Following rapid import growth last year, offtakes in January 2020 had plunged almost 11 percent y/y but were still 21 percent higher than in January 2018. According to LNG Unlimited Data, China’s LNG offtakes stood at 5.11 million tons on 29th February.

Analysts disagree on demand recovery

Tough LNG Unlimited Data takes rather bullish views on China’s gas demand recovery, other analysts are more cautiously optimistic. Anticipating a “limited resumption of economic activity,” Wood Mackenzie says full-year 2020 gas consumption could be between 6 Bcm and 14 Bcm lower.

“LNG will bear the brunt of this reduction in domestic gas demand,” analysts commented, estimating the downside impact to Chinese LNG demand as between 2.6 million tonnes (Mt) ‘best case’ with recovery by April, and 6.3 Mt in a more ‘prolonged case’ with a slower return to normal.

Supply correction needed

Faltering Chinese gas demand could not have come at a worse time for the already oversupplied global LNG market. “Disappointing demand growth in Asia Pacific contributed to the halving of LNG prices through 2019,” research director Robert Sims said, “and with further new volumes emerging from U.S. producers, we were already anticipating lower prices through 2020.

Prior to the coronavirus outbreak, analysts had hoped the Pacific Basin gas market would 9 Mt of the approximately 27 Mt of new supply growth in 2020. However, a mild winter had already weakened prices at the North Asian spot market before the virus stifled demand in China.

“With too much LNG, and nowhere left to place it, it looks like a supply correction is needed to balance the market,” Sims said. “We are expecting supply response in some markets like Egypt and potentially in Eastern Australia, where the likes of Shell and APLNG could attempt to sell gas into the domestic Queensland gas market. However, it is US Gulf producers who have the highest marginal cost of supply and the most flexibility,” he stressed, implying there might be some shut-ins of liquefaction capacity along the Gulf of Mexico.

The FSRU project will be built in the First Gen Clean Energy Complex (FGCEC). Timely start-up is crucial to ensure the continued operations of the Philippines’ gas-fired power units. The imported regasified LNG will substitute depleting domestic gas supply for several the nearby power stations, notably Santa Rita (1,000 MW), San Lorenzo (500 MW), San Gabriel (414 MW) and Avion (97 MW).

All four power stations currently run on gas from the Malampaya field northwest Palawan, operated by a Shell-led consortium. Supply contracts with the Philippine government for domestically produced gas will expire by 2024.

First LNG cargo to land in Q3-2022

First Gen said in a statement to the Philippines Stock Exchange that it had submitted an application to the Department of Energy to start construction in less than eight week’s time. Starting from early May, the FSRU will be built together with an adjunct onshore gas receiving facility. First Gen underlined it seeks to fast-track construction start “in order to be able to receive LNG as early as third quarter of 2022.”

Importing LNG is “advantageous for us,” Francis Giles B. Puno, First Gen President and COO said, noting that prices for spot LNG cargoes are currently “quite attractive and even cheaper than gas from the domestic Malampaya field.”

Once operational the FRSU is meant to cover the serve the natural gas requirements of existing and future gas-fired power plants of third parties and FGEN LNG affiliates,” First Gen said, adding these gas imports will “bring the country closer to its goals of energy security, expanded energy access and low-carbon future as stated in the Philippine Energy Plan 2017-2040.”

FirstGen is jointly developing the FSRU at Bantangas with Tokyo Gas, which holds a 20% stake in the project. EPC works for the floating gas import terminal will be handled by Japan’s JGC Corp, allowing for LNG imports delivered by large- and small-scale vessels.

To attract further investors, FirstGen is prepared to decrease its stake in the project from currently 80% to about 51%. Yet before signing up new partners, FirstGen and Tokyo Gas wanted to break ground on the project.

By summer, some new installations that will come online and some of the units undergoing service work will be ready for grid-connection as well, Joseph Anis, CEO of GE gas power services in the Middle East and Africa said, specifying “it is in the range of about 3 GW of power.”

Orders from a $14 billion scheme to rebuild Iraq’s electricity infrastructure under a have been fought over by GE and Siemens. The German manufacturer earlier secured contracts €700 million ($785m) for the construction of a 500 MW gas-fired power plant, the upgrade of 40 gas turbines and the installation of 13 substations and 34 transformers across Iraq.

Rival GE, meanwhile, in September won a contract to develop Besmaya phase-3. The mega project will add 1.500 MW of capacity to the grid by 2021, raising total capacity to 4,500 MW. During the construction phase, up to 1,200 people will be employed and GE will provide four 9F gas turbines and four generators for the project. 

According to Mr. Anis, some of the gas turbines being installed at Besmaya may be “available for the summer,” with full combined-cycle operation of the phase-3 unit slated to start in 12 to 14 months.

GE is mourning the death of Jack Welch, who transformed the company between 1981 and 2001 by implementing efficiencies. Under his tenure, GE’s grew from $12 billion to a staggering $410 billion. Since then, the U.S. engineering giant’s fortunes fell in the 2008 financial crisis and due to the overly expensive Alstom takeover. Today, GE’s market capitalisation is valued at just under $100 billion.

Energía del Pacífico had contracted the Finish OEM to supply and install the plant that is driven by 19 Wärtsilä 50SG gas engines and a steam turbine in combined-cycle arrangement. Wärtsliä claims its dry flexicycle technology with a closed-loop cooling system has “zero water consumption.”

Running on regasified LNG, the new 378 MW power plant will provide about one third of El Salvador’s electricity supply and will help reduce the country’s dependence on oil and heavy fuel oil for power generation.

Fast-starting and load following capabilities of 50SG engines will enable the power plant to accommodate increased levels of energy from inherently intermittent renewable sources, such as solar and wind.

 “This is a transformational energy investment for El Salvador. The project will deliver significant environmental benefits, and with Wärtsilä’s efficient and reliable gas engine technology, it will provide clean and reliable power to the country,” said Joel Schroeder, Vice President, Thermal Engineering at Energía del Pacífico.

Upon commissioning, Wärtsilä will locally employ, and train some 40 people to operate and maintain the power plant.

“Even if you oversize the amount of [renewables] generation you need considerably, you would still need a battery so huge it would be unfeasible. You can’t account for the days when, in the middle of winter, the wind doesn’t blow for a week,” said Statera’s managing director Tom Vernon

“A battery that is load-shifting for a month at a time is only doing three to four cycles per year so it would have to be unfeasibly large and very cheap,” he explained, “and we are a long, long way from that.”

One of Statera’s latest flagship project, the 49.99 MW battery storage project at Stocking Pelham, UK (pictured), was completed in under six months. The site comprises seven E-houses, 27 inverters, 12km of cable and 150,000 lithium-ion battery cells and is connected to a nearby 400kV substation via a 132kV grid connection.

Statera and Statkraft co-develop mega-VPP in the UK

The Norwegian energy giant Statkraft and Britain’s flexible grid specialist Statera are currently working on co-developing a 1 GW virtual power plant (VPP) in the UK, based on a 15-year strategic partnership. Consisting of reciprocating gas and energy storage, the VPP will match demand with supply from various energy sources “within seconds.”

Statera, backed by InfraRed Capital Partners, sees the deal as a safety net to develop, build, own and operate flexible gas generation and energy storage assets. Under the deal, Statera will provide one of the UK’s largest battery facilities to store excess renewable energy. It will also deliver gas reciprocating engines to generate electricity at times of under-production or peak demand.

As soon as new assets come online, they will be integrated into Statkraft’s VPP and advanced trading platform. The hybrid units – energy storage and recip engines – will complement Statkraft’s 3.8 GW renewable generation portfolio in Britain by greatly enhancing its flexibility. Ultimately, the partnership is meant to bring Statkraft’s VPP capacity to 2 GW.

An EU decision to step up 2030 climate ambitions expected this summer, and the German environment minister Svenja Schulze conceded today that additional efforts are needed.

Emission reduction by the end of the decade are forecast to stand at about 51 percent compared to 1990 levels, instead of 55 percent, the target set in the government's Climate Action Programme. Though the power sector largely complies with government plans, progress in transport and heating is seen to be “especially off track.”

Carbon levy and coal phase-out not enough

Levying a national carbon price on transport and heating or the mass roll-out of electric cars, as well as the parallel coal phase-out are supposed to reduce Germany's emissions to 543 million tonnes of CO2 by 2030, from 858 million tons in 2018. However, the Öko-Institut found emissions reduction will fall short by about 70 million tonnes.

Transport minister Andreas Scheuer, had presented a list of nearly 50 measures supposed to slash emissions in the sector. But the analyses found these steps are “far insufficient,” because they will likely bring emissions down to about 125 million tonnes in 2030, rather than to 95 million as required.

According to the environment ministry (BMU) study, heating emissions in 2030 will be 17 million tonnes higher than planned and transport emissions even 33 million tonnes higher, with the CO2 output of cars, lorries, airplanes and other vehicles falling less than half as much as would be needed.

EU aims to further tighten emission target

Deficiencies of Germany could be further aggravated by a possible decision of the European Commission to tighten the bloc's Europe-wide 2030 emissions target. The commission under Ursula von der Leyen considers raising the target from 40 to up to 55 percent reduction in the context of the new EU Climate Law.

Pressure is mounting on Germany as it will hold the European Council Presidency in the second half of the year and thus host a highly-anticipated EU-China summit in September whereby the two key economic actors will coordinate their climate policies ahead of the UN climate conference COP26 in Glasgow.

Virtually all energy demand comes from lighting and moisture/climate control. The electricity required to grow lettuce indoors is more than 10 times higher than in a conventional heated greenhouse in temperate climates per unit of growing area, according to Wood Mackenzie figures.

Energy costs curb profitability

Flowering fruits and vegetables, in contrast, require far greater light intensity to grow indoors. Profitability is hence a huge challenge in regions of high electricity tariffs, given that the ordinary consumer is not prepared to pay dearly for his lettuce.

The predictable load of indoor farms can help. A typical indoor farm operates on 18 hours of daily ‘sunlight’ and 6 hours of ‘night’ to replicate natural conditions. During the ‘night’, electricity demand reduces by around 75 percent, allowing farms to avoid peak grid load and prices. Indoor farms can provide grid stability and off-peak demand while also being sustainable by using cheap renewable electricity, soaking up solar and wind that would otherwise be curtailed. But only in the right locations, cautioned Wood Mackenzie Asia Pacific Vice Chair, Gavin Thompson.

Striving to automate processes

Indoor farming remains in its infancy and the focus is clearly on reducing costs. With an increased focus on data and automation, ‘second generation’ indoor farms claim to already be yielding over 50 times as much produce per unit of growing area compared to conventional farming.

Among the indoor farming pioneers, US-based Plenty claims its projects use 99 percent less land and 95 percent less water to grow pesticide-free food. These are bold claims, but companies argue that through technology, particularly AI and data analytics, farming is being transformed.

The source of electricity is critical to long-term sustainability. Singapore has a target of 30 percent of its food to be grown at home by 2030, but only about 2 percent of the country’s electricity will come from renewables by this time.

Just a few days earlier, international investors had been courted to help finance the 1.5 GW gas power under a Public-Private Partnership (PPP). The ministry said it pitched the PPA to several potential investors, notably AcwaPower, EDF, Engie, Hyundai, Kepco, Mitsui, Mitsubishi, Marubeni, and Sumitomo. Bidders discussed the scope of the CCGT project and construction details.

Though development costs for the Sirdarya CCGT project was not disclosed, market observer estimate that total project cost amount to around $1.1 billion.

Ultimately, ACWA Power was chosen to take the lead in constructing, engineering, operating and maintaining the plant. The new CCGT will reach an efficiency rate of well over 60 percent, saving almost twice the natural gas currently used by state-owned Uzbekenergo for electricity production.

Plans to expand CCGT to 2.6 GW

The plant will be located in Shirin City, the Syrdarya region, and was initially intended to be developed in two stages so it could eventually be expanded to 2.600 MW, the ministry said. If it reaches that capacity, the mega plant would significantly enhance Uzbekistan’s installed power generation capacity of currently just over 12,400 MW.

In addition, ACWA Power signed an implementation deal worth between $550 million and $1.1 billion to deploy renewable energy sources and help bring Uzbekistan’s installed wind power capacity to nearly 1,000 MW. Under a third deal, Air Products & Chemicals and ACWA Power agreed a equip Uzbek students with the tools and knowledge to gradually support a local supply chain for the country’s utilities and chemicals sectors.

Mohammad Abunayyan, Chairman of ACWA Power pointed out that the company seeks to extend its foothold in Central Asia. The region, in his view, has “an economically vibrant landscape that favours private investment and power sector fortification.”

Headquartered in Riyadh, Saudi Arabia, ACWA Power's portfolio includes 56 assets with an investment value of $45.5 billion. It produces 31 GW of power and 5.2 million cubic meters per day of desalinated water, often for state-run utilities based on long-term offtaker contracts.

Coal-to-gas switching has allowed Indian utilities to absorb a large share of cargoes left uncommitted after the Northeast Asia demand slowdown. So far, India’s large population has had just three cases of coronavirus outbreak, meaning energy demand and economic growth is still largely unaffected.

China cuts electricity tariffs to jumpstart industrial output

China, where the virus originated, has resorted to a range of fiscal stimuli to jumpstart economic activity, including cutting electricity tariffs by 5%. But despite Beijing’s policy push to restart industrial output, China’s Ministry of Industry and Information Technology assessed that only 30% of small- and medium-sized enterprises (SMEs) had restored capacity as of last week.

Despite all economic stimuli, Energy Aspects cautions that “a V-shaped recovery in China has been unlikely for some time,” hence the consultancy revised down its import forecast, anticipating Chinese gas demand for industry and power generation will be substantially lower in Q1-2020.

Kpler ship tracking data still indicate there will be year-on-year Chinese cargo losses early in March.

Possibly greater power sector demand Q3-2020

Fear of an infection has crippled the public life and the economy not only in China, but also in South Korea and Japan. Uncertainty as to how effectively the virus can contained and over future quarantine measures is threatening to undermine and recovery in Northeast Asian natural gas demand throughout the summer.

Subdued gas demand in Northeast Asia is seen “enough to maintain demand for Qatari spot cargoes but insufficient to encourage the region taking US spot cargoes ahead of Europe.”

JKM markets for Q3-2020 delivery are at larger premiums to the TTF than Q2-2020 delivery, but Energy Aspects stressed: “We think there is little to support this situation structurally other than the possibility of seasonally greater power sector gas demand for cooling in Asia. It is, therefore, these contracts in particular that we see as overvalued.”

The turmoil comes after OPEC and Russia failed to reach an agreement on lowering oil production quotas. Russia evening refuted the Saudi Aramco-led proposal to prop up the coronavirus-hit oil market by further reducing production. The standoff sparked a 10% drop in prices on Friday.

Angered by Russia’s refusal, Saudi Aramco escalated the situation further by cutting its April selling prices by $6 to just $8, in an effort to put pressure on Gazprom and retake market share. The Saudis also announced to raise its production in April to more than 10 million barrels per day, apparently to compete with Russian oil in Europe as well as Asia.

Targeting US shale oil producer

Analysts noted that Gazprom had hinted that the real target of the price ware would be U.S. shale oil producers, because OPEC and Russia are “fed up with cutting output and just leaving them with space.“

Sustained low oil prices could cause dozens of U.S. upstream companies to file for bankruptcy, similar to the situation during the 2014-16 oil crash.

West Texas Intermediate (WTI) crude, the main U.S. oil benchmark price, dropped to $30.12 per barrel on early Monday. At the New York Mercantile Exchange (NYMEX), meanwhile, the front-month gas future was at $1.62 per MMBtu and the Henry Hub day-ahead price was last seen at $1.73 per MMBtu.

Little effect on JKM spot LNG price

On the spot gas market, the plunge in oil prices had little effect the Japan-Korea Marker price for Asian spot LNG which is already at a seasonal low due as markets are awash with natural gas. The Platts JKM spot LNG price for Asia was last seen at $3.11 per million British thermal units

In the UK, the National Balancing Point (NBP) was last at $2.85 per MMBtu, while the main natural gas price in Continental Europe, the Dutch Title Transfer Facility (TTF), was at $2.90 per MMBtu.

The Atinkou project consists of a 20-year concession to develop and operate a 390MW power plant some 40 kilometers west of Abidjan. The new CCGT will substantially improve electrification levels in the Ivory Coast, where just 66% of the population has access to electricity.

The project sponsor is Eranove Group, a leading developer of water and electricity assets in West and Central Africa. Eranove also owns and operates the 544 MW CIPREL project, the largest power plant in Côte d’Ivoire.

“Atinkou builds on the expertise and experience acquired by the Eranove Group with the CIPREL power plant. It thus shows the strength of Eranove industrial model based on African expertise and skills,” said Marc Albérola, general manager of the Eranove.

As lead arranger, IFC coordinated the full debt financing package of €303 million, which was provided together with the African Development Bank (AfDB), the Dutch development bank FMO, Germany’s DEG, the Emerging Africa Infrastructure Fund and the OPEC Fund. In addition to mobilizing the debt, IFC is providing a 91 million Euros loan for its own account, as well as interest rate swaps to hedge the project’s interest rate risk.

“Once built, Atinkou will provide affordable power to thousands of homes and businesses, while helping Côte d’Ivoire meet its goal of transitioning to greener electricity production,” said Linda Rudo Munyengeterwa, IFC’s regional industry director for the Middle East and Africa.

Together with the World Bank, the IFC has been supporting the Ivory Coast in developing its power sector. The bank stressed this new round of financing builds on the success of CIPREL, which has been providing affordable power in the country since 1995.

In contrast, a more optimistic high case scenario assumes a quick containment and economic recovery, pushing up global demand by 480,000 barrels a day. As the situation remains fluid, the IEA said it provide regular updates to our forecasts as the picture becomes clearer.

Heavy blow to transport fuels

“The coronavirus crisis is affecting a wide range of energy markets – including coal, gas and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels,” said Dr Fatih Birol, the IEA’s Executive Director.

This particularly hold true in China, the world’s largest energy consumer, which accounted for more than 80% of global oil demand growth last year. “While the repercussions of the virus are spreading to other parts of the world, what happens in China will have major implications for global energy and oil markets,” Dr Birol pointed out.

The IEA now sees global oil demand at 99.9 million barrels a day in 2020, down around 90,000 barrels a day from 2019. This is a sharp downgrade from the IEA’s forecast in February, which predicted global oil demand would grow by 825,000 barrels a day in 2020.

Oil producers urged to diversify

Looking ahead, the IEA once again called on hydrocarbon producing countries to diversify their economies. “The impact of the coronavirus on oil markets may be temporary. But the longer-term challenges facing the world’s suppliers are not going to go away, especially those heavily dependent on oil and gas revenues,” Dr Birol said.

“These producer countries need more dynamic and diversified economies,” he urged, “in order to navigate the multiple uncertainties that we see today.”

Trump pledge he would propose Congress a payroll tax cut, relief for small business and for hourly workers in a bid to avert a recession as global market are in turmoil. The U.S. President underlined the measures would be “very dramatic” and provide “substantial relief” to help reign in fears over the coronavirus. “This blindsided the world” he commented, “and I think we handled it very well.”

Energy prices partially recover

Trump’s planned financial measures helped energy and stock markets stage a cautious recovers. Brent crude edged up an was last trading at $36.90 per barrel, still substantially lower than last week’s $50 per barrel levels. The US benchmark West Texas Intermediate (WTI) crude gained 7 percent in value to $33.28 a barrel.

LNG prices under long-term supply contracts will fall as they are linked to crude oil, though US volumes will be less volatile as they are sometimes linked to the US benchmark Henry Hub.

In US natural gas, the New York Mercantile Exchange (NYMEX) front-month future rose to $1.81 per MMBtu and the Henry Hub day-ahead price was little changed at $1.72 per MMBtu.

The oil price fall had little effect on the Japan-Korea Marker (JKM) price for Asian spot LNG. This was already at a seasonal low because of market over-supply. The Platts JKM spot LNG price for Asia was last at $3.10 per million British thermal units, slightly down on the previous day’s $3.11 per MMBtu.

The UK National Balancing Point (NBP) price that guides LNG prices for the Atlantic Basin was last at $2.85 per MMBtu. The main natural gas price on Continental Europe, the Dutch Title Transfer Facility (TTF), was at $2.90 per MMBtu.

Looking ahead with Atlantic Basin futures, the US Gulf Coast LNG prices from the Intercontinental Exchange, dropped during the past week because of the supply glut. The front-month April 2020 price was at $2.390 per MMBtu, down from $2.490 per MMBtu the previous day. The May LNG future was at $2.449 per MMBtu, down on the previous day’s $2.450 per MMBtu.

Futures move above $3.000 per MMBtu to $3.574 for the October 2020 contract and to $4.337 per MMBtu for the December 2020 contract. The US GC LNG future traded on ICE is a settled derivatives contract available through to April 2022 and based on the average free-on-board (FOB) Gulf Coast LNG price.

Saudi Arabia launched price war with Russia

Analysts said the world’s top producers including Saudi Arabia, Russia and other Middle East nations are now involved in a price war. The standoff started after OPEC and Russia failed to reach an agreement on lowering oil production quotas. Russia evening refuted the Saudi Aramco-led proposal to prop up the coronavirus-hit oil market by further reducing production. The standoff sparked a 10% drop in prices on Friday.

Angered by Russia’s refusal, Saudi Aramco escalated the situation further by cutting its April selling prices by $6 to just $8, in an effort to put pressure on Gazprom and retake market share. The Saudis also announced to raise its production in April to more than 10 million barrels per day, apparently to compete with Russian oil in Europe as well as Asia.

Some analysts noted that Gazprom had hinted that the real target of the price ware would be U.S. shale oil producers, because OPEC and Russia are “fed up with cutting output and just leaving them with space.“

Claims for back-payments from the UK capacity market scheme gave Uniper a major boost in operating cash flow. A strong fourth quarter allowed Uniper to surpass 2019 financial targets. Germany’s third-largest listed energy company posted adjusted EBIT of €863 million in the 2019 financial year, roughly range bound with previous year levels.

“The British capacity market has resumed fully and the cash has come this year which provides us with more investment security. We’ve just struck another capacity contract [for a Uniper-run gas power plant] with UK’s National Grid, allowing them to increase the share of renewable power sources,” Uniper CEO Andreas Schierenbeck said in today’s earning press conference.

By contrast, earnings were adversely affected by lower output at a small number of power plants. The Düsseldorf-based utility posted annual sales in the power and gas markets of €64.8 billion, a 30 percent drop from the €91.81 billion logged in 2018.

The Uniper CEO indicated there is scope for a higher dividend payout, up 18.5 percent to €390 million which equals a dividend of about €1.07 per share.

Role of gas power bound to rise in Germany

With the decision to phase out all coal-fired power plant  having been made and the last nuclear power plant to be taken off the grid in 2022, natural gas-fuelled plants will play an even more important role. “Efficient gas-fired power plants are indispensable to compensate for the fluctuating electricity generation from renewables,” the Uniper CEO said.

Between now and 2022, Uniper will invest more than €1.2 billion in projects that accelerate the transition to a lower-carbon energy world in compliance with Germany’s mandatory coal exit by 2035, or 2038 at the very latest.

By 2040, Europe’s total gas demand is forecast to reach 538 Bcm out of which some 170 Bcm needs to imported. “Assuming that 55 Bcm of imports will be North Stream gas, there will still be a substantial gap in gas supply to Europe, which we mean to close by importing LNG,” the Uniper CEO said with reference to the Wilhelmshafen FSRU, currently under development.

“The secure supply of gas is of great importance for the success of German industry, to ensure that the German economy runs smoothly and to provide heat to millions of households in winter,” Schierenbeck underlined. “We assume that Nord Stream 2 will come online despite the delays and will transport up to 55 billion cubic meters of gas per year to us,” he forecast.

Diversifying supply sources, Uniper is involved in both pipelines and the LNG business. In Germany, it aims for the Wilhelmshaven FLNG terminal was to start up by 2023. The German utility has already lined up LNG supplies from Pieridae Energy, the developer of the Goldboro project in the Canadian Atlantic province of Nova Scotia.

Turning to green hydrogen

Going green, Uniper plans to gradually replace conventional gas with green gas or green hydrogen in both energy generation and energy trading. As a pacesetter in the use of power-to-gas technology, Uniper installed its first power-to-gas unit in Falkenhagen back in 2013, followed by another in 2015 in Hamburg. The company supplemented Falkenhagen with methanization equipment in 2018.

Partnering with refineries and the automobile industry, Uniper seeks conduct a variety of cross-sector, industrial-scale, real-world-laboratory projects that facilitate a swift introduction of hydrogen production under market conditions.

“The technologies are out there; what has been lacking is profitability and the right regulatory environment,” Schierenback said, calling on policy-makers to come up with a pan-European approach to foster the development of a hydrogen industry.

Oil exploration activities in the offshore waters of Guyana have resulted in significant finds of crude oil and associated gas. The state-owned utility GPL hence decided to for dual-fuel fired generating units to power a 46.5 MW plant.

Fast-start capability of the 34DF engines will allow for load balancing of future renewable power in-feed to the grid. Since wind and solar power supply is inherently variable, flexible response from the fossil generator sets is essential. The Wärtsilä power plant is being delivered on a fast-track basis, including a 69 kV sub-station, is scheduled to be completed in mid-2020.

“With full support of the Government of Guyana, GPL is preparing for the day when natural gas will be available in the country, hence the selection of dual-fuel engines for this plant,” said Albert Gordon, CEO of Guyana Power & Light.

Meeting demand, saving fuel costs

Electricity demand in Guyana is expected to grow at a steep rate during the next two years. The new Garden of Eden project is seen as “the first step in addressing this growth,” GPL said.

“It will also allow us to retire older and less efficient unreliable generating units, including several that now use expensive light fuel oil (LFO),” it added. Reduced fuel costs will translate into reduced tariff requirements and will support GPL plans for adding solar photovoltaic and wind-based power generation to the grid.

This is the sixth power plant that Wärtsilä is supplying to GPL, under relations dating back to 1992 when the first Wärtsilä plant was built at the Garden of Eden site.

Making green hydrogen in Germany currently costs around €8 per kilo, but the ministry expects this could “easily be lowered to €3 or €4 with exemptions from taxes and levies on electricity.”

Though the government seeks unveil a ground-breaking hydrogen strategy in a week’s time, it is still divided over key points. The research ministry insists on a target for electrolysers with a capacity of 10 gigawatts (GW) by 2030, while the economy and environment ministries believe 5 GW are sufficient.

The strategic focus lies squarely on decarbonising the heavy industry, while provisions about using ‘green’ gas in the heating sector have been removed it the latest draft. Relying on power-to-gas for heating would be an “expensive choice for Germany,” critics warned, because so much energy is lost in the transformation process and more efficient alternatives exist.

By 2030, about 20 percent of hydrogen consumed in Germany should be CO₂-free, according to the draft strategy. The hydrogen transition is hoped to create hundreds of thousands of jobs by the 2050s, if Germany can keep its current 20% share of the global market for electrolysers that produce hydrogen.

Sell the technology, buy the hydrogen

Though the cost of making renewable hydrogen is much higher in Europe than in Asia, “the ship has not sailed yet for Germany,” economic minister Peter Altmaier said, suggesting German-made electrolysis technologies could be exported instead.

In the long-run, Germany will not be able to produce all its hydrogen needs at home but will also need to import climate-friendly fuels from countries where wind and solar power is much cheaper. Such hydrogen imports could come from African countries or Australia.

Competition is intensifying. Chinese electrolyser makers have much lower capital costs than their European counterparts. Aside from China, the minister sees Japan and other Asian countries as the biggest competitors on hydrogen technology.

Despite this, Germany is striving to defend its technological leadership role. According to Altmaier, “our goal has to be to offer the most sophisticated, innovative and environmentally-friendly technology.” He called on the industry to not only focus on research, but also on applications at an industrial scale.

The Greenidge plant currently runs at 30 megawatts during low-demand hours and 106 megawatts at peak, so there is plenty of untapped capacity around the clock. Bitcoin mining is seen as a win-win situation. It allows the peaking power plant turn a profit at times of low electricity demand and helps create more tax revenue for the town of Dresden, NY.

Betting on both bitcoin and energy markets

Kevin Zhang, director of Greenidge's blockchain strategies, said in a statement the initiative would provide potential investors with “unique exposure to both the crypto-currency and energy markets.” Adding the bitcoin mining rigs is part of a $65 million upgrade of the power plant, including its fuel conversion from coal to natural gas.

The global bitcoin network operates around the clock and Dale Irwin, CEO of Greenidge, stressed the plant is used to such commitments. “As a power plant operator, running assets reliably 24/7, on 365 days per year is in our DNA,” he said. “By partnering with crypto-currency experts, we’ve created a truly ‘one of a kind’ project and we’re excited to continue to grow.”

Though mining works for gas-fired plants, the operator cautioned that it might not make sense for renewable energy sources where it’s best to store excess electricity for later. Should the Greenidge plant face more electricity offtake, the bitcoin mining would quickly loose attractiveness.

Technicalities around Bitcoin mining mean it gets more and more difficult to generate the crypto-currency over times. So the windfalls, Atlas enjoys today might be much more difficult to reap in the years ahead.

IEA warns of Bicoins’ massive energy use

Concern is mounting after media reports claimed that bitcoin is on track to consume as much electricity as the United States in 2019 and all of the world’s energy by 2020. In contrast, academic estimates put bitcoin’s electricity consumption at just between 0.1% and 0.3% of global electricity use.

Blockhain removes the need for banks as a central authority to verify and log transactions and replaces this with a computers network, running some particular blockchain software. The lack of a centralised, trusted authority means that blockchain needs a “consensus mechanism” to ensure trust across the network. In the case of bitcoin, consensus is achieved by a method called “Proof-of-Work” (PoW), where computers on the network – “miners” – compete with each other to solve a complex math puzzle. This process of Bitcoin mining is highly energy-intensive.

Looking ahead, IEA analysts point out that bitcoin mining is a “highly mobile industry” which can migrate quickly to areas with cheap electricity. Hereby, localized hotspots could prompt electricity shortages and spikes in power prices which may prompt a strong backlash from regulators and the wider public.

Balancing supply and demand is vital to counteract renewables’ variability. So, assuming carbon capture and storage (CCS) doesn’t emerge as a white knight, a lot more renewable energy is needed.

Time-shifting supply and demand so that they better match – not just minute by minute, as today, but also season by season from tomorrow on. Energy storage has been widely heralded as the solution here, but market barriers are still slowing down quick progress.

Apart from emission reductions, the EU also aims for at least a 32% share for renewable energy, and 32.5% improvement in energy efficiency.

Pledge to phase-out combustion engines

A raft of countries has pledged to phase out the internal combustion engine in favour of electric vehicles (EVs). Companies such as Tesla and Moixa are bringing batteries into our homes; and solar panels continue to get cheaper, and wind turbines taller and more efficient.

“Before long, we could even see solar panels printed like newspaper and incorporated into all sorts of fabrics and building materials. One sees windows that convert the invisible parts of the light spectrum into power even as they remain transparent to the human eye,” said Patrick Clerens, Secretary General at the European Association for Storage of Energy (EASE). These solutions, in his view, will work together to ensure that we have abundant electricity in the future. “Yet none will solve the variability issue,” he cautioned.

Setting the right incentives to shift demand

Large scale, decentralised and intelligent energy storage can realistically incentivise energy users to shift the pattern of their demand. For example, people can be incentivised to set washing machines to run overnight when demand is lower – if the price is right.

Electric vehicles will provide a giant network of flexible battery storage when left on charge. Batteries, however, begin to degrade after enough charge cycles and use in this manner will accelerate that, he said, warning that some batteries could lose 20% within a few years time.  “It all comes down to money and incentives,"he said, "but so long as we remain relatively wealthy in Europe and electricity remains relatively cheap, those incentives would have to be significant.”

Decentralized, behind-the-meter electricity and heat storage have an important role to play in decoupling behaviour from grid needs, as do batteries which degrade more slowly through cycling.

The option of large-scale, front of meter energy storage is also an area of innovation, notably lithium-ion batteries. Elon Musk’s grand plans for Tesla include a ‘Gigafactory’ which will be the largest building on Earth by footprint, and the company has already supplied grid-scale batteries to Australia. Closer to home, Mitsubishi and Eneco are developing EnspireME – a 48 MW lithium-Ion system with a capacity of over 50 MWh, which corresponds to the average daily energy consumption of over 5,300 German households.

“But lithium-ion isn’t the whole story. In labs around the world, innovators work on better and complementary batteries such as solid state and flow designs. At the same time, we have supercapacitors, designed to hold less charge but discharge it far more quickly for fast frequency response and other applications, possibly also increasing the cycles and therefore the life span of lithium-ion,” Clerens forecast.

“Nor is it just about batteries,” he said pointing at pumped hydro storage as  a long-established technology, pumping water uphill when power is cheap and abundant and letting it flow back through generation turbines when its needed. Now a Scottish start-up is taking the same gravity-inspired concept and applying it to abandoned coal-mines.

“Compressed air is also an option, hydrogen another,” he continued. Liquified Air Energy Storage (LAES) is emerging as a high-tech contender too. Each technology has its own profile, strengths and weaknesses and an intelligent combination could go a long way to solving intermittency second-by-second, hour-by-hour and even season-by-season.

Subsidies vs. free market

Investment in renewable generation technology needs to be matched by investment in varied cutting-edge forms of energy storage. For starters, policy makers need to decide whether to incentivise deployment by market design or subsidy regimes. Europe largely opted for the latter for renewables but as the market matured, these have been rolled back.

There is little political will for a fresh wave of subsidies for storage, hence a carefully crafted market design is needed to incentivises flexibility and storage. At the European level, clear policy frameworks for EU Member States need to give a strong signal to investors and innovators. Member States need to decide on taxation and the costs at transmission and distribution network level.

The private sector can then step forward and start to put propositions in place. But this doesn’t just mean the storage manufacturers and operators themselves, it means a host of supporting services too. Investment banks need to create structured products to both help spread risk and attract different types of investor, with insurers stepping into the breech.

“This is easier said than done for a new sector, especially if we don’t go the subsidy route, offering investors guaranteed 20 year returns as we have for renewables,” Clemens cautioned. There’s a lot on the to-do list, but unlocking energy storage in Europe is non-negotiable if we are to meet our 2030 climate targets.

Electricity consumption across Indonesia increased just 3.8 percent in year-on-year in January, and the 4.5 percent growth in 2019 was way below the government target of 6.3 percent, the energy ministry disclosed.

“Some new power plant projects are underway, so it becomes an issue. There will be an oversupply of power which will burden PLN’s financials,” said the energy ministry’s director general, Rida Mulyana. Eager to reign in the oversupply, developers have already shelved some projects citing doubts over their future profitability.

The ministry urged PLN to invest more in transmission and distribution networks, instead of power plants, so they can reach more area to sell the excess electricity. Fast-tracking the rollout of electric vehicles are also hoped to push up power demand and soak up some of the current oversupply.

PLN’s chief executive Zulkifli Zaini said earlier this week the utility seeks to boost capital spending by 90 trillion rupiah ($6.36bn) through bank loans and bonds. Most of this Capex is mean to go towards expanding the power grid and finalizing the ongoing construction of some power plants, he said without disclosing any names of projects.

Two years ago, PLNG already needed to curtailed the allocation of free cashflow for new power plant projects due to sluggish electricity demand. It already became clear at the time that only around 20 GW worth of power plants, included in the government’s 35 GW program were likely to commence operations by the end of 2019.

MHPS sees Indonesia’s power demand to top 4,400 TWh/year

In contrast, Mitsubishi Hitachi Power Systems (MHPS) remains convinced that Indonesia’s fast-growing population will help push up power consumption form 2,400 TWh per year seen today to 4,400 TWh/year by 2030. Considering Indonesia’s “limited renewables potential,” MHPS reckons the country’s rising electricity demand will largely be met by new gas-fired power units.

In the Java – Bali region, the Japanese manufacturer supplied and installed over 30 percent of the power generation capacity. Some sixteen month ago, MHPS commissioned the 300 MW unit-2 of the Tanjung Priok combined-cycle power plant ahead of schedule. Unit 1 of the Jawa-2 project initially went into operation as a simple gas turbine system this June with output nearing 300 MW, and Unit 2 doubled that capacity to 600 MW.

In Indonesia, MHPS claims to hold the top market share for large gas turbines, with a total power gen equipment supplied reaching 12 GW.

The fuel transition will start in 2025, when the turbines run on a 30:70 mix of hydrogen and natural gas which will cut emission by more than 70 percent compared with the retiring coal-fired unit.

In the run-up to 2045, the hydrogen co-firing capability will then be systematically increased to 100 percent, enabling carbon-free power generation at a utility-scale plant.

Situated in Delta, Utah, the re-fuelled plant will provide green energy to Los Angeles and municipalities in other parts of California and Utah. It is owned by the Intermountain Power Agency (IPA) and operated by the Los Angeles Department of Water and Power (LADWP).

For the hydrogen conversion, IPA ordered two 1-on-1 M501JAC power trains with gas turbines, steam turbines, heat recovery steam generators, and auxiliary equipment. MHPS will service the plant under a 20-year long-term service agreement.

The Japanese manufacturer said IPA will receive its newest generation JAC air-cooled dry low NOx combustion system with hydrogen-rich fuel capability. MHPS gas turbines have more than 3.5 million hours of high-hydrogen operating experience, accumulated over 40 years and across 29 facilities.

The latest order win expands MHPS footprint in Millard County, Utah. In May of 2019, MHPS partnered with Magnum Development to develop the Advanced Clean Energy Storage (ACES) project adjacent to the Intermountain Power Plant in Delta

The ACES project will use renewable power to produce hydrogen through electrolysis. The hydrogen will be stored in an underground salt dome at the site. Stored renewable hydrogen can provide backup power at short notice, at times when the wind does not blow and the sun does not shine.