ISSUE 75 | DISPLAY TO 30 JUNE 2016 | www.asian-power.com | A Charlton Media Group publication
Five years AFTER
Fukushima
What have we learned from the 2011 nuclear disaster
+
Further project delays hit Myanmar
Taiwan grips hard on solar dreams
Eyebrows raised over Vietnam’s vow to quit coal plants Japan’s power market is finally liberalised
MICA(P) 248/07/2011
US$360P.A.
One Power Plant – Three World Records – Sincere Compliments! The future starts with Fortuna. A record-breaking project: the world’s most efficient combined cycle power plant Fortuna is an environmentally friendly and economical means of generating heat and power. It has even reached three world records. Not only does Fortuna outperform all previous bests with an electrical efficiency of approx. 61.5 % and an electrical output of 600 MWel. Thanks to its combined heat and power generation – which allows for a maximum district heating supply of 300 MWth – fuel efficiency increases to a staggering 85 %. We wish the Stadtwerke Düsseldorf successful, safe operations.
siemens.com/fortuna
FROM THE EDITOR The year is about to come to its second half, and issues in the power sector are unstoppably growing. Two of the biggest power markets, China and India, are this issue’s country focus. The Asian Power team delved into China’s role in the Asian Super Grid which has recently gained its first steps with the MoU signing among Japan, Korea, Russia, and China.
Publisher & EDITOR-IN-CHIEF Tim Charlton production editor Karen Lou Mesina art director Bryan Barrameda
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We have found out that China, being the driving force behind the Asian Super Grid, is burdened with the pressure of building trust among its partner firms and neighbouring countries. Analysts divulged that China must be a “very friendly and trustworthy partner” for the Asian Super Grid to be molded into reality.
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In India, we zeroed in on the policies that are being implemented in the power sector. Despite the expected capacity addition of 20GW, the country will still probably experience energy shortage. Where does the pitfall lie? Is it time for India to re-think older market models? Find out the answer in this issue’s country report. This issue also tackles Japanese energy market’s liberalisation which took effect early April. At this early stage, how did the industry players bend to the regulatory changes and how do they plan to keep their client base intact given that consumers now enjoy more freedom in choosing power providers? Asian Power talked to both TEPCO and KEPCO as they provided their market insights in light of this big shift. Lastly, flip the pages to find an in-depth coverage of Asian Power Utility Forum’s Manila leg and learn the current status of the Philippine power market. Is it still on track to meet its 2016 household electrification targets? In this regard, on behalf of the whole Asian Power team, I’d like to thank our partners, panelists, speakers, and attendees for making our roadshow a success. We hope to see you in the coming legs in Bangkok and Singapore, and in the next year’s forum. Enjoy the issue.
Tim Charlton
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ASIAN POWER 1
CONTENT
report: NUCLEAR Fukushima five years on: What lessons should Asia take away from the disaster? 16 sector
FIRST 06 Japan fully liberalises electricity retail market 08 Mekong’s hydro promise sparks deeper conflict 10 The Philippines gets stung by Al Gore’s piercing statements 10 Eyebrows raised over Vietnam’s vow to quit coal plants
OPINION 30 JOHN GOSS: A cleaner energy mix for China 31 ANTON FINENKO & JACQUELINE TAO: Making business case for solar PV in Singapore happen
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
12
AP UTILITY FORUM 2016 - manila Is there more harm than good in the Philippines’ changing power landscape?
22
ap utility forum 2016 - jakarta Where will Indonesia get US$70b for its ambitious 35GW capacity addition plan?
ANALYSIS 28 Will Asia’s power tigers reconcile keeping up with demand surge and climate pressure?
32 Whitest of white elephants: US$1tr could be splurged on new coal-fired plants
COUNTRY REPORT 14 China urged to work hard on building “neighbors’ trust” for Asia’s Super Grid
20 India starts peppering its power sector with policy reforms to stimulate investments
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News from asian-power.com Daily news from Asia most read
IPP
CGN Power unveils ambitions in Malaysia, Belt and Road countries China General Nuclear Power Corporation (CGN) has outlined its future plans after it secured clean energy assets in several Belt and Road countries including Malaysia. Xinhua reported that the stateowned energy giant announced the setting-up of its SEA headquarters in Malaysia earlier in April.
IPP
Singapore’s Sembcorp boosts stake in Indian renewables arm to 65.12% Sembcorp announced that its subsidiary Sembcorp Utilities has subscribed to the entire rights issuance by Sembcorp Green Infra, including the 35.94% share of the rights issuance that was not subscribed by partner IDFC Private Equity Fund III.
4 ASIAN POWER
ENVIRONMENT , POWER UTILITY
Google sets eyes on buying more renewables for its data centers in Asia Google is very vocal on its goal to power 100% of its operations with renewable power by 2025. Just recently, it announced that it is going to provide seed funding to the Center for Resource Solutions (CRS), which the firm hopes will be the first step to establish such programs across Asia, starting in Taiwan.
IPP
PLN inks deal on developing 500MW of distributed powergen capacities In connection with Indonesian President Jokowi’s visit to Germany, Siemens has signed two MoUs with the state power firm Perusahaan Listrik Negara (PLN). Both parties agreed on the development of 500MW of distributed powergen capacities.
ENVIRONMENT , IPP
China eyes halting construction on coal-fired power plants in 15 regions This is in an effort to curb its capacity glut. According to Reuters, China will stop the construction of coal-fired power plants in 15 regions as part of its efforts to tackle a capacity glut in the sector, the country’s energy regulator said, confirming an earlier media report. Capacity in these regions are in surplus.
POWER UTILITY
Time for a cool change: TEPCO undergoes four-way company split There’ll be TEPCO Holdings and 3 subsidiaries: TEPCO Fuel & Power, Incorporated (F&P); TEPCO Power Grid, Incorporated (PG), focused on transmission and distribution; and Tokyo Energy Partner, Incorporated (Retail), focused on retail sales.
Thought Leadership Article
GE powers the future with steady upgrades in turbine technology GE is set to up the game in turbine technology in a threefold bid to improve the overall efficiency beyond 63%.
“A
dvances in the last 25 years have allowed for greater than 62% efficiency, all with air-cooled technology,” says Guy DeLeonardo, general manager of utility-scale products for gas power systems, GE Power. “In the short term, continued advances in gas turbine cooling and coatings to manage metal temperatures, along with steam cycle advances will take us to combined cycle efficiencies over 63%,” says DeLeonardo. Areas of innovation To improve the turbines’ efficiency, GE is focusing on three things: advanced aerodynamics, better cooling and better thermal barrier coatings. With advanced aerodynamics, specifically through computational dynamics, advances in supercomputers and physics will allow for improved shapes of blades and stationary parts. Through better cooling, the technology extracts air from the compressor to cool the turbine parts to manage metal temperatures and life. “The goal is to reduce the amount of cooling flow we are using, which provides for higher efficiency. The use of smaller features (more and smaller holes) through drilling and other techniques also provide for better cooling,” says DeLeonardo. Better thermal barrier coatings, on the other hand, involves a process where cooled components are sprayed with a ceramic that helps insulate them from the hot gas temperatures. Near term advances involve lowering the conductivity of those coatings and allowing them to be thicker. “These three areas... were developed and are being further developed through the GE
Store – derived from GE Aviation and codeveloped with GE Global Research,” says DeLeonardo. 25 years of improvement Over the last 25 years, advances in air cooling and combustion allow for a much simpler system, while providing the requisite metal temperatures and emissions. “The goal of the original H System was to reach greater than 60% efficiency at a time in the industry when 55% efficiency was considered the highest achievable,” explains DeLeonardo. “This required a firing temperature of 2600 degrees F in the gas turbine, 400 degrees above the melting point of metal.” Twenty-five years ago, steam cooling was considered the only way to reach this high firing temperature and consequently the 60% efficiency level. In attempting to reach this high level of efficiency, GE took steam from the steam cycle and used it to cool turbine components, both the stationary and rotating components. This added some complexity as the steam had to come through the gas turbine and back out to the steam cycle which required additional piping and filtration. Powering industries and economies Today, GE’s HA gas turbines boast of a simplified, air-cooled architecture that provides a host of benefits to the power generator industry. “Air-cooled architecture means there is no use of steam to cool any of the combustion
or turbine components. This provides for less system complexity, lower capital and installed costs, easier serviceability and faster gas turbine start up as there is no link to the steam cycle,” explains DeLeonardo. Simplified air-cooled means that there are no external cooling systems or heat exchangers and all cooling is on-board with no active controls. He notes that in Asia, every point of increased efficiency is worth about $70 million of fuel savings to the customer, based on the use of GE’s largest 9HA.02 gas turbine in combined cycle. “In North Asia, there remains a high dependency on liquefied natural gas (LNG). Although LNG prices have declined, it remains a critical cost component, and as such, the value of efficiency remains a pivot primary consideration in the investment decision. Therefore GE will continue to invest in its products and programs such as ‘forward lean’ whereby we define valued parameters (such as efficiency) to be created by planning the plant around future productscapabilities. This is an example of how we approach and set new technology standards that will ultimately benefit our customers,” adds DeLeonardo. In ASEAN, the dynamics are more diverse, but GE observes a converging need to achieve lower levelizsed cost of electricity, given the low price power market. “As such, there is a need for larger gas turbine units with their attendant economy of scale to power the various economies,” says DeLeonardo.
“The goal is to reduce the amount of cooling flow we are using. The use of smaller features through drilling and other techniques also provide for better cooling.” ASIAN POWER 5
FIRST per se, we have enough players in the industry,” he clarifies. “However, the issue is the transmission of the energy supply along the way. A lot of demand comes from Japan’s central area, but our big suppliers are in the far coasts.” Another goal of the liberalisation is to suppress the electricity costs as much as possible. “Costs in Japan are already heavy on the wallet as it is, and the government wants to make sure that electrification won’t be an issue in the long term,” Misono explains. Lastly, on a more customer-related stance, Misono said that ultimately, liberalisation aims to expand the choices of consumers and business opportunities of operators. “Power of Japan is power of both the people and the players. Household customers can easily modify how much electricity they’ll need. KEPCO actually has a tariff system which brings more benefits of discount rates to households which consume more electricity,” Misono says.
big-time project delays hit myanmar
A growing economy and limited electrification rates are some factors that will boost power demand across Myanmar and make its power sector one of Asia’s fastest growing in terms of consumption. However, if barriers to projects remain, Myanmar’s power sector potential will not be fully achieved. “We expect electricity consumption to grow by an annual average of 8.5% between 2016 and 2025 - creating a myriad of opportunities for companies to invest in new power generating capacity,” says Georgina Hayden, BMI Research’s head of power and renewables. Hayden cited data from their key projects database indicating less than 18.5GW of power capacity in the pipeline comprises coal, gas , hydro and solar power projects. She notes, however, that analysing their database reveals a number of barriers to project realisation. “If projects that are currently suspended or cancelled are not accounted for, the project pipeline shrinks to 6.4GW,” says Hayden. “This aligns with our view that the potential in Myanmar’s power sector will not be fully realised, based on regulatory hurdles, limited financing availability, local opposition to projects and grid infrastructure inefficiencies.” Projects that have had issues include the Myitsone Dam Project in northern Myanmar that was unexpectedly deferred in 2011 by then-President Thein Sein. Lauren Hooley, research assistant with the Global Food and Water Crises Research Programme Future Directions International, says this is one of the China-led projects the Myanmar government should address to ensure a smooth bilateral relationship. “Should the new government continue to stall the hydropower programme, it is likely to damage the relationship with China and set the tone for its relations with the new government,” says Hooley. 6 ASIAN POWER
Deregulation as opportunity to transform
Japan fully liberalises electricity retail market
W japan
ith Japan having fully liberalised its electricity retail market since the start of April 2016, the country will be just one step away from unbundling its transmission and distribution sector. Takuya Yamazaki of the Ministry of Economy, Trade and Industry’s Agency for Natural Resources and Energy (ANRE) says there are factors that led Japan to realise liberalisation. He notes that while Japan’s electricity market has been partially liberalised since 2000, ten big EPCOs still dominate the market. “The Great East Japan Earthquake in 2011 revealed negative aspects of regional monopoly system with ten big and vertically integrated EPCOs,” says Yamazaki, the director of the agency’s Electricity Market Division. He says these downsides are the lack of system which transmits electricity beyond regions, little competition and strong price control, and little flexibility in changing the existing energy mix making it hard to increase the ratio of renewable energy. More choices for consumers Toyokazu Misono, managing executive officer at Kansai Electric Power (KEPCO), says the purpose of the electricity system reform is firstly to secure stable supply. “Electricity suppliers are not the issue
Takuya Yamazaki
Toyokazu Misono
Supply, mix, and competition Japan can also secure stable supply and achieve a desirable low-carbon energy mix while facilitating competition through policy improvements. “Plans to improve policy are to strengthen the Organisation for Cross-regional Coordination of Transmission Operators’ (OCCTO) influence over nine transmission system operators to promote risk/cost sharing and coordination for more cross-regional transmission and grid reinforcement,” he says. He also mentioned the preparation of a scheme for neutralising the risks of nuclear investments, as well as a review of the FIT system. “Since the liberalisation just started, it is difficult to predict wwhat the market is going to be like in the future. But as for TEPCO Group, TEPCO sees the deregulation as a great opportunity to transform from “utility expert” to “general energy provider.”
Japan’s generation mix target (Preliminary)
Source: ministry of economy trade and industry japan
FIRST
Jonathan Cobb
Can its solar ambitions come to life?
Taiwan grips hard on solar dreams Taiwan
J
ust when the race to harnessing the power of the sun is heating up, Taiwan aggressively enters the playing field with an ambitious target installation of 500MW solar-powered equipment this year. Taiwan’s Bureau of Energy under the Ministry of Economic Affairs revealed the target to encourage the private sector to further install more solar-power generation equipmentsomething which the agency has been doing for six years now. Last year, the country’s installed capacity hit 500MW, a whopping surge from 2010’s measly
70MW. According to BOE officials, the average viable period to generate solar power is 1,250 hours which translates to roughly 14% of 8,760 hours in a year. However, here’s the catch: the big dream of the 500MW solar power installation target calls for a total investment of US$1.36b at least. Can solar, along with renewable technologies, provide enough electricity to offset the loss of nuclear power in Taiwan- while allowing Taiwan to meet its emissions reductions commitments? Jonathan Cobb of the World Nuclear
Tim Ferry
Association says that the solution to the energy market’s problems will need to make the best use of a wide range of generation and supply technologies, and that will include nuclear. “Nuclear power has a very important role to play through supplying electricity that is low carbon and can be delivered securely and reliably.” Timothy Ferry from AmCham Taipei says that nuclear plants currently generate more than 38,000GWh of electricity annually, making up 18% of Taiwan’s total power supply. “The scale of the challenge is enormous. Researchers at the Industrial Economics and Knowledge Center (IEK) under the Industrial Technology Research Institute (ITRI) estimate that to generate enough power to replace nuclear energy, Taiwan would need to install 55GW of solar PV, requiring some 700 square kilometres of land.” “It’s quite difficult to replace nuclear power in the really short run, because we aren’t ready in terms of the whole infrastructure, and also the capacity of renewable energy is quite low right now,” says Wen Lih-chyi, director and research fellow at the Center for Green Economy at the Chung-Hua Institution for Economic Research.
The Feed-in Tariff as a strategy to achieve annual targets for roof-top and ground installations
Source: Bureau Of Energy Ministry Of Economic Affairs Taiwan
the chartist: How is Indonesia’s “35GW Programme” after more than a year? In January 2015, the Indonesian government launched the ‘35GW Programme’ to increase power generation capacity through a new wave of power plants across the country. More than a year later, is the programme any different from the other unsuccessful power programmes? According to research firm Wood Mackenzie, “Despite potential challenges the programme represents one of the biggest investment opportunities for independent power producers globally. An estimated US$80 billion of capital is required.” According to law firm Baker McKenzie, the announcement of aspirational power generation development programmes was not a new phenomenon. “But this time the President promised action, saying that his administration would look critically at the bottlenecks holding back generation.”
Java
Distributed power generation & others at Papua, Maluku, Nusa Tenggara
Source: Wood Mackenzie
Source: Wood Mackenzie
ASIAN POWER 7
FIRST
Mekong’s hydro promise sparks conflict
IPP WATCH
Sembcorp launches 2,640MW power complex in India
I
f there’s one highly controversial body of water right now, Mekong River is definitely a strong candidate as countries surrounding it start to fight tooth and nail to grab their share on its hydropower potential. This trend will continue to have complicated social, economic and environmental impacts on the countries in the region, further exacerbating the effects of climate change. As such, it is believed that regional governments, particularly Vietnam, and other significant stakeholders are likely to protest more aggressively against further attempts to increase the number of dams along the river, potentially creating more hurdles to hydropower development in the region. “The Lower Mekong sub-region could see a rise in conflict over the coming years as the growing need for power, as well as the desire for economic growth, drives the previously war-torn nations in the region to ramp up their hydropower capacity in the Lower Mekong River to the detriment of others,” said Georgina Hayden, BMI Research’s head of power and renewables. The Mekong River is a transboundary waterway located in
Mighty Mekong could ignite deeper clash
Southeast Asia which runs from the Tibetan Plateau in China, through Yunnan Province, Myanmar, Thailand, Laos, Cambodia, Vietnam, and into the South China Sea. Anders Malmgren-Hansen, a project manager with the DHI, notes that 11 hydropower projects have been planned for the Lower Mekong Basin’s Mekong River mainstream. Cambodia, Lao PDR, and Thailand will be the locations of all these proposed dams. WWF Global noted economic development anchored on sustainable resources and management should be paramount in developing hydropower. “Concerns have intensified over the potential cumulative impacts of the proposed dams on the environment, fisheries, and people’s livelihoods,” it said. “[Without] proper planning, dam development can seriously harm the environment, and the people dependent on the mighty Mekong,” it noted.
Anders Malmgren-Hansen
Singapore eyes pooling its local group of nuke experts Singapore has already made it clear: it doesn’t plan to erect nuclear power plants. But this doesn’t mean that the country has set aside the importance of managing nuclear safety. Singapore is planning to develop its own local pool of nuclear experts in the next five years, according to the National Research Foundation. Its scientists are currently training for nuclear safety management and are also focussing on nuclear forensics to detect and trace radioactive materials. A number of countries around it are planning and building new nuclear power reactors to meet their increasing demands for electricity. According to the World Nuclear Association, “Through to 2010, projected new generating capacity in this region involved the addition of some 38GW per year, and from 2014 to 2025 it is expected to be 1400GW, over 120GW per year. This is about 46% of the world’s new capacity in that period – under construction and planned (current world capacity is about 6200GW, of which 380GW is nuclear). Much of this growth will be in China, Japan, India and Korea. The nuclear share of this to 2020 is expected to be considerable in three of those countries.” 8 ASIAN POWER
At a total project cost of US$3b (RS 20,000 crores), the power complex is the largest foreign direct investment-driven project on a single site in the thermal energy sector in India to date. The complex houses two 1,320MW supercritical coalfired power plants. The first power plant, Thermal Powertech Corporation India, was successfully completed and was in full commercial operation in September 2015.
Unit 4 of Ningde NPP gets connected to the grid
At 23:02 on March 29, Unit 4 of CGN Power Ningde NPP was connected to the grid, which not only marks that Unit 4 is available for power generation, but also means that the Phase I Project is fully completed. Ningde NPP is China’s first largescale commercial nuclear power plant constructed and put into operation on the western coast of the Taiwan Straits and was planned to build 6 million-kilowatt PWR.
Malakoff plugs in 1,000MW coal-fired plant in Malaysia
No nuke plants, but yes to nuke experts
Going online soon Safety from nuclear hazards is Singapore’s priority
Malakoff has commissioned the 1,000MW Tanjung Bin Energy power plant in Johor, Malaysia. Also known as T4, the new facility is located adjacent to Malakoff’s existing 2,100MW coal-fired Tanjung Bin power plant. A global consortium comprising GE, Mudajaya and Shin Eversendai has developed T4, under a contract worth more than €1bn. Its emissions have significantly reduced through low NOx burners.
Better World
Paving the Way for Progress Providing roads for a BetterWorld. Hedcor’s road projects play a central role in rural development, providing cheaper access to both markets for agricultural output and commercial activities. It also allows these kids to enjoy an early morning jog.
H
edcor reaches a milestone in the construction of the 30-kilometer access road related to the development of its
68.8-MW Manolo Fortich Hydropower Project. Right on-schedule and with 12 kilometers already built, progress is starting to stir among communities where the new road passes by in this part of Bukidnon province. At its peak, the building of the newest hydropower project is expected to provide employment for 500 local residents. Rural road construction is like a tide that lifts all boats. Building a road in a rural area boosts the tide even more since the
Follow the road to a bright-lit community Aside from providing renewable energy power through its run-of-river hydro power plants, Hedcor is enabling economic growth in areas where it operates. Today Hedcor has 22 run-of river hydropower plants, 11 are located in Benguet, 9 in Davao, and one each in Ilocos Sur and Mt. Province.
transportation network that it creates can bring progress faster to far-flung communities. Hedcor’s roads provide essential links and wider social benefits, giving isolated communities vital access to schools, hospitals, city centers and regional markets. Indeed, Hedcor’s road development projects demonstrate the BetterWorld mindset of an Aboitiz company, which is all about operating a business that creates lasting benefits for its stakeholders.
Through its access road projects, a network of roads were built like the 45.2-km. artery for its Sibulan and Tudaya hydro plants. During the construction of the Sabangan hydropower project, another 9.5 kilometers were built, which now allows the flow of commerce and mobility of farmers and local residents. It also eases the day-to-day errands of the beneficiary residents and most specially, it significantly facilitates the local farmers in delivering their local produce to different markets.
www.aboitizpower.com
FIRST
The Philippines licks its wounds from Al Gore’s piercing statements
W
Philippines
hen Nobel Peace Prize winner and former US Vice President Al Gore visited Manila earlier in March to train climate change leaders, he dropped a statement that stung the country’s energy chief: “Quit investing in coal.” He urged the Philippine government to put an end to its heavy reliance on coal-fired power stations, especially now that renewable energy prices are rapidly dropping. “In the thinking of many nations, the leadership has not caught up with the new reality. We have the solutions at hand to address climate change. Shift to renewable energy as the age of renewable energy is beginning,” he said in a speech to a 700-strong audience in Manila. Department of Energy secretary Zenaida Y. Monsada flinched at Gore’s remarks and called it “offending.” She says that DOE has already submitted an ambitious target of 70% reduction in carbon emissions by 2030. Stricter rules for running and maintaining coal-fired power plants are also already in place, Monsada says, and storage handling and coal distribution will be seen to improve over time. “We aspire to a balanced energy mix because we can’t be dependent on a single resource. But we need the power now and we can’t stop the dependence on coal-fired power plants at the moment- not when they are committed to remain compliant to rules and standards,” she
adds. Currently, under the energy department’s fuel mix policy, 30% of its energy requirements are being sourced from coal and the same percentage is derived from each of renewable energy and natural gas. Energy from oil-based power plants contribute the remaining 10%. Still number one Coal-fired power plants continue to be the country’s top producer of electricity since 2012, accounting for approximately 39% of the country’s power generation mix- very much in line with the DOE’s fuel mix policy. According to Greenpeace Southeast Asia, as of May 2015, the Philippines has 17 operating coal plants (30 boiler units), with 29 more (59 boiler units) approved by the DOE to begin commercial operations by 2020. “Coal Operating Contracts (COC) for exploration have likewise been awarded to at least 39 companies in 2015. It should be noted that this number does not state which among them are already in operation, with some of them having been awarded with contracts as early as 2005,” Greenpeace says. It adds that according to official statements released by a high-ranking DOE official, the Philippines is looking at a dramatically increased 70% dependence on coal for electricity from 2030
Eyebrows raised over Vietnam’s vow to quit coal plants If China and most of ASEAN are stubbornly sticking to utilising and building coal-fired power plants, Vietnam is slowly backing out of the coal league. Prime Minister Nguyen Tan Dung revealed that the country will stop building coal-fired power plants and shift its focus to gas and renewables to power its electricity grid. He further added in a statement that new energy plans must zero in on protecting the environment and must strictly adhere to “international commitments on cutting emissions.” PM Dung’s announcement raised a few eyebrows among industry players and experts as the revelation to quit building coal-fired power plants was in stark contradiction to the country’s energy plans outlined in 2015. In the outline, it was noted that the share of coal in the country’s fuel and energy mix is predicted to rise from 36% to a whopping 56% in 2030. According to Nicole Ghio, senior campaign representative at green group, Sierra Club, Vietnam is among the top 30 locations of completed coal power with new capacity of 8,148MW in 2010-2015. It also ranks third worldwide in the amount of coal capacity under construction. “With 40.8GW proposed and another 12.1GW under construction, Vietnam has the largest coal pipeline in the region, and in many ways anchors the dream of expanding coal in southeast Asia. It also may have the most unstable pipeline,” she adds. CoalSwarm adds that although Vietnam’s 13.9GW of coal projects have been cancelled, 14.8GW have been permitted. 10 ASIAN POWER
Zooming in on the real issue
to 2050. Like its neighbouring countries, the Philippines turns to coal because capital outlay for fossil fuel plants is relatively cheaper than RE plants. Emmanuel P. Bonoan, vice chairman and COO at KPMG R.G. Manabat & Co., says. Fuel costs have also decreased in the past few years, which makes thermal power plants more competitive. “Conventional power plants are also needed to keep the balance in the grid, especially when RE comes in the form of intermittent wind, mini-hydro and solar sources,” Bonoan said.
Global coal power tracker
Source: CoalSwarm
Historical and expected electric generating capacity in Vietnam (2010-30)
Source: International Atomic Enegy Agency, 2013 Vietnam Country Nuclear Power Profile
ASIA POWER WEEK 3 DAYS u 3 SHOWS u 1 VENUE 20-22 SEPTEMBER 2016 KINTEX, SEOUL, SOUTH KOREA
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Official Publications
EVENT COVERAGE: AP UTILITY FORUM 2016 - manila
Exciting times for renewables are just around the corner
Is there more harm than good in the Philippines’ changing power landscape? Industry experts throw their insights at the inaugural Asian Power Utility Forum 2016’s Manila leg.
I
f power project financers are still getting the market jitters, they have every reason to be as risks have been continuously bombarding them 15 years after the Electric Power Industry Reform Act was put in place. This is one of the hot industry topics discussed in the inaugural Manila leg of Asian Power Utility Forum 2016. “RA 9136 or Electric Power Industry Reform Act (EPIRA), enacted on 8 June 2001 mandated the transfer of NPC generating assets and management of NPC’s liabilities in the main grids to the Power Assets and Liabilities and Management Corporation (PSALM) and reduced the mandate of NPC to missionary electrification, operation of NPC generating assets pending disposal by PSALM,” Urbano C. Mendiola, Jr., Vice-President, Corporate Affairs at the National Power Corporation explained in a session he led. Jaime T. Azurin, CFO and EVP for Business Development & Commercial at the Global Business Power, added that EPIRA’s basic goal is to create competition among players and bring down electricity rate for consumers. Indeed, it was able to foster a more competitive environment for the industry players as post-EPIRA and after the privatisation of a number 12 ASIAN POWER
How do you sell the idea of portfolio of assets considering that banks were used to single off-takers and take-or-pay arrangement?
of NAPOCOR assets in 2001, generators could deal directly with distribution utilites. Mendiola also commented that further, it institutionalized the provision of a “Universal Charge” with the following purposes: stranded contract cost, stranded debt, environmental charge, and missionary electrification. Other side of the fence However, these postive changes entailed quite bigger flip sides. According to Lawrence Fernandez, Head of Utility Economics at Meralco, the Philippines used to be second to Japan in the highest power prices list. This ranking reveals two things: 1.) Philippine prices are close to the prices in Japan, Singapore, and Australia, where retail power prices reflect what it costs to provide electric service, and; 2.) Where prices are lower than in the above countries, eg, Indonesia, Malaysia, Thailand, power service is subsidized by the government, so consumers pay less than what it actually costs. These he said in a panel discussion where he is joined by Janssen Dela Cruz, AVP Business Development, GBPC; Roderick Padua, Director, Corporate Planning Office, NEA, and; Luis Miguel Aboitiz, EVP and COO, Corporate Business Group, Aboitiz
Power. Azurin also pointed out in a session he led that one of the drastic transformation the reform brought was the change from a single-off taker to mutliple off-takers. Market risks have proliferated in the industry as private distribution utility numbers hit 21, electric cooperatives are at 123, and commercial and industrial customers are at 1,402 from a previously government-owned scenario. “How do you sell the idea of portfolio of assets considering that banks were used to single off-takers and take-or-pay arrangement? How do we mix portfolio assets and how to mix commercial and industrial customers given that they have different demands, load factors, electricity usage?,” he rhetorically presented at the session. He added that this created additional business costs and issues with the Bureau of Internal Revenue. Another hot topic discussed in the forum was the current status of the renewable industry. Ernesto B. Pantangco, vice chairman of the National Renewable Energy Board, revealed in his session that despite the RE law implemented in 2008, its contribution to the national mix suffered a declining trend. “It has dropped from 44% share in 1999
EVENT COVERAGE: AP UTILITY FORUM 2016 - manila to just 26% in 2014,” he said. “But exciting times for RE are still in store as we aim to push the mix to 30% by 2030.” Tom O’Meara, general manager for Energy Portfolio Management Solutions at ABB, illustrated the status of RE in North America and Europe and how it could reflect and affect the Philippine market. Philippine power sector’s “nature” The Philippines actually has more utilities with over 140 than all of ASEAN neighbors combined, according to Meralco’s Fernandez. “But we’re still smaller than Indonesia, Malaysia, Thailand in terms of the market. In terms of Manila, you can fit the power market of Singapore in 9000 sq km and that’s Meralco’s scope,”he says. Aboitiz warns though that when it comes to predicting energy supply and demand, the latter is usually easier to project--it’s just off by around 1 to 1.5%. The real difficulty lies in projecting supply. “Firstly on solar, you can’t count how many people are building solar panels in their houses or how much electricity solar panels will produce. Secondly, while you may see a lot of power plants being built, you don’t know whether the construction will be delayed or whether the commissioning of those power plants, when poorly built, will take longer than 3 or 4 months. sometimes. I have seen that they take 1.5 years of commissioning and still we’re operating like they were still commissioned,” he adds. The other problem, he notes, is that although there are power plants being built, it is not sure whether the transmission lines have the right of way. There are several cases wherein plants are ready to run but the transmission line has not started construction. Dela Cruz of GBP adds that with regards to their own operations, theirs are centered in 2 major islands: Panay Island and Cebu. “We actually built in 2 locations because it could have been more efficient to build one massive installation in one island but we could not transmit that power because the Visayas has a very weak grid. It does not have the 500MW backbone that Luzon has,” he explains. The other thing that’s unique to GBP is that when they put the coal plants in Iloilo, there was very little demand because there was a lot of electricity coming from the diesel plants. But the moment the power was available, it essentially enhanced the environment for investments.
subsidized connection side. Most of the places that have no electricity are far-off or at the end of the grids. Therefore, it is reliant on utilities on what they call SPUG areas or those at the edges of distribution lines,” Aboitiz claims. NEA’s Padua states that yes, the government is still on track. “As of December last year, the level of electrification is at 88.83%, so we’re just off by 1.17%. We’re targeting 1,003,000 consumers by the end of 2016, so when 2017 comes we’ll hit the target by 90%. Now the DOE has identified several programs for both on and off-grid players for household electrification,” he backs up. Fernandez, on the other hand, explains that in areas that Meralco handles, there are still certain spots in the fringes that need to have access to electricity. “Using government’s statistics, we estimated around 170,000 households in the Meralco area that still do not have access to electricity. For this we might have to think out of the box. We’re looking at smart grid tools or microgrids or other off-grid tools that might help economically bring electricity to those areas,” he explains. Subsidies in large-scale plants Is there political room to be able to better facilitate more industrial power and have it subsidized to some extent? Aboitiz answers that the problem with subsidies is that they’re easy to give. The problem is who’s going to pay for it? “However, I do agree if you really want to attract industrial firms to the Philippines, you can’t give subsidies. You can’t give subsidies to all 10,000MW so that the lower electricity rate will attract somebody else,” he says. Dela Cruz chimes in that one thing that he’s noticed with respect to Philippines versus other countries is that it’s normal in others to have an 800MW plant.
By not streamlining the process, it keeps out the smaller developers, it makes barriers for them to enter the market.
“In Iloilo, we have an 82MW plant and that’s because of the infrastructure where the power is going to go. You can’t plug an 800MW plant there because you’re going to burn the grid. And just like in transportation, you ride the bus you pay Php10, you ride the taxi you pay Php40. So rather than subsidies, we need a robust infrastructure that will allow for economies of scale and bigger generation plants,” he argues. What’s the antidote, then? Dela Cruz suggests that stable regulatory environment will encourage investments in the power sector along with ease of the investments. “It doesn’t matter whether you’re a 5mw plant or a 500mw plant, you will have to get all the permits. So for those investing on 20MW and below plants, they are going to incur the same costs as the guy who is planning to invest in 300MW plants. By not streamlining the process, it keeps out the smaller developers, it makes barriers for them to enter the market,” he says. In comparison to other countries, like Indonesia, Malaysia, and Thailand, Fernandez says that the Philippines is a highly unbundled industry. “The problem now with the philippines is coordination still. We still need to continue to work together if we are to achieve our common goal of providing reliable and efficient energy service.” Padua agrees and says that if players just follow the provisions of the law that created the competitive environment EPIRA, then everything should go as planned by the legislators. “But somewhere between the years, there’s been some constraints that are peculiar to the distributor section, generation side. All we have to do is follow the intent of the law and I think we can proceed as it has been planned.”
Government plans still on track? If there’s one big question hanging in the room, is the government’s electrification plans still on track? “I think that’s an issue on the distribution side and the ASIAN POWER 13
Country report 1: China
The power giant must focus on establishing a “very friendly and trustworthy“ image
China urged to work hard on building “neighbors’ trust” for Asia’s Super Grid
Take away China from the equation, and the massive plans for interconnecting Asia’s power sector could be shaky.
I
f China looks like it’s cooking up another big surprise for the power industry, then what you see is what you get. It was by end-March when the State Grid Corporation of China, Korean main utility and power provider KEPCO, big Japanese renewable energy developer Softbank, and Russian grid operator PJSC ROSSETI inked a memorandum of understanding on the Asian Super Grid. The signing has formally sealed their support and interest in building a massive interconnected grid across Asia. They will be partnering with each other to
Long-distance grid connections, if properly implemented, can make 100% renewable energy a reality for the region.
Potential effect of NEA’s new rules on coal-fired capacity
Source: Greenpeace International 14 ASIAN POWER
implement feasibility studies for a grid in the Northeast Asian region and plans for the super grid. The chairman of the State Grid Corporation of China Liu Zhenya is also chairman of Global Energy Interconnection Development and Cooperation Organization (GEIDCO). Softbank chairman and CEO Masayoshi Son, who recently joined GEIDCO as vice-chair, is also the founder of the Japan Renewable Energy Foundation. According to SoftBank spokesperson Kenichi Yuasa, Asia Super Grid(ASG) was suggested by CEO Son to promote the use of plenty renewable energy resource which is produced in Asia and share the electricity from renewable energy to other countries. One of the beneficiaries will include SBG’s wind power project in Mongolia. This would promote introduction of renewable energy power in other parts of Asia. “Global Energy Interconnection (GEI),suggested by SGCC chairman Liu Zhenya has fundamentally the same concept in mind, but his scope was not only in Asia, but all over the world. So ASG would be the first action of GEI concept,” Yuasa says.
Northeast Asia Super Grid’s goals According to Sung-yun Hong from KEPCO, the Supergrid is a highly developed electrical grid, which is operating various energy sources like electric power transaction, new renewable energy synthetically and a wide area electrical grid constructing for interchanging big power. “The Northeast Asia region occupies about 20% of world population, area, GDP, trade, and is emerging as a world best global market because of continuous economic growth, and will be counted on as a global leader. The Northeast Asia region’s electrical grid has different frequencies, system sizes and stances about constructing Northeast Asia supergrid among nations, but if Northeast Asia supergrid is realized, electric power field will lead opportunity of accompanied development. In this paper, enforcement situation of constructing Northeast Asia supergrid, technical issues and research promotion method will be described,” Hong adds. The Super Grid also aims to harvest renewable electricity in areas of very good resource conditions and get it supplied to the centers of demand, says Dr. Christian Breyer, professor for solar economy at the Lappeenranta University
Country report 1: China Annual generation and demand diagram for the area-wide open trade scenario for Northeast Asia
Christian Breyer
Lauri Myllyvirta
Source: D. Bogdanov, C. Breyer - Energy Conversion and Management
of Technology. “But apart from this, it also aims to balance the energy requirements throughout different regions and within the year due to seasonal variations.” Lauri Myllyvirta, senior energy campaigner at Greenpeace International further explains that the basic idea is connecting the excellent renewable energy resources of Gobi Desert and possibly other sparsely populated locations to demand centers across Asia. “Long-distance grid connections, if properly implemented, can make 100% renewable energy a reality for the region with lower costs and easier integration,” he says. Dr Breyer also adds that the existing high voltage alternating current (HVAC) power grid will be upgraded by high voltage direct current (HVDC) power lines, which are already heavily used in China. “The HVDC grid would evolve to a kind of overlay grid and interconnect all major centers of renewable energy supply and electricity demand from Mongolia to Japan, via China and Korea. However, our research indicates that still about 80% of overall electricity demand will be generated and consumed locally within a few hundred kilometers, only the rest may be transmitted for larger distances.” Yuasa from Softbank also explains that ASG’s primary goal is to supply the electricity produced by renewable energy sources like Mongolia but with more stability and less costs. Second goal is to solve or shrink the problem on instability of renewable energy power supply through interconnection among Asia’s huge lands. “This means we can have electricity day in and day out if grid is connected. The promotion of renewable energy power in Asia will effectively help solve global warming problem and, to some extent, other environmental problems,” he says.
China’s role in the development Myllyvirta says that China is the biggest investor in the world into long-distance UHV power transmission. Unfortunately, in China’s UHV projects, far too much priority is given to dirty coal-fired power plants. There are major market and institutional barriers to effective use of installed renewable capacity in China, with curtailment rates shooting up recently. “Resolving these will be key for China to play a constructive role in developing the grid and benefiting from it.” he explains. China and State Grid Corp of China is the driving force, Dr Breyer says. “The entire approach does not make any sense without China in the key role. There seems to be a tremendous movement, led by State Grid Corp of China towards an energy system dominated by renewable electricity, mainly solar photovoltaics and wind energy, which needs to be transmitted by using grids. The current momentum is high and could further increase the annual capacity installations in solar photovoltaics and wind power.” China’s dedication to clean energy Recently, China’s central government formally announced the policy of suspending new approvals in 13 provinces and new construction in 15 provinces. “China is finally beginning to clamp down on its out of control coal power bubble,” says Myllyvirta. “However, these new measures fall far short of even halting the build-up of overcapacity in coal-fired power generation, let alone beginning to reduce it.” China has made enormous strides in deploying renewable energy. However, Myllyvirta says there are
Sung-yun Hong
two important things to note with regard to the Super Grid: China will have enormous overcapacity in coal-fired power for a long time to come, as the newly announced policies, radical as they seem, won’t even suffice to stop the growth of overcapacity. Secondly, China’s own UHV project is currently being set up largely to send coal-fired power from the western coal industry centres to eastern demand centres. “This means that China will need to make a clear and firm commitment to designing the Super Grid around renewable sources to make sure it’s not used to export polluting energy and dump overcapacity on neighboring countries,” he recounts. It is well-known that the societal costs of coal are very high, adds Dr Breyer, mainly due to heavy metal induced massive air pollution converting large Chinese areas into toxic places AND climate change problems. “It is obvious that a sustainable and least cost solution is based on solar photovoltaics and wind energy. Coal is not competitive anymore, at all, in particular taking into account the full societal cost,” he says. Future in Northeast Asia Super Grid Myllyvirta believes that China’s coal-fired power generators and grid operators still have a long way to go to operate a modern power market where low-cost renewable sources are given full priority and coal-fired power plants adjust. The main challenges may be not in the technical or economic field, but in the field of policy. Dr Breyer warns that China needs to be a very friendly and trustworthy partner for the neighbouring countries, otherwise they would not accept on being dependent on Chinese (renewable) electricity supply. “This trust needs to be provided by China. Within China, it needs just to be built,” he adds.
Northeast Asian regional stratification and grid configuration
Source: D. Bogdanov, C. Breyer - 10th International Renewable Energy Storage Conference ASIAN POWER 15
sector report: nuclear
Japan’s problem then is the rest of Asia’s burden
Fukushima five years on: What lessons should Asia take away from the disaster? Half a decade later, were other Asian countries able to learn from what happened in Japan and its nuclear mishap?
O
n 11 March 2011, the Tohoku earthquake measuring nine on the Richter Scale struck at a depth of 30 kilometres some 60 kilometres off the east coast of the main island of Japan. It was the fourth strongest earthquake in recorded history, shifting the entire island of Honshu several metres toward the epicentre, and the most powerful to ever hit Japan. The results were cataclysmic, nearly 16,000 fatalities, over 6,000 injuries and several thousand reported missing. Aftershocks continued for four years. However the real lasting impact of the earthquake was to follow. Within one hour, a westerly tsunami struck the east coast with the low-lying Fukushima Daiichi Nuclear Power complex right in the middle of its path. The Tohoku Tsunami comfortably breached the installation’s 10-metre protective seawall and flooded the housing of the back-up generators incapacitating the cooling mechanisms to three of the six reactor units. Within hours nuclear meltdowns and explosions resulted, forcing tens of thousands from their homes – many of which may never be able to returned to the poisonous landscape. Fukushima was a disaster waiting to happen. After effects The human toll from the meltdown could have been far worse, except for a tremendous disaster response from Japanese emergency services, and the fact that many had been evacuated due to the earthquake and tsunami. Fatalities and injuries occurring directly due to the power plant disaster, as opposed to the dual natural disasters, were minimal. Japanese emergency response teams quickly evacuated 370,000 people from exclusion zones that radiated up to 20 kilometres from the plant. Generally speaking, the health risks from radiation exposure were considered low by WHO experts; nonetheless, enough time has not passed for all effects to be known and understood. 16 ASIAN POWER
Many experts do warn however, that there are so many confounding uncertainties and we are still too temporally close to the accident that it is difficult to make useful predictions.
Outside of Japan, the effects are believed to be minimal, as were the effects on the bulk of evacuees. Reports using conservative estimates indicated that the most at-risk group, i.e. infants, in the highest contaminated areas have a 1% higher lifetime risk of developing cancer than the average control subject. Even based on these conservative estimates, some suggest that zero or close to zero deaths will result from the most common cancers (leukemia and thyroid) caused by radiation exposure. Many experts do warn however, that there are so many confounding uncertainties and we are still too temporally close to the accident that it is difficult to make useful predictions. Some food sources tested registered insignificant but measurable increases in the level of radiation. Unmitigated failures Nonetheless questions were asked regarding the almost complete failure of safeguards - understandably public confidence was shattered. Worryingly, almost three months elapsed before the Japanese government admitted that meltdowns had even occurred. Immediate questions revolved around lack of foreseeability. How could the tsunami have so easily overwhelmed the seawall (or rather, why was the seawall so low on a coastline situated on a Pacific Ring of Fire hotspot – especially following the 2004 Boxing Day Tsunami. How could vital back-up generators be low lying? The Commission of Inquiry found that the incident was indeed “man-made”, with all consequences deemed foreseeable. The Tokyo Electric Power Company (TEPCO), the operator of Fukushima Daiichi; the domestic regulator; and governmentrelated nuclear energy industry bodies were all held accountable by the independent investigation commission, for unmitigated failures in responsibilities and lacking reasonable foreseeability. The report went as far as to accuse the relevant stakeholders of
sector report: nuclear Extent of the nuclear disaster
Nuclear power plants plotted across Asia
Source: International Atomic Energy Agency
Source: www.nuclearforum.asia
failing to build even the “most basic” of safeguards, a chilling and worrying accusation levied against a culture that prides itself on efficiency, technical competency and high standards of public safety. Ironically, 18 months after the disaster, TEPCO finally admitted that it failed to implement proper safety measures because of an apprehension that doing so would attract negative public attention – ironically, the exact result of not implementing tried and tested safeguards. Even internal structural flaws in the risk management framework were exposed. Fukushima’s insurance was underwritten by the Japanese government, not independent, multinational insurance companies, organisations whose underwriters would have demanded significant improvements to disaster avoidance/prevention factors and processes, and crisis procedures. A positive legacy There has to exist a long-term, consolidated set of positives and lessons. With respect to the Japanese context, the failures highlighted in the Commission’s inquiry form a volume of warnings for incumbent and newcomer nuclear power nations. It is an unfortunate reality but it took a disaster like Fukushima to force the worldwide nuclear energy industry to be hyper-reflective and undertake widespread analysis and sometimes overhauls of safety protocols and procedures. This is a tremendous positive however that cannot be discounted. For instance, in the United States, where public opinion generally favours nuclear power and recognises it as a safe and efficient alternative to fossil fuel dependence, regulators, the general public and the industry itself is also extremely watchful. This is the culture that must infuse the worldwide industry. Within a short period following the Fukushima accident, US nuclear leaders drafted “The Way Forward”, a paper aiming at mitigating the risks of “a Fukushima” occurring on US soil. A number of other incumbent nations have followed suit. Such studies are designed to take a long hard look at existing protocols and perhaps make often expensive and time-consuming improvements in an apolitical and honest environment. The US study considered strategies for handling crises and the immediate response. Perhaps the greatest take-home message is however, that safety culture must be reviewed. The Fukushima Daiichi accident occurred because of a natural disaster but it was massively exacerbated by failures in the risk management framework, a general cultural fear of escalating the communication of serious problems and importantly, a generally lax attitude fuelled by optimistic bias regarding the design of the plant itself. However, the lessons from the incident all form a fantastic positive knowledge bank for current and future safety frameworks, so that at the very least public safety with respect to an already extremely safe mode of power generation is further
strengthened.
Collin Koh Swee Lean
David Repka
Egor Simonov
Lessons learnt Experts suggest that three key lessons were learnt from the Fukushima experience: 1) The importance of preparedness. In the case of Fukushima, the combination of insufficiently high protective breakwaters and the fact the emergency diesel generators were below sea-level created a perfect storm waiting to happen. Yes, the tsunami was a one-in-a-100-year incident, but the low sea wall and the position of the back-up generators nevertheless represented poor planning and poor preparedness – it was only a matter of time. 2) A continuous assessment and revision of safety culture. Multiple stakeholders must be invested in keep nuclear energy use and facilities safe and secure. The industry must uphold the highest standard and must not view security merely as the responsibility of governments. All stakeholders must be reflective, self-challenging and watchful of other stakeholders for the good of the industry. Emergency procedures must be well-practised and cutting edge. 3) The importance of crisis and risk communication. Not only must stakeholders communicate for the betterment of the industry in general, but so must all the elements of a particular installation, with updated and well-drilled crisis response procedures. This leads to a point regarding the broader issue of human capital development, well made by Collin Koh Swee Lean, associate research fellow at Singapore’s S. Rajaratnam School of International Studies, “The nuclear energy industry needs to pay greater attention to the supportive aspects such as infrastructure development and human capital investments. Providing nuclear energy to countries that can well afford it financially is one thing, but it’s quite another if the country concerned does not possess the requisite infrastructure and human capital pool to support this energy use.” World Nuclear Association’s senior advisor for India, Middle East and southeast Asia, Shah Nawaz Ahmad, says that these lessons must be used to “refurbish the image of nuclear power in the public mind. The Fukushima incident,” he says, “would not have got the press mileage if the event could have been contained within the station premises and salvage work had gone apace.” A more proactive international regime for risk assessment and disaster prevention, mitigation and management needs to be put in place, and this is required not only for nuclear, but other sectors too. On the other hand, to anti-nuclear NGOs, Southeast Asia needs to be ready for a nuclear catastrophe if countries in the region build NPPs. Julius Cesar I. Trajano, associate research fellow at the RSIS, ASIAN POWER 17
sector report: nuclear NTU Singapore, writes that contrary to the claims by nuclear companies, anti-nuclear NGOs deem nuclear power an unclean source of energy as it generates radioactive waste. “It is also extremely dangerous as a single accident in one NPP can affect the wider region,” he adds. They also cite interminable radioactive nuclear waste as the primary reason why ASEAN states should reject nuclear power. Nuclear waste remains radioactive for thousands of years, making nuclear power inherently and irredeemably hazardous. Anti-nuclear NGOs strongly encourage countries to invest in the development of renewable energy, which has emerged as a safe, flexible and easily deployed energy source with a lower carbon footprint than nuclear power. They assert that as most governments in the world are phasing out nuclear energy and investing in renewable energy and energy efficiency technologies, Southeast Asia should follow this trend and reject nuclear energy. If people adopted sustainable energy efficiency measures, they argue, this would meet 20 per cent of global energy demand, making nuclear energy irrelevant. However, phasing out nuclear power has proven to be too expensive. For instance, Germany’s plan to transform its energy system to one reliant on renewable power as it phases out nuclear energy could cost up to €1 trillion. Renewables and nuclear energy should not be viewed as competing energy sources. They can co-exist and complement national energy mixes. Nuclear energy allows nations to buy time while waiting for renewable technologies to be fully developed. Is Japan ready? The impact on the rest of Asia Japan’s return is an excellent signal to ASEAN, according to Egor Simonov, Rosatom Asia’s director, however it is not without its challenges. “This can only happen if these countries show an unambiguous political commitment to the development of national nuclear power programmes. We see several major challenges that may hamper the development of these programmes, in particular, issues of safety, financing, infrastructure development and public acceptance.” David Repka, a partner at specialist US energy law firm Winston & Strawn, agrees, adding that, “Japan is an experienced nuclear operator and is ready to resume operations. The operators and regulators have completed a rigorous self-examination process and have made significant improvements in the plants and the regulatory oversight programme since Fukushima.” Undoubtedly China and others will learn lessons from Fukushima’s experiences and aftermath, and incorporate those lessons into their nuclear programmes; however many experts like Simonov and Repka are concerned that with respect to new Location of Fukushima I Nuclear Power Plant, Japan
Source: OpenStreetMap Contributors
18 ASIAN POWER
Not all aspirants may have the proper infrastructure and regulatory mechanisms to implement such complex programmes effectively.
nuclear entrants, such as certain nations in southeast Asia, it may still be too soon to tell whether the regulatory frameworks and oversight programmes are sufficiently developed. “[Nonetheless] Fukushima has taught [us] important lessons, particularly with respect to the importance of a nuclear safety culture.” Koh shares Repka’s cautious optimism regarding nuclear’s immediate future in Asia. “Generally, for the existing nuclear energy users in Asia, the mastery of nuclear energy technology can be said to have matured, whereas the new aspirants are in various stages of getting towards their dreams,” he says. “However, we need to note that not all aspirants may have the proper infrastructure and regulatory mechanisms to implement such complex programmes effectively.” Of course, the fact that not all aspirants are completely and fully prepared to take on nuclear generation has repercussions to nuclear governance, safety and security. However, Koh is quick to add, that with proper oversight from international bodies such as IAEA and also proper tutelage from established nuclear energy vendor states, such as the U.S., Russia and even Japan and South Korea, these new aspirants may still be capable of properly implementing their programmes in a safe manner. If we remain mindful of differing national contexts, Asia is ready for further expansion into nuclear. In view of the challenges to nuclear power development plans, ASEAN states interested in using nuclear energy need to assure their neighbours that they can safely operate their NPPs in the future. To nuclear energy companies and vendors, Southeast Asia is ready to pursue nuclear energy and should do so. Trajano believes that they claim that nuclear energy can help Southeast Asian nations achieve the twin goals of strengthening energy security and reducing greenhouse gas emissions. The nuclear industry is confident and optimistic that countries in the region can safely use nuclear power given the significant improvements made in nuclear safety since the Fukushima accident. The lessons learned from the accident have helped nuclear companies intensify the safety and security features of nuclear reactors. They also cite the deep geological nuclear waste disposal technology currently being developed in Finland and France to serve as a permanent solution to the longstanding problem of accumulating high-level radioactive waste. A very safe future “There’s nothing fundamentally wrong with nuclear energy technology,” says Koh. He suggests that if we delve into the postFukushima government report, it does not escape from serious scrutiny that a key reason behind this disaster has to do with regulation and oversight. “The Fukushima debacle may have been a sorry affair, but it doesn’t nullify the benefits one can obtain from nuclear energy.” Nuclear energy has witnessed generally safe operations throughout the decades, however, as nuclear energy becomes more widespread as a “generally safe” alternative to long-term destructive and unsustainable fossil-fuel use, human capital development, safety and security protocols, stakeholder investment, communication and accountability must also be of the highest standard. These are the lessons from Fukushima: important and valuable lessons which should be viewed as positives flowing from the disaster, and that should be built on and certainly never forgotten. However, there are still significant regional concerns over nuclear safety and security in Southeast Asia. As some ASEAN countries plan to pursue nuclear power, they need to create and maintain a pool of local nuclear professionals with actual relevant experience in the nuclear industry. Trajano also says that furthermore, well-trained and experienced nuclear professionals are also crucial in institutionalising competent and independent safety regulatory bodies. With reports from Simon Hyett and Karen Mesina
ASIAN POWER 19
Country report 2: india
“If people can pay, there’s a way” is India’s new power market mantra
India starts peppering its power sector with policy reforms to stimulate investments The government is dead serious in molding and remolding market rules to make sure money keeps flowing in.
T
he energy sector in India has seen a transformational change with progressive policy-level changes and effective implementation of directives. These changes promise enormous opportunities for various stakeholders and market players. However, deep thinking on various aspects of policy and regulatory interventions and their long-term implications will help in taking informed decisions and contribute in developing the sector. “Energy is one of the key enablers for the country’s economic development,”
Proposed provisions and interventions will modify the energy sourcing mix, enhance clean energy generation, increase power supply to households.
Installed capacity for different sources of power2016* (GW)
Source: Ministry of coal, NHPC, CEA, Corporate Catalyst India, TechSci Research 20 ASIAN POWER
remarks PwC power & utilities partner Yogesh Daruka. “With the certainty in policy-level interventions, the economy is bound to propagate and the demand for energy will inevitably surge.” Other than economic growth, human developmental aspects like poverty reduction, employment generation are also considerably dependent on secure energy supply. It has been noted that the power sector is a major consumer of energy and it has a significant impact on economic developments and social welfare. Per-capita electricity consumption of the country has now crossed 1,000 kilowatt-hour (kWh), but still, it is far below the average global consumption. Stimulating the energy sector Despite the efforts to generate more electrical energy by using multiple energy sources, the country has recorded a shortage of 3.6% of demand in FY15, according to PwC research. As per the Central Electricity Authority’s (CEA) Load Generation Balance Report 201516, in spite of the expected capacity addition of 20 GW, the country will probably experience energy shortage. India’s government has been supportive to growth in the power sector,
however. It has de-licensed the electrical machinery industry and also allowed 100% foreign direct investment (FDI) in the sector. Total FDI inflows in the power sector touched US$ 9.7 billion during the period April 2000 to May 2015. Further, Daruka notes that in the recent past, policymakers have initiated multiple steps towards improving the power sector output and benefit consumers. These include the proposed amendment to the Electricity Act, roundthe-clock power supply, the Coal Mines Special Provision Ordinance, coal auction and allocation, auction of natural gas, Integrated Power Development Scheme, Deendayal Upadhyaya Gram Jyoti Yojana, aggressive renewable energy generation targets and massive transmission connectivity plans. “Proposed provisions and interventions will modify the energy sourcing mix, secure fuel for power generation, bring efficiency and competition in the sector, enhance clean energy generation, increase power supply to households, strengthen the grid, generate business and employment opportunities,” says Daruka. “This will impact electricity tariffs, operations of utility, and environmental conditions, and increase accountability of stakeholders
Country report 2: india Solar power could achieve grid parity with conventional power by 2016 in the accelerated scenario
Vikas Kaushal
Yogesh Daruka
Source: AT Kearney Analysis
and consumers.” Huge power generation capacity The India Brand Equity Foundation notes that India has the fifth largest power generation capacity in the world. Installed capacity stood at 272.5 gigawatts (GW), as of FY15. Thermal power, the largest component, was 189.3 GW, followed by hydro 41.6 GW, renewable energy 35.8 GW and nuclear 5.8 GW. India’s total power generation capacity has increased at a Compound Annual Growth Rate (CAGR) of 9.4% over FY09–15. India is the third largest producer of electricity in the world. In FY15, India generated 1,048.7 terawatt-hours (TWh) of electricity. Over FY10–15, electricity production expanded at a CAGR of 6.3%. As per the 12th Five Year Plan, India is targeting a total of 88.5 GW of power capacity addition by 2017, of which, 72.3 GW constitutes thermal power, 10.8 GW hydro and 5.3 GW nuclear. Renewable energy is fast emerging as a major source of power in India. Wind energy is the largest source of renewable energy in India. It accounts for an estimated 60% of total installed capacity (21.1GW). There are plans to double wind power generation capacity to 20GW by 2022. India has also raised the solar power generation capacity addition target by five times to 100GW by 2022. With many bilateral nuclear agreements in place, India is expected to become a major hub for manufacturing nuclear reactors and associated components. Foreign participation in the development and financing of generation and transmission assets, engineering services, equipment supply and technology collaboration in nuclear and clean coal technologies is also expected to increase. As of June 2015, all-India generation
capacity stood at 275 gigawatts (GW) with a contribution of 69% from thermal energy, 15% from hydro, 13% from renewable, and 2% from nuclear sources, based on PwC data. Pushing for renewable energy More than any other source, however, renewable energy, especially solar, will become a mainstay segment in generation portfolio, without government support, sooner than expected. “In the eyes of many, renewables remain a futuristic, subsidy-dependent fringe segment of the power sector,” notes Vikas Kaushal, partner at A.T. Kearney in Gurgaon. “However, this is changing. Renewable energy is fast becoming a mainstay in the generation segment.” Several central- and state-level incentives, including tax holidays, capital subsidies, and attractive feed-in tariffs, have driven growth. Currently, renewable energy contributes to roughly 10% of installed generation capacity and 5% of total power production in India. However, the potential of renewable energy has not been fully tapped, even for the most advanced segments (including wind, small hydro, and biomass). The government has set aggressive growth targets for renewable energy (particularly solar) even as many cynics consider these targets highly ambitious and unattainable in India. While project execution and policy implementation issues exist, three factors could potentially redefine the future landscape. A new order? First, renewable energy will achieve cost parity with conventional sources as fuel costs rise. Capital costs have declined over the past few years, driven by technology advancements, economics of scale, and the entry of fully integrated
manufacturers. Since 2008, prices of solar modules have declined more than two-thirds, and polysilicon prices have dropped from a high $190 per kg in 2008 to $50 per kg in 2011. At the same time, conventional sources of power have become more expensive, due to higher domestic coal prices and greater dependence on imported coal. “These rising fuel prices coupled with rapidly falling solar PV costs mean that solar power prices could equal prices for conventional sources as soon as this year. This would significantly alter the market dynamics, shifting focus toward renewable energy,” says Kaushal. Next, customers are demanding cleaner energy. State discoms must meet renewable purchase obligations while many corporations have internal sustainability targets that are likely to increase the demand for cleaner energy. In developed markets, more retail customers are demanding green energy in their households, and Indian customers will likely follow suit as they become more attuned to environmental concerns. In other words, the growth of renewable energy will not just be driven by the government “push” model but also by the “pull” of specific customer segments. Lastly, a well-developed ecosystem is currently forming. Turnkey solutions from leading global and Indian players are allowing for the setup and operation of renewable projects. A strong ecosystem reduces risk, especially relevant for renewable energy due to the unpredictable nature of projects and their infrastructure and operational challenges. Re-thinking older models What do these changes mean for India’s power market? “For one, players with long-term aspirations must develop a renewable energy strategy with clearly developed long-range perspectives and definite positions on what to do in the short term,” notes Kaushal. “Early adopters at the utility scale may face uncertainties, but many of them will eventually emerge as the winners in the sector, as players without a renewable energy plan could get caught on the wrong end of the development cycle.” At the global level, conventional companies understand this and have altered their business models accordingly. For example, AES has increased its share of renewable energy in the United States from 0 to 13% in the past 10 years. Also, for associated segments such as equipment manufacturing and engineering, procurement, and construction, renewable energy will provide continued growth opportunities. ASIAN POWER 21
EVENT COVERAGE : AP UTILITY FORUM 2016 - JAKARTA
Indonesia trips over funding issues on its mission
Where will Indonesia get US$70b for its ambitious 35GW capacity addition plan?
Investors are keen on the market, but experts warn that the program might stumble if funding issues are not resolved.
I
f Indonesia wants its ambitious 35 GW power capacity addition plan to succeed, then it needs to clean up its act when it comes to providing funding options for utilities and independent power producers (IPPs). Despite high investor interest, appropriate access to capital and inconsistencies in government policy post a significant stumbling block which can hinder the success of Indonesia’s steep capacity addition target. “Great potential projects are happening under the 35 GW program, but there are quite a few difficulties as well,” says Gilles Pascual, Partner, Infrastructure, Ernst & Young, speaking at the recentlyconcluded Asian Power Utility Forum in Jakarta. “Coordination is key to make such a large program happen. You need all stakeholders in the room—you need the government side, you need PLN [Perusahaan Listrik Negara], you need to have investors, and you need to have lenders.” Funding roadblocks One of the biggest challenges to Indonesia’s 35 GW plan is access to funding. Although both foreign and domestic investors are extremely keen to take part in the capacity addition plan, they are hindered by challenges including 22 ASIAN POWER
Investors need to get comfortable that once they get this massive amount of rupiah, in a single day they can go to the market and exchange it in US dollar.
inconsistent government support for projects, lack of assurance regarding rupiah foreign exchange rates, and the absence of alternative funding solutions such as an active bond market. “There are different forms of government support for PLN obligations. There’s the BVGL [Business Viability Guarantee Letter], the PPP guarantee letter…it varies from deal to deal. There is no consistency. And that is something that the investors are still trying to get comfortable with,” Pascual says. “You have different investors for different deals. If you have BVGL or PPP guarantee, the entire investor universe will be comfortable. For a deal without a guarantee, not all investors will be comfortable to take on the risk,” he adds. In recent tenders, PLN had taken the view that they will pay using the Indonesian rupiah. Although deals will still be indexed to the US dollar, payments will be made solely using the local currency. As a result, projects run the risk of losing investors who are used to closing deals using the greenback. “Investors need to get comfortable that once they get this massive amount of rupiah, in a single day they can go to the market and exchange it in US dollar at roughly the same rate without leakage,
without losing on the exchange rate,” he says. “The rupiah is freely convertible, it’s freely transferable, the FX market every single day is in the hundreds of millions of dollars. There is no reason in my view that investors can’t get comfortable with this. But they are currently talking to banks trying to understand how the FX market works to see if that is something they can work with,” he notes. Geothermal bears the brunt The insufficient access to funding is keenly felt in the country’s geothermal energy sector. Indonesia is planning to produce 6023 MW of geothermal power by 2020, but experts warn that the country may fail to meet its ambitious targets due to regulatory challenges coupled with extremely high exploration costs. “Cost rises steeply the moment drilling and construction begins. Prior to that, costs are so low it can be funded almost entirely by equity. A single field can cost up to USD 50 million, excluding other costs. Someone has to catch the risk, whether it is the project owner or the government,” says Sugeng Triyono, President Director of PT Tangkuban Parahu Geothermal Power.
EVENT COVERAGE: AP UTILITY FORUM 2016 - JAKARTA Peter Wijaya, Vice President Commercial and Business Development at Star Energy, adds that risk-sharing for capital-intensive geothermal projects is a key concern for developers and investors. “Funding for exploration is tough— investors have to take on the full risk,” he noted. As a result, independent power producers like Star Energy have to keep a tight rein on exploration costs, with more budget spared for low-risk, established fields rather than exploring untapped “greenfield” projects. “Geothermal reservoirs are much more complex than O&G. We simply budget the exploration,” Wijaya says, adding that exploring a well could cost as much as US$7 million to US$10 million per well. “Renewable energy is low on the government agenda. If I were the government, I would say the traffic is attractive. If I were a developer, I would also say so. But the problem is implementation. In order to qualify for the tariff, you first need to prove that you have started exploration. That’s the law. The risk is entirely on the developer,” he adds. Domestic funding key to growth To resolve these funding issues, Pascual says that the government should work on strengthening its domestic financing framework, particularly because funding for power projects is being dominated by local banks using local currency. There are very few markets left for international banks to do financing. Over the last 20 years international banks’ share of the pie has shrunk considerably, Pascual says. “Domestic currency, domestic financing is the right solution and will resolve these issues. A domestic bank doesn’t need BVGL. PLN is the government, whether you have a guarantee or not. Risk assessment for international banks is different, but for a local bank, PLN is the government. So you are resolving the level of support from the government, you are resolving the US dollar to rupiah conversion,” he says. Pascual also advocates a revival of Indonesia’s power bond market to provide expanded funding options for projects. He notes that though the first IPP in Indonesia in 1995 was financed by a bond, only two bonds have been issued since then. “Bond investors don’t care whether there is a guarantee or not. They don’t care whether there is a BVGL or a PPP or government support. They just look at the credit rating and invest. This makes it a lot easier to finance projects for developers,” he said. However, the power purchase agreements (PPAs) and requests for proposals (RFPs) that PLN issues are not
conducive for the development of a bond market. “There are a lot of constraints in the PPA about financing and re-financing, and around the rules of what developers need to prove at the time of bid when it comes to certainty of financing. When you do a bond, you can’t provide the same certainty in the same way a bank can provide support by issuing letters,” he says. Pascual urged policymakers to seriously consider reviving bond financing for power projects, as it is unlikely that 35 GW worth of power projects—which is expected to amount to a staggering US$70 billion—can rely on a single funding method in coming years. “We need to expand the universe of capital that we can tap. The bond market is out there and very keen on Indonesian risk. Bond is a great solution for refinancing. So I would like the bond market to become one of three solutions for the financing of IPPs,” he says. Other challenges Access to funding is not the only issue which Indonesia needs to grapple with. For instance, access to land is also a big issue for developers, as well as discrepancies in gas supply and inadequate bid preparation timelines. When the launch of the land acquisition law in recent years, lawyers reckoned that it will take two years on average to complete a land acquisition deal in Indonesia. However, PLN proved in 2015 that it is possible to complete land acquisition deals in just months rather than years— showing that the law can work if used properly and effectively. “The law is extremely powerful if it is used properly. The law is working, and land acquisition is becoming less of a focus particularly for investors,” he says.
Bond investors don’t care whether there is a guarantee or not. They don’t care whether there is a BVGL or a PPP or government support. They just look at the credit rating and invest.
Meanwhile, discrepancies in gas supply also need to be resolved if the 35 GW plan is to succeed. “Developers can take the risk with the assurance that there is huge demand in Indonesia and PLN will be able to dispatch; but lenders will not be willing to take this risk. There are however ways to resolve this issue, with proper coordination between PLN, developers and lenders. Coordination in gas supply is crucial for the success of RFPs,” he says. Another little-known issue which needs urgent attention is extremely tight bid preparation timelines from PLN. Pascual says that developers and bankers cannot prepare properly for bids because of PLN’s vague and often squeezed project timelines. For instance, PLN does not release a detailed schedule of requests for proposal (RFPs) in the pipeline, and often releases project details at such tight schedules that leaves developers with little option to contact investors and lenders. “It is impossible in 45 days for an investor to develop an EPC solution and talk to banks. Developers are in the dark. They do not know what technology is required,” he notes. To resolve this issue, Pascual says that PLN needs to come up with specific information about projects and provide longer timelines for developers and investors. Despite these challenges, Pascual says that there is a bright future ahead for Indonesia’s 35 GW power capacity addition plan. “There’s no magic solution, but years ago when I first came to Indonesia I learned this beautiful word, sama-sama. And I think together, sama-sama, we can make it happen. Everyone is here, everyone is keen, and the solutions are not rocket science. If we work through the constraints, there are solutions,” he says.
Indonesian law is extremely powerful if used properly. ASIAN POWER 23
event coverage: WORLD SMART ENERGY WEEK 2016 among the smallest in Asia and the world. It is eyeing a 10GW wind power capacity in its energy mix plan come early 2020s and the Japan Wind Power Association proposes a further 36.2GW by 2030. In its announcement of the JWPA Wind Vision Report at World Smart Energy Week 2016, Yoshinori Ueda, general manager at JWPA, revealed that one of the biggest problems hampering Japan in positioning itself in the wind power market is its repowering negligence. Old wind turbines, those that have been in operation or have operated for 20 years, are predicted to increase alarmingly in just less than five years. By 2020, these turbines will not be utilised at their maximum despite a good number of them still standing at good wind conditions. Around 292 wind turbines will be considered old by 2034.
Japan needs more time to fully realise wind potential
Is wind power development in Japan completely up in the air? The Land of the Rising Sun has yet to explore and realise its potential in developing and generating wind power.
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hen looking at Japan’s installed wind power capacity, the surging numbers are beyond impressive. Cumulative capacity has more than doubled in the past 10 years from 1,050MW in 2005 to a whopping 3038MW in 2015. However, the numbers from the new installed capacity paint a different story. “Everybody was clapping their hands when Japan’s feed-in tariff came in 2012,” said Jorn Kristensen, senior associate advisor to the CEO, ENERCON GmbH. “But results got disappointing after that. Very few projects were successfully commissioned and a handful were delayed.” Kristensen said this during a talk at the World Smart Energy Week 2016, which gathers renowned experts of the smart and renewable energy business fields from across Japan and the world. Recently held at the Tokyo Big Sight in Japan from March 2 to 4, the event included nine exhibitions, including Japan’s largest wind energy show, the International Wind Energy Expo & Conference. A complicated situation Between 2005 and 2011, prior to the announcement of Japan’s FiT, new installed capacity was safely playing in the 220MW 24 ASIAN POWER
Japan has not been so eager in developing its wind power in the past years.
to almost 270MW range annually. Come 2012, new installed capacity swooped down to just 58MW and, to everyone’s dismay, dropped further to 50MW in 2013. 2014’s new installed capacity was a lot better as the numbers doubled to 131MW and finally recovered last year to 244MW. The energy policies put in place in Japan didn’t make the situation better for wind power players. The previous government had decided in 2012 that there will be a nuclear phase-out by 2040. Repowering with old resources Japan’s wind power market is currently
Gasping for air? Japan has been trying to harness the power of wind, but political and geographical circumstances are blowing away its chances of being one of the leaders in the wind sector. Japan’s wind power share in its electricity mix is much lower compared to the rest of the world. It only has a 0.5% share in new installations and the capacity hits a measly 3.1GW which earns it the 19th spot in the global list of newly installed power plants. Currently, Japan is aiming to boost its wind power share to 1.7% or 10GW by 2020 and 36GW by 2030 in its energy mix plan. This, in comparison to China’s plans of achieving 250GW by 2020 and India’s goal of hitting 60GW by 2022, puts the country behind the world’s and Asia’s wind power capacity ambitions. “Japan has not been so eager in developing its wind power in the past years,” said Ueda. “This is because of the many barriers to wind power development, such as grid restriction.” Japan has shifted to a pro-wind stance since the Fukushima accident, according to Ueda. “But we need more years in order to realise this. We are trying to remove the hurdles as of now.”
Attendees flocked to Tokyo, Japan for the World Smart Energy Week 2016
ASIAN POWER 25
EVENT COVERAGE: G3-PLC ALLIANCE Therefore, it is possible to manage peak consumption, to modulate power and to identify problems in order to immediately apply the best solution,” noted Lassus. “G3-PLC will still exist in 20 or 40 years, since it’s a mature but evolving technology, with always a backward compatibility with the previous version,” said Marc Delandre, general secretary of the G3-PLC Alliance, adding that it is a global standard that does not require any licence fees. The G3-PLC Alliance was first founded five years ago by 12 founding members to standardise and promote the G3-PLC technology on a worldwide scale. Now, the Alliance is finally ready for the launch of its products on an industrial scale, with millions of products utilising G3-PLC technology expected to enter the market in coming years.
Dr. Anil Mengi talks about how G3-PLC is used in Germany
What you need to know about the G3-PLC technology It’s a cutting-edge solution based on power line technology developed with one big goal – to optimise power production, distribution and consumption.
A
radical change is sweeping energy generation and distribution systems across the world. The rapid adoption of renewable energy sources means that electric grids need to become smarter, and energy companies must find the right technology in order to keep up with consumers’ swiftly changing energy consumption habits. “Tomorrow’s electric grid will be totally different,” said Bernard Lassus, chairman of the G3-PLC Alliance. “The management of this grid will be totally different. We will need data in order to manage this grid,” he said, speaking at the sidelines of the Alliance’s annual general assembly in Paris, France in April. Lassus noted that the increasing popularity of renewable energy sources, such as the rising use of photovoltaic cells, means that even ordinary consumers can now be producers of energy. Technology has blurred the traditional lines between energy producers and consumers. Against the backdrop of these changes, the G3-PLC Alliance advocates efficient grid management through the use of smart and reliable communication technology. The G3-PLC, or Third Generation Power Line Communication, is a very
26 ASIAN POWER
Anyone can use G3-PLC technology. The only way to be sure of a product’s quality is if it is certified by the Alliance.
simple yet efficient technology for smart meters and smart grid technology. It is a plug-and-play solution that uses the existing electric networks to carry information, so installation efforts are minimal. It is a radio-free solution that allows consumers to effectively monitor and manage their electricity consumption. The technology was developed with one ultimate goal – to optimise power production, distribution and consumption. “G3-PLC is based on power line technology. Through power cables, devices and information systems can communicate and exchange data.
Marc Delandre
Bernard Lassus
Certification The G3-PLC Alliance implements a strict certification process in order to ensure uniform product quality across its members. The Alliance’s certification process ensures that its technology is standardised, particularly as it has over 70 member companies at present. The Alliance works with two laboratories – one in France, another in Germany – to test products and assure customers of quality and reliability. According to Lassus, the Alliance has certified almost a hundred products, and the number of certified products will steadily increase in coming years as the Alliance begins the mass rollout of its products. “Anyone can use G3-PLC technology. The only way to be sure of a product’s quality is if it is certified by the Alliance. Certification is a guarantee for the customer,” he added. The G3-PLC solution has also been validated by several global security agencies, including the National Security Agency (NSA) in the United States; ANSSI, France’s Network and Information Security Agency; and BSI, Germany’s national cyber security agency, among others.
Bernard Lassus discusses the use of G3-PLC in Paris
ASIAN POWER 27
analysis 1: DEMAND VS. GREEN PRESSURE
Who should they please: consumers or environmentalists?
Will Asia’s power tigers reconcile keeping up with demand surge and climate pressure? China, India, Indonesia, and Vietnam are accountable to 74% of estimated global pipeline of coal power plants.
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ccording to a number of reports, Asia is on the verge of a huge expansion in coal burning, with two countries, China and India, accounting for the majority of an estimated 2,457 new coal-fired power stations either planned or in construction worldwide. Coal is the highest carbon-emitting source of energy. Coal consumption today is responsible for nearly half of all global energy-related carbon emissions, and coal-fired power plants account for nearly a third of energyrelated emissions. Coal power plants are also long-lived assets that last for many decades, and so can lock in high-carbon development for nearly half a century. A rapid, sustained build-out of Asian coal power capacity could therefore make it impossible to achieve the target, agreed at December’s United Nations climate summit in Paris, to limit global average warming since pre-industrial times to “well below” 2 degrees Celsius. Unstoppable expansion With continued coal expansion, meeting that target would probably require unrealistic levels of carbon cuts elsewhere, and indeed negative emissions. The International Energy Agency (IEA) has previously estimated that to limit global average warming by no more than 2C, almost all new energy infrastructure must be low-carbon from 2017, or else replace equivalent existing high-carbon capacity, to avoid locking in unsustainably high levels of emissions for decades to come. Some Western commentators have argued that continued growth in Asia’s fleets of coal power plant would therefore make climate action in developed countries meaningless. The focus of this report is China, India, Indonesia and Vietnam. Collectively, these four countries have pipelines of 1,824 coal power plants either planned or under construction, accounting 28 ASIAN POWER
For the four Asian countries, the relevant rate is 1.5 to one, with 635GW cancelled or shelved, compared with 411GW completed.
for 74% of the estimated global pipeline of 2,457 units. The IEA estimates that India alone will account for half of global coal demand growth through 2020, and southeast Asia for another quarter. This report examines whether coal-fired generation is likely to grow on anything like the scale suggested. It asks, instead, whether China is nearing the end of its unparalleled expansion in coal-fired capacity. It investigates whether India, Vietnam and Indonesia are poised to take over from China, or whether they are re-thinking such an expansion. And it asks how many plants might actually be built. Fewer builds? A number of factors suggest that these four countries will eventually build far fewer than the 1,824 new coal-fired power plants in the pipeline. Worldwide, from 2010-2015, shelved or cancelled coal power proposals outnumbered completed power plants by two to one. For the four Asian countries we focus on, the relevant rate is 1.5 to one, with 635GW cancelled or shelved, compared with 411GW completed. For India, the ratio is four to one, with 390GW cancelled since 2010 compared with 98GW completed. In both India and China, coal plants are being used for less and less time. In China, the average “utilisation rate” (the proportion of time that power plants run) has fallen, for coal, from 60% in 2011 to below 50% last year. For India, the similarly defined “load factor” (the proportion of nameplate capacity used) has fallen from a peak in 2008 of above 78%, to below 65% last year. Less profit, less attractive Depending on trends in power prices, this may make new plants progressively less profitable, and less attractive to investors.
analysis 1: DEMAND VS. GREEN PRESSURE Chinese utilities have been left with “over-built” capacity for various reasons, including: a credit-fuelled industrial investment binge; slowing economic growth; over-optimistic expectations for electricity demand; lagging grid and other supporting infrastructure; and a failure to foresee expansion in and falling costs of renewable generation. In India, the problem has more to do with a failure of infrastructure investment, coal shortages, and cash-strapped grid operators. This trend in falling utilisation rates is likely to continue. In China, the biggest brake comes from rapidly slowing economic growth combined with ambitious targets for energy efficiency and clean generation. Clean energy may be sufficient to meet all of the country’s projected electricity demand growth, thus consigning any new coal power plants to an increasingly idle surplus. Meanwhile, both China and India are massively expanding renewable and nuclear generation, both of which have near zero operating costs once built. Will fossil fuel be displaced? Given that real-time electricity despatch is usually on the basis of least marginal cost, these will displace fossil fuel power when available. The result may be falling and unpredictable utilisation rates, and thus greater investment risks in fossil fuel-fired power, as seen in Germany. China is now investing heavily in technologies that will enable its electricity system increasingly to use variable renewables as “baseload”, including storage, electric vehicles and regional interconnection. These four Asian nations, especially China and India, are experiencing severe air pollution, and coal is one of the main culprits. Air pollution has added to other social and environmental concerns, including public opposition to new mines, especially in India. These are prompting governments to enact curbs, including India’s carbon tax on coal. Such regulations would be expected increasingly to impact investment decisions for new coal power plants. The successful conclusion of the Paris climate summit last December will accelerate existing investments in energy efficiency and low-carbon generation. The IEA has estimated that national pledges agreed under the Paris Agreement would require around $14 trillion investment over the next decade and a half. And some countries appear to be going further and faster than those pledges. China appears on course to comfortably over-achieve its target to halt carbon emissions growth by 2030. India is leading an international coalition of nations to accelerate solar investment. And one month after the Paris Agreement, Vietnam said that Utilisation rates of thermal power, %, 2009-2015
Source: NEA
How much each country builds will depend on trends in construction and operating costs, delivery and investment, as well as the rate of economic growth.
as a result of its international emissions commitments, it would review its plans for new coal-fired power. What about Paris Agreement? The Paris Agreement also virtually guarantees that at least $100bn per year will flow from the developed world into developing countries from 2020, unlocking five conditional elements in their national climate pledges (INDCs). A large proportion of this funding will be used for clean energy investments. Taken together, these factors indicate that the four Asian nations considered in this report are likely to complete far less than half of their collective, current coal power plant pipeline. How much each country builds will depend on trends in construction and operating costs, delivery and investment, as well as the rate of economic growth. In our estimation, the global figure for new build will fall far short of 1,000 power plants in the next five years, and is likely to lie in the region of around 500. For context, some 1,082 coal power plants were completed worldwide from 2010-2015. Beyond the next five years, we note ambitious targets in China, in particular, to drive growth in non-fossil fuel energy which is incompatible with further aggressive growth in coal-fired power generation. For example, China’s domestic targets unveiled in the run-up to the Paris summit imply the building of an additional 800-1,000GW of nuclear, wind, solar and other zero-emission generation capacity by 2030. When considering the climate impact of proposed Asian coal power plants, and the argument that these undermine the case for emission cuts in the west, four further factors need to be considered: • Small, old, inefficient coal-fired stations are closed even as new ones are built, thus reducing the overall net increase in coal capacity • New plants are more efficient than old ones, so emissions rise more slowly than net capacity • Historical data show that larger plants are more likely to be shelved or cancelled, meaning that cancellations have a disproportionate impact in constraining added capacity • As a result of falling utilisation rates, emissions are rising more slowly than capacity, and may even fall as capacity rises. Indeed, coal-fired power generation has fallen in China over the past two years, while the country added about 120GW of new thermal capacity. The Four Tigers growl on cancellations The Four Tigers - China, India, Indonesia and Vietnam - have the world’s four biggest coal power project pipelines. Together, they represent 82% of the 718 units globally under construction. These pipelines must be viewed in the historical context of project cancellations, as described above; the net effect of coal plant closures; and new plans to expand renewable and nuclear power. Worldwide, from 2010-2015, some 2,300 coal power plant units were completed, shelved or cancelled, according to the Global Coal Plant Tracker. Cancelled or shelved projects accounted for 53% of the total. Regarding capacity, some 1,350GW were completed, shelved or cancelled worldwide. Cancelled or shelved projects accounted for 66% of the total, or double the completed capacity. In the four Asian economies studied in this report, the proportion was 61% of capacity shelved or cancelled, varying from 43% in China to 80% in India. These cancellation rates provide one guide for how much of the present capacity pipeline may actually get built, but may prove conservative if the Paris Agreement on climate change is effective and global coal financing becomes progressively less available. From “Asia’s Tigers: Reconciling Coal, Climate, and Energy Demand” by Energy & Climate Intelligence Unit ASIAN POWER 29
OPINION
JOHN GOSS
A cleaner energy mix for China
john.goss@aod.com.hk
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t would seem that China will be able to meet its target of having 15% of its power generation mix coming from renewable energy and other non-fossil fuel sources by 2020. The head of the International Energy Agency, Faith Birol said that he cannot foresee any reason for the country to fail in reaching its target as long as the Chinese Government’s aim for clean energy remains strong. Birol said in a recent report published in China Daily, that the country has made some major moves with its energy plans and actual transition. China is now No.1 in wind energy generation, it is also No.1 in solar energy generation and is also the world’s No.1 in hydropower energy. Whilst all of these impressive power generation figures were being achieved, the consumption of thermal coal has rapidly declined. He stated that whilst the country’s coal consumption declines, the nation was the champion of the world in terms of reducing its
carbon emissions. He did not comment on which source of energy will play a major role in the nation’s energy mix in the future as he sees that China is diversifying its energy mix and is making its energy system more efficient at the same time. Birol said that he believes the world will see more noteworthy applications of renewable energy, much more natural gas utilisation and more nuclear power generation. There will be a marked reduction in the use of thermal coal fired power generation across China. He did not forecast which energy resource will play a major role as the country diversifies its energy mix and makes its energy system more efficient. Nuclear power in the mix As China becomes a significant player in the global nuclear power industry, this industry has continued to maintain strict standards of nuclear safety. The countycurrentlyhas30nuclearreactorsinoperation with another 26 reactors under construction. “This
is the largest grouping of nuclear facilities being operated or under construction anywhere in the world”, says the country’s environmental watchdog More is needed The minister of environmental protection, Chen Jining reported at a recent conference in Beijing that six nuclear reactors in China went online during 2015 and that Chinese authorities had issued permits that allow the construction to begin on eight other reactors. Hecommentedthatnuclearsafetyhasalwaysbeen a top priority for the ministry and other authorities and that China has established an excellent safety record for its nuclear power industry. The country will need to be constructing and commissioning many more nuclear power plants in both coastal and inland locations in order to meet its ambitions and plans to combat climate change. The fact is that even though China is currently leading the world in the construction and commissioning of its nuclear reactors, many more will be needed in the future, says Angeta Rising, the head of the World Nuclear Association. “There is already a broad expectation that the country will start to plan and commission nuclear power projects which will be located in inland locations, providing all of the safety and other related concerns have been addressed properly. China is currently adopting a ‘wait and see’ strategy for its inland nuclear power plants approach.”
ANTON FINENKO & JACQUELINE TAO Making business case for solar PV in Singapore happen
T
wo years ago a commentary about the future of renewable energy in Singapore was released. Since then, the island state has witnessed rapid development of the solar photovoltaic (PV) industry. Tenders have been called under the SolarNova program that will locate 350 MWp of distributed rooftop PV on governmental buildings and public housing blocks by 2020. The market growth also comes from private sector initiatives to put solar panels on rooftops. These installations could contribute to about 5 percent of the daily peak demand, if panels generate power under optimal conditions. And after 2020 the new development targets for PV are likely to follow. Despite promising opportunities, achieving a business case for solar PV in Singapore is not easy. In fact, it became more difficult compared to two years ago. The collapse of the oil price has tanked the oil-linked natural gas prices, which is a large component of the price of electricity in Singapore. While the cost of PV systems has also been 30 ASIAN POWER
declining, the pace of cost reduction could not keep up with collapsing oil markets. This situation has put local solar developers under increased pressure by almost eliminating profit margins of their business. Why solar leasing Solar leasing in the most common business model adopted by the industry in Singapore. Under solar leasing, the developer owns and operates the panels on the client’s rooftop, while the client pays a bundled fee covering electricity and system costs to the developer. Solar leasing was especially lucrative when the oil price soared, because the developers could attract clients with tariff discounts and promises of hedging against further rises of electricity tariffs. Today, the oil price is one-third of what it used to be and the residential electricity tariff is revised down every quarter - yet many leasing clients still expect a discount. This mindset, cemented when the oil price was high, is hurting the nascent industry today, because
the easiest way for a developer to gain the market share is to continue with discount practices. It is doubtful whether this approach is sustainable in the long run, as it encourages excessive price competition among companies whose costcutting measures may compromise on the quality of delivered projects. Furthermore, a tariff offered at the price below the system’s levelised cost of electricity does not create any long-term profits for the developer. Temporary measure Price discounts could be a temporary measure for some companies to attract customers while waiting for the oil price to rebound. Alternatively, discounts could be sustained by keeping a portfolio of other clients who are willing to pay premiums for clean electricity and subsidise the discounts. Access to financing remains an unresolved issue in the domestic market. The main obstacle to obtain financing for solar developers would be the small size of the distributed PV projects.
OPINION
Urbano Mendiola, Jr. Missionary electrification subsidies in the Philippines
T
he electrification subsidy in missionary areas started on May 1, 1988 with the proclamation by the President of the Philippines that electricity rates in all islands outside the main grids shall be pegged at P2.50/kWh. Thus, the National Power Corporation (NPC) and the National Electrification Administration (NEA) allocated P1.20/kWh for generation and P1.30/ kWh for distribution. NPCalsocreateditsSmallIslandGridOperations to take over the operation of NEA/EC-owned generating plants. However, NPC’s subsidisation of the generation costs of these areas resulted in huge financial losses while NEA’s subsidisation of the distribution costs required huge government subsidies. Story of EPIRA The enactment of RA 9136 or EPIRA on June 8, 2001 mandated NPC to cede its generating and disposable assets in the main grids to the Power
Assets and Liabilities Management Corporation (PSALM) and instead, be responsible for the missionary electrification function aside from dams and watershed management, and operation of the undisposed NPC generating assets. EPIRA further prescribed a Universal Charge on Missionary Electrification (UCME) in addition to Stranded Contract Cost, Stranded Debt and Environmental Charge imposable to all electric consumers nationwide. The UCME institutionalised the provision of subsidies in areas not interconnected to the main grids so that development and progress in these areas at par with the main grids could happen. For better understanding of the UCME Subsidy, electricity users in missionary areas are only required to pay the Subsidised-Approved Generation Rate (SAGR) plus any ERC-approved Cost Adjustments notwithstanding the higher True Cost of Generation Rate (TCGR) of these areas.The difference between TCGR and SAGR of
PETER HOPPER
Going beyond the meter and consumer expectations
W
hy your customers might not be the best guide to the future. Steve Jobs once said, “You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.” So often when markets are confronted with the potential of disruptive technology it takes more than a conversation with customers to determine the priorities. It requires looking into the latent needs, the actions and choices people would love to make but don’t have the opportunity to do so. For power utilities the world over the model for the future supply of electricity has never looked so challenging. The traditional model of consolidated andcentralisedgeneration,controlledandrestricted means of transmission and distribution against a backdrop of constantly increasing electricity demand is under threat. The 2015 World Energy Outlook published by the International Energy Agency paints potential
scenarios of restricted global growth in electricity generation over the next 30 years. Policies targeted to restrict CO2 emissions and limit global warming to +2 degrees show the growth in electricity generation dropping to a CAGR of 1.5% compared to a historical average of 3.4% between 1980 to today. Restrict capacity? Achieving this isn’t dependant on restricting the generation capacity but by the combined efforts of many consuming sectors to reduce demand through greater efficiency. The same report outlines Industry will still be the top consumer of electricity in 2040 at 38%, with residential at 25%, and Commercial and Institutional consumers at 18%. Industrial, Residential, and Commercial consumers will still need the functional utility of electricity but will become increasingly adept at generating, supplying, and consuming it, with or without the
NPC, New Power Providers (NPPs) and Qualified Third Parties (QTPs) is claimed from the UCME Subsidy, recovery of which is approved by ERC through Basic UCME and UCME True-up filings by NPC. How it works The SAGR is also allowed to adjust for changes in fuel and purchased power costs through the Generation Rate Adjustment Mechanism (GRAM) and fluctuations in foreign loan repayments and forex expenses through the Incremental Currency Exchange Rate Adjustment (ICERA). On the other hand, the Basic UCME is allowed to adjust through UCME True Ups in case of lower actual national electricity sales as compared to forecast resulting to collection shortfalls, necessity for adjustments in the GRAM, ICERA and the NPP TCGR, reasonable financing costs incurred by NPC-SPUG to cover loans for UCME subsidy shortfall and other analogous cases. As of October 2015, 291 NPC-SPUG power plants and 19 NPPs/QTPs with total installed and dependable capacity of 316 MW and 267 MW, respectively, rely on the UCME subsidy to sustain the power supply requirements of 47 electric cooperatives and local government units in 34 provinces consisting of 196 municipalities, 242 missionary areas and 2,929 barangays. In addition, the UCME also supports the operating costs of NPC’s existing 770 ckt-kms of 138 kV and 69 kV transmission lines and 10 substations.
involvement of the incumbent Utility suppliers. The IEA estimates about 50% of the needed reduction will come from tighter energy efficiency measures in Industry and more efficient appliances in commercial and residential environments. Beyond that “end use efficiency”, which is at best vaguely defined, will need to play a role. Consumers do not know It won’t be enough to ask consumers what they need, they won’t know and they won’t be able to say but they will know it when they see it. The Electric Power Research Institute published a technical report back in 2011 that estimated that in the US alone the advent of Smart Grid could generate economic potential of between US$1,300 billion and US$2,000 billion over the next 30 years, in Consumer markets with smart metering, Plug-in Hybrid Vehicles, Smart equipment, and Demand and Energy Management. For the technology industry the potential lies in integrated communications, broadband over power lines, communications software and new protocols . For the power industry, the opportunity isinapplicationssuchasEnergyStorage,Distributed Generation, Renewable Generation, and Energy Efficiency. There is no in-built entitlement for existing Power Utilities to be able to capture this value. New entrants, sometimes enabled by big data-driven insight, can bring new solutions and alternatives to consumers with or without the involvement of the incumbent Power Utilities. ASIAN POWER 31
analysis 2: OVERSPENDING ON COAL
Coal plants are being used at less than half of the time
Whitest of white elephants: US$1tr could be splurged on new coal-fired plants
Investments are pouring in for 1,500 coal plants, but all these are likely to be wasted as capacity is already brimming.
T
he world has too many coalfired power plants, yet the power industry continues to build more. While the amount of electricity generated from coal has declined for two years in a row, the industry has ignored this trend and continues to build new coal-fired generating plants at a rapid pace, creating an increasingly severe capacity bubble. The problem of overcapacity is especially pronounced in China, where the average coal plant is now run at a 49.4% rate, less than half its full capacity. Meanwhile, 338GW of new coal capacity is in construction worldwide, and 1,086GW is in various stages of
There is good reason to expect a downswing in new coal plants in future years outside China.
Comparing cost of coal pipeline to proposals for providing electricity to 1.2 billion people
Source: Sierra Club
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planning—the equivalent of 1,500 coal plants. The amount of overspending on these potentially unneeded plants amounts to US$981 billion, or close to one trillion dollars. The average coal plant is being used at less than 50% of the time in the massively overbuilt Chinese power market, and still going down. Falling utilisation rates in coal plants—the percentage of maximum output actually achieved—are symptoms of excess capacity and overbuilding. Yet despite the capacity glut, hundreds more coal plants are in construction and development. China builds, others stop Levels of pre-construction activity and construction activity grew in China while declining elsewhere. The increases in China in the face of shrinking coal usage point toward dysfunction, both in power sector regulation and in capital allocation, as the country continues to approve and finance new coal capacity despite declining output of the current coal plant fleet. The causes of this dysfunction are discussed in Part II of this report. Outside China, construction activity dropped or remained level in ten out of twelve regions. Besides China, the only region showing increased construction
activity in 2015 was south Asia, where resolution of the Coalgate scandal caused the reactivation of a number of stalled projects in India. Prior to 2006, the pace of global coal plant building was 20 to 25GW per year; it then tripled to over 75GW a year as China aggressively added capacity. Capacity surge The upswing in new plant capacity in 2015 appears to contradict such optimism. However, with both preconstruction and construction activity shrinking in most regions, there is good reason to expect a downswing in new coal plants in future years outside China. Within China, the central government has reportedly ordered provincial governments to suspend new approvals in 13 provinces and regions through 2017, and to halt initiation of new construction in 15 provinces and regions. This is an important step that, according to an analysis based on the Global Coal Plant Tracker data, could see up to 183GW of new projects suspended, and signal that the problem is being tackled. From “Boom and Bust 2016: Tracking the Global Coal Plant Pipeline” by Christine Shearer, Nicole Ghio, Lauri Myllyvirta, Aiqun Yu, and Ted Nace
NUCLEAR FORUM.ASIA STORIES
SAFETY & ENVIRONMENT
China holds on to nuke reprocessing despite stockpile woes China remains committed to its plans for nuclear reprocessing, its top nuclear industry official said, despite concerns this could lead to a competitive build-up of plutonium stockpiles in Asia. Reuters reported that China is dedicated to the establishment of a complete nuclear fuel-cycle system.
POLICY & INFRASTRUCTURE
Nuclear energy still needed to achieve ambitious global climate agreement According to the World Nuclear Association, the COP 21 agreement has given a very strong signal that future investment in the energy sector should move rapidly towards low carbon. It asserts the need for nuclear energy to play its part is even clearer.
POLICY & INFRASTRUCTURE
India’s massive plan to build 12 nuke reactors is “fraught with risk” The Institute for Energy Economics and Financial Analysis reported unacceptably high risks and costs of the Indian government’s proposal to build 12 new reactors. The study, “Bad Choice: The Risks, Costs and Viability of Proposed U.S. Nuclear Reactors in India,” finds the plan, to be fraught with financial and operational hazard.
PROJECTS
These are the nuclear power plants plotted across Asia Asia’s giant may have failed in boosting its nuclear installed capacity, but it is still on the road to becoming the country with the most number of nuclear power plants, and it’s even likely to outpace the United States’ capacity in just ten years.
NON-ENERGY
Six incredible ways to implement nuclear technologies Despite the fact that nuclear technologies are commonly used worldwide, few people know that besides energy production there are many other ways of using the atom for peaceful means in our daily lives. In particular, there is a lack of awareness not only about technologies, but about radiation and its benefits.
FINANCING
India’s oldest nuke reactors near Mumbai likely to shut down Bloomberg reported that India may shut two of its oldest reactors almost five decades after they went into operation as power tariffs aren’t keeping pace with maintenance costs, according to Sekhar Basu, secretary at the Department of Atomic Energy. ASIAN POWER 33