CHINESE E-ALERT
#59 – February 2013
Table of Contents
OVERVIEW
COAL
GAS / OIL
CO2
NUCLEAR
BUSINESS
OVERVIEW
China’s New Five-Year Program allocates $56 Billion to reduce PM2.5, SO2 and Other Pollutants in Major Cities
On December 5, 2012, the Ministry of Environmental Protection (MEP) issued a special 12th Five-Year Plan (2011-2015) on Prevention and Treatment of Air Pollution in Critical Areas to control SO2, NOx, large particulate matter, and volatile organic compound emissions in 13 regional areas of China that include Beijing, Tianjin, the Yangtze River Delta, Pearl River Delta, and 117 prefecture-level cities. The plan calls for decreasing total emissions of SO2 by 12 percent, NOx by 13 percent, and large particulate matter and VOCs by 10 percent in these areas, which are spread across 19 provinces. The plan will require an estimated investment of about 350 billion yuan ($56.3 billion) between now and the end of 2015, according to the ministry. China led the world in emissions of SO2 and NOx in 2010, the ministry said, with 22.678 million metric tons and 22.736 million metric tons emitted, respectively.
According to the MEP, China will also reduce fine particulate emissions (PM2.5) by at least five percent in the 13 major areas. Key targets under the Five-Year Plan include a 16 percent reduction in "energy intensity" (energy consumption per unit of GDP), increasing non-fossil energy to 11.4 percent of total energy use, and a 17 percent reduction in "carbon intensity" (carbon emissions per unit of GDP). High on the agenda of the 12th Five-Year Plan is optimization of industrial structures and layout, as well as the setting of strict limits for projects involving coal-fired power plants, iron and steel production, cement, and petrochemicals. The progress of the plan will be reviewed every year after 2013, with a final assessment in 2016.
China will continue to operate FGD and deNOx units, including the construction of FGD for 50,560 MW of coal-fired units in service, the upgrade of 42.670 MW of coal-fired units which have FGD facilities but fail to reliably meet the standard, and the construction of deNOx facilities for 400,000 MW of coal-fired units in service and upgrade of 70,000 MW of coal-fired units with low NOx systems.
Coal-fired Power Generation to grow with China leading the way, according to IEA
Coal's share of the global energy mix continues to rise, and by 2017 coal will come close to surpassing oil as the world's top energy source, the International Energy Agency (IEA) concludes in its latest annual Medium-Term Coal Market Report (MCMR), covering the period 2012-2017. Although the growth rate of coal slows from the breakneck pace of the last decade, global coal consumption by 2017 is estimated to be some 4.32 billion tonnes of oil equivalent (btoe), versus around 4.4 btoe for oil, based on IEA medium-term projections. The IEA expects that coal demand will increase in every region of the world except in the United States, where coal is being pushed out by natural gas.
The world will burn around 1.2 billion more tonnes of coal per year by 2017 compared to today - equivalent to the current coal consumption of Russia and the United States combined. Coal's share of the global energy mix continues to grow each year, and if no changes are made to current policies, coal will catch oil within a decade. China and India lead the growth in coal consumption over the next five years. The report says China will surpass the rest of the world in coal demand during the outlook period, i.e. by 2017, while India will become the largest seaborne coal importer and second-largest consumer, surpassing the USA.
Amid concern about the impact of Chinese uncertainty on coal markets, the report offers a Chinese Slowdown Case. This scenario shows that even if Chinese GDP growth were to slow to a 4.6 percent average over the period, coal demand would still increase both globally and in China - indicating that coal demand is not likely to stop growing even with more bearish economic perspectives.
China is by far the world's largest producer and consumer of coal, and accounts for more than 45 percent of both global totals. China accounted for more than three-quarters of incremental coal production in 2011 and domestic consumption was more than three times that of global trade in the same year. Domestic coal transport by rail was more than twice as high as consumption in the United States, the world's second-largest consumer of coal. Domestically shipped coal in China comprises more than half of the global seaborne trade.
As China's primary supply of energy, coal dominates the country's power generation, power capacity and indigenous energy production. Therefore, development of the global coal market will largely be driven by China through its economic growth, investments in infrastructure, energy diversification and energy efficiency programs and policies, coal-electricity pricing policy and developments in the Chinese coal mining sector. China replaced Japan as the largest coal importer in 2011. Similarly, Indonesia replaced Australia as the largest coal exporter in 2011 on a tonnage basis. Japan and Australia had both held their lead positions for nearly three decades.
For more information on Chinese Utility Plans, click on:
http://www.mcilvainecompany.com/brochures/energy.html
2,000 Industrial Boilers will spend between $4 and $12 Billion to Meet the New Industrial Boiler MACT Rule
FGD and DeNOx will be required for a large number of industrial boilers. In order to eliminate VOCs, many industrial boilers will increase firing temperatures and NOx. So even though NOx limits are not included in MACT, there will be expenditures.
In the next few months, operators of industrial boilers will have to decide whether to gamble on low gas prices for the next two decades or add air pollution control equipment to their existing systems. There are more than 10,000 boilers listed in the McIlvaine Industrial Air Emitters database and
Utility Environmental Tracking System. Less than 2,000 will fall under the criteria for action set up by the new Industrial Boiler MACT rule.Of these 2,000 units, only 500 units will have to make major capital expenditures. These plants will have to decide whether to invest the funds to meet the new regulations or switch to natural gas or even retire the units and buy electricity. The Industrial Air Emitters program is tracking these decisions as they happen.
A survey conducted by URS and funded by the Council of Industrial Boiler owners found that to meet the new limits coal-fired boilers would have to spend $5.6 billon. Liquid-fired units would have to spend $5.2 billion and biomass and other units would spend $1.2 billion.
At present, the cost of natural gas is low, so it would seem attractive for these owners to tear out the old boilers and replace them with new gas turbines. The capital cost of the replacement turbines compares favorably with the capital cost of the upgrades to the existing plants. The question is, what will be the price of natural gas be over the lifetime of the boilers?
A number of plants do not presently have access to sufficient gas. These owners are looking at an add-on cost of up to $3/MMBtu to offset the investment by the gas supplier in new transmission lines. So even at $2/MMBtu gas when the transmission add-on is included, the economic advantage disappears.
For the plants with gas access, now the question is what will be the availability and price in the future? Europe is reducing its reliance on gas and moving back to coal. This is a scenario similar to the one in the U.S. in 2000 when gas prices soared. Can it happen again here?
Gas has a value much higher than coal. It can be converted to liquids and sold as gasoline and it can be compressed to LNG and transported around the world. It can be used for home and commercial heating without large capital investments in pollution control equipment. Fifteen billion dollars has already been allocated for gas-to-liquids plants in the U.S. Equally large sums are being invested to convert LNG regasification to liquefaction facilities. In the meantime, the supply of conventional natural gas is rapidly dwindling. This means unconventional supplies, including shale gas, will have to fill the void and provide for the new demands. At some point it is inevitable that the price of gas will reflect its higher value and the world prices.
Industrial boiler owners will have to answer the tough question as to when that will occur. On one hand, the shale gas supply could be so large as to ensure longer term low gas cost. On the other hand, the depletion rates and other realities could make the gas supply only able to keep up with traditional markets and the new demand in those markets.
Unfortunately the boiler owners do not have the luxury
to wait. Compliance is required by 2015. So decisions have to be made in the
next few months. McIlvaine is tracking these decisions plus those dealing with
the Cement MACT in Industrial Air Emitters.
For more information on U.S. Industrial Emitters click on:
For more information on Utility Environmental
Upgrade Tracking System, click on:
Flue Gas Desulfurization Revenues will Range between $3 Billion to $8 Billion/Yr
Over the Next Three Years
Over the next three years revenues for new FGD systems (not including repairs) will rise and fall over a range of $3 billion to $8 billion per year. The reason for the substantial fluctuation is the size of individual orders, the definition of the cost, scope, and chronology. These new forecasts appear in FGD World Markets published by the McIlvaine Company (
www.mcilvainecompany.com)Minimum FGD Orders
($Millions)
|
Continent |
2013 |
2014 |
2015 |
|
Total |
3,095 |
4,015 |
3,437 |
|
Africa |
89 |
15 |
15 |
|
America |
220 |
1,122 |
581 |
|
Asia |
2,128 |
2,101 |
2,075 |
|
Europe |
659 |
777 |
767 |
The above forecast is based on orders and not actual booked revenues. It assumes a four year delay from order to startup for FGD systems for new units. It assumes three years for retrofits. The revenue per MW is as low as $70/kW for new FGD systems in China. This represents typical vendor scope in China. Since two-thirds of the market (in MW) is for new coal-fired power plants in China, this low value makes a big difference in the estimate of market size.
The present forecasts also assume a slowdown in orders for new Chinese power plants in the next three years. This forecast is also subject to change as plans become more firm. In China the turnaround on a new coal-fired power plant is as little as two years.
By contrast, the average retrofit project in the U.S. costs $300-400/kW. This includes lots of cost borne directly by the utility and also costs of new fans and other components which are typically included by the utilities in estimating their project costs.
The year 2014 will be a biggest year in the Americas segment due to the new Utility MATS rule. This requires compliance with hydrogen chloride emission limits. The FGD scrubbers remove both the SO2 and HCl.
There are some new FGD systems in Latin America. Chile is installing a number of dry FGD systems. In Europe there are some new coal-fired power plants and replacement of existing old FGD systems. There is little activity in Africa.
Asia is the big market. It will account for 50 to 70 percent of the total revenue over the three year period. China will be the largest Asian purchaser. It is installing FGD with all the new coal-fired power plants. Also there are retrofit projects driven by tougher SO2 limits. The Japanese market may rebound due to an initiative to rely on coal to a greater extent.
India offers considerable long range potential. To date there have been a few seawater scrubbers installed on plants, but most do not have SO2 removal devices. Tougher regulations are anticipated, so FGD companies are positioning themselves to pursue this market. Mitsubishi Heavy Industries is partnering with BHEL to pursue this opportunity. Other international suppliers such as Alstom are also active.
For more information on FGD World Markets,
click on:
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