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New head of Engie says low power prices the new norm

May 16th, 2016

Isabelle Kocher, the new chief executive of Engie, believes that low European electricity prices are here to stay, despite hopes expressed by some utility chiefs that the historic lows seen over the last five years would be temporary.

“I do not think that this is cyclical. I think that the price of electricity has no reason to rise. It will never be like it Isabelle Kocherwas before,” Kocher told the Financial Times.

New realities have pressed the company into transforming its business model, with Engie selling €15bn worth of non-renewable energy assets, mostly in exploration and production, coal-fired power plants and US gas plants, over the next three years, replacing all that with €22bn in renewable energy, energy services such as heating and cooling networks, and decentralised energy technology.

Engie has written off nearly €24bn worth of assets over the past two years, as many of its gas power plants become uneconomical. Ms Kocher said Engie will try to find regulated, not market based, energy contracts to protect itself from further price declines.

The price of a megawatt hour in western Europe has virtually divided by two. In Germany it has fallen from €60 per megawatt-hour in 2011 to around €25 this year. The French price has moved from around €56 per MWh to around €30.

The transition to renewables in Europe and across the world is set to keep prices low for the foreseeable future, although some companies, including EDF, have predicted electricity prices in Europe will start to go up again after two or three years.

£1.3bn boost for Dudgeon wind farm

May 13th, 2016

Statkraft, Statoil and Masdar have announced a £1.3bn agreement has been reached, to achieve financial close on the DudgeoDudgeon wind farmn wind farm project.

RenewableUK said the agreement shows that investor confidence in the UK’s offshore wind market remains high.

RenewableUK’s Deputy Chief Executive Maf Smith said: “This announcement proves that the UK is the go-to destination for offshore wind investors. Big deals like this support thousands of British jobs in every part of the country. Our world-leading offshore wind industry will double in capacity by 2020, driving down the cost of electricity and securing future energy supplies from British waters.”

The 402 MW project is already under construction off the north Norfolk coast, creating local jobs and opportunities for supply chain companies throughout the UK. More than 50 per cent of the construction cost is due to be spent in the UK supply chain. Commercial operation is due to start by the second half of 2017, powering more than 400,000 homes.

Power contracts investigated in Brazilian bribery scandal

May 13th, 2016

US law firms are investigating alleged multibillion dollar bribery at three Brazilian hydroelectric power projects and a nuclear power plant.

The investigation has now been expanded to nine projects, sources have told Reuters, as the country reels from an overarching scandal that threatens to bring down the government.

The corruption investigation could now see Brazilian state-run power company Eletrobras be delisted from the New York Stock Exchange.
Eletrobras sign
Eletrobras said delivery of its 20-F form, required of foreign issuers listed in the United States, had been delayed by  an internal investigation that is analyzing potential financial losses from a graft scheme involving local construction firms.

Brazilian federal prosecutors say construction firms that bribed politicians and executives at state-run oil firm Petroleo Brasileiro SA in return for bloated contracts likely repeated the scheme at Eletrobras.

Prosecutors have already charged Othon Luiz Pinheiro da Silva, the former chief executive of Eletrobras subsidiary Eletronuclear, with corruption and money laundering. He is accused of taking $1.3m in bribes related to the Angra 3 plant near Rio de Janeiro.

The investigation has jailed dozens of engineering executives and fueled the campaign to impeach President Dilma Rousseff. She is expected to be suspended after a Senate vote later on Wednesday for allegedly manipulating public accounts. She denies any wrongdoing.

Oxford study warns of stranded assets risk in Japan’s coal strategy

May 12th, 2016

A new report produced by Oxford university’s Smith School of Enterprise and the Environment is highlighting the danger to Japan of its government backing a massive coal-fired power expansion drive.

The study asserts that the government plan to build 49 new coal-fired power plants and 28 GW of additional capacity country will eventually lead to more than $60bn of “stranded” assets, as world momentum continues to militate against the viability of fossil fuels.
Shinzo Abe
Shinzo Abe, the Japanese prime minister, has been urged not to pursue the coal path as a response to a nuclear phase-out post-Fukushima.

In all three scenarios forecast in the report, Japan’s power companies faced combined writedowns or devaluations of at least $50bn.

All but one of Japan’s nuclear reactors, which previously met 29 per cent of the energy demand, remain shut down, with shortfall met by growing reliance on oil, gas and coal.

Ben Caldecott, the report’s main author, said current plans cannot be economically justified, and would exceed the capacity required to replace the retiring fleet by 191 per cent.

The resulting overcapacity, combined with stiffening competition from solar and other renewable sources, creates a risk that assets amounting to about 25 per cent of power companies’ market capitalisation could become “stranded” — subject to premature writedowns or conversion to liabilities.

Mr Caldecott said the coal plan ignored the risk of disruption to incumbent utilities.

Renewables deployment has risen from 10 per cent of global capacity to 15 per cent in the past five years, while the costs of onshore wind and solar have fallen by 39 per cent and 41 per cent respectively over the same period.

Japan’s plans, Caldecott said, make the assumption that the country’s power sector will remain static and “safe” for thermal coal assets — an assumption that runs counter to the evidence from elsewhere in the G20.

The report, which will be presented in Tokyo on Thursday to senior Japanese officials, corporate lobbyists and business leaders.

Enel targets $.1bn asset sales in 2016

May 11th, 2016

Enel is hoping to sell $1bn worth of power assets this year, as part of a four year disposal target.

That means EUR1bn out of EUR6bn by 2019 according to CFO Alberto De Paoli who spoke at a conference call delivering Q1 results on Monday.
CFO Alberto De Paoli
De Paoli said the group intended to sell a stake of around 20 per cent in a regasification plant in Chile, a coal-fired power plant in Russia, a gas-fired generating unit in Belgium and a business in France. It will also sell some assets of Enel Green Power.

"We are currently active on some minor disposals," De Paoli told the press call.

Weak power prices, falling demand and a shift towards renewable power has seen large utilities react similarly across Europe.

Meanwhile Italy’s largest utility is stepping up investments to boost its grid and renewable energy businesses around the world.

Breakthrough in materials technology offers prospect of cheaper CCS

May 11th, 2016

A UK-based company claims to have made a breakthrough that could see the price of carbon capture and storage projects drop by up to 50 per cent.

Carbon Clean Solutions says the results of its latest "highly successful" pilot project saw innovations in solvents that could make an impact on the expense of CCS, a much-maligned feature of the technology.
Carbon Clean Solutions
The pilot, undertaken at the Technology Centre Mongstad (TCM) in Norway from November 2015 to March 2016, tested a drop-in solvent for capturing carbon emissions using CCSL's new APBS chemical. During the pilot, CCSL recorded very low levels of corrosion from the solvent - a result that may mean developers could use cheaper steel to construct CCS plants.

Based on the results, the firm calculated it could be possible to construct 50 per cent of a plant using carbon steel rather than stainless steel, reducing the capital expenditure for commercial-scale plants by up to 25 per cent.

The company also said the solvent operates at lower temperatures, using around 27 per cent less thermal energy during the capture process compared to standard solvents.

Although the results are still being reviewed, an earlier independent test at the University of Kentucky suggested the approach could cut energy costs for CCS projects by 50 per cent.

Aniruddha Sharma, chief executive of CCSL, told Business Green the results could mean CCS will soon become "economically viable".

"This pilot demonstrates a breakthrough in carbon capture technology, in terms of our ability to dramatically reduce corrosion, energy demand and solvent emissions," she said in a statement. "This translates to cost savings, both operational and upfront, which we believe will make carbon capture storage and reuse economically viable in the near future."

GE set to buy Doosan gas power unit for $250m

May 10th, 2016

General Electric Co has agreed to buy a unit of South Korea's Doosan Engineering and Construction Co that produces key components of combined-cycle gas-fired power plants.

The head of the US company's power division, Steve Bolze said on Tuesday that the deal will enable GE to lower costs, increase service revenue and allow GE to use engineering and software to raise plant efficiency.
Steve Bolze
Reuters reports the $250 million acquisition, which is subject to approval by regulators and Doosan shareholders, builds on GE's $13.9bn purchase of Alstom's energy business last year, adding capacity for engineering and manufacturing of heat recovery steam generators used to boost the efficiency of commercial power plants.

While not large in size - the Doosan unit has about $200m in annual revenue, compared with $29bn for GE's power unit - GE expects Doosan will increase the amount of equipment it sells with new power plants.

Demand for HRSG systems as part of GE's power plant sales "is more than doubling ... so we need more capacity," Bolze said.

The lower costs were expected to flow from expanding in a relatively low-cost region.

"This will be a double-digit return for GE," he added.

GE expects high-efficiency gas plants to play the biggest role in meeting global power demands that are expected to grow by 50 per cent in the next 20 years.

UK slips to all-time low in EY renewables ranking

May 10th, 2016

The UK’s attractiveness as a destination for renewable energy investment has reached an all-time low according to analysts at EY.

In a regular EY ranking of the best countries for renewable investment, the UK is now 13th out of 40, behind Germany, France, Canada and Australia.

And EY’s energy experts have warned that investment in new projects is expected to decrease drastically from next year.UK slips to lowest position in renewables ranking

According to EY’s Renewable Energy Country Attractiveness Index (RECAI), published today, the UK’s appeal to renewable investors is being undermined by a combination of historic energy policy announcements and ongoing uncertainty surrounding the role of renewables in Britain’s future energy mix.

The report cites the government’s decision to opt for gas and nuclear, instead of renewable energy, to fill an anticipated energy supply gap as the key reason for the UK’s fall. In addition, the early closure of the Renewables Obligation regime and the end of Contracts for Difference (CfDs) after a single round have limited the routes to market for electricity generated by onshore wind and solar power, contributing to the UK’s decline in the rankings.

The RECAI report goes on to warn that investment in new projects could also decrease drastically from 2017, following current record levels of activity which has been attributed to developers rushing to meet deadlines before support for renewables is withdrawn.

EY’s Energy Corporate Finance Leader Ben Warren said: “A non-committal approach to energy policy is putting the attractiveness of the UK’s renewable energy sector on a landslide.

“The current approach is going against the grain of almost universal global support for renewables and is masking the UK’s advantages – a growing energy imperative as ageing power plants are retired, strong natural resources and efficient capital markets.

“In the absence of real changes to the direction of policy support and greater demand for renewables in the energy generation mix post 2020, the only way for the UK in our Index seems to be down.”

Almost without exception, European markets slipped down EY’s rankings while less mature markets across Latin America, Africa and Asia continued their ascent.

So-called ‘emerging’ markets now represent half of the countries in the 40-strong index, including four African markets featuring in the top 30. Just a decade ago, only China and India were attractive enough to compete with more developed markets for renewable energy investment.  

The latest index sees Chile (4), Brazil (6) and Mexico (7) climb positions in the top 10 while Germany (5) and France (8) fell further behind. 

Warren added: “Emerging markets are transforming their energy industries at an unprecedented pace. Last year, renewable energy investments in the developing world overtook those in the developed world for the first time. Latin America, in particular, has become something of a litmus test for how quickly markets can grow.”

EY stated that Chile is “one of the first markets to enable economically viable renewables projects to compete directly with all other energy sources. At the same time, Brazil’s renewables sector is showing surprising resilience amid an economic downEY releases latest RECAI reportturn and its underdeveloped solar market remains a potentially lucrative lure. And Mexico’s recent power auctions have opened the door to multi-billion dollar opportunities under a new liberalised energy market.”

The report finds that European markets “appear to be scaling back their ambitions as they address the challenges of marrying up increasingly mainstream renewables with a legacy of centralised conventional power generation”.  

The US (1), China (2) and India (3) held their positions at the top of the index with the size and scale of renewables activity surpassing other countries. Notwithstanding uncertainty over its Clean Power Plan, the US held its position following the five-year extension of federal tax credits for wind and solar. EY states that this “provided critical certainty for investors and is forecast to galvanise significant capacity deployment through to 2020”.

The highest-scoring new entrant to the RECAI was Argentina. EY found that “the transformation of the country’s economy and rollout of an ambitious renewables programme under its new pro-market government brings it into the index in 19th position, and reinforces how quickly new markets can redirect the focus of developers and investors”.

Warren said: “Markets earlier in their renewables journey are benefiting from cheaper and more efficient technologies, lower cost of capital and more reliable resource forecasting. The increasingly global flow of capital proves that investors that are becoming more comfortable with new markets. We expect to see massive deployment of low carbon investment in developing markets.

“Ambitious targets and low pricing alone will not be enough to promise investment attractiveness, however. The ability of markets to climb, or stay in, the Index will depend on projects being built, and commercial viability enabling the supply of affordable energy in a competitive environment.”

Total makes major play for renewables with Saft takeover

May 10th, 2016

The French oil giant Total has served notice of its intent to become a ‘responsible energy major’ through acquiring French battery maker Saft in a €950m ($1.1bn) deal.

Total is accelerating its move into the global energy market and Saft is to become Total's "spearhead" in electricity storage, Total's chief executive Patrick Pouyanné said in a statement.
Total Energy
"The acquisition of Saft is part of Total's ambition to accelerate its development in the fields of renewable energy and electricity, initiated in 2011 with the acquisition of SunPower."

The move follows an announcement from Total last month revealing plans for the firm to create a fourth unit housing its gas, renewables, and power segments to help diversify the firm's revenues away from oil. The firm also pledged to invest $500m per year into renewables as it seeks to pivot its business model away from fossil fuel use.

Business Green mentioned a report released last week from Carbon Tracker, which found that oil and gas firms could be worth $100bn more if they aligned their investment plans with the two degree target set out in the Paris deal and stepped up efforts to minimise their exposure to climate-related risks.
Saft equipment

Exxon announces carbon capture project with FuelCell

May 6th, 2016

ExxonMobil is targeting greater innovation in carbon capture and storage and will expand an existing project with FuelCell Energy.

With reliance on fossil fuel power likely to remain for the rest of the century, the project aims to facilitate curbing of emissions from gas-fired power plants.

The companies hope to use fuel cells, rather than exhaust scrubbers, the industry standard, to capture emissions from natural gas-fired plants and at the same time generate electricity. Scrubbers typically consume power as they filter carbon.

  FuelCell Energy makes small-scale power plants across the United States. Exxon contacted  the company in 2011 to begin research, said Chip Bottone, FuelCell Energy's chief executive.

"It's critical that we have someone like Exxon, with their expertise, to create this market opportunity," said Bottone, adding that the key to the success of the technology would be making it “as affordable as possible”, so power companies would want to invest regardless of whether governments had imposed a price on carbon emissions. 

The new carbon capture idea has so far been tested only at laboratory scale. If the research goes well, the plan is to scale up to a small pilot project in a year or two.

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