 10 – Transneft Diascan, the largest Russian inspection service provider for pipelines, has developed and put into operation a power supply system for in-line inspection (ILI) tools based on rechargeable batteries. Flaw detectors performing inspections of trunk oil pipelines, gas pipelines and oil product pipelines can now use the energy from rechargeable batteries, which helps save time and reduces the cost of in-line inspection.

Pavilion starts trading LNG out of Madrid

Jan 9 – Singapore-based Pavilion Energy has completed the acquisition of all gas and LNG assets of the Spanish utility Iberdrola. From its new European headquarters in Madrid, Pavilion said has launched 2020 LNG trading operations with supplies focusing on Spain and the UK market.

Gazprom extends gas transits via Belarus until 2021

Jan 8 – Gazprom and Gazprom Transgaz Belarus have sealed additional agreements to extend the contracts for gas supplies to and gas transportation across Belarus until 2021. According to the newly-signed documents, the contractual supply and transit volumes in 2020 will remain at the level of 2019.

EastMed pipeline to take FID by 2022

Jan 7 – Greece, Cyprus and Israel have signed an agreement to build the 1,900-kilometre EastMed pipeline at an estimated cost of 6 billion Euros. The subsea pipeline, spanning over 1,900-kilometres would initially carry 10 Bcm of gas per annum from Israeli and Cypriot waters to Crete and then on to the Greek mainland and into the European gas network via Italy. A final investment decision (FID) is meant to be reached in 2022, given that the pipeline is scheduled for completion by 2025.

U.S. energy-related emissions drop over 2%

Jan 6 – Fewer emissions from coal consumption, combined with lower energy demand, have helped to significantly reduce the overall energy-related carbon emissions in the United States. According to government statistics, energy-related CO2 emissions fell 2.2 percent last year, and the downward trend is forecast to continue into 2020.

Brent crude prices surge

Jan 3 – North Sea Brent crude prices have risen to their highest level since September 2019, up nearly $3 per barrel because of Middle East tensions coupled with improved Chinese economic forecasts. Brent crude futures for March 2020 delivery were last seen trading at 69.21 per barrel the Intercontinental Exchange (ICE). This bullish price sentiment will feed through to oil-indexed natural gas contracts and LNG deliveries, linked to the Japanese crude cocktail (JCC) basket price.

IEA says coal’s fate tied to Asia

Dec 23 – Rapid rise of wind and solar power in many parts of the world has pushed coal-fired power generation into steep decline in most developed countries. "But this is not the end of coal, since demand continues to expand in Asia," analysts at the International Energy Agency commented: "The region’s share of global coal power generation has climbed from just over 20 percent in 1990 to almost 80 percent in 2019, meaning coal’s fate is increasingly tied to decisions made in Asian capitals."