Asian Power (November to December 2015) by Charlton Media Group

ISSUE 72 | DISPLAY TO 31 DECEMBER 2015 | www.asian-power.com | A Charlton Media Group publication

Indonesia’s mission impossible

US$360P.A.

Shrirang B. Karandikar CEO India Power

Cracks begin to emerge in the country’s 36.6GW growth plan

Award winners inside:

MICA(P) 248/07/2011

country report Indonesia’s capacity growth aim is ambitious

sector Report Asian countries turn to solar for long-term energy mix

first Asia holds on tighter to coal-fired power

ANALYSIS Dark profit clouds loom over Korean IPPs

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FROM THE EDITOR The much-anticipated Asian Power Awards just went past a decade of recognising the top achievers and best players of the industry. Now on its 11th year, it is more motivated to uphold excellence and pursue in naming the highest quality projects in its 23 categories. Flip through the pages and check out the awarding night which transpired at the Conrad Bangkok.

Publisher & EDITOR-IN-CHIEF Tim Charlton production editor Roxanne Primo Uy art director Bryan Barrameda

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Over a hundred key executives from outstanding companies flocked to the “Oscars” of the power industry and witnessed the awarding ceremony. The Asian Power team sought India Power’s CEO Shrirang B. Karandikar for this issue as he discusses how the firm under his leadership is constantly improving despite being one of the oldest power utilities in the country. He also discussed the firm’s intention to scale its power generation portfolio up to 10,000 MW over the coming years. Read on and see how his plans will play out for the rest of his term as the CEO. Indonesia and Vietnam are also put in the limelight as this issue’s country reports. Our team sought industry experts’ insights on Indonesia’s urgent need for power and Vietnam’s untapped power potential. Lastly, this issue features Asian solar power capacity and how China, India, and Thailand are actively on the move to boost solar in their respective energy mix. Start flipping and enjoy!

Tim Charlton

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Can we help? Editorial Enquiries If you have a story idea or press release please email our news editor at ap@charltonmedia.com. To send a personal message to the editor, include the word “Tim” in the subject line. Media Partnerships: Please email: ap@charltonmedia.com with “partnership” in the subject line. Subscriptions: Please email ubscriptions@charltonmedia.com. Asian Power is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Asian Power can accept no responsibility for loss. We will, however, take the gains.

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ASIAN POWER 1

EDITORIAL CONTENTS

ceo interview India Power talks about improvement in one of India’s most notorious power areas

FIRST

AP AWARDS COVERAGE: Find out who are the prime power industry figures in the Asian Power Awards 2015

sector report: Nuclear power in asia Here comes the sun: Asian countries turn to solar for long-term energy mix

ANALYSIS

06 Myanmar turns to $400m loan for upgrade

32 Dark profit clouds loom over Korean IPPs in

07 India eyes building Solar Cities

42 Can China’s solar players keep up with structural changes? 44 Southeast Asia’s energy landscape must brace

08 China IPPs’ growth: Trouble in disguise 10 Asia holds on tighter to coal-fired power

OPINION 48 Peter Hopper & Alice Yung: Reliable electricity: Don’t

take it for granted

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

the next 12-18 months

itself for a major sectoral change

COUNTRY REPORT 18 Indonesia’s capacity growth aim is ambitious 22 Lack of government support and poor policy

framework hamper Vietnam’s power sector

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

www.asian-power.com

Better World

Paving the Way for Progress Providing roads for a BetterWorld. Hedcorâ&#x20AC;&#x2122;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.

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. Hedcorâ&#x20AC;&#x2122;s roads provide essential links and wider social benefits, giving isolated communities vital access to schools, hospitals, city centers and regional markets. Indeed, Hedcorâ&#x20AC;&#x2122;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

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

ENVIRONMENT, IPP

IPP

India’s coal-fired Parli thermal power plant shuts down Widespread dry spell and rainfall deficiency pushed a coal-fired power plant in Maharashtra, India to stop its operations and consequently halt the commissioning of a new unit. According to reports, the 1130 MW power plant in Beed was about to commission a 250 MW unit by March next year. However, the lack of water made the plant’s operator Maharashtra State Power Generation Company (MahaGenco) decide to postpone the commissioning of the unit come the next monsoon season.

POWER UTILITY

Global nuclear sector unprepared for cyber-attacks: report UK thinktank Chatham House recently published a report investigating nuclear power plants and cybersecurity events on a global scale and revealed that the nuclear industry is not ready to handle and tackle large-scale cybersecurity attacks. This is despite a growing likeliness for these threats to occur on both small-scale and largescale scenarios. In its 18-month long examination, Chatham House said that cyber security risk is growing as nuclear facilities become increasingly reliant on digital systems.

China trails peers in offshore wind market With wind installations likely to reach 100 gigawatts by 2020, the Asian giant’s policymakers have been caught off guard with the industry’s tremendous growth since 2005. “Wind power in China is a key component of the government’s efforts to rebalance the power generation mix away from thermal power. This is reflected in a rapid increase in wind power installed capacity since 2010, with the share of wind power in total installed capacity in China having increased from 1.8% in 2009 to 7% in 2014. Capacity additions were also highest in 2014.

Implementation Of Pilot Demand Response Programs 3 In Ho Chi Minh City, Vietnam FACTORIES What is Demand Response? Demand Response (DR) is a form of electricity demand management which allows consumers to reduce or shift their power usage in exchange for payments during times of peak demand or network congestion.

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When a peak demand event or network congestion is anticipated, Ho Chi Minh City Power Corporation (HCMPC) 1 initiates a DR event using the Demand Response Management System (DRMS) located at Diamond Energy’s Demand Response Centre in Singapore 2 . The DRMS then sends a notification of the DR event to participating customers. Depending on the type of DR event, Industrial electricity consumers located in Thu Thiem Power Company’s service area 3 or Commercial electricity consumers located in Sai Gon Power Company’s service area 4 , 5 , and 6 are notified of the day and time of the DR event. HCMPC 1 , using the DRMS, then notifies each participant of their Baseline and issues reminders prior to the start of the DR event.

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Pilot Demand Response Programs in Ho Chi Minh City The Curtailable Load Program (CLP) offers incentives to large Industrial and Commercial electricity consumers in the form of payments based on quantified demand reductions achieved during a DR event. Large electricity consumers achieve this reduction through the temporary curtailment of non-essential electricity loads during a 2-hour DR event, after being notified of the event 24 hours in advance. The Voluntary Emergency Demand Response Program (VEDRP) offers similar incentives to those under CLP, however, participating VEDRP customers are notified 2 hours in advance and receive a higher incentive based on the shorter notification period.

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Upon receiving confirmation from the DRMS that the DR event has commenced, participants will initiate demand reductions. For Industrial electricity consumers such as factories 3 , this may involve switching compressors or other energy intensive equipment off. For Commercial electricity consumers such as shopping malls 4 , hotels 5 , and high rise buildings 6 . this may involve switching air conditioning systems and façade lighting off. 2 hours later, upon receiving confirmation from the DRMS that the DR event has ended, participants will resume regular operations. After each DR event, HCMPC 1 determines each participant’s demand reduction, prompting the DRMS 2 to notify each participant of their incentive payment.

Headquarters

Diamond Energy Group 1 CleanTech Loop #02-07 CleanTech One Singapore 637141

4 ASIAN POWER

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chemical processes for fossil power plant installations. It’s no wonder that we are constantly setting world records in efficiency, flexibility, reliability and execution excellence. With one common goal: your sustainable success and increased profitability. Superb project management Designing and building power plants to provide superior performance over the entire lifecycle is what we do. On average, our general project managers possess some 22 years of experience in the power generation industry. With their unique expertiswe, they bring an unmatched dimension of quality and security to your investment – including time schedules, project management as well as health and safety standards you can rely on. All reasons that have earned us a reputation as your most trusted partner delivering cutting-edge integrated solutions at highest quality.

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FIRST consumption. Recent data shows that the country’s electrification rate is only about 30%, which is strikingly low compared with its neighbors such as the Philippines (87.5%), Indonesia (96%) or Vietnam (99%). One of the biggest hurdles towards bringing this number up is the poor transmission and distribution network (T&D Network) that causes huge system/transmission losses of about 27% of output.

HK’s IPPs flinch at new emission caps

Hong Kong unveiled a proposed plan to set new power plant emission caps as electricity generation remains one of the country’s major air pollutants. According to the Environmental Protection Department, generation accounts for 47% of the SO2, 28% of the NOX and 16% of the RSP (respirable suspended particulates) emissions. The plan, which would be effective come 2020, would drag the emission caps lower for SO2, NOX, and RSP by up to 17%. The country amended its air pollution policy in 2008 to allow power plants to use emissions trading as an alternative means for achieving the emission caps for 2010 and beyond. Since then, it has been issuing memoranda to stipulate emission caps for power plants. The fourth technical memorandum (TM) issued in December 2014 further tightened the power sector’s emission caps for SO2, NOX, and RSP from 2019 onwards 63%, 40% and 44% respectively compared with caps stipulated under the memoranda of 2010. EPD says in a statement, “The reduction will help improve air quality given that emissions from the electricity sector accounted for a big chunk of the territorywide emissions of these pollutants in 2013 “ Big power producers are predicted to make deeper emission cuts from four of their power plants. HEC’s coal-fired Lamma power plant will need to reduce its emissions by up to 28% while power plants under CLP’s wing will have to cut emissions by up to 12% in total. Coping with tighter caps The question now is how will CLP and Hong Kong Electric cope with the tighter caps? What will they do to make keep their compliance with the policy? Under the new proposal, CLP needs to import an additional 10% of nuclear energy on top of their existing long-term supply contract of 70% of the annual output of Daya Bay Nuclear Power Station. The importation of additional nuclear power, they say, would also help Hong Kong achieve the target level of nuclear power in the proposed fuel mix in 2020. Hong Kong Electric Company, on the other hand, says that the new emission caps are “very challenging.” To meet these caps, HK Electric needs to increase its gas generation and ensure a high reliability of the emission control facilities for the coal generating plants. 6 ASIAN POWER

Shwedagon temple at night

Myanmar turns to $400m loan for upgrade

s the economy of Myanmar begins to open itself up to global trade, the country is expected to grow at an average of 7% per annum between 2016 and 2024. This rapidly growing economy will have a commensurately expanding demand for power as the very low rates of electrification could hamper the country’s continued development. According to Georgina Hayden, senior commodities analyst at BMI Research, the power sector in Myanmar has experienced a notable amount of investor interest over the past few years. “There are over 17.5 gigawatts (GW) of power and renewables projects at various stages of development and we continue to see companies target the market for investment,” according to Hayden. She explains further that large foreign firms indicating interest include Singapore-based energy, water and marine group, Sembcorp Industries, Japanese firm, Marubeni Corporation and Thai firm, Global Power Synergy. Rich reserves The country has abundant energy reserves particularly in hydropower and natural gas, and is actually a net exporter of power. According to GlobalData senior power analyst, Siddhartha Raina, however, the country is only able to export energy due to the very low level of domestic

Georgina Hayden

Siddhartha Raina

Structural changes still needed The country’s ministry of power has released its National Electrification Plan, which aims to increase electrification rates to 100% by 2030. Large institutions such as the World Bank have committed finance to this undertaking, with the World Bank approving a USD400mn, interest-free credit facility for the country’s power sector. To realise the country’s plans for increasing generation capacity and lift itself from its current status of having the lowest electricity consumption per capita, Myanmar needs to make significant headway in T&D. The government of Myanmar has recognised transmission and distribution as a key area of improvement to support the country’s development and has committed to channeling much of its dedicated financing into development of grid infrastructure. Rural areas will be the the main focus of grid improvement given that the National Electrification Plan is looking to create 1.7 million new users a year, with most of these new users being found outside the city. The government is also exploring off-grid renewable power sources to supply remote and isolated regions as the cost of developing the grid in those areas may be too large. In addition to physical improvements that have to be made, the country also has several structural and policy-based changes that have to take place.

Power expansion underway

e/f= BMI estimate/forecast Source: EIA,BMI

FIRST The Indian solar market is estimated to be as large as $4b a year, and requires a commensurately large capital investment of between $6-7b.

Astonfield Renewables’ 2 MW solar plant in Jhansi, Uttar Pradesh, India

India eyes building Solar Cities

he Indian solar market is estimated to be as large as $4b a year, and requires a commensurately large capital investment of between $6-7b.The potential for gridconnected solar generators cannot be realised, however, if the infrastructure to develop this sector is not in place. Georgina Hayden, senior commodities analyst at BMI Research, notes that the country’s transmission and distribution (T&D) network remains very inefficient, the development of which has not been in step with that of generation capacity. “We have long highlighted the shortfalls in India’s grid

infrastructure, notably the high T&D losses, restricted network coverage and the widespread lack of investment into the sector” says Hayden, which she feels could pose a significant risk to the sector’s continued expansion. This area will have to be a key focus of the current government’s power expansion plan, which seeks to integrate renewable energy into the country’s energy mix. The Indian Government is looking at developing 60 “Solar Cities” or “Green Cities”, which target to reduce demand for conventional fuel by 10%. Hayden notes that the development of

generation capacity in renewables will be futile unless there is sufficient T&D infrastructure to reach the end users. Regulatory and infrastructure hurdles The current pipeline of T&D investment is still quite minimal compared with that of generation capacity, says Hayden, with grid infrastructure comprising less than 10% of total investment plans. Hayden is of the view that the increase in generation capacity will not necessarily have its intended impact on the power consumption mix and that this sector will continue to underperform. Vikas Kaushal, partner at management consulting firm, ATKearney, also notes that there are hurdles on the execution side that must be addressed. “Project execution, financing, and localisation are crucial”, according to Kaushal. Sufficient technical knowledge and a frugal cost base will be key success factors for new projects moving forward as the number of projects and players increases. He also notes that local players may begin to dominate the industry as knowledge of the individual areas of operation - installation, distribution and actual execution of projects -becomes more important.

Wind and solar driving expansion

e/f= BMI estimate/forecast Source: EIA/BMI

The Chartist: Asia Pacific’s boom as the global power & utility investment destination The Asia-Pacific region is becoming one of the most active regions for power and utilities (P&U) deals. According to EY’s Power Transaction and Trends report, China dominated the region’s M&A activity, with P&U transactions hitting a three-year high (US$8b). “Deals were led by consolidation in the renewables and water and wastewater segments. We also expect continued M&A activity in the water and wastewater treatment segments,” it said. However, IEA says in its recent report that more investment is still needed and required in residential use ($119 billion) than in services ($86 billion) as incomes and ownership of large appliances increase in the region. A further one-third of cumulative investment in energy efficiency is in transport, largely in the road sector.

Share of cumulative investment in power sector by source and region, 2015-2040

Source: IEA Southeast Asia Energy Outlook 2015

Asia-Pacific deal value by segment (US$b, from Q2 2013 to Q2 2015)

Source: EY analysis based on Mergermarket data

ASIAN POWER 7

FIRST

China IPPs’ growth: Trouble in disguise

IPP WATCH

Sembcorp makes foray into Bangladesh power market

hina’s IPPs could be facing a period of consolidation in the next several years as the industry grapples with sluggish power demand, declining utilisation rates and unabated capacity additions. “Declining utilisation rates and tougher environmental regulation could lead to a period of consolidation for the IPP sector in China, where the top utilities are likely to emerge as eventual beneficiaries, in our view,” says Ephram Ravi, analyst, Asia exJapan power & utilities at Barclays. Ravi says utilisation hours for coal IPPs have slowed markedly at 10% year-on-year as of late August 2015, following an 11% decline between 2011 and 2014. Part of the blame lies in the slowdown in power demand. More challenges To make matters worse, capacity additions are expected to stay elevated in the medium term. IPPs in China are bracing for stronger growth in their installed capacity in the next two to three years, reckons Ravi, with the top five utility companies having c85GW of approved projects in their pipelines. This represents c35% of their installed capacities and c10% of the national thermal power capacity. “Arguably, the planned capacities

Time for consolidation

are more environmentally friendly and, therefore, will displace older capacities, but they are still not helpful for a recovery in utilisation rates,” says Ravi. “Lower utilisation and unabated additions seem likely to worsen over-capacity in the thermal power industry in China and prolong any meaningful recovery,” he adds. Larger IPPs are set to take advantage of this situation through increased acquisition of smaller players, especially as valuations in the industry are seeing a notable decline. “Low valuations create investment opportunities for larger IPPs to expand their market share by acquiring the undervalued smaller players,” says Matt Renie, global transaction, advisory services, power & utilities leader at EY. Renie reckons that the valuations for base-load IPPs in China have declined steadily since 2010, and many in the group are trading at 20% discount.

Sembcorp Industries’ first combined cycle power plant in Bangladesh, in the Sirajganj district, will have a capacity of 426MW, fueled primarily by natural gas with highspeed diesel as back-up fuel. According to RHB, Bangladesh represents a high-potential, fast-growing market as only three-quarters of its estimated 11,500MW of power generation capacity is considered “available”, and a third of the power generated is reportedly lost in its inefficient transmission and distribution network.

Tata Power to generate 18000mw power by 2022

IPPs in China are bracing for stronger growth in their installed capacity in the next two to three years.

India to bask in decade-long nuclear growth While coal-generated thermal power should remain the dominant contributor to India’s energy mix in the next decade, the nuclear energy sector will begin to skyrocket in growth and represent a larger piece of the pie. India’s nuclear capacity is expected to increase more than sixfold, from 5.8 GW in 2014 to 35.2 GW by 2025, says Chiradeep Chatterjee, senior analyst at GlobalData, as the country looks to reduce its reliance on coal. In comparison, thermal power expected to double its installed capacity from 188.9 GW in 2014 to 371.6 GW in 2025. Chaterjee says that India is adopting a nuclear energy development strategy that works around its limited reserves of uranium by tapping its large thorium reserves and moving towards breeder reactors that use this abundant thorium. Equipped with an expertise in fast reactors and thorium fuel cycle, India has a vision of becoming a world leader in nuclear technology, according to a report by the World Nuclear Association published in October. The country expects to have 14,600 MWe nuclear capacity online by 2020 as well as supply 25% of electricity from nuclear power by 2050. 8 ASIAN POWER

India’s nuclear power capacity-20 units to 2011

Tata Power plans to generate 18,000-megawatt (mw) power by 2022, where in 20-25% contribution will come from clean and green energy sources. At present, Tata Power has a generation capacity of 1383mw from clean and green energy sources - 576mw from hydro , 56mw solar, 511mw wind and 240mw from waste gas-based generation. To achieve the ambitious plan, it sketched out a Capex of nearly Rs 2,500 crore per annum for the next 3 years.

Huaneng Renewables to reverse generation decline Source: World Nuclear Association

India’s operating nuclear power reactors

Source: World Nuclear Association

Huaneng Renewable’s power generation, at 2.5bn kWh, declined 42% q/q due to adverse seasonality of slower wind speeds. Barclays however notes that generation was up 23% y/y due to stronger capacity addition of 1.1GW in 1H15. It expects Huaneng to deliver another 1GW capacity addition in 2H15 as 4Q is a seasonally stronger quarter.

CO-PUBLISHED CORPORATE PROFILE

Siemens SPPA-T3000 DCS – Revolutionizing Power Generation Siemens’ new intuitive system aims to increase power plant performance while creating a safer work environment.

n the power generation industry, there are few things more important than ensuring that a power plant’s performance remains always steady and reliable, and power plants are heavily dependent on the efficiency of the people manning the plant operations. With the launch of the Siemens SPPA-T3000 Control System, a top-of-the-line automation solution, Siemens is paving the way for increasingly the performance of the operational personnel, thereby increasing the plant performance. The SPPA-T3000 Control System is created to perform essential power plant automation tasks: turbine control, boiler control including boiler protection, balance of plant (BoP) and integration of third party systems. It was also developed to maximize compatibility with all types of power plants, and is designed to work with generators and turbines from various manufacturers and with each OEM system. An intuitive system The SPPA-T3000 Cue, Siemens’ latest release of their worldwide power plant control system, has developed an operator centric program that allows operators to work more efficiently by providing them with a set of guidelines, or “cues,” for which the system is named. These cues are specifically designed to support plant operators in order to maintain a steady flow of operation, which in the long run leads to increased performance. Operators are much more efficient as well as less prone to errors thanks to the effectiveness of the cue system. “With the new release [of the SPPA-T3000 Cue], this intuitive system guides the operator in two aspects: one is for normal day-to-day operations where he is given

more information, and easier access to this information,” says Ajit Nambiar of Siemens in a video interview at Power Gen Asia 2015, stressing the importance of the cue system in improving the plant operation’s overall workflow. “The second is when there is a crisis or an emergency situation in the plant. [The system] gives him active support so he can take corrective actions.” The cues effectively serve as a guide to the operators by digesting and filtering the available information that is needed to keep the power plant running smoothly. Rather than using up valuable time analysing the thousands of sensors that monitor the plant’s various main components, the system allows the operators to focus on making necessary adjustments and corrections: timely responses that could be crucial in a crisis situation such as an imminent power outage or a disturbance caused by the weather. Because of the intuitive nature of the SPPA-T3000 Cue’s system, the operator’s workflow is greatly optimized, with an ergonomic interface that is customizable depending on the operator’s specific needs. The interface allows the operator to view all relevant and up-to-date power plant data at a touch of a button in an organized and userfriendly layout, easing up the stressful task of managing the plant’s day-to-day operations for those in the control room. With this, the occurrences of unplanned disruptions are greatly lessened as the system gives the operator overall control over the different units in the plant’s operation. It also creates gapless workflows even with shift

handovers, making the continuous plant operation more efficient as a whole. “The system is a very modern Java based system. It’s the first and only Java based system in this industry and this helps the users to utilize the latest trends in technology in operating the power plant,” says Nambiar of the technology behind the SPPA-T3000. “There is a diagnostic system which would ensure that the plant is running properly, and there is also a very advanced alarm management system,” he says, adding that the control system has a comprehensive list of features that are greatly beneficial to the . For instance, the integrated alarm management processes alarms by categorizing them according to importance – critical alarms receive high priority in the control room, unimportant ones are rerouted for archiving to be attended to later on. The cue system enables operators to easily find the root cause of a problem or disruption and provides information on how to resolve the issue, reducing reaction time and allowing operators to make informed decisions all at once. The ultimate goal of the SPPA-T3000 Control System is to make it possible for power plant performance to be greatly increased while at the same time creating a safer and more efficient work environment for the plant operators. With Siemens’ history in power generation and distribution, it is an option that should be considered by those in the power industry that are looking for a sustainable long-term solution in power plant efficiency.

“Siemens is paving the way for increasingly the performance of the operational personnel, thereby increasing the plant performance.” ASIAN POWER 9

FIRST

Asia holds on tighter to coal-fired power

sian countries might be grooming renewables and other cleaner fuel alternatives to reduce its reliance on coal, but the latter will continue to rule the region’s power mix for at least a decade more. Some analysts believe plummeting coal prices and slow implementation of policies to deter coal use will contribute to coal’s continued supremacy in Asia. Asia currently relies heavily on coal-fired power generation to meet its electricity needs, with over 60% of the power mix derived from coal, says BMI Research, and this should remain so for the next decade. “We believe this trend will continue over our ten-year forecast period to 2024, as countries in the region continue to ramp-up their domestic coal-fired power capacity. Overall, we expect coal to account for 59% of Asia’s total generation in 2024, equal to 9,108 terawatt hours (TWh), forming an integral part of the power mix,” says BMI Research. “India, Indonesia, Thailand, Pakistan and Bangladesh are among those countries favouring coal, due to its relative low cost and widespread availability,” it adds. BMI Research also forecasts that China will remain the biggest coal-fired electricity generator by a significant margin, but headwinds are rising in the country due to public opposition, international pressure to reduce emissions, as well as a move towards power mix diversification. Still, most other Asian countries remain accommodative to coal use.

“We have seen some progress in implementing policies specifically targeted at reducing the use of coal in the power sector across Asia. However, there has been a varying degree of success, and several challenges to policy realisation remain,” says BMI Research. It points to the fossil fuel subsidy reform that has gained traction in Indonesia, India and Malaysia; but momentum has dampened in the face of political considerations and a bristled response from residential and industrial consumers who fear higher fuel costs. Asia also continues to lag in developing emissions trading schemes, which have shown effectiveness in deterring utilities from burning coal and other carbon-intensive fuels for power generation. Asian countries are also expected to take advantage of the current and forecasted low coal prices. BMI Research reckons prices have halved since 2010 as supply rose from major exporters, and thermal coal prices (Newcastle) are forecast to average USD61.0/tonne over 2015-2019, or 35% below the previous five-year average. But as coal use remains preferred in Asia, there are worries about its negative impact on environment, especially if Asian countries do not employ and cannot afford clean-coal technologies. “U.S. government efforts to reduce emissions from coal-fired power generation both at home and abroad, particularly through banning overseas financing for coal plants, may have the unintended effect of encouraging

Huge but untapped Indonesian geothermal potential Geothermal power can be the best energy solution to the perennial problem of power shortages in Indonesia, but its bulky potential remains unused. Indonesia’s Ministry of Energy and Mineral Resources estimates that the country holds a potential 29 gigawatts (GW) of geothermal capacity reserves, only 5% of which is currently being used. Furthermore, geothermal currently makes up only less than 3% of Indonesia’s total electricity generation capacity. US Energy Information Administration notes in its latest report that one impediment to unlocking the country’s vast geothermal resources has been the definition of geothermal development as a mining activity, which restricted new projects in conservation areas. “Indonesia passed a law in 2014 that eliminated this limitation on geothermal development while streamlining the permitting process and alleviating land acquisition issues. The law also attempted to raise private sector investment in geothermal projects by making the price more closely match development costs.” Asian Development Bank’s latest report also explains that while the declassification of geothermal as a mining activity will be helpful to new projects, it will not help the currently stalled projects. Therefore, renegotiating some Power Purchase Agreements, it adds, may be unavoidable if some of the currently stalled projects are to move forward. Indonesia plans to accelerate development of 27 GW of total power capacity in the next several years. 10 ASIAN POWER

Shuozhou coal-fired power plant in Shanxi province, China

widespread construction of less efficient coalfired power plants in power-hungry emerging Asian economies,” says Han Phoumin, energy economist at the Economic Research Institute for ASEAN and East Asia in a research paper titled “Enabling Clean-Coal Technologies in Emerging Asia.” “Thus, policy approaches must be reviewed to assist emerging Asia to afford CCT and allow for more sustainable growth across the Asia-Pacific region,” he adds.

Top geothermal electricity producers and capacity holders (2014)

Source: U.S. Energy Information Administration

Indonesia total primary energy consumption, 2013

Source: Indonesi’s Ministry of Energy and Mineral Resources

special report: site visit

14-MW Sabangan Hydro Power Plant breaks open the tailrace for hydropower opportunities

Hedcor’s PHP 1.8 billion pioneering project in the Mountain Province is a step closer to the company’s goal of ‘Cleanergy’ — 2 billion kWh of clean energy by 2020.

Entrance to Sabangan Hydro

en hours north of Manila, Philippines lies the sleepy town of Sabangan, a fourthclass municipality hidden among the craggy peaks of the Sierra Madre Mountains. One sunny weekday in August, several members of the Asian Power team left the familiar confines of their city and embarked on a dizzying trek to this dusty town to see the 14-MW Sabangan Hydro Power Plant, which was inaugurated just this year by Hedcor, a wholly-owned subsidiary of Aboitiz Power Corporation. Harnessing the power of the pristine Chico River, the Sabangan Hydro Power Plant proves that there is indeed big power in small hydro. Since it came into operation in May 2015, the Sabangan Hydro Power Plant has already supplied at least 15 million kWh of renewable energy to the Luzon grid. The plant harnesses about 55-gigawatt-hours of power per year from the Chico River and simultaneously offsets 29,000 tons of greenhouse gas carbon dioxide. Like typical run-of-river plants, Sabangan Hydro has its weir where the water is fed to the powerhouse via a 3-kilometer tunnel. Eventually, the water goes back to the river flow in a much cleaner state. It joins the company’s portfolio of twelve hydropower plants in Northern Luzon, and it also marks Hedcor’s latest push in its goal of producing 2 billion kilowatt-hours of Cleanergy by 2020.

12 ASIAN POWER

The Sabangan Hydro power plant was completed in just two years, with total investments amounting to PHP 1.8 billion. However, the total process—such as studying the feasibility of the site and securing the proper permits—took a total of 6 years. Some 400 men and women were hired for the construction of the power plant. Locals made up the majority of staff in order to provide a stable source of livelihood for the indigenous community. Sabangan Hydro operates as a run-ofriver power plant. It boasts of an innovative horizontal de-silting system for its desander, which allows for simultaneous cleaning and operating. Older small hydro power plants have vertical flushing systems which cannot be cleaned without shutting down the entire plant. The plant has also been endorsed by the Department of Energy to the Energy Regulatory Commission as eligible for the feed-in-tariff system, together with Hedcor’s other renewable energy projects Irisan Hydro 1 in Benguet and Tudaya Hydro 2 in Davao del Sur. This will entitle Hedcor to a guaranteed rate for twenty years. Stakeholder engagement Sabangan has always offered attractive hydropower potential, but it had stayed undeveloped for quite some time, due

to its mountainous location and the traditional mindset of the community. However, with persistence, continuous stakeholder engagement and full operational transparency, Hedcor was able to tap the area’s potential and boost the community’s quality of life in the process. En route to the Sabangan Hydro Power Plant, the Asian Power team saw sure signs of progress for the local communities in the plant’s vicinity. Muddy dirt paths have been turned into concrete farm-to-market roads for the people’s benefit, allowing small farmers to bring their produce to town much more easily. Hedcor’s focus on establishing a cordial relationship with the local community means that locals now treat the plant’s engineers and staff like one of their own. The Asian Power team saw first-hand how Hedcor’s engineers are invited to intimate celebrations within the community, cementing a bond that was formed through several years of collaboration and hard work. Under its goal of balancing people, planet, and profit, Hedcor engaged with community volunteers to plant over 130,000 trees covering more than 70 hectares in the municipality of Sabangan and in the neighboring town of Bauko. Green energy and town development The Sabangan hydro does not only produce green energy but more importantly serves as an important catalyst for the development of the town. About Php 16 million worth of annual shares and taxes will be given to the barangay, municipality, province and the indigenous people community. This is apart from Hedcor’s regular corporate social responsibility efforts focused on education, enterprise development and environment. As the largest run-of-river hydropower developer in the Philippines, Hedcor has built 22 run-of-river hydropower plants locally, the latest of which is Sabangan Hydro. As a whole, Hedcor’s plants have a total installed capacity of 185 MW. These plants are scattered across the Philippine archipelago, and Hedcor is still actively looking for opportunities to expand its hydropower portfolio.

“The plant is expected to produce 55-gigawatt-hours annually while offsetting 29,000 tons of carbon dioxide.”

Shrirang B. Karandikar CEO India Power

14 ASIAN POWER

CEO INTERVIEW

India Power talks about improvement in one of India’s most notorious power areas CEO Shrirang B. Karandikar says the company now maintains a round-the-clock power supply in Gaya.

ndia Power (IPCL), one of the oldest power utilities in India for over 90 years, has been recently active in diversifying its portfolio, with renewable and conventional modes of power generation, transmission, distribution and power trading. One of its significant activities after the Kolkota-based firm’s name was changed from Dishergarh Power Supply Company (DPSC) in 2013, was its takeover of the electricity supply and distribution business of Gaya-Bodhgaya from South Bihar Power Distribution Co. Ltd. (SBPDCL) from 1st June, 2014, and comprising surrounding urban and rural areas amounting to over 1600 sq.km. Surely, it was not an easy task as Bihar is plagued with high distribution losses due to the poor condition of transformers, huge pilferages, and substantial billing and collection losses. Asian Power recently caught up with IPCL CEO, Shrirang B. Karandikar to shed light on the challenges that the company currently faces as it takes on this herculean task. He also talked about the direction that he is taking the company to in its bid to diversify portfolio. IPCL currently operates 100.2 MW of wind assets in Rajasthan, Gujarat and Karnataka, and has also developed a 2 MW grid-connected solar power plant along with West Bengal Green Energy Development Corporation Ltd. in Asansol. In the conventional sector, the company is setting up a 450 MW thermal power plant in Haldia, West Bengal and has also conceived thermal power projects in Bihar and Madhya Pradesh. With the development of the power plants, IPCL intends to scale its power generation portfolio up to 10,000 MW in the coming years. The company also owns and operates a distribution licence in the region, spread over 618 sq.km. in the coal-rich Asansol-Raniganj belt. IPCL’s distribution license in Gaya, notoriously one of the worst sectors for a power company to operate in, is now one year old. What have you learnt in this time? How has the situation improved for domestic and industrial customers? Our responsibility includes continuous electricity operations and to all consumers, maintenance of the entire area, collection of revenues by issuing energy bills and remitting the agreed cost to SBPDCL on a monthly basis. This is besides complying with all regulations of the Bihar Electricity Regulatory Commission. When we took over, average power supply to the area was in the range of 13-16 hours and this was a major challenge, dealing with dilapidated network conditions. Secondly, the distribution loss level at takeover was climbing to over 71%. Besides this, there was no specific billing software or business enterprise software available for adequate control and consumer care. Incidentally, our takeover coincided with the onset of the monsoon. Our first task was to maintain the existing network and to ensure an optimum power supply. There is “Pitra – Paksha” mela in Gaya. This is a traditional ritual to remember our forefathers and thousands of people from across India congregate at these rituals in Gaya every year in September and October. In 2014 and 2015, IPCL’s efforts in maintaining power supply was highly appreciated by the people and the administration of Gaya. During our first year of operation, we were able to maintain power supply to all franchise areas of up to 23.30-24 hours on average. This is highly appreciated by our consumers.

We have also established a 24 hour a day, 365 days a year call centre and consumer care centre for attending to electricity related complaints, billing related complaints and connecting new power supply etc. We understand that people are eager to be provided with better services and are also prepared to pay the relevant charges. We need to strive continuously to extend our reach to all consumers. One of the biggest issues in the world today is the issue of climate change. At the same time, our current methods of large-scale energy generation use non-renewable resources. How is IPCL preparing for the conversion to renewable sources of energy? (Wind) IPCL understands the importance of increasing new renewable energy sources and has been striving relentlessly since 2006 to achieve a balanced mix of renewable and nonrenewable energy resources. We have over 105 MW of wind energy in four major states of India - Rajasthan, Gujarat, Maharashtra and Karnataka. We also have 2 MW of solar plant in Asansol which is already connected to the grid. We are looking forward to contributing to more wind and solar energy in India. The distribution business in India faces several challenges, especially in non-urban areas. How is IPCL taking on and overcoming these roadblocks? In non-urban areas in India, people require continuous power to water their fields and for their houses. As regards new power connections to rural areas, IPCL, along with its sister company, Sahaj, have created a network of “Village Level Entrepreneurs” (VLE). VLE are youths of the same village who assist villagers to complete applications for a new connection and register their billing details. This has helped villagers in getting their needs sorted out and we have started this specifically in our distribution franchise area. What are IPCL’s new undertakings in the distribution business? IPCL, with its vast experience in the field of power distribution, is in discussions with other Indian states like Rajasthan, Jharkhand and Uttarakhand to acquire new opportunities in the field. Simultaneously we want to increase our base and retain domestic and commercial consumers in our licensed area. We are also working towards the lowering cost of power to industries in the state of West Bengal where we are based and to help industries to become extremely competitive. IPCL has more than 96 years of experience in the distribution business, having receiving stations with both DVC & WBSEDCL, and we own more than 20 strategic distribution substations at 33/11 KV, which are distributing power across all industries within 618 sq.km. of the Asansol-Raniganj area. The company is on the verge of commissioning a 220 KV substation at J.K. Nagar, within the licenced area, to enable State Grid (STU) Connectivity. Supplying power to the critical gaseous underground coal mines of ECL, government hospitals, municipalities, railways and other industries, the distribution license is considered to be the lifeline of industrial growth in the area. It has a demand of over 250 MVA, a reliability factor of over 99.7% and T&D loss figures of around 2.7%. ASIAN POWER 15

co-published Corporate profile

Komipo on how power can change the world

KOMIPO’s global mission goes above and beyond merely supplying electricity

KOMIPO Headquaters

or many Korean citizens and businesses, Korea Midland Power Co., Ltd. (KOMIPO) is a mainstay of everyday life, contributing to overall national development as a power generation-specialized company. Since its establishment in April 2001 after spinoff from Korea Electric Power company (KEPCO), KOMIPO has achieved major advances as an outstanding company in the power generation industry in Korea and abroad. Thanks to the long-term trouble-free (LTTF) operation of Boryeong TPP #3, the first standard coal-fired power plant built in Korea among the 20 units now operated domestically, the recognitions received by KOMIPO include winning the ‘Plant of the Year’ award twice (1996 and 2008), Gold (2008) Award and ‘the Coal Power Project of the Year’ (2013) at the Asian Power Awards, Grand Prix at the Korea Record Culture Awards (2014) and registration with U.S. World Record Academy (2014). “Boryeong TPP #3, operated by KOMIPO, achieved the world’s longest LTTF operation period (5,500 days as of March 12, 2015) with operation continuing at present without any trouble. The power plant’s achievement of 16 years and four months of LTTF operation since December 17, 1998, is unprecedented in the history of the global power industry,” shares Kang Sugjung, General Manager, External Coordination Team, Planning and Coordination Department 16 ASIAN POWER

at KOMIPO. Proactive Leader by going green As awareness of the long-term environmental effects of power generation using fossil fuels grows, the industry is preparing to adopt more environment-friendly alternatives and technologies, which is currently one of KOMIPO’s primary initiatives. In addition to continuously innovating and creating new technologies to make power production more efficient, KOMIPO is pursuing the commercialization of Carbon Capture & Storage (CCS) systems, which aim to lessen the release of waste carbon dioxide into the atmosphere, thereby preventing further contribution to global warming. “In reality, power companies using fossil fuels are emitting a lot of CO2, the major cause of global warming. To secure CO2 capture & storage technology, KOMIPO completed the development of the basic design and design models for the CCS process through operation of a 10MW-class test-bed facility and plans to develop and install 100~300MW-class CCS facilities by 2020,” says Kang.

“KOMIPO is pursuing the commercialization of Carbon Capture & Storage (CCS) systems.”

Simultaneously, KOMIPO is taking pains to ensure that residents living adjacent to its power plants are not affected by largescale emissions of environmental pollutants. Introducing the latest environmental technologies, such as domestic technologyapplied, high-efficiency USC power plants and the construction of indoor coal storage facilities, the company is doing its best to eliminate pollutant emissions. “KOMIPO is practicing eco-friendly, lowcarbon green-growth management and taking a lead role on this global issue, i.e. prevention of global warming, harvesting 140,000 tons of greenhouse gas (GHG) reduction effect annually through installation of a co-firing facility for organic solid fuels,” says Kang of the W5.1 billion project first introduced in August 2012. The initiative to develop eco-friendly options is also an effort on KOMIPO’s part to continue providing Korean citizens with the quality service that it has become known for. For instance, as the lifespan of KOMIPO’s Boryeong TPP #3 is nearing its end after decades of successful operation, the company is preparing upgrades and functional improvements to sustain power supply and reduce costs. “With implementation of the upgrade & functional improvement work, KOMIPO can reduce the nation’s economic and social expenses by eliminating wasteful factors such as construction cost and environmental expenses, while consequently

co-published Corporate profile curbing electricity price increases so as to contribute to improved quality of life for residents,” says Kang. The company also is focused on introducing eco-friendly generation technologies, such as new & renewable energy projects in biomass generation, wind power generation, and hydropower, to name a few. “Based on the innovative idea of utilizing seawater to cool water in the condenser steam process for the power generator as a renewable energy source, KOMIPO has installed six small (1.25kW) hydropower plant units at cooling water outlets, which generate about 25,214kWh per year, reducing CO2 emissions by 14,000 tons annually,” shares Kang, an accomplishment that was officially registered with the United Nations as a Clean Development Mechanism project in 2009. At the same time, KOMIPO aims to reduce greenhouse gas (GHG) emissions and increase

Shinboryeong Thermal Power Plant-Under Construction

“KOMIPO has installed six small (1.25kW) hydropower plant units at cooling water outlets, which generate about 25,214kWh per year, reducing CO2 emissions by 14,000 tons annually.” recycling of waste resources as part of the company’s corporate social responsibility efforts. “KOMIPO is actively joining national energy policy initiatives, including conversion of wastes into resources, cooperating in technology development of alternative energies, contributing to the enhancement of the nation’s energy self-reliance level, and securing stronger national competitiveness through technology exports to less developed countries,” says Kang. KOMIPO eyes the future – looking to shared-growth To date, KOMIPO has the largest number of overseas business sites among domestic power companies and continues to explore new overseas markets, including Indonesia and Thailand. “KOMIPO is expanding its business scope for provision of diverse, professional services in all generation fields, from construction to operation & maintenance, technical consulting and education & training, to the whole world,” says Kang. “Its near-term goals are to achieve W12 trillion in sales, W500 billion in operating profit, the world’s top-class, U.S. GE’s level, safety culture (ISRS-C Index: 9.0 points) and recognition as an ethical enterprise (KOMIPO Management Transparency Index: 9.0 points).” In conjunction with the company’s growth goals, KOMIPO has established the specific management mission to become a global

Seoul Combined Cycle Power Plant-Under Construction

top-30 energy company by 2025 as well as to remain No. 1 among domestic thermal power companies. To realize its mission and goals, the company has enhanced its strategic management system dramatically, from the long-term vision to more detailed management strategies, both internal and external. At the same time, KOMIPO is committed to realizing overall regional development, not just company growth. “In line with the government’s policy to relocate public organizations to the provinces in order to achieve balanced regional development in Korea, KOMIPO has completed the relocation of its head office from Seoul to Boryeong City, where the company is now pursuing initiatives to identify and implement win-win projects with regional citizens and regional companies,” says Kang, adding that this effort will produce visible results by next year. “KOMIPO expects to reborn as an enterprise receiving more respect from regional citizens.” This year, KOMIPO introduced the Jang Bogo Project, an initiative to reinforce its accompanied overseas advance with small

and medium enterprises (SME) in order to create new jobs. “As a project designed to realize a ‘Living Together Win-Win’ spirit, a core value of KOMIPO, as well as a key government policy, through large enterpriseSME mutual growth, the Jang Bogo Project supports the overseas advance of SMEs, transcending the saturated domestic power generation market. KOMIPO is utilizing its directly-operated overseas business sites as outposts for its accompanied overseas advance with cooperating SMEs,” says Kang of the project. As a leading company in the power generation industry, KOMIPO also is concerned about energy shortages in developing countries, particularly for those who cannot afford electricity or have limited or no access at all. In line with this, KOMIPO constructed small hydropower facilities for citizens in poorer regions of Indonesia jointly with the Korea International Cooperation Agency (KOICA). “Advanced energy countries’ pursuit of crucial roles, construction of generation facilities and operating support for energy-poor classes, is now more important than ever,” says Kang. ASIAN POWER 17

Country report 1: Indonesia

City lights at Sudirman Central Business District, Jakarta

Indonesia’s capacity growth aim is ambitious It’s eyeing 71% capacity growth target and projects in infancy stage are telling Indonesia to get real.

he targeted increase of Indonesia’s domestic power generation capacity, on which the nation’s future economic growth and stability is dependent, is already facing numerous challenges in the planning stage alone Indonesia’s growth in the past few years has seen it quickly outpacing its power supply, causing power generation to be placed at the forefront of the country’s opportunities for improvement. As the government is targeting a four-year plan to add 36.6 gigawatts (GW) of power generation capacity to the country’s total, beginning this 2015, there are several factors and challenges to consider as the changes take effect. In a country like Indonesia where

The potential of solar power stands at 50 GW, whereas IEA puts it at above 1000 GW (4.8 kWh per m2 per day).

Indonesia aims to increase power capacity by 11.7% Compound annual growth rate (CAGR) during 2014-19

Source: 2014 Handbook of Energy and Economic Statistics of Indonesia, PLN data, Ministry of Energy

18 ASIAN POWER

massive natural energy reserves such as coal and oil abound, it may come as no surprise to some that the country’s energy mix is very poor, with power generation from fossil fuel sources making up 87% of domestic consumption. At the same time, it has allowed the economy to grow quickly in the past decade, thanks to the natural gas and coal trade with other Asian countries. However, with many countries turning to more sustainable energy options such as solar power and geothermal energy, power generation mixes are now geared towards shifting away from fossil fuels in the long run. “Natural gas consumption domestically has been increasing sharply with falling reserves which has resulted in reduced exports and falling global share. Overall, in a decade’s time, the fossil fuel-reliant trade economy of Indonesia is at huge risk – with falling reserves, changes in coalreliant country’s’ generation mix, increasing domestic consumption and global climate change actions,” says Abhishek Kumar, principal consultant in energy and environment at Frost & Sullivan. “As per the Jakarta Post, the potential of solar power stands at 50 GW, whereas IEA puts it at above 1000 GW (4.8 kWh per m2 per day),” he adds. Indonesia has several renewable energy options such as solar power and hydropower that are not yet being utilised.

PT Perusahaan Listrik Negara (PLN), Indonesia’s state-owned electricity company, will see a decline in its credit metrics due to its major capex requirements – to be largely debt-funded over the next few years. According to a study by Moody’s Investors Service, the bulk of Indonesia’s additional power generation capacity — namely 25.9 GW (70%) of the 36.6 GW — will be provided by independent power producers (IPP), with 10.7 GW (roughly 30%) to be provided by PLN. Targeting growth in power capacity This plan is certainly ambitious considering that this growth in capacity over the next five years will represent a 71% increase since end-2014, when Indonesia’s installed power capacity totalled 51.5 GW. Many of the projects involved are still in their procurement or planning stage, though the government has taken steps to shorten approval processes to expedite progress. For instance, they have set up the One Stop Services office for faster, more efficient licensing services. “The 35 GW programme is a big challenge for PLN, which struggled to build 10 GW under the previous Fast Track Programme in the same time. Unsurprisingly therefore, there have been delays in the procurement processes for many projects, and PPAs are not progressing fast enough to maintain momentum towards

Country report 1: indonesia

Julian Smith

Abhishek Kumar

Natural energy reserves abound in Indonesia

the target,” says Julian Smith, advisor on capital projects and infrastructure for PwC Indonesia. “Land acquisition, which has been a major impediment, was tackled to a large extent through the 2012 Land Acquisition bill, but implementation problems remain. A case in point is the long delays in the Central Java 2,000 MW project due to land disputes,” he adds, saying that it is unclear how many gigawatts will receive IIGF guarantees under the programme, as lack of a guarantee can be a deal-breaker for many financiers. PPP vs IPP As PLN currently holds a monopoly on power generation and transmission, it is also expected to develop the transmission and distribution (T&D) networks to support the targeted increase in capacity. Though the company is forecast to provide only 30% of the increased capacity over the next few years, building 9,035 km of transmission lines and 36,361 km of distribution lines is part of its plans to improve power distribution all over Indonesia by physically connecting its islands to the main grid, a daunting feat considering its archipelagic setting. “PPP models in Indonesia generally follow sensible international norms. In the power sector, the main benefit is the eligibility for Viability Gap Funding and IIGF Guarantee availability,” says Smith. “Coal and other fossil fuel-fired plants are usually financially viable under standard technology assumptions and given fuel quality and availability. Renewables have a harder time meeting investor hurdle rates, but the feed-in tariffs already in place for standard IPPs including hydro and biomass are not unreasonable.” In the last few years, Indonesia has demonstrated a more inefficient use of electricity, consuming more energy

to achieve the same level of economic growth, according to a study by Moody’s Investors Service. In order to offset this as well as improve the energy generation mix, the country is relying on IPPs to take a senior role to PLN and contribute ~70% of the new generation capacity additions over the next five years. “Historically, the IPP sector in Indonesia has been stagnant with only 19% overall contribution until recent times. This was due to high exposure of investment risk to external markets and an inadequate legal framework,” says Kumar of the IPP plans. “With the growing demand for power generation in Indonesia, IPPs can help bridge the demand-and-supply gap for power generation and power demand, and also help in improving electricity supply. There are more than 70 IPP projects in the fast track process currently.” The challenges at hand, however, are applicable to both PPP and IPP projects, which include land acquisition and procurement delays, as well as bureaucratic issues – regulatory inconsistencies, prolonged processing timelines, and difficulties with licensing, to name a few. Potential change at hand for Indonesia’s success While the government has made progress in easing some issues, such as the recent improvements in land acquisition, solutions for other issues are still awaiting further developments, both for PPPs and IPPs. “With the situation on land acquisition better, we are increasingly worried that transmission could be the next bottleneck. To take one example, it would be a big relief to many developers to see construction start on the 500kV HVDC trans-Sumatera transmission line,” says Smith. “Another key success factor would be precedent. Seeing a few PPP projects of

each technology type succeed, and investors make money, would be a powerful signal to the market, and alleviate a lot of concerns about regulatory inconsistency.” Indonesia is modeling its IPP solution to the power generation issue after the implementation of other countries such as Malaysia and Thailand, which have managed to tap into renewable energy sources, increasing power capacity through longterm sustainable means. Implementation of legalities in these same countries has also enabled them to develop IPPs which thrive, providing as much as 50% power generation share, as compared with Indonesia where only 19% of power is supplied by IPPs. “Challenges include ongoing confusion and inconsistency on the regulatory side (such as the recent Bank Indonesia regulation that makes the validity of USDdenominated tariffs unclear), remaining land acquisition issues, and bottlenecks in PPA negotiation and signing,” says Smith of the IPP projects that are still currently pending completion. While Indonesia’s ambitious plans to increase power capacity in order to sustain economic growth may be underway, it will take effective planning in order for it to be carried out within the given timeframe, and critical legal and bureaucratic change must be implemented by the government for it to be successful.

Power sector drives gas consumption growth Indonesia- Natural gas consumption & % Chg y-o-y

e/f= BMI estimate/forecast Source: EIA, BMI

Indonesia’s planned capacity of 36.6 GW will mostly be added close to the end of the 2015-19 period

Source: RUPTL 2015-2024, Moody’s Investor Service

ASIAN POWER 19

co-published Corporate profile

Alstom’s ultra-supercritical coal-fired power plant in Malaysia changes the face of power in Asia

Find out more about the Manjung 4, the largest coal-fired plant in Southeast Asia.

Manjung 4 aerial view

President of Alstom’s Steam Business. he 1000 MW Manjung 4 ultraOne of the key specifications TNBJ had for supercritical (USC) power plant in the project was that it be able to burn a wide Malaysia is the largest and most variety of coals to ensure competitive and efficient coal-fired plant in South East Asia. reliable operation no matter what coal might The plant benefits the country as a cleaner, be available. efficient and stable power source, generating While the design features necessary for this enough electricity to power close to 2 million did mean some efficiency trade off, Manjung Malaysian households. 4 still achieves nearly Manjung “Manjung 4 sets a new 40% efficiency making 4 is technical and commercial it the most efficient winning benchmark for Alstom that coal-fired plant global in Southeast acclaim demonstrates the strength Asia and it for its of the company’s technical generates technical capabilities.” more than 14% more power per tonne of achievements and project performance after coal burned, compared to the entering commercial operation in April this existing Manjung units. year.

Leading fuel-flexible USC technology Alstom’s* cutting edge USC technology enables Manjung 4 to run at much higher steam temperature and pressure than regular coal-fired plants to improve efficiency, increase power output and decrease emissions, particularly CO2 per unit of fuel burned. Since coming online, the plant has exceeded expectations, with net output and efficiency significantly better than guaranteed thanks to an optimized technical concept implemented in this project. “Manjung 4 sets a new technical and commercial benchmark for Alstom that demonstrates the strength of the company’s technical capabilities and capacity to offer even higher performance guarantees in future,” said Andreas Lusch, Senior Vice20 ASIAN POWER

Environmental protection An advanced low-NOx firing system provides maximized fuel flexibility, while ensuring NOx emissions are kept well within the

Manjung 4 Power Block

most stringent global and local requirements. NOx emissions are below 500 mg/Nm3. A Seawater Flue Gas Desulphurization system treats the plant’s flue gas ensuring more than 90% SO2 removal. Alstom’s Optipulse pulse-jet Fabric Filter system ensures particulates in the flue gas are less than 50 mg/Nm3. * Alstom’s Energy sectors are in the process of being acquired by GE as we go to print

Country report 2: VIETNAM

Hoa Binh Hydropower Plant, Vietnam

Lack of government support and poor policy framework hamper Vietnam’s power sector

Vietnam could have been stellar in the power scene, but lack of support and shaky policies dim its bright future.

s with many rapidly developing emerging markets, demand for power in Vietnam continues to grow, but structural changes to policy and market dynamics are needed to ramp up supply. The emergence of Vietnam’s economy has been one of the fastest in Asia, with GDP growing by almost 7% per annum over the last 20 years. With this increase in economic activity comes a commensurately large increase in the demand for power to support it, with demand for electricity estimated to have been increasing annually by about 13-15%. However, lack of government support and a poor policy framework have impeded the development of generation capacity in the country. According to Abhishek Kumar, a principal consultant for energy and development at Frost & Sullivan Asia-Pac, Vietnam scores very poorly on all indices of the World Energy Council’s “Energy Trilemma”, which measures the security, equity and sustainability of a country’s energy situation. At the moment, 60% of Vietnam’s capacity is generated by fossil fuels and only 7% of capacity is generated by renewables. Coal-fired plants are the most common in Vietnam, with 35% of total capacity using this feedstock,

22 ASIAN POWER

Much of the capacity coming online will also be coal-fired and the ratio of coal-fired plant capacity to total capacity will increase to 50% by 2030.

according to US Energy Information Administration Statistics. Much of the capacity coming online will also be coalfired and according to Kumar, the ratio of coal-fired plant capacity to total capacity will increase to 50% by 2030. These plants mainly source coal locally, but domestic supply may not be enough in the near future given the rapidly increasing demand and large requirements from new capacity. Oil-product powered plants represent about 25% of the country’s energy mix. The country is a net importer of petroleum products and is heavily dependent on its oil-powered plants. This presents a significant risk to the country’s generation capacity from price exposure to the swings in the global oil market, along with climate change actions worldwide putting pressure on the use of these plants. Renewables still make up the minority of all generation capacity, with about 38% of energy being produced by these technologies. Nuclear energy and renewables present attractive opportunities, according to Kumar. Two nuclear reactors are already in the pipeline for commissioning around 2020, with the support of the Russian and Japanese governments. However, the Fukushima disaster in Japan has put these

plans on hold for the time being. Kumar says that renewables are highly viable for Vietnam, as evidenced by studies by the German international development think tank Gesellschaft für Internationale Zusammenarbeit (GIZ). He notes that feedstock from agricultural products and residues of about 10B cubic metres can replace almost 10Mn tons of oil per annum, which presents a big opportunity to reduce oil dependence and the carbon footprint of the Vietnam’s generation capacity. Other renewable sources are still quite small, but can become viable alternatives in the future. Hydropower is at about 4GW spread over a large number of plants which are smaller than 30Mw in size, while solar and wind are still somewhat insignificant compared with the total capacity. Structural reforms Kumar explains that there are economic, policy, and technical barriers to the development of Vietnam’s power sector. From an economic standpoint, Vietnam is highly dependent on importation of fossil fuels and this exposes them to both price risk and currency risk. Given that about 61% of the country’s generation capacity is reliant on this feedstock,

country report 2: VIETNAM Vietnam is forced to be a price-taker and the economic viability of generation companies (GenCos) can be gravely affected by market price swings. Locally, the entire coal supply is held by state-owned Vinacomin under a natural monopoly which could artificially buoy prices of the input. “Under its mining licences, Vinacomin has exclusive rights to explore and operate licensed coal mines in Vietnam”, according to Brian Grieser, VP-senior analyst at Moody’s. With no competition from other local producers, input costs are likely to stay artificially elevated, which may hurt the attractiveness of fossil-fuel plants for foreign investors. The large amounts of imports must be financed with dollars, and the Vietnamese dong has been steadily depreciating against the greenback for the past five years, which has been hitting Vietnam Electricity (EVN), Vietnam’s largest power company, with forex losses that have impaired its ability to expand transmission lines critical to the sector. The structural situation in Vietnam’s power sector also presents challenges to its development. The distribution capacity is largely held by EVN, which currently

The Vietnamese power market does not yet have independent private entities handling the various parts of the power supply chain.

Historical and expected electric generating capacity in Vietnam (2010-30)

Source: International Atomic Energy Agency

Thu Duc Power Plant

operates under a natural monopoly. “Over the years EVN has been claiming losses in its business and recovering the same from tariff hikes from the consumers,” according to Kumar. There is also a lack of opportunity for small power plants, as units which are smaller than 30MW are currently not allowed to sell to the wholesale market. Alternative sources of energy such as wind, solar and geothermal are usually less than 30MW in size and this policy increases the risk of operating these plants and reducing incentive to build them. There is also a stark lack of technology to build more advanced power generation facilities, especially in renewables. This is more likely to be brought in through foreign investment, which is unlikely to gain significant traction given the numerous hurdles mentioned previously. A number of policy changes are in place that may help unlock the sector’s potential. The monopoly of EVN on distribution is set to end in 2016. Introduction of competition may lower tariff rates and improve returns to power generators, making the country’s power sector a more attractive investment destination. The country has also introduced a wholesale spot market in order to further reduce EVN’s grip on power purchasing and allow market forces to impact rates and allow for more fair prices for power consumers. At the moment however, only plants with capacity over 30MW are allowed to sell to this spot market. Kumar notes that there are still a number of policy actions that need to take place. First of all, the issue of smaller plants not being able to sell to the spot market needs to be resolved to incentivise investments into renewables. This would also improve the technology available to the Vietnamese power sector, given that

it would make the industry attractive to foreign firms that possess this expertise. The generation companies owned by EVN must also be re-evaluated in order to become more cost-competitive after operating under a monopoly for the longest time. The expiration of EVN’s natural monopoly should serve as an impetus for its genco’s to adapt to market forces. Additionally, the country still needs to set up its policy to support the development of off-grid and microgrid power generation and distribution. For emerging markets such as Vietnam, this becomes crucial, given the infrastructure deficit that continues to hamper the energising of far flung areas. PPP potential The PPP model can be adapted by Vietnam to rapidly develop the sector through broad-based investment from both foreign and domestic firms. The Vietnamese power market does not yet have independent private entities handling the various parts of the power supply chain, making it very different from the market of developed nations. Thus, Kumar notes that it would be best for Vietnam to adapt a Build-OperateTransfer (BOT) or Build-Operate model for independent power product or distribution projects that would retail to consumers. The generation will likely still require more government support given the current state of the downstream market. This will enable new players to enter the power market, improve the technology currently available and spread the project risks more evenly across entities that are better equipped with the expertise to undertake it. Additionally, it would create a multiplier effect for the economy as these projects would also spur job creation in the power sector. The reform of policy will be key to the success of the PPP model in Vietnam. The legal framework, government budget, and protection of the sanctity of contracts will be key to encouraging foreigners to invest in Vietnam power PPPs, given that these have been poorly executed in other emerging markets. The framework for purchasing of power will also have to be put into place and the government will have to manage any attempts at interference from EVN to ensure that competitiveness is maintained in the downstream market, as is the intention of these new pro-competition laws. If executed properly, there are large returns to be made bridging the supplydemand gap and servicing the country’s growing demands. ASIAN POWER 23

co-published Corporate profile

Meidensha Corporation gears up for excellence

Nearing its 120th year, the Japanese manufacturer reaffirms its commitment to excellence and service.

or most companies, industry longevity can be a liability, rather than an asset. In the long run, a “business as usual” mentality will eventually sap innovation and hamper overall progress and productivity. Whatever concept thatseems to be tried and tested for a long period of time, however, may fail to catch up with the times. Meidensha Corporation, a Japanese heavy electric machinery manufacturing firm, is one company that has managed to evade the pitfalls of being an industry old-timer. Founded nearly 120 years ago, Meidensha has found itself evolving over the years, adhering to a corporate mission of “illuminating a more affluent tomorrow” and a value provision of “customer peace of mind and satisfaction.” “During [the] 118 years since our founding in 1897, we, as a vital supplier in Japan, have made various innovations in technologies and produced various important products and services, shares Yuji Hamasaki, Meidensha President in his message to the company, “and [the] Meiden Group has been working hard [on] a daily level to contribute to society.” Indeed, the 8,000 employee-strong company’s numbers reflect a well-managed organization with a strong dedication to execution excellence. Armed with a capitalization of ¥17.07m as of end-March, Meidensha posted consolidated sales of ¥230.30m for the same period. A passion for excellence According to Yuji, Meidensha’s daily activities reflect the company’s commitment to meet the expectations of customers and society, driven by “a passion for collaborative and manufacturing excellence.” This mindset has driven Meidensha to pursue various advances and innovation in the power manufacturing business, especially among power plants in the region. “As so far as generation business is concerned, we have created some plans to enhance basic technologies such as installation, which leads the price competitiveness. Also, we have enlarged the capacity of our turbine generators. We depend highly on good leadership and cooperation, and the encouragement of our colleagues and partner companies,” explains Tetsuo Kawai, General Manager, Sales Department of Meidensha’s Power Generation Products Business Unit. For instance, Meidensha’s turbine generators—which are considered the engine behind most power plants—have always been top-of-class and reflect the latest in research and development. “For turbine generators, 24 ASIAN POWER

Tetsuo Kawai, General Manager, Sales Department Power Generation Products Business Unit Meidensha Corporation

we succeeded in drastic design optimization. We achieved about 30% reduction of the weight and cost and the highest level of efficiency in the world,” Tetsuo boasts. Unlike most companies that begin and remain with the domestic market they have grown accustomed to, Meidensha’s viewpoint is much more progressive. For most of the 20th century, Meidensha has significantly grown its network to include a presence in various countries. “We have our subsidiary companies in other Asian countries, not only in Thailand, but also in Singapore, Malaysia, Indonesia, China, etc. And they can do, and have been doing, EPC (engineering, procurement, and construction) jobs in cooperation with Meidensha in Japan. This means that we have a competitive edge against others,” Tetsuo says. “Meidensha has a great business network in Asian markets, and at this point, we are very unique because others don’t have such network.” Meidensha also boasts of its dynamic approach to customer orders, which includes working closely with its subsidiaries in order to deliver the best output, always with the customer’s satisfaction in mind. “Meidensha is a manufacturer basically, but we sometimes we work on EPC contracts and we can discuss with customers about the total plan

“The 8,000 employeestrong company’s numbers reflect a well-managed organization with a strong dedication to execution excellence.”

and the basic design of the plant if necessary. Therefore, in cooperation with our subsidiary companies, we come up with a proposal for our customers, and the final solution that is best for the customer. Also, we always give to the customer the highest level of support in the product life cycle, including support for operation and maintenance,” Tetsuo says. Future plans In recent years, Meidensha has been training its sights on business opportunities in outside Japan, snapping up contracts for various power plants as the overall economic boom in South East Asia has translated into a robust demand for power. “We are now supplying and restoring stations and substations that are part of the power generation business. Last month, we successfully completed an EPC job for a mini hydroelectric power plant in Laos. We supplied, installed, tested, and commissioned all electric and mechanical equipment,” explains Tetsuo. In 2017, Meidensha will be marking the culmination of V120, the company’s medium-term management plan that aims to strengthen the earnings base for Meidensha’s Japanese businesses and expand its businesses overseas. Coincidentally, 2017 also marks the 120thyear of Meidensha, a year that is shaping up to be as busy as any year in the past. Meidensha says: “The Meiden Group will celebrate its 120th anniversary in fiscal 2017, which is the final year of V120. Through the implementation of V120, we aim to accelerate momentum for new growth and further expand our corporate value.”

General Anantaporn Kanjanarat Minister Ministry of Energy, Thailand

H.E. Viraphonh Viravong Vice Minister, Ministry of Energy and Mines, Lao PDR

Mr.Masakazu Toyoda Chairman and CEO The Institute of Energy Economics, Japan (IEEJ)

Datuk Ir.Ahmad Fauzi bin Hasan

Chief Executive Officer Surahanjaya Tenaga, Malaysia

ASIAN POWER 25

sector report: Solar power in Asia

India One Solar Thermal Power Plant

Here comes the sun: Asian countries turn to solar for long-term energy mix

China, India, and Thailand are on their toes to increase the role of solar energy in powering their countries.

s the slow shift to renewable energy gains traction worldwide, Asian countries have taken the opportunity to invest in solar energy with a view to including it in their long-term energy mix. China’s operators are in a hurry to create new solar power plants, but the government is lagging in delivering the incentives it promised. With a dedicated agency, India is poised to become a global force in the solar power industry. Thailand, through the help of China, is slowly working on realising its potential to become a regional powerhouse. China: A fragmented gold rush In what appears to be a continued momentum in the installation of solar energy projects in the country, China’s energy companies are in a rush to maximise benefits provided under the current system. In May 2015, China’s State Council outlined in an official notification how its domestic manufacturing industry will pursue opportunities abroad through international cooperation. Frank Haugwitz of the Asia Europe Clean Energy (Solar) Advisory Co. Ltd. says drivers are an increasing assertiveness being able to compete outside of China and the demand for infrastructure projects, sustained industrialisation and urbanisation in both developing and emerging economies. Identified key industries consist of, among others, steel, railway, chemicals, automobile, aerospace, communication, shipping and electric power. The latter explicitly covers thermal, hydro, wind and solar photovoltaic (PV) system. “The State Council’s notification stipulates further to actively participate in the investment, construction and operation of PV projects, as well to strive for establishing manufacturing capacities in relevant countries. In this context, national companies considered internationally competitive will take the lead first, in order to encourage small and medium size companies to follow 26 ASIAN POWER

By the end of 2015, China could be home to approximately 45 GW of total installed solar PV, which would represent roughly 3 percent of the total existing power generation capacities.

at a later stage, with the aim to cover the entire industrial value chain. By 2020, a batch of global manufacturing bases in various countries will be established,” Haugwitz says. Potential entry points for setting up such “bases” are designated special economic trade and industrial zones in relevant host countries, offering favourable investment environments and strong local demand. To facilitate such global ambitions, China’s policy banks such as the China Development Bank, Import‐ Export Bank, China’s Sovereign Fund, the China Investment Corporation, among others, are encouraged to offer active support. During the visit of the Indian Prime Minister, Nahrenda Modi to China in mid-May, multiple memoranda of agreement between Chinese and Indian solar companies were signed. Haugwitz adds that China’s target of installing 17.8 gigawatts makes 2015 a truly ambitious year. If successful, by the end of 2015, China could be home to approximately 45 GW of total installed solar PV, which would represent roughly 3 percent of the total existing power generation capacities. Data from the National Energy Administration (NEA) show that the first quarter of 2015 has already witnessed impressive high level installations amounting to 5.04 GW of what seems to be roll-over projects from the last quarter of 2014. Analyst Charles Yonts of CLSA says, as of now, there is a gold rush as operators race to lock in high tariffs that are not likely to be around forever. Haugwitz says overall, NEA’s exceedingly ambitious target of 17.8 GW has so far been met with an equally bullish demand for projects. Solar development in China appears to be gaining momentum, thanks to the greater flexibility afforded to developers, access to finance and permits, says Joseph Fong of Jefferies. “Distributed generation does not appear to be ready to drive solar growth but developers can more aggressively build utility projects as the government has not set a hard target for distribu-

sector report: Solar power in Asia Solar power tariff trend across states in 2014

Solar to shine

Source: CSPDCL, KREDL, MPPMCL, APSPDCL, TSSPDCL, Delloite Research

e/f=BMI estimate/forecast. Source: EIA, BMI

tion generation this year,” Fong says. Yonts says China’s solar energy sector is a very fragmented space with no clear leaders, especially in distributed generation, which is at the centre of long-term disruption. He adds that aside from the ability to procure projects and capital, there are not many clear differentiating factors for Chinese solar operators. “At the same time, the gold rush atmosphere has naturally led to a plethora of bad projects that are difficult to identify without going all the way down to theproject level for due diligence. Over the coming years, management teams that prove they are able to differentiate the good from the bad will earn a premium from the market,” Yonts says. The biggest current challenge facing every solar operator in China is that subsidies are not being paid on time, or at all. Yonts says that projects connected to the grid with full approval since the start of 2014 have not yet managed to get on the registry to receive subsidy payments. “This means that solar operators are currently only receiving the equivalent of the coal-fired tariff from the grid company on a monthly basis, with just 30-40% of total revenue booked,” Yonts says. Although there is little doubt as to whether these accounts receivable will eventually be paid, there is equally little certainty about when they will be paid. The renewable energy fund which disperses these payments appears to be running low. If a previous delay in wind subsidy is anything to go by, the solar registry should start clearing up as the renewable energy fund is topped up. Until then, cash flow for operators will be a significant concern, Yonts says. “Like most markets, China’s solar demand is dependent upon subsidies today and will remain so for the next couple years. Ultimately, if the economics do work, then policy changes will only be road bumps (albeit potentially very big ones) rather than catastrophic. The economics work,” he says. India: Poised to become a world leader McKinsey and Company says with one of the world’s highest solar intensities and low cost manufacturing, India has the potential to become a global force in solar energy. “An emerging regulatory regime and high peak prices make this opportunity real and attractive,” McKinsey says. Since 2010, with the establishment of the Jawaharlal Nehru National Solar Mission (JNNSM), the solar power sector in India has been making significant strides in recent years. “What excites and sometimes overwhelms the industry is the ambitious revision of solar targets by the new government,” says MadhavanNampoothiri, of RESolve Energy Consultants. The government is proposing a five-fold increase in the JNNSM targets and is planning to revise it from 20 GW of gridconnected solar to 100 GW by 2022 or even earlier. “Considering the fact that it took India about five years to add 3 GW, adding another 97 GW in eight years looks extremely

Charles Yonts

Frank Haugwitz

Georgina Hayden

Madhavan Nampoothiri

Ulrich Eder

challenging,” Nampoothiri says. In a report for the Confederation of Indian Industry, Deloitte notes that installed capacity of solar power in the country has grown from a meagre 14 MW in 2010 to 3,744 MW by March 2015, increasing more than 265 times in a span of five years. In its Global Trends in Renewable Energy Investment 2015 report, the Frankfurt School-United Nations Environment Programme Collaborating Centre for Climate and Sustainable Energy Finance says solar was the only sector to see investment grow in India in 2014, with financing doubling to $3 billion. Unlike those in 2013, the capacity auctions last year were fully subscribed, suggesting investor confidence has risen. India now has over 3 GW of solar capacity installed, including 204 MW of solar thermal. The government also announced ambitious targets last year: for 100 GW of solar capacity by 2022 and 40GW of new wind installations by 2019. “Since its launch, the programmehas received encouraging market response. Solar power is one of the fastest growing renewable energy technologies and within a relatively short period of five years there has been steep fall (more than 60 percent) in solar PV capital cost and tariff,” Deloitte says. One of the objectives of JNNSM was to attain global leadership in solar manufacturing across the value chain by developing leading edge solar technologies. To this effect, the Ministry of New and Renewable Energy has raised budgetary support for research and development in the government’s five-year plan. The country’s manufacturing capacity for solar goods and equipment has grown over the years, with a base of 52 PV module manufacturers as of June 2014. The solar engineering procurement and construction segment too has grown in the country with most of the module manufacturers expanding their role across the value. Solar manufacturing is also poised for opportunities with the launch of “Make in India Program” which aims to facilitate investment and build best in manufacturing capabilities in the country, Deloitte notes. The mission, apart from promoting utility scale projects has also provided the impetus for the proliferation of solar power through rooftop solar projects. “Apart from several state governments initiating separate programmes for rooftop solar development, the segment is also receiving the interest of commercial and industrial players,” Deloitte says. Against the background of increasing costs of conventional power, concerns regarding availability and reliability of power from grid and long term commercial feasibility of solar power, commercial and industrial consumers are installing rooftop solar technology to meet their captive needs. Investing in solar power is also helping companies meet their corporate social responsibility initiative along with long term commercial gains, Deloitte says. Considering the cost and environmental advantages of large ASIAN POWER 27

sector report: Solar power in Asia scale solar parks, MNRE has proposed a scheme for development of Solar Parks and Ultra Mega Solar power projects in the country. Inspired by the success of Charanka Solar Park in Gujarat, other states have also initiated development of large scale solar parks in the country. “Favourable state level policies, feed-in-tariff regimes, viability gap funding mechanisms, capital subsidies, progressive net-metering arrangements and solar specific renewable obligations have created a supportive environment for development of solar power in the country,” Deloitte says. Thailand: Growing interest in the market In its Southeast Asia Energy Outlook 2015 report, the International Energy Agency says Thailand, along with Cambodia, Indonesia, Malaysia and Vietnam are often referenced as having strong potential for solar development. However, Dr. Ulrich Eder, managing director of Bangkok-based law firm, Pugnatorius, says even under the ASEAN Economic Community 2015, the solar markets remain heterogeneous and fragmented. In Thailand, developers and banks are more and more aware that the military junta may use its unlimited empowerment in the interim Constitution to change the legal framework retroactively, which exposes the whole solar project to high political risks, Eder says. “The solar industry gains in competitiveness and prepares to avoid legal and business restrictions which come with premium feed-in tariffs. This will, in some regions, be a disruptive element and puts increasing pressure on governments and remodels existing energy markets. We will see winners and losers,” he says. Eder adds that he does not expect to see a substantial shifting and dislocation within the next two years. “The existing markets will flourish and prosper and the risk-averse and cost-conscious solar industry is not keen to develop new markets before the known territories are harvested and saturated,” he says. Georgina Hayden, senior energy and infrastructure analyst at BMI Research says the outlook is optimistic in the southeast Asian renewable energy sector. “In light of the improving investment environment and the growing project pipeline, our renewables capacity forecasts for the southeast Asia region are constructive. We expect the region’s largest markets, in terms of capacity Thailand, Philippines and Indonesia - to expand 160%, 82% and 132% respectively over our forecast period between 2015 and 2024,” she says. Data from BMI Research show that the most notable difference between Thailand’s current power mix and the one envisaged for 2026/2036 is the reduction of the contribution of gas-fired electricity. Reducing Thailand’s reliance on gas is a Solar targets upped to 100GW by 2022

Source: Deutsche Bank, MNRE

28 ASIAN POWER

The most notable difference between Thailand’s current power mix and the one envisaged for 2026/2036 is the reduction of the contribution of gas-fired electricity.

government priority, given the downward trajectory of domestic gas production and the country’s heavy dependence on Myanmar for gas. Myanmar currently contributes approximately 25% of Thailand’s total gas consumption, but the Burmese government is looking to cut down on export volumes as it retains more of its gas for domestic consumption to support its growing economy. “Overall, we expect non-hydro renewables capacity to increase from an installed capacity base of around 3 GW (2014 BMI estimate) to over 9.5 GW by the end of our forecast period in 2024. Solar power will dominate the renewables capacity mix, contributing over 56% to the total in 2024, and posting annual average growth rates in capacity in excess of 15% between 2015 and 2024,” Hayden says. Thailand is emerging as an attractive destination for renewable energy investment, highlighted by growing investor interest in the market. The government has introduced a number of policies to support growth in the industry and encourage investment, including feed-in tariffs, tax incentives and energy production payments, BMI Research notes. Growing investor interest in the market - particularly from Chinese solar energy developers and manufacturers, makes Thailand a promising country for solar energy. Thailand’s ambitious renewable targets, the supportive policy environment and Chinese solar companies’ aims to capitalise on emerging renewables markets in the wider Asian region support this view, Hayden says. “We have previously stated in our analysis that Thailand is emerging as an attractive destination for renewable energy investment, as the government looks to reduce the country’s reliance on gas-fired power generation and incorporate other sources into the power mix, including renewable energy. According to the new power development plan (PDP) 2015-36, the country will look to reduce its dependence on gas-power generation from the current level of 70% to 40% by 2036, with an estimated 20% coming from renewable sources,” she says. Attractive renewables market Hayden says the increasing attractiveness of the Thai renewables market is reflected in the growing investor interest in the market - particularly from Chinese solar energy developers and manufacturers. Project announcements over the last three months attest to this view, with Hong Kong-based Symbior Solar announcing in August 2015 that it will develop three new solar projects in Thailand (in conjunction with German company,Conergy), adding to SymbiorSolar’s capacity portfolio of six solar facilities with a combined capacity of 30MW across Thailand. Furthermore, in June 2015, Chinese panel manufacturer,Suntech Power, signed a deal with Thai company,Gunkul Engineering, to supply components for 63MW of solar capacity in the country. According to the company, Suntech has already supplied about 260MW of panel capacity to Thai solar projects. “Our renewables projects database also highlights China’s growing presence in the Thai renewables industry. Out of the total number of projects in the pipeline (in various stages of development), 14% involve Chinese manufacturers or developers, the second highest percentage after domestic Thai companies,” she says. Besides the supportive policy and regulatory environment and the government’s strong commitment to power-mix diversification, Hayden says Chinesecompanies are targeting the Thai solar sector in order to offset the restrictions that have resulted from the ongoing trade disputes between China and the United States and the European Union. Both the European Commission and US International Trade Commission have implemented anti-dumping duties and tariffs on Chinese solar products to help support their domestic solar manufacturing industries, limiting the demand for Chinese panels in these markets. Therefore, Chinese solar companies are increasingly focussed on capitalising on emerging renewables markets in the wider Asian region, of which Thailand is an attractive choice.

co-published Corporate profile

Veolia launches HydrotechTM Discfilter HSF2200-1C compact at Power-Gen Asia 2015

Constantly looking to improve its products, Veolia releases the new and compact Hydrotech Discfilter as an inexpensive solution to treat and filter large volumes of water. ‘True Cost of Water’ As the company seeks to bring value to its clients, Veolia also rolled out its “True Cost of Water” assessment, an economic evaluation of risks and benefits related to water use. Veolia says existing water footprint indicators give us a view of the vulnerability and resilience of a specific activity to water challenges, such as flooding. The ‘True Cost of Water’ is Veolia’s solution to provide an even more pragmatic and straightforward metric to measure water risks in terms of dollars and cents. The business monitoring tool provides companies with vital information to tailor its water strategies in order to mitigate water risk.

Paul Coe Vice President, Power Veolia

Bill Willersdorf Global Market Director for Power Veolia Water Technologies

tower makeup or side stream filtration. Bill eolia Water Technologies has built its Willersdorf, Global Market Director for Power business on the diversity of its services at Veolia Water Technologies, says there is a in order to cater to a wide range of tremendous amount of benefits of the new clients. A global leader in technological water Discfilter over conventional side stream media and wastewater solutions, Veolia provides filtration. the services required to design, maintain, “It’s easy to operate, it’s compact, easy to build, and upgrade water and wastewater install, and we’re seeing a lot of trending treatment facilities for its clients. Focusing news for gray on creating value “the latest version of water or reclaimed for its clients the Hydrotech Discfilter water by treating has always it with a Hydrotech been Veolia’s has a 20% higher methodology in capacity compared to its Discfilter for cooling tower business, and predecessor and a 15% make-up. It’s also this has included lower water footprint. ” very inexpensive,” analysing its clients’ says Willersdorf. needs and diving With Veolia leading the charge, the trend deep into their requirements to unlock of reducing freshwater consumption is potential opportunities. spreading all around the globe, as efforts are Paul Coe, Vice President, Power at being made in order to allocate more water Veolia, says that aside from monetary for agriculture and human consumption. benefits, Veolia’s business methodology also “It’s really catching on in the power industry, helps in terms of environmental sustainability. there’s thousands of discfilters being used out there for tertiary filtration municipal New product to adhere to stringent reuse water quality Veolia recently launched its HydrotechTM standards (California Title 22),” Willersdorf Discfilter HSF2200-1C compact unit at says. Power-Gen Asia 2015. According to Jonas Veolia is also aware of the impending Hagstrom, Global Industrial Sales Manager increase of restrictions in terms of water for Hydrotech at Veolia Water Technologies, usage across Asia. As municipal sewage is a the latest version of the Hydrotech Discfilter source of water for reclamation (especially has a 20% higher capacity compared to for cooling tower make-up), Veolia sees the its predecessor and a 15% lower water Discfilter as an inexpensive solution to treat a footprint. large volume of water and filter it to turbidity The real benefit of the HydrotechTM levels of less than 2NTU. Discfilter HSF2200-1C lies in its cooling

Mitigating risk “Veolia’s True Cost of Water tool focuses on the financial implications of water-related risks. It helps the user to anticipate, prioritise, and more effectively mitigate water-related risks that can negatively affect the bottom line by creating a risk-reward trade-off analysis,” Willersdorf says. “It’s not what you pay for water, it’s what you risk if your water source is cut off. So we try to work with the client, do water audits, and come up with higher productivity for the client in taking them off their freshwater source, finding a different water, reducing the amount of water that they are using, and showing them what the risk of their operation is, if they are going to lose that source of water,” Willersdorf says.

HydrotechSF2200-1C ASIAN POWER 29

co-published Corporate profile

Find out how VPower is pushing into the next phase of distributed power in Indonesia

As one of the fastest growing independent power producers, VPower offers fast track short to medium term power supply to its clients across the globe.

ndonesia has one of the world’s highest demand for distributed power. The use of vast domestic natural gas resources instead of imported diesel makes gaspowered distributed model significantly more cost-effective and less damaging to the environment. Only short-term capital financing and project planning is needed to get the full installation off the ground, and for distributed power to be brought on-line. As one of the fastest growing Independent Power Producer (IPP), VPower offers fast track short to medium term power supply globally, with full financing to our customers, mobilizing fast-track power fleets and deploying turnkey power of 50MW and up takes a matter of months. In 2012, VPower launched its first 12MW power plant in Pekanbaru. It is among the very first gas-powered plants in the country by an IPP, and VPower adopted nine MTU 16V400 gas engines, introducing the then latest technology from Germany and greatly improved the operating performance. Compared to the centralized power model, distributed power systems can reduce losses from transportation and conversion up to 10%, and improve generating efficiency to over 40%. Running on natural gas, the power fleet is one of the cleanest and most cost-effective in the country. LNG power fleets As the first IPP to launch gas power fleets in Indonesia, VPower is striving to take this further, to add liquefied natural gas (LNG) power fleets to the country’s power generation capacity. An 80MW LNG project is being proposed for Nias

VPower 50MW project at Palembang, one of the larger gas power plants in Indonesia 30 ASIAN POWER

Oscar - Regional director of Indonesia, who has been working closely with PLN for almost 20 years

Island, an emerging world-famous surfers’ destination. Nias Island’s energy deficit is constraining the island’s development, and the current operating power capacity is exclusively dependent on diesel. Smallerscale LNG-powered fleets take full advantage of the countries existing LNG production infrastructure and the country’s vast domestic natural gas resources, kicking off a viable power structure that can grow with the power demand in the long run. It has been long recognized that gaspowered, distributed energy (DE) solutions to be among the most viable answers to Indonesia’s energy shortage, but projects like this one has yet to be launched in the country. LNG burns cleaner than diesel and is more reliable for a base-load power source than renewable energy options. It also has the benefits of a diesel-based power: highly scalable at significantly lower costs. VPower employed tested technologies to minimize the risks of delays and cost overruns in the delivery, storage and regasification of LNG. Recently, VPower has been awarded “Power Utility of the Year – Indonesia” for PLN Diesel to Gas Plant Upgrade in Pekanbaru by Asian Power. The 50MW power plant is a diesel-to-gas onsite upgrade. Importing diesel was more expensive by comparison

with higher CO2 emissions. For the upgrade, VPower adopted seven Rolls-Royce B35 gas engines and pushed the efficiency to 48%. This greatly improves resource utilization and helps meet the country’s pledge to emission reduction. VPower has been in the generator set design, manufacture and sales business for over 20 years, offering system integration, O&M and EPC services to growing economies globally. Today, VPower actively invests in fast track mobilized power plants, available under fixed term Power Purchase Agreements or other financing structures, complete with full project development capabilities. In the past 15 years, over 15,000 units have been deployed, providing an aggregated capacity of over 2GW of power in the past 3 years alone. VPower has a vision to build towards an effective and viable distributed power network and believes the most cost-effective and eco-conscience power solutions will make up more than half of the power to be supplied by under the DE model. VPower believes the technical expertise exchange that comes from the on-site power installation will help build the sound foundation for self-sustained generated power, for years to come.

“VPower actively invests in fast track mobilized power plants, available under fixed term Power Purchase Agreements or other financing structures.”

ANALYSIS: Korean IPPs

Power margin pressure hits Korean IPPs

Dark profit clouds loom over Korean IPPs in the next months Lower capacity utilisation rates will weaken the IPPs’ financial buffers.

he gap in credit quality among power generators in Korea will widen over the next 12-18 months. The different degrees of vulnerability to the margin pressure in the generation market will widen the gap in credit quality between the six gencos wholly owned by KEPCO, and the private IPPs such as SK E&S Co., Ltd over the next 12-18 months. The pressure on power margins in the generation market will have little impact on the gencos’ profits, owing to their profit sharing program with their parent, KEPCO. By contrast, private IPPs will see lower profits and therefore weakening credit quality during the same period. Power margin pressure will stem mainly from a decline in wholesale electricity prices, against the background of low liquefied natural gas (LNG) prices and high growth in the supply of power in Korea relative to demand. Lower oil and LNG prices will reduce wholesale power prices for power generators. In addition, the supply of electricity from baseload nuclear reactors and coal-fired power plants with less expensive fuel costs will likely grow by around 10% per annum on average over the next 2-3 years, exceeding our annual demand growth forecast of 2%-3% over the same period. 32 ASIAN POWER

On-grid nuclear and thermal power plants will remain the major power generators in Korea over at least the next 2-3 years.

While baseload power plants will likely continue to maintain a capacity utilization rate of 80%-85% over the next 12-18 months, we expect the utilization rate of gas- and oil-fired power plants will decline to 30%40%, from around 50% in 2014. Gas- and oil-fired power plants account for more than 45% of the total capacity mix for the power generators – except for KHNP, KOSEP and EWP – and will lead to the generators recording lower capacity utilization rates. Private IPPs will be most affected, because almost all of their power plants are fuelled by LNG Among the six gencos, KOSPO, KOMIPO and KOWEPO will likely see the largest decline in capacity utilization over the next 12-18 months, owing to their weaker cost competitiveness, stemming from a lower proportion of baseload power plants in their capacity mix. The three gencos’ coal-fired power plants accounted for 40%-50% of their capacity fuel mix as of 30 September 2015, as opposed to around 90% for KOSEP and 57% for EWP. KHNP’s capacity is composed of nuclear reactors (80% of its total capacity) and hydro (20%). That said, the competitiveness of the three gencos will improve, given that they are scheduled to commission

most of their new baseload coalfired power plants in 2016-17. Most power plants run by private IPPs have neither a profit sharing program with KEPCO nor power purchase agreements. As such, we expect the IPPs’ profits will deteriorate over the next 12-18 months, and their credit quality will likely weaken. Despite the government’s goal to expand off-grid distributed power, we expect on-grid nuclear and thermal power plants will remain the major power generators in Korea over at least the next 2-3 years, because the development of distributed power will be gradual and the expansion of renewable energy carries execution risks. The government aims to increase generation volume from off-grid distributed power – which includes renewables, combined heat and power sources and self-generation by users – to reduce the need to expand the country’s nationwide T&D networks. Such off-grid distributed power is dispatched into service before other types of power plants. The government’s planned expansion of off-grid distributed power is also consistent with its aim to reduce the country’s greenhouse gas emissions, through expansion of renewable energy. Regulations The government will likely provide regulatory support, such as the provision of financial incentives and higher compensation for maintenance capex, to encourage private sector investment in off-grid distributed power. However, an increase in generation capacity from off-grid distributed power will be gradual. Based on the government’s 7th Basic Electricity Plan, the contribution of distributed power will increase to 11.4% of the country’s total power generation in 2020 from 7.6% in 2013. Expansion of renewable generation sources in Korea will face execution risks, because of the limited sites available in the country to accommodate a substantial increase in renewable power plants, particularly solar and wind farms. Renewable projects will also likely face difficulties in obtaining the necessary funding, as cash inflows are generally less predictable than outflows. As for cash inflows, renewable projects typically demonstrate variable cash inflows from electricity sales. Such variations are due to the system marginal price, which is set at the price bid by the last generator dispatched to meet demand at a given hour, and the market price of renewable energy certificates. By Mic Kang, et al, Moody’s Investors Service

SPECIAL FEATURE: POST-POWERGEN

POWER-GEN Asia 2015: Investing in a sustainable tomorrow to beat Asia’s looming energy threats

8,316 power industry delegates from 85 countries flocked to Bangkok.

opportunities for reliable partners and proven technology providers as well as the financial community, without whom major investment projects cannot be realised.

he Southeast Asia power market, despite troubles and threats, remains buoyant. Because of this, it has become a major focus of investment for the world’s power engineering concerns. However, the world has witnessed an oil price shock that threatened to undermine market fundamentals in the power sector. Lower LNG prices have reinvigorated the gas to power market, but cheap coal means that thermal power will remain dominant in Asia. “Despite the important gains achieved through energy efficiency, continuing economic growth in the region has meant more demand for electricity, requiring power generation development at record levels in both conventional and renewable energy,” Nigel Blackaby, Director of Conferences, PennWell International Power Group, says. This and more were fleshed out at the POWER-GEN Asia 2015 held in Bangkok, Thailand. POWER-GEN Asia was part of the annual ASEAN Power Week and was colocated with Renewable Energy World Asia and the POWER-GEN Asia Financial Forum. These events at the ASEAN Power Week was held on September 1 to 3, 2015 at IMPACT Convention and Exhibition Centre. The exhibition space at the POWERGEN Asia 2015 was full to the brim with 267 exhibitors, 8,316 attendees, and 1,082 delegates. These numbers were reflective of the industry’s support and excitement in buoying the region’s power sector. One of the biggest buzz phrases in the

34 ASIAN POWER

event was project issues and challenges. According to IEA, power sector planning requires ASEAN countries to consider longterm investment costs for both generation and transmission. For generation this means evaluating different technologies across multiple criteria, including (but not limited to): the ability to produce power when needed (also referred to as dispatchability); the fuel source; and its environmental impact. For transmission this means careful consideration of system needs, and who should bear which investment costs. A key factor in deciding which generation technologies to develop is, clearly, the overall cost of investment. Major issues in power projects Tom Parkinson, Partner, The Lantau Group (HK); Mark Keleher, Engineering Manager, Black & Veatch China, and; Adis Dewi, Senior Social Consultant, PT Environmental Resources Management Indonesia explored issues and challenges plaguing power projects. In a mature industry, margins shrink, competition grows, and problems become complex. However, players are more troubled with major impacts from disruptions in the fuels market, escalating environmental regulation and political reaction to incidents. Most power utilities are also faced with the challenge of adding new capacity and replacing aging assets as well as meeting increasingly stringent environmental regulations. Such a scenario creates many

Power investments Trends and drivers of domestic and crossborder power sector investment were highly talked about in the conferences. Few doubt the need to expand electricity access and infrastructure in the ASEAN region but how is this investment and development to be achieved in the short- and long-term? A panel of experts debated and discussed the matter including Cyril Cabanes, Senior Vice President - Development of Marubeni Asian Power Singapore; Mark Hutchinson, Energy Expert, Advisers in Energy, Thailand; Gregory Karpinski, CEO, MAXPower Group; Saud Siddique, Executive Chairman, Odyssey Capital; Geoffrey Tan, Managing Director, Asia Pacific, Overseas Private Investment Corporation, and; Justin Wu, Director, Head of Asia-Pacific, BNEF Hong Kong. They explored how governments and businesses plan long-term in an increasingly volatile market and the likeliness of trends in cross-border investment to continue. The discussion also touched on the possible influence of the new Asian Infrastructure Investment Bank on the Asian power sector investment and the regional, commercial, and local banks’ impact on the project financing market. Even government support arrangements were tapped and how the security needs of investors are being provided, as well as renewable energy policies including how small scale power policies are helping renewables development. Energy policy frameworks were also put in the limelight as experts discussed policy & markets as drivers of investments. IEA highlights that across Southeast Asia there is increasing political will to implement policies aimed at meeting energy needs in a more secure and sustainable manner. Efforts to move to a cleaner, more diversified energy mix have included advancing energy efficiency, increasing physical connectivity, reforming fossil-fuel subsidies and deploying renewable energy technologies.

“The exhibition space at the POWER-GEN Asia 2015 was full to the brim as 267 exhibitors, 8,316 attendees, and 1,082 delegates.”

co-published Corporate profile

K Electric sets its eyes on greater heights as it delivers continuous, safe and affordable power

The only vertically integrated power utility of Pakistan hopes to ignite a flame as it rides on the renewed spark of its new management.

Bin Qasim II, 560 MW

Electric (KE) is the only vertically integrated power utility of Pakistan serving Karachi and its adjoining areas in Sind and Balochistan comprising a network of 6500 square kilometres. Serving Karachi is in fact serving Pakistan since the port city is the financial capital and contributes at least one-fifth of the GDP. Established in 1913 and nationalised in 1952, KE has aged along with the city and shares a time-tested relationship with its people. Over the years KE underwent series of changes in its management, though it longed for a leadership that could see beyond its challenges. In 2009 this materialized as KE was acquired by the Abraaj Group, a Dubaibased leading private equity firm. Under the new management, the company has experienced a rebirth. KE not only upgraded its technical capability, it enhanced its generation capacity and network along with rehabilitating the old units it acquired to make them more efficient. With this the public perception changed. The ripple effect of KE’s turnaround soared across Karachi and the company came closer to its customers than it had ever been before. The change has shown in the transformed mind-set of its human resource as well. The company enhanced its image through its concern in the social uplift of the underprivileged as well as in creating healthy opportunities for the youth of the city. KE’s framework and turnaround stand as the perfect example for Pakistan’s power

sector. In just a period of 5 years, 60% of the city including industries is exempted from load shed with unmatched customer service. Electricity demand has soared from 1,800 megawatts (MW) to over 3,100 MW during the last five years. Transmission and distribution losses have plummeted from 36% in 2009 to less than 24% today which marks achievement. Brand tracker study through AC Nielsen shows that KE is now a strong brand. KE in line with its vision to deliver uninterrupted, safe and affordable power to its consumers, is working to diversify and enhance its power generation and purchase pool by adopting a comprehensive power generation strategy which includes its own investments and working with developers under IPP structures. Various reputable project developers, both local and foreign, are strategically engaged with K-Electric for the development of coal, gas/LNG, and renewable based IPPs that will sell all the power generated to K-Electric. Coal, being the cheaper fuel input, is the best alternative fuel for base load power generation because

“Transmission and distribution losses have plummeted from 36% in 2009 to less than 24% today which marks achievement.”

of which K-Electric is in the process of converting its expensive oil based unit into coal in addition to developing a green field 700 MW Coal based power project along with Chinese partners. KE has the vision to restore Karachi to its former glory ‘The City of Lights”. Beyond providing the city with the basic utility of electricity, KE is bringing a change in societal norms and paving the way for progress. The company has given root to a new culture wherein everything is in place for a vigorous launch into the future.

Tayyab Tareen, CEO ASIAN POWER 35

Find out who are the prime power industry figures in the Asian Power Awards 2015

Vpower Team

he Asian region’s power industry has been hogging the headlines this year as renewables made a loud boom among the industry players. Asian Power recognises how hard industry players are working to keep the sector’s gears in check, and has held its annual Asian Power Awards to name the most innovative and the most outstanding firms and projects. The Oscars of the power industry popped the champagne on its 11th year as over a hundred executives and key industry players gathered on September 2, 2015 for the awards night held at Conrad Bangkok in Thailand. The awards featured 23 categories this year and winners were meticulously chosen from a pool of almost a hundred nominations. Nominations were judged by John Yeap, Partner, Head of Energy – Asia at Pinsent Masons, and Mark Hutchinson, Energy Expert, Advisors in Energy. John Goss, Managing Director of Ceejay International Ltd, also gave a speech at the awards ceremony on behalf of the judges. Asian Power publisher Tim Charlton applauded the awardees, saying “On behalf of the Asian Power team, we are grateful for all the attendees who came tonight. We have passed a decade of recognizing the best achievements and projects in the region’s industry, and tonight we put the spotlight on 2015’s key players who bested others in a drive for efficiency and productivity in the power sector. 2016 will definitely be a more exciting year for all of us.” VPower Group is a proud recipient of 3 awards - “Gas Power Project of the Year” and “Fast-Track Power Plant of the Year” for the Myanmar Electric Power Enterprise (MEPE) 230kV Substation project in Kyauk Phyu , and “Power Utility of the Year - Indonesia “ for PLN Diesel to Gas Plant Upgrade in Pekanbaru “We’re very honored to be recognized for these power projects,” said Rorce Au-Yeung, co-CEO of VPower Group. “We’ve been expanding fast in the past few years and our focus remains in the ASEAN region. Innovating to grow the distributed power market is where our strengths lie. The Asian Power Awards are a testimony to that.” “These awards are the result of the tremendous work and expertise gained through years of experience mobilizing close to 2,000 MW of fast-track power all over the world. I congratulate everyone at VPower for this extraordinary achievement ,” he added. The full list of winners is below: 36 ASIAN POWER

Siemens Team

Vpower Team

Wartsila Team

Solar Power Project of the Year • Gold - Koshi Agriculture Boosting Project Powered by Shizen Energy Inc. • Silver - 50 MW solar farm at Charanka within the Gujarat government’s solar park powered by Hindustan Powerprojects

constructed by POSCO E&C Powered by Siemens

Response Programs in Ho Chi Minh City, Vietnam Powered by Diamond Energy Services Pte Ltd

• Silver - Ashuganj 200 MW Modular Power Plant, The La rgest gas-fired Flexicycle™ Energy Efficient Power Plant in Asia Powered by Wärtsilä

• Bronze - Management Information System Integrated with QR-code in 345kV Power Transmission Cable and Ancillary Electrical Device Powered by Taiwan Power Company

• Bronze - Fortum’s 10 MW solar PV plant in Madhya Pradhesh, India Powered by Fortum FinnSurya Energy Pvt. Ltd

• Bronze - MOPE - Myanmar Electric Power Enterprise 230kV Substation in Kyauk Phyu Powered by VPower Group Holdings Ltd.

Hydro Power Project of the Year

Environmental Upgrade of the Year

• Gold - Sabangan Hydro Powered by AboitizPower - Hedcor, Inc.

• Gold - NOx Emission Reduced by Gas Turbine Refinement Combustion Tuning Project at Datan Power Plant Powered by Taiwan Power Company

• Silver - Jamshoro Wind Power Project of the Year • Gold - 10.4 MW in Karnataka, 24.8 MW in Gujarat & 60 MW in Rajasthan Powered by India Power Biomass Power Project of the Year • Gold - Wonju Green Combined Heat and Power Plant Powered by Korea Midland Power Co., Ltd. • Silver - Samsong Total Energy Power Plant, Korea District Heating Corp Powered by Emerson Process Management Asia Pacific Private Limited Coal Power Project of the Year • Gold - Manjung 4: The first Ultrasupercritical and largest coal-fired unit in South East Asia Powered by Alstom • Silver - On-line non-stop Operation Coal Handling Unit Control Upgrade Powered by Taiwan Power Company • Bronze - KOSEP Yeong Heung Unit #5 and #6 Powered by Korea South-East Power Co., Ltd Gas Power Project of the Year • Gold - S-POWER Ansan Combined Cycle Power Plant constructed by POSCO E&C Powered by Siemens • Silver - MOPE - Myanmar Electric Power Enterprise 230kV Substation in Kyauk Phyu Powered by VPower Group Holdings Ltd. • Bronze - Ashuganj 200 MW Modular Power Plant, The Largest gas-fired Flexicycle™ Energy Efficient Power Plant in Asia Powered by Wärtsilä Nuclear Power Project of the Year • Gold - Safety-related Tank Seismic Capacity Enhancement at Maanshan Nuclear Power Plant Powered by Taiwan Power Company Fast-Track Power Plant of the Year • Gold - Posco Energy CCPP Unit 7, 8, 9

• Silver - China North United Power Corporation Hohhot Jin Qiao Power Plant Powered by Emerson Process Management Asia Pacific Private Limited Transmission & Distribution Project of the Year • Gold - Kai Tak Cable Tunnel Project : Power Up Hong Kong’s New Vibrant Hub Powered by CLP Power Hong Kong Limited • Silver - India Power Corporation Ltd Distribution Network Powered by India Power • Bronze - AMI based Auto Demand Response for Key Consumers of TPDDL Powered by Tata Power Delhi Distribution Ltd. Power Plant Upgrade of the Year • Gold - China Huadian Power International Corporation Limited Zouxian Power Plant Powered by Emerson Process Management Asia Pacific Private Limited • Silver - Low Rank Coal Combustion Technology Upgrade Powered by KOSPO • Bronze - Beijing Energy Gao’antun Gas Fired Co-generation Co., Ltd. Powered by Siemens

Information Technology Project of the Year • Gold - KOSEP multi-site Emergency Response Room and System Powered by Korea South-East Power Co., Ltd •Silver - Fully Automated end-toend E-Procurement Process & Ensuring Information Security Powered by Tata Power Delhi Distribution Ltd. • Bronze - R-Infra Powered by Reliance Combined Cycle Plant of the Year • Gold - Ashuganj 200 MW Modular Power Plant, The Largest gas-fired Flexicycle™ Energy Efficient Power Plant in Asia Powered by Wärtsilä Power Utility of the Year - China • China Jiangsu Changshu Power Generation Co., Ltd. Powered by Emerson Process Management Asia Pacific Private Limited Power Utility of the Year - India •AMI based Auto Demand Response for Key Consumers of TPDDL Powered by Tata Power Delhi Distribution Ltd. Power Utility of the Year - Indonesia • PLN - Diesel to Gas Plant Upgrade for Efficient Power Generation in Pekanbaru Powered by VPower Group Holdings Ltd. Power Utility of the Year - Pakistan • k-electric Limited Power Utility of the Year - Philippines

Innovative Power Technology of the Year

• AboitizPower - Hedcor, Inc.

• Gold - Yeosu Thermal Power Plant Unit2 - CFB Boiler Reliability Elevation Through The Boiler Improvement Powered by Korea South East Power Co.,Ltd

Power Utility of the Year - Sri Lanka

• Silver - Talomo Hydro Automation Powered by AboitizPower - Hedcor, Inc. • Bronze - The Pre-packaged, Containerized YCP-2020 Gas Turbine Inlet Air Cooling (GTIAC) System Powered by Johnson Controls Smart Grid Project of the Year

• AES Kelanitissa 163 MW CCGT Powered by AES Kelanitissa (Private) Limited Independent Power Producer of the Year • Gold - AES Kelanitissa 163 MW CCGT Powered by AES Kelanitissa (Private) Limited • Silver - Jamshoro CEO of the Year • Ratul Puri of Hindustan Powerprojects

• Gold - Talomo Hydro Automation Powered by AboitizPower - Hedcor, Inc. • Silver - Implementation of Pilot Demand

ASIAN POWER 37

ByungDae Choi of Siemens

Park Young Jin of KOSEP

JinKyu Kim of S-Power

Manoj Gupta and Ashish Kumar Jain of Fortum FinnSurya Energy Pvt. Ltd

Wartsila Team

Jinwoo Mok of KOMIPO

Emerson Process Management Asia Pacific and Samsong Total Energy Power Plant Representatives

Kim In Kyong, Minsung Kim, Park Young Jin, Bae Chan Ho and Kim Hong Seok of KOSEP

Rene Ronquillo and Rolando Pacquiao of AboitizPower (Hedcor Inc.) 38 ASIAN POWER

Muhammad Siddiq of K-Electric

Jean-Marc Jaillet, Philip Hartney, Carina Wittmer and Sebastien Vandesquille of Alstom

John Goss of Ceejay International delivering a speech on behalf of the judges

KOMIPO Team

Luis Jaenicke and Stephen Green of Johnson Controls

Muhammad Siddiq of K-Electric

DoHee Won, Chinhai Tan and Lydia Liao of Emerson Process Management Asia Pacific

YongMo An of Samsong Total Energy Power Plant, Korea District Heating Corp

Siemens and S-Power Representatives

Dallon Kay of Diamond Energy

Manoj Pal of Hindustan Powerprojects Pvt Ltd

Raffy Macabiog, Rene Ronquillo, Rolando Pacquiao, Ramo Gavis and Lloyd Revilla of AboitizPower (Hedcor Inc.)

Guests networking prior to the awarding

Jean-Marc Jaillet of Alstom

Law Hang Sam Cheuk of CLP Power Hong Kong

AboitizPower (Hedcor Inc.) Team ASIAN POWER 39

Johnson Controls Team

K-Electric Representatives

Samsong Total Energy Power Plant, Korea District Heating Corp Team

Lloyd Revilla, Maria Arlene Pacquiao and Rolando Pacquiao of AboitizPower (Hedcor Inc.)

Guests arrive at the venue

Manoj Pal of Hindustan Powerprojects with Manoj Gupta and Ashish Kumar Jain of Fortum FinnSurya Energy

YongMo An of Samsong Total Energy Power Plant and Chinhai Law Hang Sam Cheuk of CLP Power Hong Kong Limited Tan of Emerson Process Management Asia Pacific

Lydia Liao, Chinhai Tan and DoHee Won of Emerson Process Management Asia Pacific

Siemens and S-Power Representatives 40 ASIAN POWER

SungMin Lim, JinKyu Kim and DongSoo Lee of S-Power

Raffy Macabiog, Rene Ronquillo, Rolando Pacquiao and Ramo Gavis of AboitizPower (Hedcor Inc.)

Sebastien Vandesquille, Carina Wittmer, Jean-Marc Jaillet and Philip Hartney of Alstom

Asian Power Team

Vpower Team

Emerson Process Management Asia Pacific and Samsong Total Energy Power Plant Representatives

Wartsila Team

Emerson Process Management Asia Pacific and Samsong Total Energy Power Plant Representatives

Sebastien Vandesquille, Carina Wittmer, Jean-Marc Jaillet and Philip Hartney of Alstom

Executives networking

Kim Hong Seok, Kim In Kyong, Park Young Jin, Bae Chan Ho and Minsung Kim of KOSEP

Vpower Team

Kimanis Power Plant, Sabah, Park Hyung-Koo andMalaysia Jinwoo Mok

of KOMIPO

Guests mingling before the event started

analysis: china solar compared to an investment of Rmb240m. Financing has proven to be challenging Solar farm developers will need access to ~US$22bn in capital to meet the original 17.8GW target in 2015 and even more in 2016. With projects typically relying on loans for 70-80% of the capital, access to affordable credit will be important if China is to realize its aspirations. We believe this could prove challenging, though. As a result of the challenging downturn in the solar industry, some would-be developers’ balance sheets already exceed 150%. In addition, the industry has already seen the likes of SunTech and LDK declare bankruptcy in previous years. Yingli Solar has stated it may be unable to “continue as a going concern”.

Solar sector gathers steam

Can China’s solar players keep up with structural changes?

Times are a-changin’ within the Chinese solar industry as new highs are reached in 2015 and more capital are needed to meet targets in 2016.

hina’s solar industry is gathering steam in 2015 with PV instalments set to reach 46GW from 28GW in the previous year. Early reports on the 13th FiveYear Plan are suggesting that the 2020 GW target for solar may be raised from 100GW to 150-200GW, translating to an average instalment of 20-25GW per annum. With FiTs promising to lock in returns, project developers with a long pipeline of projects who can execute are attractive propositions. The industry seems to agree, as solar companies are rushing downstream.

The industry has already seen the likes of SunTech and LDK declare bankruptcy in previous years.

Solar capacity to potentially reach 150-200gw by 2020

Source: NEA, CEC, Jefferies 42 ASIAN POWER

A rush into the downstream The industry’s expansion into the downstream, more specifically, into utility scale solar power plants, promises to change their cash flow profile. In time, cash flow and earnings will be less vulnerable to falling ASPs but rather more stable and predictable. Solar projects benefit from government subsidies to incentivize investment. According to our analysis, if we factor in government subsidies including lower taxes, VAT rebates, and Feed-in Tariffs, we arrive at an unlevered project IRR of 10% for utility scale projects. The project IRR will differ considerably depending on the province, ranging from 4% to 11%. Solar Projects are Economic Value Added Projects Economic profit is created for a firm when the returns on its investments exceed its cost of capital. In comparison to the unlevered project IRRs of 10% and up to 12% for utility and distributed generation projects, we estimate the cost of capital for utility scale and distributed generation projects to be 8.3% and 8.65%, respectively. For utility scale projects, we arrive at a net present value of Rmb266m,

Borrowing costs improving for some developers The borrowing cost within the solar industry varies considerably. On one end of the spectrum, we have Xinyi Solar with an effective interest rate of ~1%. At the opposite end, we have GCL-Poly with an effective interest rate of ~8%. On average though, the borrowing costs are slightly higher than wind farm developers such as Longyuan. We believe the higher borrowing costs compared to wind farm developers may be a function of the implicit government guarantee SOEs have; plus the solar industry’s credit profile leaves a lot to be desired and solar projects, in the eyes of loan officers, are untested. Project developers are turning to other avenues to raise funds including convertible bonds; joint ventures and limited partnership with asset companies; finance leases, crowd funding and online financial products. The reliance on alternative financing avenues may lead to higher borrowing costs and, in turn, lower the potential value of solar farms and a developer’s pipeline. In our discussion with solar farm developers, access to credit appears to be improving. At the very least, China’s monetary loosening has lowered borrowing costs. The cost of capital can differ considerably from company to company depending on their core business; difficult market conditions upstream have already strained the balance sheets of some companies. In addition, access to international capital markets has been an advantage given the lower interest rates in the United States and Hong Kong. Admittedly, this advantage could narrow as the Rmb depreciates. By Joseph Fong, CFA, Equity Analyst, Jefferies Franchise Note

Water footprint: more than volume

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ASIAN POWER 27

analysis: electricity demand

Power demand will triple by 2040

Southeast Asia’s energy landscape must brace itself for a major sectoral change The power sector shapes the energy outlook for Southeast Asia as electricity demand almost triples by 2040.

lectricity generation in Southeast Asia grows by 3.9% per year on average in the International Energy Agency’s New Policies Scenario. By 2040, Southeast Asia’s total electricity generation almost triples from 789 terawatt-hours (TWh) in 2013 to about 2,200 TWh in 2040. The increase is more than the current generation of India. To meet electricity demand growth, which almost triples, all sources of generation increase, with the exception of oil that sees its share dropping from 6% to less than 1% by 2040. Coal increases its share in power generation from 32% to 50%, while the share of natural gas declines from 44% to 26%. This trend is underpinned by the price advantage and relative availability of coal versus gas in the region. Southeast Asia’s three largest energy consumers, Indonesia, Thailand and Malaysia, have stated their intention to expand their use of coal. Coal-fired generation grows faster than every other source (except bioenergy, wind and solar PV) to reach almost 1,100 TWh by 2040. This continued ramp-up of coal-fired generation is a departure from many other parts of the world which are experiencing a decline in coal’s share due mainly to environmental concerns. Several countries, international development banks and financial institutions recently have decided to scale back or to stop funding new coal-fired power plants. The share of fossil fuels in Southeast Asia’s electricity generation mix declines from 82% in 2013 to 77% in 2040, in line with the rapid growth in renewables, which supply 22% of generation in 2040. The share of hydropower in total generation decreases from 14% to 12%, although its incremental output is the third-largest after coal and gas. The share of geothermal rises marginally to 3%, led by increasing exploitation of the large potential in Indonesia and Philippines. Onshore wind and solar PV grow at a particularly fast pace, though from low levels. 44 ASIAN POWER

By 2040, Southeast Asia’s total electricity generation almost triples from 789 terawatt-hours (TWh) in 2013 to about 2,200 TWh in 2040.

Nuclear power enters the mix in the latter half of the Outlook as Viet Nam completes construction of some of its planned reactors. Generation capacity In the New Policies Scenario, Southeast Asia’s generation capacity increases from 210 gigawatts (GW) in 2014 to almost 550 GW in 2040. The power sector has already begun to shift towards coal; in the last five years, over half of gross thermal capacity additions were coal-fired, a trend we project to continue in the medium-term. Over the projection period, coal accounts for about 40% of gross capacity additions, followed by renewables at 33% (of which 14% is hydro) and gas at 24%. The expansion of power grids to reach remote areas and the higher cost of oil relative to other fuels results in retirements of oil-fired plants which more than offsets construction of new ones. Southeast Asia’s coal-fired capacity grows at an average annual rate of 5.4% to 2040, expanding by 150 GW. Coal’s share of generation capacity grows from 24% in 2014 to 37% in 2040. It overtakes natural gas by 2030 to become the largest source of power capacity in Southeast Asia. The pace at which coalfired capacity expands slows markedly in the second part of the Outlook, due to lower growth in electricity demand and more development of renewables capacity. Indonesia, Malaysia and Thailand are expected to lead the expansion of coal capacity in Southeast Asia. Thailand has proposed the construction of coalfired power plants in neighbouring Cambodia and Myanmar, in order to export electricity back to Thailand, as it has faced significant opposition to building domestic coal plants. Several of these projects, however, have been put on hold as opposition to the environmental impacts of coal-fired generation has triggered a political backlash to exports in several countries. Given the increasing significance of coal in power generation, the region will need to find a way to balance its energy

analysis: electricity demand security, development and access needs with environmental considerations. In this respect, there is an urgent need to deploy more efficient coal-fired power plant technology rather than the subcritical units that are currently the norm. In 2014, subcritical technologies represented more than 90% of installed coal-fired capacity and over 70% of the coal capacity added. The widespread adoption of more efficient plants heretofore has been limited by financing, the ready availability of cheap coal (which discourages investment in more efficient plants), a lack of technical expertise and in some parts of the region the structure of the grid (as high-efficiency coal plants are typically large, smaller grids are not capable of handing the increased load). By contrast, subcritical plants have been favoured because of their lower upfront costs and shorter lead times. Subcritical coal-fired power plants in Southeast Asia operate at low average efficiency (33% in 2014 increasing to 35% by 2040) and have higher operating costs since their lower efficiency levels imply larger volumes of fuel input. This compares with efficiencies of supercritical and ultra-supercritical units that are projected to reach as high as 40% and 45% respectively. For countries such as Malaysia and Thailand, which rely on the international market to procure the bulk of their coal needs and therefore face greater risk of price fluctuations, there is additional incentive to build more efficient power plants. Indeed, Malaysia completed construction of its first ultra-supercritical plant (1 GW capacity) in the first half of 2015. By comparison, Indonesia has less incentive to develop higher efficiency power plants as it has ample low-cost domestic coal resources. In the New Policies Scenario, the existing and planned subcritical coal capacity is essentially locked-in as operating lifetimes are usually 40 to 50 years. However, we project a gradual shift towards more efficient coal-fired generation as a growing share of new capacity additions are supercritical or ultra-supercritical; over the Outlook period, supercritical and ultra-supercritical technologies represent the majority of new coal-fired gross capacity additions at 35% and 21% respectively, while the remaining coal-fired capacity additions are subcritical power plants. As a result, the share of subcritical plants in installed coal capacity declines to 76% by 2020 and 53% in 2040. This shift drives an increase of more than five percentage points in the average efficiency of Southeast Asia’s coal-fired power plants over the Outlook period, in absence of which, coal consumption in the power sector would be almost 16% higher. A shift to supercritical and ultra-supercritical technology will be an important way to limit the rise in energy-related CO2 emissions and mitigate some environmental impacts. Renewables-based installed capacity increases from 49 GW in 2014 to almost 170 GW by 2040 when it accounts for 31% of power generation capacity. Renewables remain an

Subcritical coal-fired power plants in Southeast Asia operate at low average efficiency (33% in 2014 increasing to 35% by 2040).

Average annual change in capacity and electricity generation in Southeast Asia

Source: xxx

attractive option for Southeast Asia, in part because of their widespread availability and their ability to help meet key policy goals such as energy security and sustainability, although their deployment is projected to fall short of the potential. Considerable investment, additional infrastructure and in many cases targeted government measures will be required to facilitate more renewables-based generation. Most Southeast Asian countries have adopted related targets and measures. The most common form of support is feed-in tariffs (FiT), which are in place in Indonesia, Malaysia, Philippines and Thailand. Hydropower had the largest share of installed capacity among renewables in 2014 and by adding about 54 GW of gross capacity over the period it is set to remain the largest renewable energy source by 2040. Currently hydro is the dominant source of installed generation capacity in Lao PDR, Myanmar and Viet Nam. According to a Strategic Environmental Assessment (SEA) conducted by the Mekong River Commission in 2010, current designs for 12 mainstream dams in the lower Mekong Basin have potential capacity of up to 15 GW (ICEM, 2010). This is equivalent to more than 40% of Southeast Asia’s hydro capacity in 2014 and 7% of total installed capacity in 2014. Sites for hydro development are often far from demand centres which is a common issue in the region. This is especially a concern for Malaysia and Myanmar, which have the largest technical potential for hydropower development, as inadequate transmission infrastructure could constrain development. This coupled with the socio-economic concerns which typically accompany proposed large hydro projects has slowed development. It has also encouraged a view of cross-border projects that could expand electricity access and stimulate economic progress at a regional level. Export-oriented hydro projects, however, are facing increasing political difficulties. Wind, geothermal and solar PV represent 11% of total installed capacity in 2040 in the New Policies Scenario, an increase of nine percentage points from 2014. Continued policy and fiscal support and the removal of fossil-fuel subsidies contribute to their expansion. Together they add around 63 GW of gross capacity by 2040. Installed renewables capacity from wind and solar PV increases from just over 2 GW in 2014 to 54 GW in 2040. Bioenergy also makes in-roads over the Outlook period: its share of installed capacity remains at 3%, though it grows in absolute terms from 6.5 GW in 2014 to 16 GW by 2040. Southeast Asia’s power sector will require $1.3 trillion of investment over the projection period. While investment in all fuel types is required, it will be especially important to invest in more efficient power plants and transmission and distribution (T&D) networks to meet increasing demand. The large mismatch in supply and demand due to the geography of the region and the distributed nature of the population mean that a larger portion of investment needs is in T&D, accounting for 53% of the total. Southeast Asia has several initiatives underway to strengthen and expand the intraregional grid interconnections to address some of these needs. Generation costs Financial considerations will be a key determinant of the evolution of the mix of fuels and technologies used in Southeast Asia to generate electricity. The levelised cost of electricity generation – which includes fixed costs, variable costs (operation and maintenance and fuel) and financing costs for new power plants – is one metric that can be used to compare the costs of different technologies. 4 In order to make meaningful comparisons it is necessary to make a range of assumptions about various cost and operating parameters of competing technologies. When both coal and natural gas are available relatively cheaply ($40 per tonne for coal and $5 per million British thermal units [MBtu] for gas), supercritical coal plants and combined ASIAN POWER 45

analysis: electricity demand cycle gas turbines (CCGT) have similar generating costs, with coal being slightly lower at $47/megawatt-hour (MWh) and gas CCGT at $50/MWh (Figure 2.9). However, if fuel prices double (coal at $80/tonne and gas at $10/MBtu), coal becomes about 27% cheaper than the generating cost for a new CCGT plant. If gas prices increases to $15/MBtu, the generating costs for large hydro and onshore wind are cheaper than CCGTs. At almost $120/MWh, large-scale solar PV is the most expensive. The generation cost for geothermal at $63/MWh can be competitive with mid-priced gas and high-priced coal (and just slightly more expensive than mid-priced coal). However, geothermal is concentrated in Indonesia and the Philippines, and is highly site specific. Coal prices in the region are set to remain relatively low in the medium to long term given the abundance of domestic resources, the absence of carbon pricing and the projected slower growth in international coal trade. Additionally the ongoing removal of subsidies to natural gas in some Southeast Asian countries and the reduced availability of indigenous gas production point towards a likely increase of gas prices in region’s domestic markets. Energy and climate change in Southeast Asia Climate change poses significant challenges for Southeast Asia as the region has a high concentration of settlements and economic activity along its long coastlines, and a strong reliance on natural resources, agriculture and forestry making it vulnerable to the effects of climate change, including extreme weather events. Effective action in the energy sector is an essential component of the global approach to combat climate change. Both factors have increasingly been incorporated in policy objectives and measures in the countries of Southeast Asia. However, while some decoupling of economic growth and energy-related CO2 emissions is being witnessed in other parts of the world, in Southeast Asia the economy/emissions growth relationship remains robust as emissions are set to increase at an even faster pace than energy demand, due to growing penetration of coal in its energy mix. Reduce energy demand and emissions The Bridge Scenario, developed for the Energy and Climate: World Energy Outlook Special Report (IEA, 2015), proposes a strategy to deliver a near-term peak in global energy-related emissions with the effective use of proven policy measures and currently available technologies. The scenario is not, in itself, a pathway to the internationally agreed target to limit the rise in global average temperatures to below 2 degrees Celsius (°C) relative to pre-industrial levels – additional technologies and policies would be needed for that. But it provides a Electricity generation by fuel in Southeast Asia (TWh)

46 ASIAN POWER

Levelised cost of electricity by technology under different coal and gas price assumption in Southeast Asia, 2030

Source: xxx

The generation cost for geothermal at $63/ MWh can be competitive with mid-priced gas and highpriced coal (and just slightly more expensive than mid-priced coal).

strategy for near-term action as a bridge to higher levels of decarbonisation at a later stage compatible with the 2 °C goal. As a means to illustrate steps that could achieve an “early” peak in emissions, the Bridge Scenario has a shorter timeframe (2030) than the 2040 horizon in the New Policies Scenario. This section provides a brief overview of the Bridge Scenario, with a focus on the implications for Southeast Asia. The Bridge Scenario depends upon five measures: • Increasing energy efficiency in the industry, buildings and transport sectors. • Progressively reducing the use of the least-efficient coalfired power plants and banning their construction. • Increasing investment in renewable energy technologies in the power sector from $270 billion in 2014 to $400 billion in 2030. • Gradual phasing out fossil-fuel subsidies to end-users by 2030. • Reducing methane emissions in oil and gas production. Effective implementation of the measures proposed in the Bridge Scenario would have profound implications for the region’s energy demand and CO2 emissions. In the Bridge Scenario, Southeast Asia’s primary energy demand is 2% lower in 2020 and 5% lower in 2030 compared with the New Policies Scenario. The primary energy mix shifts markedly between the two scenarios in 2030. The share of fossil fuels declines to 74% by 2030 in the Bridge Scenario, driven mainly by reduced coal consumption, while the contribution of renewables rises steadily to 26%. The power sector is fundamental to the change of Southeast Asia’s energy mix in the Bridge Scenario. Coal’s contribution to electricity generation is 35% lower and its share in the power mix declines to just above one-third by 2030. This results from measures that discourage the utilisation of less-efficient coal-fired power plants and from reduced electricity demand. Additional investment supports a fast expansion of renewables, which account for more than one-quarter of the electricity generation in 2030. Natural gas demand increases by 2% in the Bridge Scenario. While the measure targeting the removal of fossil-fuel subsidies helps temper the rise in natural gas demand, it does not fully offset growth, especially in the power sector. The adoption of more stringent energy efficiency requirements, especially in the transport sector, reduces Southeast Asia’s oil demand by 0.2 mb/d in 2030. The phase-out of fossil-fuel subsidies (and the resulting reduction of fossil fuels that are combusted) and energy efficiency measures, including in the industrial sector and buildings, are important drivers of the reduction in the demand for primary energy and electricity. For net importing regions, as is the case for Southeast Asia with respect to oil, fossil-fuel subsidies are assumed to be phased out completely in ten years in both the Bridge Scenario and the New Policies Scenario. © OECD/IEA 2015 Southeast Asia Energy Outlook, IEA Publishing

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OPINION OPINION

Peter Hopper & Alice Yung

Reliable electricity: Don’t take it for granted

Managing Director & Consultant SDG Technology

he reliability of the electric power generation system is vital to the economic and social well being of Hong Kong. Its reliability depends upon the seamless operation and coordination of generation and distribution systems. Today, maintaining Hong Kong’s power system faces challenges from objectives such as affordability, environmental protection and sustainability, and changes in demographics and business demands. Hong Kong businesses and its population have benefited for decades from world-class levels of dependable electricity supply. The city’s reliability level stands at over 99.999% – one of the highest in the world. This translates into an unplanned power interruption that was less than three minutes per customer on average each year, which compares favorably with other metropolitan cities such as Sydney, New York, and London. This high reliability is a result of the ability of power firms to attract capital to ensure sufficient capital investments in the system network, critical assets, and maintenance. Hong Kong residents have become used to having this unusually consistent level of energy supply over the decades. The public often forgets about what constitutes the value and importance of uninterrupted electricity supply and omits or overlooks the value of reliability when pricing their electricity services. If a power blackout occurred, life and commerce would come to a standstill. Hong Kong is heavily dependent on a secure electricity supply because it is one of the world’s most densely populated cities and a major international financial centre, both of which have a low tolerance for electricity failure. The city has the greatest number of skyscrapers in the world, and more than 50% of the population live above the 15th floor. Everyone is dependent on air-conditioning and elevator systems. The MTR subway and Airport Express networks carry an average of about 4.71 million passengers per day. The Hong Kong Stock Exchange is one of the world’s largest stock markets. A power disruption on a business day would inflict an immediate and significant economic and societal cost on everyone. A single outage would create a long-term impact on Hong Kong’s attractiveness as a global financial centre. Assessing a price for an uninterrupted power supply Modern economies are driven by technology, which are completely dependent on reliable and secure electricity services. The cost of failure and sensitivity to supply disruptions continue to increase over time. Based on SDG’s previous experience, immediate unplanned outage costs in similar US areas range from HK$ 4/kWh for some residential customers to HK$160/kWh for critical financial services. The immediate cost consequences of a blackout could be catastrophic. The collapse of financial trading systems could cause enormous losses in trading activities. Payment processing impairment could lead to crippling bank runs. Road, marine, and air traffic problems would reduce retail and wholesale turnover through business delays. By applying these cost ranges to the Hong Kong’s customer mix the overall cost of an hour-long power outage in the whole city 48 ASIAN POWER

would be approximately HK$300 million. The social and economic impact of major outages greatly exceeds customer outage costs. Persistent outages and service failures would jeopardise Hong Kong’s long-term leadership as regional financial hub and corporate headquarters. Potential causes for power disruption The most common source of power interruption in Hong Kong is damage to or faulty underground cables, which are caused by excavation works, thunderstorms, floods, landslides, and fire. Other reasons include ageing infrastructure, construction defects, and operating errors. Adequate maintenance schedules, sufficient reserve capacity margins, and backup generation are critical for power companies to sustain a reliable supply of electricity. Regulators need to ensure that power companies are sufficiently incentivised to invest in maintenance and critical infrastructure. In 2014, the government launched a public consultation on the future fuel mix for electricity generation. Two options were put forward: import more electricity through purchase from the mainland power grid or use more natural gas for local generation. Despite the lower cost of purchasing electricity through a grid compared to local generation, there are concerns that large-scale grid purchases are less stable and untried. Additional investments would be required for local backup capabilities. The potential for lower reliability represents economic and social risk. Identifying and quantifying the value of a reliable electricity supply is an important part of developing Hong Kong’s power generation policy. It is unclear whether the government has accounted for the true cost of power interruption when determining the level of permitted rate of return for the power companies. For certain types of customers, reliability is a key business and operational concern, rather than merely a convenience. These customers would be willing to pay a premium for a reliable power supply in order to avoid significant losses or impairment of revenue, critical data, and operations.

Challenges in maintaining HK’s power system

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