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Will There Be Long- or Short-Term Growth in the Air Pollution Equipment Market?

Is there really long term growth for air pollution control (APC) equipment with the current volatile energy markets? With soaring energy prices, everyone focusing on cleaner fuels and lowering emissions, is the long term future looking bleak for APC solution providers?

The global APC equipment market is highly driven by emission control regulations. The United States Environmental Protection Agency (EPA) Maximum Achievable Control Technology (MACT), Clean Air Act (CAA), Clean Air Interstate Rule (CAIR), and the European Commission Directive for Integrated Pollution Prevention and Control (IPPC) are likely to heavily influence growth of emission control compliance in the growing Asian, South American and African markets.

Last year’s events from the British Petroleum (BP) oil disaster and Japan’s nuclear plants have raised questions about the long term use of fossil fuels. However, the United States of America alone currently gets almost fifty percent of electricity from coal powered plants and about twenty percent from nuclear power. Potentially it means growth for further coal power plants; driving growth for sulfur dioxide, nitrous oxide, particulate matter and mercury emissions control solutions alongside increased electricity demand worldwide. This demand is expected to experience a sharp spike, especially in Asia and South America. With a steady closure of non-compliant plants, excess generation will fall on existing plants. Expanding existing capacity is the obvious choice, but with the global economy slowly recovering it may not be feasible for funding. Could there be a new era around the corner of natural gas powering the future? Natural gas prices are certainly lower at the moment and pollutants emitted are far less. Recent events are surely going to make it difficult for electricity companies to secure financing and meet environmental compliance for new nuclear or coal power plants or for that matter extensions and upgrades of existing plants.

According to the Energy Information Administration, natural gas-fired plants account for sixty percent of capacity additions between 2010 and 2035, compared with twenty five percent for renewables, eleven percent for coal-fired plants, and three percent for nuclear.

The U.S. EPA MACT rules and European Union (EU) IPPC Directive is set to curb emissions from power plants may have potentially gone too far in some cases for existing plants in North America and Europe. These are likely to close down in the foreseeable future from not being economically effective to remain operational. Demand for retrofit and upgrades of existing plants has to be done to meet current and future demand, but plant owners have to decide whether it is worth the necessary investment to remain operational as environmental retrofit decisions are based on an assumption that retrofits occur only if plant owners can recover their costs within 5 years.

Despite the issue of retrofit upgrades, coal continues to account for the largest share of fuel used for electricity generation through 2035 with an estimated 43 percent market share. With this, global demand for APC equipment is expected to grow as coal, oil and natural gas are used as fuels. Baghouses (fabric filters) are seen as a long term replacement for electrostatic precipitators. This is due to a reduction of space required, lower maintenance costs and environmental compliance. All plants will require FGDs (scrubbers) to remove sulfur dioxide and selective catalytic reduction to remove nitrogen oxides. Growth of APC equipment worldwide is likely to be slow and steady in Asia and South America with the current lack of regulations and, to a certain extent, carefree attitude from regions who do not relate much to emissions produced. However, as political pressures from the West slowly influence governments from both regions, emission control equipment will become a must.  In addition to the number of smaller solution providers from these regions and increased market saturation expected worldwide, it is unlikely to be surprising to penetrate new avenues with plenty of mergers, global partnerships and licensing amongst the competitors.

What remains to be seen is the rate at which natural gas powered plants become implemented and also the long term threat of renewable energy which has been of debate for some time. The use of clean coal technology will also potentially be a key barrier for growth of APC equipment. On a global macro level, coal, oil and natural gas will continue to form a large share of the world’s energy supply for the next several decades and that the U.S. and the world will depend on cleaner coal to be the “bridge” to future renewable energy solutions. For now, it seems coal is likely to remain the number one fuel used for power plants which will drive demand for APC equipment worldwide. However, with the current trend of the energy market becoming unpredictable recently, questions still remain over the short term and long term future. After all, nobody had planned for events such as the catastrophic 2010 BP oil disaster and the 2011 Fukushima nuclear power plant explosion.

Ankur Jajoo is Environmental and Building Technologies Research Analyst for Frost & Sullivan.

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