Cop 27: Nigeria seeks G7 support for energy transition

: Electricity, Emissions, Natural gas
22/11/15

Nigeria environment minister Mohammed Abdullahi has called on the G7 countries to include Nigeria in a climate partnership list for the co-creation of a just energy transition partnership (JETP), as the country seeks to financing to hit its net zero by 2060 target.

Speaking at the Cop 27 UN climate conference in Sharm el-Sheikh today, Abdullahi reiterated that to meet its emissions reductions targets, Nigeria needed "significant resources" to implement its energy transition plan (ETP) unveiled last year.

The plan intends to reduce greenhouse gas (GHG) emissions from the power, cooking, oil and gas as well as transport and industry sectors, accounting for 65pc of the country's total emissions.

According to its own calculations, Nigeria would need an additional total of $410bn, or around $10bn in annual spending, in order to meet the 2060 net zero target, funds the country seeks to secure at the Cop 27 summit.

Most of the funds will be needed to transform the power sector, driven by costs to reach about 220GW of solar, biomass and hydro generation capacity, 90GW of storage capacity and 34GW of hydrogen systems.

At the same time, the country's ETP puts an important transitional role on gas use in domestic sectors such as power generation, grid stabilisation for the integration of renewables and for cooking purposes. The plan predicts gas production expansion costs between 2020-2030s to reach around $4bn, when it also expects domestic demand to rise by 25pc above 2019 levels.

Domestic demand will decline after 2030 but further estimates show that export demand will remain significant until 2050, which has made the "commercialisation" of gas a priority for the government, according to its ETP.

Nigeria's call for a G7 partnership comes after Indonesia agreed a JETP plan for $20bn with the US and Japan today, to help the country bring forward its carbon reduction targets by largely phasing out its dependence on coal.

South Africa signed a similar agreement with Germany and France last year to help fund its energy transition and phase out coal-fired power generation, although the country warned this week that most of the funding is made of loans.

By Florence Schmit

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25/01/02

Q&A: EU biomethane internal market challenged

London, 2 January (Argus) — The European Commission needs to provide clearer guidance on implementing existing rules for the cross-border trade of biomethane to foster a cohesive internal market as some EU member states are diverging from these standards, Vitol's Davide Rubini and Arthur Romano told Argus. Edited excerpts follow. What are the big changes happening in the regulation space of the European biomethane market that people need to watch out for? While no major new EU legislation is anticipated, the focus remains on the consistent implementation of existing rules, as some countries diverge from these standards. Key challenges include ensuring mass-balanced transport of biomethane within the grid, accurately accounting for cross-border emissions and integrating subsidised biomethane into compliance markets. The European Commission is urged to provide clearer guidance on these issues to foster a cohesive internal market, which is essential for advancing the EU's energy transition and sustainability objectives. Biomethane is a fairly mature energy carrier, yet it faces significant hurdles when it comes to cross-border trade within the EU. Currently, only a small fraction — 2-5pc — of biomethane is consumed outside of its country of production, highlighting the need for better regulatory alignment across member states. Would you be interested in seeing a longer-term target from the EU? The longer the visibility on targets and ambitions, the better it is for planning and investment. As the EU legislative cycle restarts with the new commission, the initial focus might be on the climate law and setting a new target for 2040. However, a review of the Renewable Energy Directive (RED) is unlikely for the next 3-4 years. With current targets set for 2030, just five years away, there's insufficient support for long-term investments. The EU's legislative cycle is fixed, so expectations for changes are low. Therefore, it's crucial that member states take initiative and extend their targets beyond 2030, potentially up to 2035, even if not mandated by the EU. Some member states might do so, recognising the need for longer-term targets to encourage the necessary capital expenditure for the energy transition. Do you see different interpretations in mass balancing, GHG accounting and subsidies? Interpretations of the rules around ‘mass-balancing', greenhouse gas (GHG) emissions accounting and the usability of subsidised biomethane [for different fuel blending mandates] vary across EU member states, leading to challenges in creating a cohesive internal market. When it comes to mass-balancing, the challenges arise in trying to apply mass balance rules for liquids, which often have a physically traceable flow, to gas molecules in the interconnected European grid. Once biomethane is injected, physical verification becomes impossible, necessitating different rules than those for liquids moving around in segregated batches. The EU mandates that sustainability verification of biomethane occurs at the production point and requires mechanisms to prevent double counting and verification of biomethane transactions. However, some member states resist adapting these rules for gases, insisting on physical traceability similar to that of liquids. This resistance may stem from protectionist motives or political agendas, but ultimately it results in non-adherence to EU rules and breaches of European legislation. The issue with GHG accounting often stems from member states' differing interpretations of the IPCC Guidelines for National Greenhouse Gas Inventories. Some states, like the Netherlands, argue that mass balance is an administrative method, which the guidelines supposedly exclude. Mass balancing involves rigorous verification by auditors and certifying bodies, ensuring a robust accounting system that is distinct from book and claim methods. This distinction is crucial because mass balance is based on verifying that traded molecules of biomethane are always accompanied by proofs of sustainability that are not a separately tradeable object. In fact, mass balancing provides a verifiable and accountable method that is perfectly aligned with UN guidelines and ensuring accurate GHG accounting. The issue related to the use of subsidised volumes of biomethane is highly political. Member states often argue that if they provide financial support — directly through subsidies or indirectly through suppliers' quotas — they should remain in control of the entire value chain. For example, if a member state gives feed-in tariffs to biomethane production, it may want to block exports of these volumes. Conversely, if a member state imposes a quota to gas suppliers, it may require this to be fulfilled with domestic biomethane production. No other commodity — not even football players — is subject to similar restrictions to export and/or imports only because subsidies are involved. This protectionist approach creates barriers to internal trade within the EU, hindering the development of a unified biomethane market and limiting the potential for growth and decarbonisation across the region. The Netherlands next year will implement two significant pieces of legislation — a green supply obligation for gas suppliers and a RED III transposition. The Dutch approach combines GHG accounting arguments with a rejection of EU mass-balance rules, essentially prohibiting biomethane imports unless physically segregated as bio-LNG or bio-CNG. This requirement contradicts EU law, as highlighted by the EU Commission's recent detailed opinion to the Netherlands . France's upcoming blending and green gas obligation, effective in 2026, mandates satisfaction through French production only. Similarly, the Czech Republic recently enacted a law prohibiting the export of some subsidised biomethane . Italy's transport system, while effective nationally, disregards EU mass balance rules. These cases indicate a deeper political disconnect and highlight the need for better alignment and communication within the EU. We know you've been getting a lot of questions around whether subsidised bio-LNG is eligible under FuelEU. What have your findings been? The eligibility of subsidised bio-LNG under FuelEU has been a topic of considerable enquiry. We've sought clarity from the European Commission, as this issue intersects multiple regulatory and legal frameworks. Initially, we interpreted EU law principles, which discourage double support, to mean that FuelEU, being a quota system, would qualify as a support scheme under Article 2's definition, equating quota systems with subsidies. However, a commission representative has publicly stated that FuelEU does not constitute a support scheme and thus is not subject to this interpretation. On this basis, FuelEU would not differentiate between subsidised and unsubsidised bio-LNG. A similar rationale applies to the Emissions Trading System, which, while not a quota obligation, has been deemed to not be a support scheme. Despite these clarifications, the use of subsidised biomethane across Europe remains an area requiring further elucidation from European institutions. It is not without risks, and stakeholders require more definitive guidance to navigate the regulatory landscape effectively. By Emma Tribe and Madeleine Jenkins Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: Trump, macro issues ahead for US renewables

25/01/02

Viewpoint: Trump, macro issues ahead for US renewables

Houston, 2 January (Argus) — A combination of substantial policy shifts under president-elect Donald Trump and macroeconomic issues puts the US renewable power sector on uncertain footing to begin 2025. Analysts expect the federal tax credits that have bolstered new renewable generation during its substantial growth over the past decade will survive in some fashion, although Trump campaigned on repealing the Inflation Reduction Act (IRA). He also has promised 60pc tariffs on goods imported from China, a major player in the solar and battery storage supply chains. The ultimate effects may vary by project type and what the new administration is able to accomplish. Chinese solar products already face 50pc tariffs , which could temper any effects on the industry from Trump's protectionist trade policies, said Tom Harper, a partner at consultant Baringa specializing in power and renewables. But the new administration could make it more difficult to claim IRA incentives and could roll back federal power plant emissions rules , creating an environment that could slow the adoption of renewables. Utilities may become more cautious in using renewables because of higher costs, while others, such as companies with sustainability goals, might be able to weather the change, according to Harper. "There might be some very price insensitive corporate [power purchase agreement] buyers out there who are looking at a $45/MWh solar [contract] and now it's going to be $50/MWh after the tariff, and they'll be fine," he said. In addition, the US renewables industry is still weathering headwinds from supply chain constraints, increased borrowing rates and inflation, which have hampered new projects. For example, the PJM Interconnection — which spans 13 mostly Mid-Atlantic states and the District of Columbia — had approved more than 37,000MW of generation at the end of third quarter 2024, with only 2,400MW of that partially in service. Developers have blamed the delays on financing challenges, long lead times for obtaining equipment and local opposition to projects. Global problems, local solutions Changes to state procurement strategies could help. Maryland state delegate Lorig Charkoudian (D) next year will propose new state-run solar, wind and hydropower solicitations that would first target projects that have already cleared PJM's reviews. Her approach would echo programs in New Jersey and Illinois, and ultimately reduce utilities' reliance on renewable energy certificates (REC) procured elsewhere. "The idea is to give a path for these projects, so presumably they can be built within a few years," Charkoudian said. Utilities would use the new procurements for the bulk of their RECs, covering remaining demand by buying legacy Maryland solar credits and other PJM RECs on the secondary market. But a quick fix for Maryland's broader renewable energy objectives is unlikely after utilities used the alternative compliance payment (ACP) for two-thirds of their 2023 REC requirements. The fee for each megawatt-hour by which utilities miss their compliance targets serves as a de facto ceiling on REC prices. Maryland's ACP is low compared to neighboring states, where the qualifying REC pool overlaps, meaning that credits eligible in the state can fetch a higher price elsewhere. While lawmakers could raise the ACP to mitigate those issues, those costs would ultimately fall on utility customers. "As best as I can tell, the options are raise the ACP or adjust how we do it," Charkoudian said. "We're really concerned about ratepayer impacts, and so I don't think there's a real appetite to raise the ACP." In other states, the policy landscape is less certain. Pennsylvania governor Josh Shapiro (D) has no clear path for his proposed hike to the state's alternative energy mandate, should he choose to revisit it, after Republicans retained their state Senate majority in November. New Jersey state senator Bob Smith (D) has been working for two years to enshrine in law governor Phil Murphy's (D) goal of 100pc clean electricity, but the proposal failed to escape committee in 2024 after dying in 2023 over opposition to its support for offshore wind . Is the answer blowing in the wind? Offshore wind is a slightly different matter. Trump has been critical of the industry and federal regulators control much of the project permitting in the US. Moreover, as a burgeoning sector with higher costs, it could be more sensitive to the loss of the investment tax credit (ITC). Based on current expenses, Baringa's analysis suggests that losing the ITC could increase project costs by "at least" $30/MWh and push offshore wind REC prices in some cases near $150/MWh. That would be a "difficult cost for states to swallow", according to Harper. "We've seen a few offshore wind developers already say, 'Hey, we're not going to spend a dime more until we know what's going on,'" Harper said. Despite the challenging landscape, Charkoudian expects Maryland will move forward in areas it can control, such as expanding the onshore transmission, that will make offshore wind viable, whether it's now or "eight years from now". By Patrick Zemanek Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: US utilities worry over railcar supply

25/01/02

Viewpoint: US utilities worry over railcar supply

Washington, 2 January (Argus) — US utilities are concerned that they may not have enough railcars to haul coal in the future as multiple power plants are seeking to remain in operation longer than expected. Power demand is forecast to rise in the coming years because of planned data centers in multiple parts of the country. Many data centers are expected to open before new generation, including natural gas, wind and solar-power units, go into service. A number of utilities want to avert the temporary power shortage by extending the life of coal-fired power plants beyond planned retirement dates. In response, demand is "poised to shift to a slight growth in the need for coal cars", according to railcar expert Richard Kloster, president of Integrity Rail Partners. Longer power plant lives as well as expectations of increased metallurgical coal exports are likely to provide demand for equipment. But the supply of railcars for coal has been slowly shrinking. No new railcars for the coal industry — primarily gondolas or open-top hoppers — have been built in nearly a decade. Utilities and leasing companies have had little interest in ordering new railcars for a shrinking sector. Many existing cars have also been scrapped, particularly during periods of low coal demand and high scrap prices during the last few years. There also are thousands of coal railcars in storage, but those do not really count towards demand, Kloster said. The cost of pulling those cars out of storage and making them service-ready is not necessarily cost effective, he said. About 21pc of North American coal cars were in storage at the beginning of August, up from 15pc in November 2022, according to Association of American Railroads data. In comparison, about 35pc of the coal car fleet was in storage at the start of July 2020, near the height of the Covid-19 pandemic. Possibilities of new construction There is a chance that "in the next 10 years, there will be coal cars built again", because many coal cars in the fleet are nearing 50 years of age, Kloster said. The retirement of many cars means that equipment must be pulled from storage or new units built, driving potential construction. Under Association of American Railroads (AAR) rules, railcars built after June 1974 can only be interchanged with other railroads for 50 years. After that, those cars are generally limited to operating on only one carrier. Some of those older cars may be retired early if they need repairs. Maintenance expenses could cause car owners to take units out of service. Utilities strategize Some utilities are already implementing plans to secure railcars, but others think taking additional steps will be unnecessary, according to railcar expert Darell Luther, chief executive of rail transportation firm Tealinc. The differing views are tied in part to whether utilities are regulated by states or merchant-owned, Luther said. Public utilities need to prove to regulators they can meet generating needs, including having enough coal and railcars. Privately owned operators have more flexibility in terms of contracting for coal and railcars. Several utility rail managers told Argus they do not see the need to take extra steps to secure railcars, confident that they already have plenty or can lease whatever they need in the future. But other utilities said they have taken steps to ensure they have coal cars in the future. Some utilities have purchased single or multiple cars as other generators sell them off. Others are increasingly leasing cars, with one utility saying that having more cars than needed is a cheap way of ensuring future supply. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: US coal supply may tighten

24/12/31

Viewpoint: US coal supply may tighten

Houston, 31 December (Argus) — More US coal production cuts may be on the horizon, setting up thermal coal supply to potentially be lower than demand starting in late 2025. US coal producers have been scaling back mining operations since at least mid-2023 in response to lackluster demand. Market participants are continuing to contend with elevated power plant inventories following relatively mild winters and more competitive natural gas prices. Some producers are signaling more production cuts are coming in the next few months. As a result, the US Energy Information Administration (EIA) recently forecast the country's coal output in 2025 would fall by 7.2pc from this year to 472.3mn short tons (428.5mn metric tonnes), the lowest level in agency data going back to 1949. But US coal-fired generation and coal consumption is expected to grow modestly next year, to 643.7bn kWh and 409.4mn st, respectively, from 641.6bn kWh and 406mn st in 2024, because of greater electricity and industrial demand. Coal consumption for the electric power sector alone is expected to rise to 371.5mn st from an estimated 369.4mn st in 2024, EIA data show. Generators are expected to draw from their existing coal inventories for the majority of the year to meet the slightly higher electricity demand, potentially bringing power plant stockpiles down to more normal levels. Coal producers also are expected to have less inventory at mines and loadout facilities as volumes that had been deferred to 2025 are delivered. If the inventory withdrawals and expected slight increase in domestic consumption are coupled with higher export market prices and demand, "there could be an impetus for a slight ramp-up in domestic production, but currently, that prospect does not appear to be visibly on the horizon", EIA chief economist Jonathan Church said. For example, Argus assessments for calendar year 2025 API 2 coal swaps averaged $112.85/t from 1-24 December, compared with $104.19/t for all of December last year. The response from coal producers to any improvement in demand could be uneven, which could constrict competition and boost prices. While larger producers with longwall mining equipment, primarily in northern Appalachia and the Illinois basin, can somewhat efficiently resume or increase production, other companies may struggle to ramp up operations. Producers also may not have the financial support to increase coal output. A number of market participants expect smaller producers with higher-cost operations to be forced out of business as major banks continue to pull back on lending money to coal mining companies. In the nearer term, recent or planned coal mine closures could further limit supply. Alliance Resource Partners said in November that it intends to retire its central Appalachian coal-producing MC Mining complex in Kentucky, and the company has already cut operations to two of its four production units. Earlier in 2024, American Consolidated Natural Resources closed its Pride Mine in western Kentucky and Hallador Energy idled two small Indiana mines in February. Other producers have scaled back operations but kept mines open. Coal miners worked an average 45.5 hours/wk in October when not adjusted for seasonal factors, preliminary figures from the US Labor Department show. A year earlier, coal miners averaged 48.3 hours/wk. Producers also have to contend with an uncertain outlook beyond 2025, including an expected shift in environmental policies under president-elect Donald Trump, how new data centers will affect electricity demand, and timelines for installing new generation and transmission upgrades. Alliant Energy, Vistra Energy, Duke Energy and Louisville Gas & Electric and Kentucky Utilities are among utilities that recently announced plans to potentially delay retiring coal-fired generating units or plans to remodel coal units to co-fired natural gas and coal to try to meet load growth projections for the next few years. This could keep coal-fired generation and demand at least somewhat stable, but it may not provid long-term support. "To have increased coal demand, you would have to have load growth outpacing new supply," said Robert Godby, associate professor in the economics department at the University of Wyoming. He and others expect new renewable generation and transmission projects to eventually accommodate projected electricity demand growth. Increased load growth will be "at best just a reprieve from the ongoing downward trend in coal production and coal demand", Godby said. As such, producers may continue to try to limit output in 2025, which could partially raise domestic prices from current levels that straddle the line of profitability for many coal mining companies. But the increases will likely be modest as alternative energy sources are expected to continue to suppress demand for coal generation. By Anna Harmon Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Power demand could bolster RGGI allowances

24/12/31

Viewpoint: Power demand could bolster RGGI allowances

Houston, 31 December (Argus) — Regional Greenhouse Gas Initiative (RGGI) CO2 allowances in 2025 could get a boost from a projected increase in electricity demand, despite uncertainty over the RGGI states' ongoing program review. Allowance prices hit record highs this past year, particularly during the summer as high temperatures raised expectations for emissions, increasing compliance demand. The first three auctions of 2024 cleared at record levels, draining the cost containment reserve (CCR) — a mechanism where additional allowances are released to temper rising prices — during the March auction . Prices followed suit in the secondary market, reaching multiple all-time highs before peaking on 20 August, with Argus assessing December 2024 and prompt-month allowances at $27.82/short ton (st) and $27.31/st, respectively. The increases have been fueled by anticipated growth in electricity demand as states work to implement policies promoting electrification in the transportation, industrial and heating sectors. In New England alone, peak power demand is forecast to double from 27,000MW to 55,000MW by 2050, according to an Acadia Center report . But the biggest source of this demand — and the steady climb in RGGI allowance prices since late-2023 — is the rapid expansion of data centers, according to University of Virginia professor William Shobe, who studies emissions market and auction design. New CO2-emitting sources such as natural gas-fired plants must factor rising allowance prices into the future cost of electricity in the long-run, Shobe said. As prices rise, other cleaner sources of energy, such as offshore wind and small modular reactors, will become more competitive, he said. Review the review The member states of RGGI launched a review of the program in February 2021. As power demand creates a potential for a bullish RGGI market, the review remains a source of uncertainty for participants and volatility in the secondary market. The program review includes considerations for a more ambitious emissions cap plan beyond 2030. But it has faced a number of delays and was originally scheduled to wrap up last year . Member states have provided few updates on the status and timeline of the review, leaving participants and environmental groups alike on tenterhooks over how a finalized program review — and with it, an updated emissions cap plan — will affect the future supply of allowances. Participants "are always thinking about future scarcity", said Shobe. "The more information we can give them about the future path of scarcity (of allowances) now, the more efficient their own behavior can be." The latest updates were released in September. They included an emissions cap plan that combined two previously floated proposals where the allowance budget starts at about 70mn st, declining at a rate consistent with a zero-by-2035 goal from 2027-2033 and a lower rate consistent with a zero-by-2040 goal from 2033-2037. Member states are also considering adding a second CCR and eliminating the emissions containment reserve (ECR), a market mechanism designed to respond to falling prices by withholding allowances. The review is planned to end in early 2025. A draft rule with additional modeling was to be released in the fall, but there have been no updates regarding another change in timeline. RGGI has not responded to requests for comment. States in limbo The status of Virginia — which left RGGI in 2023 — and Pennsylvania as potential members is another point of uncertainty as those states' participation are under legal scrutiny in their respective courts. Virginia's Floyd County Circuit Court in November ruled that regulation enabling the state's exit from RGGI was unlawful since it was enacted without legislative approval. Governor Glen Youngkin's (R) administration intends to appeal to the Supreme Court of Virginia sometime in 2025, but has declined to specify when. While it is unlikely Virginia will rejoin RGGI in the interim, its participation would increase demand for allowances and put an "upward pressure on price", Shobe said. Much of this demand would be fueled by data center expansion, as northern Virginia is the largest market for data centers in the world, with 25pc of all reported data center operational capacity in the Americas and 13pc globally, according to a report by a state legislative commission. The Supreme Court of Pennsylvania is also reviewing a lower-court decision striking down CO2 trading regulation allowing the state to participate in RGGI. Governor Josh Shapiro (D) has reluctantly defended Pennsylvania's membership in the program as an issue of preserving executive authority, and Republican state lawmakers have been attempting to revive legislation that would cement the state's exit from RGGI. The state's high court could issue a decision sometime in 2025. But Governor Shapiro also proposed a state-specific power plant CO2 cap-and-trade program earlier this year — another development participants should keep an eye on. By Ida Balakrishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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