Raúl Carral
Business Development Executive for Mexico, Central America and Caribbean
Wärtsilä
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View from the Top

Flexible Power Engines to Complete Renewables Puzzle

By Cas Biekmann | Tue, 05/26/2020 - 10:36

Q: What is the history of Wärtsilä in Mexico and what are some of its success stories?

A: The company’s successful journey in Mexico has lasted for over 27 years. In the past 5 years, we have tripled our installed base. There are many new projects with combined EPC and O&M contracts. Here, we deliver the power plant on an EPC basis and continue operating and maintaining it for the long term. Some of our recent projects include a 140MW power plant with a combined cycle for Huinalá in Monterrey. We are recovering heat from exhaust gasses and placing it in a steam cycle, which then aids in additional electricity generation via a steam turbine. This type is called a reciprocating internal combustion engine and is one of the most efficient solutions any company could have. We also delivered the full EPC and O&M package with a 130MW power plant, supplying industrial power for Pemcorp in Monterrey. The innovative plant operates in “island mode,” together with a battery storage system. Another project is a 110MW project in Chihuahua, which is the first in Mexico solely operating for the city’s newly created spot market.

 

Mexico is an important market for our portfolio. The fundamentals of its market offer great potential. As with our power plants, we look forward to developing projects 20 to 30 years in the future. Therefore, it is important to assess the fundamentals of the country’s economy and not be led by short-term economic trends. This applies to the impact of COVID-19 as well. While this negative impact might be significant in the short to medium term, it will be resolved by global scientific efforts at some point. In the longer term, the economy will revitalize worldwide. Mexico, like all economies, has its upward and downward cycles. We look at the longer perspective as part of our core business strategy.

 

Q: How will changes brought on by COVID-19 impact forms of energy generation in the future?

A: The company’s vision remains the same. We strongly believe in renewable power and in a 100 percent renewables future. The strategy to make this happen is rooted in future-proof technologies. The company is predicting the future via a timeline, in which inflexible power generation technologies will be discontinued. Coal power plants will diminish significantly. Nuclear power plants are next in the phase, after which combined cycles with gas turbines will follow. The new baseload will become renewable power, which is the cheapest form of energy generation worldwide. Solar will take up the biggest part, followed by wind. Flexible power, such as battery storage and engine-based power make a big difference in how renewable power will be integrated in the near future.  It can go from 0 to 100 within two minutes, which is indeed very flexible. In the future, there will be more surplus of cheap renewable power, allowing for the generation of synthetic fuels or hydrogen. We made a significant announcement recently that we can run our engines 100 percent on hydrogen.

 

Q: What role does R&D play in the company’s portfolio?

A: The company aims to use R&D as a tool to see into the future. To achieve 100 percent renewable power usage, you need to ask what pieces are needed to complete this puzzle. It is widely known that renewable power is intermittent. Therefore, a base of flexible power is necessary, such as with battery storage, synthetic fuels, engine-based power or natural gas. This is quite significant for the grid, and once you have these pieces ready you can complete the puzzle. For our R&D, we look at these areas. For synthetic fuels, the company has already made some acquisitions and worked on internal development. Hydrogen has been part of the portfolio for a long time as well. Furthermore, we are focusing on making our engines more efficient. New generations of engines are coming into the market that have world-record-setting efficiency. They are much more flexible in their operation and in the diversity of its fuels. All of these factors are part of our R&D Portfolio. The company has been looking for ways to be smarter in the solutions it provides to customers. Part of this is digitalization and how to conduct operations using data more intelligently.

 

 

Q: How can the government spur Mexico’s switch to renewables?

To make up for the energy that cannot come from renewables during certain moments, flexible systems are needed. After all, wind can stop and the sun sets at night or is blocked by clouds. During these times, it is important to come in with firm power on a flexible basis that can go from 0 to 100 in a couple of minutes. Nuclear and coal power plants and combined cycle gas turbines are not very flexible. To power them up, you need many hours or even entire days to get them running. Therefore, they are not part of the vision for the new future of power generation. There are high costs when stopping plants like these, and you have to let them rest for quite a while before turning them on again. Engines do not have these issues. Think of them like modern car engines, where the engine stops when you wait for a red light, but comes right back in when you accelerate again. Having access to this can really help a country to switch to renewable power. In Denton, Texas, we sold a 240MW power plant. Eighty percent of the power used there came from renewables, such as wind and solar. Our engine power plant complements this. Electricity costs are incredibly low. We consider them the utilities of the future. Next to the environmental benefits, they generate a lot of money. It makes our clients very competitive in the market.

 

As to how the government can support this switch, it could happen in a smart, planned manner. Renewables in Mexico are currently seen as a bit of a problem, as its intermittent nature makes it more complicated to integrate into the grid, which has not been planned for renewable integration. If you look at energy transition and renewable integration from a planning perspective, you can make energy affordable for everyone and strengthen CFE at the same time. CFE could be stronger and making a lot more money. CFEcan be more competitive in terms of cost by having a plan on integrating more cheap renewable power together with flexible power. But there are other benefits as well, such as the positive environmental impact, which is considered crucial. We would all like to see a more carbon-free world. Leaving a cleaner planet for the future makes sense in all aspects. This is why I fully subscribe to a 100 percent renewables future.

 

Q: What are some intelligent solutions the company offers to the marine industry regarding sulfur emissions?

A: The marine industry has been running a lot on Heavy Fuel Oil (HFO), which definitely is not the most environmentally friendly fuel. Lots of ships use it is as their primary fuel. We have been selling new dual-fuel equipment, converting systems that operate only on HFO into natural gas engines. There is liquified gas equipment built into the ship, so gas can be stored in less space. Natural gas is much more environmentally friendly, meaning it can cope more easily with strict regulations, such as the IMO’s recent addition. We have been developing this for many years. It is one of our main focuses for services in the marine industry.

 

Q: What milestones does the company hope to achieve?

A: History has taught us that the species that thrive are those that adapt better to given situations. We need to be mindful and aware of what is going on in the world and adapt our business practices accordingly, while maintaining the full safety of our team at all times. Preparation for this new environment is key. The company has been successful at adapting in the past and will continue its business. The company concluded a significant deal in Latin America recently, signing two combine EPC- O&M contracts, totaling 400MW. This deal was made during COVID-19. It shows that if you adapt to new realities like conducting online meetings you can do business and thrive.

Wärtsilä is a global leader of Finnish origin underscoring sustainable innovation, total efficiency and data analytics. In the energy sector, the company offers flexible power plants, energy management and storage systems, as well as life cycle services that enable increased efficiency and guaranteed performance.

Cas Biekmann Cas Biekmann Journalist and Industry Analyst