Combustion Industry NewsFrom the IFRF's correspondent in Australia
From the Sydney office
Contributed by Patrick Lavery
Australia, Thursday 23rd November 2017
A recent release from the International Energy Agency has analysed the current and future digitization of the energy sector and the impact of digitization more generally on it. Long an adopter of information technology and automation, investment by the energy sector in digital electricity infrastructure and software has increased 20% annually since 2014, to a level that last year digital investment was 40% higher than investment in gas-fired generation (on a worldwide basis). Efficiency gains and maintenance savings are being made, but more widespread digitisation throughout the global economy will further transform the energy sector. Transport, as it becomes electric-powered, requiring power from the grid, might reduce its energy demand by close to 50% in the future, half of that the result of digitization. Digital technologies in buildings may reduce their power consumption by around 10%, a significant fall considering that buildings account for 55% of global electricity demand. For the power sector itself, a reduction in unplanned outages may be one of the largest benefits, with extended plant lifetimes and reduced operations and maintenance costs following. Efficiency improvements may reach 5%, with O&M cost reductions also at 5%, and plant life extensions of up to 5 years, all together delivering US$80 billion (€68 billion) in annual savings up to 2040. The most fundamental impact from digitization, however, will be through the efficiencies delivered through interconnecting various systems. Electric vehicles and other devices could be charged at times of low demand, while adding energy storage to the grid would also allow more integration of variable renewable sources (for example wind and solar). Around 185 GW of “system flexibility” could result, meaning the building of a huge amount of physical power generation capacity could be avoided. While digital technologies and increased data storage require power to run (currently around 2% of total global demand), efficiencies here too mean that the impact will be limited, or even reduced with further digitization. The downsides, however, are increased vulnerability to cyber-attacks and issues to do with the privacy of data. To this could be added unforeseen weaknesses in system design and the complexity of coding, detailed in an interesting but persuasive recent piece in The Atlantic proactively titled “The Coming Software Apocalypse”.
A report by Professor Dieter Helm of the University of Oxford has analysed the factors which have led to the UK having a “broken energy market”, as the Prime Minister, Theresa May, has described it. Four clear lessons can be taken from the UK’s experience, according to coverage of the report by the Financial Times. One is that technologies should not be chosen or specified – only end goals (such as reliability or emissions reductions), with the market deciding the technology. The second is that emissions reductions need not focus on power generation, but be across the whole chain of generation and use. The third is that ministers and inexperienced officials should not be included in the process that allocates contracts, as they do not have the expertise to do it effectively. Fourth is that decarbonisation should be done at lowest cost to ease the burden on consumers, and thereby allow for more public support to combat climate change. Whether the UK government will take up the recommendations of the report remains to be seen.
German support for Russia’s Nord Stream 2 gas pipeline, which is due to double Russia’s supply capacity to northern Europe, has weakened since the last German federal elections, as the Financial Times reports. The Social Democrats party, previously part of the ruling coalition with Angela Merkel’s Christian Democrats, were the firmest supporters of the project, as demonstrated by former Social Democrats chancellor Gerhard Schröder being the chairman of Nord Stream 2 and also of Rosneft, the Russian oil and gas company. But the Social Democrats have fallen out of government after poor election results, leaving the remaining possible government members more critical of the new gas pipeline (though there are reports that fresh federal elections may be called to avoid a minority government). The shift has coincided with, or perhaps has caused, a hardening of the EU position towards the project, with the European Commission proposing earlier this month that Nord Stream 2 be subject to rules regarding sharing transport capacity with third parties and also the possibility of forcing separation in ownership from the supplier of gas (Gazprom). With Engie, Shell, OMV, Uniper and Wintershall all co-financing Nord Stream 2, and Eastern European countries generally being opposed to the project, the politics are becoming more and more complicated.
The International Energy Agency has launched its Clean Energy Transitions Programme aimed at providing technical advice to countries such as Brazil, China, India, Indonesia, Mexico, and South Africa, which are looking to transition to low-carbon power generation sectors. The €30 million (US$35 million) programme will last several years and involve, in the IEA’s words, “collaborative analytical work, technical co-operation, training and capacity building, strategic dialogues, secondments and implementation of joint work programmes”, while also fostering intergovernmental collaboration.
The Economist has run a thought piece on the need for more investment into research and development of means to suck greenhouse gases out of the atmosphere. Focusing on carbon dioxide as the largest contributor to global warming, the article states there is no proven, practicable technology to implement ‘negative emissions’ at the scale required. Increased tree planting would take land demanded by an increasing human population (making both direct capture by trees and capture and storage by combusting biomass infeasible at large scale); shallow tillage of agricultural fields would probably not deliver the necessary reductions; chemical capture of carbon directly from the air is as yet unproven. All are presently expensive. The current global total funding of ~US$15 billion (€12.7 billion) for low-carbon technologies is inadequate, and barely 0.1% of it given to negative emissions research (Britain this year becoming the first country to give such funding). Given that 101 of the 116 Intergovernmental Panel on Climate Change scenarios for a less than 2oC average global temperature rise by 2100 rely on negative emissions technologies being deployed, the case is a strong one for vastly increased funding.
Increased economic activity is set to raise China’s carbon dioxide-equivalent emissions by 3.5% this year, after a three-year plateau which had produced hopes that the world was already decoupling economic growth from emissions growth. Instead, global emissions are set to rise by 2% this year to set a new record high, mostly because of increased emissions in the developing world and China. However, emissions in Germany are also due to rise by more than 1% this year, with increased economic activity and colder weather being cited as the reasons. The increase will mean that Germany will miss its 2020 emissions target by even more than previously anticipated – the country would need to reduce emissions by around 18% from this year’s output to meet the targets. While emissions around the world are in keeping with national pledges made at the Paris Climate Conference in 2015, there is a fear is that those pledges will not deliver the agreed goal of limiting average global temperature rises to 2oC. Worldwide emissions were flat in 2016, while economic growth was at 3.2%, data which supported the idea that economic and emissions growth were decoupling. This year’s forecast rise suggests that there was some misreporting of some data last year, or alternatively it could be that the quantitative easing and low interest rates of recent years led to economic growth on paper without ‘real’ economic growth, and that ‘real’ economic growth is now occurring.
An opinion piece on the Quartz website has looked at the social response in India to the extreme levels of air pollution the country is facing. With habitation in Delhi currently being the equivalent to smoking 45 cigarettes per day, and 2.5 million Indians dying of air pollution in 2015, the situation is dire and of the highest urgency. However, according to the piece, the social reaction is more one of how to cope with the situation rather than how to change it. At the core of this reaction, the author argues, are low expectations of the government and a lack of the idea that clean air is a staple of life. Under the government’s own Graded Response Action Plan, 30 alerts should have been issued to citizens in October-November this year, but nothing was done until pollution was “beyond emergency” levels. Corrective action has also been late in coming. This is somewhat due to the complex structure of government – in the Delhi region alone, 16 agencies at differing levels of government (and under the control of differing parties) need to take coordinated action. While the pollution at issue is mostly not from the combustion industry (being from farming, construction and transport), stronger government action, if it is to come, will probably have some impact on power generation and other heavy industry.
The Financial Times has looked at the similar challenges facing both Siemens and General Electric, and the somewhat different positions each company finds itself in. The two rivals are both facing a rise in renewable energy technologies while their traditional power businesses struggle. Siemen’s chief executive Joe Kaeser put it most starkly: “Did they know how many large gas turbines were ordered in Germany in the past three years? I’ll tell you. A total of two!” Siemen’s power and gas division saw profits fall by 15% in 2016-17, with orders lower by 30%, and job cuts are expected to come. At GE, profits from the power division were down 51% in the third quarter of the year, the reason it is assumed long-time CEO Jeff Immelt resigned earlier in the year. The problem appears to be at least twofold. Both companies expected orders for gas turbines to be higher than they have been, with a forecast in 2010 that 300 gas turbines would be sold per year this decade proving overly optimistic – only 122 have been sold this year. At the same time, both companies have experienced difficulty with their own renewables divisions, having more success with wind than with solar. It is Siemens in the better position, however, having been more prescient in realising it needed to adapt to changing market conditions, and hence being more diversified, GE being more heavily reliant on traditional power generation (the purchase of Alstom being a prime example of GE’s recent strategy). Consequently, Siemens’ share price has risen 8% over the past year, during which time GE’s share price dropped 28%. With the cost of renewable power generation capacity continuing to fall, some industry analysts do not see a future increase in the demand for gas turbines, although the spread of worldwide trade in LNG may have some influence on this. With suggestions of the possible future breakup of GE, and challenging times for Siemens too, it seems the future of both companies will hinge on how successfully they further integrate and expand renewable energy technologies. Predictions tend, however, to make fools of forecasters.
A writer at Chester Energy and Policy has made a detailed analysis of the linkages between the Department of Energy portrayed in the popular Netflix series Stranger Things 2 and the real-life Department of Energy. While the connection is not related to combustion, but rather the Manhattan Project, the post is still an interesting one in relating pop culture to the history of science, and is worth a read for those who have already seen the series (spoilers are included).
Other articles from week 48:
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