Regulation & Policy

Scott Morrison, the Australian Prime Minister, has singled out natural gas as the “only credible route for pursuing an energy transition.” To enact his gas-led energy policies, the PM seeks to double gas production in New South Wales which hinges on Santos going ahead with the Narrabri gas project.

As Germany exits both nuclear and coal generation simultaneously over the next few years, more flexible gas-fired generating capacity and energy storage will be required to balance the grid. The gas industry hence urges the Government to introduce regulation to launch capacity markets to incentivize enough new-build gas power units by 2030.

Lawmakers in the U.S. Congress are preparing to hit European investors in the Nord Stream 2 pipeline with a new set of sanctions in an effort to derail the project. Uniper, Winterhall, Engie, OMW and Shell are invested in the Baltic Sea interconnector, and the sanctions could come as soon as February or March.

Concerns over China’s gas demand grow after the government said it would hand out ‘force majeure’ certificates to domestic companies if they cannot fulfill their offtake obligations. Beijing apparently tries to mitigate potential losses of state-owned gas companies though the impact on LNG imports is still unclear.

Spain’s new government has revised the 2021-2030 Energy Plan, speeding up the country’s coal exit and stepping up solar PV targets. Coal-fired power units will “cease to be competitive by 2030,” the plan reads, given that CO2 prices in Europe are likely to rise to €35 per ton and considering the relative price of gas.

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.  

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News in Brief

Mitsubishi produces methanol in Trinidad

Jan 20 – Mitsubishi Gas Chemical Company has launched commercial operations of a methanol and dimethyl ether plant in Trinidad and Tobago. The plant has an annual production capacity of one million tons of methanol and 20,000 tons of dimethyl ether, which can be used as an alternative fuel for cars and power generation.

First 8-cylinder B36:45 engine delivered

Jan 19 – Rolls-Royce has delivered the first 8-cylinder variant of its Bergen B36:45 gas engine to a tomato producer in Belgium. The medium speed genset is planned for delivery this spring and will drive an onsite power plant that generates 4700 kW electricity and 5520 kW heat. The new engine offers a 20% increase in power per cylinder and will replace an existing Bergen 12-cylinder B35:40 genset.

Moody’s upgrades Enel to Baa1

Jan 18 – Moody’s Investors Service has upgraded Enel’s long-term rating to Baa1, with a stable outlook. The upgrade reflects Enel’s progress in reducing its risk profile, analysts said, pointing at the Italian utilities ongoing investment in networks and renewables, growing geographical diversification and focus on centralised financing.

GE sues Siemens Energy

Jan 15 – General Electric has sued its German rival Siemens Energy over the alleged use of stolen trade secrets to win gas turbine contracts worth several billion dollars. GE told the US district court in Virginia that Siemens received the secret information from a Dominion Energy employee.

Orbital Energy launches Eclipse

Jan 14 – Nasdaq-listed Orbital Energy Group has launched a new subsidiary, Eclipse Foundation, a drilled shaft construction company. The new company specialises in providing services for power transmission and substations, communication tower and a disaster restoration through emergency power.

S’Korean coal and LNG imports slide

Jan 13 – South Korea’s imports of thermal coal and LNG have fallen 12% and 11%, respectively, as the government cracks down on fossil fuel usage to curb air pollution. Customs data shows that coal imports amounted to 10.2 million tons in December, down 1.4 million tons from the same month last year but up from November’s imports of 9.5 million tons.

SMC builds 1.7 GW CCGT in Batangas

Jan 13 – Excellent Energy Resources, part of SMC Global Power Holdings, is building a 1,700 MW combined cycle gas power plant in Barangay Dela Paz and Ilijan in Batangas City with investments of about 67.863 billion Philippine Pesos ($1.41bn). The project is estimated to be completed in 36 to 40 months.

UK’s National Grid issues supply warning

Jan 12 – Natural gas prices in the UK surged as National Grid issued warnings on supply deficit as LNG cargoes are being diverted to North Asia. Prices at the British NBP gas trading hub soared to the equivalent of $8.95 per MMBtu, while the JKM price for North Asian spot LNG cargoes for February 2021 was last at $19.700 per MMBt.

Fortistar invests in hydrogen

Jan 11 – Fortistar, a privately-held fund, has joined an equity investment of up to $157 million in hydrogen producer BayoTech. Cottonwood Technology Funds and the New Mexico State Investment Council also participated in the latest financing round. BayoTech’s systems produce local hydrogen close to the application, serving end users in the industrial gas and petrochemical segment as well as those who use of hydrogen to power fuel cells.

Ashtead appoints new CFO

Jan 5 - Ashtead Technology has appointed a chief financial officer (CFO) and five managers for newly created roles across its international team. The appointments are meant to cement the company’s position in the offshore energy market, including offshore wind and decommissioning of thermal power plants

NFE secures LNG for Puerto Rico, Mexico and Nicaragua

Dec 23 – New Fortress Energy (NFE) has agreed to purchase Henry-Hub-indexed LNG for its integrated gas and power businesses in Puerto Rico, Mexico and Nicaragua. The New York-based project developer said it now has covered 80% of its expected needs throughout Latin America, thus reducing its need for spot purchases and its exposure to changes in the market price for LNG.

China and Korea mandate coal-to-gas switch

Dec 22 – The Chinese government has launched a coal-to-gas boiler switching programme, targeting 7.1 million homes, which makes gas demand more weather-sensitive this winter. Similarly, South Korea mandated the closure of 15 coal-fired plants since the start of December in an effort to reduce air pollution. Analysts expect this will accelerate the drawdown of LNG terminal inventories going into Q1-2021.

GE repowers oil field in Brazil

Dec 21 – GE Power Conversion has been awarded a contract by Sulzer Pumps UK to supply motors for four water injection pumps of a Floating Production Storage and Offloading (FPSO) vessel. The 8,000 kW, two pole motors will run at 3,600 rpm with a limitation of the starting current at 300%, enabling the oil and gas field operator to optimise the generator which supplies electricity on the FPSO.

VELO distributes Sapphire Metal 3D-Printers in the US

Dec 18 – California-based VELO3D has formed a distribution partnership with GoEngineer for Flow pre-print software, Sapphire metal AM printer, and Assure quality assurance and controls. GoEngineer will be VELO’s only distributor in the United States.

Indian electric boats to achieve zero emissions

Dec 17 – Cochin Shipyard, India’s largest shipbuilder, has asked Siemens Energy to equip India’s first fleet of 23 boats with electric propulsion drive train, integrated with batteries and vessel automation. Combining the electric propulsion drive trains, energy storage, and automation systems is expected to significantly reduce fuel consumption.

Terna BESS auction six times oversubscribed

Dec 16 – A pilot auction, held by the Italian TSO Terna, for battery energy storage systems (BESS) to provide reserve grid services has been six times oversubscribed. The auction was held with an expectation that around 230 MW would be on offer, but Terna received 1,327 MW worth of bids and eventually awarded contracts for 249.9 MW.

New £150m link to UK’s Easington terminal

Dec 15 – National Grid has completed a gas pipeline under the River Humber, build in 18 months and at a cost £150 million, as new link to the import terminal at Easington. Following commissioning, the pipeline is now operational and can now transport between 70 to 100 million cubic metres - around a quarter of Britain's gas needs.

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