China's Shale Gas Subsidies Underpin Expansion of Gas Generation
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December 2012/January 2013 www.gastopowerjournal.com China's shale gas subsidies underpin expansion of gas generation Generous subsidies for shale gas developers, offered by China's ministry of finance, are intended to boost domestic gas production which may herald an ascent of gas generation in the nation’s energy mix. he Beijing government is target- coal-bed methane production is currently ing to add 40 GW from gas-fired subsidised with 0.2 yuan per cubic plants in the near future, as it meter. Additional funds may be provided Tfocuses on a cleaner energy pol- by local governments, the ministry said, icy. Just three percent of the electricity reserving the right to adjust subsidies at generated in China stems from gas-fired some point in the future. plants, yet given China's enormous size, China could become the “second this translates into as much as 33 GW of game-changer in a global shale gas gas sourced power, according to Wood revolution”, should it manage to tap its Mackenzie figures. geologically challenging unconven- The shale gas subsidies of 0.4 yuan tional gas resources which are esti- (6.4 cents) per cubic meter, to be paid mated to be far larger than shale gas for shale gas developed and consumed plays in the US, Fatih Birol, chief econ- between 2012 and 2015, come in at the omist at the International Energy top end of analysts' expectations, as Agency (IEA) forecast. Shale gas basins and pipeline system of China continued on page 5... UK: Launch of capacity markets is likely to prompt ‘dash for gas’ A 'dash for gas', triggering fresh investment in new power generation capacity, could follow the launch of capacity payment mechanisms. Chancellor George Osborne will unveil the much- awaited Gas Generation Strategy in his Autumn Statement on December 5. nder the new capacity payment sys- Capacity auctions will be held starting growth to be jeopardized by parts of the tem, power plant operators will get from 2014 for delivery of capacity in the government pursuing green targets. additional proceeds for making winter of 2018/19. A government-owned Reaching out to its coalition partner, the Ubackup capacity available at short company will act as a single counterparty Conservatives compromised by agreeing to notice on top of their earnings from selling for new long term Contracts for Difference cap subsidies for nuclear and renewables at electricity. The incentive scheme, which (CfDs), set to provide stable revenues for £7.6 billion in today's prices by 2020 under a comes on top of the £7.6 billion subsidy for investors in low carbon energy projects at "levy control framework". In return, energy nuclear and wind power, is expected to a strike price. secretary Ed Davey (Liberal Democrats) prompt investment in up to 20 new gas-fired An adamant supporter of the 'dash for gas', dropped a demand for a 2030 electricity sector power plants. Osborne says he does not want economic decarbonisation target. OMV aims to run Samsun CCGT on E.ON Generation targets Brazil, "CCS deployment will allow for more equity gas, start-up in H1-2013 manages gas fleet out of Coventry coal, gas to be used" – IEA analyst Pursuing a strategy of integrated gas use, The BRIT countries – Brazil, Russia, [India] Deployment of carbon capture storage (CCS) OMV aims to operate its 870 MW Samsun and Turkey – are what E.ON Generation has technology will allow for more coal and gas combined-cycle power plant project in Turkey singled out as growth markets, Jim Lightfoot, to be used says Sean McCoy, analyst at the in the long-term on 'equity gas', similar to the director fleet management Gas CCGT at E.ON International Energy Agency (IEA). new Brazi plant in Romania ... Generation. See page 3 See page 10 See page 6. Markets Re-dispatch: German power plant operators want full compensation Index ermany's federal energy network affected power plant operators will take legal China's shale gas subsidies underpin regulator (BNA) should urgently action against BNA's. expansion of gas generation - cover improve compensation for opera- Electricity transmission system operators, OMV aims to run Turkish Samsun CCGT Gtors of flexible power plants that which are fully unbundled from power genera- on equity gas, start-up in H1-2013 - page 3 have to ramp up or down to maintain grid sta- tors, increasingly intervene in power plant op- bility, the German energy industry association erations following the phase-out of 8 nuclear Interview: E.ON Generation targets Brazil, manages global gas fleet out of Coventry BDEW told Gas to Power Journal. power stations. This puts fossil capacity at cen- - page 4 The fierce criticism is tre stage to step in and cover unforeseen de- directed against BNA's mand swings at short notice. Tokyo Gas expands capacity as Japan turns new partial compensation "Even if our power grids face an increas- to gas generation - page 5 scheme. It is applicable if ingly tense state [to match supply and de- "CCS deployment will allow for more coal, no more than 0.9% of the mand], caused by policy intervention into gas to be used" – IEA analyst - page 6 plant's electricity output energy-only markets, it's now up to fossil InterGen advocates switch from OEM to produced in the previous power plant operators to pick up the tab," third party service for F-class turbines - page 6 Hildegard Müller year were affected by Müller criticised. In BDEW's view, operators Montana’s Mill-Creek 180MW FT8 SWIFTPAC interventions, when called whose power plants are called upon for OCGT plant is replicable in Europe - page 8 for re-dispatch at short notice to backup re-dispatch need to be fully compensated for Interview: Siemens to break ground in renewables. all costs and operating expenditures. Singapore for H-class turbines - page 9 The risk of power grid instability, following “No trace of appropriateness” the politically-motivated phase-out of 8 nuclear Gas To Power Journal 2nd Floor, 8 Baltic Street East "Instead of granting a fair and adequate com- power plants, had prompted BNA to set out London EC1Y 0UP pensation for thermal plant re-dispatch which new rules for power plant re-dispatch. United Kingdom is indispensable for grid stabilisation, the regu- www.gastopowerjournal.com +44 (0)20 7253 2700 lator has put disproportional burdens on plant E.ON to mothball 1,037 MW of Publisher operators," said BDWE head Hildegard Müller. gas-fired generation in Germany Stuart Fryer The new regulation will be enacted on German's largest utility E.ON confirmed it Editor December 17, whereby the federal regulator will shut-down 1,037 MW of gas-fired power Anja Karl only awards compensation for 'essential' power generation capacity, mothballing both the Tel: + 44 (0) 7017 3417 plant interventions and will only cover costs 622MW Staudinger 4 plant unit and the [email protected] that are inflicted as a result of the re-dispatch. 415 MW Irsching 3 unit by the end of this year. Advertising Under the new system, operators will receive The two power plants will operate as winter Narges Jodeyri Tel: + 44 (0) 7253 3406 only the marginal cost derived from the hourly reserve under a short-term contract with [email protected] Epex spot price. Tennet, once E.ON has transferred responsibil- Events This will not allow for additional profits, ity to the regulator BNA. Kamil Hussain sparking outrage from fossil power plant "We have to accept this might be the new Tel: + 44 (0) 7017 3404 [email protected] operators. normal," he said, referring to a 10 MW/h drop "There's no trace of appropriateness," in average German wholesale power prices and Subscriptions Stephan M. Venter Müller stressed, suggesting that it is likely that negative clean spark spreads. Tel: + 44 (0) 7017 3407 [email protected] Production Vivian Chee Tel: +44 (0) 20 8995 5540 Merkel calls for ‘capacity [email protected] Subscription solution’ by mid-2013 1 Year £95 No part of this publication may be reproduced or stored he German chancellor Angela Merkel by We will work on a national dialogue to pursue in any form by any mechanical, electronic, next summer aims to have parliament this without slowing-down the pace of expan- photocopying, recording or other means without the agreed on some form of market orien- sion," Merkel said following a meeting with prior written consent of the publisher. Whilst the tated capacity payment to underpin the country's 16 state leaders on energy in information and articles in Gas to Power Journal are T published in good faith and every effort is made to investment in new power generation capacity. Berlin. check accuracy, readers should verify facts and A regular leaders' meeting in December and Responding to a press query if this means statements direct with official sources before acting on them as the publisher can accept no responsibility in a special meeting in March, dedicated to Germany will introduce capacity payments, this respect. Any opinions expressed in this magazine Germany's Energiewende [energy transition] she remained rather vague, answering "not should not be construed as those of the publisher. policy, would specify and build on the progress necessarily", seemingly hesitant to give a Printed by: reached so far, she said. definite response that could rekindle a dispute Manson Group, Reynolds House, 8 Porters’ Wood "We need security of supply; we need rapid over a strategic reserve versus capacity market Valley Road Industrial Estate, St Albans, expansion of renewables, and bearable prices. scheme. Hertz AL3 6PZ 02 Gas to Power Journal Dec 2012/Jan 2013 Markets OMV aims to run Turkish Samsun CCGT on equity gas, start-up in H1-2013 Pursuing a strategy of integrated gas use, OMV aims to operate its 870 MW Samsun combined- cycle power plant project in Turkey in the long-term on 'equity gas', similar to the new Brazi plant in Romania which runs 100% on gas produced by the company's upstream arm, says Hans-Peter Floren, OMV board member responsible for gas & power.