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eunergy — Wed, 19 May 2010 21:01:38 +0000

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Baltic Sea gas pipeline turns to OK

eunergy — Thu, 05 Nov 2009 14:19:58 +0000

Less than four years ago Vladimir Putin and Gerhard Schröder signed the gas agreement, construction of approximately 1200 kilometres long pipeline form Russia to Germany. Then the global economic situation was totally different, the oil and gas prices was on record level. But it was suspected that the implementation of the gas project would be difficult. Next to financial and technical uncertain the neighbouring countries are protesting against the plan and try to forbid it. The Polish government made the first step, and didn’t contribute to the pipeline because it is contrary to the economic interests of Warsaw – depriving the country of the budget represent a significant transit fee. Estonia immediately after it forbade beginning research in the territorial seas.

All of the Northern European countries moved: Denmark has led the engineer to move the pipe from the island of Bornholm. Finland and Sweden resisted too. It was feared that the construction would disrupt fish stocks and sea birds in the Baltic Sea and release toxins from munitions and chemical weapons sprinkled across the sea bed from earlier wars.

Russian optimism about the South Stream, however is too early. In October Demark granted construction permit to the Nord Stream project that will go to the German city of Greifswald. In this week Swedish and Finnish governments has permitted the project after the result of extensive environmental studies. Reducing potential environmental impacts to the Baltic Sea was paramount to the Finnish authorities.

Finally Russian diplomay will achieve their aim and Poland and Estonia will permit the plan soon. At the same time several of Europe’s energy for a large company interested in the Nord Stream, GDF Suez will buy 9 percent stake in Nord Stream AG.

Under current plans, Nord Stream goes through the territorial waters of Russia, Germany and Denmark and through international waters that are part of the exclusive economic zones of Finland and Sweden.

A 480-kilometer) stretch of the pipeline would pass through Sweden’s economic zone. The construction is planned to start next year. construction on the pipeline should begin in April, with the line on track to begin operations by the end of 2011. A second line should be completed in 2012.

Russia’s Gazprom holds a 51 percent stake in the project, while German energy companies E.ON Ruhrgas AG and Wintershall AG each hold 20 percent. Dutch company Nederlandse Gasunie NV holds the remaining 9 percent.

Moscow wants to use Nord Stream, and a mirror project South Stream in southeastern Europe, to strengthen its grip on European gas markets and head off the Nabucco pipeline project, that would bypass Russia.

Moscow is also keen to invest in pipelines that do not cross its neighbour, Ukraine. Moscow depends heavily on Ukrainian pipelines to get its gas to Europe and the two rivals have been at odds for years over energy issues. Russia cut off gas supplies to Europe for two weeks in January amid a pricing dispute with Ukraine.

Attractive energy project financing trends in CEE region

eunergy — Wed, 28 Oct 2009 20:28:05 +0000

Project financing fell by 30 percent in the energy sector in the first half of 2009, while renewables declined only 20 percent.

The energy utilities revenue decreased because the electricity demand is highly correlated with the GDP and sales prices falling. But the recession has even more serious consequence of decline in investments. Situation of the energy-related investment financing is more difficult because the investors don’t demand the long term and low yields investments. In Central-Eastern Europe devaluation of local currencies and the related exchange rate risk influenced it negatively.

Before the economic crisis the energy and renewable energy investments run with 10-15 percent equity loan rates, 0,8-2 percent of premium and 15-20 years duration. After the crisis, the expected counterpart 30-40 percent in the premium amounted to 3,8-5 percent, and the maturity is rarely longer than 10 years.

In the region (and also globally) financing of renewable energy is fell by lower rate than the average due to regulated revenue (feed-in tariffs) is affected by the intended structure is explained. The reasons are as follows:

- Effect of EU membership: Central and Eastern European countries must invest in renewable energy because of EU 20-20-20's criteria.

- Governments support the investors with administrative tools and subsidies to attract the industry.

Large majority of professional investors have troubled about the dependence on government subsidies, the non-transparent access to systems and the resulting high development risk and the relatively small size of the projects until recently, they interested little in the renewable sector in the CEE region.

The crisis appreciated the state-guaranteed income. The economic instability has risen significantly the risk premium, so the renewable sector became more attractive. But the real question is whether government arrangements will be subject to limits of the region's competitiveness.

New Challenges in Power Generations

eunergy — Tue, 27 Oct 2009 14:12:23 +0000

On E.ON’s capital market day 2009 interesting presentations were kept about perspectives of power generations.

The power utilities must face the Energy Trilemma which influences their investment decisions and asset portfolios. Necessity for global compromise is becoming more and more imminent.

Energy_Trilemma

Security of supply: national governments need to ensure security of energy supplies and diversified fuel mix.

Affordability of energy: electricity market structure must deliver best value to consumers.

Climate concerns: decarbonisation of electricity sector is clear trend.

The world needs more energy, appetite of China, India, Russia and other economies is growing dynamically, particularly in Asia and South America. China and India alone will account for about 40 percent of the future increase in energy consumption. OECD average energy intensity is 4 times bigger than that of China, so it’s a huge potential.

Energy_consumption

The next chart shows increasing energy demand by region:

Energy_demand_by_region

Primary energy demand set to rise at average of 1.6 percent per annual. According to the EIA 84 percent of the growth will be met by fossil fuels. Today coal provides 30 percent of the world’s electricity but is also responsible for more than 80 percent of utility-industry carbon emissions. Coal is a cheap source of energy, the EIA estimates that China and India will need to install 480 gigawatts of new coal-fired generation capacity by 2015.

Energy_demand

These figures show that we urgently need technologies to considerably decrease coal’s carbon emissions and significantly reduce its climate impact. Business-as-usual would lead to emissions of 62 Gt by 2050, but all technologies will be needed on a global basis to meet the lower emission target. So the technological competence is key for future success.

Technology<<>>

In this effort, one of the most urgent tasks is to develop and deploy technologies to capture carbon and permanently store it underground. Despite the significant progress in expanding renewables capacity, we need to use all available generation technologies to meet the challenges.

A reliable and climate friendly energy supply at affordable prices won’t be available in the next decades. Energy policymakers need to think carefully about what ingredients will be in the energy mix over the next decades.

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