Asian Power

ISSUE 59 | DISPLAY TO 31 OCT 2013 | www.asian-power.com | A Charlton Media Group publication

US$360P.A.

GLOW GROUP BLAZES in thailand Watch out for new projects based on renewable energy resourceS

MICA(P) 248/07/2011

Country Report Thailand struggles towards energy independence PAge 8

opinion India scrambles to meet electric power production target PAge 10

opinion Economic growth from increased infrastructure in China PAGE 14

FEATURE Worst is over for China’s renewable sector PAge 18

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

PROJECT

ENVIRONMENT

Malaysia, Korean and Japanese consortium to build power plant Plant to be operational in October 2017. TNB Western Energy Bhd has signed an engineering, procurement and construction (EPC) contract with a consortium of four companies to develop a 1,000 MW coal-fired power plant at Perak.

PROJECT

Thais asked to invest in Pakistan’s energy sector The Federation of Pakistan Chamber of Commerce and Industry is urging the private sector in Thailand to explore the business potential of Pakistan and take advantages of opportunities offered by the energy sector for investment.

ENVIRONMENT

POWER UTILITY

China to remain world’s largest wind market until 2020 GlobalData estimates that China’s cumulative wind power installations have doubled annually between 2006 and 2011. The compound annual growth rate (CAGR) for the Chinese wind industry was 76% from 2006 to 2012.

World’s largest nuclear reactor being built by Chinese firm State-run Sichuan Province-based Dongfang Electrical Machinery Co. said the 1,750 MW generator will soon be sent to the Taishan nuclear power plant in Guangdong Province from the company’s production base in Deyang City, Sichuan Province.

PROJECT

Solar boom threatens to overwhelm Japan’s power grid A survey found that 20% of solar power developers responding to a recent survey saidtheyweredeniedaccessbylocalutilities becauseofovercapacity,while37%saidthey would experience limits on the amount of electricity utilities could accept.

South Korean firm to build Philippines’ largest solar power plant South Korean firm, EC Cobuy Philippines, has signed a memorandum of understanding with officials from two towns in Ilocos Norte to build 20 MW solar power plants that will augment the electric power supply for the province.

FROM THE BLOG Singapore’s wholesale electricity market prices set to fall

BY RICHARD BOWMAKER What is the forecast for Singapore’s electricity prices?

Singapore’s wholesale electricity prices are set to fall and this will haveprofoundimplicationsforboth energy users and power generators.

What almost everyone didn’t know about Malaysian waters’ wealth BY NAZERY KHALID It is lamentable that as maritime nation, Malaysia has not looked at its seas for resources beyond the obvious ones such as fish and its key export commodities, offshore oil and gas.

Here’s what could really help ASEAN’s drive for efficient energy use

BY DR WEERAWAT ASEAN countries have existing policies and market incentives to promote energy efficiency, but need to ensure better enforcement and development of the requisite monitoring and evaluation systems.

Why the Chinese Central Government says ‘no’ to uncompetitive polysilicon BY EDWARD CAHILL Provincial governments may take over a struggling company, but not all provinces can save all local manufacturers, especially with the central government calling for consolidation.

Publisher & EDITOR-IN-CHIEF

MICA(P) 248/07/2011 Asian Power is a bi-monthly news magazine published by Charlton Media Group Pte Ltd registered in Singapore.

Its circulation is to leaders in the Asian power industry and is available on a controlled circulation and paid basis.

CONTACT THE PUBLISHER Charlton Media Group, #06-09 E, Maxwell House 20 Maxwell Road Singapore 069113 www.charltonmedia.com, +65 3158 1238 All editorial is copyright and may not be reproduced without consent.

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ASIAN POWER 5

FIRST China Still tops renewable market

I

ndia and Australia are increasing their share of renewable energy projects but they remain no match for China, says research and consultancy firm GlobalData.

Australia’s cumulative installed capacity for renewable power surged from 849 MW in 2001 to 5,968 MW in 2012. The cumulative share of solar and wind power accounted for 80% of the country’s total renewable power capacity in 2012, growing at a Compound Annual Growth Rate (CAGR) of 41%.

India has also invested heavily in solar energy, with the government expecting to deploy 20,000 MW of solar power by 2022. Furthermore, it aims to increase the capacity of grid-connected solar power generation to 1,000 MW by 2013 and 3,000 MW by 2017, through mandatory use of renewables by utility providers. Due to a rising number of new installations, China will remain the leading industry for renewable energy in the AsiaPacific region, while retaining its position as the largest wind power market in the world with 75.6 GW installed capacity in 2012.

Additionally, favourable government policies and incentives in the Asia-Pacific region have become an important tool to boost the renewable energy industry, according to Swati Singh, GlobalData’s Analyst covering Power.

“Most countries are supporting renewable sources in order to aid recovery from the economic downturn. Renewable Portfolio Standards (RPS) and Feed-In Tariffs (FITs) are the two most prominent support mechanisms implemented by countries that are driving renewable energy market development,” says Singh. Other incentives, such as capital subsidies, grants, rebates, tax credits and exemptions, as well as reduced-rate loans, are also being offered by these countries to help further promote the use of renewable power.

6 ASIAN POWER

China targets higher solar power capacity

BY Ivy Poon

L

ast July, the State Council of China announced that it had raised its target for solar power capacity over the next three years. Aside from benefitting China’s solar power industry, a higher target is credit positive for State Grid Corporation of China (Aa3 stable), the largest power grid company by revenue in both China and the world. The new target calls for the annual installation of 10 gigawatts (GW) of solar power capacity during 2013-15, which would boost the country’s installed solar capacity to more than 35 GW by 2015.

According to Bloomberg News, China’s solar capacity was 7 GW at the end of 2012.

State Grid’s service region covers 88% of China’s land mass. The governmentowned entity must expand its infrastructure to handle the rapid expansion of solar power and other renewable energy sources as the government seeks to boost clean energy sources. We expect the government to provide State Grid with policy and funding support in the form of favourable policies, capital subsidies and tax incentives to facilitate the expansion and achieve the policy goal. The country’s Twelfth Five-Year Plan, released in 2011, calls for China to increase the proportion of non-fossil fuels in total primary energy consumption to 11.4% in 2015 from 8.3% in 2010.

To help meet the government’s clean energy targets, State Grid developed ultrahigh-voltage grids to improve electricity

The new target calls for the annual installation of 10 gigawatts (GW) of solar power capacity during 2013-15.

transmission and distribution over long distances. In China, renewable energy resources such as solar power are concentrated in the northern, northwestern and southwestern inland provinces. However, the country’s high energy consumption areas are mainly in the more developed eastern and southeastern coastal regions.

State Grid is also developing smart-grid technology that enhances the efficiency and flexibility of integrating the transmission and distribution of renewable energy sources into the national grids. Thus, State Grid plays a crucial role in enabling power generation companies to expand into solar power generation and procure solar panels and related equipment from Chinese manufacturers, which currently depend largely on Europe.

Despite the government’s push for increased solar power, the financial effect on State Grid will be moderate. Solar power accounts for just a small fraction of State Grid’s total capital spending plan, compared with its investments for thermal power, hydro power and wind power. By 2015, State Grid expects its grid, after expansion and upgrades, to accommodate 466 GW of newly installed generation capacity and 1,780 terawatt-hours of power demand. The addition of 28 GW in China’s solar power installed capacity by 2015 will be just 6% or less of the new installed generation capacity of the country at that time.

FIRST Philippines to build 2 major power plants

P

China’s coal-fired power plants mostly in water-stressed regions

BY Tianyi Luo

T

o maintain its economic growth and provide for its massive population, China must reconcile two powerful, converging trends: energy demand and resource scarcity. One prime example of this tension is the country’s coal use and water supply.

According to a new WRI analysis, more than half of China’s proposed coal-fired power plants are slated to be built in areas of high or extremely high water stress. If these plants are built, they could further strain already-scarce resources, threatening water security for China’s farms, other industries, and communities.

Coal-fired power plants in the pipeline As of July 2012, China’s government planned 363 coal-fired power plants for construction across China, with a combined generating capacity exceeding 557 gigawatts (for reference, installed capacity at the end of 2012 was 758 GW).

This amounts to an almost 75 percent increase in coal-fired generating capacity.

China already ranks as world’s largest coal consumer, accounting for almost 50 percent of global coal use.

Using WRI’s Aqueduct Water Risk Atlas, we overlaid the locations of these proposed coal plants on our water stress maps for China.

We found that 51 percent of China’s new coal-fired power plants would be built in

areas of high or extremely high water stress.

Coal plants would add more stress to already-stressed area This finding is especially troubling because coal-related industries—mining production, coal-to-chemical, and power generation—are extremely water-intensive.

Coal mines depend on water to extract, wash, and process the coal, while coalburning power plants need water to create steam and cool generating systems.

If all of the proposed plants are built, the coal industry–including mining, chemical production, and power generation–could withdraw as much as 10 billion cubic meters of water annually by 2015.

That’s more than one-quarter of the water available for withdrawal every year from the Yellow River.

Other takeaways Other major takeaways from our analysis include first, 60 percent of the total proposed generating capacity is concentrated in six provinces. Those provinces, however, only account for 5 percent of China’s total water resources.

Secondly, in those six provinces, competition for water between domestic, agricultural, and industrial users is already high: 60 percent of the proposed generating capacity is in areas of high or extremely high water stress.

As of July 2012, China’s government planned 363 coal-fired power plants for construction across China.

hilippines is in the mood to build more power plants to meet energy demand. One is ready for auction while the other is waiting for approval to proceed construction.

As reported by several news dailies, the Power Sector Assets and liabilities Management Corp (PSALM) has scheduled the auction for the independent power producer administrator (IPPA) contracts of the Unified Leyte geothermal power plant complex (Unified Leyte) in October.

According to MayBank KimEng The IPPA contracts are categorized into two -”strips of energy” and “bulk”. For the “strips of energy,” there is a total of 200 MW to be auctioned which can be divided into 1 MW up to 40 MW. There are 21 interested parties for the “strips of energy” including Aboitiz POwer Corp’s Aboitiz Energy Solutions, Ayala Corp’s, AC Energy Holdings, DMCI Holdings, DMCI Power Corp and GT Capital Holdings, and Global Business Power Corp.

Meanwhile, the research firm notes that there are 10 interested companies for the “bulk energy” contracts which include AP’s AP Renewables, Trans-Asia Oil and Energy Dev’t Corp, Energy Development Corp’s Unified Leyte Geothermal Energy, Vivant Energy, as well as DMCI Power and GBCP. Unified Leyte has a total dependable capacity of 588.5MW and is currently owned and operated by EDC. Note that the IPPA contracts only pertain to the output of the plant.

Another project is a 15-MW diesel power plant in Oriental Mindoro which was awarded to DMCI Power, a wholly-onwed subsidiary of DMCI holding. The auction was conducted

by Oriental Mindoro Electric Cooperative (ORMECO) last june 28.

However, it still needs confirmation from government to formally proceed with the project.

COUNTRY REPORT: THAILAND

Thailand struggles towards energy independence

The fast-growing country is keen on developing its domestic energy sources, but big hurdles abound. By Krisana Gallezo

T

hailand is heavily dependent on fossil fuel, importing almost 25% of its natural gas supply and over 50% of its primary energy supply. In the next two decades its dependence will likely worsen as forecasts predict a strong increase in energy imports.

According to World Research Institute expert Lutz Weischer, the Thai electricity mix is dominated by natural gas, providing around 70% of electricity. Thailand exploits its domestic fossil fuel reserves but it remains highly import-dependent which is a major challenge in its bid to achieve sustainable energy.

In a research report published by the Climate & Development Knowledge Network, Weischer notes that Thailand’s dependence on controversial electricity imports from Lao PDR, natural gas imports from Myanmar, and volatile global fossil fuel markets are undermining the security of its energy supply.

Energy imports, she adds, also represent 8 ASIAN POWER

an economic burden on the country, consuming almost 12% of gross domestic product.

Tony Segadelli, managing director and chief engineer at consultancy firm OWL said that some of the country’s imports will be pipelined from Myanmar, but it would only be by 2022 to 2025 before they can really ramp up what is already being contracted and developed.

In terms of alternatives, Segadelli said that solar is still very expensive while wind is very limited.

“Thailand has very little wind capacity and it’s also a limited source. Biomass could take up some of the additional capacity but it won’t be added to produce the thousands of 1500 MW required a year. Hydro is largely built in Thailand and so the imports they’re going to have will be from Laos.”

The energy demand The nation’s electricity generation capacity spiked from 28,000 MW in 2007 to 32,000 MW in 2012.

Nuclear energy development is anticipated but it is at least 20 years away.

On average, Weischer notes that electricity consumption has grown by 3.3% per year over the past five years.

Segadelli believes consumption could reach somewhere between about 5 and 7% per year moving forward, which will translate to a requirement of roughly 1,500 MW of capacity to ensure power firms maintain their reserve margin Unfortunately, he cautions that he cannot see that being achieved for at least the next 10 years.

“The one major limiting factor is going to be the supply of fuel. Coal is very difficult to build, nuclear is almost impossible to build-which means that although the government wants to reduce the natural gas from 70% to 40% it is going to be very hard to actually achieve that.”

Alternatives According to Segadelli, natural gas will be the main fuel for the next 10 to 20 years but the question is: where will the gas come from? Nuclear energy development is anticipated but it is at least 20 years away, he added.

“Myanmar is struggling to increase its capacity, in terms of natural gas supply. This means that Thailand will have to import. But to make matters worse, because Myanmar is no longer pro-States they’re going to need to start having gas themselves. The only way to ‘square the circle’ is to import LNG.

COUNTRY REPORT: THAILAND The problem with importing LNG is that the price of LNG is $16 to 20 per MMBtu when the current price in Thailand on average is about $10.”

According to Segadelli, Thai stateowned oil and gas company PTT is already developing an additional energy terminal in which OWL is actively engaged and PTT is believed to be looking for at least one more 5-million-ton-per-year LNG terminal.

Renewable energy Renewable energy (RE) sources can be an important part of the answer to Thailand’s challenges. Weischer said that resource assessments show a large potential for a number of RE technologies, which have pushed the government to pass the 15year Renewable Energy Development Plan (2008–2022), setting a target of achieving 20% of RE in final energy consumption.

The goal was recently increased to 25% of total output over the next 10 years.

The Ministry of Energy aims for power generation from renewables to jump by 51% to 13,927 MW by 2021, from the previous target of 9,201 MW. Segadelli commends the strong focus on diversification but cautions that these are plans that are very difficult to implement.

Segadelli notes how importing power across borders is more likely to be implemented.

“Thailand, through the Prime Minister and family, has strong connections in Cambodia and that should result in projects being developed. The Cambodian government appears to be trying to improve the economy further and one way to do that would be to have power plants to supply both Cambodia and Thailand. Myanmar is in very much the same situation.”

In terms of the renewable energy sector, Segadelli adds that Thailand’s plans could be implemented, but only if the government can actually put into action the policies that have been promised.

The biomass side, he said, is where the government can strongly help.

“They’ve announced the tariff for biomass and they’ve been announcing it since last year. The tariff is going up to the point where it’s definitely feasible to build large biomass plants.”

Segadelli, however, notes that what the policy lacks is detail on the diversification into coal and nuclear. “Nuclear is at least 20 years away and coal is pretty much all going to be built across border.”

RE investments According to WRI’s Weischer, the policy support for RE has encouraged significant investments amounting to around $1.5 billion in 2011.

He adds that there is also a domestic RE equipment manufacturing industry

emerging. For instance, Thailand, he said, now has three companies manufacturing solar cells and modules using imported wafers, and another three assembling imported cells into modules.

He adds that there are also a number of components and services that can be supplied by Thai firms.

“On average, 70-80% of the equipment used in solar projects (by value) is still being imported and additional steps and policy stability will be necessary to build a stronger domestic industry.”

Segadelli said that there is enough investment going in. The problem however is that the investment is concentrated in the hands of a few players.

“This is for a number of reasons and one is that some players are doing particularly well and have worked out how to grow which is part of marketing strategy. Partly because there’s a lot of foreign companies that pull back for reasons that have nothing to do with Thailand. That means a lot of large-capacity power plants.”

In the solar sector, Segadelli said that there are a lot of developers that are actually building projects now. “There are at least 3 companies we know of who have either just recently listed on the stock exchange or are just about to list to stock exchange which, will draw even more money.”

Major hurdles By 2010, Weischer notes that attractive Adder rates and falling global prices for solar power equipment led to applications for more than 2,000 MW of solar projects, exceeding the official target of 500 MW at that time, by a factor of four.

He explains that there were concerns that some applications were speculative and that the impact on consumer bills would be too high if most of these projects were built, because the cost of the Adder is passed on to all electricity customers.

In 2010, Weischer said the Thai government therefore reduced the Adder for solar projects that had already submitted applications but not signed a PPA, and put a hold on accepting new applications Final project approval was moved from the utilities to a new committee, composed of government and utility representatives.

The committee introduced additional approval criteria, including access to land, financing and necessary permits.

For applicants, Weischer said that this change has meant less certainty and the number of applications has essentially stalled.

According to Segadelli, securing the factory license is the biggest problem for investors because it takes many months to get permits and they are extremely difficult to get.

The government is looking at creating a one-stop shop for all permits, and that

There is enough investment going on but is concentrated in the hands of a few players.

should greatly reduce the problems in building power plants, noted Segadelli.

Segadelli also mentioned how poor community acceptance hinders renewable energy investment.

“There’s a lot going on in newspapers recently about the waste energy projects which have been stopped by the local community. I don’t know the details about the projects but it’s not clear whether they were about to build something that was not acceptable, in which case, it would be more of the license and permit in the first place. But it’s more likely that they did not communicate with the local community in a way that the members will feel like they’re working with them rather than working against them.”

New projects Segadelli said that any new investment in the country is always good but they are confronted with various challenges.

Doosan was the EPC contractor for the most recently built coal-fired power plant in Thailand. Segadelli notes that they had discussions with various divisions of KEPCO, but they have not really seen much action on that. “We also talked to POSCO a few years ago about the wind project they want to invest in but again but that project didn’t come off,” he added.

Thailand’s power generation mix

Source: EGAT data as reported in EPPO 2013 not including VSPPS

Renewable energy potential, 2008 capacity and 2021 alternative energy dev’t plan targets

Source: Tongsopt and Greacen 2012, DEDE 2012s

ASIAN POWER 9

OPINION

Pooja Malhotra

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India scrambles to meet electric power production target

ndia is a fast growing economy and the world’s fourth largest energy consumer. The growth story of India has unfolded since liberalization reforms in the 1990s, followed by rapid modernization and urbanization in the last five years. The GDP has grown at 8-9% since 2003 with a fall in 2008-09 during the global economic recession. Further, in the financial year 2011-12 it slowed again at 6.5% receding to 5.4% in first half of financial year 2012-13.

The surge in economic growth also led to high growth in electrical energy demand. Peak and energy demand have grown at an annual average rate of 5% and 6%, respectively over the last decade. Corresponding peak and energy deficits have been in the range of 12-14% and 9-10%. The need to bridge this gap motivated reforms to attract private sector investments through competitive bidding, market development through open access and power trading and the introduction of point of a connection tariff regime in transmission.

The private sector exceeded its investment target of 15 GW capacity addition with an actual of 23 GW in the 11th five year plan (2007-12).The overall conventional capacity addition of 50 GW took place against a target of 62 GW in this plan period. The peak and energy deficits are down to 10.6% and 8.5%, respectively. The country aims to add over 100 GW in the 12th five year plan (2012-17), half of which is expected to come from the private sector. It is important to note that a significant part of this capacity is already under various stages of construction.

Challenges in the Indian power sector If India succeeds in adding this capacity, it is possible that deficits will be wiped out in the current plan period. However, the present deficits are still quite high as a result of the significant demand from a large economy. The effect of urbanization on energy consumption is evident from the growth of 13.4% from commercial and 8.2% from domestic categories over the past five years. A strong growth in electricity demand, growth despite decline in economic growth, may be a result of significant unmet demand as well as the substitution effect.

Despite encouraging growth in the Indian power sector during the last five year plan, many challenges have surfaced.

One of the key issues that may slow down the anticipated growth is the financial viability of the retail energy segment.

Most of the 876TWh of energy generated in India is supplied to retail consumers through state run distribution utilities that are getting sapped by surmounting financial losses estimated at around US$ 13 billion as of 31 March 2011.

The average technical and commercial transmission losses have come down from 35% in 2004-05 to 26% in 2010-11 but are still high which serves as an impediment to optimize resources across the country. There are efforts at various levels to resolve these issues, and partial success has been achieved with some states undertaking an overdue revision of retail tariffs. The government has recently announced a debt restructuring package for these utilities which the states have to volunteer for. However, only time will tell what the result of 10 ASIAN POWER

such an initiative will be.

Most of the power projects are facing fuel supply issues.

With the increase in installed thermal capacity from 86 GW in 2006-07 to 131 GW in 2011-12, the growth in fuel production has not kept pace. Growth in coal production has fallen from 8% in 2009-10 to just 1.3% in 2011-12. Gas production from the huge KG-6 gas field has been reduced from its anticipated volume and there isn’t much willingness to pay for power produced from more expensive imported gas. The shortage of fuel availability is evident from falling thermal PLFs from 78.6% in 2007-08 to 73.3% in 2011-12.

Due to high imported coal prices and foreign exchange rates, the private developers who bid low power tariffs (without fuel price escalations) under the competitive bidding regime face huge challenges. These developers are now struggling to make the projects viable by urging for revision of Power Purchase Agreement (PPA) tariffs.

Most private developers are debt laden and under financial pressure due to high interest rates, higher cost due to fuel and project delays, accompanied by lower merchant power prices. The key to India achieving surplus power production will be the growth of these private developers and their continued interest in the sector.

A significant capacity is expected to come on line in the next few years. At the same time, energy demand is growing consistently and this is likely to continue. The government interest in improving the sector is evident from various regulatory and structural reforms initiated in over the past couple of years.

It is expected that these reforms will be implemented, perhaps at a slower pace due to hurdles along the way. By addressing the key issues of fuel supply, financial viability of distribution segment and strengthening of regulatory machinery, it will be possible to meet the growing electricity demands of an advancing Indian economy.

Will India meet its 100GW additional capacity target by 2017?

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co-published

Alstom breaks new barriers amidst heightened power demand in Asia

With global power demand expected to double by 2030, find out how Alstom stays on top of the game.

HVDC 660 kV LCC Valves at Fengjin for Ningdong-Shandong project Credit to Alstom Grid

W

ith global power demand predicted to keep growing over the next two decades, especially in the Asia-Pacific region, major equipment players will have a lot of work to do in successfully managing that expansion. Once more, the use of efficient energy management systems will be a critical element in meeting the many challenges that will arise. Based upon projections of the region’s GDP increasing 225% by 2035, economies in Asia-Pacific are expected to account for 60% of the world’s demand for new power generation and transmission equipment.

To effectively manage the heightened energy demand, Wouter Van Wersch, Alstom’s Senior Vice President East Asia Pacific & President of Alstom Singapore, believes it is important that effective forward planning and forecasting be performed. By implementing a networked power system which will reduce indirect needs for energy during peak shifts and redistribute electricity more evenly during the day, energy usage can be optimised.

He adds that intelligent re-deployment and in¬creasing the available capacity of the older plants allows governments to mitigate the impact of re¬placement costs while ensuring that growing energy needs are met.

Breaking new barriers Amidst these challenges in Asia’s energy industry, Alstom constantly values innovation and seeks to break new barriers in designs, processes, products and services for its customers. “We already have the right technology, people and industry relationships in place around Asia. Our customers trust in the timely delivery of our quality products and services,” 12 ASIAN POWER

says Wouter.

From gas to wind, Alstom’s customers can choose from a portfolio of products covering all fuel types, the broadest in the industry. In design, manufacture, procurement, construction and servicing, Alstom has been setting the standard in clean, efficient, flexible and integrated power generation solutions for over a century. Alstom recognises the importance of strong partnerships to confidently overcome all challenges. To be aware of the latest developments in science and technology, Alstom works closely with a variety of international research partners as well as a number of leading universities worldwide.

Through these mutually beneficial partnerships, Alstom enhances the quality and rate of innovation and fosters long-term relationships with future graduates.

“In order to better address both the opportunities generated by Asia’s massive needs for power infrastructure and the challenges from Asianbased competitors, Alstom has been undertaking a number of initiatives to strengthen Alstom’s position in Asia with Singapore as an Asia Pacific hub,” reveals Wouter.

Commitment to East Asia Wouter says that Alstom is committed to develop its business in ‘East Asia’ with Asia Pacific representing

“Alstom is committed to develop its business in ‘East Asia’ with Asia Pacific representing 25% of its total order intake last year.”

Wouter Van Wersch, Senior Vice President East Asia Pacific & President - Alstom Singapore

25% of its total order intake last year. Alstom has played a key role in developing the power infrastructure throughout Asia.

“We will continue to work with our partners in these countries to ensure that the energy needs of the region are adequately met. We will continue to invest in the region not only in terms of facilities but also in growing the local talent in each country; and sharing and developing the latest technology with our partners.” Alstom has recently embarked on JVs with Vietnam Electricity (EVN) for a Reconditioning Workshop in Phy My, with Kepco in Korea for KAPES (KEPCO Alstom Power Electronics Systems) focusing on delivering high voltage direct current (HVDC) projects in Korea and further investing in our local production facilities in Indonesia.

“Also we plan to bring to the region technologies and practices tested and deployed in Europe and other parts of the developed world. These include High Voltage Interconnections between countries, which is a priority in ASEAN and critical to ensuring cooperation amongst the member countries so as to utilise their natural resources in the most optimum way,” adds Wouter.

Not only does Alstom generate the power but also transmits it at High Voltages to Distribution networks via best in class SmartGrid technology and products which put reliability, security, quality of power as top priorities, all while optimising investments and ensuring the planet’s sustainability.

“Through innovation and excellence in project execution, we strive to provide energy and transport infrastructures which combine economic development, social progress and respect for the environment,” concludes Wouter.

Developing sustainable power grids, with Alstom ELECTRICAL GRID ENGINEERING Alstom builds power grids for now and the future. We interconnect major grids, ensure an intelligent balance between production and consumption, and improve the integration of renewable energy.

www.alstom.com

OPINION

JOHN GOSS

Economic growth from increased infrastructure in China john.goss@ceejay.com.hk

T

he Chinese Government, at both Central and Provincial levels, have recognized that the next stages of China’s economic development will be in the nation’s rural regions. An excellent example of this forward-thinking strategy is to be found in China’s southern Province of Guangdong.

The Guangdong Provincial Government says that it has recently allocated sums in excess of 672 billion yuan ($109.75 billion) to develop the western, eastern and northern parts of the region over the next five years.

The Party Chief of Guangdong Province, Hu Chunhua, says that once the rural areas start to develop economically they will provide the province with new areas of economic growth in the near future.

The government’s investments will, at first, focus upon the construction of new railways and integrated highway networks to connect the rural areas with the already developed Pearl River Delta (PRD). The PRD borders the Hong Kong, Macau special administrative regions (SAR’s) as well as a number of rapidly developing economic development zones on the mainland, such as Shenzen and Guangzhou.

The Provincial Government has said that it will spare no efforts to introduce many new and preferential measures for economic growth in the more rural and mountainous regions. The government says that the City of Zhanjiang, in western Guangdong, is a major focus for future development and growth. It is also planning to build a number of prefecture-level cities with each having an estimated population of one million people.

It is clear that improving the infrastructure of these rural areas, which have an abundance of land, natural resources and skilled workers, will serve to help to attract investments and high-tech expertise. The PRD region’s poor infrastructure has long been a major road-block for rural economic development. Expanding investment will help the rural areas become new hot investment targets and serve to encourage PRD cities to transfer some of their industries to the more rural areas.

Developing the energy infrastructure Along with the new investments into the transport network in Guangdong’s western regions, there will be supporting infrastructure to facilitate this planned growth. Perhaps the most critical of these is the energy sector. Guangdong will be able to take advantage of China’s Central Government’s initiatives and subsidies for the application of renewable ‘clean’ energy. Reports say that these could be as large as 1.8 trillion yuan ($204 billion) during the 12th Five Year Plan (2011 – 2015).

Perhaps the most significant development in recent months is the opening of the Myanmar- China natural gas pipeline. The pipeline starts on Myanmar’s western coast and enters southwestern China at Ruili in China’s Yunnan Province. A parallel oil pipeline is expected to deliver crude oil by the end of this year.

Completion of both pipelines will bring 22 million tons of crude oil and 12 billion cubic meters of natural gas annually into China.

To date, China’s natural gas supplies in the south-western region

14 ASIAN POWER

have depended mainly upon gas pipelines from Central Asia and imports of Liquefied Natural Gas (LNG) to China’s south-western coast. The new Myanmar to south-western China pipeline will greatly increase the supplies of natural gas in the region.

At present, China’s consumption of natural gas accounts for 5.5 percent of its primary energy mix. This figure is 18.4 percent lower than the global average level. To cope with climate change and reduce carbon emissions, the government has set a target to increase natural gas consumption to 8.3 percent of the energy mix by 2015.

With the increased availability of natural gas across Guangdong soon, natural gas fired power plants will play an increasing role in the region.

Guangdong Province has continued to rank first in the GDP rankings amongst all of China’s provincial regions for more than two decades. This impressive performance has been achieved despite the fact that its rural and mountainous regions have remained in an economic rut.

We can only imagine what performance levels the country will reach when many more of China’s rural regions begin to develop and grow. These new industries in China’s development regions will be taking advantage of the latest clean energy technologies and will have a range of cleaner fuels to choose from. China and many other Asian regions have learnt the lessons of the past and are now moving towards a cleaner and more efficient future.

What’s next for China’s energy investments?

co-published Corporate profile

The perfect power plant solution Integrated instrumentation, control and electrical packages for thermal power plants.

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BB has been in the power industry since 1883 – that is a few years longer than the world’s first commercially operated power plants. At that time, we were pioneers in a new and revolutionary industry. Now – 130 years later – we have been in the power generation industry longer than just about any other company. There are few power plants in the world that do not rely on ABB solutions to generate their power and deliver it safely, reliably and efficiently to their customers.

ABB is a market and technology leader in power and automation technologies. We design and manufacture products, systems and solutions for the power and process industries. For the power industry, we deliver complete solutions from power generation to transmission grids and distribution networks.

We are the number one supplier in many electrical and control technologies – generator circuit breakers, transformers, substations, motors, drives, gas analyzers, and distributed control systems, to name but a few.

For the power generation sector we integrate these high-performance products into complete instrumentation, control and electrical (ICE) packages for all types of greenfield and brownfield thermal power plants – from supercritical and ultra-supercritical coal-fired plants, to gas- and oil-fired plants, biomass and wasteto-energy plants, and geothermal power plants.

Our scope of supply extends across the entire delivery chain. It begins with system studies and

16 ASIAN POWER

includes detailed design, engineering, project management, installation and commissioning.

This incorporates all the electrical, control and instrumentation equipment– from the electrical balance of plant to the substation and grid connection, and from the instrumentation and field devices to the distributed control system.

Integration makes a difference An integrated solution comprised of products made by ABB has many benefits. The key word is ‘integrated.’ This is where our long and indepth expertise really does make a difference – both for the EPC (engineering, procurement and construction) contractor and the power plant owner.

For the EPC, it means a single interface with a single vendor, thereby minimizing project risk.

It reduces the amount of engineering required and makes it significantly more cost effective.

For the end user, it means a more efficient and optimized solution that meets their requirements for availability, redundancy and performance. These benefits are not restricted to any one region. Our global footprint is

“ABB operates in around 100 countries worldwide and has dedicated power generation resources in more than half of those countries.”

unsurpassed. ABB operates in around 100 countries worldwide, and has dedicated power generation resources in more than half of those countries. This and our extensive process knowhow and experience of local grid codes, gives us a unique capability to help our customers meet their production objectives in whichever country or region they operate.

For instance, in Europe, thermal power plant owners require a high level of operational flexibility to enable power grids to integrate large-scale wind and solar power plants. In India, China and Asia, cost is a market driver – one that ABB is able to meet thanks to its numerous local manufacturing facilities and engineering centers. In the Middle East, our power plant solutions meet the high technical standards and specifications that are required for the region’s demanding climate and operating conditions. In the Americas, our products and solutions are manufactured locally at ABB factories to meet regional requirements and standards. The heart of ABB’s integrated ICE solutions is the Symphony™ Plus total automation system. This industry-leading control platform integrates all areas of the plant in a simple, scalable, seamless and secure manner. It provides users with the broadest possible view of the plant by integrating data from all plant areas and systems. Through its open architecture, Symphony Plus seamlessly consolidates and visualizes plant data to improve operator response to changing

co-published Corporate profile

conditions, resulting in improved plant safety and availability.

Complete service offering Our service offering covers the complete scope of the plant’s power and automation systems, from the distributed control and plant optimization systems to the instrumentation and emission monitoring systems. On the electrical side, it covers the entire energy path, from electrical balance of plant to the substation and grid connection. We offer a full portfolio of life cycle management services. It extends from repairs and spare parts to complete plant upgrades and equipment retrofits which covers each phase of the plant life cycle, from first concept to decommissioning.

Energy efficiency and plant optimization are two of our specialties. We perform energy efficiency assessments and use our unique process, product and application expertise to identify savings that can reduce plant energy consumption by between 5 and 20 percent.

We also use that same expertise to optimize plant operations with a broad range of solutions, from computer-based maintenance management systems (CMMS) to online optimization tools and online lifetime assessment monitoring for turbines and boilers.

To learn more about ABB’s offering for power plants, contact your local ABB power generation office or go to www.abb.com/powergeneration

“Life cycle management services extends from repairs and spare parts to complete plant upgrades and equipment retrofits which covers each phase of the plant life cycle, from first concept to decommissioning.”

Plug-and-play EBoP solution for new gas power plant in Thailand ABB is delivering a modular, pre-engineered electrical balance of plant solution for a new gas turbine combined cycle power plant that will help Thailand meet increasing demand for power with more efficient and environmentally sustainable technology.

ABB has been awarded a contract from Mitsubishi Heavy Industries (MHI) to design and engineer a complete electrical solution for the 1,600 megawatt (MW) U-Thai gas turbine combined cycle power plant in Thailand. The power plant will be located in the U-Thai district of Ayutthaya Province, about 70 km north of Bangkok.

As part of the solution, ABB is supplying distribution transformers, low and mediumvoltage switchgear as well as direct current (DC) systems. The solution includes a modular and customized E-house to store the electrical equipment that will integrate MHI’s turbine control system.

ABB’s modular, pre-engineered approach is a cost-effective plug-and-play solution that ensures faster overall delivery. Containers are pre-tested in the factory, helping customers to reduce operational and execution risks, while maintaining the traditional ABB standard of high-quality products and installation.

The U-Thai plant is owned and operated by Gulf JP UT Company, a leading in dependent power producer in Thailand and a subsidiary

of Gulf JP Company Limited. Under a 25-year power purchase agreement, the generated electricity will be sold to the Electricity Generating Authority of Thailand (EGAT), and the steam to users in Rojana Industrial Park, serving mainly the electronics and automotive industries.

The plant is part of Thailand’s effort to provide reliable and cost-effective power generation by promoting the use of more efficient and environmentally sustainable technology. More than 80 percent of the country’s power capacity comes from traditional fossil-fuel generation. This project supports Thailand’s public-private partnerships (PPP) program by enhancing the efficiency of its power generation infrastructure, and is in line with the national plan to use such partnerships to add an additional 22 giga watts (GW) to the country’s current 34 GW generating capacity within the decade.

ABB is scheduled to complete its part of the project in the second quarter of 2014.

ABB is also currently working with MHI to supply similar electrical equipment and an E-house for the Nong Saeng 1,600 MW gas turbine combined cycle power plant in Thailand’s Saraburi province. This plant is also owned and operated by Gulf JP Company Limited, through its subsidiary, Gulf JP NS Company Limited. The project is currently under construction and scheduled for completion in 2014.

ASIAN POWER 17

SECTOR REPORT: RENEWABLE ENERGY counter-cyclicality as its earnings are negatively correlated with coal price.

Our analysis shows that IPPs are more sensitive to a decline in coal prices than to a change in utilisation hours. Renewable energy is one of the few sectors that is likely to receive favourable policy support from the government.

China has aggressive expansion plans for renewable energy, and investment in renewable energy is unlikely to be impacted if economic growth slows.

China is restructuring its industries: its focus will shift from the old labour intensive industries that suffer from over-capacity to new high-tech, high value-added areas. Renewable energy falls into the latter category.

Worst is over for China’s renewable sector

The coal-fired power segment is showing counter-cyclicality as coal prices drop. By Manishi Raychaudhuri & Daisy Zhang, BNP Paribas.

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hina has the most aggressive renewable power capacity addition plans globally. It is targeting solar/ wind power capacity CAGR of 48%/18% over 2012-15, which is far higher than the national power capacity CAGR 8.5% over the same period.

China’s wind power industry suffered a rough patch in 2011-12: utilization hours in high-speed areas was very low as inadequate grid infrastructure failed to transmit wind power from Inner Mongolia and northeast China to northern China and coastal regions.

However, we believe the worst for the industry is over as more new capacity is being added in low-speed areas where local demand is strong, thus eliminating the need for long-distance transmission.

in high-speed areas to revert to ‘normal’ levels as grid connection improves.

The suspended ultra-high voltage (UHV) power grid transmission line construction plan was reinitiated in 2012.

One new UHV DC line and one new UHV AC line is scheduled to start operations in 2013, while several new lines are either under construction or are in the process of securing approval from the NDRC. We expect grid bottlenecks in Inner Mongolia and northeast China to disappear in late 2014 and 2015 after the UHV lines start operations.

We expect wind farms in low-speed areas to continue to generate good returns and profits through 2014, while those located in traditionally high-speed areas should see a rapid recovery in late 2014 and 2015.

Returns We expect returns from low-speed areas to be better than those from the high-speed areas given higher utilisation hours and higher tariffs for the former.

Longer term, we expect utilization hours

China’s power utility Both the traditional coal-fired power and renewable power segments are likely to outperform in the current weak economic environment.

The coal-fired power segment is showing

18 ASIAN POWER

China IPPs Qinghuangdao Port spot coal price for 5500kcal has declined 5.6% YTD to RMB585/tonne – the lowest since September 2009.

While inventory both at IPPs and ports remains high, we expect coal prices to slide further -even during the traditional peak season -as IPPs have little incentive to stock-up given the current low price.

We estimate China IPPs will be key beneficiaries of sluggish coal prices. Our analysis shows that earnings of IPPs are more sensitive to changes in coal prices than to utilisation hours, all else being equal.

Our channel checks with IPPs and China Electricity Council suggest that on-grid power tariff cut is less likely at end of the year.

If we assume on-grid power tariff cut of 5% in December 2013 and unit fuel cost decline of 10% in 2013 and 0% in 2014, our sensitivity analysis shows there would be limited impact on the earnings of China IPPs. If the coal-power price pass-through mechanism is established, we believe valuations of China IPPs could re-rate as this would ensure stable returns and margins We believe China IPPs will be among the few sectors that will deliver resilient earnings growth in the next couple of years.

More capacity additions in low-speed areas

Source: CWEA, BNP Paribas

ASIAN POWER 19

Esa Heiskanen CEO, Glow Group

20 ASIAN POWER

CEO INTERVIEW

Glow Group realizes significant growth 2012 saw the completion of 2 of its major power plants in Thailand and these are just the beginning of further business expansion.

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sian Power recently caught up with Esa Heiskanen, the Chief Executive Officer of Glow Group, one of the largest private independent power producers in Thailand, to talk about some of its multi-year expansion projects that started in 2008 -and its planned expansions moving forward.

Around 70% of Glow is owned by GDF SUEZ Energy Asia which owns and operates installed production capacity plants in the region. 30% of Glow’s shares are also publicly listed on the Thai Stock Exchange. Its total generating capacity is over 3,000 megawatts (MW) and its major thrusts have been in IPP and cogeneration businesses.

Last year, the group reported a strong normalized net profit (NPP) of THB 5,078 million, an increase of 24% year-on-year, mainly due to contributions from the expansion of its IPP business. GHECO-One, a 660 MW IPP plant in which Glow holds a 65% stake, started commercial operation in August 2012 and posted EBITDA and NNP of 2,300 MTHB and 1,386 MTHB, respectively. Now, it maintains and operates power plants in the country as well as in Laos.

For the first half of 2013, Glow posted consolidated total revenue of THB 34,392 million, EBITDA of THB 8,893 million, and NPP of THB 3,917 million. The EBITDA and NNP represent 63% and 86% annual increases, thanks to continued strength of its Cogeneration Business and contribution of expansion

“Glow has been working on a multi-year expansion project and we made a lot of breakthroughs in 2012.This project, we started in 2008, saw our business expand in Laos where we acquired a hydropower plant “ projects. Comparing to last year, expansion projects including 660 MW coal-fired IPP (GHECO-One) and 110 MW gas-fired SPP (GSPP12) also provided substantial contribution to the results.

Heiskanen commented: “Our results for the first half 2013 clearly reflected the contribution from expansion programs which have increased our production capacity by around 80%.

Even though big portion of expansion capacity, especially in Cogeneration Business, already came on-line since 2012, the results of 2012 was pressured by tight industrial customer electricity sale margin. With the margins returning to normal level, the Cogeneration Business results became main driver for increased profitability for the first half 2013.”

Can you describe your company’s major activities? How do you operate your IPP business and cogeneration businesses in Thailand and Laos?

For the IPP business, we supply and sell electricity to Thailand which goes through the Electricity Generating Authority of Thailand (EGAT), which is under Thailand’s IPP program. Our IPP business is based on a combined cycle gas-fired power plant, a power plant that makes use of bituminous coal, and a hydropower plant located in Laos. This marks our first major business expansion outside Thailand. We also have over 20 generating units for our cogeneration business. These generating units are responsible for producing energy which will be sold to EGAT under the Small Power Producers (SPP) program. These units also produce steam and industrial water to major industrial clients in Map Ta Phut Industrial Estate.

Was 2012 a banner year for the company? What were your major achievements last year?

2012 was a good year for Glow. As I’ve mentioned, we made a lot of business expansions outside Thailand.

Glow has been working on a multi-year expansion project and we made a lot of breakthroughs in 2012. This project, we started in 2008, saw our business expand in Laos, where we acquired a hydropower plant. It’s a 152 MW Houay Ho hydroelectric power plant, which was acquired in 2009. This acquisition extended our supply and production capabilities and supported our growing market in the region.

In Thailand, we made several business expansions as well. The GHECO-One project in Rayong is a highly efficient bituminous coal-fired power plant in Map ta Phut Industrial Estate.

We also have a cycle gas turbine plant in Siam Eastern Industrial Park and both of these projects started their operations in 2012. As one of the biggest power producers, we’re also looking at unveiling new projects based on renewable energy resources.

How about in terms of earnings growth? Were you able to meet your growth target for the year? What were the major challenges?

In 2012, both revenue and net profit increased, despite challenging operational environments. For instance, fuel cost, which makes up a huge sum of our overall operating cost, recorded significant increased last year, But Glow’s facilities are interconnected, which allows us to improve the reliability of our steam and electricity supply. It dispatches our lowest-cost generating units to minimize our operational cost.

In 2011, Thai National Power (TNP) was transferred to Glow.

What significant changes have transpired since its turnover two years ago? Were there any challenges?

Yes, the acquisition of TNP assets was met on time and within the budget of around $7.7 billion.

Around $6 billion was used to cover TNP’s existing debt, including the completion of its 2nd small power producer or SSP project. The acquisition boosted Glow’s capacity by around 90 MW. TNP’s gas-fired cogeneration unit expansion has also been included in our portfolio. Glow made sure that these assets were integrated into its own without affecting existing operations and other planned expansions.

How do you see 2013? What growth opportunities are you looking at?

We are still looking at building our renewable energy sources portfolio. So, these are probably some of the key aspects for this year and beyond. And business expansion outside Thailand will also be considered since we have already started in Laos.

GDF Suez will also be assisting Glow in its business strategies.

Is there anything else that you would like to add?

Well, we continue to grow the company by venturing into different investments across the region, this is most likely the focus for Glow.

Of course, growing our renewable energy portfolio is also another key aspect. And we plan to continue doing this with minimal operational cost and better reliability for our customers.

ASIAN POWER 21

co-published Corporate profile

Distribution Automation Solutions – An approach to increase availability in distribution networks Learn about two concepts that can provide secure and reliable access to disconnectors, circuit breakers and reclosers for monitoring, control and Self Healing.

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major requirement on electricity supply systems is high supply reliability for the customer – which is mainly determined by the distribution networks. Supply reliability is influenced by various technical and organizational factors, and typically quantified using criteria such as SAIDI and SAIFI. In general, customer expectations on supply reliability are steadily increasing – in some cases explicit power quality criteria are even included in negotiated contracts between customers and utilities. Moreover, in liberalized markets, regulators typically require the utilities to report on the reliability performance, or define explicit performance targets – that are even penalized in case of violations in several countries.

Given this background, the power quality performance of distribution networks is coming more and more into focus of system operators.

Today’s distribution networks typically feature a rather low degree of automation only. The implementation of distribution automation is a highly capable and powerful approach to increase supply reliability performance. Even the automation of a smaller share of ring main units in a system only can already realize significant improvements. Intelligent agents in substations and on the feeder devices allow effective monitoring and local decision making without human intervention.

The automation allows detecting and faster reacting on specific circumstances in the network. The system itself is monitored by centralized systems such as a Regional Control System. The Regional Controller authorizes local automation and provides additional supervisory information, in order to handle network situations, which are out of the range of the local automation system and can interact with the central SCADA. Scalable distribution automation solutions are starting with the monitoring of distribution substations through RTUs and the use of short circuit indicators, mainly this configuration is used in ring main units for cable networks.

Over headline networks can also be automated by using peer-to peer interaction between reclosers and sectionalizers on the feeders even with in combination with Regional Control System. The two concepts can provide secure and reliable access to disconnectors, circuit breakers and reclosers for monitoring purposes and provide control over these devices.

Concept 1: Self Healing Implementation

with a centralized Regional Controller on Substation level with decentralized IEDs Protection relays monitor and protect distribution feeders from the substation and control feeder switches. Additional disconnectors or circuit breakers at the secondary substations can be controlled via RTUs or protection relays. Standard ANSI protection functions for distribution feeders are included in the device to handle critical fault satiations by tripping circuit breakers at the in feed and sending the information to a so Regional Controller. Currents, voltages and status information from primary equipment of the distribution network are sent to the Regional Controller to analyze and take further action.

The Regional Controller is a layer between the central SCADA system and the intelligent devices in the field, like IEDs on the disconnectors and circuit breakers. The IEDs sent the status of the distribution network to the regional controller to analyze and take further action. The regional controller is setup to handle standard switching for fault detection via fault indicators and will also handle further actions for fault isolation and service restoration.

Concept 2: Self Healing Implementation with decentralized IEDs with peer to peer interaction The system is designed to work using independent automated devices and the self healing logic resides in individual IED located in the feeder sections. The IEDs located at each secondary substation are associated with a circuit breaker or disconnector and include current and voltage sensors to provide the necessary input data used to determine logical sequences. This information is then made available to each of the other IEDs, starting over the communications channel located within that particular loop and then back to the substation.

Modern communication systems use open

“The implementation of distribution automation is a highly capable and powerful approach to increase supply reliability performance.”

Oliver Schrödel Lifecycle Management, Siemens AG standards rather than proprietary technology, especially the IEC 61850 standard support this decentralized application. IEC 61850 provides the required logic and flexibility for the realization of self healing functionality.

Peer-to-peer functionality via IEC 61850 generic-object-oriented substation event (GOOSE) messages provides not only binary data, but analog values as well. Each device contains extensive programmable logic to realize the automation functionalities – using input data such as voltage, current, timecurrent characteristic curves or load. The IEDs then handle the self healing functionality and attempt to clear and isolate faults, and to then initiate the supply restoration logic.

Such advanced distribution automation concepts – up to the self healing functionality offered by autonomously operating breakers – can be realized using technologies and equipment that is readily available today.

In distribution networks, advanced and “smart” distribution automation solutions can provide substantial technical and commercial advantages to network operators – being much more cost-effective compared to solutions based on primary technology only.

Siemens ENEAS (Efficient Network and Energy Automation Systems) Solutions for distribution automation www.siemens.com/eneas

co-published Corporate profile

GE moves machines to the cloud

Find out more about the industrial internet platform built for unique scale of industrial data.

Internet platform. GE will leverage Amazon Web Services powerful, scalable, low-cost platform to offer GE’s customers cloud solutions for industrial applications and infrastructure.

“Decades of GE-led innovation have helped shape history, and we are excited to work with the GE team to help shape the future of Industrial Big Data,” said Werner Vogels, Amazon.com Chief Technology Officer.

“GE’s domain knowledge and R&D capabilities combined with the strength of AWS’s global infrastructure, breadth of services and big data expertise will help enable customers to solve problems in ways we haven’t even imagined yet, such as improved accuracy in healthcare treatments or extreme levels of energy efficiency.”

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E recently revealed the first big data and analytics platform robust enough to manage the data produced by largescale, industrial machines in the cloud. Built to support the Industrial Internet and turn big data into real-time insight, the platform will benefit major global industries including aviation, healthcare, energy production and distribution, transportation and manufacturing.

Combined with the new GE Predictivity services and technologies available today, airlines, railroads, hospitals and utilities can manage and operate critical machines such as jet engines and gas turbines in the cloud – running businesses better by increasing productivity and reducing waste and downtime. This marks the first time industrial companies will have a common architecture, combining intelligent machines, sensors and advanced analytics.

GE’s industrial strength platform is supported by the new Proficy Historian HD – the first Hadoop-based historian data management software. Historian delivers real-time data management, analytics, and machine-tooperations connectivity in a secure, closed-loop architecture so critical global industries can move from a reactive to a predictive industrial operating model.

Bill Ruh, VP of the Global Software Center, GE, said, “GE’s industrial strength platform is the first viable step to not only the next era of industrial productivity, but the next era of computing. The ability to bring machines to life with powerful software and sensors is a big advancement but it is only in the ability to quickly analyze, 24 ASIAN POWER

understand, and put machine-based data to work in real-time that points us to a society that benefits from the promise of big data. This is what the Industrial Internet is about and we are building an ecosystem with partners to save money for our customers and unlock new value for society.”

Expanded partnerships GE and partners will continue to advance the Industrial Internet by integrating services and developing software, analytics, and cloudbased capabilities that serve diverse functions for industry. These partnerships include a global strategic alliance with Accenture to develop technology and analytics applications that help companies across industries take advantage of the massive amounts of industrial strength big data that is generated through their business operations. This alliance expands on the aviation joint venture Taleris, announced in 2012 to provide airlines with technology that predicts likely failures of aircraft parts and systems and recommends preventive action.

There will also be a strategic relationship with Amazon Web Services, who will be the first cloud provider on which GE will deploy its Industrial

“GE’s industrial strength platform is supported by the new Proficy Historian HD – the first Hadoopbased historian data management software.”

Bigger and faster data GE’s platform is the first that can truly manage industrial big data, which is far more complex than other types of new and emerging content and information available today.

According to Defining and Sizing the Industrial Internet and The Industrial Internet and Big Data Analytics: Opportunities and Challenges by The Wikibon Project, industries have been slower than enterprises to take advantage of cloud environments because industrial big data has unique requirements and managing this complex data requires enormous computing power.

According to the new report, industrial data will grow at two times the rate of any other Big Data segment within the next ten years.

Intensive machine-based software and services – including capturing sensor data, performing local processes and industrial analytics in realtime, and distributing data to end points – are required to deal with this massive growth in Industrial high-data output. Wikibon estimates that the total Industrial Internet Technology Spend will reach $514 billion by 2020.

Jeff Kelly, Big Data Analyst, The Wikibon Project, said, “Our research found that an industrial strength cloud environment needs to meet the challenges of integrating large volumes of machine data with data from other sources while executing near real-time analytics.

GE is well positioned – it has both the Industrial Internet technology and the deep expertise across healthcare, energy, transportation and aviation - to develop and deliver software and services capable of scaling and delivering meaningful insight and action from complex industrial data.”

co-published Corporate profile

Indian electrical equipment makers look to booming Middle East for growth

Electricity consumption is growing at a breakneck pace in the Middle East, opening up lucrative opportunities for Indian manufacturers.

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LECRAMA, billed as the world’s largest power transmission & distribution biennial confluence, is taking stage once again in January 2014 to portray India as the favoured destination for new age businesses, science and technology, R&D and innovations. It aims to serve as an ideal platform for the Indian industry to connect with the appropriate partners across the globe, including the Middle East countries.

The Middle East The Middle East region is a particularly attractive market for India as the former posted strong growth in electricity consumption over the past few years, and is poised to grow at an even faster pace in the next decade. Among a raft of countries in the Middle East region, countries like Qatar and Oman are projected to grow their electricity consumption at doubledigit compounded annual growth rates (CAGR) during 2011-2014, the 2012 edition on the back of increasing demand from residential and industrial sector.

According to Aaditya Dhoot, Vice Chairman, ELECRAMA-2012 witnessed a huge number of international visitors, with those from the Middle East region representing the largest slice at 41%.

Influenced by the strong and sturdy progress and burgeoning bilateral trade agreements with India, Dhoot said that it was no surprise that visitors from the Middle East were much higher in ELECRAMA-2012 than in earlier editions.

“In spite of arduous and intricate geographical location the Middle East region has been witnessing astute and robust growth rates in recent years. The rapid urbanization and strong growth in investments in these countries has led to increase in the demand of consumption of electricity. Thus the Indian electrical equipment manufacturers have a huge potential prospect in these regions,” said Dhoot.

Oman’s power sector has been one of the fastest growing in the Middle East, and the country’s electricity sector is expected to augment in the near future as installed electricity capacity and consumption are seen to grow at 16% and 12.5% CAGR, respectively, during 2011-2014. Several other Middle Eastern countries including the UAE, Saudi Arabia, and Jordan also exhibit strong future growth potentials in the electricity sector.

With growing industrialisation and rapid urbanisation seen in the Gulf States in the last five years, demand for transmission and

26 ASIAN POWER

distribution (T&D) networks, too, has increased sharply. As a result, the Power T&D sector in the Gulf Cooperation Council (GCC) countries comprising of The Kingdom of Bahrain, Kuwait, The Sultanate of Oman, Qatar, Saudi Arabia and the UAE - is expected to witness rapid growth, with investments totaling $60 billion in the next five years and an additional 18,000 circuit km of network.

Dhoot said that emerging trends strongly support the need for these countries to continue augmenting their existing power capacities and infrastructures in order to meet their ever-increasing power demand. Thus, the Middle East market today, he added, remains a key focus area in both power generation and T&D equipment sourcing, and is expected to drive the next phase of growth in the sector.

Other markets According to Dhoot, the next 10 years will be crucial for the Indian electrical equipment industry as it gears up to meet domestic demand and also establish its presence as an important player in the global electrical equipment arena. In order to do so, he noted that there is a dire need to identify new regions and territories for exports. “The most reckoned regions being the African continent, Middle East and the GCC countries. These are the regions which have observed rapid urbanization and industrialization in the last five years due to which the demand for transmission and distribution (T&D) networks has increased manifold,” he said.

ELECRAMA 2014: What to expect Given the flourishing bilateral trade between India and the Middle East nations, which stood at over US$205 billion in 2012-13, the forthcoming ELECRAMA-2014 will provide an opportunity for business visitors from the Middle East countries to also take part in various concurrent events.

Dhoot boasts that ELECRAMA has always been held with a focus to showcase the global competitiveness of Indian products and the capability of Indian manufacturers to develop

“ELECRAMA-2012 witnessed a huge number of international visitors, with those from the Middle East region representing the largest slice at 41%.”

Aaditya Dhoot Vice Chairman, ELECRAMA-2014

world-class engineering products at competitive costs. It provides a global platform for Indian product manufacturers to display their strengths of technology and their endeavor to exhibit core potency for the international market.

ELECRAMA-2014 will be themed “GO GLOBAL”, providing state-of-the art facilities at the LEED-certified green Exhibition & Conference facility at Bangalore.

ELECRAMA-2014 promises to hold once again its world class business exchange activity, REVERSE BUYER-SELLER MEET (RBSM).

Overseas buyers from various targeted regions and countries from Africa, ASEAN, CIS, West Asia, SAARC and Latin America are invited. Also diplomats of various countries, including some Ambassadors and High Commissioners with their delegations based in India are also invited.

Dhoot said that various initiatives have been undertaken to help Indian companies obtain purposeful interactions with decision makers from the utilities of various countries, including visits to manufacturing facilities in India.

FEATURE: SINGAPORE UTILITIES

Singapore power firms to suffer losses as LNG terminal commences Singapore power generation firms have long enjoyed improving profits since 2007 due to lack of new capacity addition but this is set to reverse in 2013, warn analysts. By Krisana Gallezo

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ccording to Credit Suisse Analyst Gerald Wong, power generation companies in Singapore have witnessed a sharp improvement in profitability since 2007 due to limited new power generation capacity, as there has been a shortage of gas supply in Singapore.

Sembcorp Cogen’s net profit increased from S$30mn in 2007 to S$111mn in 2011, while Keppel Merlimau Cogen’s net profit rose from being barely break-even in 2007 and 2008 to S$68mn in 2011.

However, the commencement of Singapore’s first LNG terminal last May is seen to change the future course of energy prices and blunt profits.

Energy capacity Based on data from the Energy Market Authority (EMA), total installed capacity in Singapore is expected to grow by 3.0GW during 2013–14, with the bulk of the capacity growth coming through in end-2013.

To enhance Singapore’s energy security through diversifying LNG geography, and to reduce susceptibility to price and supply risk, the government began construction

28 ASIAN POWER

“The commencement of Singapore’s first LNG terminal last May is seen to change the future course of energy prices and blunt profits. ”

of Singapore’s first LNG terminal in 2010.

The LNG terminal has an initial throughput of 3.5mn tonnes per annum (Mtpa) and the capacity will increase to 6 Mtpa by end-2013 when additional jetties and regasification facilities are completed.

Energy prices PA Consulting Group’s energy expert Richard Bowmaker cautioned that the future course of energy prices is a key influencer for both industrial and commercial businesses contemplating expansion or new investment, and to prospective new suppliers of electricity when considering new or expanded generation facilities.

To determine the outlook for electricity prices in Singapore, Bowmaker said that it is important to appreciate how prices are formed.

In Singapore’s competitive wholesale electricity market, he noted that prices are determined by the cost of the highest-cost generator used in any trading period.

And, with the anticipated changes to the composition of Singapore’s generating capacity, the cost of the highest-cost generator is likely to change, which means that

past prices are not a reliable guide to what the future holds, he said.

Traditionally, Singapore’s generation capacity has been dominated by two main types: highly efficient combined-cycle gas turbines (CCGTs), and relatively inefficient oil-fired plants. Gas prices are indexed to oil prices in Singapore, so fuel prices are relatively consistent across the different types of plants.

But the relative inefficiency of the oilfired plants results in them being consistently higher-cost generators than the CCGTs, Bowmaker cautioned.

The amount of CCGT capacity, and its ability to generate electricity, has for many years been limited by the capacity of the pipelines carrying gas into Singapore from Malaysia and Indonesia, according to Bowmaker.

Consequently, he explained that while CCGTs have provided the bulk of the generation, the higher-cost oil-fired plants have been required to meet the demand for power, and their operation has kept electricity prices high.

This has been particularly profitable for CCGT owners who receive the high mar-

FEATURE: SINGAPORE UTILITIES ket prices for their low-cost generation.

However, recent market developments look set to alter this course, warned Bowmaker.

Spurred on by the past profitability of existing CCGT plants, the new LNG terminal gas, he said, has opened the floodgates to a wave of new CCGT construction projects. According to Bowmaker, by 2014, almost 3 GW of new CCGT capacity is planned to be built, increasing the CCGT generation capacity to almost 80% of total capacity. As a result, he anticipates that there will be sufficient CCGT capacity to meet all of Singapore’s electricity needs in virtually all trading periods, without the need to frequently fire up expensive oilfired generation.

The effect, Bowmaker said, will be a significant reduction in Singapore’s wholesale electric prices.

“We also anticipate a long-term trend in which pricing in the Asia-Pacific LNG market (and perhaps LNG markets more widely) decouples from oil prices. If this occurs, there is potential for natural gas prices to drop below those of oil per unit of energy, which, particularly when coupled with the operation of more efficient CCGT generating plants, would further reduce energy prices in the Singapore market.”

London Economics International (LEI) forecast that Singapore’s wholesale energy prices may fall by 16% over the next three years as the city-state’s first LNG terminal begins operation, allowing for the import of more competitively priced fuel.

LEI consultant Victor Cheung said that the average Uniform Singapore Energy Price (USEP) is expected to fall to S$159.2/ MWh in 2016 from a forecast of S$189.7/ MWh in 2013, as eight new generation projects, representing nearly 4 GW of capacity, come online in Singapore.

LEI’s projections show the USEP then rising gradually to S$216.4/MWh by 2022 on power demand growth.

Cheung added that while prices for Singapore’s Piped Natural Gas, which feed the island’s existing gas-fired plants, is currently indexed to the High Sulphur Fuel Oil 180, “competitive pressures in the global LNG market would eventually lead to a decoupling of LNG and oil prices.”

“In general, the market will become more efficient and Combined Cycle Gas Turbines are expected to set prices more often. This means that competition in Singapore will rise and that the generation companies will need to operate more efficiently in order to maintain their profit margins,” Cheung added.

Bowmaker said that this outlook on price is good news for Singapore’s major power consumers, but not for its generators, who will see their margins come under pressure: major power consum-

ers should avoid long-term contracts that lock in (or worse, project forward) recent prices, and should instead consider greater exposure to the spot market which will offer these lower prices.

New generation capacity Credit Suisse’s Wong said that there has been a strong uptake of LNG by companies to fuel new generation capacity in Singapore. In 1Q10, Senoko Energy, PowerSeraya, Tuas Power Generation, Sembcorp Cogen, Keppel Merlimau Cogen, and Island Power contracted for an initial tranche of 1.5 Mtpa of regasified LNG, which was subsequently increased to 2 Mtpa.

CreditSuisse estimates that the growth in installed capacity will lead to an increase in reserve margin to 47% in 2013E, close to the 2007 level. “Assuming steady demand growth of 3.5% per annum, reserve margin declines to 2012 level of 37% in 2020,” said Wong.

Already, the expected increase in capacity has led to a decline in the Uniform Singapore Electricity Price (USEP) by 23% to S$174/MW in 1Q13, relative to a 13% decline in fuel costs. At the same time, vesting prices for contracts which commit generation companies to sell a specified amount of electricity were also revised downwards in January 2013, following a review of the long run marginal cost parameters.

According to Wong, one of the two key factors driving the decrease is the assumption of the capital cost, which includes the cost of purchasing the plant and all associated equipment, which has fallen from S$559.2mn to S$479.5mn for one unit of “F” class CCGT. In addition, the riskfree rate assumption has been reduced to

“In general, the market will become more efficient and Combined Cycle Gas Turbines are expected to set prices more often”

2.41% from 3.31%, based on the average daily closing yields of a AAA rated, 20year Singapore Government Bond over the 12 month period from June 2011 to May 2012.

Credit Suisse noted that while reserve margins and power spreads could revert to 2007 levels with the significant capacity increase, their base case assumptions are less negative. “We believe a number of factors could provide downside support, including: (1) likely rational pricing behaviour of dominant gencos and new players given their high acquisition price; (2) retail contracts locked in with industrial customers which could make up 60% of electricity sales, as well as (3) contribution from non-electricity sales such as bundled utilities to customers on the Jurong Island,” said Wong.

Wong added that the downside support to market pool prices could be provided by the required return of dominant generation companies, which purchased assets from Temasek Holdings in 2008. The sale

Significant power generation capacity expected in 2013-2014

Source: Energy Market Authority

ASIAN POWER 29

FEATURE: SINGAPORE UTILITIES “While public data is available on spot prices and vesting prices, there is limited disclosure on the retail contracts of generation companies.”

of Tuas Power (to China Huaneng), Senoko Power (to Japanese consortium Lion Power) and PowerSeraya (to YTL Power) was made at a EV/Licensed capacity valuation range of S$1.2–S$1.6mn/MW. More recently, First Pacific and Meralco purchased a 70% stake in two 400MW plants from GMR at S$2mn/MW. Sale of major gencos In 2008, Temasek Holdings divested three of its wholly owned Singapore power generation companies—PowerSeraya, Senoko Power and Tuas Power. In March 2008, China Huaneng acquired Tuas Power for a cash consideration of S$4.235bn. Tuas Power has generation assets with a licensed capacity totalling 2,670 MW, comprising 1,200 MW of oil-fired steam plants and 1,470 MW of gas-fired combined cycle plants. In September 2008, Lion Power Holdings, a consortium comprising Marubeni, GDF SUEZ, Kansai Electric Power, Kyushu Electric Power and Japan Bank for International Cooperation, acquired Senoko Power for a cash consideration of S$3.65 bn.

Senoko has a combined installed capacity of 3,300 MW, comprising 1,945 MW of combined cycle plants, 1,250 MW of thermal plants, and 105 MW of fast-start gas turbines. In December 2008, YTL Power acquired PowerSeraya for a cash consideration of S$3.6 bn. PowerSeraya has a registered capacity of 2,940 MW, comprising 732 MW of combined cycle plants, 1,990MW of steam turbine plants and 218 30 ASIAN POWER

MW of open cycle gas turbine plants. The acquisition multiple for these transactions were in the range of S$1.2-S$1.6mn/MW. In March 2013, GMR entered into a share purchase agreement to sell its 70% stake in GMR Energy (GMRE) to FPM Power Holdings, a 60:40 joint venture between First Pacific and MERALCO. GMRE owns a 2x 400 MW natural gas fuelled power plant on Jurong Island, Singapore. The plant is 96% complete, and is expected to commence operations in December 2013.

The consideration will be a total of $537mn (S$660mn) for a 70% stake in GMRE. The sale translates to an Enterprise Value (100% basis) for GMRE of S$1,293mn (S$1,612mn) on project completion.

The power plant was financed on a limited recourse basis by a consortium of banks providing a $545mn 17-year debt facility and a further $270mn credit facility. The remaining 30% stake in GMRE is held by Petronas that will continue to stay invested in the project.

According to Wong, the acquisition multiple of S$2mn per MW is at a premium to the valuation of assets divested by Temasek in 2008. “We believe this could be due to higher efficiency of a newly completed plant, as well as improvement in power spreads since 2008.

We believe that there might be downside support to market pool prices based on the required return of generation companies.

For example, we estimate that a long-term

EBITDA of $100mn is required to generate an 11% IRR for the investments by First Pacific and Meralco, which is almost in line with the effective EBITDA for a 70% stake in Sembcorp Cogen (800MW) in 2011.”

Based on CreditSuisse estimates, the dominant generation companies have a higher fixed cost base relative to Keppel and Sembcorp. Depreciation cost per MWh of electricity sold in 2011 was around S$9.3–11.9 for the dominant gencos, versus S$6.1 for Sembcorp and S$5.1 for Keppel. Similarly, finance cost per MWh of electricity sold in 2011 was around S$4.3–12.5/MWh in 2011, versus S$2.4/MWh for Sembcorp and 2.6/MWh for Keppel. Wong nonetheless noted that profit decline could be moderated by contracts locked in with retail customers.

While public data is available on spot prices and vesting prices, there is limited disclosure on the retail contracts of generation companies. Before 2001, all consumers in Singapore were subjected to the Singapore Power Electricity Tariff.

Following the liberalisation of Singapore’s electricity retail market in 2001, a contestable customer with minimum electricity consumption of 10,000 kWh and above has the option of choosing the retailer that provides the best service.

According to Wong, such contracts, which typically range from a month to a year, limit the impact of volatility from spot prices. “We estimate that such retail customers made up about 30–40% of electricity sales for Tuas Power and Sembcorp Cogen in FY11,” he said.

Wong also noted other sources of revenue that would help offset the profit decline. For example, Sembcorp Cogen also generates 700 tonnes per hour (tph) of steam, which are sold as bundled utilities to industrial customers. Likewise, its 400MW cogen plant expansion could also generate 200 tph of steam.

“We estimate that non-electricity related revenue could contribute up to S$250 mn of revenue per year to Sembcorp Cogen,” said Wong.

Contributors of Singapore power generation assets to net profit

Source: Company data, Credit Suisse estimates. FY12 for YTL Power and Huaneng, FY11 for Sembcorp INdustries and Keppel

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