Market outlook: Clusters search for renewable energy

24 February 2014 00:00 Source:ICIS Chemical Business

Capital investment in the European chemical sector has been stalling because of the region’s rising energy costs. Investment in new plants and expansions in the industry’s energy-intensive bulk chemicals sector has virtually ground to a halt because of its loss of competitiveness due to high energy prices.

This handicap has been highlighted by the impact of the shale gas boom in the US which has provided its chemicals industry with a relatively inexpensive new source of both energy and feedstocks, particularly in its petrochemicals sector.

Soon, rejuvenated petrochemical producers in the US could be exporting their products to Europe endangering the future of some of the more vulnerable of its petrochemical clusters.

Rotterdam

The Port of Rotterdam has 47 chemical facilities and plans to become an EU biomass hub

Nonetheless, the energy strategy of some of Europe’s large chemical sites and clusters is to continue on the path of extended use of renewables in order in the long term to be able to switch completely to low carbon energy sources. Currently this move into renewables has been losing some of its momentum because of their relatively high costs at a time of slow growth in chemicals output across Europe.

A shift into renewable energy sources will impose significant additional costs on some chemical companies, warns Industriepark Hoechst at Frankfurt, one of Germany’s largest sites. “Some of our customers are under enormous cost and competitive pressures,” says Juergen Vermann, chief executive of Infraserv Hoechst, the site operator.

However, some chemical sites maintain their belief that in the long term, renewables can bolster their competitiveness. The use of renewables will firmly embed sites into a green supply chain extending from energy production to making chemicals, a large proportion of which will be biochemicals.

The realisation of this vision will be possible only in chemical sites able to operate independently in the provision of energy by having their own electricity and heat generation facilities. In fact, since the 1990s the objective of many sites has been to progress steadily to new, more sustainable systems of electricity supply separate from national supply networks through investment in site-based electricity plants, many of them combined heat and power (CHP) units. This has meant switching to energy sources based on renewables such as biomass – like wood and municipal waste – wind, and solar power.

LOW CARBON CENTRES

Some of the bigger sites are setting themselves up as centres of low carbon energy which can not only be used by its chemical plants but also supplied to national electricity grids. The objective is to become regional centres of “green” energy.

The Port of Rotterdam, one of Europe’s ­biggest chemical clusters, has 47 chemical ­production facilities. These, together with refinery and power generation facilities, account for 55% of the port’s revenue. The port now has ambitious plans to become a European biomass hub. It aims to import large quantities of wood pellets and other biomaterials as feedstock for energy and feedstocks for its chemicals cluster but also to distribute to other chemical and industrial sites in ­northern Europe.

In the port of Rotterdam itself there is at present a total of 2,800MW of capacity with biomass co-firing, shared between three generation plants and one 22MW biomass-only unit. There are also other renewables energy sources such a wind power whose capacity is expected to rise from 150MW to 300MW between 2013 and 2016.

“We are offering chemical companies in our cluster a choice of green energy sources,” says Frans Jan Hellenthal, the port’s business manager for chemical and bio-based industry. “Companies in the cluster benefit from relatively integrated (energy) systems. Integration is key to keeping energy costs competitive and providing an overall sustainable picture.”

In the Botlek area of the cluster a steam pipe system transports excess heat from hot water or steam to businesses with a shortage of heat. The system has a looped network of pipes with fluid streams from which the heat is extracted by users. The objective is to allocate high grade heat to local industries and low grade heat to houses, offices and greenhouses in the city and surrounding areas.

Currently Rotterdam handles around 1m tonnes/year of biomass imports, mainly wood pellets, equivalent to around 25% of the total European imports. By 2020, demand for biomass in Europe, mainly comprising northern Europe, could triple to 60m tonnes/year, and by 2030 to 70m tonnes/year, according to a study by the Copernicus Institute of Utrecht University, commissioned by the Port of Rotterdam.

The port’s objective is to maintain or even increase its share of the rising imports to meet this increased demand which European biomass producers will find it increasingly difficult to supply. It wants to handle around 8-10m tonnes/year of biomass by 2020, some of which will provide supplies to biomass co-firing plants on its main industrial area of Maasvlakte.

“It is expected that biomass trade (ie imports) will cover a large part of domestic demand for the countries in northwest Europe because domestic production of dedicated energy crops in northwest Europe is more expensive than imports of solid biomass,” says the Utrecht University study.

With its massive port infrastructure, Rotterdam is well positioned to act as a central distribution point for imported biomass from areas like North and South America to a hinterland comprising Netherlands, Belgium, Germany, northern France and the UK. By 2030 it expects that it could be importing as much 15m tonnes/year of wood pellets.

TEES VALLEY – A MAJOR DESTINATION

In northeast England, the Tees Valley area – with its Teesside chemical cluster – is also aiming to establish a low carbon energy centre. “The supply of biomass through a Rotterdam biomass hub will improve the supply of this feedstock to Tees Valley projects,” says Neil Kenley, business investment director at Tees Valley Unlimited, a partnership of municipalities in the area.

The cluster, which accounts for around half of the UK’s petrochemicals production while also having a range of specialty chemical companies, is spread over the three sites of Wilton, Billingham and Seal Sands.

Symbolic of its move away from dependence on traditional fossil-derived energy is the decision last autumn to demolish the massive Teesside Power Station which, with a capacity of 1,875MW, was the largest combined cycle gas turbine (CCGT) generator in Europe. Built in the early 1990s adjacent to the Wilton site by the US energy giant Enron Corp at a cost of £850m ($1.4bn; €1.0bn), its capacity had already been drastically reduced by its current owners GDF Suez of France to 45MW.

At Wilton, the site’s owner Sembcorp UK has a joint venture with the energy company SITA UK for a 49MW power station using 430,000 tonnes/year of household waste from Merseyside in northwest England. The facility is expected to start operating in 2016.

tree trumps

Some chemical sites believe renewables will bolster their long-term competitiveness

Sembcorp already has on the site, which has at its core a 865,000 tonnes/year ethylene cracker run by Saudi Basic Industries Corp (SABIC), a 35MW biomass CHP facility which consumes 300,000 tonne/year of wood. A coal-fired power unit on the site is due to be closed in May this year.

In December last year a project for a 275MW biomass CHP plant, to be built by MGT Power of the UK and a consortium of South Korean companies on Teesside, was approved by the UK government for financial incentives offered under its renewables ­energy programme.

Adjacent to the Billingham site, Air Products of the US is planning to build a facility for the gasification of 300,000 tonnes/year of waste into syngas for fuelling an electricity generation unit with a capacity of up 50MW.

The cluster will also have access to power from extensive offshore wind farms in the North Sea which already have over 3,500MW of capacity, the largest offshore total in Europe. One planned offshore wind power project – at Dogger Bank – will have capacity of as much as 9,000MW.

“Tees Valley is a ‘Centre of Offshore Renewable Engineering’ with the Teesside Offshore Wind farm already complete and land and infrastructure available to service what could be the world’s largest offshore wind farm at Dogger Bank,” says Kenley.

Greater flexibility in the development of energy sources could be provided by a carbon capture and storage (CCS) scheme which has reached an advanced state of planning by Tees Valley Unlimited.

“Tees Valley expects to have an industrial CCS network, the only one in the UK, which will provide essential infrastructure for industrial emitters to locate in Tees Valley and store their CO2,” says Kenley. “This infrastructure will allow the UK and Tees Valley to compete with other industrial locations for investment, such as Rotterdam.”

The area also has long-term plans to establish a hydrogen supply network as a source of power and chemical feedstocks. The Air Products gasification project will have the ability to extract renewable hydrogen from its syngas output.

Rotterdam port also has projects for CCS and for a hydrogen network. The port predicts that by 2030 around a quarter of its power supplies will come from coal-fired stations applying CCS while a third will come from renewables, the majority of which would be biomass and the remainder wind and solar power.

As both Rotterdam and Teesside take a lead in Europe in the shift to low carbon energy among chemical clusters they are showing that it will have to be a slow but nonetheless steady process.

By Sean Milmo