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Putting energy tax on renewables is ‘like putting alcohol tax on orange juice’ says Drax boss

November 9th, 2015

Dorothy Thompson, the chief executive of Drax Group which operates the UK’s biggest power station, has spoken of her dismay at recent changes to government policy on renewables.

Drax power plant in England provides around 7 per cent of the UK’s electricity supply and is in the process of converting three of its six coal units to run on biomass – two are complete and the third is due for completion next year.Dorothy Thompson, the chief executive of Drax Group

This work was carried out on the understanding that the biomass units would not be hit by the UK Climate Change Levy, an energy tax designed to be an incentive to cut emissions that did not apply to renewable technologies.

But in August the government changed the rules of the levy to include renewables, a move that Thompson said “was a shock for shareholders and a shocking change of policy”.

She told the Economist Energy Summit in London that putting the Climate Change Levy on renewables “was like putting an alcohol tax on orange juice”, and added that the government’s move had added a bill of £18m a year for Drax.

She said that “biomass is the perfect back-up for the unreliability of wind and solar” and added:  “With biomass we are just at the beginning of the journey. Burning pellets is as competitive as burning coal.”

However she claimed that the UK “is behind the rest of Europe on biomass”.

Related stories: Blow for CCS as Drax pulls plug

Doosan Babcock wins multimillion Drax emissions deal

Brazil approves 290.6 MW of renewable power projects

November 9th, 2015

Brazil's power sector watchdog Aneel has approved 290.6 MW of winning energy projects from an earlier auction this summer, it has been reported.

The projects include eight wind farms with 231.6 MW of combined capacity, including two small hydropower plants of 23 MW in total in Minas Gerais, one 8 MW biomass plant in Rio Grande do Sul and one 28 MW natural gas-fired plant in Bahia.

They were approved after the owners met requirements established by Aneel. Power supply should start on 1 January, 2018.

From the 29 winning projects in the August 21 auction, Aneel has approved a total of 21 schemes, or 530 MW of capacity.

The tender secured 669.5 MW of clean energy, or 58,004,224.8 MWh.

Renewable subsidy cuts dominate UK energy debate

November 9th, 2015

The UK government’s recent decisions to cut subsidies for some renewable energy technologies were put under the microscope at a London conference.

And there was disagreement on the government’s actions, with some believing it had done the right thing, while others said that the renewable investment climate had been damaged.

Since coming to power after the General Election in May, the Conservative government has reduced support for onshore wind and solar projects, giving the reason that too much had been spent on them during the previous administration, in which the Conservatives shared power with the Liberal Democrat Party.UK Energy Minister Andrea Leadsom

At the EnergyLive2015 conference last week, Energy Minister Andrea Leadsom was – unsurprisingly – adamant that there no U-turn on renewables support and unapologetic for withdrawing and cutting subsidies.

“In no business area would you allow a budget to run away from you,” she said. “Demand-led subsidies where there are not any boundaries is very bad for business. You don’t have to put more pounds in to get better results.

Stating that the government was “not micro-managing the daily electricity supply”, she said that it remained committed to decarbonising – but at the lowest cost to the consumer.

She said that the government did not indulge in “crazes” for a particular technology, but instead wanted a “diverse energy mix”.

Alistair Phillips-Davies, chairman of utility SSE, and Kevin McCullough of Calon Energy, which operates combined-cycle gas plants in England and Wales, both disagreed that there had been a government U-turn on renewables.

And Tim Rotheray of The Association for Decentralised Energy, while agreeing that the speed of the subsidies cuts had “made everyone nervous”, stated that “there has been a sense of entitlement among some in the renewables industry”.

“They say: ‘You can’t do this to me because I’m green’. They say, ‘Please can I have my subsidy back because I’m wonderful’, instead of saying, ‘Can I have my subsidy back because it’s really important to help beat fuel poverty’.”

This view of entitlement was amplified by Angela Knight, former chief of Energy UK, the trade body that represents Britain’s major utilities.

She said that anybody surprised by the government’s action on renewables subsidies “should have read the Tory manifesto” before the General Election. She explained that the manifesto contained two pages on energy in which the Conservative Party outlined exactly what it has subsequently done in recent months.

And she added: “If you rely on government subsidies, you are in the hands of governments. You cannot assume you have a God-given right to a subsidy – you have to get a grip on that.”

She said that for renewable subsidies “the writing was on the wall a long time before the election. And picking up a bucket of sympathy and pouring it all over the place isn’t going to help.”

Knight’s successor at EnergyUK Lawrence Slade told the audience that “what we have lost since the General Election is policy certainty. We need transparency; we need timetables. Post 2020 there is tremendous uncertainty.”

Joan McNaughton of the World Energy Council agreed that “the state of the industry is bound up with policy, so there is uncertainty. We need clarity and the last thing we need is a fundamental reset of the EMR [Electricity Market Reform].

She said that “politicians under-estimate how their policies affect the perception of risk”.Angela Knight, former chief of Energy UK

And she said that the UK should have taken the same approach as Germany on ending subsidies, where support was cut but with a long lead-time and with much advance notice. “It’s a matter of regret that we didn’t so it that way.”

But the German Energiewende got short shrift from Angela Knight. “Germany’s energy policy is barking [mad] – they have blown holes through their commercial energy companies.

“Germany may be a poster child for the green lobby but it is not a poster child for a common sense and a practical approach to industry. You can’t apply a heart-rending approach to a major industry.”

She said that “energy and climate change are not the same thing – they should be separated. Energy has to be a practical policy – it cannot be an emotional policy, and climate change is an emotional policy. It will lead to the wrong outcomes.”

GE offers details of Ansaldo sale and new business

November 6th, 2015

GE has provided further details on its sale of gas turbine assets to Ansaldo Energia, as well as on how its new Power Services business will incorporate Alstom’s portfolio.

In a media briefing on Thursday, Paul McElhinney, Power Services president, acknowledged that GE had “had to make changes to the structure of the deal” which gave Ansaldo its GT26 gas turbine product line (see Ansaldo buys gas turbine assets from GE) “to accommodate the regulator’s concerns”. These “remedies” will impact only “a small portion” of Alstom’s installed gas turbine base, he said – 34 GT26 units, to be exact – while a number of contracts and customers will also be transferred to Ansaldo. Under the deal, GE will not be able to offer services on these contracts for three years.

Pascal Schweitzer, general manager of Power Services in Europe, said GE expects to complete the transfer of contracts to Ansaldo “by the end of the year, or very early next year”. But because “we have teams working full-time on that right now,” he said, “I think we’ll end up closing the transfer of those units much sooner.”

Another transfer to Ansaldo will be Alstom’s Power Service Manufacturing business, although GE will “retain significant amounts of intellectual property” from the business according to McElhinney. Keeping this business out of the Power Services umbrella was “one of the remedies” agreed with European regulators, he said.

Hartman also noted that GE is to launch another new business this week, focusing on supporting equipment manufactured by other OEMs. McElhinney added that GE’s business to date has involved “spending more on servicing other people’s [power generation] equipment than GE’s”, and that Alstom has also “been in the other-OEM business significantly for a while”. The two companies’ combined expertise “on gas, but also on the generator and steam side” will allow the company to, for example, “bring greater value to a Siemens gas turbine customer than Siemens can".  



Mexico faces challenges in development of renewable power

November 6th, 2015

Mexico has great potential to promote renewable projects thanks to its vast territory. However, it has not yet been able to promote the use of its renewable resources despite great efforts made over the past decade.

The Latin American country has laws and aims to promote the development of renewable energy, but it also faces great challenges as the goal of 35 per cent of generation of electricity from non-fossil sources by the year 2024 seems unattainable for now.

There are also technological limitations that prevent the rapid stimulation of investment and technological modernization in the field of renewable energies.

According to a report by PricewaterhouseCoopers (PwC ), initiatives such as the creation of the system of Certificates of Clean Energy (CCE), which will be operational in two years, would help meet the targets.

There are also plans to expand the nation's network of overloaded transmission lines to help the interconnection of renewable projects, and there is a greater allocation of public funds for intensifying research in this field. According to analysts, these two efforts could help ensure that the goals set by the law are met.

However, there are those who still doubt the possible concrete results, especially if one takes into account the fact that Mexico will have to install 18 GW of clean energy over the next three years. This aims to reach 2018 with a share of renewables in the energy mix of 24.9 per cent, which would represent a major step towards the goals set by law.

CCEs will be a key instrument to reach the goal of 35 per cent renewable energy by 2024, experts said. They will serve to ensure entry into the electrical system of a particular amount of energy from renewable sources. This requirement has been defined as a "proportion of total electricity consumed in load centres", which will be defined by law and the amount of which will gradually increase every three years.

This mechanism will also be a market for the sale of certificates for suppliers and users to comply reasonably with the provisions of the regulations, in addition to avoiding high fines that would result in hypothetical violations. If companies fail to achieve the clean energy goals, they can purchase bonds in the secondary market to enable them to meet the requirements of the law.

This will ensure greater incentives for producers of renewable energy. This strategy could result in a substantial reduction in costs that would raise the competitiveness of renewable technologies and attract greater levels of investment in the renewable industry, experts say.

Mexico has already drafted the guidelines as a basis for the design of future CCE market starting in 2018, in addition to setting the 5 per cent requirement for electricity consumption from renewable sources that suppliers, qualified new market users and end users will have to meet.

It is not surprising that more and more voices are demanding greater realization of public policies and the development of new laws aimed at definitely boosting the renewables sector.

Much remains to be done.

China urged to end coal-fired power plant construction

November 6th, 2015

Researchers in China believe the country ought to stop adding coal-fired power capacity in order to adapt to a forecasted decline in energy-intensive industry.

Problems associated with severe over-capacity have already affected the steel and cement industries and according to Yuan Jiahai, a professor at the North China Electric Power University, expected production cuts by industry could mean a severe oversupply of coal-fired power.

He told Reuters, "If it keeps on growing with no control, the oversupply troubling the steel and cement industries would be even worse for the power sector."
Coal power plant China
China has seen a boom in construction of coal-fired plants, increasing new capacity by 55 per cent in the first six months compared with the same period last year, according to the China Electricity Council. It also approved 200 GW of new plants in the first half of 2015, exceeding the total approvals in the previous three years.

China's steel sector currently has 300 million tonnes of surplus capacity.

Coal consumption by cement makers and steel firms will see coal use peak by 2016, according to the think tanks and consumption by power stations will likely peak by 2020, the research found.

Growth in coal consumption is already falling and could be the slowest in 30 years in 2015, said Miao Ren, a researcher at the Energy Research Institute, the Chinese government's top planning body, the National Development and Reform Commission.

Thermal power plants are set to cut operating hours by nearly 400 hours this year as the economy slows. In addition a new environmental tax, expected to be enforced in 2017, aims to cut coal use by raising the expense, while tighter controls on lending to coal miners may also impact the sector.


Outgoing UK grid chief says more power generation required

November 4th, 2015

Steve Holliday, the outgoing chief of the National Grid says the gap between electricity supply and demand this winter is “tighter than we would like” and called for more power generation to be added.

“There is a neSteve Hollidayed to build some more generation in the next few years. Hinkley Point (nuclear power plant) is part of that, but it is some way off,” Holliday said, adding “We have the tools we need to make sure we balance supply and demand in the coldest, darkest hour in the winter.”

National Grid is paying companies to switch off for periods of time, among other measures, in order to avoid shortages. The situation is exacerbated by the ongoing decommissioning of ageing coal and gas-fired power plants.

Holliday has overseen a consistent 10 per cent shareholder return each year since his stewardship commenced in 2007 and will be replaced by John Pettigrew, executive director of UK operations.

RWE to consider splitting business as downward spiral continues

November 4th, 2015

RWE chief executive Peter Terium has not ruled out splitting the business in the same manner as rival E.ON as wholesale power prices continue to drop.

The company’s cost cutting measures are failing to make a sufficient impact on a $28.5bn net debt, with Terium telling reporters, "The case X has not yet occurred but at power prices of 28 euros ($31) per megawatt hour (MWh) things are slowly getting exciting. It's becoming harder to just cut more costs."

Reuters reports that German wholesale power prices have nearly halved since early 2012 and currently trade at 29.35 euros per MWh, squeezing margins at the group's gas and coal-fired power plants to the point where it becomes more economical to simply shut them down.
An added burden on utilities is the German government’s insistence on them paying for the country’s nuclear phase-out.

Berlin has tasked a commission with presenting ideas on how to safeguard the up to 80 billion euros in funds by the end of January, with a public trust being one option under discussion.

Terium also stated that the company is looking to expand outside Europe, focusing on Africa and the Middle East in particular, and is considering a bid for Enerjisa, a Turkish joint venture of E.ON and Sabanci Holding.

Ansaldo buys Alstom gas turbine assets from GE

November 3rd, 2015

Ansaldo Energia has bought several Alstom gas turbine assets from GE.

The move comes in the wake of yesterday’s finalization of GE’s acquisition of Alstom (GE finally completes Alstom acquisition).

Ansaldo said that the deal will allow it to increase its turnover twofold in the coming five years, become an international leader in the gas turbine sector and expanded its markets in Europe, the Middle East and the US.Ansaldo buys Alstom gas turbine assets from GE

The Italian company has bought all of Alstom's heavy duty gas turbine intellectual property rights for the latest ratings of the GT26 and GT36 turbines, existing upgrades and pipeline technology for future upgrades, as well as servicing agreements for 34 GT26 turbines already sold in recent years by Alstom.

Ansaldo has also acquired more than 400 Alstom employees in Baden, Switzerland, who will continue to develop Alstom heavy duty gas turbine technology and support the service and turbines business.

The deal – which is expected to close early next year following regulatory approvals – also sees Ansaldo take over Alstom's Power System Manufacturing (PSM), a company based in Florida in the US which mainly focused on other OEM aftermarket businesses.

Ansaldo will license to GE to offer two after-market services: PSM’s intellectual property for Siemens-Mitsubishi gas turbines and Alstom’s intellectual property for the portions of Alstom's heavy duty gas turbine business to be retained by GE.

Ansaldo Energia chief executive Giuseppe Zampini said that the deal “lays the foundations for Ansaldo Energia to enhance a sustainable growth in the power generation industry”.

Exclusive: GE viewpoint on Alstom acquisition

Exclusive: GE viewpoint on Alstom acquisition

November 3rd, 2015

In an exclusive article for Power Engineering International, Paul McElhinney, president of GE’s Power Services business, outlines what the Alstom deal means for global utilities and industrial operators


GE’s €9.7bn ($10.6bn) acquisition of Alstom's Power & Grid businesses is rightly being described as a transformational moment for both companies and the broader energy industry.

By combining our power generation and grid assets, we will be in a far stronger position to help power producers meet the world’s demands for reliable and more sustainable electricity.

The deal marks the largest of its kind in GE history, with a defining investment in the energy sector and dramatically transforming the company’s industrial portfolio.

GE’s share of the world’s thermal power generation capacity will grow to 1600 GW – or about 40 per cent of the global thermal energy sector – which is enough to power more than 1.5 billion homes, driven by the world’s largest installed base of nearly 28,000 power generation assets.  

The combination of our company with Alstom’s Power & Grid businesses offers crucial benefits for us to better serve utility and industrial operators worldwide. On a broader level, the deal creates the necessary scale that GE has sought to become more globally competitive in helping our customers meet the world’s energy needs, which are expected to grow steadily in the coming decades in both emerging and more developed regions.Paul McElhinney, president of GE’s Power Services business

This deal brings together two of the world’s best services teams to create GE’s Power Services business. Headquartered in Switzerland, Power Services will serve the world’s GE and Alstom power generation installed base of nearly 28,000 assets.

By blending the strongest attributes of our respective generation services technologies and expertise, the global utility and other industrial sectors will benefit from a world-class provider of total plant asset and lifecycle solutions that can support equipment from multiple leading OEM suppliers.

Combined expertise

Power Services serves the world’s largest installed base that includes more than 7000 gas turbines, 7000 steam turbines and 10,000 generators, positioning the company to be the broadest base power supplier. The business offers the combined expertise of more than 26,000 people in more than 150 countries, giving GE the ability to rapidly respond to local needs and execute local projects in the company’s seven regions around the world.

These capabilities will prove vital in the coming years. While the world will experience fluctuating demands for energy in various regions, over the long term, the demand for power is expected to rise by 50 per cent over the next 20 years according to the International Energy Agency, placing a greater priority on utilities to keep their existing generation assets operating at their optimal performance levels.

In thermal energy for example, Alstom Power and GE have complementary services in steam and gas turbine technology. With Alstom Power’s robust steam turbine, generator and other OEM assets and capabilities, GE Power Services offers power plant operators more complete, customized ‘one-stop shop’ solutions, not just for developing new power plants but also for enhanced lifecycle support across their total plant.

Integrating Alstom Power’s robust portfolio of more than 90 OEM products with GE’s own deep domain knowledge of its own installed fleet creates more customer options and solutions, making GE Power Services one of the few energy businesses with the ability to serve power customers across total plant services—from heavy duty and aeroderivative gas turbines, steam turbines, boilers and heat recovery steam generators to a broad portfolio of digital controls and other software solutions for generation equipment.

In addition to enhancing local service capabilities around the world, the deal offers additional value to Alstom Power’s global installed base by creating opportunities for GE Power Services to incorporate the industrial internet with Alstom’s generation equipment.

GE has invested more than $1bn in software and data analytics to become “the first digital industrial company” to improve the performance and reduce the downtime of power plants using GE equipment. GE will bring the industrial internet to the Alstom fleet to help operate power plants featuring this equipment more efficiently, dynamically and profitably.

Stronger together

Consider the exciting challenges and opportunities ahead: GE and Alstom are combining their power generation assets at a time when – despite a current softening in demand for power in some emerging regions – global energy demand is projected to grow by 50 per cent by 2035 and the world population is expected to rise from 7.3 billion to nearly 10 billion in the next 35 years.

In combining more than 230 years of our collective experience in solving the energy industry’s biggest challenges, GE and Alstom Power are stronger and better together, with the scope needed to compete in a global, digitalized economy. The strength of this combination is built on shared commitment that is dedicated to creating a more reliable, efficient and environmentally sustainable energy future for the world.

Paul McElhinney is the president and chief executive of GE’s Power Services business, the newly-formed global services organization created by GE’s acquisition of Alstom’s Power & Grid businesses.

Related stories: GE finally completes Alstom acquisition

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