Energy markets report: oil and gas

mobile electric power generator
Nicholas Newman Content Live August 2017

As part of a series of articles on the energy sector, we investigate the prospects for on-site oil and gas power systems.

Commercial-scale combined heat-and-power (CHP) generators have traditionally been fuelled by diesel and used to provide power during supply interruptions, or for festivals, air shows and sporting events. Aggreko Ltd, for example, hires out temporary power solutions to a wide range of customers, including Network Rail, the University of St Andrews, and a fleet of ships laid up in Edinburgh’s Leith Docks.

The market for standby and CHP generators has diversified in recent years – and the trend at the moment is for generators to be used as a permanent source of power to either supplement or replace grid power supplies, as well as to cut energy bills.

Commercial customers include both private and public-sector enterprises, ranging from leisure and data centres to hospitals. One notable example is Oxford University Hospitals, which is investing £14.7m in a new gas-fuelled CHP plant to provide both heat and power to the district heating and power networks. The move will cut the trust’s energy bills by £460,000 a year.

The choice between diesel and gas-fuelled generators is increasingly influenced by environmental regulations, since gas generators produce about 27% fewer carbon emissions than diesel or heating oil. Economics and market conditions are also fundamental deciding factors.

According to John Walsh, strategic account manager at E.ON UK: “The majority of demand is for gas since the ‘spark spread’ is favourable.” The spark spread is the theoretical gross margin of a gas-fired power plant from selling a unit of electricity, after purchasing the fuel required to produce that unit of electricity. All other costs – operation and maintenance, capital and other financial costs – must also be covered from the spark spread. Read more

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