Finding extraordinary engineers for exceptional clients

E.ON’s Uniper signals confidence with financing ahead of split

June 3rd, 2016

E.ON's Uniper unit has secured a $5.6bn (EUR5bn) financing line from three big banks and the German utility believe is a vote of confidence in its plan to spin off the company.

"We are pleased that we managed to get this financing sorted out so early," a spokesman said. "The capital market understands our business model and begins to trust us."
E.ON building
Company shareholders will vote next Wednesday on the spin-off of the legacy power-plant and energy-trading operations as Uniper, while Germany's biggest utility will keep renewables and other newer business areas as its future core business.

Reuters reports that the move is likely to be approved but there is a lot of work yet to do in delivering a convincing long-term strategy to investors.

The company has been denied the chance to move its nuclear reactor business, and costly waste decommissioning, to Uniper, but the German government has intervened to make the company retain it.

The split is to help E.ON focus on new business areas like renewables, end customer solutions, and regulated networks.

Vattenfall to spend $1.12bn on Danish wind farm

June 2nd, 2016

Vattenfall has decided to go ahead with the construction of the 400MW Horns Rev 3 offshore wind farm in Denmark.

The Swedish utility will spend around $1.12bn (€1bn) and the project off Esbjerg will be online in 2018.

Chief executive Magnus Hall said, “Horns Rev 3 gives a clear signal to the world around us that Vattenfall´s strategy is to make new investments in renewable electricity generation and to grow in wind.”
Horns Rev 3 offshore wind farm
MHI Vestas also confirmed today that it is in line to supply V164-8.0MW turbines at Horns Rev 3. Other contractors are expected to be announced this week.

Horns Rev 3 will supply enough electricity to power 400,000 Danish homes. Vattenfall seek to reduce the construction costs of offshore wind power, thereby also cutting the generation cost of each kWh (kilowatt-hour) produced. This will allow Horns Rev 3 to be built and commissioned in just under three years.

“Horns Rev 3 is the cheapest recent offshore project and the experience we have gained from our other wind projects had a very positive impact. This project underlines our ambition  to lead the industry in a highly competitive market environment”, added Gunnar Groebler, Head of Vattenfall Wind.

Toshiba wins Turkey geothermal plant supply contract

June 1st, 2016

Toshiba is set to supply a flash steam turbine system and generator for a geothermal power project in Turkey after winning the contract from independent power producer Zorlu Energy.

Toshiba’s 72 MW flash steam turbine generator system is to be delivered in December to the 95 MW Kizildere III plant, which is under development in the Anatolian province of Aydin, around 150 km from the Aegean Sea.

Kizildere III is a high-efficiency triple flash combined-cycle geothermal power plant, Turkey’s largest and one of the biggest such plants in Europe and the Middle East. It is planned to be operational in 2017. 

The plant will integrate a 72 MW flash steam generation system that uses steam under high pressure, and an approximately 23 MW binary cycle power generation system that uses flash turbine exhaust steam to vaporize a working fluid with a lower boiling point to drive a turbine.

Toshiba will supply the flash steam turbine generator system, while the binary system will be supplied by US-based Ormat Technologies. The two firms have also partnered on other geothermal projects under a collaboration agreement signed in last year.

Turkey’s government aims to reach a target of 2500 MW of installed geothermal power capacity by 2023. It currently boasts an installed capacity of 620 MW.

 

German government to close nuclear liability loophole

May 31st, 2016

Splitting up companies will not prevent utilities from facing up to the liabilities involved in decommissioning their nuclear power plants, with the German government acting to legally close off that possibility.

Government sources told Reuters that a move will be announced on Wednesday to close a loophole ahead of the annual general meeting of E.ON on June 8, when shareholders will vote on plans to spin off the utility's power plant and energy trading unit.
Reichstag
Germany's No.2 utility RWE also plans to hive off its renewables, grids and retail units into a separate entity and sell a 10 per cent stake in an initial public offering.

The German cabinet approved a draft law last year that ensures power firms will remain liable for the shutdown and decommissioning costs for as long as it takes, even if they spin off subsidiaries that own the nuclear entities.

However, there is some legal uncertainty as to whether this will still apply if the nuclear assets remain with the parent company, as E.ON and RWE now plan to make the case.

As a result, the statement on Wednesday is designed to ensure that the taxpayer will not have to be relied upon for the costs if the parent company goes bankrupt by ensuring that any improved law will still have a retroactive effect.

Centrica boss says era of ‘Big Six’ over

May 31st, 2016

The chief executive of British Gas owner, Centrica, Iain Conn, says that the era of domination by the big six energy companies in the UK has come to an end.

Energy Voice reports Iain Conn called time on the era, saying that a new wave of energy technology was already making the notion of Big Six past tense.

“We are on the edge of a revolution,” he said. “The Big Six nomenclature will become passe.”
Iain Conn
Centrica, SSE, Npower, Scottish Power, Eon and EDF Energy have dominated the market share in the UK since privatisation 30 years ago – controlling 99 per cent of the residential energy market in 2012. However, that number has since fallen to 85 per cent.

The development of in-home batteries, cheap solar power and big data all feed into the energy revolution the Big Six are battling, according to Conn. More than 600,000 UK homes are now fitted with solar panels.

In response to the demands Centrica issued a £700million rights issue. Half of the proceeds were used to snap up two companies Conn said would allow Centrica to deploy a business strategy focused on small generators connected to homes.

“These acquisitions accelerate our response to these trend,” the company leader said. “In this environment it is not easy to find additional cashflows inside the company, so I approached our shareholders.”

He added: “We face new challengers in terms of technology, energy supply and generation, energy management and, of course, access to customers. We are going head-to-head with like of Google, Amazon and Samsung.”

Dong Energy IPO set for $16bn valuation

May 27th, 2016

Dong Energy is set for the world’s biggest stock market listing so far this year, with an initial public offering that could value the utility at up to $16bn. 

If it goes ahead it will surpass the current biggest listing, of China Zheshang Bank, which raised $1.9bn, according to data from Dealogic.

Offshore wind turbine and engineer
The Danish offshore wind farm specialist is looking to raise up to DKr18.5bn for shareholders such as the Danish government and Goldman Sachs in the listing in Copenhagen, which is earmarked for June 9.

Following a few turbulent years the utility has boosted its profitability, reduced its debt and increased its investments in offshore wind.

Henrik Poulsen, chief executive, said he had been “encouraged by the positive feedback” from investors so far to the IPO. 

The Danish government, which owns 59 per cent of Dong, will retain a stake of 50.1 per cent in a company that is Denmark’s biggest utility and one of its biggest oil and gas producers.

Goldman Sachs, which owns 18 per cent, is set to double the value of its investment in just over two years but has said it wants to remain a long-term shareholder in Dong.

Claus Hjort Fredriksen, Denmark’s finance minister, added: “The IPO is an important milestone in the development of Dong Energy. The company has grown from primarily being a Danish utility business to becoming a growing international company with a leading position in the offshore wind sector.” 


Understanding European piping regulations

May 26th, 2016

Pressure piping systems that transport liquids and gases in European power installations must meet the safety requirements laid out in the Pressure Equipment Directive. However, this directive is often misinterpreted or misunderstood, writes Len Swantek

 

A typical installation featuring grooved mechanical couplings

Credit: Victaulic

Since their introduction nearly 100 years ago, mechanical grooved piping systems have provided a wide range of performance benefits for system designers, installers and end users in the power sector.

Pressure piping systems that transport a wide range of dangerous and non-dangerous liquids and gases in European power installations must meet the essential safety requirements laid out in the Pressure Equipment Directive (PED 97/23/EC). This legislation will be updated in July and establishes consistent safety practices in pressure equipment and related piping system design, operation and maintenance.

Those who commonly use the directive and its various annexes have come to rely on these guiding principles in the preparation of their conformity assessments, technical construction files, Declarations of Conformity, and application of the 'CE' mark.

In relation to mechanical piping systems and their components, this directive is often largely misinterpreted or misunderstood.

For example, many system designers expect that mechanical piping products follow some type of pressure rating protocol based on the system temperature, or that a mechanical coupling is considered pressure equipment. Another misconception is that these types of products require a 'CE' mark and must be accompanied by a Declaration of Conformity in order to be considered compliant with the directive.

Product classification

Mechanical couplings and fittings for grooved end piping systems do not meet the definition of pressure equipment or pressure accessories as defined in the PED and other industry-accepted PED guidelines, including the Guidelines Related to the Pressure Equipment Directive 97/23/EC and PD CEN/TR 14549.

By themselves, these material components do not contain a specifically defined pressure boundary and primarily serve to connect two grooved pipe ends, grooved end fittings, or other grooved end components within a pressure system. Therefore, in order to maintain compliance with the directive, these components are not 'CE' marked, and they do not require a PED Declaration of Conformity.

Because of some misunderstanding in regard to these requirements, system owners may be mistakenly presented with products bearing the CE mark accompanied with dossier packages containing declarations or conformity statements that are simply not valid for these types of products. This can result in further confusion between notified bodies and their clients as they strive to complete their pressure equipment installation review and related safety inspections in time to meet system commissioning schedules.

However, in contrast, when pressure equipment or a pressure piping system is fully constructed using mechanical couplings and fittings, this entity that functions as a pressure retaining unit does qualify for testing and certification for 'CE' marking by the end user under the control of their notified body. This is also a clear requirement for certain risk categories based on the system pressures, temperatures or fluid type and classification.

Some applications here include geothermal systems, turbine cooling water lines, heat exchanger piping compressed air and hydraulic systems, among many others.

The modelling process in product design is a critical step, as potential exposure to static and dynamic loading conditions must be considered

Credit: Victaulic

Product design

When designing products for multiple uses and service conditions, the structural elements and materials of construction are equally important. The modelling process in product design is a critical step, as potential exposure to static and dynamic loading conditions must be considered.

A process that runs in conjunction with design and materials studies is a dedicated and focused review of product safety. Design safety factors are just one part of this review, as the designer also incorporates a comprehensive risk analysis and safety review in accordance with the PED.

In this review, the pressure-bearing components are thoroughly analyzed against rigourous criteria outlined in the PED's essential safety requirements. The information includes stress calculations, section thicknesses, material properties at ambient temperature with correlation data at elevated temperatures, product performance testing, validation of established ratings and additional correlations between European, US and other international norms. This process alone is very time-consuming, but is viewed as one of the most important in establishing product safety data for critical applications.

Validation

Ongoing physical property testing of the ductile iron casting material is performed by both internal foundry metallurgical labs and external independent testing authorities. These tests include detailed evaluations of tensile strength, yield strength, material elongation, hardness, and Charpy impact resistance.

The data generated from these tests at Victaulic is maintained on file and audited by TÜV Rheinland (Notified Body 0035) as a requirement of its Material Manufacturer QMS Certification of Victaulic's ductile iron casting material. This certification validates the ductile iron manufacturing process in accordance with PED requirements

In addition, Victaulic conducts customized testing for clients who must have performance data for review by their notified body, which closely simulates the system performance characteristics of the end use application.

The results of these custom evaluations are used by clients and their notified bodies to conduct internal studies on their system designs and are often used by the designer of record in preparing a particular material appraisal (PMA) in accordance with PED Annex I, Section 4.2. For valve products, Victaulic again utilizes the services of TÜV Rheinland for its Module H Certification in accordance with Annex III of the Pressure Equipment Directive.

Remaining diligent

As applicable codes, standards and directives continue to evolve in various industries and markets, manufacturers are challenged to keep up with these changes by applying new compliance systems. The Victaulic Regulatory group remains aware of pending changes in regional piping codes, through direct and dedicated involvement in the codes & standards development process. The goal is to not only stay informed of changes in the codes, but also play a direct role in shaping these requirements through membership and active participation on a wide range of standards committees globally.

Within these groups, the aim is to apply expertise to technical discussions, and also to represent 'the voice of the customer' by working toward problem resolutions that will have a positive influence in the relevant markets - and, at the end of the day, to continuously improve safety for the operators and end-users of these components and systems.

Len Swantek is Director of Global Regulatory Compliance at Victaulic.

 

Back to the Future

May 26th, 2016

In 1996, a number of industry experts predicted how the power sector would change over a 20-year period. That period has now passed, and David Flin looks back to see how well these experts were able to foresee future developments

According to the novelist LP Hartley, the past is a foreign country. Back in 1996, the Kyoto conference hadn't taken place, total global wind power capacity was 6.1 GW, Facebook didn't exist, the internet was accessible on just 10 million computers worldwide, mobile (cell) phones cost around $1000 each, and some bright computer experts were predicting that the Millennium Bug might bring civilization to a standstill.

In 1996, 16 experts from 15 different organizations from different parts of the industry predicted what the world would look like in 20 years. Those 20 years have now passed, and the predictions are now due. So what did the panel of experts get right, what did they get wrong, and what did they miss entirely?

A big issue then was privatization, and eight experts predicted that privatization and deregulation would not merely continue, but would accelerate globally. It was felt that privatization would increase competition, and would ensure that the customer got the best possible deal.

Some experts said that it would solve nearly all the issues of financing infrastructure development. It was generally assumed that, around the world, transmission would remain in state hands, while generation and distribution would be run almost entirely by private companies, and there would be little role for governments. IPPs would be the dominant source of generation capacity, and buying and selling capacity would be commonplace.

According to the World Bank, a little over half the countries in the world have reformed their electricity sectors, mostly - but not universally - with big gains in performance. Whether the consumer is getting a better deal is less clear. Isolated communities not connected to the national grid have not always benefitted from privatization, and these areas have become much more dependent on distributed generation.

Three experts predicted the growth of distributed generation and CHP. One predicted that the high energy efficiency levels that can be achieved by CHP would make it attractive as an environmentally-friendly method of power generation; one said that distributed generation would grow as a result of the cost of extending grid networks into remote regions; and one said that the economics of distributed generation made it attractive, and that there would be a boom in facilities wanting reliable power supply independent of the grid.

Another prediction that time has proved to have been accurate was that of consolidation among the major manufacturers. There wasn't complete agreement on how many manufacturers would remain by 2016; most suggested around five turbine manufacturers, with one expert suggesting that two to four large gas turbine manufacturers would be all that remained. But those who commented said uniformly that there would be mergers among the big players.

The experts agreed that gas would continue to be an increasingly dominant fuel. Nuclear power was seen as a solution only where there was the political will to press ahead with a nuclear programme, and that the growth in privatization combined with the very long-term investments required for nuclear power would combine to make it generally unattractive. Coal was seen as maintaining its position, but it would grow increasingly concentrated near major coal reserves.

A subject on which the experts differed was how important renewables would be by 2016. Views included:

"The excess cost and intermittent nature of supply from renewables means that it will still be a niche supplier."

"Renewables are unlikely to provide sufficient power to replace fossil fuels."

"Renewables and fast-ramping gas turbines will work together to provide a powerful synergy."

"The demand for low emissions will come, and renewables will play a vital role in meeting that demand."

More than one of the experts said that the problems of CO2 emission levels would provide a boost to the fortunes of the nuclear industry, and that renewable energy would remain niche because it would not be cost competitive.

Were they right? In 1996, global wind power capacity was 6.1 GW. By 2014, capacity had reached nearly 400 GW, and was increasing by around 16 per cent annually. In 2014, wind and PV provided 73.4 per cent of new power generation capacity in the EU.

There was no real agreement as to where the dominant markets would be. China and India were generally - but not universally - predicted to continue to be big markets. Other big markets predicted by some of the experts included:

  • Eastern Europe. One expert predicted that the end of the Soviet Union would lead to deregulation and privatization of the former Soviet Union countries, leading to a massive boom in demand;
  • Russia. Two experts said that the growth of demand for gas in Western Europe, combined with political instability in the Middle East, would lead to Russia becoming a major gas supplier, and using that to increase its influence;
  • China and India. One expert predicted that both China and India would need to undergo privatization to free capital to enable infrastructure investment;
  • South America. Three experts said that South America would see a dramatic growth in demand for power. One suggested that there would be a major shift in investment from Asia to South America.

In technological development, one expert predicted that single crystal blades for gas turbines would become much more significant, and would be commonplace in first and second row blading by 2016. Less impressively, there was near unanimity that the continuing drive to increase combined-cycle efficiency would continue, with the peak efficiency attainable being pushed ever upwards, with the 70 per cent barrier being broken by 2016. Back in 1996, gas turbine manufacturers were pushing at the 60 per cent barrier for combined-cycle plants. In 2016, the barrier has been shifted to around 62 per cent.

What they didn't say

Equally interesting is looking at which burning issues of today did not warrant a mention 20 years ago. With one honourable exception, no one mentioned the development of communication and information technology. We now have a world in which real-time control of data and operations is commonplace, and consumers can download apps for a mobile phone to operate devices from miles away. Back in 1996, mobile phones cost over $1000, and didn't have apps. It is now commonplace, but it wasn't even considered by the experts.

The experts generally failed to foresee the emphasis on operational flexibility that would arise. It was an assumption that development activity would be focused on pushing the technical boundary and the headline figures. Higher efficiencies and higher output were seen as being the main drivers. It was assumed that plants would be operating at full capacity and it would be crucial to minimize lifecycle costs by increasing output and efficiency.

As it has turned out, reducing time lost to maintenance by shortening time in maintenance, and increasing the time between maintenance periods, have been just as important, as has been the emphasis placed on being able to operate flexibly.

The issue of CO2 emissions was largely ignored. Three experts mentioned environmental concerns, and one specifically mentioned CO2 emissions. One expert said that, by 2016, global warming would be accepted as a scientific reality, and that governments would be starting to take the issue seriously.

He went on to say that there would be a period in which dealing with the environment would consist largely of "words and lip service", but that eventually, serious action on emission levels would come about. However, other than that, the environment was simply not considered as being an important factor by 2016.

The possibility of a global economic crisis also received no comment. This was also missed by many economic pundits, but the slowdown in the global economy, and the funding crisis had a marked effect. The Enron scandal and the crash of 2008 damaged confidence in the financial probity of companies in general.

Does it matter?

Is it important to be able to predict what the needs of the market will be in 20 years?

One could argue that most changes are gradual, and it is comparatively easy to adjust accordingly. However, power plants have operational lives in excess of 20 years, and upgrading of existing turbines is a very active market. Turbine designs are typically evolutionary; for example, the LM6000 gas turbine from GE and the SGT6-5000F gas turbine from Siemens were both introduced in the early 1990s, and although both have undergone numerous upgrades and improvements over the years - increasing output, increasing efficiency, simplifying maintenance, and improving operational flexibility - the basic turbine design remains much the same. The longevity of these turbines has become a major selling point, with both vendors pointing to the huge number of operational hours gathered by their turbine fleets. It is crucial to be able to upgrade turbines already operating.

It can easily take 10 to 20 years for an idea to be transformed into a commercial reality, making it important to be able to determine whether a development will be of value in 20 years' time.

Specific predictions

We have avoided being specific about which experts made which predictions 20 years ago, simply because of the difficulties involved in making such predictions, and because some of the experts are no longer involved in the industry - and, in some cases, the organizations they were with no longer exist.

However, I will mention the predictions made by Amory Lovins, Chairman and Chief Scientist from the Rocky Mountain Institute in Colorado, US. He made four predictions, and was proved correct on each one:

l Coal-fired power generation would start to decline when environmental concerns take greater prominence and more benign methods of generation become cost competitive. We are now seeing a conscious decision to phase out old coal-fired plants in many countries around the world;

l Baseload power would increasingly be provided by a combination of renewable energy and fast-tracking combined-cycle gas-fired power plants. That model is exactly what is happening in many places;

l Distributed generation would become much more significant. We would see new houses built with solar panels as standard, and electricity consumers would increasingly want greater control over their supply;

l There would be a boom in information and communication technology, and the growth in real-time access to data will lead to a transformation of the way business is carried out. Transactions being carried out on-line will just be the tip of the iceberg.

And the next 20 years?

Given that his predictions from 20 years ago turned out to be so accurate, we turned to Amory Lovins to predict what the industry would be like in the year 2036. He looked at three areas: fuel mixture; the next transformational developments; and the next big issues for the industry.

Regardless of the fuel, there is generally no economic or operational rationale for new central thermal power plants if their alternatives are properly chosen, designed, built and run. By 2036, massive central power plants will feel like steamships do today. The winners in the new competitive landscape will be negawatts (efficient end-use), flexiwatts (demand response), and a diverse portfolio of distributed renewables, dominated by PV and wind, and cheaply applicable virtually everywhere.

Electrifying the 1.2 billion people who currently live in darkness will further accelerate the distributed-renewables-and-efficiency revolution worldwide. Since medium-quality renewables near load centres have about the same economics as best-quality renewables far away, but with lower risk and inconvenience, the focus will become local and regional rather than tending towards a global grid.

Coal is in long-term decline with no durable and sustained growth market to rescue it, failing on economic fundamentals and shrinking demand. China continues to fuel GDP growth with less coal, is the world's renewable leader, is improving efficiency by 3-5 per cent annually, and is moving to deauthorizing planned coal plants as generating capacity has tipped into surplus. India is aggressively shifting to renewables, and is starting to discover the benefits of high efficiency. It has quietly cancelled many of its announced coal plants, and capital markets have little appetite for more.

New nuclear build has no business case, being two to three times more costly than modern renewables. Sales of reactors are driven by geopolitics, dual-use capability and national pride. The UK's offer to pay three times the current market electricity price for 35 years for Hinkley Point C has attracted no private investor. Total operating nuclear capacity will begin its permanent decline by about 2020, and be a mere remnant by 2050.

Gas will enjoy a healthy medium-term market, but it is already uncompetitive with modern renewables in many places, and will suffer as renewables get relentlessly cheaper. Fast-ramp gas-fired generators will compete for balancing power in an increasingly renewable, diverse, decentralized constellation of generators. Even in 2015, distributed power made one-fourth of global electricity and accounted for over half of added capacity. Gas cannot count on a long-term need for backup of variable renewables: demand- and supply-side flexibility offer cheaper options than backup or storage.

Transformational developments

The explosion in IT, and developments in the energy-IT mashup, have only begun to transform everything. Customers are beginning to realize that they can use electrons more productively, produce their own, and even trade the electrons they generate with other consumers. Dutch customers can already buy electricity from other customers on the Vandebron website, bypassing the involvement of utilities.

Back in the 1880s, Thomas Edison didn't sell electricity. He sold lighting services, charging to run a lamp for an hour. In 1892, the New York Edison Company overruled him, selling the electricity rather than the service. Consequently, an increase in customer efficiency cuts providers' revenues, not their costs. No industry can survive over the long term if its interests are so opposite to those of its customers. Decoupling and shared savings - rewarding utilities for cutting customers' bills rather than for selling them more energy - is an essential start.

Moreover, many utilities that feel exposed to competition from efficiency and renewables such as rooftop solar are trying to combat these threats to their legacy assets by imposing oppressive rules, practices, taxes, fees and tariffs. This will not have the intended effect, but will instead tend to result in increasing solar adoption.

Utilities, however, are not fated to become obsolete. They can apply their skills in many ways: branding and selling new offerings, co-operating with new players, financing, and integrating all technically qualified offerings.

The next big issues

In 1996, the big issues affecting the industry were privatization, fuel supply and fuel costs. In 2016, the dominant issue is greenhouse gas emissions. What will be the big issues in 2036?

There will be five main issues over the next 20 years: resilience; capital productivity; recapitalization; democratizing energy decisions, and implementing the full melding of electricity and information grids.

Resilience will be necessary to ensure a reliable service in an increasingly restive world with a changing climate. This needs efficient use, distributed generators, and a new grid architecture of networked microgrids that can disconnect fractally, serve isolated critical loads without interruption, then resynch and reconnect when appropriate.

Utilities will need to ensure efficient capital productivity by shifting emphasis from generation planning to distribution planning, and shifting resources from giant to small, remote to local, and supply-side to mainly demand-side.

Recapitalization of the industry will be necessary as sales and revenue dwindle while traditional multi-billion dollar, decade lead-time projects become too risky and too costly to finance.

Choice and accountability will shift from central technical and political authorities to local stakeholders, leading to democratization of energy decisions. This will require close engagement with stakeholders, and the tactics adopted by some utilities could create customer resentment.

Utilities will need to develop strategies to digest and implement the "InterGrid", the full melding of electricity and information, as intelligent information becomes ubiquitous, free and utterly transparent, probably at the expense of privacy.

Resilience could become acute tomorrow, and it is already an issue in many countries. The other issues will grow increasingly important over the next decade or two. We will see some very interesting times, and this could be the industry's most exciting era since Edison.

In 20 years, we will be able to judge how accurate or otherwise these predictions have been. In these days of instant gratification and instant global communication, it feels strangely inappropriate to be able to say that the next update on this story will be in 20 years.

BAD PREDICTIONS

Some predictions have been made in the past that have turned out to be less than perfect. Here are five that make one long for the days of astrology and the reading of entrails:

1. "I think there is a world market for maybe five computers." - Thomas Watson, President of IBM,1943

2. "Television won't be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night." - Darryl Zanuck, Executive at 20th Century Fox, 1946

3. "There is no reason anyone would want a computer in their home." - Ken Olsen, founder of Digital Equipment Corporation, 1977

4. "I predict the Internet will soon go spectacularly supernova and, in 1996, catastrophically collapse." - Robert Metcalfe, founder of 3Com, 1995

5. "Two years from now, spam will be solved." - Bill Gates, founder of Microsoft, 2004

THE ORIGINAL PARTICIPANTS IN THE 1996 ARTICLE

Job titles are those held in 1996.

Mark Axford, Vice President, Stewart & Stevenson International

Henry Bartolli, Senior Vice President, Foster Wheeler

Tom Bray, Director Industrial Power, Allied Signal

Dr Derrick Fielden, Senior Executive of Business Development, Commonwealth Development Corporation

Malcolm Kennedy, Chairman of Merz and McLellan

Dr Julia King, Director of Advanced Engineering, Rolls-Royce Industrial Power Group

Amory Lovins, Director of Research at the Rocky Mountain Institute

Peter Moore, International Marketing Director, Smallworld

Chris Packard, President of Kvaerner Energy

Professor Klaus Riedle, Head of Fossil Fuel Power Generation, Siemens

Dick Ruegg, General Manager for Marketing, GE Marine and Industrial Engines

Dr Bill Stockdale, Managing Director of HSB Engineering Insurance

Bill Thompson, Director of Global Marketing, Black & Veatch

Bob Thurlby, Head of Consultancy Services for Utilities, ICL

Bill Voegtle, Executive Director of HSB Engineering Insurance

Kurt Yeager, President and CEO, EPRI

Q&A: Bigger than batteries: energy storage in 2016

May 26th, 2016

A flexible power network hinges on energy storage. But does the technology match the hype? A roundtable of industry players discusses the challenges facing the storage sector and the steps needed to overcome them

Roundtable participants:

• Bernd von der Heide -

Managing Director, Mehldau & Steinfath Umwelttechnik GmbH

• Simon Hobday -

Partner, Osborne Clarke

• Mathias Meusburger -

Head of Excitation Department, Andritz Hydro GmbH

• Fabien Roques -

Senior Vice President, Compass Lexecon

Q:

What is needed to drive energy storage to the next stage?

A:

Fabien Roques: Firstly, we need to ask what we are talking about when we discuss energy storage because there are so many technologies, with so many differences in size and in terms of characteristics of the storage assets. And second, there are, I would say, many different applications in terms of business model. We don't know today what the winning technologies are going to be and we don't know what the winning business models will be.

I think we need to put in place a market and regulatory framework that will remunerate flexibility in a fair way, and put in place a level playing field between different assets. This is what is really going to enable batteries and storage to find their footing in Europe's energy market.

Simon Hobday: I agree with Fabian that there's no magic bullet, but the states with the most breakthrough so far have been Germany and California - both supported by generous subsidies. There is not an appetite for subsidies across Europe though, and so R&D and the commercialization of energy storage is going to be key.

The ultimate goal is to make alternative generation cheaper than fossil fuels, then the industry needs to begin investing in new technologies - in R&D - to do so. This might be in energy storage, or other new forms of technology.

Mathias Meusburger: Yes, and in addition to this, we will only get security from energy storage if the right market models are put into place. A big onus will also be on investors to support projects and drive them to the next stage.

Bernd von der Heide: People also need to know what timings they're working towards - for instance, in Germany we're looking for renewables to account for 60 to 80 per cent of energy supplies by 2030 as a result of energy storage.

And these targets should direct the industry towards developing the best possible technologies. At the moment we've come a long way, but lots of storage technologies remain commercially unviable. This can't persist if we're to continue on the path towards increased reliance on intermittent renewable generation.

Once the regulatory environment is in place, then we need to think about funding too. We need to provide support for R&D and in developing the ecosystem that will surround the eventual buyer.

Q:

What are the implications of energy storage on the European energy market?

A:

SH: Energy storage is potentially part of the solution that could help to safeguard the future of our energy systems. It is one of the tools that can alleviate the impact of intermittent generation on Europe's power grids.

Secondly, it is one of the ways that individuals or communities can become self-sufficient. Thirdly, it is potentially a way of balancing the system, and supporting a more efficient European power system.

But energy storage is currently very expensive, and so for us to realize these benefits, the economics need to be in the right place.

MM: If energy storage is rolled out in an intelligent way then the supply costs could be greatly reduced.

Liquid air energy storage project in the UK

Credit: Highview Enterprises

FR: Well, if energy storage becomes a genuinely mass technology, the implications are massive for the electricity industry because, for a long time, we have had a power system built around different generation technology, with different viable systems. We've had baseload units running a lot. Big units just running a few hours. So if we've got massive deployment of storage in the future, potentially there is much less of the role for distributed units. At the same time, if we've got a lot more renewable generation then you may well have a perfect match between storage and renewable technologies. So it could really be a game changer for the economics of different power generation technologies in the future.

BvdH: Across Europe we've made a decision to reduce nuclear and coal generation. But even though capacity is falling, we don't just want to do less with it. Instead, the aim is to be more efficient with what we do generate.

The problem is that renewable sources can't be turned on or off at will - it depends on the weather. So sometimes we'll be producing more than we can use and at other times we'll run a little short. The purpose of storage is to smooth these peaks and troughs out.

And storage will also help the renewable industry in the eyes of the public. By doing more with less, we can potentially limit the number of wind turbines in fields - and that's before we consider the jobs that a growing energy storage industry could offer.

Q:

What are the biggest challenges facing energy storage?

A:

SH: The three biggest challenges are existing technology, cost and the commercial place.

MM: Investment in energy storage projects is very costly at the moment compared with conventional production costs. Another key challenge will come from public opposition. Large-scale energy infrastructure projects are often met with a lack of public support, and this means it can be very difficult to get approval to build the necessary infrastructure.

FR: I think there are technological challenges. We need to bring the cost down, we need to demonstrate that it is safe to operate, that it's not a niche technology. There are also business model challenges because, at the moment, the value you can get for the storage is really diverse on several markets: the energy market, the flexibility market and, potentially, the capacity market. So we need business models that can put the pieces of the puzzle together to modify the value of storage. Finally, as I've already mentioned at length, we need the regulatory framework and the market framework to be there.

Smarter Network Storage facility

Credit: UK Power Networks

BvdH: Money makes the world go round, as they say. So I agree that finance is a key issue. We need finance to develop new technologies - and then of course to help roll them out.

But that's not all. Safety is also key. Any energy project requires an element of safety risk management, and of course that's without considering the unique challenges of working with hydrogen, for instance.

And of course public opinion always has an impact. If storage is to succeed, people need to support it. People need to feel comfortable with the changes storage will bring - and we need to minimize the potential for job losses to keep them on board.

Q:

What could the industry be doing to overcome the challenges facing energy storage?

A:

SH: One of the areas is how the existing industry documents work together. How do the various industry connection agreements, the distribution codes, the licences, the transmission network codes treat how batteries and storage technologies interact? Should they be treated the same way as a grid stabilization product at the call and behest of the network? Should it be viewed as a generation product? Or something else? Work will be needed to update the documents and codes to reflect what is, in effect, a different type of technology, because you would be trying to make it work in a world that was written and existed before large-scale storage was commercialized - or even conceptualized! It doesn't mean that it can't happen, but work needs to go into getting everything ready.

'The sky's the limit' on storage

Credit: AES

MM: Yes. One thing I'd like to see is a drive towards existing facilities. For example, an automotive plant where you can use existing storage plants and building pumps to also use as storage.

FR: The industry needs to demonstrate through large-scale pilot projects that storage is not just a niche, small-scale application, but that it has a possible role at a much larger scale. Either you talk about the battery that everybody has got in their homes or in their car in the future, or you talk about very large-scale projects. I think what the industry needs to do is to progress on those fronts. We need to identify at what point you start to drive down the cost in order to demonstrate the impact of these models and to identify the industrial applications.

BvdH: I believe in technology. As long as we keep developing new technologies, we'll be able to deal with any challenges we face along the way. By advancing technology we can continue to improve its offer and to reduce the cost. That's how you get people on board and build momentum. Take the electric car, for example. The target is to have one million electric cars on German roads by 2020. Not long ago that would have been unthinkable!

Q:

Where do you expect the industry to be on energy storage in 10 years' time?

A:

FR: There are three different scenarios that may occur. The first is one in which the cost of storage continues to go down very quickly and devalues with the regulatory framework, and the market framework evolves quickly to put some more money towards flexibility. In 10 years this could mean a massive change, with storage becoming a key element of our power system. But that's a scenario in which all of the positive forces would align. In another, the value of flexibility is not really well-regulated within the market framework, and so the value chain would remain shattered and fragmented, and the cost of storage won't play a role in continuing to increase flexibility. In such a scenario, storage would play a bigger role than today but would not be a game changer - at least within the next 10 years. And probably the reality is that it will be somewhere between the two extreme scenarios, as usual, and it will largely depend on whether the different legislations and regulations in each country are ready for storage to play a major role.

SH: Along with other changes in the industry, I would expect storage to be part of the mix. But I'm not thinking now of just batteries. It's the wider energy storage, where it's conversion of energy stored in one form to another, whether that's electrical power in a battery, heat stored in a thermal capacitor or whether that's storage heating in a home, or whether that's a form of, let's say, pump storage water or flywheels. There are all sorts of ways of conserving energy and using it later. It's something that's being explored in a wider space than just lithium-ion batteries. The time for that will be driven by data usage as well.

MM: I think there will be an increased capacity for energy storage across Europe, but for the moment I don't see a big change. It also depends heavily on political decisions. If, in the coming years, you have big problems with supply and demand, then this could certainly be one of the solutions, but if it's running smoothly, then I don't see that there will be a very high need to progress in energy storage in the next 10 years.

BvdH: The future's bright for energy storage. Ten years might be too soon but I can easily imagine it as ubiquitous by 2036. Mobile phones are a classic case in point - once a truly innovative technology starts to show its value it can really take off. The sky's the limit.

Powering the decarbonization agenda

May 26th, 2016

Decarbonization is essential to guarantee the long-term sustainability of Europe's economy and electricity sector, argues Hans ten Berge

COP21 is a signal to invest in low-carbon generation

Credit: NASA

The European power sector believes that the most effective way forward in the transition towards a low-carbon economy is through a clear, predictable carbon price signal that will allow industry to invest in an efficient and sustainable manner.

This will require that full consistency and coherence between the elements and targets of the EU's 2030 climate and energy framework is ensured, as well as the development of an adequate governance framework which enables the achievement of these objectives.

This calls for an EU decarbonization framework that recognizes the role of decarbonized electricity as an essential vector for achieving a carbon-neutral and energy efficient economy in the EU.

Decarbonization is essential to guarantee the long-term sustainability of the global economy. As a global leader in decarbonization, the European power sector is committed to decarbonizing power supply by 2050, and we are already taking important action.

In 2014, 56 per cent of electricity in the EU came from low carbon sources. In the same year, the share of renewables in the power mix became the largest source of low carbon electricity in the EU, comprising 28 per cent of total power generation.

As stated recently by the International Energy Agency, the power sector is a global leader in decarbonization. Renewable energy has increased much faster in the power sector than in heating and cooling. Electricity is on track to becoming a carbon neutral energy carrier and, if used widely to replace fossil fuels in transport and heating, electrification can lead to more energy efficiency and reductions in greenhouse gas emissions.

The agreement reached in December at the COP21 United Nations Climate Change Conference in Paris should lead to an ambitious and rules-based climate change regime, which paves the way for a stable and predictable framework for policy and action. EURELECTRIC is happy that the Paris Agreement provides a clear and unequivocal signal to government and investors to invest in low-carbon technology in line with the long-term decarbonization objectives.

The European power sector believes that "decarbonization should take place in a cost-efficient manner and two elements are crucial in this respect: a well-functioning electricity market and a robust EU Emissions Trading System (ETS). Only the combination of an effectively reformed EU ETS and an improved EU electricity market design can lead to proper price signals from the relevant markets to drive investments into low carbon technologies.

In this context, the European power sector believes that the EU ETS should be the main driver for renewables investments in the electricity sector. Strengthening the EU ETS is a no-regret option. The EU ETS, which is an established, technology-neutral, Europe-wide instrument, can also bring an increasingly EU-wide approach to low carbon technologies development and investment.

The European Commission's proposal to revise the EU ETS Directive puts the EU on course to take important steps on the path towards cost-effectively decarbonizing the European economy. However, the success of the reformed EU ETS will depend on ensuring full consistency and coherence between the various elements and targets of the 2030 Climate and Energy Framework, as well as developing an adequate governance framework which enables the achievement of these objectives.

European policies and implementing instruments must therefore be designed in a way that does not undermine the overall economic efficiency and environmental effectiveness of the EU ETS. Coherent and integrated policy instruments based on a well-functioning EU ETS will be crucial to achieve the EU's greenhouse gas (GHG) emissions reduction targets on a level playing field and in the most cost-effective way.

Electrifying the EU economy

To date, the European electricity industry has delivered the bulk of GHG emission reductions on the path to a low‐carbon European economy, with these reductions coming primarily from the supply side. Looking forward, we see the electrification of the demand side sectors of the economy, which do not fall under the EU ETS, as being crucial on the path to decarbonization.

The upcoming revision of the Effort Sharing Decision, the EU's Heating and Cooling Strategy, as well as its efforts to decarbonize the transport sector provide an excellent opportunity to enhance the role of decarbonized electricity in achieving the EU's decarbonization agenda. The key role of electricity in the decarbonization of the European economy, the recognition of the synergies in the energy transport and heating systems - many of which will be unlocked through a smarter electricity system - and the central role to be played by customers are all advancements that we support and encourage.

The European power sector sees that further electrification of the non-ETS sectors (such as transport, heating and cooling) provides a technically and economically effective way to further enhance the contribution of renewables to the EU's decarbonization objectives. As electricity becomes increasingly low carbon, replacing fossil fuel-based systems with electric technologies linked to storage will provide a promising pathway to decarbonize these sectors.

The EU's Heating and Cooling Strategy, as well as its efforts to decarbonize the transport sector, must recognize that as the electricity sector's greenhouse gas emissions are strongly decreasing, electricity should play a key role in decarbonizing these sectors and will bring other important benefits, such as improvements in air quality, especially in cities. It is also important to provide consumers with choice, affordability, security and quality of services through markets, and to recognize the fact that a 'one size fits all' approach cannot work. The solutions must therefore allow the necessary freedom to Member States to assess their national and local challenges and opportunities.

A new market design

If Member States choose to maintain support for mature technologies after 2020, it should be done in the most cost-efficient and market-based way to maximize market integration and minimize distortions. Beyond research, demonstration and early deployment, policy measures should not seek to promote specific technologies or projects, but rather support renewables development in the most cost-efficient way. When deciding to support certain volumes, it is important to take into consideration system costs as well as the evolution of demand for electricity to avoid further energy oversupply.

Further alignment of support schemes' key characteristics through common EU rules should take place. Partial opening across borders and regional support programmes also increase cost-efficiency. Member States should address the barriers to regional support (taxes, levies, permitting etc) and take into account the future electricity demand when deciding on the geographical scope of schemes. Experience shows that it is challenging to find the political will to establish common schemes, and that their execution involves challenges as well.

As further development of flexible resources is a necessity, we need to accelerate the integration and efficiency of short-term markets. A future-proof market design should facilitate the integration of increased shares of renewables and, at the same time, ensure a high level of security of supply. We must ensure the full integration of day-ahead, intraday and balancing markets, implement shorter gate closure to effectively make the market fit for renewables and ensure that wholesale prices adequately reflect scarcity situations.

The Energy Union should also provide the necessary foundations to develop cost-effective interconnection capacity and to optimize the use of existing capacity with a view to enabling the single electricity market, the market integration of renewables and to enhance security of supply.

EURELECTRIC believes that well-designed capacity markets can contribute to ensuring the required level of security of supply. Regional adequacy assessments must be developed and should be taken into account when introducing market-based capacity mechanisms. These mechanisms should be open to generation, storage and demand response, and should have a regional perspective to ensure security of supply in a cost-efficient way, for instance through effective cross-border participation.

Policymakers should bear in mind the important objective of reducing state-imposed, unrelated policy add-ons on electricity customers. We believe that this will be an opportunity to explore ways of making support for energy-related policies less distortive and burdensome on the power bill. The Energy Union should enable a cost-efficient and market-based energy transition, while ensuring that energy costs for European customers remain affordable. Two elements will be absolutely crucial in this respect: a well-functioning electricity market, as well as a robust and well-functioning EU ETS system.

The power sector is undergoing a complex and long-term transformation: accelerated technological change, shifting consumer preferences, the application of ICT technology to link power generation and demand, as well as the evolving EU climate and energy policy agenda. These provide unprecedented challenges but also important opportunities for the sector. In the midst of this energy transition, Europe needs to ensure secure, sustainable, affordable and competitive energy for all its citizens and businesses.

The Energy Union project, based on its five mutually supportive dimensions (energy security, solidarity and trust; the internal energy market; energy efficiency as a contribution to the moderation of energy demand; decarbonization of the economy; and research, innovation and competitiveness) is intended to address these challenges. EU institutions and Member States should work together to ensure that collective and national measures lead to the development of a decarbonized and fully competitive single market in energy.

Immediate action

The European power sector believes that a number of policy areas call for immediate action in the context of the Energy Union project at the EU, regional and national levels. There is significant added value in regional and EU-wide co-operation regarding market integration, renewables and security of supply, which EU Member States should recognize in their efforts to achieve the Energy Union. The Energy Union process should ensure that benefits of co-ordination and opportunities for co-operation on renewables should be identified, and drive co-operation on security of supply.

The real challenge is to implement a market design that underpins the low carbon transition of power systems. The new market design, including a reformed and strengthened EU ETS, must deliver security of supply in a cost-efficient way and provide a solid basis for sustainable investment in low carbon technologies.

An effectively reformed EU ETS, a truly internal energy market in which renewables are fully integrated, and an improved EU electricity market design can deliver decarbonization in a cost-effective manner.

Hans ten Berge is Secretary-General of EURELECTRIC.

 

 

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