How can utilities navigate the power transition?
Utilities face dramatic upheaval as change sweeps across the European power industry and the integration of renewables gains pace. Members of POWER-GEN Europe’s Advisory Board address some of the key questions ahead of POWER-GEN Europe 2014, being held in Cologne on June 3-5
Energy Digital will be publishing top energy executives’ answers to imperative questions throughout the week. The Roundtable participants are:
- Philippe Paelinck, VP portfolio and strategic positioning, Alstom;
- Risto Paldanius, director, business development, Wärtsilä;
- Dr. Franco Rosatelli, CTO, Ansaldo Energia;
- Dr. Tamer Turna, CEO, Yildirim Energy Holding Inc.
Over the past 30 years European governments have been deregulating and privatizing energy markets, separating generation, transmission and distribution: what have been the notable successes and challenges thus far?
Franco Rosatelli: The liberalization of energy markets in Europe and the separation of generation, transmission and distribution in most countries have played a crucial role in increasing the efficiency of energy systems for the benefit of industrial users and consumers alike. New players have strengthened their presence in the energy markets, endowed with higher efficiency, a greater propensity for investment, and greater generation capacity compared with former monopoly players.
Philippe Paelinck: The creation of a single European electricity market has been moving in a positive direction. With the EU Electricity Liberalization Directive agreed by all Member States forming the framework of EU energy policy, the overarching goal is for consumers to benefit from an internal market governed by coordinated rules – for the implementation of renewables and development of the electricity network. A market-oriented European energy system also aims to make the most of different types of power generation and to optimize the costs associated with managing, maintaining and evolving the grid infrastructure.
Risto Paldanius: Over the last 5-10 years, there has been large reformation of the European power system, as a result of the successful promotion of Renewable Energy Sources (RES). However, this has resulted in some undesired side effects. One of these is that an ‘old commodity’ product, electricity, has been turned into a highly volatile market product where production costs and revenues are not necessarily aligned.
Stable rates of return and flat consumer rates are just not there anymore. Yet, investments in ‘basic infrastructure’ such as power plants are 20-year commitments, and are hard to make bankable if the planning horizon has shrunk to 1-2 years. This has led to Security of Supply concerns, both in the short term balancing time frames to deal with the intermittent character of RES, and in the longer term around capacity adequacy.
Tamer Turna: The power generation market, together with the related gas and LNG markets have grown in tandem with privatization. As such, the market-oriented model has so far proved extremely successful. However, a completely deregulated structure has not yet been achieved, and neither has complete political independence of the energy market regulatory authorities. Public opinion and subvention schemes have enabled creation of the market for renewables. Given this has mainly been sustained via regulated tariffs, the greatest challenge to the renewables model lies ahead with the realization of a fully liberalized market.
Drax advances biomass strategy with Pinnacle acquisition
The Group’s enlarged supply chain will have access to 4.9 million tonnes of operational capacity from 2022. Of this total, 2.9 million tonnes are available for Drax’s self-supply requirements in 2022, which will rise to 3.4 million tonnes in 2027.
The £424 million acquisition of the Canadian biomass pellet producer supports Drax' ambition to be carbon negative by 2030, using bioenergy with carbon capture and storage (BECCS) and will make a "significant contribution" in the UK cutting emissions by 78% by 2035 (click here).
This summer Drax will undertake maintenance on its CfD(2) biomass unit, including a high-pressure turbine upgrade to reduce maintenance costs and improve thermal efficiency, contributing to lower generation costs for Drax Power Station.
In March, Drax secured Capacity Market agreements for its hydro and pumped storage assets worth around £10 million for delivery October 2024-September 2025.
The limitations on BECCS are not technology but supply, with every gigatonne of CO2 stored per year requiring approximately 30-40 million hectares of BECCS feedstock, according to the Global CCS Institute. Nonetheless, BECCS should be seen as an essential complement to the required, wide-scale deployment of CCS to meet climate change targets, it concludes.