“Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations.”
That’s a prominent sentiment from the late Steve Jobs, widely acknowledged to be one of the most influential pioneers of the 21st century. But is it also essentially what Air Products did in announcing its exit from the energy-from-waste (EfW) business three weeks ago?
Until very recently, the company’s Tees Valley facilities (TV1 and TV2) were held aloft as two of the most innovative renewable energy projects in the world, and the first of their kind in the UK. Both facilities were based upon state-of-the-art advanced plasma gasification technology, an innovative, carbon-lean process that uses very high temperatures to efficiently convert waste to syngas.
The syngas is then used to generate renewable ‘baseload’ electricity, with Air Products believing that once complete, the facilities would generate as much as 49.9MW of electricity per plant – enough to provide electricity to the equivalent of over 100,000 homes, and divert over 350,000 tons per plant per year of non-recyclable waste from landfill.
But all has clearly not been what it seemed with the technology behind these plants, certainly not for Air Products at least.
The company’s intentions towards its TV1 and TV2 operations on Tees Valley in the UK had become the subject of intense speculation for months. Various reports seemed to question activity at the site toward the end of 2015 and despite confirming a temporary suspension of construction work on the TV2 site in November, Air Products remained resolute in its defence of the sites and its ultimate goal to ‘continue progression through to its operation’.
A statement explained that advances in construction technologies/practices had been discovered on the earlier TV1 project, and that deferment of construction activity on TV2 would allow the company to apply any identified improvements in a cost-effective way when work does resume.
”Just three weeks ago, however, we found that it couldn’t keep that defence up any longer. The company revealed its newfound intent to exit the EfW business as of its fiscal second quarter, at a pre-tax charge of up to $1bn in discontinued operations…”
In the face of swirling speculation and fierce public criticism by a workers union, Air Products defended its actions with the concluding assurance that, “…in the long-term, this decision will aid the overall operational success and future of both our renewable energy facilities at Teesside.”
Earlier this month, however, we found that it couldn’t keep that defence up any longer. The company revealed its newfound intent to exit the EfW business as of its fiscal second quarter, at a pre-tax charge of up to $1bn in discontinued operations, and cited a renewed focus on its core industrial gases business.
My initial reaction was one of intrigue. How could the company have just walked away from the project after such a staunch earlier rebuttal, and at such cost?
To learn from mistakes and move on is one thing, but this isn’t ‘just’ a few hundred thousand dollars we’re talking about – it’s a billion dollars in stated costs.
I found myself pondering what the reaction to this decision would have been had it fallen under the leadership of John McGlade. Would it have been billed as a catastrophic mistake, rather than a brave but practical business decision that it might be painted under current Chairman, President and CEO Seifi Ghasemi? Unfortunately there is no answer to that loaded question. Further, one cannot argue with the fact that the gases industry is currently focused on maximising its efficiencies and core products – rendering this a very practical decision indeed.
So what of the apparently sad indictment of the industry’s green credentials, and of the technology itself?
There’s a feeling amongst those in the industry that I have spoken and listened to of late, that this was a ’car crash waiting to happen’. I heard suggestions that work began on plant two (TV2) before the technology of plant one (TV1) had even been finished and proven, with the mechanical handling aspect of the plant a thorny issue from day one.
Speculation? Perhaps. But we can’t dispute that the projects have now effectively been mothballed on the grounds of unfeasible technology.
Further digging has left me questioning whether this announcement is actually an indictment of the technology behind these plants itself, rather than the motives of the industry or company. After all, Air Products remained resilient in its defence of the plants right to the end, while many of those that I have spoken to of late have also expressed surprise that any white knight will come in to pick up where the company left off with TV1&2.
And a similar project in Nottinghamshire (UK) seems to face an uncertain future, after the Department for Communities and Local Government (DCLG) delayed a decision to grant planning permission in the wake of Air Products’ Tees Valley withdrawal. The £70m ($101m approx.) facility at the former Bilsthorpe Colliery – based upon a more experimental plasma arc gasification concept – was given the go-ahead by Nottingham County Council in 2014 but in view of Air Products’ recent cold feet where the economic feasibility of such technology is concerned, the DCLG has now postponed a final decision on the project.
The organisation promptly invited comments on the facility to allow it to reach an informed decision on its fate, with 26th April given as the deadline for comments. A subsequent decision on planning will not be made until May at the earliest.
All of which led me to ask Frank Gordon, Senior Policy Analyst at the Renewable Energy Association (REA), whether such announcements are indicative of an inherently troubled technology. Discussing Tees Valley, Gordon expressed caution that too much could be read into one decision, stressing that Air Products’ decision seems to have been based on a company change of direction and adding that, “there are a large number of plants under development and therefore you could argue the industry is continuing to develop.”
As many as 70 gasification and pyrolysis-based plants could be under development in the UK at present, we understand, representing a ‘huge leap’ in deployment. The characteristics and approach to each differs, while any new technology has teething issues and it is a ‘complicated set of processes’ to get right, Gordon observed, telling me it is ‘still possible’ that the Tees Valley projects will be taken on and developed to completion by another company.
But, I queried, is it not proven that the costs behind EfW are prohibitive? “Not at all. What you might call ‘conventional’ EfW technologies (incineration, different to more advanced gasification and pyrolysis technologies) are some of the cheapest renewable energy technologies,” he responded, voicing the REA’s disagreement with some of the assertions made about these technologies.
“This is demonstrated by the ‘strike prices’ in the last CfD auction, which was £80/MWh for two EfW projects – a lower price than almost any other technology, including both offshore and onshore wind in the relevant commissioning year. Gasification and pyrolysis plants cleared at a price of £120 and £115/MWh, level with offshore wind.”
“More policy support such as a minimum capacity for gasification and pyrolysis in the next CfD auction, and addressing the issue of the current huge RDF exports would help the sector develop to its full potential,” he underlined.
This is potential that Air Products will not now realise at TV1&2, though one might argue that firm business decisions cannot bank on hoped-for policy support. So has Air Products exercised some much-needed wisdom where Tees Valley is concerned?
While keen not to comment on individual projects, Gordon pointed out that EfW plants operate successfully around Europe and the UK and have numerous benefits, with a potentially improving market for gasification and pyrolysis plant by-products in the coming years which will aid plant economics.
Time will ultimately tell whether the decision to exit this market is the right one or not; Air Products’ announcement this month does at least put an end to the ongoing speculation and scrutiny surrounding the site. But as the company returns its focus to optimising opportunities in the gases industry, it’s a move that arguably does little for the ‘green’ credentials of the gases industry and poses even bigger questions of the EfW technology it once so lauded.