Abstract

In this report, Siemens has analyzed the status and future trends of global gas to power generation and its implication for China. Siemens believes these trends are conducive to the development of the Chinese energy sector. Specific recommendations are suggested for China with regard to policy making.

Global Oil & Gas markets enter an era of “New Normal” with the emergence of competent, flexible US shale gas producers. Natural gas is the fastest-growing fossil fuel with 1.9% CAGR  until 2040 according to the International Energy Outlook 2016 by EIA . Coal is the world's slowest-growing energy source, rising by 0.6% per year through 2040.

Abundant clean burning (relatively to many alternative fuels) natural gas resources and robust production - including rising supplies of tight and previously deemed stranded gas, shale gas, and coal-bed methane - contribute to the strong competitive position of natural gas. According to IHS , the global supply of natural gas surpasses demand in the near future，e.g. in 2020 natural gas supply will be 3,827 BCM  while demand will be just 3,810 BCM.

Overall, the strong growth of natural gas production between 2015 and 2040 can effectively meet rising demand without major upward price disruptions. Global LNG  is being commoditized and reshaping the global natural gas market.

The attractive pricing of Natural Gas makes it a good choice for new fossil generating. By 2040 coal, natural gas, and renewable energy sources will provide roughly equal shares (28%-29%) of world electricity generation - a significant change from 2012, when coal provided 40% of all power generation.

The recently announced China 13th FYP  sets ambitious goals for gas fired power generation with 50GW  of added generation over the 2016-2020 periods. Meanwhile gas consumption in TPEC  is expected to grow from 5.9% to 8.3%-10% by 2020, aiming to address the challenges in emissions, coal reduction, and renewable development faced by the China energy revolution.

Despite the low global gas prices, it is still difficult to keep gas fired electricity prices low due to the lack of competitive access to the midstream infrastructure required to import cheap oversea LNG. The LCOE  for CCPP  is ~0.8 RMB/kWh, approximately 2.5 times of coal. Around 75% of the LCOE comes from the cost of Natural Gas.

Therefore, in order to fulfill the ambitious target of the 13th FYP it is necessary to leverage the best practices from other countries and to employ a holistic approach to the integration of the Gas to Power Value Chain (hereafter referred to as G2P Value Chain).

Countries like Morocco, Mexico and Brazil are already committed to develop low emission gas fired power generation by optimizing and integrating the total G2P Value Chain via institutional reform, innovation in business models, and adopting advanced technologies etc.

One of the main opportunities in maximizing the most efficient use of natural gas is to evaluate a “business model integration”, which connects the up/midstream gas project development (e.g. Liquefaction plant) with the downstream power generation project, and employing “technology/System Integration” in the liquefaction/regas/power generation process, which provides a lower cost over the whole G2P Value Chain.

Siemens offers a comprehensive portfolio of products and solutions integrated in upstream exploration and production, midstream liquefaction and pipeline transmission, downstream power generation, transmission and distribution along the G2P Value Chain

For LNG, Siemens has been offering advanced technologies, modular designs with a proven track record  in ranges of liquefaction technologies including Micro LNG (up to 0.003 MTPA ), Medium LNG (0.1-2.0 MTPA), Floating LNG, and large LNG (>2.0 MTPA). In the Russian Yamal LNG project in which CNPC owns 20% share and Silk Road Fund to purchase 9.9% stake, Siemens designed and supplied the world’s largest (90m x 36m) and heaviest (2,500 MT) single lift E-House module (supplying 29 E-Houses in total) for electrical power distribution linking a Siemens supplied power island (SGT-800) as well as BOG  compression, all subject to harsh arctic environment (perma-frost) conditions.

In addition to offering the most efficient mechanical drive gas turbine driven Liquefaction solutions (Trent 60), Siemens was a pioneer in development and supply of an all-Electric Drive solution (eLNG), which provides benefits to the client via enhanced safety, longer continuous operation, and lower emissions, offering up to 10 days of additional production per year at lower CAPEX  (under grid connection conditions)

For gas fired power generation, Siemens has a portfolio ranging from 142KW to 420MW gas engine/gas turbine complimented by in-depth integration expertise on Distributed Energy (DE), Combined Heat and Power (CHP /COGEN) and Combined Cycle Power Plant (CCPP) technologies. Siemens has references covering over 3,000 gas turbines and 2,700 Gas Engines for power generation, representing in excess of 260GW of large size Combined Cycle Power (CCPP) of installed capacity.

The Siemens 8000H recently commissioned at Lausward Fortuna CCPP in Düsseldorf (Germany), on January 22, 2016 set three new world records: maximum electrical net output of 603.8 MW in a single-shaft configuration; ~61.5% for net power-generating efficiency; and an overall CO2  reduction in the amount of 2.5 MTPA.

In January 2017, Siemens received the first 8000H Gas Turbine order in China - the combined cycle unit in its Black Point Power Station in Hong Kong. There are now a total of around 80 sets of SGT-8000H sold worldwide. The customer is Castle Peak Power Co. Ltd. (CAPCO), a joint venture of China Southern Power Grid International Limited and CLP Power Hong Kong Limited (CLP Power). Scheduled to be in operation before 2020, the plant will have an installed total capacity of more than 560 MW – enough energy to supply approximately a million households with electricity.
Since 2003, Siemens has been successfully co-operating in technology of large sized gas turbine (E, F and H-class) with its Chinese strategic partners, and has supplied closed to 60 sets of E and F-class gas turbine for China with manufacturing in Joint Ventures, and for export projects as well.

Starting from 2007, Siemens has also been successfully cooperating with Zhuzhou Nanfang Gas Turbine Packaging and Installation Co. Ltd. (ZNGT, a subsidiary of AVIC) on the localization of small gas turbines, and in 2015 with Hangzhou Steam turbine Co., Ltd. (HTC) to kick off localizing medium size gas turbines. Both gas turbines are applicable to distributed power generation. Siemens is very much willing to share its experience achieved worldwide with Chinese peers (e.g. Institutes, Universities) and the Chinese government.

In digitalization, Siemens provides unique value proposition for its customers by providing domain know-how and expertise in combining Operating Technology and Information Technology. In the Yuanba project for SINOPEC , which is dedicated to continuous pipeline monitoring in order to ensure safety and detect leaks, Siemens provides redundant failure resilient Industrial Ethernet solution with fiber-optical cables, a virtual private network (VPN), and industrial network components capable of withstanding hazardous environmental and locational conditions. The solution helped SINOPEC reduce leakages by continuous surveillance, achieve higher uptime by continuous data availability, and reduce OPEX  due to remote expert access. Siemens is also introducing its cutting-edge Digital Power Plant (DPP) solution into China in a pilot project together with SPIC. DPP provides with professional management of plant’s asset and is designed to optimize rotating equipment economy and availability with continuous surveillance and equipment status assessments etc.

Siemens would like to recommend the following aspects to be specially noted for the Chinese government:
1) Encourage projects aimed at building up integrated G2P Value Chain - utilizing upstream, midstream, and downstream resources at home and abroad, private and state-owned or mixed ownership from both a business model perspective and/or a technology perspective
2) Improve Third Party Access to midstream SOE(State Owned Enterprise) facilities, and ease approval of LNG Regasification Terminal construction for Non-NOCs, thus to make full utilization of low cost LNG in global market
3) Define measures and take timely actions to encourage current gas power enterprises to make full use of the advantages of gas power
4) Strengthen the economics of gas power generation via a feasible market mechanism. e.g. to deregulate pricing in gas and electricity to enable effective business model construction, and speed up the electricity dispatching reform to shorten the time to build up the market mechanism for Natural Gas
5) Accelerate the reform of electricity dispatching etc. that encourages gas fired peaker and CHP applications
6) Adopt the most advanced technology on the whole Gas to Power Value Chain.
7) Further controlled opening of the Chinese market may encourage international companies with advanced technologies in planning, system design, engineering, key equipment manufacturing (e.g. Gas Turbine), service and R&D  to further enter into China, and cooperate with Chinese companies in various ways.

Siemens believes these recommendations will bring more benefit and energy to the long term successful development of the Gas to Power Value Chain in China