Regulation & Policy

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.

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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.