Regulation & Policy

Dealing a blow to the industry, China’s National Development and Reform Commission (NDRC) has significantly reduced solar subsidies by setting new on-grid power tariffs that range between $7.8-11c/kWh, effective June 1. Distributed projects are capped at 10 GW and all utility-scale projects are mandated to set power prices through competitive auctions.

Bowing to industry pressure, the British government has indicated it will make a direct investment of public money into the much-contended Wylfa nuclear project in north Wales, backed by Hitachi. Critics dismiss this move as state aid, a reversal of 40 years of UK energy sector privatisation, and unfair prioritisation of nuclear power to the detriment of renewables and new gas-fired power projects.

Energy industry stakeholders have unanimously condemned U.S. President Trump’s latest market interference by directing the Department of Energy (DOE) to stop, what he calls, “impending retirements of fuel-secure power facilities.” Rebuking the move, several energy industry associates called the action “misguided” as it would be effectively subsidizing “failing coal and nuclear plants.”

Improving power system flexibility is vital for cost-effective management of variability and uncertainty in both supply and demand, the International Energy Agency (IEA) finds. Hence the agency calls for a proactive response from regulators and policy makers to help manage today’s fundamental a transformation of energy markets.

China's National Development and Reform Commission (NDRC) will unify China’s residential and industrial city-gate natural gas pricing systems from June 10 to better reflect rising demand and costs. The new mechanism will allow gas prices to rise by no more than 20% from a benchmark price, NDRC stated, which is “more flexible” than the existing one which since 2010 kept a ceiling on residential gas prices at at 1.4 yuan (about $0.22) per cubic metres.

Canada’s current policies, combined with energy efficiency investment, could deliver final energy savings of 1.9% per year on average through 2050, the International Energy Agency (IEA) finds. Sectors with the greatest energy savings potential would be buildings (28%), followed by transport (25%), oil and gas extraction (21%) and industry (12%).

Dirty king coal is no longer vital for Germany’s security of power supply. In fact, about half of the country’s coal-fired power generation capacity could be shut down over the coming years if planned grid extension and the additional gas-fired plants start operating according to schedule, said Jochen Homann, head of the German energy regulator.

Deployment of electric vehicles so far has fallen short of expectations hence penalizing policy measures, like London’s new Emissions Surcharge, or T-Charge, have been introduced to spur growth. Penalising offending vehicles is one part of the solution, finds Jacob Klimstra, Senior Energy Consultant and Member of the Advisory Board for Electrify Europe. He highlighted plans by the Dutch government for all new cars to be zero-emissions vehicles by 2030 – others, including Paris, are already following suit.

Chicago-based Exelon has approached the U.S. Federal Energy Regulatory Commission (FERC), suggesting it would keep operating two gas-fired power plants and the LNG import facility in Everett between 2022 and 2024, if it gets permission to collect about $1 per month from all electricity customers in New England. The Mystic gas-fired power plants are some of the largest generators in New England, but they are not economical in the current market environment.

Painting a bleak picture of the planet’s climate, the International Energy Agency (IEA) has warned if countries limit their clean energy efforts to their  nationally determined contributions (NDCs) in the Paris Agreement, this will set us on a path consistent with about 2.7°C warming by 2100. Yet, as the adage goes, “that which is measured, improves,” says IEA Climate Change Policy Analyst, Caroline Lee, so there is hope that natural gas and renewables will help turn the tide towards more sustainable electricity supply.

Beginning June 1, New England will become the first US grid operator to fully integrate demand-response (DR) resources into its daily energy dispatch and reserve processes. The ISO estimates that about 408 MW of DR will be available which will participate in real time in the energy markets. Pay-for-performance incentives will be in effect starting June 1.  With this instrument, the ISO is confident to meet peak summer demand. 

Federal financial interventions and subsidies in U.S. energy markets have been in a steep decline over the past five years. According to the U.S. Energy Information Administration (EIA), federal monies spent in energy markets nearly halved in the period 2013-16, falling from $29.3 billion in the 2013 fiscal year to $15.0 billion in FY2016.

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News in Brief

Zhonghua’s profits halve

April 1 – Hong Kong-listed Zhonghua Gas Holdings has recorded a staggering 46.7% fall in profit, citing a lower margin for LNG supplies and reduced subsidies, although full-year revenue rose by 7.3%. In December, Zhonghua partnered with Shanghai Shenergy to supply LNG in the Yangtze River Delta region, and also has strong business relationships with Tractebel Engineering and Tianjin Jinre Heat-Supply Group.

Endesa donates $28m to fight coronavirus

March 31 – Endesa has created a 25 million euros ($27.8 million) fund to help fight the coronavirus pandemic in Spain. The Spanish utility, subsidiary of Enel, said the fund will be designated for purchases of protective equipment for health-care workers.

 

MAN develops liquid methane terminal in Swedish port

March 30 – OxGas has commissioned MAN Energy Solutions to act as ‘owners engineer’ to develop and build a liquefied methane-based fuels terminal in the Swedish Port of Oxelösund. The terminal will feed both LNG and green methane derived from bio gas to SSAB ’s local steel production, and to re-distribute it via train and trailers to other parts of Sweden for use in the steel industry and decentralized power generation.

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.