Regulation & Policy

The UK Government's Energy Bill which includes contracts to develop low carbon generation and market-wide capacity contracts is expected to pass through the House of Commons "within the next month or two", Tim Lord, Security of Supply Team at the Department of Energy and Climate Change (DECC) told a conference organised by Gas to Power Journal in London today.
"We expect the first capacity auction to be held in 2014 for a delivery year of 2018/19," he said.

Scottish Powers' Director of Regulation, Rupert Steele has called on the UK Department of Energy and Climate Change (DECC) policy to "maintain momentum" to deliver a workable scheme for a Capacity Mechanism and Contracts for Differences (CfDs) in 2014, though he strongly opposed a Carbon Floor Price.

German chancellor Angela Merkel has admitted the country's clean-energy prone needs an overhaul, including a cut in subsidies for renewables paid by consumers via the EEG levy, to ensure that state-of-the-art gas fired power plant can operate at a profit.

The European Commission has warned Ireland that it must fully transpose the Electricity Directive of the third energy package into law or face referral to the European Court of Justice (ECJ). The directive contains provisions for the proper functioning of European Union electricity markets such as rules on the unbundling of networks, rules strengthening the independence and powers of national regulators and rules on the improvement and functioning of retail markets.

Germany's 'green' energy policies are failing to provide their intended emissions reductions , says John Rhys, Senior Research Fellow at the Oxford Institute for Energy Studies (OIES), arguing that phasing out nuclear will continue to increase coal use significantly. "Germany does not promote CCS (...) and it is also foregoing gas," he said in an opinion piece published by the Institute, claiming "Germany's simultaneous capitulation to anti-nuclear prejudice and willingness to compromise on cheap high CO2 emissions coal is therefore a disappointment to British supporters of EU ambitions to lead on climate change".

A coalition of 10 US states and 5 cities lead by New York Attorney General Eric T. Schneiderman has filed a court brief urging the US Supreme Court at the request of the Environmental Protection Agency (EPA) to review and reverse a lower court decision that invalidated an EPA rule requiring substantial cuts in the interstate transport of air pollution.

Gas-fired distributed power projects in the UK will benefit from specific support schemes, including capacity mechanisms, which are forthcoming as part of a new regulatory package stipulated under the Electricity Market Reform, says Dr. Jim Fitzgerald, Associate Partner at The Advisory House.
"Contracts for Difference (CfD) will differentiate on technology, with different auction prices for each low carbon technology. We expect a specific capacity mechanism to be put in place to enhance support available for distributed gas fired power generation projects," he told Gas to Power Journal in an interview.

Unless new efficient policy measures are implemented, about 40 percent of Spain's installed Combined Heat and Power (CHP) capacity is at risk of being shut-down in 2015, Javier Rodríguez Morales, Director General of Spain's Cogeneration Association (Acogen) told Gas to Power Journal. "At the moment, there is a moratorium in place to install new cogeneration capacity since 2012, as well as uncertainty about the actual regulatory framework reform and new energy taxes applied since 2003 which are deeply impacting CHP," he said.

Selling heat in addition to electricity has made new combined-cycle power plants (CCPPs) economically feasible in Germany, Norbert Wenn, Director of Sales Support and Product Line Management at Siemens told Gas to Power Journal at this year's COGEN Europe annual conference in Brussels. "The renewed German CHP law and incentive scheme has made a business case of the Lausward plant currently being built in Düsseldorf, which would have never happened had it been planned as a pure condensing plant," he said.

Long-term regulatory stability is key for helping make new cogeneration developments more attractive for European industry, Dave Brownell, Refinery Manager at ExxonMobil told Gas to Power Journal at this year's COGEN Europe annual conference in Brussels. "In Europe, we're looking for stability in the rules of the game; stability in terms of regulations. A large cogen plant is an investment of hundreds of millions of euros, typically takes four to six years of project development and the operational life of the unit exceeds 30 years," he said.

The EU's 2004 CHP Directive has played an important part in the encouragement and recent introduction of CHP incentives across several member states, according to an International Energy Agency (IEA) report on Cogeneration and District Energy. The Directive establishes general principles for CHP policy but leaves detailed implementation to member states.

The introduction of Capacity Payment Mechanisms (CPMs) as suggested under the UK Electricity Market Reform may solve immediate problems of renewable output increasing revenue volatility for operators of coal- and gas-fired power plants, but could introduce many more, says James Marshall, Senior Consultant, Pöyry Management Consulting. "Conventional generation must expect to rely on a smaller number of hours to cover fixed and capital costs, with the timing largely determined by weather patterns with only short-term predictability," he told Gas to Power Journal.

Stricter emissions regulations from the US Environmental Protection Agency (EPA) could make many of the country's coal-fired power plants just as expensive to run as gas-fired plants, even at much higher prices for natural gas, Lincoln F. Pratson, professor at Duke University told Gas to Power Journal, commenting on a study under his lead from Duke's Nicholas School of the Environment.

Low gas prices, state incentives, environmental regulations and the retirement of old power plants helps fuel rising investment in combined heat and power (CHP) installations in the US, according to a Department of Energy (DOE) and Environmental Protection Agency (EPA) report.

President Barrack Obama supports an initiative to expand the currently installed capacity of 82GW by another 40GW by the end of 2020.

District heating and cooling (DHC) cogeneration currently provides 1.6 million households in 26 South Korean areas – mostly in greater Seoul – with power and heat, after an array of new installations came online in the wake of the 1999 Integrated Energy Supply (IES) Act. The latest report of the International Energy Agency (IEA) on cogeneration and district energy highlights the Korean IES regulation as an example of CHP best practice.

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News in Brief

Blackout after fire at Madison substation

July 22 – Electricity is gradually being restored at Madison, Wisconsin, after 13,000 people experience a blackout following an explosion at a substation near Madison Gas & Electric’s 100 MW gas-fired Blount Generating Station. No injuries were reported.

Fuel switch could abate 1.2bn tons of CO2

July 19 – Some 1.2 billion tonnes of CO2 could be abated by switching to gas using existing infrastructure, if prices and regulation are supportive. According to the International Energy Agency (IEA), this would be enough to bring global CO2 emissions back down to where they were in 2013.

IEA launches methane tracker

July 18 – A new ‘methane tracker’, launched by the International Energy Agency (IEA), provides up-to-date estimates of current oil and gas methane emissions by drawing on the best available data. Analysts stressed methane emissions could be reduced by nearly half at no net cost.

Canada’s CO2 tax also affects gas power

July 17 – Change in Canada’s carbon tax regulation for new power plants has changed to also affect cleaner-burning, gas combined-cycle power stations starting from 2021. The move could cause SaskPower to reconsider its planned upcoming Moose Jaw gas power station.

MAN, Daewoo, HSD partner on engine digitalization

July 16 – MAN Energy Solutions, Daewoo Shipbuilding & Marine Engineering (DSME) and HSD Engine (HSD) have signed a strategic agreement to cooperate in the field of marine engine systems digitization. The three companies also work together on auxiliary systems and data analysis, aiming to apply part of their know-how to power generation and related sectors.

Canada launches first utility-scale smart microgid

July 15 – The Ontario-based municipal utility North Bay Hydro Services is cooperating with the smart grid solutions firm S&C Electric to launch Canada’s first utility-scale microgrid system. Among some solar power, the 789KW microgrid system will be powered by two 265kW natural gas generators.

Macquarie funds Mexican power plant

July 12 – Macquarie Capital has chosen Credit Agricole, Natixis and SMBC to co-finance a $380 million combined-cycle gas power plant. The 560 MW plant is designated to be built in San Louis Potosi, a city in central Mexico.

B&V launches distributed energy group

July 11 – Black & Veatch has launched a dedicated distributed energy group to place its conventional power business in the context of the global energy transition. The distribute energy group will look into new fuel sources such as hydrogen and aspires to “re-power the more-than-century-old power industry.”

Funding secured for Kazah CHP project

July 10 – Kazinform Erg has committed to spend $500 million on a gas cogeneration station that will provide heat and electricity to the south of Kazakhstan. Over 87% of Kazakhstan’s electricity is generated from fossil fuels, and in 2018 the country produced 107,060 billion kWh of electricity, a 3.8% increase over the previous year and enough to cover total power use of 103,228 kWh.

Bitcoin mining uses much energy

July 9 – Estimates of bitcoin’s electricity consumption are wide-ranging, on the order of 20‑80 TWh annually. According to George Kamiya, digital energy analyst at the International Energy Agency (IEA), bitcoin mining consumed around 45 TWh in 2018 although this has risen significantly this year. Through the first six months of 2019, bitcoin mining has already consumed an estimated 29 TWh.

Coal exit doesn’t impact Germany's supply security

July 8 – Electricity supply security in Germany is set to stay “very high” even as the country begins to phase out coal-fired power generation, the Federal Ministry for Economic Affairs and Energy (BMWi) said in a monitoring report. “Energy supply is adequately ensured”, the ministry said, in all scenarios examined up to 2030. Thereafter, things are less clear but the German Coal Commission is adamant that its proposal to exit coal power by 2038 is feasible and won’t seriously impact reserve margins.

Hydrogen demo plant starts in Adelaide

July 5 – The Australian Gas Networks (AGN), part of the Australian Gas Infrastructure Group (AGIG), has received A$4.9 million in government funding for an A$11.4m hydrogen electrolyser demonstration project at the Tonsley Innovation District in Adelaide. At the test site, AGN plans to blend 5% renewable hydrogen with natural gas for supply to customers using its existing gas distribution networks. The project is based on a Siemens proton exchange membrane (PEM) electrolyser, running based on wind and solar power.

Wärtsilä forms biogas solution

July 4 – Wärtsilä Puregas Solutions, specialists in biogas upgrading technology, has merged with Wärtsilä’s biogas liquefaction team to create a one-stop-shop service for biofuel production. Having installed the world’s largest bioLNG facility in Skogn, Norway, Wärtsilä will deliver two more bio-LNG plants to customers in Scandinavia. The company’s Puregas CA process recovers more than 99.9% of the biomethane present in raw biogas.

PNM to close San Juan Generating Station

July 3 — New Mexico's largest energy holding, PNM Resources, has filed an application to the Public Regulation Commission to close the coal-fired San Juan Generating Station. For replacement power, PNM said the preferred option was a mix of gas power plants, solar and wind farms and new battery storage facilities. The utility strives to be ‘emissions-free’ by 2040.

ADB opens office in Singapore

July 2 — The Asian Development Bank (ADB) has decided to open an office in Singapore. The lean office with twelve staff will focus on the expansion of its private sector operations, e.g. through Public-Private Partnerships. “We estimate that developing Asia will need $1.7 trillion per year in infrastructure investments until 2030 to maintain the region’s growth momentum,” commented Singapore’s finance minister Heng Swee Keat.

Testing starts at Haliade-X

July 1 – Technology testing has started at GE’s Haliade-X, the world’s biggest offshore wind turbine. The 12 MW nacelle and 107-metre long blade was shipped to the UK as part of an advanced technology testing program, focused on enhancing the platform before it enters into serial production in 2021.

Tata to build UK’s first CCUS plant

June 28 – Tata Chemicals has announced plans to build the UK’s first industrial-scale Carbon Capture, Usage and Demonstration plant at its Northwich industrial site. The CCUD unit will be built at an estimated cost of£16.7 million and is planned to start operation in 2021. It will make use of CO2 emissions from fossil fuel power plants and turn it into sodium bicarbonate, which can then be sold to pharmaceutical industries.