Declining demand for residual fuel oil?

Thursday, October 29, 2015

Global demand for residual fuel oil is expected to decline, according to the U.S. Energy Information Administration.

A Maine State Ferry Service boat near Vinalhaven, Maine.

Residual fuel oil is basically what's left after gasoline and other lighter hydrocarbons are distilled from crude oil.  Industry recognizes several grades of residual fuel oil, including No. 5 (used in steam-powered vessels in government service and inshore powerplants) and No. 6 (used for the production of electric power, space heating, vessel bunkering, and various industrial purposes.) 

Because residual fuel oil is composed of the residue left after distillation, it can contain large amounts of contaminants such as sulfur, nitrogen, or heavy metals.  As environmental regulations limit emissions of pollution, residual fuel oil can become less attractive (or more expensive) as a fuel source for electric power generation or marine transportation.

The EIA notes declining global demand for residual fuel oil since the mid-1980s.  In a brief report, EIA projects that the electric power and heating sectors will likely be responsible for continuedlarge reductions in residual fuel oil demand.

EIA also points to tighter international emissions regulations for the marine transport sector.  Rules under Annex VI of the International Maritime Organization through the International Convention of Pollution from Ships (MARPOL, or Marine Pollution) require global controls on emissions of sulfur and nitrogen oxides.  While residual fuel oil with a sulfur level no more than 3.5% can be used to meet the MARPOL requirements throughout most of the oceans, stricter limits apply to designated emission control areas like the North Sea, the Baltic Sea, and coastal areas in North America and the Caribbean Sea.  These strict limits effectively require 0.1% sulfur content residual fuel oil or lower in the covered emission control areas.  EIA suggests that strategies for MARPOL compliance will likely include low-sulfur fuels (marine gasoil or intermediate fuel oil, or even liquefied natural gas or LNG), or using scrubbers or other technology to remove sulfur post-combustion from the exhaust.

At the same time, EIA notes that some developing countries' power sectors may rely on residual fuel oil as a "transitional fuel" if they are "more sensitive to price and less sensitive to environmental and health implications."

Northern Pass files with NH SEC

Wednesday, October 21, 2015

The developer of the Northern Pass Transmission Project, a proposed high-voltage transmission line from Canada into New Hampshire, filed a formal application to New Hampshire regulators this week.

First proposed in 2009, the Northern Pass project would include about 190 miles of new direct current transmission lines and an AC-DC converter station.  Collectively, the project would be capable of importing over 1,000 megawatts of power from Canada into the New England electric grid.  Its formal sponsors are two companies affiliated under the Eversource family: Northern Pass Transmission LLC and Public Service Company of New Hampshire d/b/a Eversource Energy.

Early versions of proposal drew criticism and controversy over issues including siting, visual impacts, the potential use of eminent domain, and impacts to domestic renewable energy production.  After a series of public information meetings and other dialogue, Eversource released a revised route and plan in August 2015.

On October 19, Eversource announced that it had filed a formal application to the New Hampshire Site Evaluation Committee.  The Northern Pass Transmission application to the SEC is available on the project's website.  It describes a project cost estimate of $1.6 billion, and a capacity of 1,090 megawatts. 

The SEC was established by the state legislature for the review, approval, monitoring and enforcement of compliance in the planning, siting, construction and operation of energy facilities.  It includes members from the Public Utilities Commission, cabinet level commissioners, and two members of the public.  The SEC has jurisdiction to review applications for siting and construction of large-scale energy facilities and to issue a Certificate of Site and Facility enabling a project's development.  The process before the SEC is likely to play out through 2016.

Massachusetts nuclear power plant to close

Tuesday, October 13, 2015

The Pilgrim Nuclear Power Station, the sole nuclear power plant in Massachusetts, will close by June 2019, according to its owner Entergy Corp.

Entergy is an integrated energy company headquartered in New Orleans, Louisiana.  Entergy is one of the leading nuclear generators in the U.S., with nearly 10,000 megawatts in nuclear generating capacity as well as about 20,000 megawatts of other electric generating capacity, as well as serving retail utility customers in Arkansas, Louisiana, Mississippi and Texas.

The company's Entergy Wholesale Commodities business owns and operates five nuclear power units located in the northern United States, and sells electricity produced by those plants to wholesale customers.  Those units include Pilgrim Station's Unit 1, a boiling water reactor with a maximum dependable capacity of 688 megawatts.  The Pilgrim Station unit was installed in 1972, and is currently licensed through June 8, 2032.

Today Entergy announced plans to close Pilgrim Station by June 2019.  In its press release, Entergy cites "poor market conditions, reduced revenues and increased operational costs."  In Entergy's view, low current and forecast wholesale energy prices "brought about by record low natural gas prices, driven by shale gas production" hurt Pilgrim's revenues; wholesale energy market design flaws mean merchant nuclear power plants are inadequately compensated, while "unfavorable state energy proposals ... subsidize renewable energy resources at the expense of Pilgrim and other plants."  Entergy also cites "increased operational costs and enhanced Nuclear Regulatory Commission oversight" following a recent NRC decision to give Pilgrim a higher level of scrutiny.

The announcement resembles a 2013 decision by Entergy to close the Vermont Yankee Nuclear Power Station, a plant similar in vintage to Pilgrim Station.  Entergy announced Vermont Yankee's closure in 2013; that plant ceased commercial operation at the end of 2014, and Vermont Yankee's decommissioning is now underway.  In announcing the Vermont Yankee closure, Entergy pointed to financial factors including a "natural gas market that has undergone a transformational shift in supply due to the impacts of shale gas, resulting in sustained low natural gas prices and wholesale energy prices", high plant cost structures, and wholesale market design flaws.

According to Entergy, it has notified regional electric grid operator ISO New England Inc. of its intent to exit the region's capacity market.  Entergy said the exact timing of plant shutdown will be decided in the first half of 2016.