Why coal is a fossil fuel

The inaguration of the solar panel system was organised at the Swedish Residence on March 15

Global access to modern and renewable energy and clean fuel is fundamental to meeting several of the challenges currently facing the world, including poverty, food security, climate change, clean water, health, and inclusive economic growth.

“Energy is central to social and economic well-being. Solar energy does not produce any environmental or noise pollution and is one of the cleanest sources of energy. Switching to solar allows you to reduce your use of fossil fuels and increase your energy security. We hope that the event will inspire others to also install solar panels,” said Ann Måwe, Swedish Ambassador to Vietnam at the event.

The photovoltaic rooftop power panel with energy storage at the Swedish Green Residence (10 Dang Thai Mai) is the first of its type in the area. With the total capacity of 18.5kW, it is a hybrid solar power system which generates power in the same way as a common grid-tied solar power system. In addition, it uses special hybrid inverters and batteries to save energy for later use. This ability to store energy enables the system to also operate as a backup power supply during blackout, similar to a UPS system.

“In just 58 days of operation, this hybrid solar power system has produced 1.74MWh. That is equivalent of five trees planted, 600,000 kilogrammes of coal saving, and about 1.73 tonnes of CO2 emissions in a relatively short period of time during winter. We expect that the system is able to produce more power in the summer where sunlight is abundant in the northern part of Vietnam,” said Viet Anh, technical officer of Orient, the service provider for solar installation and maintenance.

Sweden has ranked the first in terms of energy transformation for three consecutive years (2018-2020) by the World Economic Forum (WEF). This means Sweden is a forerunner for transition to a secure, sustainable, affordable, and inclusive future energy system.

Right up till the early 1970s, Sweden depended heavily on oil for energy supply. 75 per cent of energy generated came from oil. After the infamous 1973 oil crisis, Sweden has invested extensively in the search for alternative energy sources. Fast forward to today, Sweden is one of the most forward-thinking countries in the world. It recycles up to 99 per cent of household waste and has one of the lowest per-capita carbon emission among developed nations.

“Our Swedish experience has shown that the fossil-free development pathway is both possible and better. More than half of the energy used in Sweden already comes from renewable energy sources. Sweden has set out to meet 100 per cent of its electricity needs from renewable sources by 2040. Lowering carbon emissions is key, and Sweden has managed to combine falling emission levels with a growing economy,” continued Ambassador Måwe while stressing that the future lies in low-carbon economies.

As for Vietnam, the country is at a crossroad. Its energy consumption is fast increasing. Critical decisions need to be made urgently concerning the country’s dependency on coal for power generation. Renewable energy is increasingly cost-competitive and has great potential to meet the enormous demand for energy of the country. Despite relatively new initiatives, in 2019 and early 2020, the country witnessed large investments in solar and wind energy with more than 4.5GW of solar power installed. The challenges lie in how Vietnam can push forward to increase its share of renewables and continue investments to upgrade its power grids to enable the sustainable inputs of renewables.

Vietnam has been successful in limiting the spread of COVID-19 in society. As such, Vietnam has the potential to overcome the economic consequences of the pandemic through “building forward” better and in a more sustainable way. Vietnam can be a leader in the region to demonstrate clean, inclusive, and resilient recovery, building on the principles of the Paris Agreement and the UN Sustainable Development Goals (SDG7 on Affordable and Clean Energy is a key goal) – and not only because it benefits people and climate, it is also good business.

“Using power to make hydrogen to make power is in most cases really dumb, because there are so many losses involved in the cycle,” said Thomas Koch Blank, senior principal at Rocky Mountain Institute, a clean energy think-tank.

Rapid-starting natural gas power turbines have become the go-to generation source for grid operators looking to keep the lights on during heatwaves and winter freezes.

Renewable, or “green” hydrogen could perform the same role but it is not cheap. Even if production costs fell more than two-thirds to $1 a kilogramme, the price in energy terms would be $8 per million British thermal units, three times as costly as benchmark US natural gas, according to Morgan Stanley estimates.

Climate Capital

But with proponents arguing that hydrogen will be indispensable for the world to cut carbon emissions enough to avoid catastrophic climate change, projects are being launched across the US power sector to prove it can work.

Los Angeles, which under California law is required to use 100 per cent carbon-free energy by 2045, will convert a coal-fired plant it operates in Utah, initially to natural gas but then to hydrogen. The power station’s newly ordered turbines will be able to take a 30:70 blend of hydrogen and gas by 2025 and only hydrogen by the 2045 deadline, according to manufacturer Mitsubishi Power.

Mitsubishi and a partner have proposed a nearby facility to store green hydrogen sufficient to generate 150,000 megawatt-hours of electricity, which could supply 5m average US homes for a day.

“Hydrogen is that one technology where you can actually do seasonal storage,” said Paul Schultz of the Los Angeles Department of Water and Power. “All of this amount of over-generation that you potentially have in the spring and the fall can be used when you are renewable resource-poor during the summer and the winter.”

Schultz acknowledged that a hydrogen blend would cost more than natural gas, “but we have an environmental commitment to this”. He said the city had approached the US Department of Energy about securing low-cost federal funds to help finance the project, declining to specify the amount.

Paul Browning, chief executive of Mitsubishi Power Americas, said that while the cost of so-called green hydrogen was expensive compared with natural gas, it was competitive with other forms of electricity storage.

“Keep in mind, what we’re really targeting is renewable power that today is 100 per cent wasted when it gets curtailed,” he said. “We know we can do better than that.”

The need for long-term storage will become more acute if renewables become the lion’s share of the generation mix. Solar and wind do not run all the time, while lithium-ion batteries empty within hours.

It would be possible to achieve a zero-carbon grid without thermal power plants by hugely overbuilding solar, wind and battery facilities, but California could reach its goals consuming far less land and billions fewer dollars by pursuing a path of power to gas, according to a study by Wartsila, a power technology company.

Elsewhere, New York-listed New Fortress Energy has launched a business to make green hydrogen for sale to the power, industrial and transport sectors, along with the less scarce “blue” hydrogen which is made using natural gas.

German utility Uniper hopes to use renewable electricity produced during the most prolific four hours of each day to make hydrogen for storage in underground structures in Hamburg, which were previously used to hold natural gas.

The hydrogen could then be tapped for trading, selling to industrial clients or generating electricity via a “peaker” plant that could supply electricity back to the grid — although the project is dependent on securing government subsidies, according to chief executive Andreas Schierenbeck.

FT Series: Hydrogen — Fantasy or fuel of the future?

The Hydrogen Council, an industry group, said in a 2017 report that 250 to 300 terawatt-hours a year of surplus solar and wind electricity could be converted to hydrogen by 2030, with more than 20 power plants generating a combined 100TWh-200TWh of electricity from clean hydrogen. In comparison, renewables will generate almost 8,000TWh worldwide this year, according to the International Energy Agency.

“The intermittency of renewable energy is a problem; some large storage container is required to smooth out the output from wind and solar, and hydrogen is just that very large container,” said Daryl Wilson, executive director of the Hydrogen Council, whose membership includes some of the most energy intensive companies in the world and oil producers such as Saudi Aramco and BP.

NextEra, which did not respond to requests for comment, is starting small at Okeechobee with a 20MW electrolysis system. A regulatory filing revealed the plant shares a transformer with at least two adjacent solar farms NextEra has constructed.

The company, the largest US utility by market capitalisation, has recently disclosed other ventures, including a $20m installation to create hydrogen with solar power and feed it to a fuel cell to create electricity.

In all, NextEra had about 50 potential green hydrogen projects in the pipeline to serve the power, transportation and industrial sectors, John Ketchum, president of its bulk-power division NextEra Energy Resources, said late last year.

“We see hydrogen as really a long-term solution,” he told analysts, saying that eliminating the last 15 per cent of carbon from electricity supply “gets very expensive to do with batteries, much cheaper and more manageable to do with hydrogen.”

The colours of the hydrogen rainbow

© Christopher Furlong/Getty Images

Green hydrogen Made by using clean electricity from renewable energy technologies to electrolyse water (H2O), separating the hydrogen atom within it from its molecular twin oxygen. At present very expensive.

Blue hydrogen Produced using natural gas but with carbon emissions being captured and stored, or reused. Negligible amounts in production due to a lack of capture projects.

Grey hydrogen This is the most common form of hydrogen production. It comes from natural gas via steam methane reformation but without emissions capture.

Brown hydrogen The cheapest way to make hydrogen but also the most environmentally damaging due to the use of thermal coal in the production process.

Turquoise hydrogen Uses a process called methane pyrolysis to produce hydrogen and solid carbon. Not proven at scale. Concerns around methane leakage.

GE’s latest 9HA.02 turbine is accelerating the shift to LNG

After a wave of investment in solar and wind power over the past two years, Vietnam is now witnessing strong interest in the field of electricity generated with the use of liquefied natural gas (LNG).

A report by the Institute for Energy Economics and Financial Analysis (IEEFA) published in January stated that Vietnam has quickly become one of the most promising LNG import markets in Asia, and many domestic and international investors have expressed their desire to pursue projects in the country. They are encouraged by changes in government management that no longer sees coal-fired thermal power as the centre of the power system, as well as the rapid growth of renewable energy in the nation’s power structure.

As such, investors have actively portrayed LNG as a cleaner source to replace coal and argue that gas-fired power units will be one of the main power sources required to feed public demand and supplement unstable renewable sources.

The IEEFA report also stated, “Vietnam’s electricity industry has never seen a wave of investors expressing so much interest as they do now, that – with the accompanying diplomatic pressure – remains unprecedented in the country’s history.”

Interest in LNG power may also be related to Resolution No.55/NQ-BCT on the orientation of Vietnam’s National Power Development Plan (PDP8), which emphasises the rapid development of LNG thermal power plants. However, at the same time, experts advise that priority must be given to developing LNG import and distribution infrastructures.

According to the nation’s target until 2030, Vietnam must import 8 billion cubic metres of LNG per year, while the current rate is zero. The focus on LNG power generation is also attributed to its advantages, such as ensuring a stable power supply and minimising the impacts on the environment.

“The third draft of the PDP8 for the period 2021-2030, with a vision to 2045, is proposing to quadruple the current capacity of gas-fired thermal power by 2030 to 28GW, equivalent to 21 per cent of the total system capacity. Most of these plants are then expected to use imported LNG,” the IEEFA report states.

According to experts, LNG power generation is flexible and can be adjusted as needed. Besides this, the carbon emissions of LNG account for roughly half of coal power, which helps to reduce the energy sector’s impact on the environment. At the same time, LNG power is capable of reaching higher power output when needed, without interruptions and dependencies on nature such as wind or solar power.

Given the fact that global CO ₂ emissions are still increasing, the power sector takes on a mandate and a multidimensional approach to take important steps to rapidly reduce greenhouse gas emissions and solving the problem of climate change on a large scale.

“Despite the massive deployment of renewables such as wind and solar power, the energy sector has not improved significantly to meet the goals set out in the Paris Agreement on carbon neutralisation. The International Energy Agency (IEA) said that to achieve improvements in power efficiency, instead of spending time building new renewable power sources, it is possible to convert from coal to gas to reduce emissions faster,” said Vic Abate, General Electric’s (GE) senior vice president and chief technology officer and former CEO of both GE’s Gas Power and Renewables businesses.

According to the current draft of the PDP8, there are about 24 LNG projects proposed with a total potential of 23GW by 2025 and 84GW by 2035, with a demand for imported LNG of about 60 million tonnes per year.

Challenging negotiations

According to experts, about half of the proposed gas power projects are complexes for LNG import ports, storage tanks, recycling systems, and gas pipelines and power plants, with the remainder being pure power plants running on LNG.

However, no LNG power project has started its construction yet because contracts related to their operation have not been completed, most notably because of the missing power purchase agreements (PPA).

Even though the Bac Lieu LNG project was licensed in early 2020, the project owners are still negotiating a PPA without seeing the finish line anywhere close.

Talking about the progress of LNG project implementation, experts from the energy sector, as well as several project brokers and financial advisors, also said that the biggest challenge will be to negotiate the PPA.

“PPA negotiations must comply with the regulations of the Ministry of Industry and Trade, whereby the approved project documents must be available before the negotiation. Based on investment costs, cash flow in and out, profits, and discount rates, the purchase price of electricity that investors want to sell will be set. Except for those cases that do not exceed 7 US cent per kWh, for which Electricity of Vietnam will sign a PPA immediately, other prices will take computation and consideration,” said energy consultant Nguyen Binh.

Other investors also said that since the government reaffirmed that there are no guarantees, the decision to invest in an independent power plant requires investors to make great efforts.

“Spending a few billion US dollars on projects without a foreign currency conversion guarantee will make it difficult for investors to keep cash flows in hand when unexpected situations occur,” said Binh.

Track 4A power plant in Malaysia running on GE’s latest generation of HA turbines

Scale is king

According to Petrovietnam, the 24 planned LNG power projects recorded in the draft PDP8 will lead to a situation where the coastline of Vietnam will be covered by the configuration of “one power plant plus one LNG import and gas refinery warehouse”.

Meanwhile, other countries around the world are developing power plant clusters using large receiving ports to optimise the cost of gas infrastructure between the port and the power plants.

This means that these power centres choose a place with favourable conditions for convenient infrastructure with low cost, located near a suitable load centre and built according to environmental criteria. For instance, port warehouses must have a capacity of at least 6 million tonnes of LNG per year to be considered cost-efficient.

In parallel with the recommendations on the size of LNG terminals, experts also said that using new and innovative technologies will bring higher efficiency to an LNG power plant.

In the technology race, GE’s two world records for operating power plants with the highest efficiency have sparked the interest of LNG project operators in Vietnam as they offer significant cost savings compared to other technologies in the industry.

“The newest generation of turbines offers the lowest cost of capital and fuel conversion with a long engine life, thus reducing the total cost of ownership. As such, a generation H turbine combined with cycle plant for 1,000MW occupies an area of ​​about 0.05 square kilometres, far less than the 20sq.km needed for onshore wind or solar power plants of the same scale,” said Christophe DuFault, general manager (Project Execution) of GE Gas Power Asia, adding that GE’s HA turbines are currently the largest and most efficient gas turbines in the world and have received more than 120 orders from more than 48 customers in 20 countries and regions.

With its strong development potential, the IEA expects the Asia-Pacific to be a region with many “breakthroughs in the development of LNG power plants in the next decade”.

GE has more than 80 years of experience in the supply and construction of combined cycle power plants, and it has been 29 years since the first H turbine generation. GE’s H-generation turbines currently supply 21.5GW at 24 locations worldwide and are monitored daily at its centre in Kuala Lumpur.

In addition to delivering outstanding energy efficiency and cost savings, GE’s newest H-generation turbines also cut emissions – a key factor in securing the future of the energy industry in Asia-Pacific.

However, experts also say that although LNG can be a superior solution to other fossil fuels in terms of efficiency and emissions, both these advantages depend heavily on related technology.

“Our new power plant operating in Malaysia demonstrates that low-carbon or non-carbon gas power technologies, such as our HA technology, can help accelerate CO ₂ reductions in power production. At GE, the combination of gas and renewable electricity will be part of the solution for the present and the future,” said DuFault.

LNG is now expected to lead the way in Vietnam’s energy structure, meeting a large portion of its capacity by 2030.