Off Loaded Tasks Accumulator #A
Just another Seasonal Site's Network site
Source: BOE Report
Source: BOE Report
Source: BOE Report
Source: BOE Report
Ahead of the S&P Global Platts Global Power Markets conference in Las Vegas, April 8-10, 2019, The Barrel presents a series of articles on the global and US electricity sectors. Here, Bruno Brunetti and Lin Fan analyze world power capacity additions in 2018 and look at factors that will drive developments this year.
Global investment in renewable power capacity continues to outstrip that in fossil fuels and nuclear, but growth has softened recently as a result of policy U-turns – with solar additions notably impacted.
A major change in the support for renewables was announced in May 2018 in China, creating uncertainty in a country that had been a global leader in terms of solar growth over the past several years. PV tariffs and installation quotas were reduced, while China is looking to introduce tenders for utility-scale plants and market-based allocation for distributed PV. Capacity additions in China during 2018 have totaled only about 44 GW, a decline by 16% on the year.
Early in 2019, some encouraging signs for solar developers once again emerged, as the Chinese government removed quotas on projects built without central government support and made efforts to reduce taxes, land costs, administrative burdens for developers and also prioritize grid access to non-subsidized projects. This latest announcement is likely a positive for Chinese solar development. Although declining costs are making solar photovoltaics more appealing, it’s still unclear how the new regime will impact the development of unsubsidized projects. That means continued uncertainty around annual PV additions in the near future.
Meanwhile, headwinds have also been emerging in another important market for solar additions, India. While an ambitious solar target of 100 GW by 2022 has been set under the Jawaharlal Nehru National Solar Mission (JNNSM), a government initiative, there are nonetheless uncertainties related to the implementation of a 25% safeguard duty for imported modules, and other taxes have further dampened the enthusiasm around solar.
Tariffs on imported PV modules also took effect in early 2018 in the US, adding 30% to the cost of a module in the first year of implementation. The tariffs are set to decline by 5 percentage points each year over the next four years, and so will equal 25% in 2019. Module prices have, however, declined by over 30% over the past year, offering support to growth. The pipeline of utility-scale projects in the US totaled 38 GW as of January 2019, according to the S&P Global Market Intelligence World Electric Power Plants Database. Corporate-backed renewable projects remain a positive driver of installations, along with utilities’ procurements under state-level renewables mandates.
Interest in offshore wind grows
In the wind sector, capacity additions globally last year are estimated to have totaled around 44 GW, about 3% below 2017. Almost half of this capacity was added in China, with wind additions trending higher, in spite of uncertainty around its renewable supporting mechanism. While feed-in tariffs for onshore wind have been progressively lowered, China also took the decision in 2018 to switch to an auction mechanism, with gradual elimination of government subsidies. China has a strong pipeline of projects that will still be able to benefit from the prior or current support mechanism and will still be largely unaffected by the switch to auctions in the near term.
However, Europe has seen a significant decline in newly added capacity. Among the major markets, Germany installed over 3 GW in 2018, the UK about 2 GW and France around 1.8 GW. But overall, wind additions were well below 2017 and previous year levels, and were mostly in the onshore segment. To put this in perspective, there is rising interest in developing offshore projects, where Europe is already a leader. This is the result of a significant decrease in the overnight costs in recent years, while financial institutions are now comfortable with the technology.
Some 2.7 GW of offshore plants were connected in 2018, with the pipeline of offshore projects much larger, in the order of 27 GW, and Germany and the UK lead the way. The UK will see a third contracts for difference auction in May 2019, with offshore wind projects widely expected to capture most of the available funds. Up to 6 GW of offshore wind capacity may be awarded in this round. Also, a number of offshore projects in Europe are not relying on public support – other than grid connection – which suggests an increasing confidence that wholesale prices will be sufficient to cover installation costs.
Also worthy of note is the widening pipeline of offshore projects in the US East Coast – now totaling over 25 GW. Onshore wind is already the largest non-hydro, renewable source of power in the US, but development of offshore projects is gaining momentum.
The 800 MW Vineyard Wind project, being developed off the coast of Massachusetts, signed a power purchase agreement starting in the early 2020s at $65/MWh, a recent indicator of where US offshore wind costs may be in this early stage. With the supply chain now just being developed, this is already comparatively low, considering that UK projects will be allowed to bid in the upcoming May 2019 CFD auction for up to £56/MWh (equivalent to $73/MWh) with completion set for 2023/24. Beyond the costs, a more critical issue to watch for offshore wind is the timing of development of these projects, especially the permitting phase, which has been particularly lengthy.
Coal projects deferred, canceled
Although China remains the leader in clean energy installations and manufacturing, it may seem ironic that the country is also bringing online a large amount of coal capacity – 38 GW alone in 2018, just a few gigawatts below China’s annual PV solar additions.
The World Electric Power Plant database indicates that about 45 GW of coal-fired projects are still in an active construction stage, although a growing number of projects face a more uncertain fate. It should be noted that Chinese power demand continues to grow, with a 49 GW increase reported in 2018. Last year’s additional renewable capacity (solar, wind and hydro) would meet only a quarter of this demand increase. But the central government is getting more cautious and it recently started restricting the coal-fired capacity to be connected to the grid, in an effort to address growing overcapacities in certain provinces and air-quality concerns in major cities.
Similar trends have also emerged in India. According to the Central Energy Authority, India’s net coal capacity has increased to 197.4 GW as of the end of 2018, up by only 4.5 GW on the year, with 6 GW of capacity commissioned offset by about 1.8 GW of retirements. To put things in context, India had been installing some 20 GW/year of coal in the prior five years. Increasing renewable generation, together with fuel availability problems, have undermined utilization of the existing coal assets – now in the 50-60% range, whereas load factors were at 70-80% earlier this decade. India has 13.8 GW of solar in construction and 22.8 GW is already tendered, with bids in 2018 as low as Rupee 2.4 /kWh (equivalent to about $33.60/MWh), making coal newbuilds a considerably more difficult proposition, especially in a context of elevated imported coal prices.
While Asia continues to bring coal plants online – albeit at a slower rate – gas-fired capacity is increasing mostly in the US and Middle East. In fact, out of the 35 GW of gas generation connected in 2018 across the globe, the US accounted for about half, with another 20% in the Middle East. Cheap gas is clearly a major driving force in these regions. In the case of the US, lower gas prices have had a major impact on the erosion of coal-fired capacity. Over 70 GW of capacity with coal as the primary fuel has been retired over the past seven years. A further 20 GW of retirements have been announced, with much more capacity at risk. As many as 150 GW of coal units have been operating for more than 40 years. In addition, Platts Analytics sees another 16 GW of nuclear capacity at risk of retiring within the next five years, in spite of states in the Northeast implementing policies to aid at-risk nuclear generation.
The appetite to invest in large-scale gas-fired units has been fairly limited in other regions, especially in Europe. Baseload retirements in Europe are not expected to be as large as in the US, at least within the next 10 years. Platts Analytics forecasts that 20 GW of nuclear and 56 GW of coal/lignite will be closing in the upcoming decade in the major European markets. But uncertainties over competing renewables and operating hours are dampening power generators’ interest in large-scale CCGT investment, while relatively high imported gas prices have hurt the margins of existing gas units. Even in countries where capacity mechanisms are in place, such as the UK, large-scale gas units were unable to secure long-term contracts, as distributed resources were more competitive. Instead, there have been a lot more small-scale OCGTs, which have low capex and considerably higher operational costs, with their flexibility matching the intermittency of renewables.
Gas-fired projects in Russia appear so far to be limited, considering that a large portion of the country’s operational fleet is more than 40 years old. However, things will likely change as the Russian government recently approved a new capacity mechanism under which long-term contracts will be awarded for the upgrade of some 40 GW of aging thermal units. The first tender will be held in April-May for 11 GW that will have to be available from 2022-24.
Pace of nuclear build lifts
Nuclear remains a more marginal technology, although nine nuclear units were connected to the grid during 2018, representing some 10.4 GW, making 2018 one of the best years for nuclear in terms of capacity growth. Worthy of note is the fact that all of the Western-designed generation III+ reactors under construction in China – the French-designed EPR at Taishan and the AP1000 projects in Sanmen and Haiyang – have been connected to the grid. The pace of nuclear restarts in Japan has also picked up, with four reactors reconnected. However, the pace of global nuclear growth remains largely tied to China too, since the country has the largest capacity under construction globally. At present, there is only about 60 GW of nuclear capacity in construction worldwide.
Although the relatively limited investments in nuclear energy globally are in part driven by local opposition and national policies, the technology is another victim of the conundrum currently facing the power industry. Platts Analytics’ long-term scenarios clearly show that the world will need more generating capacity, yet there is not enough investment in non-emitting (or even low-emitting) technologies.
Current renewables and nuclear yearly additions could at most meet annual global power demand growth, but what about the gap opening up as a result of coal retirements? Even investments in flexibility appear to be lagging behind, with batteries accounting for only up to $1 billion/year, with less than 2 GW of batteries currently added each year. Reform of market design and the introduction of carbon pricing more widely across the globe could address some of these concerns going forward.
The post Tracking global power capacity: Renewables growth outpaces fossil fuels appeared first on The Barrel Blog.
Source: BOE Report
Source: BOE Report
Source: BOE Report
Source: BOE Report
Source: BOE Report
The Canada Pension Plan Investment Board is forming a $3.8 billion joint venture with U.S. energy firm Williams Cos Inc.
The post CPPIB forms joint venture in Marcellus, Utica shales with Williams appeared first on Shale Gas Reporter.
Source: Shale Gas Reporter
Source: Oilprice.com