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CARBON COMMENTARY NEWSLETTER

This is a weekly newsletter about low-carbon energy generation and efficiency. I summarise the blog posts I have published during the previous week and comment on news stories that have interested me in the last few days. Subscribe at www.carboncommentary.com.

Industry news

Things I noticed and thought were interesting

Week ending 27th January 2019
 
1, Hydrogen for making steel. Another major steelmaker made a commitment to decarbonisation. Germany’s Thyssen Krupp promised to move completely away from coal to melt the iron ore by 2050. Currently, steelmaking contributes about 40m tonnes of CO2 a year, about a third of total emissions from German industry. Hydrogen will be burnt to create pig iron which will then be remelted in electric arc furnaces. At the moment, hydrogen use is vastly more expensive than coal but German manufacturers are under pressure to show how they will move away from fossil fuel. Thyssen Krupp, also one of the leaders in the reuse of CO2, estimates the transition to hydrogen will cost over €30bn. The amount of electricity that will be needed to make the hydrogen and run electric arc furnaces will be enormous. Over the border in Austria, local steelmaker Voestalpine suggests that conversion to hydrogen at its main plant will need about 30 terawatt hours a year, or about 50% of today’s total Austrian use.
 
2, Microgrids and indoor farms. Indoor farms use large amounts of electricity in predictable patterns. They are prime targets for microgrid suppliers. Bowery, a New Jersey-based farm operator, is working with Schneider Electric to install a system which uses solar on the roof (but only for about 15% of total needs), a natural gas generator, batteries and, when necessary, grid supplied power. The microgrid will be able to reduce energy consumption at times of high prices. Schneider says that microgrids like this will typically save 20% to 30% on energy bills.
 
3, Fossil hydrogen buys into electrolysis. At some point, hydrogen manufacture will switch from using fossil fuels to employing electrolysis. This week saw an important point on that road. Air Liquide is one of the world’s largest producers of industrial gases, including hydrogen, almost all manufactured using conventional fuels. It bought a 19% stake in Hydrogenics, one of the world leaders in proton exchange membrane (PEM) electrolysis. Air Liquide said the transaction ‘strengthened its ability to offer competitive decarbonised hydrogen on a large scale’.
 
4, Funding energy efficiency. France has a programme to improve domestic energy efficiency and reduce CO2. The major energy market participants, EdF and Engie, announced measures to provide highly subsidised heat pumps, biomass stoves and efficient gas boilers to lower income groups. Other households can get, for example, a new gas boiler for €49 a month, payable over five years. The subsidies for the new installations come from surcharges on energy imposed on all consumers. The net effect of the French scheme is redistributive, benefitting less well-off households, of particular importance in the current political environment. This seems a good model for other countries to copy.

5, Coal use in India. Rapid expansion in electricity production, including a rise of over 5% in 2018, is causing Indian coal output to rise (up 10% in the latest period). Large numbers of new mines have been opened in the last five years with an extra capacity of about 160m tonnes. Indian solar PV grew by about 7 gigawatts last year, which will provide only about 1% of yearly electricity supply. The extra coal produced will have provided almost ten times as much new power production. By contrast, coal use in the US continued to fall, down about 4% last year.
 
6, Domestic batteries. BNEF said that global installed capacity of household batteries around the world would reach about 2.8 GWh by the end of 2019, double the level today. The rate of increase is staggering but 2.8 GWh is still only about a third of the capacity of the UK’s largest pumped hydro plant. Australia will be the most important market, with about 70,000 households acquiring a battery this year, or almost one in a hundred homes. If these batteries can typically discharge at 3 kW, they would be able to satisfy about 1 percent of Australian average demand. These figures may seem small but at the current growth rates domestic batteries – alongside the 20% of homes with PV – would rapidly remove the need for any form of ‘peaker’ generating stations if they can be instructed to charge or discharge by the electricity operators.

7, Concentrating solar power. China’s industrial strategy includes an emphasis on CSP. One recent paper suggests that the country has made cost breakthroughs similar to those it achieved with PV and wind. Projects completed in the last few months appear to have levelised costs of around 10 cents per kWh, including many hours of storage. This figure is estimated to be 40% below the costs in other parts of the world. By 2022, China will have installed as much CSP capacity as the whole world has previously built. After a series of pilot plants of 50 to 100 MW now being finished, larger scale plants will be used to drive down costs further. The country focuses on heliostat and tower designs, not the earlier parabolic troughs. Heliostat costs are coming down sharply, so this seems to make good sense.
 
8, Germany coal plan. High coal use has slowed Germany’s emissions reductions almost to a halt. Its 2020 target of 751 million tonnes will be missed by about 20%. The country finally announced a plan to cut coal use to zero by 2038, a timetable that impressed few. However in a survey last week for a public broadcaster, 73% responded that ceasing coal production in the ‘quickest possible way’ was is either ‘very important’ or ‘important’ to them. The majority in favour of stopping coal use crossed all political parties apart from the right-wing populist AfD. Other surveys have demonstrated similar results, but show that public opinion in coal-producing areas in the east of the country is against a rapid phase out of the fuel.
 
9, Cost of solar and wind. NextEra, a US utility that is one of the world’s largest developers of renewable energy said that the company sees ‘the beginning of the next phase of renewables development (that) pairs low-cost wind and solar energy with a low-cost battery storage solution'. With continued technology improvements and cost declines, we expect that without incentives, wind is going to be a $0.02 to $0.025 per kilowatt per hour product, and solar is going to be $0.025 to $0.03 per kilowatt hour product early in the next decade. Combining these extremely low cost with one-half to three-quarter cent added for a four-hour storage system, will create a nearly renewable generation resource that is cheaper than the operating cost of coal, nuclear and less fuel-efficient oil and gas-fired generation units.
 
10, Oil company advertising. Exxon ran a relentless campaign in the global business press in the second half of 2018 suggested the company was beginning to switch to algae as a source of oil. BP has copied the general idea, running dense advertising on media such as the Financial Times to give the impression that it is moving ‘beyond petroleum;’. According to the company’s Director of Brand 'the measure of success will be for people to play back that they see that BP are doing lots of things to contribute’ to energy challenges. In other words, the intention is to convince the observer that BP is actively involved in advancing low carbon technologies. As one example, the advertising gives a lot of coverage to a US low-carbon concrete business that has probably absorbed less than $10m of BP investment. The original investment in this company is not even mentioned on the company’s web site. Elsewhere BP has told us it will put just 1% of its worldwide capital investment into low carbon technologies this year. As with the Exxon advertisement, BP is misrepresenting its activities in order to reduce the pressure to move more rapidly away from oil and gas. (It isn’t just me; the UK’s leading media magazine gave the campaign the title of ‘Turkey of the Week’).
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