As POWER-GEN Europe celebrates its 20^th anniversary, Nigel Blackaby, conference director, considers the trends that have shaped the European power industry over the past two decades and how current developments might influence its evolution in the next 20 years.

Significant transformation has epitomized the power industry over the past two decades. As it strives to balance the needs of consumers, governments and the environment, few could have predicted the shape of the current energy mix and even fewer would have thought we’d still be so reliant on fossil fuels. Looking back, industry commentators agree the most significant trend has been the industry’s shift from being largely state-owned, centrally-controlled and dominated by large integrated companies to that of a liberalized environment.

The deregulation that began in the early ‘90s led primarily by the UK and Norway has since spread throughout Europe. Some would suggest this has led to lower prices for the consumer and the introduction of efficiencies into the marketplace. Others would argue that energy costs for end-users have actually risen in real terms, that there continues to be a lack true competition and that wider market uncertainty still hampers long-term investment in plant and infrastructure.

Certainly, further deregulation, the ‘green agenda’, the integration of renewables into the electricity system, plus new uses of electricity such as electric vehicles, bring fresh challenges, but they also create exciting new opportunities, as do increasingly rapid advances in plant, storage and smart grid technologies. As always, huge questions remain over the future of nuclear energy and other fossil fuels that have an impact on the environment. The choices we make about these technologies and the way in which manage the whole electricity infrastructure, potentially impacts the global economy and our way of life.

Market liberalization

Unbundling of generation, transmission, distribution and supply (retail), as well as the creation of energy trading markets has driven efficiencies into the marketplace, primarily in respect of technology efficiencies and lower wholesale prices via energy trading. Specifically, combined-cycle gas turbine generation has continued to blossom, with major advances in efficiency and size.

Gas turbine technology provides a means of constructing power plants in a relatively short time and at much lower cost, with lower environmental impacts and increased efficiency of fuel conversion into electricity. At the same time, the change in the marketplace and introduction of competition has accelerated its adoption, since new investors look for propositions with shorter lead times, greater certainty of outcomes and easier permitting.

This boost was critical in re-dressing the effects that the stagnation in power consumption of the late ‘80s and resulting overcapacities had in directing investment away from infrastructure towards mergers and acquisitions. Indeed, many utilities delayed investment in new plant until the impact of liberalization became clear and a number of equipment manufacturers suffered as a result. That said, investment decisions continue to be clouded by myriad factors today.

Investment decisions

In unbundled markets, companies must consider their investments carefully because every plant has a technical life of between 40 and 50 years, meaning there is always the risk of a competitor emerging with a better technology. The climate debate has added to this uncertainty, with the landmark Kyoto Agreement of 1997 and the EU 20-20-20 targets established in 2007/8 driving a major and long-lasting shift in focus to addressing concerns around CO₂ and greenhouse gas (GHG) emissions.

Carbon reduction and renewable energy legislation has been enacted in the majority of European countries, prompting an increase in the number of wood- and biomass-burning plants, as well as greater interest in carbon capture and storage (CCS) technology. The major players have programmes to develop green energy production and have accepted they must now build power plants on the basis of clean power. The utilities are increasingly recognizing renewables, especially wind and solar, as being the way forward.

However, regulatory boundaries continue to change in respect of GHG emission restrictions, emissions limits and carbon pricing; the cost and availability of fuels; and the opposing positions being taken on development of nuclear since Fukushima. Some would argue that nuclear has not been a realistic alternative since the disasters at Harrisburg (Three Mile Island) and Chernobyl, that coal is cheap but dirty and that despite gas turbines (and combined cycle) having developed to high efficiency and capacity, the historical rise in the cost of oil, and as a consequence gas, has countered these benefits to some degree.

Likewise, although shale gas is having a major impact on lowering gas prices and ensuring security of supply, it is facing significant opposition in Europe because of concerns surrounding the environmental impact of ‘fracking’. It is argued that if shale gas projects were properly executed, there would be minimal impact, making development of standards a priority and work has already been started in the US by the Environmental Protection Agency.

The evolving energy mix

Moving forward, the industry must look much more closely at the energy mix, because each type of energy source will have its place and there will no doubt be other technologies emerging. Wave and tidal power for example, could be complementary, as will storage via improved battery technology and pumped hydro. Both storage and conversion of whatever the end product might be will be hugely important because renewables introduce an increasing amount of non-synchronous energy such as wind and solar into the electricity system. This creates operational issues in the form of frequency stability, voltage stability and provision of reserve.

There are a number of pump storage plants being constructed in countries such as Switzerland, Germany and Austria for example, while most countries are looking at how to address the need for large-scale storage. In a fully sustainable world, natural gas and biogas will offer the most economical solution for peaking power, covering contingency demand and for bridging seasonal differences. For the time being, there is sufficient supply of natural gas and shale gas to act as a buffer.

There is also the issue of expanding the grid and deploying new transmission lines to accommodate renewables, especially offshore renewables that are usually located quite some distance from the load centres. Obtaining the necessary permits and public acceptance is currently proving difficult. Similarly, doubts persist as to whether CCS is a realistic option, given public opposition to transporting CO₂ via pipeline and storing it underground. Using excess energy from solar or wind to transform CO₂ into methane provides a viable alternative. Meanwhile, flue gas cleaning and other emission reduction technologies will remain an important aspect of the clean energy mix.

Building a flexible and sustainable system

Another key development will be the smart grid, which is currently undergoing a tremendous amount of development work and will be extremely important to the operation of electricity systems in the future. There will also be parallel development of wind, solar and wave, as well as geothermal and storage. Of course, the financial crisis of the past 3-4 years has meant not just a slowdown in electricity demand, and this has led to a reduced appetite for investment in renewables. Nevertheless, the long-term outlook for renewables is good and there is optimism that the EU’s 2020 targets can be met.

For some countries with hydro, wind and solar energy, a decarbonized power industry is entirely possible. But for others, such as the UK, Germany and the Netherlands, it remains a much more distant prospect. That doesn’t mean the industry cannot reduce the use of fossil fuel to a large extent. Natural gas will be required as a buffer for times when there is not a lot of wind or solar energy available, while development of coal fired CCS will need to advance if the industry is to able to utilize the large reserves of coal that remain in an environmentally-acceptable way. However, this technology is taking longer to bring to market than originally envisaged.

In essence, what is needed is system flexibility in terms of both fuels and outputs. This means that alongside the rapid expansion of renewable power generation, gas fired power plants will be essential in meeting demand for power by delivering the necessary level of system flexibility and the ability to respond rapidly to changes in demand. This can be achieved using modern gas-fuelled equipment such as fast responding fuel-efficient gas engines, together with combined cycle gas turbine plants.  Cleaner thermal power plants will be used to handle base loads. There is also likely to be major investment in high voltage grids over the next 10-15 years as European nations move towards a single integrated system that is much better connected and enables cross-border transmission of electricity.

Given the scale of the challenges and complexities faced, against a backdrop of greater demand for energy from emerging markets and a gradual rise in economic activity globally, it is more important than ever that all stakeholders pull together to find a solution to delivering a secure, sustainable and least-cost electricity system. This will mean increasing the efficiency of renewables, as well as the efficiency of coal and gas fired plants, retro-fitting where possible and replacing where necessary. This also means maintaining plant fired by brown coal for base load while migrating towards gas fired plant for medium load.

Ultimately, all investments in the power sector are long-term and will feed through to the consumer. Therefore clarity regarding long-term strategies of regulators together with improved transparency for consumers must be achieved. Moreover, both government and industry must reevaluate the challenge of better communicating the need for technology development in general – including nuclear, shale gas, CCS and coal – to gain public acceptance of the necessity of these technologies, alongside renewables, as being key to sustaining our way of life and preserving the planet.

About POWER-GEN Europe 2012

Now in its 20^th year, POWER-GEN Europe, co-located with Renewable Energy World Europe, offers the largest and most comprehensive conference and exhibition for the European electricity and power technology sectors. The combination of conferences and exhibitions across the entire spectrum of power generation is unique and is serving the vital move towards integrating the traditional fossil fuel and fast-growing renewable generation sectors. The show is being held from the 12^th to the 14^th of June 2012, and is taking place at KoelnMesse, Cologne, Germany. For more information, please visit the POWER-GEN Europe website at www.powergeneurope.com.