Regulation & Policy

UK utilities and investors with gas to power assets in their portfolios face rising uncertainty in predicting long-term operational cash flows as market interventions as proposed under the UK's Electricity Market Reform have the effect of replacing market risk with political risk, says Dr. Jim Fitzgerald, Associate Partner at The Advisory House.

Are European regulators toothless tigers? Gunnar Streck, regulatory manager at E.on Energy Trading has criticized the "lack of ambition on the regulatory side to enforce rules that could ultimately lead to an integrated European energy market".

UK energy and climate change secretary Edward Davey has today urged the gas industry to step up investment, singling out gas generation with carbon capture storage (CCS) as "vital" to provide backup electricity supply as generation margins are seen dropping to close to zero by 2015/16.

An increasing share of variable renewable energy sources in the grid requires a market push for the development and demonstration of flexible conventional power generation, says Christer Björkqvist, Managing Director of the European Turbine Network (ETN).

Britain's energy regulator Ofgem today said the projected tightening of the spare power generation margin over the next four years would step up the urgency for the upcoming energy reform (EMR) package to encourage investment.

Capacity payment mechanism should not only consist of a lump sum for availability but should include a premium for flexibility, says Edward Nagelhout, Market Development Analyst, Wartsila Power Plants.

To launch a capacity mechanism in Britain is the right approach to incentivise new investment for security of supply, says to Ray Tomkins, founder and director at Economic Consulting Associates.

"We have been lucky that due a combination of circumstances - such as the dash-for-gas, the investment strategy of the vertically integrated oligopoly, and more recently the recession depressing demand- that major blackouts have been avoided as private generators have 'over-invested'," he said. "This cannot be relied on in the future...

As Germany's power grid operators are busy negotiating with power plant operators over the amount of available cold reserves, the federal network regulator Bundesnetzagentur (BNA) confirmed that Germany will need over 2,000 MW of capacity reserve to guarantee supply security in during the upcoming winter.

The autumn statement of the UK finance ministry, set for 5 December, will impact on the timing of the Government's update on the Electricity Market Reform (EMR), JP Morgan Cazenove said today. As both the EMR and the gas generation strategy paper need to be consistent with the Government's fiscal targets, the papers are „only likely to be published once the fiscal targets are known in December,"  says Edmund Reid, analyst at the bank.

Nigeria's federal government has spent about $8 billion on power intervention projects since 1999, to support the construction of 10 power plant projects with a combined capacity of 4,774 MW, James Olotu, owner of the National Integrated Power Project (NIPP), said in Lagos.

InterGen, a global power producer with a total installed capacity of 7,686 MW worldwide, has applied for generation licences in the UK for 1,800 MW of new gas-fired capacity, the British industry regulator Ofgem said on Monday.

Germany's energy industry association BDEW on behalf of its members has submitted a discussion paper to the Ministry of Economics (BMWi) pushing for a deal to compensate operators for refraining from carrying out planned closures of fossil power plants to guarantee supply security during the upcoming winter period.

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News in Brief

Italy’s power exports Montenegro surge

Jan 22 – Italian electric power exports increased by 28% in 2020, largely driven by flows to Montenegro which surged 26% to 8.6 TWh. In contrast, domestic power demand fell 6% last year to 271.6 TWh with electricity sales from conventional plants down nearly 9% to 140.5 TWh, figures by the Italian energy exchange GME show.

US considers new nuclear

Jan 21 – The new US President Joe Biden has said his country could construct new nuclear power plants and reiterated plans to “swiftly rejoin” the Paris Climate Agreement swiftly. Germany’s environment minister, Svenja Schulze, called it illusionary to believe that newer, smaller reactors will be a technology of the future.

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.

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