Questions 1 and 2 were addressed in Part 1, in the March 25 issue of this update. Question 3, incentives that will increase total gas-based power generation in general, or higher efficiency combined cycle technologies in particular, are summarized below.

North America is blessed with plentiful and diverse energy resources including oil, gas, coal, hydro and other renewables. The region’s power generation is generally shifting away from coal and towards more natural gas.

· The United States is undergoing a dramatic shift from coal to gas-based power generation due to strict limits on the emission of mercury and other air toxics, as well as greenhouse gas emissions. In addition, with the production of shale gas in the U.S., the price of natural gas fell over 50 percent between 2007 and 2012.

· Mexico amended its constitution in 2013 to open the oil & gas and power sectors up to foreign investment. The privatization of the sector will encourage investments. In addition, a major new gas pipeline is being built from Texas to Mexico to supply natural gas.

South America is very dependent on hydro sources for power generation. Several countries are seeking to diversify their energy sources, but most of the region suffers from limited natural gas or coal resources. Therefore, these countries are looking to biofuels, nuclear power and renewable energy to meet their growing demands for electricity.

The energy mix for power generation in Europe varies greatly, from France with 76 percent nuclear power, to Norway with 97 percent hydropower, to Poland with 80 percent coal-fired generation. The drivers affecting future energy mixes are very complex and often contradictory. Global warming and air pollution concerns are driving power generation away from coal. The Fukushima disaster in March 2011 is driving some countries (such as Germany) away from nuclear power. High gas prices have led to an overcapacity of gas-fired generation in Western Europe. The only clear winner appears to be renewable energy.

Countries in the CIS region rely on a diverse mix of fuels for power generation. For example, Belarus relies almost exclusively on natural gas, Kazakhstan heavily on coal (81 percent) and Ukraine largely on nuclear power (45 percent). In reality, however, Russia is the dominant force in the CIS. With huge natural gas reserves, Russia uses natural gas to generate roughly half of its electricity. Until very recently, however, gas-fired power plants in Russia have been conventional steam plants rather than open-cycle or combined-cycle gas turbines. The country previously emphasized standardization in power plant design and foreign OEMs encountered difficulties introducing new technologies due to Russia’s strict codes and standards.

Russia began to liberalize and privatize its power market around 2008. One goal of the privatization program was to boost the installation of new, more efficient power generation facilities so that more gas could be freed up for the international market. Liberalization efforts have created a trend away from highly standardized power generation toward more optimized and tailored combined cycle solutions. Russia had only 3GW of combined cycle capacity at the end of 2008, but added another 13 GW over the following five years (2009-2013). Continuing growth is expected.

Africa’s power sector is split into two distinct regions; northern African nations rely almost exclusively on oil and natural gas, whereas South Africa relies on coal for over 90 percent of its power generation.

· Gas-fired power generation has more than doubled in the last five years in Algeria, from 5,189 MW in 2008 to 10,521 MW in 2013. Algeria’s public utility, Sonelgaz, is pursuing a large-scale investment program to add an additional 12,000 MW of gas-fired generating capacity by 2019.

· Nigeria’s National Integrated Power Project (NIPP) was initiated in 2004 to build ten gas-fired power plants by 2010 (actually completed in 2012), totaling 4,250 MW. Nigeria introduced another major power sector reform package in May 2010 to double power production from 24,000 GWh to 54,000 GWh by 2017.

The Middle East relies primarily on oil and gas for power generation, largely because the region has ready access to significant oil and gas resources. A sharply rising demand for power in the region is being driven by population growth, a rapidly expanding industrial sector, the high demand for air conditioning during the summer months, and heavily subsidized electricity rates.

Asia consists of a very diverse group of economies, from highly developed nations such as Japan to struggling economies such as Myanmar. Asian nations also vary greatly with respect to their access to sources of energy – Australia and China have huge coal reserves, southeast Asia has access to productive oil and gas fields, and countries such as Taiwan and Japan rely primarily on nuclear power and energy imports.

· China currently has 30 GW of gas-fired generating capacity, but that is only 3 percent of overall capacity. Gas-fired capacity is expected to double to 60 GW by 2020, due to pollution concerns and access to alternative sources of natural gas.

· India suffers from severe natural gas shortages and no additional gas-fired power generation capacity is expected until 2017, at the earliest.

U. S. PROJECTS

CONNECTICUT: NTE Energy Proposes New 550 MW Combined Cycle Plant for Killingly

NTE Energy has announced plans to invest $500 million to construct a 550 MW combined cycle, natural gas power plant near an industrial park in Killingly, Connecticut. Project developers said the air-cooled plant has the potential to develop and sell enough electricity to the grid to power 550,000 homes.

A preliminary project schedule calls for making air quality permit and siting council applications to the state in the spring, with construction to begin in the summer of 2017. If the plan is approved, commercial operations would start in 2020.

NTE Energy, based in St. Augustine, Florida, has three ongoing projects in various phases of development across the country including the Kings Mountain Energy Centers in North Carolina, Middletown Energy Center in Ohio and Pecan Creek in Texas.

PENNSYLVANIA: Hill Top Proposes New 536 MW Power Plant for Former Nemacolin Mine Property

A New York company wants to build a 536 MW, natural gas-fired power plant on the property of the former Nemacolin mine in Cumberland Township. The power plant, which will be developed by Hill Top Energy Center LLC of Huntington Bay, NY, applied for an air quality permit from the state Department of Environmental Protection for the plant last September. The application is in the technical review stage, DEP spokesman John Poister said.

The company also advertised its intention to apply to DEP for a National Pollutant Discharge Elimination System permit for water quality management. That application has not yet been submitted to the agency, Poister said.

A legal notice regarding the water quality application notes the permit is needed for a discharge of cooling water used as part of a cooling tower system. Water will be withdrawn from the Monongahela River, used in the cooling system and then returned to the river, the notice said.

Information provided by DEP regarding the air quality permit application indicates the plant will consist of a natural gas-fired combustion turbine, heat recovery steam generator and a steam turbine. The plant also will have selective catalytic reduction (SCR) equipment to reduce nitrogen oxides emissions and oxidation catalysts to reduce carbon monoxide and volatile organic compound emissions, the application said.

The company plans to begin construction early next year provided all the necessary permits are received. Construction is expected to take 30 months. The property on which Hill Top’s proposed plant will be constructed is owned by Greene Energy Resources. Greene Energy is affiliated with Wellington Development WVDT LLC, which had originally planned to build a coal-waste burning plant on the property.

VIRGINIA: Corporation Commission Approves Dominion’s Greensville Power Station

The Virginia State Corporation Commission (SCC) has approved Dominion Virginia Power's request for a Certificate of Public Convenience and Necessity to build a state-of-the-art natural gas-fired power station in Greensville County.

Construction is expected to begin later this year on the $1.3 billion power plant on a site that straddles the Greensville/Brunswick County line. The power station will generate 1,588 MW of electricity and will be built on 55 acres. It is being constructed just a few miles from Dominion's Brunswick Power Station, which is expected to be fully operational next month.

WISCONSIN: Alliant wins Preliminary Approval for Riverside CCGT Expansion

Alliant Energy Corp. has won preliminary approval from a regulatory panel to build a $700 million natural gas-fired power plant near Beloit. The Madison-based utility says the new plant will be located next to its existing gas-fired Riverside power plant, doubling the capacity of the complex.

Construction is expected to begin this fall, and the 700 MW plant could begin operating in 2020. It will be the first new fossil fuel power plant built in Wisconsin in nearly a decade, and is expected to create 1,000 construction jobs. The PSC's approval Thursday is contingent on Alliant obtaining state and federal permits.

WORLD PROJECTS

BANGLADESH: Unit 4 of Ghorasal Power Plant to be Converted to Combined Cycle

With the aim of ensuring maximum utilization of gas and optimum generation of power, the government has launched a project for re-powering the fourth unit of Ghorasal power plant.

"The fourth unit of the Ghorasal power plant would be converted into combined cycle technology from the existing single cycle unit under the repowering project," said Planning Minister AHM Mustafa Kamal.

Nearly 70 percent of the machinery would be replaced to extend the lifespan of the power plant, which would also boost generation and bring stability in the power management, he added.

The planning minister said the government has adopted the project as part its goal of bringing all the villages in the country under power coverage in line with "Vision-2021". Bangladesh Power Development Board (BPDB) is entrusted to implement the project by June 2019.

Under the project, a diesel generator, a gas turbine generator and a gas booster compressor will be replaced and rehabilitation of the existing steam turbine unit will be carried out. In addition, the existing power evacuation system would be renovated while a new evacuation system would also be created for a new gas turbine.

JAMAICA: Gas Supply Agreement for 190 MW Old Harbour CCGT Now in Place

The Jamaica Public Service (JPS) says its 190 MW power plant project has reached another significant milestone, with the signing of a supply agreement with New Fortress Energy for the natural gas that will be used at the Old Harbor Bay plant in St Catherine. In addition, both the Office of Utilities Regulation and the Electricity Sector Enterprise Team have given formal approval for the power purchase agreement for the new facility. The JPS said it has also received the environmental permit from the National Environment and Planning Agency to proceed with construction.

JPS is still working on the final details with General Electric, the equipment supplier, and Power China, the engineering procurement and construction company selected to build the power plant, and that those arrangements should be finalized within the next two weeks. Financing of the project is expected to be completed by the end of April. The project is on target to be fully operational by mid-2018.

The new gas-fired plant will replace the JPS’ existing oil-burning power plant in Old Harbor Bay, helping to reduce the country’s dependence on oil as the primary fuel for electricity generation. In addition, the greater flexibility of the new power plant will allow for more efficient integration of renewables on the national grid.

SRI LANKA: Electricity Board to Fast Track Three 35 MW Gas Turbines

Sri Lanka' state-run Ceylon Electricity Board (CEB) will fast-track the building of three 35MW gas turbine power plants within the next 12 months as part of measures to solve the country's power crisis. The nation’s power grid has weakened after two transformer failures, high demand amid hot weather and a drought that has hit hydro power generation.

The 2015 Long Term Generation Plan of the CEB has listed two 35 MW gas turbines to be installed by 2018 when a 45 MW private Asia Power unit retires, and a third 35 MW to be built by 2019 which will allow four old 18 MW generators in Sapugaskande to be retired.

The CEB also needs back-up power to safely cool and shut down three coal plants if the national grid fails. At the moment, when the national grid fails, the coal plants releases steam by rupturing a diaphragm, requiring three days to cool the plant and replace the component.

TURKMENISTAN: Mitsubishi to Supply Turbines for 400 MW Zerger Gas-fired Power Plant

Mitsubishi Hitachi Power Systems (MHPS) has received a contract to supply M701 DA gas turbines and generators for the 400 MW Zerger gas-fired power plant in Turkmenistan. Under the contract, Mitsubishi will supply three sets of M701 DA gas turbine for the power plant, which is being developed by Sumitomo for the national utility Turkmenenergo.

In 2015, Sumitomo won a $300 million engineering, procurement and construction (EPC) contract for the Zerger plant, which is planned to be commissioned in 2018. Being built in the Lebap province located approximately 600 km northeast of Ashgabat, the Zerger gas-fired power plant is backed by loans from a syndicate of Japanese banks.

Power generated from the facility will be sold to the Afghanistan Government under a 10-year power purchase agreement. The supply of low-cost gas-powered electricity to Turkmenistan is a part of a project initiated by Turkmenistan to assist the country in reconstruction following the damage suffered in the civil war, Mitsubishi said.

Turkmenistan, which is estimated to hold the world's fourth largest natural gas reserves, has been promoting downstream energy projects to facilitate the use of its abundant gas resources. Controlled by the Ministry of Energy of Turkmenistan, Turkmenenergo operates nine power stations and seven distribution companies.

BUSINESS

IRAN: Siemens Agrees to License Gas Turbine Technology to Iran Following Lifting of Sanctions

German industrial group Siemens has signed an agreement with Iran’s power and infrastructure group Mapna to export two F-class gas turbines and to provide the technology of gas turbine manufacturing to the Islamic Republic. According to the agreement, Siemens and Mapna will cooperate to manufacture at least 20 gas turbines and associated generators during the next decade.

Siemens suspended its cooperation with Iran in 2010 due to sanctions, but has resumed that cooperation in recent months. In February, Siemens was finally able to deliver 30 gas compressors that were intended for the South Pars gas project. The equipment had not been delivered to Iran as a result of the sanctions.

In addition, Siemens will supply two F-class gas turbines for a power plant in Bandar Abbas, a city in southern Iran. The delivery of the new turbines should help Iran to work towards its previous power generation goals that were hindered by sanctions.

According to Iran’s 5^th development plan (2010-2015), the country had planned to increase power generation by 5 percent annually. However, last year the increase was less than 1 percent. According to the latest statistics, released by Iran's energy ministry, the country’s power generation capacity stood at 73,761 MW on February 25, about 600 MW more than the same day in 2015.

DC Regulators Approve Pepco-Exelon Merger, Creating Largest Public Utility in U.S.

District regulators approved a $6.8 billion merger between Pepco Holdings and Exelon on March 23, creating the largest publicly held utility in the country. The decision marked a surprising turn of events for the deal, which D.C. regulators had rejected twice and which appeared to be on life support in recent weeks as D.C. Mayor Muriel E. Bowser (D) and other city leaders lined up in opposition. The merger means that Pepco will be absorbed by a company with the largest number of nuclear reactors in the country and widespread operations throughout the Mid-Atlantic, Midwest and New England.

The sale affects about two million Mid-Atlantic electric customers who are served by Pepco Holdings, including more than 815,000 ratepayers in the District and in Prince George’s and Montgomery counties. And it is widely expected that those customers will see higher electric rates — possibly as soon as this summer — as has happened in Baltimore and other cities after Exelon acquired energy distributors.

In voting 2 to 1 to approve the deal, the D.C. Public Service Commission said it “was in the public interest,” noting that the utilities would deposit $72.8 million in a “customer investment fund,” set aside $11.25 million for energy efficiency and conservation programs targeted toward low-income residents and carve out $21.55 million for pilot projects, such as modernizing the electric-distribution grid.

The PSC’s approval had been the final hurdle to the merger, which had been approved by the Federal Energy Regulatory Commission, the Justice Department, and the states of Maryland, Delaware and New Jersey.

GE Expands High-Efficiency Capabilities with Completed Acquisition of Metem Corporation

GE has completed the acquisition of Metem Corporation, a U.S.-based provider of precision cooling hole-manufacturing technologies that enable turbine engines to function more efficiently, saving costs, increasing operation time and reducing emissions. The acquisition was closed less than 120 days after GE first announced its intent to purchase in December.

By bringing the Metem cooling hole-drilling capability in house, GE expects to realize supply chain efficiencies and reduce costs as it continues to strengthen its advanced, high-efficiency portfolio. GE’s HA gas turbines can achieve more than 62 percent efficiency. Achieving that level of efficiency subjects heavy-duty gas turbines to very high temperatures during operations, making metals weaker. With heavy-duty gas turbine blades operating under high temperatures and experiencing significant centrifugal stresses, turbine blade cooling is an important component of GE’s next generation of advanced gas turbines.

GE and Metem have had a very strong relationship since the 1970s, driven by Metem’s record of innovation and technology development and the strength of its workforce. At the time of the acquisition close, GE was Metem’s largest customer. This acquisition is strategic for GE Power, as demand for advanced manufacturing technologies significantly increases as products evolve.

MARKETS FORECASTS

$14 Trillion to be Spent on Power Plant Equipment and Repairs in the Next 25 Years

Electricity production will be up 100 percent by 2040. This will require an investment of $14 trillion in new hardware and repair parts for existing equipment and systems. Coal-fired generation will grow by 10 percent. One would, therefore, expect that investment in coal-fired power generation would be less than in other technologies. However, when you take into account repair and upgrades, coal-fired power will require more in investment than any of the alternatives.

World coal powered generation capacity is 2.2 million MW today and is slated to rise by only 10 percent or only 200,000 MW during the next 25 years. The investment needed to keep an old power plant running from age 50 to age 75 and to be upgraded to the likely emission limits, will be nearly equal to the $2 million/MW cost of a new power plant over a 25 year period. This means that $4.4 trillion will need to be invested in coal-fired power. Much of that will be in Asia where many new power plants will be built. Net capacity will drop in Europe and the U.S. This does not mean that the two areas will not be spending money on coal-fired power plants. The U.S. moratorium on new coal-fired power plants and the necessity to maintain 200,000 MW of coal-fired capacity means that the U.S. will have to spend $400 billion just to keep the old power plants running and meet increasingly stringent environmental standards.

Power Plant Investment 2015-2040
Generator Type	$ Trillions
Coal-fired Power	4.4
Gas Turbine Combined Cycle	2.2
Nuclear	2.0
Biomass	0.6
Wind	2.3
Solar	2.8
*Total*	*14.3*

Nuclear capacity is slated to increase from 392 GW in 2013 to more than 620 GW in 2040. But its share of global power generation will rise just one percentage point to 12 percent, because almost 200 reactors of the 434 operational at the end of 2013 will be retired, they will need to be offset by new power plants. Total investment will exceed $2 trillion over the next 25 years.

The gas turbine combined cycle power generation market will grow by more than 300 GW to over 2 million GW by 2040. Replacements, upgrades and retirements all result in a net capital investment of $2.2 trillion.

Biomass capacity will be 300 GW in 2040. Wind capacity will be 1300 GW and solar 1000 GW. By 2040 Chinese energy production will be twice that of the U.S. but per capital consumption will still be only half that of the U.S. The gas turbine market in China will be bolstered by the Chinese coal-to-gas program which will deliver gasified coal to turbine generators throughout the country.

India today is home to one-sixth of the world’s population and is its third-largest economy, but accounts for only 6 percent of global energy. Demand for coal in power generation and industry will surge increasing the share of coal to almost half of the energy mix and making India the largest source of growth in global coal use. By 2040, Asia is projected to account for 80 percent of coal consumed globally. Coal will remain the backbone of the power system in many countries.

Many components of coal and gas turbine generating plants need to be replaced frequently. Catalyst for a coal-fired power plant is replaced every 3-5 years and every 10 years for a gas turbine power plant. Boiler feedwater valves will be replaced more frequently in a gas turbine power plant due to the constant cycling and phenomena such as Flow Accelerated Corrosion (FAC). Slurry pumps, ball mills, fans and air pre-heaters in coal-fired power plants are in periodic need of replacement parts. Both coal and gas turbine operators are now more likely to use zero liquid discharge (ZLD) systems which are high maintenance systems.

Coal-fired power plants are switching from electrostatic precipitators to fabric filters. This results in bi-annual purchases of new bags. Gas turbine plants now favor high efficiency inlet filters which are more expensive and need more frequent replacement than the low efficiency alternative.

McIlvaine publishes market reports with detailed forecasts of the power market. They include:

59EI Gas Turbine and Combined Cycle Supplier Program
N043 Fossil and Nuclear Power Generation: World Analysis and Forecast
42EI Utility Tracking System

PROJECT DATABASE ENTRIES

McIlvaine maintains a comprehensive database of gas turbine projects around the world, including those just announced, in the planning phase, under construction or cancelled. The database is continuously updated as new information becomes available. The following projects have been added to the database since our last update on March 25.

Country	Project	Size (MW)	Completion Date
Georgia	Gardabani CCGT - Georgian Oil and Gas Corporation	230	2017
India	Pioneer CCGT - Pioneer Gas Power Ltd	388	Unknown
Iran	Bandar Abbas CCGT – MAPNA	1400	Unknown
Russia	Kazan CHP-1 CCGT - TGK-16	230	2018
UK	Kinneil CHP GT – BP	159	Unknown
US-CT	Killingly CCGT - NTE Energy	550	2020
US-PA	Hill Top Energy CCGT – Hill Top Energy LLC	536	2020

HOT TOPICS

Upcoming Hot Topic Hours

DATE	SUBJECT
April 21, 2016 *Decisions*	Hot Gas Filtration - Issue and Option for particulate capture in coal-fired power, cement, steel, and waste incineration.
June 16, 2016 *Decisions*	FGD and Acid Gas Separation - Issue and options for SO₂ and other acid gas separation from coal-fired power, cement, steel, and waste incineration plants.
*TBA Markets*	Desalination - Thermal vs. Membrane; energy recovery, pump, valve, compressor and chemicals options; power/desalination combinations.
*TBA Markets*	Oil, Gas, Refining - Supply and demand; impact on flow control and treatment products; regional impacts e.g. subsea in North Atlantic vs. shale in the US vs. Oil Sands in Canada.
*TBA Markets*	Food - Analysis of 12 separate applications within food and beverage with analysis of valve, pump, compressor, filter, analyzer and chemical options; impact of new technologies such as forward osmosis.
*TBA Markets*	Municipal Wastewater - Quality of pumps, valves, filters, and analyzers in Chinese and Asian plants; new pollutant challenges; water purification for reuse.
*TBA Markets*	Mobile Emissions - Reduction in CO, VOCs, and particulate in fuels, oils, and air used in, on, and off road vehicles; impact of RDE and failure of NO_x traps and the crisis in Europe created by the focus on diesels.

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