Asian Power May-June Issue

ISSUE 63 | DISPLAY TO 30 JUNE 2014 | www.asian-power.com | A Charlton Media Group publication

US$360P.A.

Taipower stays upbeat can chairman hwang convince the people that the era of high energy prices has come?

MICA(P) 248/07/2011

first Why is Taiwan not giving up its nuclear energy?

feature Why China’s coal power demand wanes

first What’s troubling Japan’s solar boom?

country Report Bangladesh still haunted by power blackouts

PAge 10

PAge 28

PAGE 12

PAge 17

Agriculture

Construction

Material Handling

Powergen Powergen

Critical power every second, minute, hour, day and year around the world.

Our engines make a difference.

www.perkins.com

FROM THE EDITOR

Publisher & EDITOR-IN-CHIEF Tim Charlton ASSOCIATE PUBLISHER Laarni Salazar-Navida Art Director Jonn Martin Herman Editorial Assistant Queenie Chan Editorial Assistant Alex Wong ADVERTISING CONTACTS Laarni Salazar-Navida lanie@charltonmediamail.com

ADMINISTRATION Lovelyn Labrador accounts@charltonmediamail.com Advertising advertising@charltonmediamail.com Editorial editorial@charltonmediamail.com

SINGAPORE Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road Singapore 069113 +65 62237660

HONG KONG Charlton Media Group 19/F, Yat Chau Building, 262 Des Voeux Road Central Hong Kong. +852 3972 7166 www.charltonmedia.com

In the previous issue, we published a comprehensive report on the perennial problems faced by Taiwan’s power sector, especially its unsustainable system of electricity subsidies.

Much has been said about the negative effects the system has on the long-term prospects for the industry, including a looming power shortage. But just like a recipe with a missing ingredient, the discussion would not be complete without input from a firm directly concerned and affected - the country’s monopoly grid operator and biggest electricity producer, Taipower.

To shed further light on the issue, Asian Power presents an in-depth interview with the chairman of Taipower, Hwang Jung-chiou. He reveals that the firm has incurred total losses of approximately US$6.9 billion at the end of 2013 due to insufficient adjustments of electricity rates. As a remedy to ballooning losses, Chairman Hwang calls for a reasonable tariff mechanism that fluctuates with fuel prices. The challenge to convince people that the era of low pricing is over however, is certainly a daunting task. How Chairman Hwang straddles the line between nonprofits and for-profits is something to watch out for.

This issue is also packed with various energy situationers of key economic hubs in Asia such as Singapore, Thailand, Japan and China.

Our channel checks reveal that Japan’s solar sector is booming but the country’s desperation to restart nuke plants is feared to pull against growth in generation from renewable energy.

Singapore is doing great in sourcing energy from renewables but how far has it gone now in its goal to be an “intelligent island”? Thailand is among the earliest to implement feed-in tariff programs, but how well does the Adder scheme work for the country? And for a coal-dependent China, is a coal-to-gas shift underway for real?

Enjoy the issue!

Tim Charlton

Can we help?

Editorial Enquiries If you have a story idea or just a press release please Email: ap@charltonmedia.com and our news editor will read it. For a personal message to the editor put the word “Tim” in the subject line.

Media Partnerships Please Email: ap@charltonmedia.com and put “partnership” on the subject line and it will forward to the right person.

Subscriptions Email: subscriptions@charltonmedia.com Asian Power is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Asian Power can accept no responsibility for loss. We will however take the gains.

*If you’re reading the small print you may be missing the big picture   



ASIAN POWER 3

EDITORIAL CONTENTS

Singapore gets green and smart 09 FIRST

10 FIRST Why is Taiwan not giving up its nuclear energy?

REPORT 16 COUNTRY Bangladesh still haunted by power blackouts as huge infrastructural defects persist

FIRST 08 Gloomy skies for APAC’S solar sector 08 Natural gas still unlikely to replace coal in Asia

OPINION 28 Handcuffs or handrails?: Philippine limits on fits 30 JOHN GOSS: China’s increasing unconventional gas industry

09 Singapore gets green and smart 09 The Chartist: China to fall short of new solar installations in 2014

FEATURE

10 Find the right FiT in Thailand

14 CEO Interview: Taipower calls for a reasonable tariff mechanism

10 Why is Taiwan not giving up its nuclear energy?

20 Manmade gas using coal holds promise for China’s growing

10 SEA’s biggest wind farmsolidifies status 10 IFC invests $26m in Pakistan wind project 12 What’s troubling Japan’s solar boom?

12 Will Indonesia’s power tariff hikes hurt industrial users?

Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road

4 ASIAN POWER

energy consumption

24 Case Study: What makes the Andong CCPP a brproject in South Korea?

26 Feature: Why China’s demand for coal power will wane

For the latest news on Asian power and energy, visit the website

www.asian-power.com

Switch over to energy efficiency.

With MWM gas engines.

Tomorrow’s energy today – with efficiencies of over 90 %.

MWM gas engines can be integrated into your existing equipment flexibly to ensure a reliable supply of energy and high efficiency. An investment that pays off quickly. www.mwm.net

News from asian-power.com Daily news from Asia most read

POWER UTILITY

PROJECT

Asia-Pacific is shifting towards sourcing energy outside the region As Asia-Pacific’s economic prominence grows, so grows its demand for and trade in energy, with China accounting for a big part of it, says Standard & Poor’s Ratings Services. Crude oil, coal, and gas imports in APAC have doubled as a percentage of total imports over the 20 years to 2012.

“Most of the expansion in energy trade in our 20-year sample occurred in 2002-2007, although the trend continued through 2012,” says Paul Gruenwald, S&P’s chief economist.

PROJECT

Clenergy inks investment deal for distributed PV market in Fujian, China Clenergy announced that it has entered into an investment agreement with the Xiamen National Hi-Tech Entrepreneurship Center. The two partners will co-operate to develop and construct distributed generation solar projects in Fujian province.

By fully leveraging their market resources and advantages in the government sector, the partners will establish a joint venture and develop about 150MW of distributed solar projects in Fujian.

Navigat Group scores US$21m support from two Indonesian investors Navigat Group announced a US$21m investment from two Indonesian investors, Mahanusa Capital and Gunung Sewu Group. The investment comes shortly after Standard Chartered Bank Private Equity’s US$25 million investment in Navigat in December 2013.

As with the SCB PE investment, the new funds will be deployed to enable MAXpower to achieve its target of 1,000MW of installed operating capacity by the end of 2015.

FROM THE BLOG The future of Singapore’s renewable energy

BY ANTON FINENKO For the small city-state of Singapore which has no significant indigenous energy resources of its own and is consequently dependent on fossil fuel imports to meet its energy needs, the use of various forms of renewable energy could improve the country’s energy diversity.

6 ASIAN POWER

How smart cities will help Singapore deal with tackling energy demands

BY JASON GOH In the last decade, Singapore’s population has grown by 25%. With this rapid pace of growth it comes as no surprise when a study by Shell Eastern Petroleum showed that four out of five Singaporeans ranked future energy needs as important as cost of living.

Power Up: New hot areas for transformation Part 2

BY DANIEL NIMMO Another technology-led area of transformation involving big data for the energy sector is in customer interactions.

Utilities are using big data management tools, cloud, and mobile platforms to deliver new engagement models with customers.

The impact of China’s increasing energy consumption

BY GERARD BURG In 2000, China accounted for around 10.5% of global primary energy consumption and in 2010, China overtook the US to become the world’s largest energy consumer. This resulted in China now holding 22% of the global total energy consumption.

The power of nature is admirable.

Many species can thrive in extremely tough conditions. We have taken this as inspiration for developing cutting-edge solutions, which are environment-friendly too.

Like our solutions for bio-energy generation. Robust, efficient, clean solutions, that are able to create new energy where before there was only residual matter or organic waste.

Solicíte nuestro nuevo catálogo ecológico en:

w w w. g u a s c o r p o w e r. c o m

FIRST are expected to ramp up natural gas consumption rather than relying heavily on coal, says Sanjeev Gupta, Asia-Pacific Oil & Gas Leader at Ernst & Young.

“With India and China facing acute problems with pollution, there has been concerted effort by these countries to increase consumption of natural gas that resulted in high compound annual growth rate during the last decade. Even if we assume modest growth in natural gas, as compared to the previous decade, the demand for natural gas will be quite strong for the next two decades,” says Gupta.

GLOOMY SKIES FOR APAC’S SOLAR SECTOR

The Asia Pacific region’s dependence on fossil fuels is a ticking time bomb, yet countries are doing very little to diversify their fuel mix to accommodate renewable energy and the difficulty to acquire land for solar projects is not helping either. Rajiv Vishwanathan, an analyst with Standard and Poor’s, says there are significant opportunities in APAC for solar power, with declining sources of fossil fuels and rising power demand brought by economic growth.

S&P forecasts a 5.4% gross domestic product growth for the region for 20142016, with ASEAN posting a higher 5.5%.

“However, investment in solar power remains dependent on foreign investment and foreign investors need transparent and consistent regulations ensuring a return. So far this has not been well established, or at least the pace regulatory development has been mixed.”

Challenges Vishwanathan says challenges include the establishment of adequate regulations, timely tariff increases, attracting project sponsors obtaining the necessary funding as most would be done on a project finance basis, negotiating licenses and permits, land acquisition and compensation, and negotiating power purchase agreements with state-owned utilities. He adds that solar power is more expensive than conventional sources such as thermal power, due to high capital intensity. This results in increased power tariffs.

“Land acquisition is a major challenge for solar developers due to the low energy density of the technology (1.5ha per MW). The high life cycle cost results in low generation caps although this is not an issue in many small grids because the alternative is even higher,” notes Tony Segadelli, managing director at Owl Energy Consultants.

Despite this, however, several countries in South and Southeast Asia have already considered a gradual change in their fuel mix by incorporating other renewable sources of energy. India, for example, has a renewable purchase obligation on state electricity procurers to encourage consumption from renewable energy sources. Thailand has been the leader in ground-based photovoltaic installations over the last few years and Malaysia and the Philippines are coming up with small projects for solar energy generation.

8 ASIAN POWER

Natural gas consumption to increase in the next 20 years

Natural gas still unlikely to replace coal in Asia

I

nstead of relying heavily on coal, Asian countries are expected to significantly increase their consumption of natural gas as they move away from nuclear power and strive to ensure that carbon footprint is still in check. The next two decades will see Asia’s energy demand increase and natural gas will play a key role in meeting this burgeoning demand, but analysts say it is still unlikely to replace coal as a fuel of choice.

Demand forecast Primary energy demand in Asia is projected to grow at 2.5% per annum and reach 7.1 billion tones of oil equivalent (btoe) in 2035, which is a two-fold increase from 3.6 btoe in 2007, says Ryoichi Komiyama of The Institute of Energy Economics Japan in his paper titled “Energy Outlook to 2035 in Asia and its Pathways Towards a Low Carbon Energy System.” He says Asia will account for approximately 61% of the world primary energy increase to 2035. Also, the share of Asia in world primary energy demand is likely to rise from 33% in 2007 to 42% in 2035. The soaring energy demand will be driven

by Asian countries achieving fast-paced economic growth, such as China, India, Vietnam, Thailand & Malaysia.

To meet this massive energy demand while also keeping their carbon footprint in check, Asian countries

Asia is also home to two of the top 3 exporters of natural gas – Malaysia and Indonesia – which should ensure that a spike in demand will be met.

Japan a major boost Natural gas will also gain steam in the coming years as governments, led

by Japan, move away from nuclear power. “Japan, which has been the most affected with the shutdown of all its nuclear plants, is facing strong resistance from the electorate to restarting its nuclear reactors. As a result, demand for natural gas has increased in the region,” says Gupta.

Asia is also home to two of the top 3 exporters of natural gas – Malaysia and Indonesia – which should ensure that a spike in demand will be met.

The region is abundant in natural gas resources, and many countries are developing import infrastructure to meet future gas demand and address gas supply disruptions, says Rajiv Vishwanathan, Corporate Credit Analysis & Research at Standard and Poor’s. He cites BP World Energy statistics which show that natural gas import volumes have been increasing over the years, driven by the fact that natural gas is cheaper and becoming more abundant than oil. While natural gas will rise in importance and prominence in Asia, Gupta says it will not likely replace coal as the region’s definitive fuel of choice in the next two decades.

Incremental increase in primary energy demand by fuel from 2007 to 2035

Source: The Institute of Energy Economics, Japan

FIRST Renewable energy could meet about 8% of Singapore’s current peak power demand by 2025.

RE to meet 8% of Singapore’s peak power demand

Singapore gets green and smart

F

or a small country like Singapore which heavily relies on fossil fuel imports to meet its energy requirements, it is inevitable to turn to alternative energy sources at home.

Anton Finenko, analyst at the Energy Studies Institute of the National University of Singapore, says despite challenges like geographic constraints and lack of space required by geothermal plants and wind farms, the city-state is doing well with solar photovoltaics, biomass and waste-for-energy combustion.

“According to a new white paper launched by industry experts in January

2014, renewable energy could meet about 8% of Singapore’s current peak power demand by 2025,” Finenko says.

He adds that there is a potential investment of S$3 billion to S$4 billion from the private sector waiting to flow into the renewable energy sector, based on estimates made by industry experts.

Singapore: smart city Meanwhile, Jason Goh, vice president of Schneider Electric Singapore’s Energy Business Unit, says Singapore needs to make a shift from being the Lion City to a smart city if it wants to meet the energy needs of its population.

Goh says Singapore needs to evolve into a smart city to meet the energy demands which will be placed on the country’s infrastructure by a growing population.

He describes a smart city as one which has interconnected systems that are able to work with each other, sharing information to make a city more efficient, and at the same time more environmentally friendly and sustainable.

“While a mix of alternative energy sources like solar and wind is commonly highlighted as one of the solutions that could help to meet future energy demand, we believe that strategic and efficient use of energy can take any city to a more sustainable future, and this is particularly so for Singapore,” he adds.

Goh says that in a smart city, all the various systems work together, forming a critical mass of data that allows for continuous improvement of the systems themselves. The improvement delivers information which can be analyzed by intelligent software systems, and the data allow cities to deliver more efficient public services.

Grid Emission Factor and Percentage Share of NonNatural Gas Energy Products in Fuel Mix

Source: Energy Market Authority, Singapore

The Chartist: China to fall short of new solar installations in 2014 Macquarie Equities Research forecast 10.5GW in 2014, lower than the official guide of 11.8GW - 7.6GW new installations from distributed solar projects (rooftops) and 4.2GW from utility scale solar projects (solar farms).

“Our projection is based on a sum of individual projects that have been granted preliminary approval by the local NDRC, and our estimated rooftop distributed projects, with a split of 50:50. The Street is concerned that China demand will be far off track if the Chinese government caps 4GW solar farm installations in 2014,” according to a recent Macquarie report.

The Chinese government sets a clear goal of achieving over 35GW cumulative installation of solar power capacity by 2015, implying ~45% CAGR in annual new installations.

China Solar annual new installations and cumulative installations’ growth

Source: CEC, China PV Assoc., Macquarie Research

Estimates of cumulative solar power capacity by region (end of 2013)

Source: NEA Macquarie Reseach

ASIAN POWER 9

FIRST

Find the right FiT in Thailand

IPP WATCH

SEA’s biggest wind farm solidifies status

O

ver the past two decades, Thailand’s Adder scheme has galvanized expansion in the energy sector, but momentum has been faltering in recent years as support for the country’s feed-in tariff (FiT) program has weakened. Analysts believe that the Thai government must roll out a renewable energy law to help boost the FiT program.

Thai Adder Scheme Created in the 1990’s, the Thai Adder scheme has helped incentivize the use of renewable energy and energy efficiency in the country by providing fantastic returns to operators, says Tony Segadelli, managing director at OWL. “Although the Adder has remained unchanged for most technologies over long periods of time, the increase in the Fuel Transfer due to the spike in fossil fuel costs has effectively resulted in a major increase to the revenue received by RE power plant owners, whilst their costs have not increased in a similar manner,” says Segadelli.

He points to the solar Adder rate currently set at THB6.5/kWh noting that it provides a “very bankable” internal rate of return for solar projects. But Chris Greacen, project engineer at SunEnergy Power

Thai government sets ambitious RE goals

International, says that despite having the foundations for a good FiT program, Thailand enacted changes in 2010 that have slowed down market expansion.

The need for clear policy Coupled with more ambitious targets set under the Alternative Energy Development Plan, the government must shore up planning and strategy, as well as policy and regulatory frameworks for FiT if it hopes to keep renewable energy development on the right track.

A renewable energy law to back up the country’s FiT program will help shield the renewable energy sector from political shocks resulting from administration changes. “Having such a law could provide legal mandates for the involved agencies to act in concerted effort and gives comfort to renewable energy investors,” Greacen says.

Why is Taiwan not giving up its nuclear energy?

Taiwan is not ditching nuclear energy from its fuel mix just yet, despite the disastrous accident in Fukushima, Japan. “Giving up nuclear energy immediately will have impact on electricity supply safety, public welfare and economic development,” says Taiwan Power Co. chairman Hwang Jung-chiou.

In 2011, after the Fukushima disaster, the Taiwanese government issued a new energy policy ensuring nuclear energy security, and steadily reducing nuclear energy dependence.

However, the government recognizes that nuclear energy will stay for the moment.

Eugene Chen, managing director and co-owner of Grand Aspect International, enumerates three reasons. “First of all, it is the replacement interest of current coal based system which is still playing an important role for the country. The second factor is that the lobbyists representing nuclear power plants providers have successfully built connections with influential politicians who have helped ambiguous safety measures pass the parliament before. The third factor is to keep the possibility of making nuclear weapons. All reasons look simple but are getting more and more difficult to defend,” he says.

10 ASIAN POWER

Ayala Corp’s subsidiary, Northwind Power Development Corp., will kick off the third phase of the Bangui Bay wind farm in Ilocos Norte, Philippines to add 18MW to the existing 33MW project.

According to the Department of Energy, the now 51MW project has already received clearance for the grid impact study. Clearing work and site inspection started in January.

The expansion project is expected to cost $50 million. The Bangui Bay wind farm sells electricity to the Ilocos Norte Electric Cooperative and provides 40% of the power requirements of Ilocos Norte.

Despite having the foundations for a good feed-in tariff program, Thailand has enacted changes in 2010 that have slowed down market expansion.

IFC invests $26m in Pakistan wind project

The World Bank’s financing arm, International Finance Corp., will invest $26 million in a 50 MW wind power project in Thatta District in Sindh province.

The project, to be developed by Karachibased Metro Power Co., is estimated to cost around $132 million.

According to IFC, it is expected to generate enough electricity to supply about 270,000 people a year. Iqbal Alimohamed family and InfraCo Asia Keenjhar Wind Pvt, which owned Metro, will pay for 22.5% of the project’s cost.

RusHydro to design India’s largest hydroplant

RusHydro International AG, a subsidiary of JSC RusHydro, has won a contract from India’s North Eastern Electric Power Corp. Ltd. (NEEPCO) to design the 3750MW capacity second phase of the Upper Siang hydropower project.

Regarded by the Indian government as a high-priority national project, it will be located in India’s northeastern Arunachal Pradesh state.

Surveying and design work for the $16b project is estimated to take up to 24 months. The plant will be operated by a Russian/Indian joint venture called RusHydro International India.

Large-Scale Power. Fast.

This is not your typical power plant.

When Uruguay’s national utility urgently needed large-scale power to hedge its hydroelectric dependency, it called on APR Energy. As the world’s largest provider of fast-track mobile turbine power, APR Energy delivers large blocks of power within weeks, not years – with solutions that easily integrate into existing infrastructure. We help keep the power on in Uruguay and in many other countries around the globe.

Learn more at aprenergy.com/fastpower

Day 1

Day 8

Day 24

Day 42

FIRST

What’s troubling Japan’s solar boom?

J

apan’s solar energy sector is booming but hurdles are slowing its ascent. When public support for nuclear energy plummeted in the aftermath of the Fukushima Daiichi disaster, solar energy became the new darling of government subsidies and investments.

Japan has bucked the worldwide downtrend in renewable investments excluding research and development, growing 80% to $29 bn while China, US and Europe all saw declines, based on a new Bloomberg Energy Finance report, which attributes the rise to heavy solar energy investments. But the creation of new solar power plants in recent years has outpaced grid development, and is one of the many bottlenecks that analysts believe will seriously dent the sector’s rapid expansion.

Grid management “To integrate an increasing amount of renewable energy is creating difficulties in the grid. Already some utilities such as Hokkaido EPCO have put restrictions on solar energy plants, when the grid capacity is not able to handle it,” says Frenk Withoos, chairman of the Energy Committee of the European Business Council in Japan.

“The Japanese power sector will need to rethink grid management and, based on our conversations with the Japanese authorities, they are still learning the ropes and bureaucratic hurdles remain,” adds Fatima Toor, research analyst at Lux Research. The Japanese government has made moves to alleviate the

problem, such as the Ministry of Economy, Trade and Industry’s announcement that it will provide subsidies of roughly US$98.3 million for an energy storage incentive program, notes Toor.

But even if grid connection setbacks are solved to some extent, Japan’s utilities are not ready to abandon nuclear power completely, says Martin Adams, energy editor at Economist Intelligence Unit. “There are powerful factors that will pull against growth in generation from renewable energy. One of them is that Japan’s utilities are in dire financial straits. They are desperate for the restart of nuclear plants and not keen on hooking up lots more still-expensive renewables, hence the grid-connection problems affecting solar plants,” adds Adams.

Renewable energy pathway While renewables’ share of total energy will grow over the remainder of the decade, Adams predicts it will not be by much. Instead, he believes that fossil fuels will continue to carry the bulk of the burden - a view supported by Japan’s decision to scale down carbon-emissions targets. Toor shares this subdued forecast, saying, “Japan’s solar industry will go through a similar boom and bust cycle like the European Union, where the government subsidies in the near term will explode solar demand in the country but in the long term the demand will stabilize to a few gigawatts of new installations every year.”

Renewable energy proponents argue, however, that public sentiment is still against a return to a

Komekurayama Solar Power Plant in Kofu, Yamanashi Prefecture

heavily nuclear-dependent Japan, despite media reports that the government will “review” its nuclear phaseout mandate. “A ‘review’ is very clearly not a decision but rather, simply a bow of acknowledgement to nuclear interests that their input would not be ignored. In sum, its real interpretation actually supports the renewable energy pathway by acknowledging that a direct policy support for nuclear is not a politically viable option,” says William I.Y. Byun, managing director at Greenpower Fuels.

Will Indonesia’s power tariff hikes hurt industrial users?

The Indonesian government decided to raise electricity tariffs for industrial use from 1 May 2014, but analysts reckon that this increase will have limited impact on industrial companies in the country. With the tariff increase, ranging from 40 to 65%, Fitch Ratings notes that the government expects to save about USD774m (IDR8.9trn) in electricity subsidies.

“While the tariff increases will temporarily compress margins, companies will be able to gradually pass through the cost increases because of their strong market positions. In addition, electricity is not a major cost component for most of Fitch’s rated industrial portfolio,” says Erlin Salim, associate director at PT Fitch Ratings Indonesia.

Among Fitch’s rated industrial portfolio, industrial gas supplier PT Aneka Gas Industri will be most impacted by the tariff increase. Although AGI’s sales contracts allow it to pass through about 60% of its total electricity cost increase to customers, AGI will still need to absorb the remaining 40% of the increase.

Meanwhile, Rajiv Vishwanathan, an analyst with Standard & Poor’s, the increase could have a varying impact on industrial companies, depending on the power costs as a proportion of total costs. “Heavy machinery and complex electromechanical components require large amount of power for operations. Such companies may see an impact through a decline in EBITDA. However, we see this as a further step towards reducing the amount of subsidy burden for the government, particularly towards the power sector,” Vishwanathan adds.

12 ASIAN POWER

Rajiv Vishwanathan Analyst, Standard & Poor’s

Erlin Salim, Associate Director , Fitch Ratings

Hwang Jung-Chiou Chairman, Taipower

14 ASIAN POWER

CEO INTERVIEW

Taipower calls for a reasonable tariff mechanism Taipower submitted a tariff mechanism that fluctuates with fuel prices to the Legislative Yuan. Once approved, will this new mechanism keep the company from losing another US$6.9 billion?

I

n recent years, Taipower has struggled with mounting challenges, including electricity tariffs that have not yet reflected the full cost of power supply, nuclear power disputes, and power industry deregulation. These are severe tests for Taipower’s financial situation, power supply structure and the future direction of management. In addition, all eyes are on how management responds to public criticisms on various government reforms in a bid to improve energy sustainability in the country. Convincing the people that the era of low pricing is over is also a daunting task.

Asian Power recently caught up with Taipower’s Chairman Hwang Jung-chiou to get insights into pertinent issues that the company is currently facing. Since he took over as chairman of the company in May 2012, Hwang has encouraged his colleagues to think entrepreneurially when making operating and investment decisions so as to pursue reasonable cost, efficient operation and reasonable profit.

reflect the rising costs of fuel due to the government’s commitment to secure the public’s basic necessities and economic development.

As electricity prices are far below the costs of electricity, Taipower’s cumulative losses amounted to approximately US$6.9 billion (NT$208.4 billion) by the end of 2013. Therefore, if the government pushes forward the ‘user pays’ principle and lets electricity prices reasonably reflect the costs, Taipower will be able to operate sustainably. On September 11, 2013, Taipower submitted a reasonable tariff mechanism, which fluctuates with fuel prices, to the Legislative Yuan. As soon as the mechanism is approved by the Legislative Yuan, electricity prices will be reviewed and adjusted annually. As a result of this measure, consumers will realise that there is no such thing as a free lunch. They will understand the ‘user pays’ policy and that energy saving is a must. Taipower’s financial situation will also be gradually improved.

Taiwan’s electricity prices remain some of the cheapest worldwide, but do you think it’s time to forego low pricing?

98% of Taiwan’s power supply depends on imported energy.

Due to the soaring fuel prices in the international market in recent years, Taipower faced an accumulated loss of NT$117.8 billion in 2011. This loss was mainly caused by the insufficient adjustments to electricity rates, which did not reflect the scale of international fuel price hikes. Because long-term subsidization is impossible, Taipower was allowed by the government to raise the electricity prices in two stages in 2012 and 2013, in order to bring energy prices back to reasonable levels.

After the adjustments, Taiwan’s electricity prices still remain relatively low compared with those of many Asian countries.

However, the public must acknowledge that the era of high

What is your long-term prospect for Taiwan’s power sector?

Taiwan’s power supply depends heavily on imported energy.

With the transformation of industrial structure and slow growing demand for electricity, the objective of power development has changed from pursuing quantity to enhancing quality. Our future goal is to develop towards a “high-quality power service” and “sustainable power supply”.

“High-quality power service” means safe, stable and reliable power supply as well as diversified customer service to satisfy customers’ needs. For instance, we will construct a smart grid with AMI so as not only to enable customers to flexibly choose the most favourable tariff but also to achieve energy conservation and carbon reduction.

“Sustainable power supply” consists of a “diversified energy portfolio” and “the development of green renewable energy”.

In order to reduce carbon emissions, we will bring in more renewable energy such as solar power, wind power, hydropower and biomass power, etc. In addition, highly efficient low-carbon thermal power, co-generation, nuclear and pumped-storage hydroelectricity will be included in the “diversified energy portfolio,” which enables the power system to be compatible with both centralized large-scale units and distributed renewable energy. Then the goal of providing “safe and reliable, clean and environmental-friendly as well as affordable” electric power could be reached.

“Generators will be able to sell power to consumers directly, which means the market structure will no longer be monopolistic.” energy prices has come, and should try to reduce the use of energy. Taipower will communicate with the public continually to make them understand the necessity of reasonable tariff schedules.

How did you resolve the difficulties and public’s doubts about the electricity price adjustments?

In order to achieve our goal of the electricity price adjustments, Taipower not only provided general guidance and explanation, but also introduced power-saving initiatives and held powersaving lucky draw activities. Moreover, we launched a series of activities to communicate with the public on 14 September 2012, which was the first time our company took the initiative of all staff members communicating with the public. According to our statistics, at least 960,000 person-time attended the 4,700 communication sessions that were held.

How do government reforms, such as the ‘user pays’ principle affect Taipower’s financial sustainability?

Since 2003, under the influence of international skyrocketing fuel prices, Taipower’s electricity costs have been increasing substantially. However, tariff adjustments did not completely

The government is in the process of liberalizing the power market. How does this influence Taipower?

Draft revisions to the “Electricity Act” have been submitted to the Executive Yuan for review. Once the legislative process is completed, the generator sector will be able to set up and invest in the power grid utility, power producers and power suppliers. Subsequently, generators will be able to sell power to consumers directly, which means the market structure will no longer be monopolistic.

In addition, a competitive mechanism will be established to improve the performance of utilities. Liberalization releases the obligation of Taipower to buy the power produced by cogenerators and IPPs and releases policy-level duties to benefit some specific users so as to reasonably reflect the costs. It will return an equal and competitive management environment to Taipower. This is the critical issue for the sustainable development for Taipower.

ASIAN POWER 15

COUNTRY REPORT: bangladesh

Bangladesh targets 20,000MW power capacity by 2021

Bangladesh still haunted by power blackouts as huge infrastructural defects persist The Bangladesh government struggles to supply over 5,000MW of power every year.

F

or half of Bangladeshis on the grid, power blackouts are a part of daily life. Despite a number of improvements in the impoverished country’s human development indicators over the past two decades, the challenge is clear: jack up generation capacity and ensure a long-term sustainable fuel mix.

“Considering the hidden and suppressed demand in the country, Bangladesh requires more than 5000 MW of power per year for the next decade at least. Besides, the power sector is beset with huge infrastructural defects. There are no adequate transmission lines, the substations are old and antiquated. Thus generation, transmission and distribution are not in sync,” says Syed Tanveer Hussain, former secretary to the government of Bangladesh and chief executive officer of The Climate Change Company.

In a report, Fahmida Khatun and Mazbahul Golam Ahamad of Centre for Policy Dialogue mentioned that one of the major obstacles responsible for the power shortage is the lack of adequate maintenance of existing power plants and institutional and managerial skills. Poorly managed public-private partnership and lack of local investment 16 ASIAN POWER

“The country’s reliance on natural gas is threatened by rapidly diminishing and the state struggling to make ends meet.”

prevent the development of the energy and power sector, and poor physical infrastructure and lack of political commitment make energy trade with neighbouring countries difficult.

Government response In an effort to bridge the huge gap in demand and supply, the government has undertaken a number of measures to find more sources of fuel.

David Milligan, senior associate at Norton Rose Fulbright Hong Kong, says the government is showing willingness to honour its commitment. “The present government- led by Prime Minister Sheikh Hasina of the Awami League– has shown great commitment to its plan to boost generation capacity, by taking steps towards improving the efficiency of existing plants, attempting to diversify fuel sources, and planning new transmission lines and a new generation of power stations. It has encouraged state-owned energy companies to get out into the market and seek funding from international banks, some backed by export credit agencies, in order to make these projects a reality,” he says.

Milligan says the government has been striving to modernize its energy

infrastructure with the state-owned Bangladesh Power Development Board (BPDB), its subsidiaries and sister companies promising a 20,000 MW overall energy capacity for Bangladesh by 2021. The goal is expected to be accomplished through cooperation between the public and the private sector.

The country also signed a deal with India to import an initial 250 MWh of electricity through a grid connection between Bheramara in Bangladesh and Baharampur in India. The country also hired several costly diesel and furnace oil-based power plants from the private sector. Recently, it has tendered a number of independent power plants, including two combined cycle plants in Bibiyana and Meghnaghat. The plant developers entered into long-term offtake agreements with the state’s power development board backed up by sovereign guarantees.

Bangladesh’s fuel mix Currently, Bangladesh is heavily dependent on natural gas, with 80% of power plants in the country gas-fired. The country’s reliance on natural gas is threatened, however, by rapidly diminishing reserves and the state struggling to make ends meet.

COUNTRY REPORT: bangladesh Petrobangla, the state-owned oil and gas company, is struggling to extract more natural gas to meet the enormous national demand. The government responded by inviting bids for a floating liquefied natural gas import terminal on Moheshkali Island, expected to have a 5-million-metric-ton capacity per year.

The government is also looking at the country’s coal reserves for future use.

The country’s total reserve of local coal is 3,300 million metric tons (MMT) in five coal mines: Barapukuria, Khalaspur, Phulbari, Jamalganj and Dighipara. Of the total reserve, about 492 MMT are recoverable, Khatun and Ahamad say.

“Large coal-fired plants with capacities of 1320 MW each are planned for Khulna and Chittagong,” Milligan says. Coal mining is relatively small in Bangladesh, and protests are launched against efforts to establish open-pit mines in the north of the country.

Milligan says importing coal may be the solution, but it is likely to be expensive.

“It may also prove difficult to obtain foreign financing for coalfired power plants, particularly from the more environmentally conscious international development banks and export credit agencies,” he adds.

Aside from natural gas and coal, Bangladesh is also carrying out a two-year technical and economic study for a nuclear option that would establish two plants in Rooppur. The study is Russian-funded and employs Russian expertise on nuclear energy.

According to the World Nuclear Association, the country’s interest in nuclear energy started in 1961, when a power plant in the west of the country was proposed. Rooppur was selected as a potential site for power plants as early as 1963, after years of reports supported the technical and economic

feasibility of adding nuclear energy into the country’s fuel mix. A 125 MWe plant was proposed and approved in 1980, but was not built. In 1999, the government revisited the plan for the Rooppur plant and adopted a national Nuclear Power Action plan in 2001. In 2005, it signed a nuclear cooperation agreement with China, which offered funding and technical assistance for the project. The International Atomic Energy Agency approved a technical assistance project for the Rooppur plant to be started between 2009 and 2011 with a planned 1100 MWe capacity.

Russia proposed building a nuclear power plant and The government agreed in May 2009. In the end, the government then signed an agreement for Russia to fund the project. However, with the recent disaster in Fukushima, environmental and safety concerns will pose a challenge to the plan, and the government’s political will to increase generation capacity will be put to the test.

Financing a huge energy requirement In order to maintain a sustainable fuel mix that will end periodic blackouts, the government is tasked with seeking a number of funding sources. In November 2012, the government borrowed a total of $1.6 billion from the Asian Development Bank, the European Investment Bank and the Islamic Development Bank.

The amount is intended to improve the efficiency of existing generating facilities to boost capacity by 700 MW. The state also signed a deal the following month, with the Ashuganj Power Station Company, a subsidiary of the Bangladesh Power Development Board using a loan facility backed by three European export credit agencies (ECAs), the Multilateral Investment Guarantee Agency of the World Bank Group. The amount will

S.Tanveer Hussain

Fahmida Khatun

M. G. Ahamad

David Milligan

Sales of electricity by sector

be used to finance a 450 MW Ashuganj (South) combined cycle gas turbine plant.

“This was the first time that ECAs have been involved in financing power projects in Bangladesh, and represents a possible model for future projects undertaken in the public sector,” Milligan says.

Over the years, the government has scaled up budget allocation for the energy and power sector, with a 5% allocation from the total budget for 2013-2014.

“The government of Bangladesh intends to augment power generation to 11,457 MW by 2015 that requires an investment of $15 billion, of which $5 billion is supposed to be provided by the public sector, and the rest will have to come as private investment.

The lack of adequate public and private investment in oil, gas and electricity is also acknowledged in the Sixth Five Year Plan (GoB 2011).

Inflow of foreign direct investment In case of electricity production, the share of government is about 60% in 2010, and it is expected that private sector will take the lead by 2016 (BPDB 2011),” Khatun and Ahamad say.

The inflow of foreign direct investment (FDI) in the country also increased significantly in during 2000-2008, specifically in the energy and power sector,which had a positive impact on the overall infrastructure and capacity development of the country.

During 1996-2010, the largest share of total FDI inflows went to the manufacturing sector, followed by transport, storage and communication and power, gas and petroleum.

Khatun and Ahamad see a problem, however, with reliance on FDI for the energy and power sector.

“The highest flow of FDI was during the period between 1997 and 2001 and between 2005 and 2007.

Since 2008 onwards, the FDI flow has however been decreasing which appears to be a major concern for the development of the energy and power sector of Bangladesh,” they add.

Government Provision (Million BDT))

Source: BPDP

Source: BPDP

ASIAN POWER 17

POST-EVENT FEATURE: VENTYX

Asian Power Editor Tim Charlton moderates a roundtable with Ventyx along with leading power generators and market regulators

How Singapore’s utilities approach plant O&M See how using real time and digital monitoring rather than time based maintenance can save two-thirds of manpower budget.

S

ome of Singapore’s leading power generators, as well as representatives from the market regulator, sat down with Asian Power and Ventyx to look at the challenges facing plant operators in operations and maintenance. The theme of the event was around enhancing visibility of the health of critical assets and improving reliability and lowering costs through predictive maintenance strategies.

One finding at the roundtable was that Singapore does not have a very old infrastructure on the power generation side but that, nevertheless, engaging staff with more productivity tools was seen as advantageous. A discussion point was the need to do more to engage young engineers in power plant maintenance and operations through leveraging new technologies and the role that predictive maintenance systems can play in a power plant’s operations.

Ventyx EVP Global Sales Daryl Rolley said the issue of asset health in ageing infrastructure was particularly acute in the developed world. “There is not enough money for what the plant operators want to do, and every operator has the problem of how to stretch the maintenance dollars.

Twenty-five years ago maintenance was time-based, and each asset had a manual program of inspections. Nothing was digitized nor was it in real time. Now the 18 ASIAN POWER

“This is not about saving 5-10 percent of your operations and maintenance (O&M) manpower budget; it’s about saving two thirds.”

technology of condition-based maintenance (CBM) allows us to run a business in a different way. Rather than time-based maintenance, we can get information and do maintenance based on conditions at the time, as well as on conditions that are trending toward issues in the future. This is true predictive maintenance,” he added.

Massive savings Rolley referenced a study by Shell, which tracked maintenance over five years and found that 64 percent of the time spent on maintenance added no value. “This is not about saving 5-10 percent of your operations and maintenance (O&M) manpower budget; it’s about saving two thirds,” he said.

Rolley also noted how consumer devices such as personal health trackers, which link to apps on an iPhone, and the home digital device NEST, which was acquired by Google, are influencing the way plant operators should look at running their systems. “With real-time and digital monitoring rather than time-based maintenance, you can focus on what needs to be looked into and not replace an asset that doesn’t need to be replaced.”

ABB regional president Haider Rashid said: “At ABB in Singapore we have 1200 people of whom around 300 are service engineers. It is getting harder to find people who are willing to sit in a base-

ment waiting to be called out. They want to be able to look at data on an iPad and respond.”

Planning maintenance strategies Tuas Power SVP Generation Business Lau Tai Hwee said that they focus on reliability based maintenance on key equipment of Tuas Power Station. “OEM’s data on equipment failure is one of the considerations in planning our own maintenance strategy. We do offline plant performance modelling and the key is to get good quality data from field instruments. You can pull all sorts of data from the plant’s distributed control system but interpreting the data is the challenge,” he said.

Keppel Merlimau Cogen assistant general manager Ng Kiat Siang said it was important to leverage technology and to take a balanced approach to risk assessment. He cited examples of the oil and gas offshore industry where data is streamed to the headquarters for monitoring.

Keppel Merlimau Cogen’s Phase I plant has just passed the quarter life mark so it’s still relatively young, and the Keppel Merlimau Cogen Phase II expansion was completed ahead of schedule in 2013.

The Keppel Merlimau Cogen in Singapore does all the analysis of plant data offline rather than in the control room.

“We don’t want the plant operations to be disrupted,” he said.

POST-EVENT FEATURE: VENTYX “In Singapore, where 90 percent of the market for generation is now fueled by natural gas, security of supply remains a key concern.”

Daryl Rolley EVP Global Sales, Ventyx

Haider Rashid Regional President, ABB

Lau Tai Hwee SVP Generation Business, Tuas Power

Ng Kiat Siang Asst. Gen. Manager, Keppel Merlimau

Another participant at the roundtable was Hyflux, whose wholly-owned subsidiary Tuaspring had taken the approach of outsourcing the operations and maintenance of a 400-megawatt combined cycle power plant under construction in western Singapore. Tuaspring is building the plant adjacent to a seawater desalination facility that is also under construction. The power plant will supply energy to the Tuaspring desalination plant and sell excess power into Singapore’s electricity market.

Other issues Apart from the maintenance concerns raised during the roundtable, issues such as energy security and price competitiveness also need to be considered. In Singapore, where 90 percent of the market for generation is now fueled by natural gas, security of supply remains a key concern. With limited solar and biomass, Singapore is heavily reliant on imports for almost all its fuel. This makes the country vulnerable to price fluctuations and supply risks. With Malaysia and Indonesia the biggest exporters of gas into Singapore in the form of piped natural gas, the LNG terminal has helped Singapore to start diversifying its sources.

VENTYX VIEW

Don’t just get alerts when assets are about to fail, use data to anticipate issues before they turn into problems

S

uccess in asset intensive utilities is dependent on the reliability of critical assets. Many utilities struggle today with assets that are near or even past their expected life and a lot of resources are put into trying to prolong the equipment lifetime. Many maintenance programs are still done with a time- or usage-based approach, and this means that visibility into real time conditions that could impact the risk of failure may not be considered.

When the condition of the asset is not taken into consideration as part of the asset maintenance and management, unnecessary maintenance may be performed. Unnecessary maintenance is an additional cost that could have been avoided.

Based on data from Shell Group 68% of timebased maintenance provide no added value and/ or does not lead to any corrective action.

Secondly, every time you perform maintenance you may generate additional and unintended equipment failures as a consequence of the maintenance performed. A catastrophic failure of a transformer, for example, can cost anywhere between 3 and 10 times the cost of the equipment itself - in some cases the failure and related substation damage can cost as much as $25 million USD. And this is just the financial cost; there is also an increased risk of work crew safety, regulatory fines, environmental risk

and a company’s reputation to consider when thousands of customers can be affected by a single outage.

An asset health approach to maintenance Today, many utilities approach asset health with an ad-hoc mix of information from multiple sources, like time and usage based inspection data, alarms from remote sensors, and industrial enterprise systems. Often, this data is trapped in functional silos across the business and utilities rely heavily on human experts to manually review this data to identify trends and address the highest risks of failure across the asset portfolio.

As more of these experts retire, utilities will need to preserve this expertise.

Asset Health Center combines decades of subject matter expertise in transformer manufacturing and maintenance, with historical and real-time data analysis. By integrating operational technology with its information technology, organizations have the ability to consolidate the wealth of data on system loads, markets, inspections and equipment sensors into meaningful insights on the health of their critical assets. The Asset Health Center solution doesn’t just alert you when assets are about to fail, it also helps anticipate issues before they turn into problems. Using this improved level of insight,

utilities can take immediate action to prioritize their response and resources. Organizations can optimize their maintenance spend to get the most from their assets and budget, build business cases for repair/replace decisions and codify the expertise of staff in order to make it accessible for new employees and even maintenance outsource partners.

Some of the expected benefits of deploying an asset health strategy to critical infrastructure include: Fewer catastrophic equipment failures; optmize operational costs; extend asset life and optimizing asset replacement; reduce unplanned outages; lower planned outage costs; increased safety; enhanced regulatory compliance and reporting. Aging equipment is a long-term challenge for many electric utilities, maintaining and extending the life of new infrastructure is a challenge for others. Utilities with either of these issues will require focused and consistent efforts — along with innovative technology — to meet both current and future challenges. Fortunately, technology now exists with the Asset Health Center. This solution enables an end-to-end asset health management system that manages the vast amounts of information utilities have on their assets. Asset Health Center provides a view of assets in one place with predictive asset health management with actionable data, not alerts.

ASIAN POWER 19

sector report: alternative energy

China aims to switch out of coal and use more gas

Manmade gas using coal holds promise for China’s growing energy consumption Will China achieve 60GW gas-fired power capacity by next year as it deepens its commitment to develop unconventional gas? By Joseph Lam, Power Utilities Analyst, Nomura

A

China gas revolution is in the making. Unlike the US shale revolution, however, China is turning its eye towards a familiar resource – coal – broadening the definition of gas from natural gas to man-made gas. Thanks to the country’s abundant coal reserves, cheap local coal prices and urbanization involving most of the key coal production bases, we believe clean coal technology will carry a different meaning and economics in China vs. the rest of the world.

If China realizes the syngas revolution, we expect it will likely have a similar impact to that of the US shale gas revolution on Chinese consumers and various industries.

We believe the impact on the global commodities market would be significant as well, as increased unconventional gas supply would likely enable China to reduce gas imports from 2018F and replace 15% of oil demand by 2020F. Gas market in China China’s gas consumption has historically doubled every 4-5 years, while domestic production growth has slowed in recent years amid a lack of new gas discovery.

In addition, currently, imported gas is expensive at USD13-17/mcf vs China’s

20 ASIAN POWER

“China’s gas consumption has historically doubled every 4-5 years, while domestic production growth has slowed in recent years amid a lack of new gas discovery..”

gas selling price of USD7-8/mcf. Nevertheless, in the 12th Five-Year-Plan (2011-15F), the NDRC predicts that imports should rise sharply from 17% of total supply in 2010 to 35% by 2015F. However, we believe this is not a sustainable model as China is actively tapping new gas sources.

Development of unconventional gas China has been developing tight gas and CBM (coal-bed methane) as possible alternative sources of gas. In addition, it recently began shale gas exploration.

It also has been developing syngas (coal gas). Tight gas is at production stage and supplied 1/3 of the 2011 domestic production. We expect it will likely remain as a main supply source, but in the Chinese context, tight gas is viewed as conventional gas since the majority of the production base overlaps with conventional and the production process/accounting is integrated.

CBM is moving to production stage, but we expect the contribution to be limited at 5% of total supply by 2015F and likely taken over by shale and syngas in 2016-20F. We view CBM as relatively less attractive than shale and syngas due to CBM’s relatively small reserve size and

lack of liquid potential. These factors will likely to limit its medium-/long-term growth.

Shale gas is at an early stage of exploration, and we do not expect any meaningful supply until 2015F. China is said to have the world’s largest shale gas reserve, but as seen in Poland, massive reserves do not necessarily lead to massive production.

In 2013-15F, we believe China shale gas-related activities will likely be focused on geological survey and test drilling to establish the economic viability of China shale.

Syngas is likely to pick up sharply in coming years, in our view, and account for 15% of total supply by 2015F and 35% by 2020F, reflecting recently approved and some construction projects in the pipeline. Syngas was listed as a key strategy in the 10th, 11th and 12th FYP, and we note that lately, various test projects have started to realize safe and steady operations and reported profits in 2010-12.

China syngas revolution vs. US shale revolution China has the world’s second-largest coal reserve. Its proven coal reserve accounts for 13% of global total supply, while the

sector report: alternative energy equivalent for oil and gas is merely 1%, according to the 2012 BP World Energy Review. Its coal reserve life stands at more than 200 years, compared with oil’s 9 years and natural gas’ 24 years.

Syngas (synthesis gas) refers to coal gas produced from coal gasification or clean coal technology (CCT). It is manmade gas, but the chemical component is comparable to natural gas, and the CO2, NOx and other pollutant emission is in line with global standards. Syngas can be used for town gas and CNG/LNG, gasoline/ diesel substitute (coal-to-liquid, CTL), petrochemical feedstock (coal-to-olefin, CTO) and power generation.

The technology is considered stable by many industry participants and the economics superior in China. At CNY250/ ton of local coal input cost, we calculate syngas production cost at USD7-8/mcf.

China Energy Policy China’s energy consumption has increased more than 6x in the last 30 years vs the rest of world’s 1.6x, according to BP Statistical Review. China’s rapid growth made it the world’s largest energy consumer in 2010 and the world’s biggest CO2 emitter in 2006 as coal fuelled the bulk of the growth.

In 2011, China accounted for 26% of global CO2 and 78% of the increase in global CO2. Currently, China has no obligation in the Kyoto Protocol, but it may have to pay eventually, in our view.

Applying AUD23/ton of CO2 as suggested by the Australian government, we estimate the Chinese government has to pay a considerable USD206.5bn in CO2 tax based on 2011 emission.

Long-term energy planning is aimed to move away from coal to gas. China aims to switch out of coal and use more gas. In its 12th Five-Year-Plan (FYP, 2011-15F), China aims to increase natural gas usage in the total energy mix from 4.4% in 2010 to 7.5% in 2015F and 10% by 2020F, a net 5.6% point gain. Meantime, coal in the energy mix is estimated by the NDRC to fall from 68% in 2010 to 63% in 2015F and 60% by 2020F, a net of 7% point loss.

In our view, the estimate implies gas is to take up 80% of coal’s share in energy mix and possibly more, if the hydro/ wind/solar development is to unfold slower than planned.

Gas demand targets and the drivers In order to facilitate the switch from coal to gas in the total energy mix, the NDRC has set China’s gas consumption target of 230bcm in 2015F and guidance of 320bcm by 2020F. The implied growth is 18% pa during the 12th Five-Year-Period and 7% pa in 2016-20F. In late-October 2012, the State Council approved the 2015F gas demand target of 230bcm and

supply target 260bcm. While the supply target of 260bcm is in line with previous guidance from the NDRC, the 2015F gas demand target of 230bcm is lower than the market expectation of 260bcm. We believe the government lowered its 2015F demand target to factor in the recent economic slowdown and also may suggest slower gas price reform given that supply still dictates demand in China.

We estimate China gas demand to grow from 108bcm in 2010 to 260bcm in 2015F (19% CAGR) and 400bcm in 2020F (9% CAGR). Our estimates are higher than NDRC guidance of 230bcm/320bcm in 2015F/2020F. We are of the view that NDRC 2020F guidance may be outdated and not fully reflect recent changes in key end-user markets, ie.

CNG/LNG vehicle growth, coal-to-olefin expansion, etc.

Given that the State Council just approved the 2015F gas demand target in October 2012, we expect the NDRC to submit a final revised 2020F demand target to the State Council in due course, and we expect the final 2020F demand target to be higher than 320bcm.

In 2010, according to CEIC, China’s gas usage consisted of 36% industrials, 31% chemicals, 20% residential and 13% power. According to our estimate, the 2015F demand 260bcm and demand CAGR of 19% in 2011-15F is likely driven by the three areas: power, transport and coal-to-olefins.

Power sector demand According to the draft version of the power industry’s 12th FYP (2011-15F) from the NDRC, China plans to increase gas-fired power capacity from 10 GW in 2010 to 60 GW by 2015F, and from less than 1.0% to 4.2% of total national power generation capacity. However, we believe the target is viewed as unachievable by the Chinese power industry and even other government working guidelines suggest 2015F/2020F gas-fired power capacity at 40GW/50GW. We estimate 12th FYP gas demand from the power sector to grow 32% pa in 2011-15F, followed by 5% pa in 2016-20F. The estimated 32% CAGR in gas demand in the 12th FYP is significantly slower than the >60% CAGR reached in the 11th FYP (2006-10) which had been driven by a severe power shortage caused by high coal prices and frequent drought.

Our slower gas-fired power capacity growth estimate in the 12th/13th FYP should be met with an increase in utilization, in our view.

Currently, China uses gas-fired power only for peak production, and utilization is kept low at 30-40% compared with that of coal-fired plants (55-60%) or nuclearpower plants (80-90%). We expect

“The government sets the demand target to grow from 100bcm in 2010 to 230bcm in 2015F and guidance of 320bcm by 2020F.”

gas-fired power utilization to improve to ~50% this decade thanks to increased supply of gas following the completion of pipeline projects in China, and favourable tariffs compared with coal-fired power plants on government subsidies.

Conventional gas supply problems In 2011, China’s natural gas supply was 80% from domestic production and 20% import. According to the 2015F government demand supply targets, the domestic vs. import ratio is to change to 65:35. Domestic gas production is 92-93% on-shore and 7-8% off-shore. The Sichuan, Tarim and Ordos basins account for 80-85% of on-shore production, while the Western South China Sea represents 60% of off-shore production. The combined domestic production accounts for 50% of 2015F gas supply target of 260bcm.

Assuming approved/some underconstruction syngas projects come on line and shale gas and CBM make reasonable progress in production, China gas supply should grow from 115bcm in 2010 to 260bcm in 2015F (17% CAGR) and 420bcm in 2020F (10% CAGR), based on our estimates. Unconventional gas should account for 48% of China’s 2020F gas supply (syngas 35%, shale 7%, CBM 6%), followed by 32% conventional gas and 20% import. Increased gas supply should reduce the import requirement from 2018F and increased gas use in CNG/ LNG vehicles and coal-to-olefin projects should enable China to replace 15% of oil demand by 2020F.

China’s energy consumption grew 6x over 1980 - 2010

Source: BP Statistical review, Nomura Research

Energy consumption mix of top 10 consumers 2011

Source: BP Statistical Review, Nomura Research

ASIAN POWER 21

co-published Corporate profile

Delivering excellence in project execution

Delivering integrated instrumentation, control and electrical solutions for power generation and water plants – on time, within budget, and with strict compliance with health and safety regulations – is one of ABB’s defining strengths.

A

BB has a long and distinguished track record in project execution. It is one of our defin ing characteristics, a competitive strength that differentiates us from the competition. There are many factors that contribute to this – from our integrated solutions and engineering expertise, to our global footprint and resources, and our project execution professionalism.

Integrated solutions ABB has been in the power business since the days of Edison and the world’s first commercially operated power plants in the 1880s. During those 130 years we have built up a vast bank of expertise that extends across all power and water plant applications – from thermal power plants and renewables to water processing and distribution. In that time our installed base of power and automation products and systems in the power and water business has become one of the biggest in the industry. There are few power or water plants in the world that do not rely on ABB solutions to secure production and plant efficiency.

Our offering of integrated instrumentation, con22 ASIAN POWER

trol and electrical (ICE) packages builds on this heritage of leadership in power and automation technologies. These packages consist almost exclusively of ABB products and systems – from the generator circuit breaker to the substation and grid connection, from the gas analyzers and flow meters to the distributed control system and plant optimization software. We also take full responsibility for system studies, design, engineering, installation and commissioning, and we support the plant over its entire life cycle with a comprehensive program of service products and solutions.

Most importantly, our integrated ICE solutions simplify the project execution process and deliver substantial savings to the customer. For the contractor they eliminate the risk of working with multiple vendors and of integrating multiple interfaces into a single system. With ABB, there is just one vendor

“Our global service network is probably the largest and most decentralized in the power and water business.”

and one interface. This reduces the need for engineering and speeds up project execution.

The potential savings in capital expenditure for a greenfield project are significant. For the end customer, the ABB single vendor/single interface solution delivers operational benefits in the form of significantly reduced cost of ownership. An integrated electrical and control solution maximizes production and efficiency. It also reduces life cycle costs by minimizing the need for spare parts, maintenance and staff training.

Global resources ABB operates in about 100 countries and employs around 145,000 people. Of these power and automation specialists, around 4,500 are dedicated power generation experts, engineers and project execution professionals. They know the global and regional power markets, and they know the market drivers and customer preferences for each market.

They, and our global footprint, enable us to serve our customers in whichever markets they operate worldwide.

Much of our project execution expertise is chan-

co-published Corporate profile neled via our network of competence centers.

These serve as centers of excellence for a broad range of applications: thermal and water, photovoltaic power plants, hydropower, hydro generator service, nuclear, energy efficiency, cyber security and Symphony Plus automation.

Our global service network is probably the largest and most decentralized in the power and water business. We have more than 1,300 dedicated power generation and water service specialists in 56 countries worldwide, ready to respond quickly and proactively to customers’ needs.

For all our products and systems, we offer lowrisk evolution strategies that ensure maximum return on investment while enhancing equipment availability and performance. Our service philosophy is simple: We protect your investment through the stepwise evolution and upgrading of your electrical, control and instrumentation systems to minimize the consumption of energy, prolong asset operating life, and reduce the cost of ownership.

Project execution expertise ABB prides itself on its ability to deliver each project on time, within budget, to the correct specifications and in compliance with health and safety regulations. Each ICE project is led by a certified ABB project manager. He is ABB’s face to the customer and his role is to ensure smooth and consistent project execution, from the first kick-off meeting to completion and hand-over of the plant.

Behind each ABB project manager stands a team and an organization with vast experience and proven procedures for managing complex supply chains of ABB and third-party manufacturers. Our extensive worldwide network of power and automation manufacturing partners enables us to deliver the solution on or ahead of schedule and at the best price.

Installation is always supervised by an experienced ABB site manager, and commissioning is always performed by ABB engineers. This approach ensures that the equipment is installed to ABB’s standards and the solution optimized to achieve the best possible plant performance.

Compliance with health, safety and environment (HSE) regulations is a crucial part of ABB’s project execution activities. Our objective is simple: to instill a zero-incident culture throughout the workforce and design HSE into all site activities. Our zero-incident policy extends to legal compliance as well. All ABB managers are trained to comply with the laws, ordinances and regulations that apply to the project and country in question. Our employees are required to follow the values and principles of the company as set out in the ABB Code of Conduct, which is based on ABB’s business principles of responsibility, respect and determination.

Following the successful completion of the project, ABB offers a comprehensive service portfolio for the entire solution – with dedicated service professionals and fast response times from our global network of power generation and water service centers.

To learn more about ABB’s offering, please contact your local ABB power generation office or visit www.abb.com/powergeneration.

Flexible power generation Utilities need to continuously minimize operation and maintenance costs and improve their commitments for bidding in their markets. They need decision-support tools to determine their optimal operation strategy. Minimizing cost can be carried by operations scheduling (unit commitment).

ABB OPTIMAX® PowerFit helps utilities handle the needs of interconnected cogeneration networks and deregulated markets. Its features include: – Frequent updates during the day that complement traditional day-ahead plans for conventional power generation – Combined heat and power generation scheduling, from heat-driven to electricitydriven – Exploits storage capacities on the heat side – Increased controllability of renewable gen eration units A new version of OPTIMAX PowerFit, now available in the ABB Dynamic Optimization platform, provides a new optimization method for real-time power plant control. It enables the pooling and combined management of individual power generation units, as if they were one large plant. Real-time optimization distributes overall set points to each individual power generation unit, considering actual efficiencies, process constraints and temporary limitations.

The introduced hierarchy reduces overall complexity, increases flexibility, and provides the best power generation solution for each unit.

Load optimization traditionally focuses on day-ahead plans for power production and trading. In an OPTIMAX PowerFit system, an automation network - either a physical network or a virtual private network (VPN) – connects multiple production units. This new system layout addresses four new trends: – The number of power production units significantly increases with the use of

renewable energy – Power production needs to be replanned frequently during the day to account for fluctuations – The required optimization cycle times are reduced from daily planning cycles to seconds, eg, for the pooling of secondary frequency control – The role of human operators changes from being part of the loop to supervision The new trends in power generation are driving the switch to automated optimization in real-time control systems. OPTIMAX PowerFit directly accesses the automation network via the scanner, supplementing fast, reliable communications with sophisticated numerical optimization, reliably handling large optimization programs in fractions of seconds.

For large conventional power plants, the idea is to pool and optimize multiple units per plant locally, automating communication from the load dispatcher to the control systems of the power generation units, enabling responses to increasingly frequent updates. It ensures the appropriate provision of primary frequency control, secondary frequency control and required load ramps.

Pooling small renewable power plants can achieve an overall capacity that is sufficient for participation in the electricity market.

Many renewable production units, like wind and solar, do not participate in direct trading.

Instead, they supply an increasing amount of unmanaged power to the grid. This can harm grid operation and stability. Renewable supply management controls the amount of renewable power fed to particular distribution networks.

Online optimization offers proven technology to break down overall set points to individual power generation units, fulfilling legal requirements and meeting plant constraints.

As a result, the renewable generation units receive limits for their supply to the grid.

ASIAN POWER 23

cASE STUDY: andong ccpp

CCPP Andong produces 60% less CO2 emissions compared to coal-fired power plants

What makes the Andong CCPP a breakthrough project in South Korea?

The plant was completed in just 24 months, half a year faster than the execution period of a typical project in Korea.

J

ust when you thought Siemens has reached its pinnacle of achievement in South Korea with the completion of the new Dangjin 3, it has notched another impressive milestone by finishing the Andong combined cycle power plant (CCPP) in record time.

The Andong plant has been turning industry heads not only for its brisk construction period of 24 months, but also for being the second Siemens operating power plant in Asia with efficiency greater than 60%.

Andong CCPP is a liquefied natural gas-fired plant with an electrical capacity of 417 megawatts (MW) and is designed to address the rapidly increasing electricity demand in South Korea, capable of producing 417 MW out of one shaft, which is about 35% larger as existing F- class projects.

The plant is owned and operated by the Korea Southern Power Co. Ltd. (KOSPO), a leading power utility, whose extensive experience enabled the team to successfully reach the record schedule.

The Andong CCPP is located in the namesake city in the province of Gyeongsangbuk-do, and will provide power to the city’s 170,000 residents, which consume around 2,700 MWh of electricity daily. Siemens constructed the plant to be 24 ASIAN POWER

“With CO2 emissions of less than 330 g/ kWh, the plant produces 60% less CO2 emissions compared to state-of-theart coal-fired power plants such as one located just 100 kilometers north of Andong. ”

able to perform up to 250 starts per year with a rapid start time of 30 minutes from standstill to full load. The company said the plant’s high flexibility allows it to react optimally to the growing challenges in the Korean power market.

The concept for the Andong CCPP is based on Siemens single-shaft design with the latest SGT6-8000H gas turbine, a technology that allows the plant to perform at the highest efficiency and flexibility.

Cleaner operation But arguably the crowning glory for the Andong CCPP is its remarkably cleaner operation compared to other gas-fired CCPPs, said Lothar Balling, executive vice president and head of global project management in the Siemens Energy Power Generation Division. The plant is designed for extremely flexible operation, with about 250 starts a year and 3,800 full load hours per year.

With CO2 emissions of less than 330 g/ kWh, the plant produces 60% less CO2 emissions compared to state-of-the-art coal-fired power plants such as one located just 100 kilometers north of Andong. Balling said the possibility of heat extraction to increase the utilization of waste heat allows the plant to further reduce CO2 emissions.

It also churns out less emissions of SO2,

dust, NOx, mercury and other minerals, as well as less waste water and deposits like slag and ash.

Balling estimates the Andong CCPP and other newly built gas combined cycle plants will reduce future CO2 emissions by more than 3.5 million tons per year compared to similar-sized existing coal-fired plants. He said this will substantially contribute to the sustainability of the South Korea’s energy future.

In addition to emitting lower CO2, the plant also saves about 5-6% of gas due to the higher efficiency.

Enhanced flexibility The Andong CCPP also holds the advantage of enhanced flexibility in terms of its startup time and ramp rates, allowing it to more easily support the integration of renewables. This fast startup concept with a Benson HRSG design is part of what makes the Andong CCPP a breakthrough project in South Korea.

Another standout achievement for the plant is its short track schedule of 24 months, or roughly half a year faster than the execution period of a typical, similarsized single-shaft project in South Korea, which takes around 28-30 months.

Balling said it was made possible through the close cooperation with cus-

cASE STUDY: andong ccpp tomers, Siemens consortium partner GS E&C and KOSPO. “The trustful relationship developed with KOSPO and our partner GS E&C made it possible to execute this high efficient H-class single shaft power plant in record time with highest quality to support the high power demand in the Andong area. The project execution also was a benchmark in terms of health and safety and zero harm in Korea,” said Balling.

“We place special emphasis on maximized efficiency, operational flexibility and environmental friendliness. For that reason, we opted for a solution provided

by Siemens, which features cutting-edge power plant technology. The plant’s quality and the fast project execution once again proved that Siemens is a very experienced and reliable partner to us,” said Lee SangHo, President and CEO of KOSPO. Other success factors Aside from the harmonious cooperation with stakeholders, Balling listed down the other success factors that enabled the plant’s completion within the short schedule. First was the availability of major equipment. Second, the Andong CCPP used the same design as the Dangjin 3 CCPP, which was the first H-class project in South Korea. The Dangjin 3 CCPP was

commissioned in August last year, and holds the world record for efficiency in Asia. It was the first plant to surpass the 60% efficiency barrier in the region, and has impressed with its smooth-running, economical and environmentally-friendly operations.

Dangjin 3 as a basis for innovation The gold standard set by the Dangjin 3 CCPP forms the core basis for the Andong CCPP, especially in terms of innovation.

Dangjin 3 CCPP uses the same singleshaft configuration that allows both the gas turbine and the steam turbine to operate on the same generator.

Siemens and GS E&C were responsible for the turn-key erection of the plant, and also supplied the major components for the plant, including one SGT6-8000H gas turbine, one SST6-5000 steam turbine, one SGen6-2000H generator and a Benson heat recovery steam generator.

The company also provided an SPPAT3000 I&C system and other auxiliary systems. To ensure these critical components run at their best performance, the company has also signed a maintenance contract with a term of 10 years. “The short track schedule demonstrates also the ease of erection and commissioning of our single-shaft H-class and subsequently the

“Siemens has in its pipeline three other projects: Daegu, located 70 kilometers (km) north of Andong; Ansan; and POSCO 7/8/9 in the vicinity of Seoul and Incheon.”

maturity of the technology and design,” said Balling.

The third enabling factor was Siemens choosing GS E&C, its same partner in Dangjin 3, whose expertise helped create efficiencies in the construction process.

Fourth and last was the commitment of highly motivated teams to keep the project rolling along and eventually finish the plant ahead of schedule.

Project pipeline Emboldened by the success of its last two projects, Siemens has in its pipeline three other projects: Daegu, located 70 kilometers (km) north of Andong; Ansan; and POSCO 7/8/9 in the vicinity of Seoul and Incheon with six more gas turbines from H-class technology.

Siemens has been able to speed up project development since late last year after it established its Seoul office, which serves as the regional headquarters for Middle East and Asia, and supports South Korea and the rest of the region with sales, bidding and execution capabilities.

With the onrush of projects, the regional office is expected to expand to more than 500 employees by 2017. Currently, around 43% of Siemens’ total revenue stems from green products and solutions, including Andong and other highly efficient CCPPs.

Control Room

Gas Turbine SGT6-8000H at Andong

Inside view of Andong

Outside view of Andong ASIAN POWER 25

feature: China coal power

Coal power generation hits a few speed brakes

Why coal power demand wanes A strengthening environmentalist movement are to blame.

A

t the turn of the 21st century, China became so enamoured of coal power that it spent the next decade rapidly growing its use so that by 2013, coal accounted for around a third of China’s overall energy consumption.

Coal power served as the country’s strong energy backbone that helped it reach unprecedented economic growth during this period as its coastal cities flourished with trade and manufacturing activities.

But in the next decade, demand for coal power is expected to slightly cool even as the less-developed central and western China regions ramp up their coal power production.

Two of the major dampening factors are the rising investment in renewable energy sources, and a strengthening environmentalist movement that blames coal plants for the dwindling quality of air and life in China’s biggest cities due to their high emissions.

“With the sustained investment in renewables, significant plans and policy support for long-term growth in nuclear and gas capacity additions, continued decommissioning of ageing and inefficient coal capacity, and a broader focus on tackling environmental issues, the relative role of coal power in China is set to fall sharply from 63% of total installed capacity at year-end 2013 to around 49% at year-end 2023,” says Adrian

26 ASIAN POWER

“The relative role of coal power in China is set to fall sharply from 63% of total installed capacity at year-end 2013 to around 49% at yearend 2023.”

John, managing director of Precergy.

Slowly, the Chinese government has been reducing its reliance in coal power.

China’s newly added capacity rose 8% in 2013 to 94GW but the majority came from non-coal-fired alternatives.

“We continue to see new capacity additions shifting to non-coal-fired alternatives, with about 61% of total capacity added last year from non coal-fired power and an annual growth rate of 60%,” says Gary Chiu, CFA, analyst at Macquarie.

Coal power reduction China Coal Trading & Logistics Association (CCTLA) forecasts national coal demand to rise by only 2 to 4% year-on-year in 2014, driven by incremental demand from central and western China. In contrast, coal demand in coastal regions is expected to drop slightly by up to 3% year-on-year in 2014, due to economic growth slowdown and a shift to non-coal cleaner energy.

The reduction in coal consumption in Chinese cities is not only due to the lower industry demand, but also because of a rash of coal control measures.

According to Greenpeace, 12 of China’s 34 provinces, accounting for 44% of China’s coal consumption, have pledged to implement such measures to reduce CO2 emissions and other air pollutants that heavily contribute to the smog

problem seen especially in urban areas.

Greenpeace East Asia climate and energy campaigner Li Shuo says the coal control measures imply a reduction in coal consumption of approximately 350 million tonnes (MT) by 2017 and 655 MT by 2020, compared with business-as-usual growth, which then translates to an estimated reduction in CO2 emissions of about 700 MT in 2017 and 1,300 MT in 2020.

In 2012, China’s annual growth in coal consumption slumped to 2.8% from its normal average of 9% per year, “a significant deceleration” that is also seen to remain in the 2.63% annual growth rate until 2014, according to industry forecasts.

Ten provinces, including Beijing, Shanghai and Guangdong saw their combined absolute levels of coal consumption reduced by 66.5 million tonnes. On a regional basis, three of the country’s key economic regions -- namely the Beijing-Tianjin-Hebei, Yangtze River Delta and Guangdong – which account for 30% of China’s total coal consumption, cut down their coal use by 0.7%. This trend towards a slowdown of regional coal consumption is already paving the way for broader national moves in this direction, says Li. Exit coal, enter renewable energy As coal consumption decreases, Li says renewable energy is increasingly meeting China’s new energy demand. Most recent renewable energy developments have placed wind and solar energy in a position to directly compete with coal.

For the first time ever, in 2012, China’s wind power production increased more than coal-fired power production.

Li also cites how thermal power use, which mainly uses coal, grew by only about 0.3% in China during 2012, representing an addition of roughly 12 terawatt hours (TWh) more electricity.

Meanwhile, wind power production expanded by more than double the thermal power amount to about 26 TWh. Currently, China’s total amount of wind power production is at 100 TWh, making wind power the third largest source of power after thermal and hydropower, and notably, even larger than nuclear energy.

China has also been rapidly building up its solar photovoltaic power. Bloomberg New Energy Finance data showed China installed 12GW of solar panels in 2013, more than doubling its capacity in the course of a year. To get a sense of the rapid growth of non-coal power generation, consider that China’s national power output in 2013 grew 7.5%.

In the same period, power generated from coal-fired plants rose slower than the national rate at 6.7%.

rolls-royce.com

energy out of the box

Pre-fabricated and modular the Bergen power plant design delivers the solution electricity power markets demand, a cost effective, flexible system with the highest levels of performance and reliability. Using preengineered packages, power plants from 2MW to 200MW and beyond can be configured for power generation or CHP (Combined Heat and Power) operation. Capable of running in isolated mode, or in parallel to the grid at times when electricity prices are high, Bergen generating plant can operate at low variable costs with minimal environmental effect.

For your next power station see what’s inside the box to generate affordable electricity outside the box.

Your powerful partner.

Bergen Engines AS A Rolls-Royce Power Systems Company ASIAN POWER 27

OPINION

WILLIAM BYUN, MARILIA PARASCHOU Handcuffs or handrails?: Philippine limits on FiTs

W

ith a growing population projected to reach 100 million and a sustained economic boom, the need for new power generation in the Philippines is as obvious as the threats of blackouts. In addition to an ambitious bulk steel-in-the-ground target to triple installed capacity by 2030, the Philippines has also tried to upgrade its economic efficiency model via a Retail Competition and Open Access Scheme (RCOA) introduced in mid-2013 to increase competition amongst electricity producers and lower prices for end-users.

As Cubs baseball great (and optimist) Ernie Banks said, “It’s a great day for a ball game; let’s play two!” Bundling renewables policies though, may be an altogether different ball game. On its face, also coupling renewable energy capacity increases may seem like a no-brainer. Instead of importing expensive fuel, why not just take advantage of the huge renewables potential from biomass, solar, geothermal, hydro, etc. specifically abundant in the country?

Also, the smaller capacity sizes which betwixt renewables otherwise, may just be the right fit for an archipelagic country like the Philippines where big baseload centers may pose its own distribution challenges across the various island demand centers. Finally, on top of that, civil society et al loves renewables.

Philippines’ unique FiTs On its surface, looking at the track record of the Philippines with renewables, it is a success story with actual installed capacity ranging widely across biomass to geothermal to pig manure gas to tidal and so forth. Just below that headline though, much of such installation took place under a gun when the critical shortfall of capacity resulted in fast and generous approvals and tariffs for any capacity – any and all capacity.

In line with other tried and tested national renewables policies, the long anticipated Philippines policy centers around new Feed-In Tariff (FiTs) Rates for Hydropower, Biomass, Wind, and Solar Energy Projects rolled out in 2013. The tariffs will be paid for renewables plants under 20-year agreements and in turn, the FiTs payments will be recovered by the end-consumers as a new FiT-Charge applied to electricity bills.

FiTs are not new, and many countries have successfully grown renewables using such programs. For example, the VSPP program in Thailand has seen over 1850 MW of new renewables capacity under a relatively straightforward PPA and grid connection system.

While there may be as many exceptions as there are unique factors affecting the success of a program to expand installed renewables capacity across different countries, one cautionary note from the Philippine program may be its bundling into the policy mix capacity caps. Ostensibly to bring such renewables capacity growth along a more orderly (and competitive/cheaper priced) pathway, the Philippines’ renewables policy also introduced an additional twist in set “Installation Targets” which award FiTs on a ‘first-come-first-served’ basis 28 ASIAN POWER

quota cap set every three years.

Once enough projects are approved to meet the Installation Target of a certain three-year period, no new FITs will be provided for that period. Interested parties will need to apply at the beginning of the next period. Plants outside the FiT scheme will need to sell their output at market prices (which for renewables, living by FiTs, means simply “no go”).

For the first three years, the Philippine government announced Installation Targets of 250MW for Hydropower and Biomass, 200 MW for Wind Power, and 50MW for Solar Energy plants.

In terms of economic theory, the policy aims to encourage the quick and efficient development of renewable energy plants as IPP competition should encourage a rush to build and invest. However, practically, given the commercial size of most projects, these caps means that a handful of projects at most would be eligible per period.

Such an Installation Target barrier bluntly draws a line that a time risk also exists that a corporate developer strategy of having a rolling development of plants may not work but rather, a land grab rush approach (with a heavily front-load weighted risk) would also need to be pursued.

Worrying too is that the existence of an FiT prop itself clearly means that renewables are as yet, not entirely independently competitive, and the existence or not of an applicable FiT is not an enhancement, but rather a stark threshold line of a profitable long-term revenue stream, or a flat-out ab initio bankruptcy position.

Therefore, Installation Targets add not just an element of additional and graduated step-wise risk but rather, a brightline cutoff of total and catastrophic project and investment risk. The bundling of policies to promote more interest may then actually mean that a successful volume of interest could in turn kill off the likelihood of success itself.

Growing renewables using FiTs

reGister toDay & save witH tHe early birD oFFer MAKE PLANS TO ATTEND ASIA’S PREMIER POWER EVENT POWER-GEN Asia, co-located with Renewable Energy World Asia, is the leading force in delivering a platform for the power and renewable energy industries to meet, connect and share information on the challenges facing the power industry within Asia.

Attracting 7,000 delegates and attendees from over 60 countries across South East Asia and around the world, it is the industry’s premier conference and exhibition dedicated to the power generation, renewable and alternative energy industries.

With its rising prominence in the global economy, developing Asia’s energy capacity becomes a major activity within the marketplace. Asia’s energy needs will expand in tandem with its growing economic influence. Expanding renewable energy sources will not be enough to meet future demand. Consequently, Asia needs to invest in making conventional power cleaner and more efficient.

Gain access to the opportunities within the power generation and renewable energy industries of Malaysia and the wider region, and ensure your presence at POWER-GEN Asia and Renewable Energy World Asia 2014.

POWER-GEN Asia and Renewable Energy World Asia will, for the first time, be joined by the POWER-GEN Asia Financial Forum. This forum will be devoted to all aspects and types of power infrastructure financing within Asia, enabling both power industry professionals and those involved in power finance to come together to discuss and disseminate the future of the industry.

reGister to attenD as a ConFerenCe DeleGate anD reCeive aCCess to all 3 events! for further information and to register please visit www.powergenasia.com

Owned and prOduced by:

preSenTed by:

cOnnecTing asia’s power prOfeSSiOnaLS 10-12 SEPTEMBER 2014 KLCC, KuaLa Lumpur, maLaysia www.powergenasia.com

we invite you to join us in Kuala lumpur, malaysia on 10-12 september 2014

For exhibition and sponsorship opportunities contact: POWER-GEN Asia Kelvin Marlow Exhibit Sales Manager T: +44 (0) 1992 656 610 C: +44 (0) 7808 587 764 F: +44 (0) 1992 656 700 E: exhibitpga@pennwell.com

SuppOrTed by:

cO-LOcaTed eVenTS:

OPINION

JOHN GOSS

China’s increasing unconventional gas industry john.goss@ceejay.com.hk

T

he Chinese Government is currently encouraging a significant increase of China’s indigenous supplies of natural gas.

These increases will be produced from the development of the country’s vast reserves of unconventional gases, such as: coal bed methane, various biogases and more recently the exploitation of China’s vast shale gas reserves, The government is offering favorable policies and a more stable business environment to the developers of the new shale gas production projects. The Deputy Head of China’s National Energy Administration (NEA), Zhang Yuping said that the NEA will be working, with other departments, to ease relevant problems. These can include: government policies and other standing regulations that exist today. The NEA’s stated plan is to create a better environment for shale gas producers.

It would seem that China’s shale gas related industries could soon be realizing their boom years. This sudden growth in China’s exploration and production of shale gas is due to the country’s two leading domestic oil and gas majors, China National Petroleum Corp (CNPC) and Sinopec Group. China’s output of shale gas has risen from 25 million cubic meters in 2012 to more that 200 million cubic meters in 2013.

China’s domestic production of shale gas during 2014 will reach 1.5 billion cubic meters, says the NEA. There have been many breakthroughs in the unconventional gas exploration sectors. Last year, Sinopec averaged single well output of 150,000 cubic meters per day at its Chongqing Fuling shale gas block. The company is expected to achieve an annual production level of one billion cubic meters by the end of 2014.

CNPC, China’s largest oil and gas developer, has already achieved a total commercialized shale gas output of 70 million cubic meters, mainly from three productive blocks, namely: The ChangningWeiyuan block in Sichuan Province, the Zhaotong block in Yunnan Province and the Fushan-Yongchuan block. This block, in Sichuan was jointly developed with Royal Dutch Shell plc.

The terrain in China is far different from the topography to be found in the USA, which is the world’s largest producer of the shale gas. Most of the shale gas blocks in China are located in mountainous regions which make it difficult to transport the massive fracturing equipment needed for extracting the shale gas. Other concerns lay in the groundwater exploitation and potential contamination.

China and the US join forces on shale gas China’s Shenhua Energy Co Ltd, which is the world’s largest producer of coal, has announced that it will be joining forces with a US company called Energy Corp of America to develop a shale gas project in the US State of Pennsylvania. Shenhua Energy is planning to invest USD $90 million to set up a new subsidiary for the proposed new shale gas project. This US shale gas project includes 25 shale gas wells. It is expected to be producing 3.8 billion cubic meters of the gas during its first 30 years of operation.

Shenhua is by no means the first Chinese energy company to invest into North America’s shale gas sector. It was at the start of 2012, when the state owned China Petroleum & Chemical Corp.

(Sinopec Co), acquired one-third of Devon Energy Corps stake in five US based shale gas projects.

30 ASIAN POWER

As demands for clean energy continue increasing across China, the overall utilization of natural gas will continue to increase. A recent report from China National Petroleum Corporation (CPPC), says the demand for natural gas in China may reach something like 130 billion cu m by the end of 2014.

Gas usage is estimated to rise to 130 billion cu m by 2015. This is a rise of 58 percent when compared with 2010, China’s12th five-year plan focuses upon energy conservation and environmental protection. By 2015, coal consumption will decrease by 8.3 percent with the share of natural gas and non-fossil fuel power generation will be increased by 3.2 percent and 3.1 percent respectively compared with 2010.

High efficiencies and environmental friendliness New power plants must be able to demonstrate both high energy efficiency and environmental friendliness. An outstanding example of such a efficient power plant is the recently commissioned Shanghai Lingang Combined Cycle Power Plant. This power plant features a high-efficiency of 59.7 percent, high-flexibility and low emissions.

Shanghai Electric adopted Siemens’ proven and advanced F-class gas turbine technology, which included gas turbines, generators and relevant auxiliary systems. The Siemens SPPA-T3000 control system ensures highest efficiencies and maximum reliability. The plant is another key milestone in China and is one of the best solutions to helping China realize its ambitious energy targets.

Shanghai Lingang Combined Cycle Power Plant

Use your mobile phone’s QR reader to scan the QR code.

Creating the most from wind – and we’re the driving force behind your success siemens.com/wind-equipment

Wind offers unlimited potential – and we open up opportunities for you to get the most from it with our industry-proven components and systems for high-availability wind power plants.

We support you in the engineering, production and operation of wind power plants with: • A comprehensive portfolio of perfectly coordinated components and systems • Maximum availability with minimum lifecycle costs • Intelligent standardization based on proven platforms • Competitive advantages in series production And there’s more: You also benefit from our unique expertise backed by decades of experience with industrial automation and over 20,000 wind generators worldwide.

When everything revolves around just one thing – creating the most from wind – we’re the right partner for you.

Maximum efficiency thanks to reliable components working perfectly together

Answers for industry.

IC1000-E220-F179-X-4A00

www.siemens.com/eneas

The key to cost-effective, reliable and safe power supply ENEAS solutions for distribution automation

As technology leader in the field of energy automation, Siemens provides solutions for current and future distribution grid challenges. Whether to cost-effectively automate and operate primary equipment or to increase supply reliability and power quality in order to quickly adjust changes in the distribution grid: ENEAS solutions for distribution automation have proven effective in numerous applications worldwide. They are installed where it counts – with automation equipment directly in the field.

In addition, new superordinated applications such as automatic self-healing, voltage compensation and quality measurement make energy systems safer and more reliable. As a result, all fault detection, localization and correction functions are covered.

Also, bidirectional load flow operation and active control are supported – allowing for the integration of distributed generators and electric vehicles. All in all, ENEAS solutions in distribution grids ensure energy supply with maximum reliability.

Answers for infrastructure and cities.