Author Archives: olivianelson076

Historical Look at the Indonesian Coal Sector

wh_01200766The latest player on the international coal stage, alongside China, is Indonesia. The country has enjoyed one of the most rapid recent increases in coal production in the world, rising from 400,000 tonnes (t) in 1981 to 253 million tonnes (Mt) of coal in 2009. It is now the second largest exporter of hard coal in the world. Despite economic difficulties, coal production has not only been maintained but even extended and increasingly channelled into exports. The country produces around 30 to 40 Mt of lignite.

The policy pursued by post-Suharto governments of assigning autonomous rights to the provinces involves, among others, a shift in power away from the mining ministry towards provincial governments. The authorities there were hardly prepared for this or were unable to continue the necessary administrative work properly. Also, the mining law generally valid until now is practically suspended. Instead, the authorities are using their new powers to raise taxes and levies or are attempting to exert political influence over the mining companies. On top of this, comes a revitalisation of the unions, which are putting growing pressure on companies through strikes and plant occupations and also the financial demands of local townships. The consequence has been a serious worsening of the investment climate.

Indonesia was the second largest exporter of hard coal in 2009 with 230 Mt, after Australia with 259 Mt. Coal mining was hardly affected by the East Asian economic crisis during the years 1997/98. Coal production was extended and channelled into exports despite runaway inflation in the national currency and a wave of cancellations and delays in numerous coal-based IPP power plant projects and firmly agreed long-term coal supply contracts. A more momentous impact on the coal mining sector, however, has come from centrifugal political forces and the turmoil they have brought since the presidential change in 2000.

Coal industry restructuring in Russia

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The coal industry has undergone a major restructuring since 1993, in two phases. The first saw large-scale closure of uneconomic mines, resulting in an increase in the sector’s competitiveness and labour productivity. The second, from which the sector is still struggling to emerge, concentrates on improving the productive fields and opening new ones. The success of this process is critical for the sector to meet the rapidly growing domestic demand that current planning foresees. The coal industry also strives to compete in international coal markets and competes internationally to raise capital. It is hampered by social burdens and a lack of finance, worsened by the generally unstable investment climate in Russia.

The main provisions of Russia’s Energy Strategy to 2020 are based on the increasing coal use in the heat and power sector to lower the dependence on gas in the fuel mix. The provisions project the share of coal in the fuel balance to increase from about 20% in 2000 to 21-23% in 2020, with a matching decrease in the shares of natural gas and oil to meet the increasing electricity and heat demand and increase energy efficiency.

To achieve this, coal production will need to rise by almost 75% by 2020, to 340-430 Mt a year. Despite the sector’s progress towards restructuring during the 1990s, several factors raise concerns about its ability to meet this challenge. Doubts are attached to the sector’s capacity to attract the needed investment, the competitiveness of coal as an input fuel versus natural gas and the environmental implications of the increased mining and use of coal.

Under the Soviet system, the Ministry of the Coal Industry of the USSR controlled regional production associations. It was succeeded in 1991 by the Ministry of Fuel and Energy (Ministry of Energy since 2000) and RosUgol, the state-owned coal company. The restructuring process created 14 regional coal production companies and 11 regional coal associations to act as regional holding companies, in addition to a few stand-alone private mines.

Issues for wind power

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Debate regarding wind power has centred on a number of issues. The body of evidence is accumulating, revealing problems and solutions are being proposed, but some of these issues still require much further study and analysis.

It should be emphasised that it is not within the scope of this report to present a full summary of all the evidence, arguments and conclusions in these matters. The purpose is to raise the issues and to point out that questions exist. Some of these questions have been answered, others remain to be answered.

Grid balancing

In order to maintain security of supply, a second-by-second balance between generation and demand must be achieved. An excess of generation causes the system frequency to rise whilst an excess of demand causes it to fall. To sustain the balance, the electric system must provide power at the instant the load demands it, and at the prescribed frequency and voltage limits. Variations outside these limits can either cause protective systems to shut down large parts of the network or can cause extensive damage to delivery equipment and customers’ facilities. This is a vital issue for intermittent sources of energy.

Network balancing problems have occurred because of the variability of wind power and these have sometimes been serious. It has been pointed out that this is the normal state of an electrical system and a wholly fossil fuel powered system requires a spinning reserve in any case. However, evidence suggests that wind power can exacerbate this problem.

Grid extension

Because in many countries wind turbines are sited in remote areas where wind speeds are high but the distance from load centres is considerable, the transmission of large amounts of energy has placed burdens on the transmission system and caused congestion. This has been acute in Germany where the main fossil fuel base load generators are located in industrial areas, requiring little transmission capacity and the transmission network has developed accordingly. It will also need to be addressed in the UK where offshore wind farm developments in the northwest of Scotland will place burdens on the transmission network to transport power south. Because wind proposals have not always come to fruition, National Grid at one time proposed requiring a deposit from wind developers to link them to the grid.

The effects of sudden and intermittent flows of electricity reach beyond the location of the wind generators, unless they are in an electrical island. Examples of this are found in Poland and the Slovak Republic. The Polish TSO, Polskie Sieci Elektroenergetyczne SA has stated that it will need to make new investment in transmission capacity to accommodate the additional power from Germany. Likewise the Slovak TSO, SEPS, Slovenska elektrizacna prenosova sustava, has told ABS that they will need to construct major new interconnection capacity with the Czech Republic to accommodate the surges of wind power flowing south from Germany.

Historical experiences with wind energy – USA experience

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Several states in the US have encouraged extensive development of wind energy.

Investigations in California following the power crisis reported to the state legislature that because electricity systems must be kept in balance on a real time basis in order to maintain system reliability and because output from wind power is intermittent, variable and unpredictable, other dispatchable generating units must be kept immediately available to provide back up. These must be kept connected to the grid and running below peak capacity or in spinning reserve mode. These units incur costs which are part of the real cost of wind power generation.

A study during the 2006 California heat storm revealed that output from wind power significantly decreased as peak demand increased, due to greater air conditioning and other demands that stem from high temperatures.

A sudden drop in wind speeds in Texas in December 2009 almost resulted in blackouts in western parts of the State.

The US Department of Energy (DoE) has published a comprehensive report listing the steps to implement in order to develop wind energy. The programme aims at installing a total of 100 MW in each of sixteen states by 2010, recently raised to 30 states. Three primary targets are identified:

  • Technology characterisation and data collection
  • Tools and methods of development
  • Applications and implementation

A substantial research and development programme is needed to examine both high and low wind speed turbines, including the deployment of smaller wind systems in distributed settings. The thrust of this structured plan is that the DoE wishes to assess the future potential for wind and to move progressively towards a manageable system; in small regional units rather than large wind carpets like the European systems.

Geographical distribution of coal reserves in South Africa

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The country’s coal reserves are mainly bituminous, with a relatively high ash content of about 45%, and low sulphur content of about 1%. South Africa’s recoverable coal reserves, estimated at 54.6 billion short tons (Bst), are the world’s seventh largest, representing approximately 5% of the world reserves. The South African Department of Mineral and Energy Affairs (DME) began a national study to reassess the country’s coal reserves which was expected to be completed by the end of 2003. The DME’s Discards Inventory was completed in 2002. The inventory tracks the discard or ‘waste’ coal from current and former coal operations in the country by size, location and quality. As much as one Bt of discard coal, which is South Africa’s largest source of industrial waste, is on the surface in South Africa.

According to a study published by the World Energy Council of 2001, commercially mineable hard coal reserves in South Africa amount to 49.5 Bt. More cautious assessments now put the quantity at only 34.4 Bt, if extraction continues rising beyond the current level. Some of the best-quality deposits are the Witbank, Highveld, Ermelo and KwaZulu. In 2009, South Africa’s hard coal production totalled 245.17 million tonnes (Mt) coal. Some 184.71 Mt was for domestic consumption.

Africa has been organised by landowner mining, that is, mining rights have remained with the owner of the land. State control merely took the form of a statutory approval procedure and mining supervision, so that no royalty had to be paid to the state. Wide areas of land are owned by big mining companies, and this is also true of the country’s coal deposits. Thus the government is gradually introducing profound change in this sector. The government and mining companies agreed on new draft mining laws under which, all of the country’s natural resources are transferred to state ownership. Present and future mining companies must re-apply for their mining rights, the issue of which is to be associated with statutory stipulations; deposits which are not exploited at present or whose short-term exploitation has not been applied for by the landowner can now be granted to other interested parties.

Electric vehicles in China

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Both grid operators are investing heavily in electric vehicle charging stations. China is expected become the main market for battery and plug-in hybrid vehicles in the mid-term and the largest market for battery electric vehicles in 2012. The number of electric vehicles on the road is forecasts to reach between 1 and 5 million electric vehicles by 2020. Generous subsidies are likely to drive the market in the short term. Government subsidies of RMB 3,000 per kWh are available for plug-in and pure electric vehicles meeting government requirements, up to RMB 50,000 per unit for PHEVs and RMB 60,000 per unit for BEVs. An additional subsidy of RMB 30,000 for PHEVs and RMB 60,000 for BEVs is available in Shenzhen for new vehicles certified and passed by experts in July 2010. Moreover, as part of the scheme in Shenzhen a total of 22,200 charging posts for low-speed, middle-speed and high-speed charging are planned to create a diversified and networked charging system. This should result in the province achieving its target of 25,000 privately-owned new energy vehicles on the road by 2012. Most battery and electronics manufacturers are located in this province, perhaps explaining why this incentive exists.

For buses a government subsidy of RMB 500,000 per bus was available for 1,000 buses in 2010, and up to RMB 600,000 for fuel cell-powered large commercial buses.

Sixteen of the county’s car manufacturers, amounting to a total of seventy one hybrid, electric and fuel-efficient vehicle models, are eligible for an additional government subsidy of CNY 3,000 (USD 441) per vehicle. Companies that will receive the subsidy include BYD, Hyundai Motors’ Chinese venture, Shanghai General Motors and Ford-backed Changan-Ford-Mazda joint venture.

Two key policies to promote the development of the electric vehicles include: 10% of cars on the road must be emission-free by 2013 and 20% of power has to come from renewable resources by 2020. To finance the uptake of vehicles, the Ministry of Finance in China has announced plans to spend RMB 4 billion to support the commercialisation of new energy vehicles in 2010.

The State Grid has published six standards for electric vehicles and electric vehicle infrastructure, and by the end of the year plans to have completed 75 charging stations; 6,209 AC charging spots and battery replacement stations are proposed. Already the State Grid has commissioned 101 electric vehicles, 30 pilot charging stations and, through the Beijing municipal government, 7 electric bus lanes and 58 electric buses.

The National China Grid Company, part of the State Grid, commissioned its first large electric charging station for electric vehicles, the Nanhu Charging Station, in Tangshan in March this year. The RMB 19 million station has 10 charging spots for 10 vehicles, two large DC chargers and eight medium chargers. This will serve the 19 electric vehicles on the road in Tanshan. A further 3 charging stations and 100 charging poles are planned for 2010 through strategic agreements between the North China Grid and the municipal governments of Tangshan, Zhangjiakou, Qinhuangdao, Langfang and Chengde.

In December 2009 the Southern Grid commissioned its first electric automobile charging facility in Shenzhen consisting of two charging stations and 134 charging poles. Another eight charging facilities have been installed since then. Furthermore six charging facilities have been installed in Guangzhou before the Asian Games commence in November this year.

Before the end of 2010 the Southern Grid expected to construct electric vehicle charging stations in Liuzhou, Guangxi. The first station should be a RMB 3 million station covering 700 m2 in the Yanghe industrial new district. Southern Grid is also in discussions with the Chinese automotive company, BYD, to construct an electric vehicle charging station.

Historical Overview of the Solar Industry in China

From time to time we take you back to one of our past reports to present the state of an industry as it was viewed when it was written. This time, we look at the solar industry.

China is emerging as a future leader in the global solar PV industry. There is a huge gap between production and consumption and manufacture has predominantly been for export until the domestic market develops. The solar PV manufacturing industry is growing rapidly and in 2006 and 2007 there has been a spate of IPO’s for Chinese solar companies on the stock exchanges in Shanghai, Hong Kong, New York and London. One Chinese company, Suntech, is the third or fourth largest cell producer in the world. Chinese module production increased from 134 MW in 2005 to 370 MW in 2006 but in that year installed capacity reached only 70 MW, due to a lack of fiscal incentives to stimulate the domestic market. Many would argue that solar energy will be constrained for some years to come by the relative ease of accessing coal, but consensus of opinion is that China will soon become a major market.

New Chinese policies are spurring the development of solar PV. In March 2009, a subsidy was approved for building-mounted  PV systems which would pay up to 20 yuan per watt for systems of more than 50 KW. For ground-mounted projects, the government is paying a feed-in tariff. For a 10 MW project in Dunhuang, the first in a series of planned ground-mounted projects; this has been agreed at 1.09 yuan per kilowatt-hour. The incentives on building mounted installations are expected to drive up to 100 MW of additional capacity, but the Chinese provincial authorities are expected to develop further incentives; Jiangsu province has led the way with plans announced to install 400 MW of solar up to 2011. This is likely to include 260 MW of new roof capacity, 10 MW of BIPV and 130 MW of ground-mounted capacity.

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