Dash for gas has run out of steam
Friday, 21 March 2008
Ross Tieman
THE sprint for gas-fired power generation is turning into a cross-country race. Having plugged short-term capacity gaps, many utility bosses in Europe and the US are now pondering the changing energy landscape with new caution.
Rising energy prices -- for uranium and coal, as well as oil and gas -- have made fuel diversity the priority for many utilities. In Italy, where 18GW of gas-fired plant has been installed since 2003, utility group Enel is about to commission a big clean coal plant on the outskirts of Rome.
In the UK, Europe's energy liberalisation pioneer, the government wants a new generation of nuclear plants. France, where nuclear supplies more than 80 per cent of demand, is installing gas-fired generators. And in the US, a $100bn gas-plant building boom has given way to debates over alternative fuels.
Denis Cochet, senior vice-president of power sales at French power-plant maker Alstom, says plant selection decisions are driven by operators' need to hedge their bets on fuel prices. "In most cases, customers need to balance risks and have a mix."
That seems a remarkable change of pace after a global boom in gas-plant construction. Gas-fired power stations were rare until the late 1980s, when plant builders added steam turbines driven by waste heat from primary gas turbines to create today's combined-cycle gas turbine (CCGT) plants.
From an energy conversion efficiency of about 35 per cent for single-cycle gas plants -- on a par with coal -- that took CCGT efficiency to 50 per cent, and turbine tweaks have since pushed it towards 60 per cent.
For utilities facing competitive pressure in liberalising markets, the CCGT was Nirvana. Efficient, quick and cheap to build, flexible in operation, and with cheap gas plentiful, it answered all their needs.
In little more than 15 years, some 13,000 turbines of more than 40MW have been installed, amounting to 880GW of capacity - 19 per cent of the world's total.
In Italy, where obtaining planning consents for other plants is a triathlon challenge, gas now provides 50 per cent of power.
Mr Cochet says the market for CCGT plants is "very active, but well down from the 1999-2000 peak of 100GW a year for the US alone". Today, he says, the market for CCGT plants has recovered from the ensuing dip, and is running at about 30GW a year, driven by demand from the Middle-East, Africa and Asia.
In these regions, strong economic growth is compounding plant renewals, while in the Middle-East, gas is also the fuel of choice because of plentiful supplies.
In Europe, demand for CCGTs is increasingly driven by the need to replace older plants, and the desire of operators to balance their portfolios.
French-Belgian utility Suez is the world's biggest gas generating plant operator, with 99 gas plants providing 45 per cent of its 55GW capacity. Dirk Beeuws-aert, chief executive of Suez Energy International, says: "If you are a big player, you need a mix of generation options -- nuclear, coal, gas and renewables."
Rising gas prices have narrowed the gap between production costs of the different technologies but, even today, he says, "the investment cost per kilowatt of power from a CCGT is half that of a coal plant, and a third that from a nuclear plant of the same capacity".
Enel of Italy now relies on gas to power 30 per cent of its generating fleet, a level Gianfilippo Mancini, head of Enel's Generation and Energy unit, says he feels "comfortable" with.
Yet, according to the International Energy Agency, during 2006, gas provided only 22 per cent of Europe's electricity. Some operators are still balancing their portfolios by adding more gas.
That explains why Eurogas, a pan-European industry organisation, predicts EU gas consumption will rise 43 per cent from 2005 to 2030, with 60 per cent of the increase burned in power stations. Power plant consumption will almost double to 239m tonnes of oil equivalent, Eurogas forecasts.
In the US, where the utility industry is more fragmented and generating companies smaller, a separation prevails between generators and the gas industry.
But in Europe, Suez, a global operator, is pioneering the emergence of an integrated gas and power company, with rivals such as Enel and E.On and RWE of Germany, and Electricité de France hustling in its wake.
Mr Beeuwsaert of Suez says the financial and operational logic of combining gas transport with gas supply and gas-fired generation is compelling.
Gas is expensive to store and transporting it requires huge infrastructure investment, whether in pipelines or via liquefaction plants, ships and de-liquefaction plants. But household consumption rises and falls with the outside temperature.
Running interruptible gas power plants enables integrated operators to balance demand and optimise use of the transport chain.
Suez has receiving plants for liquefied natural gas in Boston, Massachusetts and Zeebrugge, in Belgium. A de-liquefaction plant in Chile starts construction in May, and Suez plans another in Florida, where gas demand peaks in the summer, to produce electricity for air-conditioning.
Enel, meanwhile, has bought interests in Russian gas fields and gas generation. It is also seeking stakes in new pipelines planned to deliver gas to Italy and Spain, where it jointly controls generator Endesa. In addition, it hopes to get planning consent for a de-liquefaction terminal in Sicily this year, Mr Mancini says.
The share of gas in power generation looks set to increase further, although at varied speeds around the world. But the priority for vanguard gas plant operators now is securing gas supplies and using their flexibility as gas consumers and distributors to win extra profits by optimising gas transport operations.
................................
Under syndication
arrangement with FE
THE sprint for gas-fired power generation is turning into a cross-country race. Having plugged short-term capacity gaps, many utility bosses in Europe and the US are now pondering the changing energy landscape with new caution.
Rising energy prices -- for uranium and coal, as well as oil and gas -- have made fuel diversity the priority for many utilities. In Italy, where 18GW of gas-fired plant has been installed since 2003, utility group Enel is about to commission a big clean coal plant on the outskirts of Rome.
In the UK, Europe's energy liberalisation pioneer, the government wants a new generation of nuclear plants. France, where nuclear supplies more than 80 per cent of demand, is installing gas-fired generators. And in the US, a $100bn gas-plant building boom has given way to debates over alternative fuels.
Denis Cochet, senior vice-president of power sales at French power-plant maker Alstom, says plant selection decisions are driven by operators' need to hedge their bets on fuel prices. "In most cases, customers need to balance risks and have a mix."
That seems a remarkable change of pace after a global boom in gas-plant construction. Gas-fired power stations were rare until the late 1980s, when plant builders added steam turbines driven by waste heat from primary gas turbines to create today's combined-cycle gas turbine (CCGT) plants.
From an energy conversion efficiency of about 35 per cent for single-cycle gas plants -- on a par with coal -- that took CCGT efficiency to 50 per cent, and turbine tweaks have since pushed it towards 60 per cent.
For utilities facing competitive pressure in liberalising markets, the CCGT was Nirvana. Efficient, quick and cheap to build, flexible in operation, and with cheap gas plentiful, it answered all their needs.
In little more than 15 years, some 13,000 turbines of more than 40MW have been installed, amounting to 880GW of capacity - 19 per cent of the world's total.
In Italy, where obtaining planning consents for other plants is a triathlon challenge, gas now provides 50 per cent of power.
Mr Cochet says the market for CCGT plants is "very active, but well down from the 1999-2000 peak of 100GW a year for the US alone". Today, he says, the market for CCGT plants has recovered from the ensuing dip, and is running at about 30GW a year, driven by demand from the Middle-East, Africa and Asia.
In these regions, strong economic growth is compounding plant renewals, while in the Middle-East, gas is also the fuel of choice because of plentiful supplies.
In Europe, demand for CCGTs is increasingly driven by the need to replace older plants, and the desire of operators to balance their portfolios.
French-Belgian utility Suez is the world's biggest gas generating plant operator, with 99 gas plants providing 45 per cent of its 55GW capacity. Dirk Beeuws-aert, chief executive of Suez Energy International, says: "If you are a big player, you need a mix of generation options -- nuclear, coal, gas and renewables."
Rising gas prices have narrowed the gap between production costs of the different technologies but, even today, he says, "the investment cost per kilowatt of power from a CCGT is half that of a coal plant, and a third that from a nuclear plant of the same capacity".
Enel of Italy now relies on gas to power 30 per cent of its generating fleet, a level Gianfilippo Mancini, head of Enel's Generation and Energy unit, says he feels "comfortable" with.
Yet, according to the International Energy Agency, during 2006, gas provided only 22 per cent of Europe's electricity. Some operators are still balancing their portfolios by adding more gas.
That explains why Eurogas, a pan-European industry organisation, predicts EU gas consumption will rise 43 per cent from 2005 to 2030, with 60 per cent of the increase burned in power stations. Power plant consumption will almost double to 239m tonnes of oil equivalent, Eurogas forecasts.
In the US, where the utility industry is more fragmented and generating companies smaller, a separation prevails between generators and the gas industry.
But in Europe, Suez, a global operator, is pioneering the emergence of an integrated gas and power company, with rivals such as Enel and E.On and RWE of Germany, and Electricité de France hustling in its wake.
Mr Beeuwsaert of Suez says the financial and operational logic of combining gas transport with gas supply and gas-fired generation is compelling.
Gas is expensive to store and transporting it requires huge infrastructure investment, whether in pipelines or via liquefaction plants, ships and de-liquefaction plants. But household consumption rises and falls with the outside temperature.
Running interruptible gas power plants enables integrated operators to balance demand and optimise use of the transport chain.
Suez has receiving plants for liquefied natural gas in Boston, Massachusetts and Zeebrugge, in Belgium. A de-liquefaction plant in Chile starts construction in May, and Suez plans another in Florida, where gas demand peaks in the summer, to produce electricity for air-conditioning.
Enel, meanwhile, has bought interests in Russian gas fields and gas generation. It is also seeking stakes in new pipelines planned to deliver gas to Italy and Spain, where it jointly controls generator Endesa. In addition, it hopes to get planning consent for a de-liquefaction terminal in Sicily this year, Mr Mancini says.
The share of gas in power generation looks set to increase further, although at varied speeds around the world. But the priority for vanguard gas plant operators now is securing gas supplies and using their flexibility as gas consumers and distributors to win extra profits by optimising gas transport operations.
................................
Under syndication
arrangement with FE