Asian Power (March to April 2015)

ISSUE 68 | DISPLAY TO 30 APRIL 2015 | www.asian-power.com | A Charlton Media Group publication

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kowepo lights up korea ceo in-kook cho targets 25GW power generation capacity by 2025

MICA(P) 248/07/2011

analysis Import-dependent Taiwan attempts power generation

country Report Philippines forced to turn to renewable energy

first Asian energy at risk from shaky tariff system

ANALYSIS What does the next decade hold for Asia’s energy market?

PAGE 14

page 18

page 6

PAGe 22

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FROM THE EDITOR China and India account for half of global energy growth and are big rivals in the global energy market. This issue features comprehensive stories on these countries and the issues that their unstoppable growth is facing.

Publisher & EDITOR-IN-CHIEF Tim Charlton production editor Roxanne Primo Uy Editorial Assistant Joana Rizza Bagano Editorial Assistant Queenie Chan

The rest of the region is moving to the beat of these two superpowers, but are heavily swamped with their own challenges and are struggling to meet energy targets.

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Taiwan, in its move to reduce imports and generate its own power, looks to geothermal, one of its most abundant resources. Meanwhile, the Philippines hopes to step up its game in the renewables arena amid a looming blackout in the next few months.

We also talked to CEO In-Kook Cho of KOWEPO, who is heading Korea’s first IGCC (Integrated Gasification Combined Cycle) power plant, and who hopes to further improve capacity in the country.

Read through the pages and find stories on what could be expected in the Asian energy sector in the next 12 months, as well as problems in the tariff structures across the region, and new trends in financing power projects.

Enjoy!

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ASIAN POWER 1

EDITORIAL CONTENTS

28

22

ANALYSIS Fuelling the future: What does the next decade hold for Asia’s energy market?

China’s mega dams 10 First

FIRST 06 Asian energy at risk from shaky tariff system 06 Malaysia: world’s new solar giant?

07 Fukushima’s radical energy shift

ANALYSIS 13 CEO Interview: KOWEPO targets coal firing through Korea’s

first IGCC power plant by June 2015

20 Southeast Asians urged to turn to nuclear power amidst

08 Yield co for funding power 08 Cambodia pumps up biggest hydropower project

Analysis All eyes on China: The economic superpower is planning its next big energy move

soaring demand for energy

OPINION 32 JOHN GOSS: An increase in renewable energy output in

China is forecasted

COUNTRY REPORT 14 Import-dependent Taiwan attempts power generation of

150MW by 2025

18 How tighter power supply forces the Philippines to turn to

renewable energy

Published Bi-monthly on the Second week of the Month by Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building Singapore 069533

2 ASIAN POWER

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

www.asian-power.com

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

IPP

China on track to hit 2020 target of 58GW nuclear power capacity China’s is well on track to hit its 2020 target of 58GW– with much of this front-end loaded.

By 2020, China’s installed capacity would be at similar levels to France, and its 2030 ‘soft-target’ for installed nuclear capacity of 200GW would be double the current US capacity of 99GW.

IPP

India’s Power Grid 3QFY15 profit surged 21% y/y at INR12.6bn India-based Power Grid Corp. of India’s 3QFY15 EBITDA at INR37.7bn and normalised PAT at INR12.6bn -- up 21% y-y -- were in line with Nomura and consensus forecasts. Further, reported PAT, after adjusting for prior-period items, stood at INR12.2bn, up 18% y-y.

4 ASIAN POWER

POWER UTILITY

Shenhua warns of a massive 36% y/y decline in 2015 earnings China Shenhua Energy Co., Ltd.’s guidance, which for the first time has been released ahead of full year results, implies a 36% y/y decline in earnings for 2015, compared with a 3% y/y decline in Barclays’ forecasts.

According to Barclays, the coal segment appears to be the key drag with a 10% y/y decline in production.

IPP

APR Energy’s Australia power plant starts operations APR Energy announced that it has commissioned its mobile gas turbine power plant at Port Hedland, Pilbara, Western Australia.

According to APR Energy , the plant features four state-of-the-art GE TM2500+ aero-derivative turbines.

power utility

Malaysia unveils cuts to electricity tariffs until 30 June Malaysia’s Minister of Energy, Green Technology and Water announced cuts to electricity tariffs effective 1 March to 30 June, citing lower electricity generation costs from coal.

According to Nomura, the cuts amount to 2.25sen/kWh in Peninsula Malaysia and 1.20sen/kWh in Sabah and Labuan.

IPP

What’s the most common risk to Asia’s nuke projects?

What has been touted as the most common risk to nuclear power projects, which have been described as having complexities, long construction periods, and a wide range of equipment from various suppliers?

They say it’s not about capacity.

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FIRST global fuel costs. “Such tariff systems would enable electric utilities to pass fuel cost increases onto customers on a consistent basis, and therefore reduce exposure to volatility in fuel costs, particularly for major power companies in China, Korea, and Malaysia,” Moody’s says.

malaysia: world’s new solar giant?

In a world where renewable energy is rapidly becoming a high-demand commodity, Malaysia is holding its own in the solar product industry, particularly in terms of production.

With more foreign investments coming in, Malaysia has become one of the top producers of solar products worldwide, the 3rd largest solar module producer in the world after China and Japan and the 4th largest producer of solar cells in 2013.

This growth is due to feed-in tariffs (FIT) financed by the Renewable Energy fund (RE), introduced to the country in late 2011 to fund greater developments in renewable energy. As falling costs for solar modules produced attractive returns for investors, it created a lucrative industry which generated increased investments in Malaysia.

Macroeconomic factors The global demand for Malaysiaproduced solar products is high, with exporting making up the bulk of the market as more and more countries opt for renewable energy. Growth in demand is expected to reach 16% in 2015.

Along with increasing demand, generous tax breaks and the affordability of skilled Malaysian engineering manpower are two major factors in stimulating industry growth in Malaysia, as their production costs can compete even with China’s low prices.

With the anti-dumping tariff imposed on Chinese and Taiwanese manufacturers by the U.S. government as a result of the trade war, Malaysia can expect to gain further traction in the U.S. market as more investors look to avoid increased costs in China.

“China, Japan and U.S. will drive growth underpinned by FIT, subsidies, tax incentives and falling price of solar systems. Growth in demand will slowdown after 2016 in U.S. with the reduction in Investment Tax Credit while Japan may face issues on gridconnection and land availability,” according to Song Eng Eng, analyst at EXIM Bank.

6 ASIAN POWER

The challenge of stable structures

Asian energy at risk from shaky tariff system

W

hen ASEAN members announced plans to unite under one single economic entity this year, initiatives were introduced to demolish trade tariffs to promote free trade. But the opposite is true as far as Asian power sectors are concerned, as power tariffs – specifically cost pass-through tariffs – are expected to remain, albeit improved. “Individual countries are hoping to redesign existing regulations and implement fair market conditions in order to stabilize electricity prices,” says Shuji Miyasaka, a partner at KPMG Management Consulting, about tariff system developments across Asia.

A stable tariff system – one that is consistent and transparent – is crucial to the operation of most power companies, according to a report by Moody’s entitled “Stable Outlook Reflects Steady Market Structures and Utilities’ Financial Buffers.”

Stability is key “The absence of a consistent tariff system in most power sectors reduces the predictability of operational cash flows during the outlook period, particularly for most rated state-owned power companies,” says Moody’s. A stable tariff system in place would also allow utilities to tap the debt market if needed in order to raise cash, and act as a buffer against the fickle tide of

Shuji Miyasaka

Different countries, different rates But challenges to a consistent and transparent tariff system remain. “From a power and utilities perspective, the cost pass-through tariff system is different from country to country,” says Miyasaka. Vietnam, for instance, operates with a very low pass-through rate, with government preferring to subsidize electricity – but at a steep cost to its state-run utility, EVN, according to Tony Segadelli, chief executive officer at OWL Energy, an energy consultancy with a Vietnamese presence.

“Many countries do not have strong track records of established and consistent tariff structures, except Hong Kong and Singapore, and most IPPs (independent power producers) in the region,” Moody’s says.

In Hong Kong, utilities CLP Holdings and Hongkong Electric Company operate under a control agreement with the Hong Kong government that allows them to to charge tariffs in order to recoup important operating costs.

The same can be seen in Singapore, with state-run SingPower and other private power generation companies enjoying predictable and adequate returns under a transparent tariff system.

In the meantime, should Asian economies decide to tweak their existing tariff structures, an ideal model to follow, according to Miyasaka, would be British power and gas regulator Ofgem, which in early 2013 adopted a new performance-based model for setting network companies’ price controls called RIIO (Revenue = Incentives + Innovation + Outputs).

Weak affordability a risk to a consistent system

Source: The World Factbook of Central Intelligence Agency, Moody’s

FIRST

Mina Sekiguchi

Tony Segadelli

100% renewables, really?

Fukushima’s radical energy shift

A

s Japan continues to explore alternative sources to supply the country’s demand for energy, feedback was initially enthusiastic: people were eager to replace the atomic reactors that powered a major part of Japan and came to be a stable part of the country’s energy sector. Fukushima Prefecture went so far in 2014 as to pledge to go 100% renewable by the year 2040. This somewhat ambitious and daring pledge received mixed reactions – while many citizens felt that sustainable energy was the way to go, several projects developing renewable energy sources were halted by skyrocketing

costs.

While going 100% renewable may seem ideal, it is certainly expensive.

Countries which have attempted similar renewable policies such as Germany have suffered from the higher tariff that resulted from the change, as was the case with Germany’s power situation.

Price stability and energy reliability were two factors that were greatly affected by the transition to renewable energy, a costly mistake Japan hopes to avoid. Meanwhile, the government continues to experiment with different energy sources, which include both solar and offshore wind power generation,

in the lead up to the 2040 renewable energy goal.

“There are two main issues with renewable energy (RE) technology at present, cost and the intermittent nature of supply,” says Tony Segadelli, CEO of Owl Energy.

Segadelli is optimistic, citing continually falling costs as well as development of alternative energy supplies such as Battery Energy Storage Systems (BESS), a newly-developed technology for RE. Facilities such as BESS could eventually become much cheaper in the long run once mass-produced, leading to a further drop in costs for alternative energy.

As continuous developments explore the potential of the different RE sources Fukushima looks to utilize, the debate on the best way to manage Japan’s energy has yet to come to a conclusion.

“Although there are different views on the best energy mix, we don’t see many supporting 100% renewable anymore,” says Mina Sekiguchi, Head of Energy & Natural Resources of KPMG Asia Pacific.

“For all countries, how to source its energy and power is a significantly important decision which nation’s government has to deliberately decide.”

Nuclear’s share of electricity generation in Japan

Source: The Economist Intelligence Unit

The Chartist: power-hungry china still failing to electrify thousands of its villages The past three decades have seen China’s rise as an economic leader, the result of a surge in industrial expansion and fixed asset investments. According to Barclays Research, this has led to rapid power consumption growth.

China’s 11% annual growth in electricity consumption between 2000 and 2013 has surpassed almost all other emerging economies; in fact China’s power needs have been the highest in the world.

However, Barclays says that despite being the highest absolute power consumer in the world, China’s per capita power consumption at around 3,900 kWh per year still lags the developed economies’, around 50% lower than Japan and 70% lower than the US. In fact, almost 4,000 of China’s villages are still sealed in poverty and are without electricity.

China is far from being the largest power consumer on a per capita basis...

Source: World Bank, Barclays Research

...but electricity consumption has been rapidly growing as a result of growth

Source: World Bank, Barclays Research

ASIAN POWER 7

FIRST

Yield co for funding power

IPP WATCH

100MW wind power project in Madhya Pradesh soon to rise

A

sia’s energy companies need not look to traditional ways of financing power, and could even take initiative in pushing for more efficient ways of funding in their respective countries. Yasumitsu Himeno, representative and senior business development officer of the Multilateral Investment Guarantee Agency in Tokyo, says that historically, financing for power generation has been mostly supported by export credit agencies backed by government guarantee on long-term power purchase agreements with a stateowned power company.

John Yeap, partner and head of power (Asia) for Pinsent Masons Hong Kong, says large-scale power projects were typically promoted by international companies, often coming into the region for the first time and generally unfamiliar with the countries in which they are seeking to invest. This has caused investors to take an extreme view on risks.

“Today, many projects are undertaken by either in-country incumbents or regional investors with far greater understanding of power project risks across Asia. Projects are being financed without sovereign guarantees, including in countries such as Indonesia and Philippines, with incumbents and regional investors having greater confidence

Investors need stable local partners

CLP India signed a turnkey project to construct a 100MW wind farm in Chandgarh, Madhya Pradesh. The new wind project will increase CLP India’s wind power portfolio to 1100MW spanned across six states: Rajasthan, Gujarat, Maharashtra, Tamil Nadu, Karnataka and now Madhya Pradesh. The company emphasises renewable energy to assist growth plans and achieve commitment towards environmental sustainability.

in their ability to manage country risks. However, there continue to be countries such as Vietnam and Myanmar that will have significant financing challenges in the absence of robust government support,” Yeap says.

Finding financing In terms of expanding financing options, Yeap suggests the “yield co” approach for renewable energy. Yield cos involve the bundling of various small projects into a single vehicle which is then spun off, raising funds for further future investments. For Himeno, in order to source longer maturity financing, investors need to look for another type of lenders.

“Pension fund and insurance companies are looking for investment opportunities with long-term stable return. These investors are now open to study into Asian power sector. We will see their participation not so long in the future,” he says.

Tenaga Nasional unfazed by lack of tariff adjustment

John Yeap

Yasumitsu Himeno

Cambodia pumps up biggest hydropower project With an electricity demand that is expected to double every four to five years, the Kingdom of Cambodia is determined to make ends meet by tapping into its biggest hydropower project yet – the 338-megawatt Russei Chrum Krom hydroelectric dam.

“In line with its rising economic growth in the last 15 years, Cambodia electricity demand is growing at an approximate rate of 20 percent annually,” says Sok Khavan, partner at Rajah & Tann Sok & Heng Law Office.

Cambodia set a new milestone with the inauguration of the hydropower plant, enabling the country to generate electricity surplus. It is the largest project of its kind in Cambodia, and took more than 10 years to complete. The project is structured under a 35-year buildoperate-transfer agreement, with the stateowned Electricity of Cambodia contracted to buy output from the plant at 7.35 cents per kilowatt hour.

“Given the lack of installed generation capacity, this project – which is still in its infancy – is already being hailed as a success, passing benefit to consumers and businesses alike,” says Roddy Adams, partner and head of ASPAC Infrastructure Markets at KPMG. 8 ASIAN POWER

Malaysia-based Tenaga Nasional (TNB) is unaffected by the lack of tariff adjustment in 2015 as indicated in the recent revised 2015 budget by the government. This is due to the sharp decline in crude oil prices.

The electricity tariff in Peninsular Malaysia is determined through the IncentiveBased Regulation (IBR) framework and the Imbalanced Cost Pass-Through (ICPT) mechanism. The government reviews the tariff every six months.

ABB supplies automation for 670MW Indonesian plant

Cutting the lack of power generation

A tide of projects coming in

ABB is supplying a Symphony Plus total plant automation system for a new supercritical power plant that will provide much-needed power for Java, Indonesia’s most populous island and the hub of the country’s fast-growing economy. The 670 megawatt (MW) Banten Serang supercritical coal-fired power plant will provide much-needed power for the people and businesses of Java. Banten Serang power plant is scheduled to start production in mid-2016.

co-published Corporate profile

Innovative ABB solutions for microgrids

The Microgrid Plus System integrates high penetration renewable power into a microgrid, while improving grid reliability and energy efficiency.

M

icrogrids are small, self-sufficient power grids that serve as a selfcontained, often isolated entity such as an island, a remote rural community, industrial site, military base or municipal, which traditionally rely on diesel generation.

It can draw or supply power to the main grid or operate in ‘island-mode’, which is one of the advantages to avoid consumers from outages due to natural disasters, thus ideal for rural electrification.

Implementing a microgrid Setting up a microgrid is much simpler as compared to building a coal-fired or combined cycle power plant. Even so, important steps need to be followed starting from conceptualization, design and modelling for most optimized and efficient solution, deployment and grid stabilization to obtain highest degree of efficiency and reliability.

Innovative ABB solution Microgrid Plus™ System is built around two core microgrid technologies – the PowerStore grid-stabilizing generator and the MGC600™ controller platform. It is supported by years of microgrid engineering and project execution experience. ABB’s microgrid technologies are best suited for systems of between 300 kW and 50 MW of peak demand.

PowerStore grid-stabilization generator The PowerStore grid-stabilization generator uses a fast-acting, spinning flywheel to store energy and absorb or inject power onto the grid. PowerStore enables seamless operation of the microgrid. Because PowerStore can switch from a full-power charge to a full-

power discharge in less than 5 milliseconds, all the loads contained within a microgrid can be transferred seamlessly between the microgrid’s distributed energy resources (DERs). Temporary power interruptions due to intermittencies from the renewable sources or from the start-up sequences of fuelbased generators will go unnoticed by the microgrid’s end users.

Microgrid Plus control system The Microgrid Plus control system is based on ABB’s MGC600 controller, and is responsible for the control and communications aspects of the microgrid. The Microgrid Plus control system is decentralized, which means it has no single master controller. It consists instead of many control modules that are distributed across the microgrid area and communicate with each other on a peer-to-peer basis. This arrangement gives the system a high level of flexibility and redundancy.

Microgrid engineering services Each Microgrid Plus System is engineered to address specific customer needs and achieve operational objectives. ABB’s microgrid engineers can perform energy yield studies, power system dynamic modeling, and protection studies in order to make a technical and financial assessment of the project.

ABB’s advantages ABB global support network that can serve almost any project from local offices worldwide Extensive experience delivering projects with advanced logistics and strict delivery

World’s first high penetration PV/diesel power stations Marble Bar, Australia The world’s first high penetration, solar photovoltaic diesel power stations were commissioned in 2010 in the towns of Marble Bar and Nullagine in Western Australia.

The project includes more than 2,000 solar modules and a solar tracking system that follows the path of the sun throughout the day. When the sun is shining, PowerStore grid-stabilizing technology and the Microgrid Plus power management system both ensure that maximum solar energy (100% peak penetration) goes into the network and significantly reduces diesel generation. When the sun is obscured, PowerStore covers the loss of solar power generation by ramping up the diesel generation to ensure that the network has an uninterrupted energy supply.

The solar energy systems generate over 1 GWh of renewable energy a year, supplying 60 percent of the average daytime energy for both towns, saving 405,000 litres of fuel and 1,100 metric metric tons of greenhouse gas emissions annually. timelines Field-proven solution with more than 80 installations worldwide and decades of operational history Proven microgrid solutions that achieve high fuel savings through maximum renewable penetration combined with highest microgrid stability and reliability Open, scalable automation solutions with broad application range and maximum project flexibility over the solution’s lifetime To learn more about ABB’s portfolio of microgrid technologies, contact your local ABB office or visit http://new.abb.com/power-generation/ microgrids-solutions.

CONTACT www.abb.com/powergeneration +65 6776 5711

“ABB’s microgrid engineers can perform energy yield studies, power system dynamic modeling, and protection studies to make a technical and financial assessment of the project.”

ASIAN POWER 9

FIRST

China goes all out on mega dams

B

ucking opposition from its northern and southern neighbors, China is bent on rolling out dam after dam in a hydropower project binge that is at the heart of the country’s bid to improve energy security. “The hydropower sector currently is by far the biggest and longestestablished among all renewable energy sectors in China,” says Dr. Wu Shanshan, principal at Roland Berger Strategy Consultants, Greater China.

Wu says China is going full force with its hydropower projects for energy security, and in response to a demand to use cleaner renewable energy for the environment and for the pollution problems of its major cities. The economic superpower has relied mostly on coal to fuel its economy over the past decades, leading to economic degradation on an enormous and increasing scale.

The move to clean energy “To mitigate environmental degradation, the Chinese government wants 15 percent of energy consumption to come from clean or renewable sources by 2020, up from 10 percent in 2013.

Hydropower generated from mega-dams will be the most mature and cheapest primary energy resources for China and therefore indispensable,” Wu says.

Wu adds that infrastructure such as mega dams have strong economic appeals in a country where the task of boosting growth lies entirely in the hands of the government.

“Local governments, in particular, view dams as attractive economic development projects.

Dam building improves local employment, and the extra electricity supports local economic expansion,” Wu adds.

Upstream, downstream casualties China’s mega dam binge is not without opposition. Countries lying on the upstream and downstream areas of the country’s projects have borne the brunt of the project’s major environmental impact. For example, the waters of the Mekong River that originates in the Tibetan Plateau and runs through Myanmar, Laos, Thailand and Cambodia, is primarily used up by China, leaving almost nothing for the downstream countries, says Simrat Virk, research associate at CAPS. “According to Former Chief Engineer at Hunan’s water authority Nie Fangrong, ecosystems of both upstream and downstream were irrevocably changed. And millions of people were been displaced from their ancestral homes,” Wu says.

Besides a drop in water levels, there is also the added fear of floods, as seen in 2001 with Arunanchal Pradesh witnessing its worst floods in history. “This was primarily a result of a dam breach on the river. The fact that China plans to construct more such mega dams, has only reinforced India’s fears,” Virk says.

Despite Indian opposition, however, the fact that China claims the Tibetan Plateu which is

Vietnam solves energy shortfall by harnessing wind power potential Energy consumption in Vietnam has soared enormously over the past years, resulting in a decision by the Vietnamese government to expand the country’s generation capacity by focusing on new coal-fired power plants, as well as the country’s traditionally dominant hydropower sector.

According to a report by KfW Development Bank, Vietnam also aims to develop the use of renewable energies. KfW says that wind power from Vietnam’s long coastline is the most suitable option, and adds that the bank is financing the construction of a wind farm in Phu Lac, with a nominal capacity of 24 megawatts.

The wind farm will produce an estimated 50,680 MWh of electricity per year. This will be sufficient to supply around 150,000 people with electricity, at an average energy consumption of 330 KWh per capita.

Vietnam’s seventh energy master plan (2010-2020) aims to reach 75,000 MW in 2020, from 19,735 MW in 2010. KfW cautions that if the expansion goes ahead as planned, CO2 emissions are likely to increase tenfold by 2030.

In consideration of the expected consequences of the coal-fired power plants, Vietnam plans to tap on environmentally and climate friendly renewable energy sources. In fact, Thailand is considered the largest potential wind market in Southeast Asia. Presently, the country only has one wind farm, which was connected to the grid in 2009. In order to achieve its full potential, the country has to address a lack of regulation for feeding energy into the network.

10 ASIAN POWER

Best wind potential in SE Asia

Low-E glass on Vincom center

What’s the rush, China?

the source of the continent’s biggest rivers gives the country supremacy over how it controls the resource.

“Another factor that affects India’s chances of having a say is that, under international law a country that is already putting its natural resources (that it shares with other countries) into use, has more rights over them comparatively.

Having begun work on the River gives China advantage over both India and Bangladesh,” Virk adds.

ASIAN POWER 11

In-Kook Cho

CEO, KOWEPO

12 ASIAN POWER

CEO INTERVIEW

KOWEPO targets coal firing through Korea’s first IGCC power plant by June 2015 CEO In-Kook Cho says that this next-gen technology is far superior to fossil-fueled power plants.

C

ompared to a few years ago, the Korean electricity market obtained a stable reserve margin with new power plant constructions, such as high-efficient Combined Cycle Power Plant (CCPP). With the opening of a carbontrading market in January 12th and the heightening of interest in low carbon and eco-friendly businesses, the electricity market takes an advanced step forward which can create future values based on a stable foundation.

Korea Western Power Company Ltd. (KOWEPO), a representative supplier in the Korean power industry, has a power generation capacity of 9.3GW and secures diverse power resources such as LNG, bituminous coal, heavy oil, and new and renewable energy.

In their portfolio, they have 4GW of Taean Thermal Power plant in operation with bituminous coal, 1.8GW of Seoincheon Combined Cycle Power plant with LNG and 1.4GW of Pyeongtaek Thermal Power plant with heavy oil.

Above all, KOWEPO is about to complete Korea’s first IGCC plant construction with the aim of having a power generation capacity of 25GW until 2025.

Asian Power interviewed the CEO of KOWEPO, Mr. In-Kook Cho, and asked about the overview of the Korean electricity market and how he will strategically achieve the vision of KOWEPO. President Cho is an electricity expert who has been in the power industry for a long time. He held a variety of leadership roles in Korea Electric Power Corporation (KEPCO, a parent company of KOWEPO) prior to his current position. He served as a managing director for KEPCO Academy from 2009 and in 2012, became Senior Vice President of KEPCO. He is named to CEO of KOWEPO in 2013.

The Korean electricity market currently maintains a stable reserve margin of over 20%. What is the impact of this on KOWEPO? After the blackout in September 2011, Korean government has actively concentrated on securing sources of electrical power, and now maintains a stable reserve margin of more than 20%.

KOWEPO contributed on maintaining the reserve margin with timely completion of construction like Pyeongtaek #2 CCPP (869MW) and Dongducheon CCPP (1,880MW).

However, the decrepit power plants, Pyeongtaek #1 CCPP and Seoincheon CCPP, were in critical situations due to lower load factor. So, KOWEPO is making an effort to improve load factor by maximizing the efficiency of operating power plants and strengthening advanced power generation technologies and capabilities.

Furthermore, KOWEPO strives to become a leading supplier through timely constructing high-efficient power plants, committing to stable electrical power, and, at the same time, securing core technology.

Earlier this year carbon-trading market opened. How does KOWEPO cope with eco-friendly conditions?

KOWEPO has the mission of creating the best energy generated in harmony with human, technology and environment. However, an adverse effect of focusing on bio-energy, such as wood pellets to easily earn certificates for RPS in a short term, occurred under the condition of slow development due to insufficient sources of new and renewable energy, lack of residents’ acceptability, and environmental

regulations.

Therefore, we are thinking that it is desirable to establish balanced development for the source of new and renewable energy, and we are devising and carrying forward a development project that relieves the unequal distribution of energy source.

KOWEPO is about to complete the construction of Korea’s first IGCC power plant. Can you give us a few updates on the status of the project?

IGCC stands for Integrated Gasification Combined Cycle, an advanced technology which combines coal-gasification technology and Gas Turbine Combined Cycle. It is a combined cycle power plant that operates by generating the gas turbine with the gas fuel refined from coal gasification and generating the steam turbine with the exhaust gas from the gas path and turbine.

IGCC is the next generation coal power technology far superior to fossil fuel power plants, in terms of environmental preservation. IGCC technology is currently known as an early stage technology for commercialization which just operated in five demonstration plants in the world, such as America, Netherlands, and Japan.

Even though it has some disadvantages like high level technical development and investment, this technology is considered as having lots of advantages in the aspect of the environment and availability for securing diverse fuels.

Currently, Taean IGCC power plant is in progress to store natural gas, conduct commissioning of facilities and clean up chemically for HRSG and combustion system.

It is targeted to complete initial firing by April, initial coal firing by June, and synthetic gas supply by September.

KOWEPO is running a project with the aim of completing the construction of Taean IGCC power plant (380MW) in November 2015, and, from this, plans to secure IGCC optimal operating and practical technology.

The vision of KOWEPO is to become an energy company that create satisfaction for its customers. What is your strategy to achieve this goal?

KOWEPO has four management goals to achieve its vision, such as creating shared values, eco-friendly management, improving internal capacity, and enhancing business competence.

We create shared values by proactively implementing national endeavors, developing its value for mutual benefit, promoting social contribution, and strengthening compliance with business ethics.

In addition, we manage in eco-friendly ways through expanding new and renewable energy business and ecofriendly projects, proactively measuring against disasters, and securing expertise in quality control.

Moreover, we improve internal capacity by building high business confidence, fostering talented staffs, enhancing financial soundness, and getting stable and economical procurement of fuel.

Finally, we enhance our business competence by maximizing power generation efficiency, constructing high-efficient power plants within the given time, securing potential growth engines, and strengthening advanced power generation technologies and capabilities.

ASIAN POWER 13

Country report 1: taiwan

Why import what you can generate?

Import-dependent Taiwan attempts power generation of 150MW by 2025

Geothermal energy might just be Taiwan’s most worthwhile power generation endeavour, among all the other options.

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ow levels of energy efficiency continue to hound Taiwan, pushing its leaders to look closer to home for ways to reduce its heavy dependence on imports. Two points shy of complete electricity reliance on its neighbours, the island country’s high dependence on the outside world has been gradually increasing over the years, and is expected to continue to grow, unless immediately acted upon.

A FACTS Global Energy survey reveals that Taiwan imported 85 percent of its 2013 oil needs from the Persian Gulf; all 72 million tons of its 2012 coal consumption; and 600 billion cubic feet of liquefied natural gas in 2013.

A hopeless situation?

The miniscule amount of energy Taiwan produces for itself comes mainly from non-renewable sources, specifically locally-sourced oil, coal, and natural gas, all of which are burned to create power.

This thermal power generation accounts for almost 75 percent of installed capacity in the country’s grid. The remaining quarter is procured from nuclear reactors, cogeneration, pumped storage, and renewable energy plants.

The same energy problem greatly hinders Taiwan’s power-generation 14 ASIAN POWER

Taiwan’s geothermal energy potential is all the more alluring as it is guaranteed to be cleaner and more ecofriendly.

technology as funds are sucked dry by the importation of fuel, leaving little for use in research and development. As such, compared to its Asia Pacific neighbors, Taiwan is severely lagging behind in energy efficiency, energy substitution, and emission reduction technologies.

And with the prices of oil and coal rising gradually, the country’s situation is not likely to get any better.

“The fact is we cannot completely get rid of thermal power on this isolated island,” says Chia Cheng Liu, an engineer at Taiwan Power Company’s Department of Renewable Energy. Relying on said power not only harms Taiwan’s sovereignty, but also hastens health and environmental degradation due to the carbon dioxide byproduct. These of course lead to an unsustainable and fragile economy, making Taiwan less competitive against other export-oriented nations.

With the local manufacturing industry thriving on exports, a secure channel for low-cost energy will not only ensure economic competitiveness, but will also help Taiwan achieve “low carbon country” status by its 2020 target date.

Luckily, Taiwan’s scientists, engineers, and businesses need look no further than their country’s boundaries for the spark they

sorely need.

“We have already made lots of progress in the renewable energy sector – about 3 percent installed capacity – especially in inland wind power and solar power, and we will continue to develop these,” says Liu. Where should Taiwan plug in?

Taiwan’s strategic geographical location in the Pacific Ring of Fire as well as its island status allows for a myriad of energy sources, without having to depend on compacted trees and liquefied dinosaurs.

Besides wind and solar harvesting, ocean wave and geothermal energy are, in Liu’s opinion, “…the next step of Taiwan’s renewable energy.”

Having power plants dedicated to reaping the latter two will help the existing 323 wind turbines maintain a sustained load in Taiwan’s grid.

Among the available options, tapping geothermal power seems to be the most worthwhile endeavour, given all the volcanic and tectonic activities present in and around the island. Though discounted in the past – a 3 MWe geothermal power plant in Ilan Plain was forced out of commission due to inefficiency – recent studies by Taiwan’s National Science and Technology

Country report 1: taiwan Program reveal more hopeful scenarios.

“The results show that geothermal resources present in Taiwan equal 159.6 GWe, the exploitable quantity amounts estimated up to 33.6 GWe,” reveals Dr Tsanyao Frank Yang and the Geothermal Energy Research Teams of Taiwan. Of this number, 7.15 GWe could be readily sustained during any given period.

Taiwan’s geothermal resources are most abundant in the following places: Ilan Plain (532 km2 with 36,923 MWe), Datun Volcano Group (88 km2 with 2,886 MWe), Hualien-Taitung (5,403 km2 with 100,431 MWe), and Lushan (954 km2 with 19,336 MWe). And the best news is that most of this power is available at depths above 2,000 metres.

The NSTP geothermal program Besides being plentiful, Taiwan’s geothermal energy potential is all the more alluring as it is guaranteed to be cleaner and more eco-friendly. It does not involve burning carbon resources, instead relying on Earth’s inexhaustible heat. Dr Yang adds that, “…the area of land required is extremely small and the extraction of geothermal energy doesn’t destroy the original ecology of the natural environment.”

Though the early exploration of pioneer geothermal wells pose the highest risk to the environment, government commitment would ensure that negative effects would be minimal and overall efforts would be promising.

In order to capitalize on this invaluable resource, a 5-year National Energy Program – Phase II (NEP II) was launched last 2014. Outlined in the program is the constant influx of scientists and engineers and increase in allotted budget per year.

According to a report by Dr Yang, the NEP II has six main goals, namely: “(1) Review and reassessment of currently existing geothermal fields and construction of geothermal power plants; (2) Estimation of the potential and properties of geothermal resources in Taiwan; (3) Research and development of key technologies for the exploration and exploitation of geothermal energy resources in deep strata; (4) Better understanding of the impact of the development of geothermal energy resources for the environmental systems; (5) Construction of an EGS pilot plant; (6) Transfer of technology to the private sector to spur the development of geothermal industries and increase the percentage of green energy and carbon reduction.”

It is hoped that by 2016, a typical geothermal power plant with an installed capacity of 4 to 5 MWe and an enhanced geothermal system plant with a 1 MWe

will already be fully functional. After the program, further efforts will be undertaken to have a 60 MWe full-load sustained output by 2020, and 150 MWe nameplate capacity by 2025. Taiwan’s government hopes that as technology matures, a more significant amount of the 33.6 GWe power potential can be further tapped in the future, securing the energy needs of 23.4 million people and thousands of businesses.

The construction of long-term functional heat plants would also sway debates against the controversial erection of hazardous nuclear power plants.

Problems to consider Geothermal technology is quite advanced throughout the world so, for the most part, engineers need only watch out for the wear and tear of critical power plant components. The only problem that will certainly derail the NEP II will be inefficiency, as seen with a 3 MWe facility in Ilan Plain.

This particular plant was substandard from its opening, as its whole architecture wasted valuable energy, leading to geothermal decay.

Asked about their plans to mitigate such waste, Liu responds, “To avoid the same fate for the future plants, we will conduct detailed surveys to understand the geothermal field and choose a suitable system.”

Another obstacle the NEP II needs to overcome will be legislation. The presence of national parks and reserves throughout the four sites listed previously will be a hindrance to the power plants’ drilling efforts. Other issues still to be solved include operational expenses, such as hot water fees.

Luckily, Taiwan doesn’t need to pioneer geothermal technologies, as many other countries around the world have

Tsanyao Frank Yang

been successfully tapping this energy resource for a long time. Among the top harvesters of the Earth’s heat are Kenya (167 MWe installed capacity), El Salvador (204 MWe), Japan (536 MWe), Iceland (575 MWe), New Zealand (700 MWe), Italy (843 MWe), Mexico (958 MWe), Indonesia (1,197 MWe), the Philippines (1,904 MWe), and the United States (3,086 MWe). Moreover, these nations’ exploitation of geothermal energy has resulted in a decreased need for oil, gas, and coal imports.

With geothermal energy being relatively affordable, safe, and clean, Taiwan needs to properly account for the financial, technological, and manpower resources to wean itself off its dependence on imports. Not only that, but its greenhouse emissions will see a significant decrease, and its businesses will thrive on its newfound energy security.

“We will be compatible with the renewable energy policy of the government, and considering the development of renewable energy technology and the economic and environmental conditions, we’ll continue to exploit renewable energy,” says Liu.

Structure of Taiwan’s energy supply

Source: Middle East Institute

Source:

Taiwan is also resource-rich ASIAN POWER 15

co-published Corporate profile

Audacious OWL Energy unfurls its wings wider to fuel Asia’s renewable energy boom Within just a few years, OWL Energy has transformed from a young Thailand-based firm into an esteemed business with three offices across the region.

I

t takes great audacity for a young firm to venture out of the familiarity of its home market and establish a foothold in foreign shores. Bravery is exactly what OWL Energy needed when it first decided to establish an office in the Philippines two years ago.

OWL Energy Managing Director Tony Segadelli told Asian Power just how daunting it was for the firm to leave the familiarity of Thailand, where the company originates from, and make its first tentative steps into the Philippine market. “To go away from our home office where we have all our contacts, we have all our clients, and we knew the market inside and out, to moving into a market that we knew but where we had far less contacts—it is very, very pleasing to be able establish ourselves so quickly and to win such prestigious projects,” Segadelli says.

Remarkable track record Fortune indeed favors the bold, for OWL Energy was already able to clinch a number of big projects and bag a prestigious award in the short time that it has launched operations in the Philippines. OWL Energy, in collaboration with Bronzeoak Philippines and ThomasLloyd, clinched the silver award under the solar power project of the year category for its SaCaSol project at the Asian Power Awards 2014.

SaCaSol, the first utility-scale solar power plant in the Philippines, is not the only feather in OWL Energy’s cap. In the longer term, the group has also been able to leverage on its roots by bringing some Thai clients into the Philippine market. Its stellar success in the Philippines also provided the necessary springboard for its expansion into Japan, where OWL Energy opened an office just in May last year.

Soon after establishing its Japan office, OWL Energy inked a deal with GE Financial services to provide oversight on multiple solar energy projects under construction in the country. Foremost among these is the 230-megawatt solar project in Setouchi City, Okayama prefecture, which will be the largest solar project in Asia. The colossal project is worth ¥90 billion (US$756.5m) and will occupy 260 hectares of land.

“It’s going to take four years to build the project, and so we are going to have a longterm base there. GE is obviously a major player in the global energy market so it’s very pleasing to get a project from them,” Segadelli notes.

In addition, OWL will be providing oversight for construction of the 32MW Kumenan and 42MW Mimasaka projects located in the 16 ASIAN POWER

OWL’s fifth anniversary celebration

Okayama prefecture. OWL has been engaged on a long term basis to provide technical support including monitoring construction, reviewing documentation and providing regular reporting.

Robust expansion But OWL Energy is not going to rest on its laurels even after clinching the mammoth solar power deal. Segadelli states that OWL Energy’s Japan operations are going to be intensely focused on solar energy in the near term.

Following a slowdown in Thailand’s solar power sector, OWL Energy is currently aiding several Thai clients in their search for opportunities in Japan’s robust solar power market.

OWL Energy is also exploring windpower opportunities in Japan. Segadelli states that they are currently working with European developers and a major EPC contractor to help them gain deeper knowledge of the Japanese market.

In the longer term, OWL Energy will also be exploring Japan’s nascent biomass sector— there are a number of wood chip plants in Japan, but there are barely other biomass projects at present.Following several years of robust growth, Segadelli also shared OWL

OWL has been engaged on a long term basis to provide technical support including monitoring construction and reviewing documentation.

Energy’s plans for further expansion in the coming years. “We’re looking at the whole of Southeast Asia, but the one country we’re focused on more than others would be Vietnam,” he says He adds that OWL Energy is already working with a number of developers in Vietnam.“We’re working with some developers there on working with converting some coal plants from firing anthracite coal andturning that into sub-bituminous because of a lack of anthracite in the country. If that comes through, then we’ll use that to establish an office in the country,” he notes.

Gaining goalposts In the longer term, which Segadelli estimatesto be within the next couple of decades, OWL Energy is looking to establish an office in every capital city in East Asia and diversify their business from purely power generation into its associated technologies.

“For instance, last year we worked on acoal mining study in Myanmar, we worked on building a distribution electrical system within a new city that’s being founded in Cambodia, and we’re just about to be assigned a project for a bioethanol power plant. So we’re looking much more through the energy sector rather than just purely power generation,” he says.

Within a few short years, OWL Energyhas proven time and again that power canindeed be generated through wisdom.With its expertise and proven excellence,OWL Energy indeed has plenty of opportunities to spread its wings in its bidto power Asia’s booming economies.

ASIAN POWER 17

Country report 2: philippines

Strong gusts of investment coming

How tighter power supply forces the Philippines to turn to renewable energy

Supply pressures triggered by a calamity and poor infrastructure are jumpstarting new energy sources for one of Southeast Asia’s most power-hungry economies.

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f there is a single bright spot in what is otherwise a dire power situation in the Philippines, it is that current challenges seem to be fast-tracking the development of a viable, much-needed renewables sector, buoyed by a tariff system passed earlier this year.

In 2013, the Philippines began experiencing strains on its already besieged power sector. In September that year, the strongest typhoon on record, Typhoon Haiyan, devastated Tacloban City in central Philippines, causing massive damage to transmission and distribution infrastructure and “forcing utilities to focus on recovery work costing more than $2.4 billion, rather than on new capacity build-out,” says Klair White, editor of EY’s Renewable Energy Country Attractiveness Index (RECAI).

Supply and demand imbalance Before the year ended, the situation was exacerbated by the forced shutdown of the Malampaya natural gas facility, a critical source of power for the entire country.

“This supply and demand imbalance, and the government’s refusal to subsidize power, has also resulted in electricity prices being among the highest in the 18 ASIAN POWER

Other renewable energy sources still lag behind, with wind, biomass, and solar barely comprising 1% of the Philippines’ energy portfolio.

world, peaking in 2013 when the nation’s only commercial gas plant shut for repairs,” White adds.

Meanwhile, a scheduled shutdown of Malampaya in March this year due to maintenance works threatens to create a power shortfall anywhere between 300 to 1,000 megawatts (MW) this summer.

President Benigno S. Aquino III has sought to obtain emergency powers to stave off what appears to be a major power crisis, pending endorsement in the Senate after being cleared by the House of Representatives last December.

“The message was clear: more demandside efficiency and supply generation is needed to fill the gap,” says Stephen Webb, a partner at DLA Piper. More importantly, however, power rates are expected to rise steeply across the board as power generation companies step in to fill the widening gaps in supply through the Interruptible Load Program, a temporary scheme where the government will compensate private power generators for deloading from the grid during power supply deficiencies.

Since then, “there has been a strong focus on ensuring adequate supply in the market, especially in the greater Manila area, which represents over 50% of the

electricity consumption in the country,” says Luis V. Gamboa, senior manager – Utilities at Accenture Philippines.

Analysts have noted that this volatile power situation has created a window of opportunity for the development of renewable energy.

“The development of domestic renewable energy resources is a key pillar of the Philippine Energy Plan 2012-2030, which also calls for the increased use of alternative fuels and enhancement of energy efficiency and conservation,” says Rehan Kausar, unit head, Project Administration, Southeast Asia Energy Division, at the Asian Development Bank. The main hurdle is the supplydemand scale. Demand has so far been outstripping supply, and on a rather large scale, both in the short- and long-term.

“Since 2001, the government has been prohibited from building new capacity to avoid distorting an otherwise liberalized energy sector. However, a 16% increase in generating capacity in 10 years to 2012 has failed to keep pace with a 50% rise in consumption over the same period,” White says.

Meanwhile, in the next 15 years, projected demand for power is expected to shoot up to roughly 29,000 MW

Country report 2: philippines compared with expected installed capacity of about 26,000 MW, Gamboa says, citing the government’s Philippine Energy Plan. At present, much of the country’s power is still sourced from non-renewable energy such as coal, which remains relatively cheap and plentiful, albeit less environmentally friendly than renewable sources.

According to Department of Energy (DoE) data, as of June last year, approximately a third of the country’s energy needs was generated by coal power plants, followed by hydro plants.

Other renewable energy sources still lag behind, with wind, biomass, and solar barely comprising 1% of the Philippines’ energy portfolio.

“There is a need to further diversify the energy mix, and the government is banking on renewable energy to wean the country from its dependence on fossil fuel,” explains Fernando Peñarroyo, managing partner at Puno and Peñarroyo Law. Nevertheless, interest in renewable energy is slwy picking up. “A relatively small but growing part of the generation is being met by the rapidly expanding renewable energy sector,” says Webb.

The regulation ruckus Moving forward, analysts say that key to the further development of the renewable energy sector in the Philippines is the effective implementation of the tariff system that came into effect in January this year.

After the Renewable Energy Act of 2008 was passed in order to “establish the framework for the accelerated development and advancement of renewable energy resources, and the development of a strategic program to increase its utilization,” the government followed up in July 2012 with a feed-in tariff (FIT) system, providing rates and installation caps for specific renewable energy technologies as well as a FITAll (FIT-Allowance), a uniform charge of P0.0406 – or roughly $0.001 – per kilowatt-hour (kWh), to be divided among all electricity consumers. On a per-kWh basis, DoE set FIT rates at $0.140 for run-of-the-river hydro, $0.158 for biomass, $0.203 for wind, and $0.230 for solar.

“For some time, the development of new renewable energy did not show results, but recently some stimulation for RE such as the FIT and the net-metering program is helping it to move forward.

More projects are under development and in planning status, and the country is faring well so far on the renewable energy front,” Kausar says.

Reception for FIT has proven to be encouraging. So far, FIT has provided a “strong incentive” for companies investing

in renewable energy sources, Gamboa says; particularly for solar and wind.

“With the highest FIT rates provided for solar and wind, we see continued acceleration of the adoption of solar and the development of wind farms,” Gamboa notes. Webb, for his part, welcomed the implementation of the FIT-All, hailing the tariff as necessary to stabilize the system’s finances.

“The collection of FIT-All from customers commences this month (February 2015), and is expected to provide increased financial certainty and sustainability to the Philippine FIT system by ensuring that sufficient funds will be available to pay the applicable FIT,” says Webb, noting that this will translate into “bankability” and easier access to debt financing for local renewable energy projects. This approach, however, has been too conservative, resulting into a crowded renewable energy market at present.

“These relatively stringent conditions and low-capacity caps have resulted in early oversubscription as developers rushed to secure the FIT, for wind projects in particular,” White laments.

As a result of these criticisms, the government is now considering a review of the installation targets, she says.

Soon an investors’ haven?

While their impact has yet to be effectively measured, the Renewable Energy Act, coupled with FIT’s implementation, should bode well for the Philippine investment climate as more power firms seek a slice of the local renewable energy pie.

“Overall, the Philippines market is shaping up to be an attractive investment destination for electrical generators and investors, EPC (engineering, procurement, and construction) contractors, and manufacturers. The current government’s recent regulatory steps further increase the attractiveness for greater developments in the renewable space, and there appears to be no shortage of interest from the private sector to oblige,” Webb says.

If the Philippines expects a repeat performance of its robust 6.1% growth in 2014, it must be able to work toward a stable electricity supply.

“The biggest challenge continues to be ensuring adequate future supply given continued strong GDP (gross domestic product) growth forecasts. Additional opportunities lie in energy efficiency and demand response, in particular looking at Europe or US where load growth has been impacted heavily by renewables adoption and energy efficiency,” says Gamboa.

White says, “despite increasingly

Klair White

Stephen Webb

Luis Gamboa

Fernando Peñarroyo

attractive renewable energy prospects, efforts will also now need to focus on addressing the administrative bottlenecks and allegedly weak enforcement of antitrust laws that have slowed both market reform and the pace of deployment. A 40% cap on foreign ownership has deterred some private sector investment, though it is currently under review.”

A key piece of legislation covering the power industry is the EPIRA, or Electricity Power Industry Reform Act, which was passed in 2001. Many in the public sector are currently clamouring for EPIRA’s amendment, or even repeal. But a number of major power industry players warn against doing so.

“The business community believes that amending EPIRA is not the solution to the high cost. They believe that amendment of the law will make the investors/lenders wary and uneasy, as it will project volatility in the regulatory environment,” says Peñarroyo.

Local business groups are instead advising the renewal and modification of the rules governing WESM (Wholesale Electricity Spot Market), which operates the Philippine electricity market, and strengthening the capability of market regulators such as the DoE and its attached agency, the Energy Regulatory Commission, he adds.

Total primary energy, by Fuel

Source: Department of Energy

Targets for the introduction of renewable energies

Source: Department of Energy

ASIAN POWER 19

SECTOR REPORT: nuclear energy

The need for nuclear is escalating exponentially

Southeast Asians urged to turn to nuclear power amidst soaring demand for energy

The region needs to address three key issues: safety concerns, public misconceptions, and finding capable partners.

A

s Southeast Asian nations look to consume 75% more power by 2030, nuclear energy use is becoming irresistible, albeit adoption roadblocks.Across Southeast Asia, the specter of fear that has recently surrounded nuclear energy is starting to fade as the region’s governments recognise the boons this energy source can provide their booming economies.

There is still no operating nuclear power plant (NPP) among the 10 member countries in the Association of Southeast Asian Nations (ASEAN), the region’s representative organisation, but construction plans and interest are gaining ground.

Vietnam is working to set up a landmark nuclear power program, while Singapore is leading the charge in nuclear safety standards. Thailand and Malaysia, meanwhile, have been exploring how to build their own programs.

It is clear that ASEAN members are warming up to the grand promise of nuclear energy to provide cleaner, cheaper and safer energy to support Southeast Asia’s fast growth trajectory.

“In Southeast Asia, Vietnam is currently the only country with concrete nuclear energy plans, with construction on the first expected to start around 2020.

20 ASIAN POWER

Nikolai Drozdov

Yeo Yek Seng

Yukiya Amano

However, against the backdrop of rising energy demand in Southeast Asia, nuclear energy continues to be one of the longterm energy options that many countries are considering,” says Yeo Yek Seng, acting chief executive of Energy Market Authority in Singapore, in a high-level industry event last January.

Yeo says nuclear energy has long been a source of cost-effective, low-carbon baseload electricity, and as the region’s needs for such a source escalates, so does its appeal.

“One of the most important challenges for ASEAN countries is the search of an environmentally friendly and reliable source of affordable electricity. In this regard, nuclear power may be considered as a viable option for ASEAN,” concurs Nikolay Drozdov, director of international business at Rosatom.

But he says there are three key issues that prevent Southeast Asian nations from fully committing to nuclear energy: Safety concerns, public misconceptions, and finding capable partners in nuclear power development.

Addressing safety concerns ASEAN members have expressed safety concerns with regard to nuclear power plants and this stems from the region’s

proneness to natural disasters, says Drozdov.

The Fukushima nuclear disaster of 2011 that ravaged Japan only exacerbated these concerns, although nuclear energy proponents led by the International Atomic Energy Agency argue that recent research and technology advancements are raising safety standards and will be able to quell lingering fears.

“Remarkable research is being done on new generations of reactors which will be safer and generate less waste. Innovative work is also being done on long-term disposal of nuclear waste. Great progress has been made in improving safety,” says Yukiya Amano, director general at International Atomic Energy Agency (IAEA), speaking in the country’s Energy Market Authority Distinguished Speaker Programme.

“Nuclear safety culture has been greatly strengthened throughout the world compared with the situation before the accident,” adds Amano. “I have seen a strengthening in safety features in every nuclear power plant that I have visited since the accident.”

Nuclear companies such as Rosatom are designing newer reactors that can withstand accidents such as those that led to the Fukushima disaster as well as

SECTOR REPORT: nuclear energy aircraft crashes.

“If our VVER reactor recently put into operation in India at Kudankulam NPP had been installed at Fukushima site, such an accident would not have happened,” claims Drozdov.

Dispelling public misconceptions While governments might find it easier to shake off safety concerns, it is another matter altogether to convince the public to support the construction of a NPP if there are strong public misconceptions undermining the proposal.

ASEAN populations need more education on nuclear energy and the related technologies that are used to create and operate them.

Here lies the dilemma: Only when ASEAN populations see an NPP operating smoothly in their own backyards can the public sentiment swing in its favor, but governments need strong public support to push through with the massive undertaking of a maiden NPP. “The level of public acceptance is traditionally high in countries with operating nuclear plants. But people living in countries with no nuclear facilities often have little idea of nuclear technologies, and that may give rise to prejudice and myths related to nuclear power,” says Drozdov.

As an example, Drozdov says there is fear of radiation but this flies in the face of medical radiological health care technologies that are now helping to diagnose and treat cancer, as well as other serious illnesses.

“That is why an important pillar of the successful implementation of any nuclear project is to ensure its public acceptance by circulating reliable and unbiased information, both about the project itself and about nuclear technologies in general,” says Drozdov.

Finding capable partners Given the humongous complexity and costs attached to nuclear power plant projects, the third key challenge for ASEAN members is to find capable partners that will help them resolve issues.

“Construction of the first nuclear power plant is a serious investment and a long-term project,” says Drozdov, citing IAEA data that the entire process from making a decision to build a NPP until its commissioning may take 1o to 15 years.

“Therefore, it is very important to find a partner having experience not only in NPP construction and fuel supply, but also in the area of building up nuclear infrastructure, including legal framework and regulation, NPP safety, training of specialists, and public acceptance,” he adds.

Advocates of nuclear energy believe

that the world is entering into an age of nuclear power proliferation where even smaller countries can dream to build their own NPP and reap the benefits and rewards that come with this energy milestone.

“Technically and financially, access to nuclear power is no longer limited to developed countries,” says Amano.

“Nuclear power can help to improve energy security, reduce the impact of volatile fossil fuel prices, mitigate the effects of climate change, and make economies more competitive. Nuclear can deliver the steady supply of baseload electricity needed to power a modern economy,” says Amano.

Amano also notes that smaller countries now have options to help them cope with the high start-up costs that in the past may have shot down their chances of constructing an NPP. “The high cost of building a nuclear power plant is seen by some as an obstacle to future development. A number of innovative new financing models have been developed. I expect to see other creative approaches to the high start-up costs of nuclear power emerge in the coming years,” he adds.

Finally, ASEAN can begin to leverage on regional cooperation and expertise. Yeo says that Singapore is working closely with ASEAN neighbours to strengthen nuclear safety standards and share radiation monitoring data.

While Singapore has concluded that it is not yet suitable to deploy existing nuclear technologies in the country based on its latest nuclear pre-feasibility study, it has recognised the need to monitor developments and strengthen capabilities to understand nuclear science and technology.

To this end, Singapore’s National Research Foudnation launched the

“ASEAN people need more education on nuclear energy and the related technologies that are used to create and operate them.”

Nuclear Safety Research and Education Programme in April 2014. Backed by this growing knowledge, Singapore is spearheading coordination efforts to strengthen the safety standards of neighboring ASEAN nations that are treading the nuclear energy path.

“Through such efforts, we hope to establish greater collaboration in nuclear safety, better coordinate emergency planning and response, and to jointly develop our human resources,” says Yeo. Seeing the potential of Singapore to propel nuclear energy development in ASEAN, the IAEA has signed an agreement to enhance the cooperation between the agency and the island in providing training to assist countries in the region in important areas of nuclear applications, safety and security.

IAEA plans to share knowledge and experience with Singapore. And as the country cascades these learnings – drawn from the experience of developed economies that have pioneered the construction and operation of nuclear power plants – the ASEAN members may benefit from shorter construction times, more profitable performance, and higher safety levels.

ASEAN AAGR (5) for Power Generation from Nuclear and Renewables (2007-2030)

Source: National University of Singapore

Safety features have been strengthened ASIAN POWER 21

ANALYSIS: energy outlook

More power plants = energy security?

Fuelling the future: What does the next decade hold for Asia’s energy market?

Governments will need to continue to work together to drive at least regional approach to energy security issues.

T

he demand for energy in Asia-Pacific is growing rapidly.

Already, the region accounts for about a third of global energy consumption. At current growth rates this will increase to more than half of global energy consumption within the next 20 years. This period will also see increasing use of a variety of fuel sources. Aside from the strains this will place on the global energy market, governments in the region are also wrestling with the impact this will have on local energy markets (including fuel and energy prices and calls for domestic reservation of gas) and the potential increase in pollution levels and carbon emissions. It is clear from the views of respondents that addressing Asia-Pacific’s energy needs will require a multifaceted approach, one that accepts the ongoing role of fossil fuels, albeit reweighting their use, but which materially expands alternative sources of energy and seeks to focus on energy efficiency and curtailed carbon emissions.

Deploying new technologies to make existing conventional power cleaner, more efficient and more affordable will bolster this trend. Streamlining the regulatory burden and addressing regional integration of energy markets, supply chains and infrastructure will also be important. Accomplishing a shift of this nature will include a significant shakeup of the current fuel mix, a process that, as recognized by respondents, is not easy, cheap or quick. It will take decades to make this transition and an enormous amount of capital.

From fossil fuel to renewables At present, coal remains the dominant fuel for power generation across the region, particularly in China, India, Australia and ASEAN. Oil has seen the widest use in the transport sector. Both are cheap sources of energy, with abundant supply and longtested technology. Carbon emission and other environmental concerns may challenge their future dominance in Asia-Pacific, 22 ASIAN POWER

Both oil and coal will continue to have significant growth potential in the next five and even ten years.

but respondents maintain the view that both oil and coal will continue to have significant growth potential in the next five and even ten years.

For renewable energy, as new technology and applications are rolled out, the potential energy security benefits are becoming more apparent. Breaking the current reliance on fossil fuels would not only have profound impacts on environmental improvements and access to electricity for expanding populations but also reduce reliance of energy importing countries on the global energy supply chain.

The respondents anticipate a wider use of solar and, to a lesser degree, wind power and greater opportunities for geothermal power, a response we believe will be significant in the relatively large number of seismically active nations in the region.

For example, in Indonesia the first major geothermal plant is now under construction, and other countries, such as Japan and the Philippines where the resource has not yet been exploited on any significant scale, are likely to follow. Achieving this, as noted by respondents, will take two measures: significant increases in investment and greater flexibility in government regulation. It will also require governments to be willing and able to explain the importance of these initiatives to their constituents.

Issues facing the industry A series of external factors make Asia-Pacific’s energy industry particularly susceptible to shocks and volatility. Geo-political events such as those affecting the supplyof gas to Europe continue to cause unease, while globalmacro-economic conditions create uncertainty. However,the most pressing issue facing the industry, by respondentexpectations, was the often complex regulatory environmentin countries across Asia-Pacific. Close to 35% of respondents said regulatory changes would be either the most critical or second-most critical issue facing the energy

ANALYSIS: energy outlook industry in thenext 18 months.

Concerns over regulations are being driven by changes to energy policy, such as the ongoing debate in Australia around carbon emissions and the Renewable Energy Target, enhanced environmental liability both from stricter laws and major litigation (see for example the liability arising from the 2010 Gulf of Mexico spill) and permitted levels of foreign ownership, such as changes in Indonesia around resource ownership and local processing. Changes in import tariff regimes, like the recent imposition of import tariffs for thermal coal into China, and changes to occupational health and safety laws around the region, are also considerations. In our view, these concerns are unlikely to abate any time soon. For example, as governments respond to communities that are becoming more conscious of the environmental impact of urbanisation, industrialisation, resource extraction and power generation, “energy firms will struggle to gain cost control as they face political pressure to limit their impact on the local ecology and reduce byproducts, such as pollution and other waste,” as stated by a US-based private equity investor.

China’s response to air quality issues, whether by promoting renewables, encouraging the development of gas-fired power or the imposition of tariffs on imported coal (as well as energy efficiency measures), will have a direct impact on the future fuel mix there and directly affect competition for LNG. This trend is also likely to unfold in other emerging markets as economic development allows and demands those markets to move toward cleaner, more efficient sources of energy.

Low-carbon technologies Technological development will play an enormously important, even disruptive, role in reshaping the region’s energy sector. Even today, the options emerging are dramatic, from carbon capture and storage and enhanced oil recovery technologies through to energy storage, smart grids and more efficient renewables. More Is the market right to undertake significant new project development in the next 12 months?

Source:Norton Rose Fulbright

Fuel composition for Asia’s energy requirements

Source: Asian Development Bank

More general energy efficiency technologies, such as LED street lighting, will also have a material impact on the demand side.

general energy efficiency technologies, such as LED street lighting, will also have a material impact on the demand side.

While government programmes have financed these projects in the past, leaping the next generation of technological hurdles will either require a pricing advantage over existing technology or significant alternate sources of funding as policymakers scale back incentives and support.This has become a pressing issue across the energy industry, especially as large investments will be needed to scaleup low-carbon technology and raise their commercial viability.

Under the IEA’s 450 Scenario, a climate change mitigation plan to reduce carbon emissions, large capital commitments will be needed to reach climate targets. At current investment rates and emission levels, investment across a range of technologies, noticeably energy efficiency technologies, will need to double by 2020, with a six-fold increase in cumulative funding needed by 2035. Respondents have suggested that the large funding gap needed to attain greater low-carbon energy use will see investment flows remain focused on more traditional fuel sources, such as oil and gas, at least in the short term.

At present, respondent preferences for technologies likely to see investment in the year ahead favoured those necessary to tap oil and gas reserves. Indeed, advances in oil and gas will see wider deployment of new exploration and extraction procedures, allowing the exploitation of stranded resources, for example those in the waters around Indonesia as well as China’s massive yet difficult-to-access shale gas reserves. As the search for resources pushes up exploration and production costs, respondents said enhanced oil recovery methods would be most likely to see the strongest investment. This was followed by advanced subsea technologies and unconventional extraction methods. According to these respondents, applying these technologies is becoming increasingly necessary as oil companies try to raise productivity.

This is especially true of national oil companies across AsiaPacific that are stepping up operations and their presence in the region, both tasks that will require them to maintain a competitive edge over international energy companies.

While respondents emphasised investment in advances geared toward oil and gas, qualitative feedback showed similar support for significant technological development in the power and distribution sectors as well as energy efficiency technologies.

Reshaping the load curve and “shaving the peak” technologies, such as energy storage, and distributed generation, to name a few, will significantly impact traditional generators and network businesses, particularly those exposed to short-term market pricing of electricity or gas.

Clearly, investment opportunities will be significant. It is also interesting to see respondents’ views on the most effective means of reducing carbon emissions in the economy. The emerging technology of carbon capture and storage (carbon sequestration) was positively viewed, although either imposition of a carbon tax or a cap and trade scheme are considered the most important policy frameworks to achieve a mandated carbon outcome.

Barriers to entry Investing in energy and resources remains a heavily regulated process. Three in four respondents said regulatory issues would likely be a significant impediment to companies looking to conduct energy deals, either through M&A or project development in Asia-Pacific. Government scrutiny over these investments is heavily influenced by national security and resource sovereignty concerns. This is particularly true when a foreign investor is involved. Another often-cited reason for regulatory barriers was increased environmental concerns in the region, either through a desire to protect natural landscapes or to curb carbon emissions.

Recent decisions in the US, for example around the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, have caused energy companies to look again at their environmental liability, ASIAN POWER 23

ANALYSIS: energy outlook particularly where their assets are being operated by a third party.

Governments have also introduced increased liability, some strict liability, for those scenarios. “Considering the recent emphasis on combating pollution and the sometimes negative impact the energy sector can have on the environment, regulatory issues will continue to be a burden on corporations and investors in the industry,” said the head of finance at an Indian energy corporation.

Countries such as Pakistan, India and Bangladesh topped the list of respondent expectations as having the highest impediments for investment in power generation and renewable energy projects. While investing in the power sector, including in new geothermal and conventional power, remains reasonably attractive, high barriers to entry in the energy infrastructure sector limit the opportunities available. Respondents also felt that access to the local market remains difficult in China.

Lower impediments were seen in Singapore, Japan and India, especially in relation to renewable energy projects. In Japan, the government “realises the importance of renewable energy and is taking measures to increase its use and applicability.

Regulatory barriers are being lowered and taxes have been reduced so that renewable energy becomes an attractive proposition for investors,” said the partner at a Japanese private equity firm. The managing director of a Singapore-based private equity firm echoed these remarks. “Renewable energy is the next big market and is becoming a core component of national energy agendas as governments strive to meet increasing energy requirements. I think we’re going to see regulations begin to ease in the coming years to encourage investment in renewables” the managing director said. In power generation across ASEAN, there is also evidence of a move towards a liberalisation of energy markets. Progress towards a free and open investment energy market can be seen to varying degrees.

Singapore’s open energy investment market demonstrates what can be achieved following the sale of state energy assets; in Investment in global energy supply

Source: International Energy Agency

Do you believe regulatory issues are likely to be a significant impediment to energy deals in AsiaPacific in the next 12 months?

Source: Norton Rose Fulbright 24 ASIAN POWER

Singapore’s open energy investment market demonstrates what can be achieved following the sale of state energy assets.

Vietnam, measures to create a more competitive power market and to re-balance the dominance of the state owned companies in the power sector are under consideration, while Cambodia, Laos, Vietnam and Myanmar are all at an earlier stage of development.

Investment expectations Favourable conditions for securing financing present a promising outlook for investment in energy deals, a point where most respondents remain enthusiastic. A US-based investment banker reinforces this view, saying “the financial climate across the region is improving and we can therefore release more capital into the market while simultaneously helping businesses increase their capacity. In turn, this will allow them to increase their performance.”

As noted previously, the availability of financing was the least likely issue facing energy investments in Asia-Pacific based on a short-term outlook. Indeed, this availability of financing in tandem with relatively stable economic conditions and growing demand for resources have made it an attractive proposition to pursue new projects across the region. Noting these positive developments, close to nine out of 10 respondents said new projects would be part of their investment strategy going forward.

Aside from capital injections into alternative energy initiatives, respondents also pointed to infrastructure as an area having significant investment opportunity. While such infrastructure is already sufficient in several countries, advances in technology and a transition to smart grids means older networks will require extensive upgrades. wewAs the director of finance at an Australian energy company says “higher consumption in the region will strain existing networks, requiring ‘smart technology’ to be deployed across the region.” The privatisation of government owned infrastructure assets in Australia will also drive significant transaction flow in 2015.Somewhat unsurprisingly, Asia’s energy sector continues to be dominated by state-owned enterprises and international energy companies.

In our analysis, respondents noted that the oil and gas industry would usually see engagement in energy deals from either national oil companies based in Asia or international oil corporations. These corporations have the financial resources, and perhaps more importantly the expertise and experience, necessary to fund, manage and navigate the complexities of energy projects and vast power networks, respondents noted.

Private investors As national oil companies across the region come under pressure from their governments to maximise production, these companies are increasingly turning to private investors and their affiliated start-ups to assist with resource exploration and extraction.

This was the case with US-based private equity firm Blackstone and its startup Tamarind Energy, which was recently approached by national oil companies in Southeast Asia to enter into partnerships to help tap previously exploited oil fields.

In recent years, as international oil companies began offloading oil and gas assets across the region, private equity investors and specialist funds have acquired a variety of assets, with deal values completing an upward trajectory since 2012. These transactions have centred around US-based oil companies divesting assets in Southeast Asia, a trend that is likely to continue as these companies sell overseas assets to focus on developing their shale gas operations in the domestic market.

In the year ahead, respondents expect private equity firms to focus on investment into clean energy, including geothermal, wind and solar power. These expectations run counter to a trend earlier in 2014, when private equity firms began a massive retreat from the over-hyped renewable energy sector when expected returns failed to materialise.

By Norton Rose Fulbright

ANALYSIS: india’s smart grids for the country’s smart grids, still in the initial stages, have yet to achieve lift-off.

“The unwillingness of state governments and regulators to import cheap power from other states has meant that lower-cost power has gotten stranded,” laments Surendra L. Rao, first chairman of the Central Electricity Regulatory Commission and former director general of the National Council of Applied Economic Research.

This comes on top of “inadequate transmission with no redundancy in capacity, peak shortages of over 10% inadequate distribution capacities, and little effort by distribution capacities to scale up experiments,” – the biggest hurdles to India’s smart grid development, according to Rao.

How many important projects have they missed?

India’s ambitious smart grid roadmap failing to bear fruit

Smart grid projects have already broken ground in India, with 300 million starved for stable power. But a number of factors may be hindering their full potential.

I

f the number of planned investments over the next decade is any indicator, then support for India’s smart grid development should currently be surging and enjoying peak demand. However, this may fluctuate, according to analysts.

According to a report released in January

by Northeast Group LLC, entitled “India Smart Grid: Market Forecast (2015-2025)”, the Indian government plans to invest a total of $26.1 billion in smart grid infrastructure over the next 10 years – a large sum that could go a long way, given the right conditions.

“Most Indian utilities fail to achieve cost recovery, and smart grid investment will be an important tool for utilities to reduce losses and improve revenue collection and operational efficiency. In many ways, India represents the best smart grid market opportunity among all emerging market countries,” the report notes.

A deteriorating power situation India, an emerging ‘super-economy’ of around 200 million electric consumers, currently suffers from the constant peril of power failures, with utilities bleeding rupees and supply constantly struggling to catch up with demand.

“A large Indian population still 26 ASIAN POWER

Rahul Tongia

Umesh Agrawal

Vivek Dhariwal

does not get 24/7, good quality power supply due to high peak load, leading to load shedding,” observes Vivek Dhariwal, senior manager at Emergent Ventures India Pvt Ltd. As a result, India’s economic momentum—both on the macro and micro levels—is under constant threat of reversal.

“Almost all investment-climate surveys point to poor availability and quality of power as critical constraints to commercial andmanufacturing activity and national competitiveness.

Further, more than 300 million Indians live without electricity, and those with power must cope with unreliable supply, pointing to huge unsatisfied demand and restricted consumer welfare,” according to the summary to “More Power to India: The Challenge of Electricity Distribution,” a World Bank report published last June.

The loss numbers are quite dismal: Northeast Group’s report puts India’s transmission and distribution (T&D) loss rate at 22.7%, one of the world’s highest, while loss rates nationwide are in double-digits; over 15% for “almost all states,” and more than 50% for some.

Analysts doubt that India’s power woes will be going away anytime soon, as plans

Wanted: adequate know-how Smart grids in India face a host of challenges – including organizational problems among key stakeholders.

“Smart grids inherently involve multiple stakeholders – getting alignment is a challenge, both in India and worldwide,” says Rahul Tongia, a Fellow at Brookings India and Technical Advisor to the India Smart Grid Task Force, an inter-ministerial group established in 2010 which, along with the India Smart Grid Forum, contributed to India’s Smart Grid Vision & Roadmap, a comprehensive 15-year plan designed to lay the foundations for the development of Indian smart grids.Yet two years after the roadmap’s launch in 2013, many feel that concrete steps have yet to materialize.

“Smart grids came into common power sector parlance in India perhaps a decade ago. However, there has been little movement on the ground,” Rao says.

Umesh Agrawal, associate director – Energy, Utilities, & Mining at PwC, agrees. “The awareness of the consumers about the concepts of smart grids, consumption patterns, benefits accrued to them, etc, need to be publicized in order for consumers to be educated and for smart grid projects to be successful,” he says.

While public and private sector organizations, such as technology firm Infosys, think tank Center for Study of Science, Technology and Policy, and electric utilities NTPC and Tata Power, are beginning to consider smart grid investments, these groups remain in the minority.

“There are a minimal number of people with appropriate skill sets and knowledge of smart grids. Most of the technology providers are foreign companies, and hence development of local professionals is crucial for success and deep penetration in markets,” Agrawal adds.

Currently, the Ministry of Power

ANALYSIS: india’s smart grids

Broadening, elevating the grid Even while their future remains uncertain, analysts agree that smart grids

according to data from the Ministry of New and Renewable Energy.

“Smart grids enable distributed renewable energy (eg solar PV [photovoltaic] rooftops) integration with the grid through net metering, etc. Solar PV is reaching grid parity in most of the Indian states, and will lead to massive installation of solar rooftops in coming years,” Dhariwal says.

The ghost of ‘missed opportunities’ Ultimately, while the delay in the enactment of India’s smart grids will unlikely impact the country’s electricity sector in the short-term, it may haunt the Indian economy in the form of lost economic opportunities in the coming years. “While it is too early to say how smart grids will affect power generation in India, the long-term impact is significant,” explains Dhariwal.

Tongia, on the other hand, suggests that, “Given smart grids are yet to take off in India, delays in their rollout doesn’t directly impact power generation or supply. It would have an impact in terms of missed opportunities, but business as usual (BAU) continues, and BAU also continues to improve.”

India cumulative smart grid forecast CAGR:33%

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A future for renewable energy In addition to developing the use of non-renewable energy sources such as coal or gas – which comprise the bulk of India’s power at present – smart grids are also expected to decentralize the transmission process, where most critical losses occur, and pave the way for the large-scale development of solar energy; a cleaner, more environmentally-friendly alternative.

As of end-2014, India’s solar installed capacity stood at 3,062.68 megawatts (MW), still behind wind and small hydro power which totalled 22,465.03 MW and 3,990.83 respectively,

Several bidding processes are already saddled with excessive policy and regulatory barriers.

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Financial challenges Another reason companies are reluctant to invest in smart grid projects, and participate in state auctions for them, is the need for a significant financial war chest.

“Large upfront investments are required to implement smart grid projects, compared with the longer term benefits. Hence, the payback periods may be longer than the stakeholders would like,” Agrawal says.

“One big unknown is ‘how do we cross the chasm from today’s low-volume/highcost world to one of high-volume/lowcost?’ Getting the terms and financials right is a challenge, especially given that the costs of a pilot are always going to be higher in large volumes,” Tongia notes.

In order to soften the blow of potentially huge investments, distribution utilities and the government are urged to step in and lend a hand to companies aiming to implement smart grids. “In addition to challenges in rolling out the pilots, one needs utility- and state-level buy-in for the larger effort of scaled deployments,” suggests Tongia.

Even without ample financial commitments from the public sector, several bidding processes are already saddled with excessive policy and regulatory barriers that hamper smart grid development, namely “active regulatory interventions” for the design of policy initiatives, as well as “dynamic tariffs for encouraging smart grid technology adaptation by consumers.”

These, according to Agrawal, serve as major hurdles to smart grids.

will have a profound effect on the Indian electricity sector moving forward.

“Smart grids, adequate transmission to move power from surplus to deficit areas, and adequate distribution, managed in an entrepreneurial and not statist way, will help both transmission and distribution enterprises,” says Rao. For one, the operation of a micro grid via a smart grid would spur potential investments in many offgrid areas, Agrawal says. A smart grid would also lead to better utilization of existing energy sources – a key solution to frequent blackouts.

“The smart grid technology would be a key component in the ability of the grid to integrate the energy from intermittent generation sources.

The smart grid technology would be an application for information and decision-making for scheduling renewables, base load, and peak load generation sources,” says Agrawal.

“With demand response and smart micro grids, it can be ensured that minimum power supply can be given to everyone, and peak load management will be better,” Dhariwal adds.

Total Value ($M)

(MoP) has already officially sanctioned 14 smart grid pilot projects around the country, to be implemented by various state-owned distribution utilities.

“There are over a dozen central government approved (supported) smart grid pilot projects in India, all at different stages. A few utilities have received bids, while some are preparing RFPs (Request for Proposal)/bid documents,” notes Tongia. However, to date, only a handful of utilities have made progress.

“Most of these projects are in the process of selecting turnkey contractors, with a few utilities facing the hurdle of getting a higher bid price than the estimated costs of the pilot projects,” says Agrawal.

Due to bidding issues like these, a number of important projects end up being re-tendered, or subjected to longer technical evaluation periods, and thus fail to be awarded, according to Dhariwal.

AMI

Source: Northeast Group

Solar roofops are integrated through net metering ASIAN POWER 27

ANALYSIS: china’s energy policy

Consumption has been extremely heating up

All eyes on China: The economic superpower is planning its next big energy move Macroeconomic trends, macroeconomic disruption, and possible reforms will affect the next fifteen years.

T

he People’s Republic of China (PRC) will be the largest national energy importer over the 2015–30 timeframe, and most likely the largest importer of both coal and oil. It is already the largest total energy consumer, largest generator of power, largest coal producer and consumer, and biggest alternative energy spender.

That China matters a good deal to the global energy market is plain, but the reverse is not entirely true: the key factors determining the size and composition of the Chinese energy sector are unlikely to be global energy supply and prices. Thanks to its huge foreign-exchange reserves, the PRC is fairly price insensitive as a global buyer. And as a large economy, its own policies will, over the long term, be the primary driver of net energy demand and its components.

What reform?

The critical element of those policies is whether Beijing will undertake procompetition reform, both in its energy sector and across its economy. Without fundamental economic reform, Chinese growth will stagnate; without energy reform, its energy industry 28 ASIAN POWER

Initial estimates show that China’s primary energy consumption rose roughly 4 percent in 2013 to 2.85 billion tons of oil equivalent.

will remain inefficient and intensely import dependent. While energy and broader reform are linked, one could conceivably occur without the other.

A comprehensive reform path, including both economics and energy, seems to be what most observers are assuming, and would lead to strong expansion in energy consumption, production, and imports. At this point, the single most likely path remains weak or absent reform, with the result that China’s energy consumption and production growth is far below potential. But the path remains dependent on foreign energy supplies.

China’s current energy sector China’s energy sector presently has the following main features: inadequate local resources, slowing but still notable consumption growth, high coal dependence, increasing import dependence, and heavy spending, especially on alternatives to fossil fuels.

In terms of reserves, the PRC has the third-largest recoverable coal reserves, at approximately 13 percent of the world total. Its shale reserves are widely quoted as the world’s largest, but this is not a useful figure, as so little of the reserves has been

proven commercially viable. Initial estimates show that China’s primary energy consumption rose roughly 4 percent in 2013 to 2.85 billion tons of oil equivalent. Coal predominates, accounting for at least 66 percent of energy consumption. Oil accounts for 18 percent, hydropower 7 percent, gas 6 percent, and nuclear and wind about 1.5 percent each.

Electricity demand in particular climbed 5.3 percent in the first half of 2014, slowing from the previous year. Nearly 80 percent of electric power comes from coal, 16 percent from water, 2 percent from nuclear, nearly 2 percent from wind, and 1 percent from solar.

China accounts for almost half of global coal consumption. Domestic coal production inched up 1 percent to 3.7 billion tons in 2013 and slipped 2 percent in the first half of 2014 to 1.85 billion tons. Coal imports rose 13 percent to 327 million tons in 2013.

Precise coal-consumption figures vary among the NDRC, Ministry of Industry and Information Technology, and China Coal Association but can be roughly calculated using production and imports.

The non-fossil fuel share of energy

ANALYSIS: china’s energy policy use approached 10 percent in 2013, rising almost half a percentage point.

Hydropower production, by far the biggest component, rose 7 percent to 789 billion kilowatt hours (kwh).

Wind power production stood at 125 billion kwh, a 33 percent increase, though data may be compromised by political demands for rapid gains in this area. Nuclear power generated 111 billion kwh and is likely to rise quickly after a pause caused by the Fukushima Daiichi tragedy. While solar power generation has grown rapidly and the PRC produces the majority of the world’s panels, solar still constitutes a negligible portion of total power generation.

Economic variables The central factors that could affect China’s energy sector in the next 15 years are: current macroeconomic trends, possible macroeconomic disruption and improvement from broad marketfavoring reform, domestic and international political changes, the national resource endowment, and reform within the energy sector.

Most forecasts for 2002-08 Chinese energy use have proven far too conservative. One reason was unexpectedly durable economic growth; another was the surprise adoption of an energy-intensive development model. According to official data, coal production fell for two consecutive years, to 880 million tons in 2000. But by the end of 2009, it was 2.96 billion tons.

Looking forward, weaker-thananticipated economic growth may now produce the opposite effect: overly high energy-use forecasts.

Successful economic reform would boost growth but would also shift away from the current energy-intensive development model, to some extent cutting into energy demand growth.

In addition, there has been a change in the GDP-energy consumption relationship globally and, more recently, in the PRC, with GDP gains becoming less energy intensive.

In principle, reform could speed up the inevitable shift away from heavy industry that has bred high energy use over the past decade.

Less emphasis on construction and related sectors – such as steel and cement – means less urgent need for coal.

In terms of specific changes, there has been some movement in the financial sector, and the operation of capital markets can be extremely important to raising energy

production. Presently, however, China’s energy sector faces few limits on access to capital. Nor is that likely to change with reform, given pressure to produce more at home to reduce the heavy dependence on imports.

Capital-market reform will more likely alter industry winners and losers. Commercially oriented financial institutions would see sectors differently than the NDRC, cutting financial subsidization and oversupply.

This means comparatively less coal use as oversupplied industries such as steel and real estate are cut back.

Within the energy sector, alternative energy is more heavily subsidized than other sources and, following financial sector reform, would fade in importance unless preferential policies were adopted outside of finance. In combination with more competition being permitted, capital-market reform would also help elevate private firms at the expense of state monopolists.

Another often-cited variable affecting the energy outlook is urbanization. Analysts sometimes confuse the urbanization that occurs because of greater opportunities created by reform with state-directed urbanization.

For now, the state option is not being exercised. Furthermore, market-driven urbanization is still some way off, and its role is contingent on other factors.

Blocking both market- and stateled urbanization is the timetable for the unification of urban and rural registration in terms of land ownership and available benefits.

Labor and energy At present, rural residents cannot freely move to and establish formal residence in Chinese cities, which is necessary for access to local schools and other benefits. Unified registration is not supposed to be completed until 2020, and the impact on energy consumption will take several years beyond that to materialize. Even then, the impact of freer labour movement on energy production will remain limited unless more commercial competition is permitted, specifically in energy.

Sharper land-ownership rights in rural areas are potentially much more important. The shale boom has occurred in the US well in advance of everywhere else, chiefly because of deep-seated and welldefined American land rights: landowners own the mineral resources, not just the right to build.

Granting such rights in the PRC would be transformative,

In combination with more competition being permitted, capitalmarket reform would also help elevate private firms at the expense of state monopolists.

first in agriculture but ultimately in energy as well, as rural land in China is still owned by the state and rented to citizens. Unfortunately, reforms are aimed at protecting rural landholders from predatory behaviour by local governments, not at granting true ownership. These reforms would mark an advance in social and political terms, but not in the economic or energy spheres.

It follows that while the success of broad economic reform matters enormously, on its own it is not especially important to net energy demand through 2030. The two paths for the economy are the excessively energy intensive path it has been on since 2002, with progressively slower growth, and a reform path that sees disruption followed by an acceleration of growth that is less energy intensive. What truly distinguishes the two economic paths is the composition of energy use.

The impact of reform failure has not been sufficiently examined. China is already in the same league as the US, while Saudi Arabia in shaping global energy outcomes and has the potential to become an even bigger factor. The uncertainty surrounding the PRC’s energy sector is thus second only to uncertainty regarding the Middle East’s global importance.

By Derek Scissors, AEI

The industrial sector consumers majority of China’s power

Source: CEIC, Barclays Research

Residential and commercial sectors are increasing their share of power consumption

Source: CEIC, Barclays Research ASIAN POWER 29

analysis: asean renewables that facilitates the sharing of information, best practices, and progress updates among ASEAN member states. Such platform is very useful to monitor renewable energy development in each country although for it to effectively serve its intended functions like the one currently used by the European Union, countries in the region need to get more proactive in supplying relevant information to the system.

How can SEA step up its game?

What should Southeast Asia prioritise in its energy mix?

As renewables are a relatively new energy source, governments need to establish investors’ trust of its profitability and people’s trust of its utility and reliability.

T

he Southeast Asian region is now viewed as an oasis of socioeconomic development and the region’s vibrant economic growth has led to a corresponding increase in energy consumption.

In order to reduce the region’s over-reliance on imported fossil fuels and build a more sustainable and environmentally friendly power supply, ASEAN member states are exploring the use of alternative energy sources such as nuclear and renewable energy. Apart from technical and financial barriers, renewables also have a completely different set of environmental and socioeconomic costs.

Although hydropower has fuelled the power trade in the Greater Mekong Subregion, helping Thailand and Vietnam meet their rapidly growing demand.

In the Philippines and Indonesia, land acquisitions for geothermal developments are often met with strong opposition from local populations.

Action plans Realising the multiple challenges facing its member states in getting renewable energy on board, ASEAN has come up with a number of supporting 30 ASIAN POWER

Efforts to shape conducive environment for renewable energy market are only a part of the equation as buy-in from the public is equally important.

initiatives. The ASEAN Plan of Action for Energy Cooperation (APAEC) 2010–2015 envisions a collective target of 15% renewable energy of total power installed capacity by 2015. To this end, ASEAN spells out action plans directed towards enhancing awareness of renewable energy, and preparing the region as a renewable energy hub.

The ASEAN Centre for Energy (ACE) in cooperation with German Development Cooperation (GIZ) has also conducted a study to investigate opportunities and challenges of renewable energy development in Southeast Asia.

The resulting report ASEAN Guideline on Renewable Energy Support Mechanisms for Bankable Projects notes that ASEAN member states currently stand at different stages of renewable energy market development, with Thailand being the most advanced, followed by Malaysia, Indonesia, and the Philippines.

As different stages of development entail different sets of challenges, each country needs to stay committed to overcoming the hurdles it faces so that the collective target that ASEAN has set can be achieved.

ASEAN cooperation with GIZ has also come up with an online platform

Commitments to renewable energy The commendable initiatives taken

by ASEAN must be supported by strong commitments from member states. As renewable energy is a relatively new form of energy sources, governments need to establish investors’ trust of its profitability and people’s trust of its utility and reliability.

Efforts to shape conducive environment for renewable energy market are only a part of the equation as buy-in from the public is equally important to support government’s substantial spending on renewable energy and the ensuing infrastructural changes that will come with renewable energy usage. Creating enabling environment for renewable energy investments, which include implementing policies, enacting reliable regulations, and simplifying administrative processes, needs to take place at national level.

When it comes to cooperation, governments need to identify priorities.

Of the various recommendations made at the regional level, there are three collaborative efforts that will collectively accelerate renewable energy development in meaningful ways: first, conduct research to strengthen ASEAN manufacturing capabilities for renewable energy technologies and products; second, establish innovative financing instruments and mechanisms; third, standardise and harmonise ASEANmade renewable energy products.

Acquiring the capability to manufacture and operate the technologies will make renewable energy significantly cheaper. Having secure financial assistance mechanisms will greatly support renewable energy development in its earlier stages.

Furthermore, standardising and harmonising systems before the renewable energy market is fully developed will lay a good foundation for continuing future cooperation.

Getting things right from the outset, after all, will cost less than refurbishing them later. To this end, governments in the region need to stay strongly committed to renewable energy development.

By RSIS Commentary

OPINION

JOHN GOSS

An increase in renewable energy output in China is forecasted

john.goss@aod.com.hk

A

ccording to China’s 13th Five Year Plan (2016 – 2020) on energy, there will be an increase in offshore oil and gas exploration and the output targets for renewable energy resources, especially wind and solar power, will be raised according to a senior official in China’s National Energy Administration (NEA).

Apparently, there will be an increase in offshore oil and gas exploration in the Bohai Sea, the East China Sea and the northern sector of the South China Sea, which has recently been added to the energy plan, said the Deputy Head of the NEA’s planning department, He Yongjian at a recent energy forum.

The recently released plan for energy shows that China will be focusing upon raising the country’s energy output, improving its energy supply structure and accelerating the development of renewable.

The nation will form five energy production bases in China’s Shanxi Province, the Ordos Basin, eastern Inner Mongolia and the Xinjiang Uygur autonomous region. China will also be establishing a nuclear power development belt in eastern China and an offshore energy exploration belt along the coast.

The 13th Five Year Plan says that the nation’s total installed capacity of wind power will reach 200 million kilowatts by 2020, which double the 12th Year plan’s level.

The installed capacity of solar power will be quintupled to more that 100 million kilowatts when compared to the solar power targets in the previous five year plan.

The NEA’s He said that 53 million kilowatts of nuclear power installed capacity are expected to be operating by 2020.

There are some 30 million kilowatts of nuclear power capacity being constructed in China, although some of the nuclear power construction work is behind schedule. Additionally some 53 million kilowatts of nuclear power capacity are expected to be put into operation by 2020.

The control of energy consumption will continue to be a major task for China’s energy authorities during the coming Five Year Plan.

The government will continue its efforts to increase the nation’s supplies of natural gas that would then replace the consumption of coal in the coming years.

The world’s largest renewable energy market It is possible for China to become the world’s largest renewable energy market by 2020, if the nation can double the ratio of renewable sources such as solar power and wind power feeding into its total energy mix by 26 percent, says the IIREA. A recent report entitled Renewable Energy Prospects: China from the agency, in cooperation with The China Renewable Energy Centre, said that the utilization of such an energy mix in China will improvethe lives of millions of people.

It would also save billions of dollars when taking into account the vast costs of healthcare and the savings achieved by reducing emissions.

The report says that China can double the utilization of renewable in its power generation sector to 40 percent by 2030. The country’s energy consumption has been forecasted to increase 60 percent by 2030.

This means that how China decides how to supply its rapidly 32 ASIAN POWER

growing energy needs could determine if the world can reduce or even halt climate change in the future.

Reports say that China is aiming to cap its emissions of carbon dioxide bt 2030 and in doing so will expand the share of non-fossil fuel energy in the country’s primary total energy capacity mix to around 20 percent by 2030.

The report says that under the current plans for the share of renewable energy sources in the nation’s energy mix will only rise to 17 percent by 2030. However, if the Chinese government can accelerate the pace of renewable energy implementation it will reach 26 percent.

The IREA has estimated that that an annual investment of $145 billion would be needed between now and 2030 in renewable energy technologies to reach the 26 percent target.

The agency has said that two thirds of this investment would have to be channeled into the power supply sector including wind, solar and hydropower.

The Director of the new energy and renewable energy department at the NEA, Shi Lishan,said that renewable energy is China’s choice to ensure energy supply and solve its never-ending pollution problems. However, many of the renewable energy plants such as solar, wind and even hydropower are still not connected to the grid.

This is a huge obstacle in the development of renewable energy in China.

However, recent history tells the world that when the Chinese government decides to do something for China’s forward development and growth, it gets done very quickly and very well.

Will renewables solve China’s pollution?

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