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Combustion Industry News

From the IFRF's correspondent in Australia
From the Sydney office
Contributed by Patrick Lavery
Australia, Sunday 10th June 2018

Large gas turbine makers struggle amidst sluggish demand

An article on the Utility Dive website has looked at the continuing sales difficulties of large gas turbine manufacturers such as GE, Siemens and Mitsubishi Hitachi, and the reactive measures the companies are taking in response. As coal-fired plants across the world have been reaching their retirement ages, it was widely expected that gas-fired plants would replace them, being generally around half as carbon polluting than coal. However, renewable energy generation technologies have filled some of that void instead, and sluggish electricity demand has also reduced orders for new large gas turbines. Last month, Siemens took the eye-catching step of temporarily closing its power and gas division for around a week worldwide (depending on local regulations), after last year cutting thousands of jobs from the division. As has previously been reported in the Combustion Industry News, GE cut around 12,000 jobs last year, but in May its share price dropped a further 7% in one day after its CEO, Jon Flannery, said that he did not see a quick fix for the company. Mitsubishi Hitachi, meanwhile, has had a better 2018 than GE or Siemens, but nevertheless has announced that it will ‘consolidate’ its manufacturing in the US, closing some sites to cut costs in the expectation of lower future demand. No Japanese sites are to be closed, though they may be somewhat reorganised, and across the company it appears that the plans are to shift staff to other areas (for instance the manufacture of automobile turbochargers) rather than making them redundant. Mitsubishi Heavy CEO Shunichi Miyanaga has said that that "We cannot survive as things stand now." The company says that without fresh demand, output from its plants will be markedly reduced by 2020. Whether that demand will come is an open question. A recent report from the Rocky Mountain Institute (a sustainability think tank) has suggested that with about 500 GW of power generation capacity to be replaced in the USA by 2030, there will be a ‘rush’ to gas, particularly with plentiful and cheap shale gas available. However, the same report suggests that it would be more expensive to replace the retiring capacity with gas-fired capacity than renewables, because costs for renewables will fall further in the next decade. For GE, Siemens and Mitsubishi’s gas turbine divisions, just how well renewables will fare over the coming years will be vital to their future.

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Trump administration looking to national security legislation to support coal and nuclear plants

US President Donald Trump has told his energy secretary, Rick Perry, to use emergency powers to devise ways of keeping coal and nuclear power plants operational. Under the Defense Production Act of 1950, the US government has the power to intervene in business for the sake of national security, and it is through this legislation that the Trump administration believes it can take legal steps to help both coal and nuclear power generators. It appears the argument for national security rests on the assertion that coal and nuclear plants store their fuel onsite, which is debatable – most renewable energies would seemingly qualify on the same grounds because they do not require any fuel, and the Federal Energy Regulatory Committee last year turned down an attempt by Mr Perry to subsidise coal and nuclear plants because they provide resilience. Details of what the steps would actually consist of are unclear, but may involve higher prices paid for the electricity generated from coal and nuclear plants. Oil, gas and renewable companies have all criticised the move, while coal and nuclear companies have unsurprisingly supported it. Energy analysts believe that litigation against any steps would begin almost immediately after they were put in place.

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US to apply tariffs to European, Canadian and Mexican steel

In further American news, the USA has decided to end its exemption on tariffs for imports of steel and aluminium from the EU, Canada and Mexico, meaning that the same 25% steel and 10% aluminium tariffs that have applied to the rest of the world since March will now apply to those areas. The exemptions had been put in place while the US negotiated with the other parties, but those talks were considered by the US not to have made sufficient progress. US Commerce Secretary Wilbur Ross has stressed, however, that the US is open to continuing talks, and that President Trump has the power to lift or alter the tariffs at any time. The implied unpredictability in the position appears to be something of a trademark of the Trump administration, with Mr Trump seeing it as a strength when bargaining. EU, Canadian and Mexican leaders have criticised the decision, saying that a trade war benefits no one, and their views have even received support from amongst Mr Trump’s political allies. Republican Kevin Brady said that the EU, Canada and Mexico were not the problem, but that China was. As the US imports steel mostly from Canada and the EU, with Mexico fourth after South Korea, the tariffs do appear poorly aimed if they are designed to punish “unfair” trade behaviour (the reason for the EU’s own tariffs on Chinese, Russian, Brazilian, Iranian and Ukrainian steel). Mr Trump’s reasoning, however, is that the US requires a strong steel industry for strategic reasons.

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Trans Mountain pipeline expansion project has Canadian state and federal governments at loggerheads

Canada has been experiencing something of a constitutional and political storm over a dispute between a number of states over the proposed expansion of the Trans Mountain pipeline, which takes oil from Edmonton in the central state of Alberta to Burnaby, British Colombia, on the west coast of the country. The original Trans Mountain pipeline has operated since 1953, and a proposal to triple its capacity through an expansion was first submitted by its owner, Kinder Morgan, in 2013. Amid protests over the expansion of the pipeline, the government of British Colombia, which had approved the project last year, has now subjected the project to legal challenges following the election of a new premier. The state of Alberta launched a form of legal retaliation, proposing a state law that would allow it to control the flow of oil into British Colombia, in effect giving Alberta the ability to exert strong economic pressure on its neighbour to the west. Such drastic legal action on the part of states over an inter-state infrastructure project has not occurred before, leading to questions over constitutional breaches. The legal uncertainty led to investor uncertainty, which in turn has prompted the federal government, keen to give Canada an oil-exporting future, to step in and propose a takeover of the ownership of the pipeline to push the expansion through. Part of the federal government’s action may be due to uncertainties regarding export to the USA via other pipelines (such as the Keystone pipeline) because of fear of future tariffs, but it nevertheless creates a headache for Prime Minister Justin Trudeau because of opposition to the expansion from environmental and indigenous groups, normally his allies. For his part, Mr Trudeau argues that revenues from oil help to finance a transition to a low-carbon economy, which though plausible is not met with much sympathy amongst opponents of the expansion, who may launch legal proceedings of their own against the federal government’s move. The political and legal complexities run even deeper, as a post in The Conversation has described, and what will happen to the pipeline seems quite uncertain, though one suspects federal financial considerations will push through the expansion.

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Recent rise in Californian GHG emissions blamed on looming drought

An interesting article on the Grist website, which provides environmental news and opinion, has looked at the increasing emissions of greenhouse gases in California. GHG emissions fell consistently in 2015, 2016 and 2017, but in February and March of this year, emissions rose. The unintuitive rise has taken place even as more renewables are being deployed in the state, reflected by the fact that a record was achieved in late April this year of renewables providing 72.7% of the instantaneous electricity demand (at 1:25pm, with the sun shining). Although the article does not demonstrate the source of the rise in GHG emissions conclusively, it postulates quite reasonably that a reduction in hydropower production may be the cause. With a drought expected in California, water authorities may not be releasing as much water from dams as they did last year (and data from the California Energy Commission does show that hydropower generation varies significantly from year to year, with 2017 being something of a peak after much lower output between 2012 and 2016), even though dam levels are at the moment high. To make up this slack in ‘baseload’ generation, gas is instead being used, as it still makes up something like 53% of the state’s installed generation capacity (with large hydro making up around 15%). What is also interesting about the article is how much electricity is being dumped in California because of the lack of storage capacity in the state. In April, around 95,000 MWh of electricity was shed, equivalent to about 132 MW worth of constant power production, although this is only around 2.5% of installed solar PV and wind power production. Together, this information suggests that California requires more electricity storage capacity to manage its renewables, or some source of very low carbon flexible power generation (for instance CCS-equipped thermal power generation). The costs of battery storage may for the moment discourage such expansion, meaning that GHG emissions in California will depend on rain for the time being.

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Radboud-Cambridge study raises prospect of global financial crisis before 2035 because of collapse in fossil fuel asset values

In news almost the opposite to the findings of researchers from the University of Illinois reported in the Combustion Industry News recently, a new study has suggested that the world may face a global financial crisis sparked by plunging valuations of fossil fuel assets. The University of Illinois work estimated that there was a 35% chance the world would exceed the worst case scenario in the latest Intergovernmental Panel on Climate Change reports because the world economy might do better than assumed by the IPCC, and that would mean increased use of fossil fuels. In the new study, undertaken by researchers at Radboud University and the University of Cambridge, a sudden drop in demand for fossil fuels is considered likely before 2035, which would make many fossil fuel assets uneconomic to exploit. Because fossil fuels are a significant part of some countries’ economies, including Russia, Canada and USA, there would be an economic contraction in those countries which would spread globally. According to the authors, this likelihood will hold even if there is a de-escalation in clean energy policies, because renewable energy and energy efficiency technologies are already on course to outcompete fossil fuels in the medium term. The lead author of the study, Dr Jean-François Mercure, suggested that fossil fuel companies would serve themselves and their shareholders best by changing their strategic directions more sharply towards renewables to avoid become too heavily stranded with uneconomic assets. He also stressed that although he considers the stranding of fossil fuel assets somewhat inevitable, policy change is still occurring too slowly for the world to meet the aims of the Paris Agreement. Although it is undeniable that renewable power generation costs are falling dramatically, perhaps the tension between the two reports points to the Hollywood adage of William Goldman that “nobody knows anything” – the future is extremely difficult to predict.

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New International Energy Agency website tracks energy-related Paris Agreement progress

A new website from the International Energy Agency has been launched to show how progress towards the 'well below 2°C' climate goal of the Paris Agreement is tracking. The site details 38 indicators, split between power, buildings, transport, industry and energy integration, and the current progress is rather discouraging. Four indicators – solar photovoltaics, lighting, data centres and networks, and electric vehicles, are ‘on track’, 23 ‘need more effort’, and the remaining 11 are ‘not on track’. Of particular interest to the combustion industry are that unabated coal-fired power, carbon capture, utilisation and storage, heating, and CCUS in industry (iron and steel, paper and pulp, cement) are not on track. The IEA target is for global unabated (i.e. without CCUS) coal-firing to decline by 5.6% per year, but in 2017 it increased 3%; for CCUS, it is that 350 megatonnes of CO2 will be captured annually by 2030, while in 2017 it was 2.4 Mt (and with planned projects to raise it to only 11 Mt by 2025). The CCUS picture is similar for other industrial applications. In the renewables field, geothermal, ocean and concentrating solar power are off track, while other forms are mostly needing more effort. The site also shows that the carbon intensity in producing end-use energy has been relatively flat since 2000, though with a fall of 1.5% since 2013, there may be some cause for optimism – the world energy system is an enormous system, after all, and to change it is a gargantuan task. Total CO2 emissions from fuel combustion have risen markedly since 2000, and need to reverse that trend beginning immediately to meet the target. Overall, the site contains a wealth of information which will presumably be updated annually.

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University of Louisville researchers developing biocoal

Researchers at the Conn Center for Renewable Energy Research at the University of Louisville in the US state of Kentucky are experimenting with their own form of biocoal, the type of coal-substitute or coal-biomass blend which has been gaining some attention over the last few years. Dr. Jagannadh Satyavolu’s team of researchers have been developing mixes of forest waste, hemp and kenaf (a plant native to south Asia) made into pellets after a process of torrefaction (a mild form of pyrolysis, which amongst other things helps to make the product easier to grind) and densification. The team’s biocoal is free of mercury and sulphur, and is (probably) less carbon intensive than burning coal itself. They hope to find markets in Japan and Europe, and as a first step are looking for partners willing to trial their fuels.

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Wärtsilä keen on buying GE’s industrial gas turbine business, Jenbacher

Wärtsilä’s chief financial officer has said that GE’s industrial gas engine business, Jenbacher, would be a good fit for his company. Wärtsilä is one of a number of companies that made a bid for Jenbacher in April, following GE’s decision to try to offload the company and raise some cash. Jenbacher’s engines are smaller than those manufactured by Wärtsilä, which would give Wärtsilä a wider product range while keeping it in the smaller power generation market in which the company has excelled in recent years, and which complements renewable energies.

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