ISSUE 34 WINTER 2018
F RO M T H E E N E RGY I N D U S T R I E S C O U N C I L VIEW FROM THE TOP Minister of State for Energy and Clean Growth Claire Perry
ELECTRIC HIGHWAYS Are electrified roads the future of driving?
OIL AND GAS What does IMO 2020 mean for refiners and shippers?
RENEWABLES The skyâ€™s the limit with aviation biofuels
Transportation special Energy Focus looks at the new vehicles, fuels and regulations hitting the market and what it all means for the industry
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Contents ISSUE 34 WINTER 2018
FROM THE EIC
OIL AND GAS
24 Industry gets ready for global sulphur cap
35 Making virtual power plants a reality
Dina Abieva, Senior Downstream Analyst, EIC
From the Chief Executive
6 View from the top
27 Vision 2050: A roadmap for refiners
Claire Perry, Minister of State for Energy and Clean Growth
10 News and events
Stephen George, Chief Economist – EMEA and APAC, KBC
Updates from the EIC
14 The big question
We ask members: What does the future hold for the transportation industry?
29 On the road with LNG
16 Special report: Charting a course to sustainability
Energy Focus looks at Limejump
38 The next wave of power generation Wesley Tivnen, Managing Director, Power and Gas, Siemens
41 Powering the electric car revolution
Q&A Damien Gerard
Fiona Howarth, CEO, Octopus Electric Vehicles
Andrea Gerini, Secretary General, Natural and bio Gas Vehicle Association Europe
Jeremy Bowden on what it will take to make shipping sustainable
20 Could electrified roads be the future of driving?
Damien Gerard, Commercial Director, OGCI Commercial Investments
Lucy Woods on charging up electric highways
Making nuclear work
50 My business Dean Rossiter, Transcar Projects
42 Making nuclear new build an investment vehicle
Vincent Zabielski, Senior Lawyer – Energy, Pillsbury Winthrop Shaw Pittman
45 The role of nuclear in a low-carbon Europe
Tim Yeo, Chairman, the New Nuclear Watch Institute
46 Renewable jet fuels take off
Neville Hargreaves, Vice President – Waste-to-Fuels, Velocys
Second generation biofuels
48 Advancing biofuel technologies
Vijay Swarup, Vice President of Research and Development, ExxonMobil
The Energy Industries Council 89 Albert Embankment, London SE1 7TP Tel +44 (0)20 7091 8600 Email email@example.com Chief executive: Stuart Broadley Should you wish to send your views, please email: firstname.lastname@example.org
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For sales and advertising please contact Tim Cariss +44(0)7759 463456 email@example.com Energy Focus is online at energyfocus.the-eic.com ISSN 0957 4883 © 2019 The Energy Industries Council
Energy Focus is the official magazine of the Energy Industries Council (EIC). Views expressed by contributors or advertisers are not necessarily those of the EIC or the editorial team. The EIC will accept no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this publication.
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Foreword Stuart Broadley CEO
From the Chief Executive: Our 75th year was one of our busiest to date and 2019 is shaping up to be just as exciting Happy New Year to all our readers! I hope your holidays were relaxing and that 2019 is off to a good start. This time of the year inevitably brings with it reflections on the year past as well as contemplation of the one to come. Looking back on the previous 12 months, I think I can safely say that it was one of the busiest and most memorable years in the EIC’s long history. In 2018 we hit the grand old age of 75 and to celebrate this remarkable milestone we held anniversary events all over the world: Afternoon Tea at the House of Lords, courtside seats at the Houston Rockets, dinner aboard the QEII in Dubai, events with members including Costain and Emerson, and many charity fund-raising activities, most notably the 600-mile cycle challenge from Aberdeen to London. While being a lot fun (perhaps not the word the EIC cyclists would choose) our 75th anniversary activities also raised almost £15,000 for two very worthy charities: Cancer Research UK and The Ocean Cleanup. In addition to our 75th celebrations, we also squeezed in another 130 EIC events worldwide, not to mention launching a whole host of new and upgraded business development tools, all designed to enable our members to win work on energy projects around the globe. Once again, we took our EIC Connect model on the road and held five highly successful events in Malaysia, the UAE, the UK, the US and Vietnam. Our CAPEX project database, EICDataStream, continued to grow, hitting 8,500 projects worth collectively over US$10tn. Likewise, its OPEX
counterpart, EICAssetMap, extended its reach from the UK into Norway, Brunei, Malaysia, Singapore, Bahrain, Kuwait, Oman, Qatar and the UAE. Saudi Arabia is next! At ADIPEC, we broke our record for the largest UK pavilion we’ve ever hosted anywhere, at a staggering 1,056sq m. Among lots of other global conferences and exhibitions, we also managed the UK pavilion at WindEnergy Hamburg. Taking part in renewable events is something we’ll be doing a lot more of. Recognising the growing importance of this market, we launched an EIC Renewable Energy Membership category. We also unveiled Overseas Primary Membership options for the Americas, Asia Pacific and EMEA for those companies focused on these regions. We took overseas delegations to Kenya, Mozambique, South Africa and Uganda. These are a really great way to meet a country’s key players as well as potential local partners in a supportive environment with the agenda and logistics taken care of for you. While I can’t cover everything here – there just isn’t enough space – you get the idea; 2018 was a phenomenally busy year. And 2019 is shaping up to be just as exciting. In March, the Fit4Energy programme starts. This new course, developed in partnership with Robert Gordon University and Opportunity North East, will provide companies of all sizes with the knowledge, network and tools needed to scale-up their operations. A Fit4Energy approval lets operators and international clients know that you have the processes, procedures and strategies in place to deliver large international projects. If mid-March is a bit too soon for you, new cohorts will start in June and September. To find out more:
www.rgu.ac.uk/business-innovation/ business-services/fit4energy We’ll continue to take EIC Connect around the world, starting with Mexico on 19 February, Vietnam on 12 March, Abu Dhabi on 16 April, Thailand on 16 May, Manchester on 10 September and Houston on 26 September. Perhaps the most exciting thing on the horizon though is the first-ever Energy Exports Conference, which the EIC is organising with many industry collaborators. Shaping up to be the biggest-ever EIC event to date, we’re bringing over 20 international energy companies to Aberdeen to discuss over US$150bn of projects which require UK content. Whether you’re a first-time or experienced exporter, make sure 18–19 June are blocked out in your calendars as this is one event you won’t want to miss. Please visit: https://exportsconference.energy Anyhow, that’s all to come. For now, on behalf of the EIC, I wish all our members and readers the very best for 2019.
Stuart Broadley EIC CEO email@example.com
www.the-eic.com | energyfocus
From the EIC Q&A Claire Perry
View from the top
Q&A: Claire Perry Minister of State for Energy and Clean Growth
Meeting our Climate Change Act commitments will require decarbonising transport, nearly all heat in buildings and most industrial processes
6 energyfocus | www.the-eic.com
Q&A Claire Perry: From the EIC
Claire Perry, Minister of State for Energy and Clean Growth, talks to Energy Focus about how the UK is leading the way to a low-carbon future
What progress have you seen since the release of the Clean Growth Strategy in late 2017? We have made impressive progress. Notable highlights include the creation of the world’s first floating offshore wind farm in Scotland; certainty for the renewables sector with new auctions to deliver between 1 and 2GW of offshore wind each year in the 2020s; and the Prime Minister announcing that we will at least halve the energy use of new buildings by 2030. Government investment in low-carbon innovation has already led to falls in the costs of renewable energy, such as offshore wind. The UK has the potential to become a world leader in a range of new technologies, which is why we are investing £100m in industrial energy and carbon capture, usage and storage (CCUS) innovation to 2021, on top of £365m invested since 2011. Our first Green GB Week was held in October 2018 and it was impressive to see UK-based businesses committing to take new, significant action on tackling climate change – from investing hundreds of millions in energy infrastructure to switching to 100% renewable providers. We must continue to build on this progress. How will the government help deliver the objectives of the Clean Growth Strategy? More than 50% of UK electricity came from low-carbon sources in 2018, making it a record year for renewables. This was made possible by the government’s commitment to put clean energy at the heart of its Industrial Strategy. We also saw the world’s biggest offshore wind farm open off the coast of Cumbria; there are plans for even bigger facilities in the pipeline, and we are working on a sector deal for the industry to secure investment into this growing market. We committed to work towards having the project up and running from the mid-2020s, alongside £170m for the world’s first net-zero carbon cluster of heavy industry by 2040. We hope to build on this during the next year, driven by the Climate Change Act, which holds us to stringent climate targets. This framework for tackling climate change, along with our Industrial Strategy, has created the right conditions for a stable policy environment and
underpins investor confidence – providing the impetus for clean growth in the UK economy. What more would you like to see from the industry and its supply chain to help you achieve your objectives? The UK still requires concerted action across the economy, including further decarbonisation of the power sector. Meeting our Climate Change Act commitments will require the decarbonisation of transport, nearly all heat in buildings and most industrial processes. This will involve major transformation to energy systems and transport networks. We want to see industry collaborate across all sectors to ensure this transition is smooth. We are looking for industry to come to us with clear plans on how it might use technologies such as CCUS to reduce carbon emissions by creating clusters of energyintensive industries with a shared vision to decarbonise. We have come a long way, but to go further this needs to be a joint public and private sector endeavour. What is the biggest challenge in decarbonising heat? Our recent report, Clean Growth: Transforming Heating, sets out key issues and areas that require further exploration to inform the development of a new long-term policy framework for heat. Widespread use of electric heating, or low-carbon hydrogen for heat, could deliver the emissions cuts we need to achieve our 2050 targets. Biogas can also play a role. But we need to prove the safety and feasibility of hydrogen, understand the systems impacts and generation needs of the options, and work out how to transition nearly 30m homes, as well as businesses and industry, to low-carbon heating technologies. Reducing heat demand through initiatives such as the £18m Industrial Heat Recovery Support Programme and the £315m Industrial Energy Transformation Fund, as well as improving energy efficiency, will be a major stepping stone in this process. The challenge is understanding which options are to be pushed ahead with today, and where we need to keep our options open. That’s why energy efficiency, particularly in the home, needs to be a priority.
About Claire Perry The Rt Hon Claire Perry was appointed Minister of State at the Department for Business, Energy and Industrial Strategy on 12 June 2017. She was elected Conservative MP for Devizes in 2010. Before becoming an MP, Claire worked for the Bank of America, McKinsey and Company and Credit Suisse and also started her own small company offering financial advice for women. Claire Perry was educated at Nailsea Comprehensive School, Oxford University and Harvard Business School where she received a MBA.
www.the-eic.com | energyfocus
From the EIC: Q&A Claire Perry
More than 50% of UK electricity came from low-carbon sources in 2018, making it a record year for renewables
There are almost 400,000 people working in low-carbon businesses and their supply chains across the UK
How do you respond to concerns that the £60m allocated to the next contracts for difference auction is too low? Today the UK is a world leader in offshore wind – which makes it hard to believe that, 20 years ago, we generated nothing from this natural resource. Last July, I set out how offshore wind and remote island wind providers, and other renewable electricity generating technologies, can bid for contracts to power more than 4m homes, from Cornwall to the Shetland Isles. These clean electricity auctions will be held in 2019 and every two years from then on, signalling support worth up to £557m for industry. Up to £60m of annual support will be available for the delivery years 2023–24 and 2024–25, which could produce at least 4GW of new renewable energy generating capacity – more than the 2017 auction, which awarded £176m to 11 schemes totalling 3.3GW. With each round of competitive auctions, the strike price of offshore wind has reduced as the industry has developed and is able to leverage economies of scale, a growing supply chain and advances in wind turbine technology – creating opportunities for local contractors and service providers, as well as manufacturers. The private sector must match our ambition to seize the industrial opportunity present in the move to a greener economy. As the industry continues to thrive, the cost of energy generation is driven down – and so too is reliance on the taxpayer to help the sector grow. In the next round I expect to see a competitive auction that will further decarbonise our electricity system and continue to deliver value for money for consumers. How is the government helping UK clean energy suppliers to realise their ambitions for global growth? There are already almost 400,000 people working in low-carbon businesses and their supply chains across the country, and the UK’s low-carbon economy has the potential to grow up at to four times the rate of GDP growth by 2030, supporting up to 2m ‘green collar’ jobs and generating £170bn of annual exports. The UK is already seen as the place to invest, and government support for innovative start-ups and research (through the Industrial Strategy Challenge Fund and more than £2.5bn of investment in low-carbon technology) provides businesses with the impetus they need. From the inventors of tiny robots that install underfloor insulation to innovators looking at new ways to heat our homes, those wishing to reap the rewards from the shift to a low-carbon economy know they can come to the UK. What is the government doing to support the decarbonisation of the UK oil and gas industry? Oil and gas will continue to play a significant role in meeting the UK’s energy needs. Innovative technologies
8 energyfocus | www.the-eic.com
such as CCUS will be essential to decarbonise our heavy industries and could play an important role in a future low-carbon hydrogen economy. The oil and gas sector will be integral to this transformation, bringing its expertise and problem-solving energy to these technological challenges, ensuring that the existing skills and infrastructure are retained in the UK. This is why we have invested more than £365m in CCUS since 2011, investing £45m in CCUS innovation and launched a CCUS Action Plan in November 2018. CCUS provides an economic opportunity to oil and gas operators and the supply chain, as well as a technology that is helping to tackle the hard-to-decarbonise sectors of the economy, which includes the oil and gas industry. With the feed-in tariff (FIT) scheme being scrapped in April 2019, what is next for small-scale solar? The FIT scheme has overachieved on its original objectives, outstripping installation predictions by nearly 100,000, with more than 830,000 solar installations producing enough power for 2m homes. However, the FIT scheme is funded through levies on suppliers, and ultimately consumers, regardless of whether they directly participate in the scheme. It is right we look to protect consumers and adjust incentives as costs continue to fall – with solar prices falling by 80% – and as such we believe it is the right time to close the scheme. However, we have been clear that we do not believe that electricity exported to the grid from small-scale generators should be provided for free. The Smart Export Guarantee scheme looks to harness the technology of smart meters to make more transparent and real-time payments to homes and businesses who are exporting excess energy back to the grid. As well as helping with bills, the scheme aims to play an important role in our transition to a smarter, more flexible energy system. What’s the outlook for nuclear new build in the UK? The government believes that nuclear power has an important role to play in our energy system as we transition to a low-carbon society, with nuclear energy already providing around 20% of UK electricity. It is the only technology that is currently proven on a sufficiently large scale to provide continuous low-carbon power. However, we have been clear that no technology will be pursued at any price, and these projects must represent value for money for taxpayers and consumers. We also recognise the potential for the UK to become a world leader in developing the next generations of nuclear technologies. To help enable the development of small reactors, the government outlined a new framework in our £200m Nuclear Sector Deal, designed to encourage industry to bring technically and commercially viable small reactor propositions to a vibrant UK marketplace.
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news&events introduce members to regional energy markets and their major players.
Worldwide business support
About the EIC Established in 1943, the EIC is the leading trade association for companies working in the global energy industries. Our member companies, who supply goods and services across the oil and gas, power, nuclear and renewables sectors, have the experience and expertise that operators and contractors require. As a not-for-profit organisation with offices in key international locations, the EICâ€™s role is to help members maximise commercial opportunities worldwide. We do this in a variety of ways: 10 energyfocus | www.the-eic.com
Enabling members to expand into markets across the globe
Helping members to track global energy projects and assets Our projects database, EICDataStream, provides extensive information on more than 8,500 active and future projects in all energy sectors. By tracking full project lifecycles from feasibility to construction and then completion, it helps members to identify opportunities and plan their business development strategies. Our operations and maintenance database, EICAssetMap, puts the details of more than 4,000 energy facilities across Asia Pacific, Europe and the Middle East at your fingertips.
High-profile international events Connecting members with buyers and partners The EIC hosts flagship industry events that bring together supply chain companies with global energy contractors and operators, and bespoke events that keep members informed about projects, sector developments and markets. Our overseas trade delegations and EIC-run pavilions at international exhibitions
Member companies who want to do business outside the UK can rely on our global network of offices to provide regional market knowledge, one-to-one advice and practical support. We also provide virtual and rental offices, and facilities for hotdesking, meetings, conferences and corporate events.
Business intelligence Keeping members informed and raising their profile
We help our members to stay connected with the world of energy through informative online news, e-bulletins, market reports and industry publications. Our comprehensive directory of member supplier services is also a useful resource for operators and contractors.
Enhancing membersâ€™ skills and knowledge Our quality courses, which can be delivered off-site or in-house, are led by highly experienced trainers with industry backgrounds. We tailor our training to suit a variety of levels and also work with member companies to run programmes, some of which include tours to manufacturing companies.
From the EIC News and events
EIC Country Report: EIC Country Report: Malaysia Germany The energy industry is a major part of the German economy and opportunities are available across all sectors. The country’s decision to phase out nuclear power has made global headlines and is attracting the attention of nuclear decommissioning specialists, who will be in high demand, as Germany carries out an unprecedented nuclear decommissioning programme. While heavily reliant on coal for much of its power, Germany plans to wind down its mining operations, filling the energy gap with clean sources – most notably offshore wind – offering an abundance of opportunities for experienced UK suppliers to this rapidly growing technology.
One of the fastest growing economies in Asia Pacific, Malaysia is aiming to turn its abundant natural gas reserves and strategic location on the South China Sea to its advantage and establish itself as an LNG exporter and regional petrochemical hub. The country is looking to foreign investment and technology to maximise the value of its mature and marginal fields, as well as take part in the decommissioning of almost 300 wells, 50 pipelines and 38 platforms. Both reports highlight the major projects in planning and under development across the oil and gas, power, nuclear and renewables sectors, the operators and contractors working on these, and key business considerations for those companies thinking about entering these markets.
Malaysia is aiming to turn its abundant natural gas reserves and strategic location on the South China Sea to its advantage and establish itself as an LNG exporter and regional petrochemical hub
EIC Country Reports are free of charge to EIC members or £195 for nonmembers, please visit www.the-eic. com/Publications/MarketIntelligenceReports to download your copy.
W NEORTS P E L RE NOW B LA I A AV
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EVENTS COMING UP
The EIC Middle East golf tournament When: 21 February 2019 Where: The Els Club, Dubai Why attend? Work on your drive in the company of fellow Middle East energy professionals at the one of the region’s most popular golfing destinations. Designed by golf legend Ernie Els, the holes incorporate a fusion of features from some of the best links courses around the world, in particular those in the UK – personal favourites of Ernie’s, where he’s won of two of his four major championships.
We top and tail the day with meals, starting with breakfast, and closing the day with a barbecue and prize-giving ceremony. Book your team’s place on this always fun day out of the office by visiting: www.the-eic.com/ EventDetail?dateid=2235 Our thanks to Triplefast Middle East for its support of this event.
When: 11–13 February 2019 Where: Cairo Why attend? Launched in 2017, the Egypt Petroleum Show (EGYPS) has quickly become one of North Africa’s most important oil and gas events. Given the huge developments taking place in the country’s oil and gas sector, which will soon see it become a natural gas exporter, it’s no surprise. EGYPS brings together Egyptian and North African government representatives, key project owners, national and international oil companies, international service providers, EPC contractors, consultants and financers. Simply put, if you want to do business in this rapidly growing market, it’s the place to be. The UK pavilion at EGYPS 2019 will be the first of many we’ll be managing at worldwide energy events throughout 2019, including ADIPEC, Offshore Europe and OTC.
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For the full list of exhibitions where we’ll be flying the flag for the UK, please visit: www.the-eic.com/Events/Exhibitions
EIC Connect Mexico Energy Forum
When: 19 February 2019 Where: Mexico City Why attend? We take our flagship EIC Connect model to Mexico for the first time ever. Since the North American country’s historic energy reform in 2013 broke Pemex’s
12 energyfocus | www.the-eic.com
monopoly on Mexico’s oil and gas industry, opening it to foreign investment, international oil companies and contractors have been queuing to enter the market. The first auctions of oil and gas blocks have proven successful, and newly elected President López Obrador has committed to continuing the tender process, with around 500 more blocks up for grabs over the next five years. The auctions have already led to successful finds, most notably the Zama discovery, offshore Tabasco, by a consortium
of Mexico’s Sierra Oil & Gas, the US’ Talos Energy and the UK’s Premier Oil. With up to 2bn barrels of recoverable resources, Zama has been described as one of the largest shallow water finds in the past two decades. During the day you’ll have the opportunity to hear from and take part in private one-to-one meetings with buyers from , BP, BHP, Jacobs, McDermott and Schlumberger. For more information and to book your place, please visit: www.the-eic.com/ EICConnect/MexicoEnergyForum
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From the EIC Members’ comment
What does the future hold for the transportation industry?
Transforming the transport sector is crucial to limiting the worst effects of climate change. With the industry in transition, Energy Focus asks three members what lies ahead
continue to enable modern transportation and advance human wellbeing across the globe.
Marion Burlak Senior Strategic Marketing Manager at Honeywell UOP As the largest source of fuel for meeting global transportation demands, hydrocarbon fuels will be vital to the energy economy for the foreseeable future. Through 2035, demand for fuels is projected to grow at an average rate of 1%, requiring an additional 6MMbbl/d of gasoline, diesel and jet fuel. This growth is driven primarily by emerging economies and vehicle fleets, which are expected to double in the next decade. The continued push for clean fuels, specifically ultra-low sulphur, high octane and renewable fuels, will have a considerable impact on the global refining industry and the future of transportation. The environmental advantages from these fuels, such as reduced nitrogen oxides and carbon monoxide emissions, have a measurable impact on human health in densely populated regions and allow for greater fuel efficiencies, providing an economic benefit as well.
14 energyfocus | www.the-eic.com
The push for clean fuels will have a considerable impact on the global refining industry and the future of transportation However, these fuels require complex refining processes, and while much investment has been made during the past decade, more capacity to produce these clean fuels is needed. This can be seen to a great extent with the upcoming ultra-low sulphur requirement for marine fuels. With insufficient refining capacity to treat traditional bunker fuels, the shipping industry will be forced to fill the gap with diesel, increasing diesel demand in 2020 by 1.4MMbbl/d. Refiners able to increase diesel yields during this time will be at a clear advantage, able to monetise these demanddriven higher prices. With these environmental advancements and clear economic advantage, fuels will
Honeywell UOP is a leading international supplier and licensor of process technology, catalysts, adsorbents, equipment and consulting services to the petroleum refining, petrochemical and gas processing industries. Honeywell UOP is part of Honeywell’s Performance Materials and Technologies strategic business group.
Nick Brown Marine & Offshore Director at Lloyd’s Register IMO 2020 will bring with it commercial and operational opportunities and risks. Regarding tanker employment and charter rates across ship types, we see likely upsides as vessels are taken out of service for modifications to tank arrangements or
Members’ comment: From the EIC
scrubber installations. Commercially, there will need to be significant discussions between charterers and tonnage providers. The availability of compliant fuel will be there – it’s just a matter of what you have to pay for it. Straight distillate, blended fuel or a derivative bleed-off from the refining complex will all come at a variable price. A closely integrated fuel procurement process will also be needed to ensure what’s purchased is used correctly onboard, given the increased variability of compliant fuel compatibility. If using scrubbers, fuel buyers should ensure they have long-term contracts in place to secure high-sulphur fuel oil supply. We also recommend a focus on crew training and bunker purchasing department awareness. Lloyd’s Register’s own testing of the new fuels, via our fuel oil bunker analysis and advisory (FOBAS) specialists, shows reasons to be optimistic and we remain very busy today supporting shipowners and managers around the world in the development of their new fuel management plans. While the challenges posed by the 2020 fuel change are not to be underestimated, the industry can tackle these with a sense of confidence if sufficient planning, preparation, stakeholder engagement and proactive fuel change management is implemented.
Kevin Walsh UK Sales Director at LV Shipping The challenges facing the shipping and logistics sector range from the more immediate implications of Brexit (the final make-up of which is still unclear at time of writing) to the ever-changing nature of shipping consortia, and of course the evolving role that technology, IT, blockchain and so on play in the world of international shipping and transportation. Of course, with challenge comes opportunity, and as a Dutch-owned company we are in regular dialogue with our colleagues on the continent, discussing ways we can prevent Brexit from having an adverse effect on our clients. For instance, we will be taking advantage of the Netherlands’ favourable customs regime via the system of limited fiscal clearance. With an increasingly global footprint, we are able to stay in close contact with shipping
lines and airlines, and to keep track of the shifting alliances and networks that are developing in light of recent consolidation within the industry, particularly where ocean freight is concerned. This enables us to continue to offer our clients in the energy sector the best service options available for their cargoes, along with competitive pricing based on our global volume purchase with carriers. Our own IT systems are keeping up with the fast-moving pace of technology in the industry, from being able to offer digital ports of discharge to transparent track and trace facilities that allow our clients to easily see the progress of any of their given shipments, via rail, road, sea or air.
LV Shipping is a well-established freight forwarding and logistics services provider with a special focus and expertise on projects in the energy sector including oil and gas, wind and biomass. In addition to 11 UK branch offices and 200+ staff, the company has offices in Azerbaijan, Brazil, the Netherlands, Indonesia, Saudi Arabia, Singapore and the US.
TRANSPORT DEMAND CONTINUES TO BE DOMINATED BY OIL
The availability of compliant fuel will be there – it’s just a matter of what you have to pay for it
The transport sector continues to be dominated by oil, despite increasing penetration of alternative fuels, particularly natural gas and electricity. Oil will account for 85% of total transport fuel demand in 2040, down from 94% currently. *Other includes biofuels, gas-toliquids, coal-toliquids and hydrogen.
Billion tonnes of oil equivalent 3.5 3 2.5
Other* Electricity Gas Oil
2.0 1.5 1.0 0.5 0
www.the-eic.com | energyfocus
Source: BP Energy Outlook 2018 edition
Lloyd’s Register started out in 1760 as a marine classification society. Today, it is one of the world’s leading providers of professional services for engineering and technology – improving safety and increasing the performance of critical infrastructures for clients in over 75 countries worldwide.
Global demand for both passenger and freight transport services will more than double by 2040.
Special report Sustainable shipping
Charting a course to
sustainability The backbone of world trade and globalisation, shipping is facing significant pressure from increasing environmental and climate regulation. Jeremy Bowden asks: what will it take to make shipping sustainable?
16 energyfocus | www.the-eic.com
Sustainable shipping: Special report
ith COP24 in Poland last December, climate change remains high on the agenda, and that includes emissions from shipping. International trade relies on shipping for about 90% of its freight transport, generating about 3% of total global greenhouse gas (GHG) emissions. Despite technological improvements, emissions continue to increase as trade increases. So far, efforts to decarbonise the sector have been limited, but in April 2018, the International Maritime Organisation (IMO) made its first commitment to reduce carbon emissions, with a cut of 50% from 2008 levels now targeted for 2050. Christos Chryssakis, Business Development Manager at EIC member company DNV GL – Maritime, noted that shipping was the first sector to have targets applied on a global basis by its own governing body. Because of its international nature, shipping is not included in the UN’s COP
The shipping industry accounts for
of global trade emits about
1bn tonnes of CO2 annually
could contribute up to
of global CO2 emissions by 2050 if left unregulated contributes
of total GHG emissions
negotiations and the IMO’s move is likely to mean it stays that way. ‘The IMO is to establish a greenhouse gas study in 2019 and that will tell us how much closer to the [50%] target we are,’ he said. The IMO has also committed to a 40% improvement in CO2 intensity (a measure of ship and fuel efficiency) by 2030, compared to 2008, and a 70% improvement by 2050. Only two countries objected to the April deal: the US and Saudi Arabia. Mr Chryssakis said about half the 40% efficiency improvement had already been achieved, so the sector was currently on target to achieve its 2030 goals. ‘Vessels built now are much more efficient than in 2000 or 1990. The less efficient vessels will be out of the fleet by 2030,’ he said. Many of the improvements are being driven by minimum efficiency standards for new vessels. ‘Slow steaming also reduces fuel costs, and cuts emissions – and has been a major contributor to cuts so far.’ He said advanced data analytics would contribute to the efficiency improvement by picking the best vessel routes and speeds, or even suggesting when an engine should be stopped. Other new technical developments that improve efficiency include advanced paints to cut drag. And for calmer, short-haul journeys there are also advances such as the rotor-sail, which was developed by Finland’s Norsepower, and can cut fuel consumption by up to 20%.
Lower sulphur In addition to its CO2 targets, the IMO is introducing challenging 0.5% sulphur rules for marine bunker fuel globally from 2020 (down from 3.5% now, although much of Europe is lower already). This is expected to lead to major changes in marine fuel use, as lower sulphur fuel oil and marine gas oil become far more expensive and high sulphur fuel oil (currently the dominant fuel) is no longer an option on its own, unless an exhaust gas cleaning system, a scrubber, is installed. While more sustainable alternatives like liquefied natural gas (LNG), biofuels and hydrogen, will become relatively cheaper, Mr Chryssakis said most shippers would first look at the cheapest option to meet the sulphur limits, which in many cases is installing scrubbers. Scrubbers remove sulphur and other impurities, but do not cut CO2 emissions, which may actually rise as scrubbers require the use of a lot of auxiliary
Advanced data analytics could contribute to efficiency improvements by picking the best routes and speeds, even suggesting when an engine should be stopped equipment. The vessel may also use fuel less efficiently as high sulphur fuel oil is cheaper. Shipping is tough to decarbonise because it is difficult to use electricity (which is relatively easy to decarbonise) for all but the shortest routes, due to the battery size and weight. There are a few short-distance ferries in Norway, but they can recharge after each crossing. Longer distances require hybrids, which combine power and liquid fuels – for example, Norway-Sweden ferries and Stena lines from Sweden to Denmark. Globally the number of hybrids has risen from none a few years ago to 250 vessels currently, according to DNV GL.
LNG as a bridging fuel In the absence of green electricity or a cheap zero-carbon alternative, using LNG as a marine fuel cuts some CO2 emissions, removes sulphur oxide and reduces nitrogen oxides impurities. So, this, combined with hybrids and further improvements in efficiency, is expected to be where the most progress in lowering the carbon intensity will be achieved in the short to medium-term. ‘Electricity is helping at the margin, otherwise more energy efficiency and cleaner fuels are needed,’ said Mr Chryssakis. ‘We think LNG will play a significant role. But the problem with LNG is that it only reduces CO2 emissions by about 25%. This is welcome but not enough – it’s a medium-term solution… liquefied petroleum gas is also interesting. But as we get closer to 2050, we will need to be more radical – including biofuels and synthetic fuels, which are currently very expensive.’ The first LNG vessel was launched in 2001 in Norway, with government support. www.the-eic.com | energyfocus
Special report: Sustainable shipping
According to DNV GL’s database, the number of LNG-powered ships rose to 21 in 2010, and now stands at 133 LNG in operation, with another 140 on order – not counting LNG carriers. The transition will have to be through new builds as it is difficult and costly to convert ships to LNG, according to DNV GL, apart from those designed with an ‘LNG-ready’ option where conversion is relatively easy – of which there are 130 ships worldwide. Mr Chryssakis said larger container vessels were now switching to LNG, rather than just smaller ones as was the case previously. To enable the switching, it is essential to establish the LNG infrastructure needed for convenient use. The UK already has three LNG import terminals – Dragon and South Hook in Wales, and Isle of Grain in Kent – and there are plans for more bunkering facilities. And in Germany, the government recently reversed its long opposition to LNG imports and gave financial backing to the country’s first LNG import terminal. It will also build a network of small-scale LNG bunkering facilities, with LNG expected to become key to reducing shipping emissions. The EU also plans to spend almost €2bn on LNG infrastructure for waterborne transport over the next 10 years. Nevertheless, the International Chamber of Shipping recently warned that capital costs, limited infrastructure and the IMO’s long-term strategy could restrict the role of LNG as a shipping fuel. This is because shippers are likely to initially just focus on sulphur reduction, and then may switch directly to a zero-carbon option – rather than going through an intermediate LNG stage.
IMAGES: ISTOCK / SARAH AULD /NOUN PROJECT
Longer-term options Looking beyond 2030, Mr Chryssakis said the 2050 target would require lower-carbon or zero-carbon fuels. These would need to be developed outside or in partnership with other industries. For example, if biofuels were to be used, then their low-carbon credentials needed to be established by producers outside the shipping sector. The mixing of biofuels into conventional marine fuels was only first permitted in 2017,
18 energyfocus | www.the-eic.com
Shipping is tough to decarbonise because it is difficult to use electricity for all but the shortest routes, due to the battery size and weight
Making shipping sustainable. What are the options available? C hanges in operational practice including slow steaming (ships operate at slow speeds, reducing their fuel consumption considerably), reducing port calls and route optimisation
C hanges in technical measures including optimising the design of the vessel, engine and propellers as well as waste heat recovery
R enewable energy, in particular
innovative wind propulsion technologies. Notable examples of work include Cargill and Wessels trialling of kite systems, and the experience of Enercon and Norsepower who have both installed different high rotor designs on ships.
Energy storage through the use of batteries and cold ironing (onshore power supply). This would reduce emissions while ships are berthed in port by providing power from shore-side electricity rather than onboard auxiliary generators
S witch to lower carbon fuels such as LNG, biofuels and hydrogen
at a maximum of 7%, and it still only represents a tiny fraction of sales. Mr Chryssakis said the main challenges to biofuel use were the long-term sustainability and availability of the fuels themselves, and the risk of clogging fuel filters. He also noted that road fuels had minimum biofuel content rules, which pushed up prices. ‘If the IMO imposes minimum biofuel content levels, it could work. It would have to come through regulation… Most likely, the EU will not impose it unilaterally, but it might put pressure on the IMO.’ Hydrogen is also an option if it is produced using green electricity. However, it requires a large fuel storage space onboard the ship, which decreases range and means vessels must refuel more frequently. DNV GL said three vessels would soon be using compressed hydrogen, including the HySeas III ferry in Orkney (which will use hydrogen produced using surplus wind and tidal power), and another in San Francisco. They are small ships but could prove the technology and lead to future expansion. Most vessels are designed to last 40 years or more, which makes decarbonising the shipping sector a mammoth task that will take many decades to achieve. The process has already begun, but so far high oil prices and falling sulphur limits have been the main driver of change. It may take more severe carbon intensity regulation to meet the CO2 targets that lie ahead.
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Feature Electrified roads
(Left) Siemen’s eHighway, which powers trucks via overhead electric cables, is already being demonstrated in Sweden and California. Trials in Germany and Italy will follow (Right) eRoadArlanda’s technical solution transfers energy from a rail in the road to the vehicle, using a movable arm
Could electrified roads be the future of driving? As several new field trials have demonstrated, hitting the open road and never having to refuel could soon be a reality for drivers, writes Lucy Woods
IMAGES: SCANIA CV AB/ EROADARLANDA
magine never having to stop and refuel. No more sighing at volatile fuel prices or suppressing environmental guilt every time you need to refill the tank. Or, for electric vehicle (EVs) drivers, imagine never needing to plan trips around infrequent charger locations, or never having to wait up to two hours for a battery recharge. Innovators across the globe are testing a solution that could replace petrol pitstops, as well as removing range anxiety and lengthy charging waits for those with EVs: electric highways. According to EV analyst Aurora Energy Research, EV numbers in the UK will rise from an estimated 140,000 in 2018 to 17m by 2040. Millions of EVs require millions of charging stations; Aurora predicts that, by 2040, as many as three million chargers will be needed. Electric highways would reduce this need.
20 energyfocus | www.the-eic.com
Electrified roads would also reduce the need for big, expensive batteries. ‘If you electrify the roads you don’t need a huge battery – which is about half the cost of EVs today,’ says Hans Säll, Head of Business Development at the Nordic infrastructure designer NCC Infra and CEO of development company RUAB, which heads the eRoadArlanda project. There are two types of electric highway being tested today: wireless and contact.
On-the-go wireless charging This concept has been proved theoretically viable by tests such as the Massachusetts Institute of Technology’s 2007 wireless powering of a lightbulb, and Stanford University’s 2011 successful wireless EV charging demonstration. However, when applied to mass motor transit, ‘it sounds cool, but the cost is high
If you electrify roads, you don’t need a huge battery – which is about half the cost of EVs today
Electrified roads: Feature
www.the-eic.com | energyfocus
Feature: Electrified roads
– at least when compared to stationary chargers,’ says James McKemey, Head of Insights at UK electric charger installer and designer Pod Point. Charging of any kind also emits heat: just as laptops and phones heat up, wireless EV charging on large stretches of publics roads would emit a lot of heat. ‘If you have high voltage, and lots of chargers, that heat could become an environmental hazard,’ says McKemey. ‘I love the idea, but practically speaking, wireless is less feasible than other charging technologies.’ Highways England, the maintenance provider for England’s roads, halted its wireless charging tests this year, seemingly sharing McKemey’s hesitation. According to a spokesperson, the study is on ‘pause’ until later this year, when the results of an off-road wireless charging test in France – conducted by mobile phone technology company Qualcomm – is completed. Until then, Highways England, alongside the Department for Transport and independent researcher TRL, is investigating the feasibility of zero-emission heavy goods vehicles. This study will be completed by February 2019.
Contact charging hits the road Other technologies being investigated are contact-charging electric highways. Tech giant Siemens has opened ‘eHighways’ in Sweden and California, and plans to carry out further trials in Germany and Italy later this year. eHighways use overhead cables, in a similar way to tram networks. This allows vehicles to recharge while on the move – but unlike a tram, the vehicles are able to turn or change lanes, leaving the power supply safely and flexibly. In California, Siemens teamed up with the South Coast Air Quality Management District and opened a mile-long demonstration road in Los Angeles. Commercial trucks are fitted with a ‘smart’ pantograph, which automatically connects and disconnects to overhead power cables. In Sweden, the world’s first eHighway runs on a motorway near Stockholm, where the Swedish Transport Administration (STA), Siemens and commercial vehicle company Scania have been running two hybrid trucks since 2016. The STA is also supporting another trial launched last year by a consortium that includes infrastructure
22 energyfocus | www.the-eic.com
(Above) eRoadArlanda-style rails could be installed for a comparatively low cost – below €1m per km, which is comparable to the cost of resurfacing or maintaining existing roads
Practically speaking, wireless is less feasible than other charging technologies company NCC, utilities company Vattenfall and systems developer Elways. The project, named eRoadArlanda, is the first ever electrified public road. It uses an electric rail embedded in the tarmac to power and recharge vehicles during their journey. Vehicles are modified with a metal retractable arm that connects to the rail to transfer the energy. The primary focus of the eRoadArlanda tests has been safety. The rail is earthed and waterproof, says Säll, and not electrified all the time – ‘only for 50 metres, and only when it is activated by an authorised vehicle’. If anything were to become trapped in the narrow rails (which are smaller than tram tracks), there is more danger of being run over than of being electrocuted. Tests will continue to run until summer 2019. One exciting prospect that could be replicated from the eRoadArlanda’s project,
says Säll, is the use of the contact arm, as existing vehicles could be modified to use the electric rail. ‘That is what we did with the test truck. It was 100% diesel, now it is 100% electric. It is probably even easier to do this modification for cars.’ Modifying existing vehicles removes the need to manufacture millions of new EVs. The rail could also be installed for a comparatively low cost –‘below €1m per km’, according to Säll. This is comparable to resurfacing or maintaining existing roads.
UK opportunities on offer As the rail is made of steel and concrete, and involves parts that are similar to existing railway infrastructure, there would be plenty of opportunities for UK companies to meet demand if eRoadArlanda rails are to be installed elsewhere. eRoadArlanda has reported ‘eager’ demand from infrastructure planners across the globe, says Säll – predominantly in China and India. McKemey agrees that electric charging rails in roads, and the modification of existing vehicles, is the charging technology that is most likely to provide opportunities for ‘innovative UK industries’. ‘I’m very optimistic,’ says McKemey; as zero carbon transport technologies evolve, he foresees ‘huge opportunities for UK industry’.
ENERGY EXPORTS CONFERENCE Aberdeen Exhibition & Conference Centre, Aberdeen / 18-19 JUNE
Inspiring the next generation of exporters
Organised by the EIC in partnership with: Department for International Trade, Oil & Gas Authority, Oil & Gas UK, Opportunity North East, Scottish Development International, Scottish Enterprise, UK Export Finance
Key objectives • Inspire the next generation of exporters. • Double UK oil and gas service sector revenues, in line with Vision 2035. • Connect British suppliers with major global project opportunities and associated energy company decision makers. • Encourage diversiﬁcation across all energy sectors.
Oil and Gas IMO 2020
Industry gets ready for
GLOBAL SULPHUR CAP From 2020, IMO rules will ban ships from using fuels with a sulphur content above 0.5%. EIC Senior Downstream Analyst Dina Abieva looks at what compliance means for shipowners and refiners
MO 2020 is the latest regulation by the International Marine Organization (IMO) to reduce sulphur content in fuel oil used on board ships to 0.5% mass by mass (m/m) from 3.5% m/m. When the regulation comes into effect in January 2020, the sulphur oxides (SOx) emissions from ships will be reduced, improving environmental implications as well as the health of those living close to ports and coasts. In total there are about 60,000 vessels travelling international routes. According to BP, marine ships consumed 3.8m barrels per day (MMbbl/d) of high sulphur fuel oil (HSFO) in 2017, accounting for half of global fuel oil demand. The impact on refineries will depend on the routes chosen to implement the sulphur cap.
Meeting the new IMO regulations There are four options available to ship owners for complying with the new sulphur limits in marine fuels: Fitting marine vessels with exhaust gas cleaning facilities, known as scrubbers, in order to continue burning cheap HSFO from the refineries About 60% of new-build ships in South
24 energyfocus | www.the-eic.com
IMO 2020: Oil and Gas
Korea were fitted with scrubbers in 2017 and the market to retrofit existing vessels is expected to grow steadily to 1,550 vessels by 2020. According to Finnish exhaust gas cleaning company, Wärtsilä, a typical scrubber can cost between US$1.23m to US$7.38m and can take up to a year to install, making it a costly and time-consuming option. BP predicts that HSFO use will decline significantly with implementation of IMO 2020, as only limited vessels will be fitted with scrubbers – thus impacting the refineries with highest HSFO production. With time and advances in technology, scrubbers will be an increasingly attractive solution and more vessels will be fitted with them, but the HSFO production from refineries is likely to steadily increase. However, the open-loop scrubbers are not environmentally sustainable, as in order to reduce SOx, seawater is utilised and then discharged into the sea. Singapore, with the world’s busiest port, is planning to prohibit the use of open-loop scrubbers in its waters to protect the marine environment. Burning liquefied natural gas fuel This option is likely to be limited to specialist sectors and geographies as it is costly and complex, restricts vessel cargo capacity and requires specialist operating skills. The International Energy Agency estimates that liquefied natural gas (LNG) will account for only 0.2MMbbl/d of total bunker fuel consumption as part of IMO 2020 due to limited bunkering infrastructure. South Korea plans to financially incentivise LNG-fuelled vessels and to re-orientate its shipbuilding industry towards LNG-fuelled ships. Although this option requires a higher up-front investment, lower LNG prices could make this option more cost effective in the long-term with lower carbon emissions, if methane slip is controlled.
PHOTOGRAPHY: RICHARD GLEED
Burning marine gas oil Marine gas oil (MGO) is a blend of
Given the scale of the change, the oil value chain is likely to see high volatility during 2020 various distillate components, in particular diesel, with about 60% aromatics. It is expected to account for the majority of fuel use as part of IMO 2020 with no fuel switching. The need for additional lubricants makes MGO the most expensive option. The expected rise in MGO consumption is likely to help refineries boost their margins by increasing production of distillates with maximum sulphur content between 0.1%m/m and 0.5%m/m, as well as increasing production of lubricants. ExxonMobil has recently completed construction of the new delayed coking unit at its refinery in Antwerp with an investment of more than US$1bn in order to convert heavy, higher-sulphur residual oils into MGO. It is also planning to use its proprietary technologies to turn lower value by-products into high-value marine fuels at its Fawley refinery in England. Galp Energia is currently analysing the possible solutions at its Sines refinery in Portugal, either to supply alternative fuels or to upgrade the refining processes for the production of fuel according to the new specifications. Burning very low sulphur fuel oil Very low sulphur fuel oil (VLSFO) is also a blend of various distillate components, either aromatic or paraffinic, with a maximum sulphur content of 0.5% m/m and has been specifically designed to meet IMO regulations. It is expected that half of the
current level of HSFO will be re-blended to produce VLSFO. Major companies including BP, Cepsa, Compañía Española de Petróleos, ExxonMobil and Shell are investing heavily to develop their own blend of VLSFO due to financial incentives. According to IHS Markit, BP is developing two possible new VLSFO blends; Cepsa is planning to sell a single 0.5% fuel at ports in Spain priced at about US$120–US$190/tonne above HSFO levels. According to several studies, the wide variety of blends produced by the refineries will make it difficult to ensure fuel compatibility and stability and may lead to technical issues and engine problems.
What it means for refiners Overall, the IMO 2020 regulation is expected to increase demand for various types of low-sulphur fuel and reduce high-sulphur fuel consumption by ships. As a result, the implementation of IMO 2020 is already having a significant impact on the refining industry. The main challenge for refiners will be finding alternatives for the surplus high-sulphur residue oil. The design and construction of new conversion units for HSFO will take several years with multimillion-dollar investment required. Some refineries have started constructing new conversion units to stay competitive, in particular during the transition period in 2020 when the demand for compliant bunkering fuel is predicted to be high. The predicted excess supply of HSFO is likely to drive prices down whereas the prices of MGO and new VLSFO will be significantly higher, also impacting prices of fuel used in road transportation. Given the scale of the change, the oil value chain is likely to see high volatility during 2020. Those refineries that can stay flexible and switch between production of low and high-sulphur fuel oil will enjoy the greatest benefits in the long run. By Dina Abieva, Senior Downstream Analyst, EIC
www.the-eic.com | energyfocus
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Oil and Gas Refining
Vision 2050: A roadmap for refiners Europe’s refiners have set out their ambitions for switching to low-carbon liquid fuels in a programme called Vision 2050. To make this happen, they must rethink and rebuild their industrial and technological strategies, says Stephen George at KBC
he aspirations of Europe’s refiners for greenhouse gas reduction, technology leadership and renewables focus will help to define the global direction of travel in the decades ahead. Vision 2050 starts with the premise that, for the foreseeable future, Europe and the rest of the world will continue to rely upon liquid transport fuels, which are energydense, cost-effective and in some cases (e.g. aviation) the only practical way to maintain affordable mobility. The report also states that alternatively fuelled vehicles, such as electric and hybrid cars, will play a role in private transport, but cannot meet the needs of the entire transport sector, much of which will continue to rely upon liquid fuels.
Planning for what’s next Vision 2050 is a roadmap for a viable future for Europe’s refineries, but it is not a simple way forward. The vision is ambitious, as FuelsEurope – a division of the European Petroleum Refiners Association – is quick to acknowledge. Yet it is vital to Europe’s energy independence, the environment and the economy. Delivered successfully, these will become a benchmark for refiners in many other markets. It can be difficult, looking at your organisation, to know if you are ready for these challenges.
Refiners should be well positioned to manage the complex and expensive challenges required by the energy transition. If the EU comes to the table and fosters the investment and regulatory climate needed to stay the course, Europe’s refiners will need to rise to that challenge and deliver the vision. This will require strategic insight, capital investment, technological evolution, organisational maturity and operational excellence.
Turning preparation into practice To do this, refiners need to invest in robust technology solutions. Adopting an operational excellence framework integrates strategy, business processes, people and technology to address business, asset, organisation and applied technology challenges. Operational excellence solutions are focused on delivering continuous improvement and sustainable competitive advantage through a programme of discovering, delivering and sustaining operational benefits in all key areas of management control. Conducting a pre-investment analysis of new technology to ensure the new investment choices are robust and resilient will help manage the risks from adopting new technology. It may also identify whether there are any synergies that can be realised with existing technologies. It is worth considering simulation software to simulate the impact of
adopting new technologies and unconventional feedstocks on both refinery yield and financial performance. Refiners must also ensure that they are digitalisation-ready – looking not just at new technologies they are putting in place, but also employees and their capability to cope with new developments. New digital technologies will change the way the organisation is managed, from remote control centres to operations, maintenance and contractor management. It is therefore important to help guide the transition by delivering change management targeted at frontline employees to ensure they retain the right capabilities and develop the necessary future skills. Translating Vision 2050 into practice will require Europe’s refiners to rethink and rebuild their long-term strategies – transforming their organisations into modern, flexible knowledge-based enterprises along the way. By Stephen George, Chief Economist – EMEA and APAC, KBC Read FuelsEurope’s full report Vision 2050: A pathway for the evolution of the refining industry and liquid fuels at: www.fuelseurope.eu/ wp-content/uploads/DEF_2018_V2050_ Narratives_EN_digital.pdf
www.the-eic.com | energyfocus
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Oil and Gas LNG
On the road with
LNG To support the transition to a carbon neutral future, Europe’s heavy-duty transportation sector needs alternative fuels. Andrea Gerini at NGVA Europe champions LNG as the fuel of the future for long haulage
H IMAGES: ALAMY
eavy-duty freight transport is a key economic sector in Europe. As such, and being heavily reliant on imported oil, it has a crucial contribution to make to decarbonising the European economy if Europe wants to fulfil its commitments under the 2015 Paris agreement. In order to curb the industry’s emissions, the European Union has outlined its CO2 emissions reduction policy for heavy-duty vehicles (HDVs), requiring emissions to be reduced by 15% by 2025 and 30% by 2030. The transition to alternative powertrains in combination with low-carbon fuels will play a fundamental role in achieving these targets.
The case for natural gas The use of natural gas in transportation is well established globally, with nearly 26.5m natural gas vehicles (NGVs) worldwide – of
which Europe represents 7%. There are some 31,000 refuelling stations across the globe, with 15.7% of these in Europe. Two forms of natural gas are currently used in vehicles: compressed natural gas (CNG) and liquefied natural gas (LNG). Biomethane renewable natural gas (RNG) can also be used as a transportation fuel in the form of CNG or LNG. As technology advances HDV operators are increasingly moving to LNG as a fuel of choice. Not only is it cost competitive with
HDV operators are increasingly moving to LNG as a fuel of choice
diesel, but engines fuelled by LNG are 50% quieter and produce significantly less nitrogen oxide and particulates than diesel engines. CO2 emissions are 20% lower too, thanks to new engine technologies such as high-pressure direct gas injection.
LNG shifts to a higher gear LNG is already available in Europe today. There are currently close to 4,000 LNGfuelled vehicles on European roads, supported by more than 150 LNG fuelling stations. For transportation applications, it is most economical to store natural gas as a liquid. The gas is cooled to temperatures as low as -162°C, compressing it to 1/600th of its original volume; this makes it easier to transport and store. Looking at the energy content of the unit of volume, 1.6L of LNG corresponds to 1L of diesel fuel, which means a much greater range is achieved with LNG. www.the-eic.com | energyfocus
Oil and Gas: LNG
trucks could be fuelled with LNG by 2030 in Europe, which will require
This makes it a more attractive fuel for regional, long-haul and high-mileage truck fleet operations. Today, solutions with up to 1,600km range are available on the market. The price gap between LNG and diesel has been fairly consistent and robust, even following the 2015 drop in oil prices; on an energy equivalent basis, LNG fuel costs on average about 55% less than diesel. Furthermore, LNG benefits include lower excise duty and reduced taxes in some European countries. So while an LNG truck is more expensive than a diesel truck, these significant fuel and operation cost savings give a LNG conversion payback between one to three years.
Will LNG transform transport? In our recent report ‘gmobility: Driving Circular Economy in Transport’, published in association with the European Biogas Association, an estimated 280,000 trucks could be fuelled with LNG by 2030 in Europe. To realise anything near that number, significant investment is needed in new infrastructure in Europe – this fleet will require at least 2,000 LNG stations, contributing to a yearly consumption of 10bn cubic metres of LNG. To this end, and in accordance with the directive on the deployment of alternative fuels infrastructure, the EU has promoted the construction of LNG stations by the TEN-T programme and projects as the LNG Blue Corridors in order to create a road network with LNG stations every 400km, by 2025. Long-term stability and homogeneity of the level of excise duties for LNG in the different European countries will also be necessary.
30 energyfocus | www.the-eic.com
(Above) The LNG terminal in Rudong County, Nantong, China’s eastern Jiangsu province
Asia Pacific leads the way David Perry, Business Manager and News Editor at NGV Global, spotlights the major LNG developments in Asia Pacific – on land and at sea
China is experiencing huge growth for LNG-fuelled transportation where increasingly stringent domestic environmental policies are driving the transition from heavy-duty diesel trucks to NGVs. There were 350,000 LNG vehicles operating in China by the end of 2017, refuelled from 3,100 stations. That figure may double by 2020, based on current growth In Japan, Isuzu Motors Co., Ltd. is working with the support of the Ministry of the Environment to reduce emissions from heavy transport vehicles and has prepared two LNG trucks for testing Major oil companies in India are moving collectively to introduce close to 20 LNG fuelling stations on some of the country’s main heavy
transportation routes. LNG has been approved for long haul trucking and agricultural tractors. Indian rail is experimenting with LNG for locomotives on non-electrified lines A TATA Daewoo high horsepower LNG truck is kicking off a long-awaited pilot project in Korea Indonesia’s oil and gas corporation PT Pertamina and railway company PT Kereta Api Indonesia, both state-owned, began testing LNG in late 2016.
China’s coastal waters and major inland waters are now protected by domestic emission control areas that limit sulphur and particulate matter. There are reportedly 280 LNG vessels operating in local waters, and the number of bunkering ports is growing Japan’s first LNG bunkering vessel will go into operation in 2020, and joint ventures have been established to build bunkering facilities and promote LNG as a marine fuel
From both LNG station operator and from the fleet operator standpoint, stability of total cost of ownership conditions are fundamental to support the market growth. LNG bunkering infrastructure is a necessity for operating LNG stations. The proximity of LNG bunkering infrastructure impacts directly on the operational costs of the LNG stations. NGVA Europe welcomes current
The Indian Register of Shipping has expanded its rules to embrace LNG-fuelled coastal and inland vessels, anticipating the introduction of legislation for cleaner transportation on India’s inland waterways. The Port of Kochi offers LNG bunkering. Ten new R-LNG terminals are to be built and some will likely include bunkering locations The Korean government is supporting the building of 140 small and medium LNG-fuelled ships by 2025, and the creation of LNG bunkering facilities is also on the government’s agenda Singapore is preparing to become a major centre for bunkering LNG, including building a bunker vessel for ship-to-ship refuelling, commencing 2020 Pengerang in Malaysia joins the growing number of Asian ports gaining experience with LNG bunkering. Three Malaysian companies have joined to build and operate the first LNG-powered ship operating in Malaysian waters by the end of 2020
bunkering developments in the Baltic states as well as in the Mediterranean region. This will boost the LNG fuelling infrastructure. While the transition to LNG in transport has already begun, it will need to accelerate in the next decade. By Andrea Gerini, Secretary General, Natural and bio Gas Vehicle Association Europe
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Oil and Gas Q&A Damien Gerard
Energy Focus speaks with Damien Gerard, Commercial Director at Climate Investments – a US$1bn fund based in London that is part of the Oil and Gas Climate Initiative (OGCI) created in 2014 What is OGCI Climate Investments? When the Paris climate agreement was made, 13 members of the oil and gas industry formed OGCI. It set climate targets and provided investment to support late-stage technologies: more than US$1bn has now been placed into the 2016–26 Climate Investments fund. We have a very clear investment charter which is geared towards: carbon capture, utilisation and storage (CCUS), minimising methane leaks, and improving energy and transport efficiency. But how do you bring your product to market in an insular industry? It’s not just about financial support – it’s about creating new business models and having the capacity to deploy your technology in our member companies. That is what we bring to the table. Throughout 2018 we received more than 450 applications for investment. Last year your focus was on reducing methane. What technologies did you back? Climate Investments invested in three companies. The first is valve manufacturer and distributor Clarke Valve. If you look at a picture of a valve from 1902, and a picture of a valve now, they’re more or less the same. Clarke Valve developed a new, smaller, more efficient valve which eliminates leaks. The second company is GHGSat, and the third is Kairos Aerospace. Both take pictures to identify leaks. GHGSat takes pictures from a satellite orbiting the planet and Kairos ties cameras to small aircraft, photographing areas about the size of Scotland over a couple of days, to identify the precise location and volume of a leak. Can you give an update on the Teesside CCUS project? Six of our members – BP, ENI, Equinor, Occidental Petroleum, Shell and Total – have entered into a strategic partnership with Climate Investments to
progress the Clean Gas Project, the UK’s first commercial full-chain CCUS project in Teesside. We’re still very far away from a commercial model but we hope that Teesside will be selected as one of the two CCUS clusters in the UK. What activities have been undertaken to engage with the local and wider UK supply chain? Jonathan Briggs is the stakeholder manager for the Clean Gas Project and prior to the project’s announcement last year, we had maintained an ongoing discussion with the local EIC team so that we could share the latest on project timing, current activities and forward timeline. We have a good understanding of what the local supply chain can offer, but at this point it’s still an early stage for the project. The project will aim to source from the local skills, labour and supply chain as far as possible. What would you like from government to ensure Teesside’s completion? The UK government needs to include CCUS in its contract for difference payments. There are a lot of emitters in Teesside: a fertiliser plant, hydrogen plants and chemical complexes producing useful goods. If they invest in CO2 reduction, they will need some sort of remuneration. The government should put in place policies and regulation to help the industry in general to become greener.
OGCI MEMBERS BP Chevron CNPC Eni Equinor ExxonMobil Occidental Petroleum
Pemex Petrobras Repsol Saudi Aramco Shell Total
Clarity on storage regulation is needed too. Once you put CO2 in the ground, it stays there for centuries. At some stage, CO2 liability and ownership has to be transferred from the emitter to the state. Until that is in place, few emitters will store CO2 and assume liabilities and responsibilities. Is Climate Investments investing in reducing emissions in transport? A key priority for us is heavy duty vehicles. When you look at global CO2 emissions from ground transport, this is the fastest growing sector in the world. There’s also a long list of opportunities for truck efficiency improvement. We’re also looking into aviation and shipping. What areas will you invest in this year? Our investment charter is not set in stone. We’re constantly looking at the best opportunities and the best impact we can deliver with our money. This year, we will focus on CCUS. For example, we’ve invested in UK-based Econic, which uses CO2 as a feedstock to make products such as the foam found in upholstery. There’s a lot of talk on direct air capture, but it’s not clear yet that there is a convincing business model around that. For energy efficiency we’re asking, where do we focus? The landscape is broad: cement, coal, transport and petrol chemicals. They are all different worlds with different solutions. What should a company applying for investment know? Climate Investments is interested in relatively mature technologies that are ready for pilots or deployment. Companies need to deliver a material impact on climate change. It’s all about global greenhouse gas reduction. That’s the priority. www.the-eic.com | energyfocus
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Turning energy into solutions
Making virtual power plants a reality Energy Focus looks at how energy technology disruptor Limejump is turning the industry on its head
he hot topic in the UK energy industry is the transformation from a centralised system, based on a small number of large power stations, to a decarbonised, decentralised and digitalised system, with a large number of technologies generating, storing and managing the demand for energy. These are located on commercial property, fields, homes or wherever feasible. But how can all this energy from so many diverse sources be harnessed, brought together and used most effectively to support the grid, rather than place a strain on it?
A new model for clean energy integration A virtual power plant (VPP) or platform is a cloud-based data control centre that aggregates generation data from various distributed energy resources â€“ including, but not limited to, wind, solar PV plants and battery storage facilities. These data centres use various communication technologies and sensors to gather information, allowing the production of each asset to be monitored and controlled. By integrating several sources, VPPs enable a reliable power supply from a multitude of sources, meaning the operator of the VPP
The potential for this technology in the UK is significant. But to really build the market for VPPs, the rulebook needs to be rewritten www.the-eic.com | energyfocus
can aggregate the energy generated and trade with wholesale markets. There is no single set design for VPPs, and markets are developing in various countries, including the UK, Japan, the US and Saudi Arabia. In Australia, state governments have been working with energy companies to turn entire urban areas into VPPs. In South Australia, for example, the government will potentially install up to 50,000 household solar and battery storage systems and connect them to form a VPP. Earlier this year, it awarded a contract to Tesla to trial this concept with 250MW of solar energy and 650MWh of battery storage. In fact, the global market for VPPs is expected to be worth up to US$1.2bn by 2023, growing at 30% a year according to US-based analyst P&S Market Research. Key factors driving the growth of the burgeoning VPP market include increasing infrastructure development in Asia Pacific and more government initiatives to reduce carbon footprints.
Opening up the UK energy market Limejump is one company pioneering this technological revolution in the UK. On 9 August 2018, the Limejump VPP became the first to trade an aggregated balancing mechanism unit (BMU) in the UK balancing mechanism, helping the National Grid to balance the frequency. This was the first time a VPP had been permitted to take part in this market.
There is no single set design for VPPs, and markets are developing in various countries, including the UK, Japan, the US and Saudi Arabia 36 energyfocus | www.the-eic.com
Each site in the VPP is connected via hardware which allows Limejump to receive performance data back from each individual asset. Machine learning is utilised to look at all performance aspects of the asset â€“ for example the wind speed and height of a wind turbine. This can calculate how much energy each asset will generate per half hour, which is then aggregated to be in competition with generation from a larger power station. As well as cloud-based analytics, the VPP is comprised of smart connective devices, a full shift trading desk, a commercial and billing platform and customer portal. A VPP supports decarbonisation efforts by allowing multi-scale and intermittent generation access to revenue streams that would otherwise be out of their reach. This market access increases the viability of renewable resource development and storage asset investment and creates confidence for investors to create new development. This replaces a requirement for new large-scale carbon pollutant generation to balance the grid.
Towards a new reality The potential for this technology in the UK is significant. But to really build the market for VPPs, the rulebook needs to be rewritten from one designed for large, centralised carbon-based power stations, to one that accommodates the new realities of the energy system demands. Regulator Ofgem and system operator National Grid are already working on this,
and a series of reforms are underway. Limejumpâ€™s pioneering entry into the balancing mechanism over the summer was the result of Ofgem revising rules stipulating that data on BMUs submitted to National Grid could only go through one grid supply point. However, it remains the case that assets are not permitted to participate in the balancing mechanism and frequency response market simultaneously. Interim solutions have been proposed to allow standalone battery BMUs and aggregated BMUs to bid through a specially created framework. This will be permitted from February 2019, with a more permanent solution developed towards the end of the year. The capacity market would benefit from changes to further accommodate aggregators that would incorporate VPP structures. At the moment, it is categorised by particular types of generation or demand side response, but contracts designed to provide an indication of the number of megawatts required would be more insightful. These ideas have been shared within the governmentâ€™s five-year review of the capacity market (though the mechanism is currently at a standstill until the government can resolve a dispute in The European Court of Justice).
The future of energy Generally, it would be beneficial if market transparency was increased by working with aggregators to determine which ancillary services count towards specific markets, what its decision-making criteria are for each market and how much power they are intending to purchase through the year. Embracing technology and allowing innovators to propose new solutions to market change, rather than its current agnostic methodology to create a suite of different products, would then be available to de-risk the energy market. Aggregators are well placed to adapt to market forces as required, using flexibility and boosting the market for VPPs even further. The future for VPP structures is evolving as the need for renewable and sustainable solutions increases in the UK. However, the opportunities for VPPs to play a major role in the future of energy has global applications.
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Power Mobile power stations
The next wave of
How can power plants be brought to inaccessible areas where the infrastructure for conventional solutions is lacking? Wesley Tivnen at Siemens UK says the answer lies out at sea
38 energyfocus | www.the-eic.com
he energy market across the world is changing rapidly. In developed nations, it is no longer just centralised power stations feeding the grid; decentralised power supply, with many active participants utilising many different energy sources, is increasingly playing an important role. However, in developing nations, a lack of infrastructure and a reliable power supply could be inhibiting growth. It is estimated that, by 2050, there will be 9.7 billion people living on our planet. Today, there are already 1.2 billion people without access to electricity, and 800 million suffer from a shortage of
drinking water. This means new concepts will need to be developed to fulfil these basic needs for everyone in the future.
Bringing power to the people In countries on the cusp of development, electricity demand often exceeds supply â€“ so a solution that brings power to the people and allows for economic development is key. This could be through smaller modular stations that are transported to inaccessible areas of the world, where the infrastructure for a conventional solution is lacking. Another solution is providing turbines mounted onto floating platforms that can connect to the grid from either a shoreline or a river.
Mobile power stations: Power (Left) A 145MW power barge, Estrella del Mar III, will supply the Dominican Republic with electricity at a lower cost than a land-based plant, starting from spring 2021
such as earthquakes or hurricanes. Where there is extensive damage or destruction to infrastructure, mobile power plants can bring power and hope to people â€“ as well as financial security to banks and lenders.
Optimised for difficult conditions
Siemens has a vision for a future where, through modular or floating power stations, all have access to affordable and clean electricity and water. It is a tough challenge, but vital considering climate change and the rapidly growing global population. Putting a power station on water seems a slightly odd concept. Surely a power station capable of supplying enough power for a community needs to be a huge structure, on land? However, the concept of a floating power plant is not actually all that new â€“ Westinghouse gas turbines can be found dating back to the 1990s. We envisage floating power stations powering remote areas such as islands, or helping to develop industrial areas on shorelines or major rivers. They could replace
A solution that brings power to the people and allows for economic development is key coal-fired power stations that reach the end of their operating lives; efficient combined cycle turbines could be installed on the platform, creating a wide range of applications. These mobile power stations could also provide immediate relief following disasters
In fact, it was as a result of the 2011 tsunami in Japan that Siemens looked to develop a floating power plant solution, SeaFloat, which can be built with industrial gas turbines to provide between 140MW and 1.2GW of power. Once docked, the simplest option is to supply it with liquefied natural gas from land or a ship. SeaFloat can also be supplemented with a desalination plant to provide clean and potable water to communities. Recent developments have seen a 1.2GW combined cycle gas turbine installed, vastly increasing the power that can be supplied. Combined cycle power plants do need to be based on a firm foundation: the swell of the sea can expose the turbine to increased stresses on the floating platform. However, thanks to Siemens engineering excellence, a wide variety of measures to adapt supports, bearings and other components that can dampen wave-induced movements now means SeaFloat is ready for operation. SeaFloat has been designed to be as small as possible, and can be constructed in a short lead time using standardised equipment in, for example, a shipyard. In autumn 2018, Siemens secured a contract for a floating power plant in the Dominican Republic ,which will have a power output of 145MW. There is limited free land in the countryâ€™s capital, Santo Domingo, and a floating power station allows plant size to be increased in comparison to what could be achieved on land.
New energy future on the horizon The energy landscape is evolving, and the innovations being developed will open up a power supply to ever more people. While our vision for all to have access to electricity and clean water will be tough to achieve, mobile power solutions mean we are on the way to meeting it. By Wesley Tivnen, Managing Director, Power and Gas, Siemens UK www.the-eic.com | energyfocus
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Power Electric vehicles
the electric car revolution Securing demand, growing infrastructure and managing energy consumption will be fundamental to catalysing market growth, writes Fiona Howarth at Octopus Electric Vehicles
y all accounts, the market for electric vehicles (EVs) is set to grow exponentially. By 2040, it is believed that 33% of the global fleet will be electric, with National Grid forecasting anything up to 25m EVs by 2035 and 38m by 2050.
All charged up Norway is leading the charge, with 60% of new registrations in 2018 being all-electric or plug-in hybrid vehicles. This astonishing take-up can be largely attributed to the generous tax breaks and other financial incentives on offer. In the UK, growth has been a steady 6% in the last year. With plans afoot to ban the sale of new petrol or diesel cars by 2040, this pace is only going to increase. Manufacturers are firmly on board, bringing some fantastic cars to the market, but with progress comes challenges: in this case, changing consumer perception and growing the infrastructure needed to support a nation of EV drivers.
Overcoming barriers to electrification As in Norway, the government here is going to play a vital part in broadening the appeal of EV ownership. There are significant savings to be made through salary sacrifice schemes, whereby employees can pay for their car lease out of their gross salary,
unlocking savings of up to 40% on costs. Employers can save on National Insurance payments, too. EVs incur much lower benefit in kind rates than petrol and diesel cars (dropping to almost nothing in 2020), enabling employees to maximise their savings. This benefit sits alongside other government incentives, including a subsidy of £3,500 to help reduce the up-front price of an EV and up to £500 towards the cost of a charge point installation at home or at work. Charging EVs has become increasingly convenient, with a number of companies offering low-cost home charging solutions. There has also been significant growth in the public EV charging network, and there are now more than 6,000 locations across the UK – as opposed to 8,400 petrol stations. This is set to grow exponentially as innovations such as lamppost charging become more prevalent. When it comes to ensuring the necessary energy infrastructure is secure, affordable and sustainable, investment is needed. However, Octopus Electric Vehicle (OEV) believes the increase in EV take-up will feed the market with the stimulus for that investment. Forward-thinking companies will recognise the opportunities in this area, and will innovate with new products and services to meet the needs of the EV community. We are already seeing new smart charging solutions, load management systems and consumer education tools that
work within the boundaries of our networks. The industry has seen for a long time that an EV is not merely a drain on the network, but a conduit for the new energy economy.
Unlocking the potential stored in EVs The UK is on the cusp of what some see as a revolution through vehicle-to-grid (V2G) technology, in which EVs can be used as portable battery packs – storing energy during cheaper off-peak times, and ready to use when demand is high. V2G is a significant step in balancing the load on an overstretched network, and OEV is at the forefront of this smart charging innovation. As part of a three-year Innovate UK-funded trial, in association with the Powerloop consortium, we will be rolling out V2G charging technology at volume in 2019. Of course, in order to support the wider take-up of EVs at the levels National Grid is forecasting, the UK needs to ensure the charging network is fit for purpose. This energy must come from somewhere, and the concern is that we will need to significantly increase our energy generation capacity and invest billions in our electricity grid to cope. There is reason to be optimistic: the ability to control when we charge our cars (and moving this to off-peak hours) can enable us to balance the grid and even ‘match’ our energy usuage with renewable sources.
Driving the transition Certainly, there is work to be done in order to achieve the huge potential of EVs. There needs to be further support from the government and manufacturers; in other countries, implementation of supply side measures (where car manufacturers need a certain percentage of their total vehicles sold to be EV) and demand side measures (where the cars are subsidised and/or given effective tax breaks) has been highly effective. This is a battle worth winning, and sooner rather than later – not only to help the UK take a lead in this technology, but also to have a significant impact on climate change reduction. By Fiona Howarth, CEO, Octopus Electric Vehicles www.the-eic.com | energyfocus
Nuclear New build
nuclear new build an investment vehicle Vincent Zabielski at Pillsbury Winthrop Shaw Pittman explains how to make nuclear new build a viable institutional investment
hile other countries in Western Europe such as Germany, Switzerland and France have decided, to varying degrees, to move away from nuclear power in favour of renewables, the UK has embraced nuclear power as an important facet of its future energy mix. The government has announced a comprehensive nuclear sector deal that should ensure nuclear continues to play a major role in meeting the UK’s future energy needs. The UK’s approach seems particularly enlightened in the wake of the UN’s recent warning that we have only 12 years to avert irrevocable climate damage due to global warming. However, despite the support of the government, investors do not currently see UK nuclear new build as an attractive investment opportunity. There have been several rather spectacular nuclear project failures during the past couple of decades, resulting in bankruptcies, unit cancellations, construction schedules that are completed decades late, and billions in cost overruns. However, a few projects have been relatively successful. There are lessons to be learned in failure as well as success. In addition to
42 energyfocus | www.the-eic.com
government support, an ‘investable’ nuclear project needs three key factors:
Step one: get references The first and most important factor affecting whether a project is investable is using a completed design, supplied by a vendor with a successful recent track record of building nuclear power plants of a similar design. A ‘reference plant’ should be used to fully define the scope of delivery. Many recent nuclear new build projects have been hampered by a ‘design-as-you-go’ approach with advanced, and sometimes unbuildable, features. From an ‘investability’ standpoint, it is always best to let someone else deal with the pains of developing a first-of-its-kind new reactor design. Before they are willing to put their cash into a project, investors want to know that the power plant design has been properly sorted, and that it can be built on-time and on-budget.
Step two: allocate risk fairly When putting together the contract for delivery, ensure there is a reasonable and proper allocation of risk between the project developer and the contractor building the
units. A common school of thought is that the best way to procure a nuclear power plant is to push all the risk onto the contractor that is building the plant. Recent history has proven this approach wrong – it makes the contractor responsible for risks that they cannot control. At best, this increases the cost of the project and invites contentious litigation. At worst, this approach bankrupts the contractor.
Step three: split owner and operator entities A third way to make a nuclear project more attractive to investors is to isolate the investment from any potential nuclear liability. Under the nuclear liability regimes in Europe and the UK, nuclear liability is channelled to the operator of the nuclear facility, and that operator is typically the owner of the facility, too.
New build: Nuclear
However, in some jurisdictions, such as the UAE and the US, it is possible to have non-operating owners. Under this approach, the business structure is split into two entities: a legal entity that serves as the ‘owner’, which is the borrower and the equity investment vehicle, and a separate legal entity that is the ‘operator’, which is responsible for safe operation of the reactors. Under this structure, the owner is party to the power purchase agreement, and is also the borrower of funds and the vehicle for direct investment in the project. The two entities are tied together by an agreement whereby the operator pledges the electrical output from the nuclear plant in exchange for a promise to pay the operator’s costs of running the nuclear plant. The debt used to build the power plant is secured by the future stream of revenue from the sale of electricity
One way to make a nuclear project more attractive to investors is to isolate the investment from any potential nuclear liability produced. In this structure, the operator is insured up to the legal liability limit, and bears responsibility for any nuclear damage resulting from the units. Naturally, the Office for Nuclear Regulation would have a lot to say about the specific structure and who may own shares in such a
scheme, but there is conceptually nothing to prevent the implementation of such a model. Using this approach, government equity investment in the project could be temporary, with the government serving as a ‘cornerstone’ investor during construction, and then selling its shares upon achievement of commercial operation. This approach would also allow for passive investment by pension funds, for example, or any other investors seeking a stable, long-term return over the 60-year life of the plant. The UK appears to be on the right path for successful deployment of a new generation of nuclear plants. The key to attracting investment will be to think through the entire project life cycle from the beginning to the end – with an eye towards eliminating project risk. By Vincent Zabielski, Senior Lawyer – Energy, Pillsbury Winthrop Shaw Pittman www.the-eic.com | energyfocus
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Nuclear Low-carbon Europe
The role of nuclear in a low-carbon Europe Tim Yeo at the New Nuclear Watch Institute on why Europe needs nuclear
urope is leading the world’s response to climate change. Challenging carbon emissions reduction targets are accelerating decarbonisation of many parts of the economy while reform of the European Union Emissions Trading System is boosting the price of EU carbon allowances towards a level that incentivises more investment in low-carbon technologies.
Crucial role in climate protection
Looking ahead, the EU is committed to cutting emissions to 40% below 1990 levels by 2030, and has set out a vision of zero net emissions in 2050. These are laudable goals but they cannot be achieved without significant policy changes, particularly with reference to nuclear power. At present, nuclear provides about a quarter of the EU’s electricity – though this proportion is gradually declining – and more than half of its low-carbon electricity. It will be impossible, even with substantial growth in renewables, to meet emissions targets unless nuclear remains a significant part of the European energy mix. The situation has been aggravated by Germany’s decision to phase out nuclear and by French plans to reduce the share of nuclear in the power mix to 50% by 2035 – down from 75% today.
Securing our energy needs Nuclear is also important for Europe’s energy security. At present, energy imports account for about half of EU power needs,
and almost 40% of its gas comes from Russia. Another European Commission aim is to increase the EU’s indigenous energy production. Since new nuclear plants are currently planned or under construction in only a third of EU member states, and several other member states are actively opposed to nuclear, it is likely that total EU nuclear capacity will decline slightly in the early 2020s. This is in sharp contrast to what is happening elsewhere. Fast-growing Asian countries such as China recognise that nuclear energy is essential to cut their heavy dependence on coal. In the Middle East, governments are preparing for a decline in oil demand by building nuclear plants. Around Europe’s borders are pro-nuclear countries such as Ukraine, and now Turkey too, while Russia alone has more new plants planned than the whole of the EU. Europe now needs a hard-headed analysis of how it can accelerate its switch to more low-carbon energy while simultaneously enhancing energy security and keeping prices competitive. Unfortunately, the predilection of the European Commission for separate specific targets for expanding renewables, alongside the wider emissions reduction targets, confuses the issue. Such targets encourage advocates of renewables to dream of a future where all electricity is generated from solar, wind, hydro and marine sources. Modern economies require a continuous electricity supply, and until large-scale, long-term, flexible and affordable electricity
storage is available, no country can rely exclusively on intermittent energy sources. Furthermore, renewables still require back-up generation capacity. And while renewables await their storage solutions, natural gas cannot be the only bridging fuel. Remaining at the forefront of addressing climate change will deliver great economic benefits for Europe because the high-growth nations in this century will be those that are the first to end their dependence on fossil fuels.
Making it happen European governments must accept that nuclear power and renewables are not alternatives or in competition but are complementary. Both are needed to prevent dangerous irreversible climate change. Countries that support nuclear energy must work cooperatively together towards more harmonised designs, regulations and construction techniques. This approach, coupled with an openminded attitude towards nuclear technologies developed outside Europe, will make nuclear energy cost competitive, enhance energy security and cut emissions, as well as enabling the development of globally competitive supply chain industries. By Tim Yeo, Chairman, the New Nuclear Watch Institute
www.the-eic.com | energyfocus
Renewables Jet fuels
he global aviation industry emitted 859m tonnes of carbon dioxide in 2017 – 2% of all CO2 emissions1. According to a report by the Roundtable on Sustainable Biomaterials, ‘Greenhouse gas emissions from global aviation have more than doubled over the last 20 years… Demand for aviation fuel will grow by approximately 1.5–3% per year to 20302.’ As a result, in 2009 the airline industry committed to carbon-neutral growth by 2020 and a 50% reduction on 2005 emissions levels by 2050. After six years of negotiations, the International Civil Aviation Organisation agreed on a global mechanism for aviation to deliver carbon neutral growth: the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA will be the first market mechanism for dealing with climate change from any industrial sector. Sustainable fuels will play a part in airlines’ methods for meeting their CORSIA obligations. Since 2008, more than 100,000 commercial flights have flown on some blend of biofuel, and the industry has recorded more than 4m tonnes of offtakes of renewable fuel2. By 2022 there is expected to be a worldwide demand for more than 6m tonnes per year of renewable jet fuel based on carbon neutral growth.
A new plant Velocys, a renewable fuels company, is working to develop the UK’s first commercial scale waste-to-renewable fuels plant, with the support of British Airways and Shell. This plant would take hundreds of thousands of tonnes per year of residual waste left over after recycling, destined for landfill or incineration, and convert it into clean-burning, sustainable fuels for aviation and road transport. The project team is developing the engineering and business case for the project, which is also subject to planning consent, funding and a final investment decision. The first plant would require several hundred million pounds of capital. It could enter construction during 2020, creating hundreds of construction jobs and 50 to 100 direct long-term skilled jobs.
How it works This plant will use waste that cannot viably be recycled, to produce a fuel that displaces
46 energyfocus | www.the-eic.com
Renewable jet fuels
While the uptake of sustainable alternative fuels in the aviation sector is still in its infancy, Velocys is one company that is helping the UK move closer to developing its first waste-to-renewable jet fuel plant, writes Neville Hargreaves
Jet fuels: Renewables
Turning waste into sustainable fuel Feedstock conditioning facility
Physical preparation of the feedstock
Thermally and chemically breaks the material into its component parts to produce syngas
Physically and chemically removes impurities from the syngas
Chemically reacts the syngas to form long chain hydrocarbons
Chemically cuts the long hydrocarbons to form jet fuel and naphtha
the consumption of fossil-based fuel and its associated CO2 emissions. The project is taking proven technologies and combining them in a new way to deliver a cost-effective supply of renewable fuels. A simplified version of the process is shown on the left. The incoming waste is sorted and prepared to enter the gasifier, where it is heated to a high temperature to break it down and convert it into synthesis gas (or syngas) composed mainly of hydrogen and carbon monoxide. After removal of contaminants, the syngas is used in the catalytic Fischer-Tropsch synthesis to make hydrocarbons, which are then hydrotreated and separated into synthetic paraffinic kerosene (approved worldwide for commercial aviation at up to 50% in a blend with conventional jet fuel), and naphtha (a constituent of petrol). All these steps use commercially proven technology, but the combination is novel; integration will be one of the key risks for such a project, which needs to be mitigated using a combination of technical and financial approaches.
Environmental impacts The jet fuel produced from the biogenic fraction of the waste is expected to deliver over 70% greenhouse gas reduction, compared with fossil fuel3. It would also deliver local air quality improvements around airports. Studies on jet aircraft using fuel made by the Fischer-Tropsch process have shown up to 90% reduction in particulate matter emissions, nearly 100% reduction in sulphur oxides, up to 40% reduction in carbon monoxide and up to 10% reduction in nitrogen oxides. In addition, operation of the plant would prevent several hundred thousand tonnes of non-recyclable waste from going to landfill each year.
Status and support In June 2018, the project received £4.9m of funding for the current development phase. This includes a grant of £434,000 from the Department for Transport under the Future Fuels for Flight and Freight Competition (F4C). The project will also benefit from the policy support of the Renewable Transport Fuel Obligation (RTFO), now with a category of Development Fuels giving extra incentives to the hard-to-decarbonise aviation sector. These incentives are important in the short term for getting new technologies such as this established in the market. However, the project has a balance of revenues between waste gate fees, fuel sales and credits under the RTFO. In December 2018, the project secured a site near Immingham, North East Lincolnshire.
Outlook Projects such as this could be a key part of a flourishing bioeconomy in the UK. The country could create an industry for the production of sustainable fuels worth up to £250m per year in 2030, supporting up to 4,400 high quality jobs in the UK4. This industry, built on British innovation and intellectual property, has the potential for global export. By Neville Hargreaves, Vice President – Waste-to-Fuels, Velocys References 1. Air Transport Action Group (2018) Facts and Figures. Available at www.atag.org/facts-figures.html 2. The Roundtable on Sustainable Biomaterials (2018) Alternative Aviation Fuels. Available at www.rsb.org/ wp-content/uploads/2018/09/RSB-Alternative-Aviation-FuelsA-Sustainable-Future-is-Taking-Off.pdf 3. Based on independently reviewed life cycle analysis using assumptions approved for the F4C 4. Sustainable Aviation (2018) Sustainable Fuels UK Road-Map. Available at www.sustainableaviation.co.uk/wp-content/ uploads/2018/06/SA-SAF-Roadmap-FINAL-24-Nov-2.pdf
www.the-eic.com | energyfocus
Advancing biofuel technologies ExxonMobilâ€™s Vijay Swarup looks at how the company is tapping algae and agricultural waste to fuel a sustainable future
t often surprises people to learn that an oil company like ExxonMobil is investigating the promise of alternatives, such as biofuels â€“ but we are. While many companies have ceased or scaled back their work in this area, we have maintained a steady focus on the fundamental science since we first announced our partnership with Synthetic Genomics, Inc. in 2009 to investigate the ability to produce biofuels from algae.
Second generation biofuels A biofuel is any fuel that is derived from living organisms. Given their renewable nature, they offer the potential to help expand energy supplies while reducing greenhouse gas emissions. Many people are familiar with the biofuel ethanol, which is predominantly produced from corn or sugar cane and blended with gasoline. Discussions continue, however, about the environmental footprint of such first generation biofuels. ExxonMobil is therefore pursuing research into second generation biofuels as part of a wide-ranging
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Oil from algae can potentially be processed in conventional refineries, producing fuels no different from convenient, energy-dense diesel
portfolio to determine how they may best fit into the energy future. These second generation biofuels use feedstocks that do not compete with food and have the potential for lower land-use impacts. Our continuing focus on the fundamental science is critical in potentially advancing such technologies to scale and helping ensure they are affordable to consumers.
A broad research portfolio Our extensive work includes research into algae and other programmes focused on converting alternative feedstocks such as cellulosic biomass. We are working with Synthetic Genomics and leading universities and research institutions, including the Colorado School of Mines, Michigan State and the University of Wisconsin, to advance biofuel technology. Oil from algae, for example, can potentially be processed in conventional refineries, producing fuels that are no different from
Could algae be the low-emission fuel of tomorrow? From production to combustion, ExxonMobil gives seven reasons why it thinks this renewable energy source, which can be grown at scale on a limited amount of land, is so promising Algae consumes CO2
In addition to producing algae, production sites could also act as carbon capture projects
Low-emission fuel On a life-cycle basis, algae biofuels emit about half as much greenhouse gas as petroleum-derived fuel
Each acre of algae yields more than
litres of fuel. Compare that to 2,460 litres per acre for palm oil and 190 litres per acre for soybean oil
Year-round harvests convenient, energy-dense diesel. The oil produced by algae could also serve as a potential feedstock for chemical manufacturing. The challenge is to find and develop algae that can produce bio-oils at scale on a cost-efficient basis. In March 2018, ExxonMobil and Synthetic Genomics announced an exciting new step in developing scalable biofuels from algae that could lead to the technical ability to produce 10,000 barrels of algae biofuel per day by 2025. The new phase of research includes an outdoor field study that will grow naturally occurring algae in several contained ponds in California. The effort involves teams of scientists and engineers, from both Synthetic Genomics and ExxonMobil, working to understand algae growth characteristics. Both of our organisations have worked closely for several years to develop algae strains for improved photosynthetic efficiency and potential future oil production. While this research target is still years away, and it will take well over 10,000 barrels per day to fuel the world’s transportation needs, ongoing work in the field and lab is bringing
2017 2018 2019
Unlike other feedstocks, such as corn, which is harvested only once a year, algae can be harvested repeatedly throughout the year
Food production Algae can be cultivated on land unsuitable for other purposes with water that can’t be used for food production
Algae can be grown in wastewater and industrial effluent, and can actually purify polluted water while simultaneously producing energy-rich biofuels
Algae-derived diesel can be pumped into existing diesel automobiles without making major changes to car engines and infrastructure
Since 2000, ExxonMobil has spent more than US$9bn to develop and deploy lower-emission energy solutions across its operations researchers closer to scaling up algae biofuels production in a meaningful way. ExxonMobil is also partnering with the Renewable Energy Group, Inc. (REG) to study the production of biodiesel through fermentation of renewable cellulosic sugars from sources such as agricultural waste. REG has developed a patented technology that uses microbes to convert sugars to biodiesel in a one-step fermentation process.
What’s next? ExxonMobil’s work with advanced biofuels represents only one component of our broad research programme. Since 2000, ExxonMobil has spent more than US$9bn to develop and deploy lower-emission energy solutions across its operations, including carbon capture, utilisation and storage; breakthrough energy-efficiency processes; natural gas technologies; advanced energysaving materials and environmental life-cycle assessments. We invest about US$1bn a year in research and development across all of our various business lines. Researching and developing advanced biofuels is a long term endeavour. We have a long history of taking science to scale. We are focused on determining the technical feasibility and potential environmental benefits during this phase of our work. If we see positive results, we will proceed to the next step and continue the research toward scalability. We have made great progress, but we know we still need scientific breakthroughs for biofuels to be scaled up economically and produced in a way that yields meaningful environmental benefits. By Vijay Swarup,Vice President of Research and Development, ExxonMobil www.the-eic.com | energyfocus
EIC Member Focus Transcar Projects
Dean Rossiter, Transcar Projects
stabilising the business and then going on to win and execute one of the world’s largest projects as part of a JV.
Can you tell us a little bit about Transcar Projects? Transcar Projects is one of the last privatelyowned project logistics management specialist companies. Clients include blue chip majors throughout the world in the oil and gas, petrochemical, process, renewables, water treatment and civil construction sectors.
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How did Transcar Projects start out? We’re a family business, started in 1977 by two former K&N employees, John Salter and Wolfgang Rust. Then, major projects were considered anything in excess of a few containers and the company’s main business was linked to Libyan river projects. Fortytwo years later, we’ve executed projects in all corners of the world, the largest of which was for more than 2m freight tonnes of cargo for a large gas-to-liquids plant in Qatar. What services do you offer the energy industry? All of our services are tailored to each client. We optimise their logistics budgets; procuring, expediting and reporting, taking responsibility for delivering every item on time and within budget. This is all coordinated to and from anywhere around the globe. Our processes and systems give clients the confidence to commit to their schedules as we transparently and cost effectively move and track freight. We contract the best specialists in the transportation sector to move anything from 3,000-tonne modules down to shrinkwrapped washers and foundation bolts. What’s a typical day like? The great thing about our business is that most days are different. Most of our activity takes place in the Cloud for ease of international access via any of our regional operations, as well as providing our clients with instant access to our updates.
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Managing Director Dean Rossiter takes Energy Focus behind the scenes at Transcar Projects If you weren’t working at Transcar Projects, what do you think you’d be doing? I was originally a medical student and I think I would have gone back to medicine as it has always interested me. What’s been Transcar Projects’ biggest highlight to date? We are still competing for work in an environment where we are dwarfed by multi-billion dollar international logistics giants. Despite this, we are able to win and execute projects so well that our clients continue to ask us back, time and time again. And yours? When John Salter died suddenly in 2005, the future of the business was at stake as we had just started to break into the major project markets. I always look back on that as a time when both myself and the Transcar team pulled together so effectively, dealing with the inevitable challenges that arose after John’s death,
What would it surprise our readers to know about Transcar Projects? That many of the company’s original founding team from 1977 were still with the company until their recent retirement. We have one of the lowest staff turnovers in the industry, which provides highly valued continuity for our clients and partners alike. And you? I recently turned 50 and decided to do my first triathlon to celebrate that milestone. It took place in Australia last November and I enjoyed it so much that I did another in December. Now I am hooked and will do another this March. The training certainly helps you keep on top of the jet-lag and schedules that come with the project environment. What’s next for Transcar Projects? Although the last 12 months have been quiet, there are signs that new projects will emerge in 2019. We have continued to push our non-project contract work and it’s grown strongly. We are very bullish about the next 12–18 months as a result. What does the future hold for the shipping industry? Brexit and US political turbulence have driven huge swings in currency rates and brought about uncertainty which can easily cause a slowdown in our sector. I suspect we will see ongoing volatility for the next 12 months, although because of the amount of trade and revenue at stake, governments will eventually have to find a way forward and things should then settle back down.
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