Asian Power (March - April 2018)

ISSUE 86 | DISPLAY TO 30 APRIL 2018 | www.asian-power.com | A Charlton Media Group publication

US$360P.A.

INDONESIA’S

NEED FOR

HEAT

CIREbON POWER’S PRESIDENT DIRECTOR HERU DEWANTO bELIEVES INDONESIA MUST bOOST ITS GAS-fIRED PROJECTS TO HIT THE 35GW GOAL.

VIETNAM’S LOVE AFFAIR WITH COAL INDONESIA’S FAILING INCENTIVES ARE TENDER SCHEMES BEATING FITS? DILEMMA WITH MICROGRIDS

FROM THE EDITOR Asian Power’s March-April issue probes into Vietnam’s fiery love affair with coal as the government puts higher priority on coal projects and allots low subsidies to non-hydro renewable projects. How long will the country hold on to coal? We also delved into why Indonesia, despite possessing around 40% of the world’s geothermal reserves, could not seem to put geothermal development into high hear. The government has been offering incentives, but channel check with analysts revealed that these are not attractive enough for most developers.

Publisher & EDITOR-IN-CHIEF Tim Charlton production editor Karen Lou Mesina Graphic Artist Elizabeth Indoy

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We also explored Southeast Asia’s thriving solar industry despite gloomy market expectations as the solar boom is predicted to start fizzling out due to markets nearing saturation.

We also feature the Asian Power utility Forum’s first leg in Manila. Go straight to page 24 and catch up on what has been discussed.

Start flipping the pages and enjoy!

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ASIAN POWER 1

CONTENTs

16

CEO INterview Indonesia needs more gas-fired power projects

07 Why microgrids can’t go all out

26 Southeast Asia’s solar industry thrives amidst

08 Indonesia’s failing stimulus 10 Are tender schemes beating FiTs?

28

eVENT COVERAGE Japan urges investors to diversify renewable assets

SECTOR REPORT

FIRST 06 Is coal still king for Vietnam’s power needs?

20

ASIAN POWER UTILITY FORUM: mANILA Can energy storage gain steam in the Philippine renewables?

dimming market expectations

ANALYSIS 26 Are Indian distribution firms finally out of the woods?

OPINION

COUNTRY REPORT 12 Taiwan’s nuke-free vow under fire as energy supply issues

30 A guide to Singapore’s recently announced Carbon Tax

30 What is the future of power sector, renewables,

arise amidst massive blackout

18 South Korea drops nuke, cools off on coal

energy storage, and IoT?

32 Solar power development in Southeast Asia 32 Back to the future? – A shakeup in industrial solar

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

Why Indonesia is popping the champagne on less headwinds for renewables

POWER UTILITY

These 3 things dim India’s bright solar capacity growth India’s solar power addition is likely to see continued high traction in FY19, according to India Ratings & Research, given the declining tariffs and low variability in solar radiation patterns, and hence better However, solar capacity addition could face challenges in debt tie-ups and additional equity requirement.

POWER UTILITY

China’s wasted wind power drops to 41.9b kwh in 2017 China’s wind power generation has picked up amidst government efforts to expand clean energy to curb pollution. Wind power generation totaled 305.7 billion kilowatt hours in 2017, accounting for 4.8 percent of the country’s total power output.

4 ASIAN POWER

POWER UTILITY

India to open auctions for 500MW of solar projects Gujarat government in India is opening tenders to set up 500MW of solar projects under the reverse-auction mechanism. The state has also provided another 500MW under the “greenshoe option” which allows it to delegate capacity to companies who are amenable to matching the lowest tariff in the auction for the initial 500MW.

POWER UTILITY

Australian power suppliers to pay $3.9m in compensation over outages Reuters reported that power companies in Australia’s second most populous state will pay A$5m ($3.9m) in compensation to households hit by electricity outages during a heatwave in late January, the Victorian state government said on Sunday.

POWER UTILITY

Indonesia is popping the champagne on less headwinds for renewables Reuters reported that the developer of Indonesia’s first commercial-scale wind farm says conditions for renewable energy investors are better now than ever before, but more work is still needed for the country to achieve its wind energy targets. Historically, the prospects of getting commercial projects up were bleak.

PROJECT

Here’s what pushed Japan to explore virtual power plants Japan’s venture into using more renewable energy is being threatened by headwinds in dispatching power supply as energy kept coming in. The marked supply-demand imbalance prompted the government and utilities to explore virtual plants.

FIRST introduced by the government have been widely criticised for being too low and not ensuring an attractive return on investment,” said Hayden.

She added that when the tariff was first introduced in 2011, investor interest in the market picked up, with the government registering 48 wind power projects for development. However, by the end of 2014, only three projects had been commissioned.

x INVESTMENT HOTSPOTS SOUTHEAST ASIA

Tony Segadelli, Energy Dr Bikal KumarOWL Pokharel, Wood Mackenzie

Asian x Power spoke with Tony Segadelli, OWL Energy’s managing director, on where the investment hotspots are in Southeast Asia. He discussed the current projects his firm is handling and the industry issues he’s observed from the ground.

What’s interesting now in the Asian power market and the investment activity in the industry?

I see Myanmar is going to start off very soon.

Banks are about to issue a tender for LNG, regasification, and CCGT. Indonesia is trying to work out what to do after it has issued regulations 10, 11, and 12. Cambodia is slowly building things--a lot of hydro being brought by the Chinese.

Thailand has another round of solar coming up, there’s biomass and waste to energy, they’re very focussed on the renewables sector.

Vietnam is starting to make all the right noises on renewables as well, but they’re probably gunning for more coal-fired power as they’ve recently imported more coal in the last quarter than what they’ve had in the other quarters, implying that they’re firmly focussed on the fossil side.

And then, Philippines, there’s still a lot of coal being built at the moment. Solar has slowed down, but it has not stopped as there’s a lot of bilateral discussions going on so the future’s looking very bright for Southeast Asia at the moment.

Given your experience as an engineering firm, what’s happening right now in the Japanese power market?

There’s actually quite a number of solar companies gone bankrupt at the moment because it’s totally over-built. OWL Energy left because the market’s still in development phase, had a very saturated market. They built 10GW on 2013 and 15GW in both 2014 and 2015. They just can’t carry on building at the same rate that they were. Wind has not taken off in a way that it was expected to and biomass is likewise being delayed significantly.It’s a difficult market for the foreign companies to get in.

In Southeast Asia, which country do you think has the most interesting opportunities for the investors?

I would say that obviously Myanmar has huge potential. As for the other players Thailand is just going to continue growing and that’s not going to change. Philippines on the other hand will also continue to grow. Hopefully, Indonesia will solve its regulatory issues and investment opportunities will pour in in the next two to three years.

6 ASIAN POWER

Vietnam keeps deep love affair with coal

Is coal still king for Vietnam’s power needs?

W

VIETNAM

hen Irish renewable energy developer Mainstream announced its 940MW wind project in Vietnam, it joined a number of renewable energy projects that are seemingly listed on the country’s non-priority list. With Vietnam’s current energy policies, nonhydro renewables capacity will likely double over the next decade. Moreover, maintaining the low subsidies for wind power development will prevent the sector from reaching its full potential despite rich resources and keen investor interest.

BMI Research expects non-hydro renewables capacity to increase from just under 400MW in 2016 to just over 850W by 2026, resulting in non-hydro renewables contributing less than 1% to total electricity generation in the country by the end of the forecast period in 2026. By contrast, thermal fuels, particularly coal-fired power generation, should see strong growth over the same period.

Georgina Hayden, head of power & renewables at BMI Research, reckoned this underperformance and lacklustre growth projections for wind and other renewable energy sources can be attributed to low subsidies and higher government priority on coal.

“Vietnam’s regulatory environment for renewables remains underdeveloped and the wind subsidies that have been

Georgina Hayden

Massive investments Showing the strong potential of the sector despite the hurdles, some investors continue to plow large investments into Vietnam’s wind power sector. Mainstream Renewable Power is amongst the hopefuls who signed a cooperation deal to develop, build, and operate three wind projects.

These include the 800MW Phu Cuong Wind Farm located in the Soc Trang province with an investment injection of approximately $2b, the 83MW Thai Hoa Wind Farm, and the 55MW Thai Phong Wind Farm, with a combined investment injection of ~$200m.

Still, Hayden warned that “whilst renewables project announcements have increased in Vietnam over the past six months, our capacity growth forecasts remain conservative. Low subsidies on offer to developers and the government’s stronger focus on other power sources all form bottlenecks to growth.”

But whilst Southeast Asia is starting to gain access to key microgrid technologies, Asmus reckoned longterm sustainability will depend more on finding smarter business models than slapping on systems with the most cutting-edge science. “You do not want to have the most sophisticated system necessarily if there is no local labor that might understand the technology and be able to keep it operating,” Yeoh Keat Chuan, managing director of EDB said, citing companies such as SparkMeter and PowerHive that seem to have figured out how to combine new technology with innovative business

Vietnam’s planned installed wind power capacity

Source: Federal Ministry for Economic Affairs and Energy

FIRST

Malin Östman

Funding and site availability drag development

Why microgrids can’t go all out

W

INDONESIA

hen energy storage provider Qinous announced that it will develop hybrid microgrids in Indonesia, industry experts had mixed reactions. For its proponents, hybrid power systems are the dream of the future, integrating traditional power sources with renewable power sources, but experts warn that it can turn into a technical nightmare.

There is an array of technical challenges that must be overcome to ensure that present levels of reliability are not significantly affected when operating a hybrid power system, says Amit Gupta, chief of electrical capability group-Asia at Rolls-Royce Singapore Pte Ltd. One key task is to design new market models that allow competitive participation

of intermittent energy sources, and provide appropriate incentives for such investments.

Competitive participation first There is also a need to design appropriate demand side management schemes to allow customers to react to the grid’s needs. Countries like the Philippines also face an uphill battle when it comes to funding and site availability. Malin Östman, manager, project development, Wärtsilä, said there is excellent potential for PV-engine hybrids in the Philippines due to good level of irradiation and widespread diesel use as generating fuel, which supports their economic feasibility.

But cost and availability of land remain major challenges to implementing solar

PV and PV-engine hybrids across the islands.

The rising complexity of hybrid systems should also keep operators on their toes. “The development of more storage technologies will increase the complexity on hybrid systems, and the control systems needed to manage these,” added Fernando Niggli, technical manager at DEIF Korea. He reckons that individual sources cannot operate if the integration with the other sources is incomplete. This only causes more problems, especially in the microgrid level of applications, and puts pressure on the industry to roll out better systems. “Microgrid needs continuous development of energy management systems to succeed,” he adds.

“There is a newer entity which has been set up. It’s a guarantee and investment facility which has been set up in the Philippines through the Association of Southeast Asian Nations, plus three governments,” he said. “And the idea is to guarantee issuance of local currency bonds for projects. Now, that’s one market that has been totally untapped in the region, where there is no capital market support.”

Total market potential in developing countries

Source: Frost & Sullivan

the chartist: Southeast JAPAN’S SOLAR Asia INDUSTRY to spend IS $500b DIMMER onWITH power JUST projects 20GW PROJECTED in the next TOfive COME years ONLINE Over the Japan’ s solar nextpower five years, sector over will32,700 expandactive at robust rates projects are scheduled through tofor 2020 construction as a large x Representing 7,803 projects valued at over backlog of start-up, amounting projects supported to a potential by feed$1.27t in tariffs come investment of more online. than After $4.1t, 2020, according BMI Research to Industrial said Info that Resources. the transition Eastto and a reverse auctions Southeast Asia, with system an investment will slow growth, value as the$1.27t, of Japanese represent government morelooks than half to regulate of capacity the wholeadditions continent’s in order activity to in reduce powersubsidy costs and support generation spending. grid stability.

“We In SEA, expect Industrial JapanInfo to register is tracking robust 3,300+ solar capacity active projects growththat through are scheduled to 2020 as for a result of the implementation construction start-up, reflecting of a substantial potential pipeline ofofprojects spending more than that $505b. benefit Indonesia from a generous leads in project feed-in activity tariff support with almost scheme.

30% Ourthe of forecast region’sistotal that investment out of a 50GW value. backlog The of such projects, Philippines is second, only 20GW although willitactually has the come online, highest number as most of projects, will notwith be able 18.6%. to take advantage Vietnam rankedof third thewith FiT subsidies 19.5%. Coal amid is stringent still a major government fuel sourcerequirements at 29.9% in power and Source: Industrial BMI Research Info Resources delays in development, generation spending in”the BMIregion.

Research added.

5-year (2018-22) spending analysis by project x type status

Source: Industrial BMI Research Info Resources

ASIAN POWER 7

FIRST

Indonesia’s failing stimulus

Geothermal share of electricity generation in top 10 countries

vietnam’s decision 11 VIETNAM

INDONESIA

W

hilst Indonesia possesses around 40% of the world’s geothermal reserves, development has not accelerated to full gear due to insufficient incentives to make the high exploration risks worth taking. The government has been offering incentives, but analysts say these are still not attractive enough for most developers.

“Recognising the potential, the Indonesian government has introduced various incentives to try to encourage development.

If the relevant public authorities made full use of such incentives and implemented them consistently in a way that mitigated key private sector risks, they could make a real difference,” said Marius Toime, partner at Berwin Leighton Paisner.

“However, political and bureaucratic tensions often get in the way of effective administration, and sponsors may be discouraged by exploration risks, complex regulations and inadequate feed-in tariffs.”

Geothermal project developers must undertake significant capital outlays for exploration without a guarantee of profitable return, which is why many in the private sector are unwilling to invest in exploratory drilling programmes without plant WATCH

Source: Earth Policy Institute

attractive feed-in tariffs to compensate for upfront risk.

Kaushik Das, senior partner at McKinsey & Company, reckoned geothermal energy is already competitive in several regions, but increased tariffs for geothermal and accelerating the issuance of licenses and permits will further incentivise upstream producers to invest.

Sweetening the deal for renewables investors is critical for the country to tap into its large geothermal potential, reaching an estimated 27GW. Lost opportunity?

Das added that even if Indonesia’s planned fuel mix is designed to achieve least-cost production by maximising the percentage of coal and gas in the fuel mix — the two are supposed to account for up to 84% of total electricity production by 2017 — there is an opportunity to increase the contribution of renewables, particularly geothermal, hydro, and biomass.

David Harrison

Asian Power talked to Mayer Brown JSM partner David Harrison and associate Van Hai Nguyen to find out what Vietnam’s Decision 11 is and how it will affect power projects in the future, particularly solar.

Kaushik Das

Marius Toime

Karaha geothermal plant up for tweaks

Equis Energy hits financial close

AGL’s $200m upgrade for Bayswater

INDONESIA

AUSTRALIA

AUSTRALIA

Pertamina Geothermal Energy is waiting for a final decision of amendments to a power purchase agreement with PLN for its 30MW Karaha geothermal project. Due to the massive investment required to make the project successful, Pertamina Geothermal is looking to increase the rate to $0.114/ kWh. According to Pertamina Geothermal’s director Khairul Rozaq, US$178m investment will be needed in order to produce the 30MW from the project.

These funds will be used for the upstream development of the project..

8 ASIAN POWER

Equis Energy has achieved financial close on its 127MW Tailem Bend Solar Project (Tailem Solar) in South Australia, 100km south-east of Adelaide. Construction is due to commence in February 2018 and the $200m project is expected to begin delivering power to the grid in Q1 2019. Equis has signed a Power Purchase Agreement (PPA) with Snowy Hydro under which Snowy Hydro will purchase 100% of the power from Tailem Solar for at least 22 years. Snowy Hydro is a leading integrated energy business in Australia that owns and operates 5,500 MW of capacity.

Van Hai Nguyen

AGL will spend more than $200m and create 90 jobs during work to upgrade and maintain the coalfired Bayswater Power Station in Muswellbrook. The upgrade is among the investments being made by AGL to replace the 1000 megawatt capacity shortfall AEMO identified could follow the repurposing of Liddell plant in 2022. The Bayswater upgrade will improve the power station’s capacity and efficiency, providing enough energy for up to 100,000 homes - increasing electricity supply without increasing coal consumption or emissions.

What exactly is Vietnam’s Decision 11?

Decision 11 is groundbreaking in that it is the first Vietnamese legal instrument that specifically governs the development of the country’s solar power sector. Decision 11 sets out the general legal framework for developing solar power projects and provides for a feed-in-tariff under which the single offtaker (i.e. Electricity of Vietnam (EVN), a 100% state-owned entity) will purchase solar power from generating companies. The tariff is set at US$0.0935 per kWH. Prior to Decision 11, there was no regulatory guidance on how to invest in, and operate, a solar power project in Vietnam. Prior to its issuance, a few projects were developed on an ad hoc basis. Overall, Decision 11 is a positive development as it sets out a roadmap with expectations and understandings on the tariff, investment incentives, and the regulatory process that will guide sponsors, financiers, and government agencies.

How will investors be affected by this?

The introduction of a general framework for solar power projects is a welcome – and, in the minds of some investors, an overdue legal development.

The focus should now be on improving the draft template power purchase agreement (PPA) circulated by the Ministry of Industry and Trade (MOIT) in June.

Do you have any worries about Decision 11?

Decision 11 still has certain limitations, some of which pertain to the Vietnamese power market in general, and others that result from gaps in the legal framework governing this industry.

For example, Decision 11 does not provide for a direct PPA which would have allowed large corporate customers such as industrial parks or manufacturing facilities to purchase solar power directly from independent power producing sellers (IPPs). This structure was once considered in the context of wind power, but all power sales must flow through EVN. Two significant and inter-related hurdles for solar power in Vietnam are: 1) lack of clarity about the ability of investors to benefit from a government guarantee of EVN’s obligations as the sole offtaker, and 2) the quality of the draft template PPA. Decision 11 requires that the purchase of all grid-connected power must be based on a standard PPA template.

CO-PUBLISHED CORPORATE PROFILE

OWL Energy to play pivotal role in Philippines’ renewables strategy The country seems to be geared up to become increasingly green but where does this leave coal?

T

he solar gold rush in the Philippines is finally over, and the increase in new projects have slowed down on the back of a more rational approach rather than with a “build, build, build” mentality. This bodes well for the sustainability of the solar sector and for individual companies that aim for more steady and less risky projects.

Tony Segadelli, managing director, OWL Energy says that future growth in the renewable sector will consist of hydro, solar and biomass. Baseload energy will come from biomass, of which the main sources would increasingly be napier grass and straw waste. Meanwhile, solar energy will meet daytime supply, especially for peak demand.

Hydro, on the other hand, will mitigate the risks posed by intermittent sunlight and solar grid instability.

In the solar arena, Segadelli said that OWL has probably undertaken more projects in Southeast Asia than any of its competitors, with a growing presence in half of the countries in the region.

OWL’s work on solar involves roles as Lenders’ and Owner’s Engineer and has expanded into EPC(M) although this is currently limited to the Philippines and Thailand.

OWL is also working on solar projects in Indonesia as Lender’s Engineer. Segadelli said that OWL is working for the Asian Development Bank (ADB), after the finance institution approved two loans totaling almost USD1.1b for Indonesia’s energy sector in general. OWL is working on four utility scale projects under construction, out of a total of six projects of the same kind in the entire country.

Growth in hydro Notably, OWL Energy sees huge opportunities in run-of river hydro projects in Northern Luzon and Mindanao. Projects in this sector have not been met with much resistance on the social and environmental aspects, owing to the fact that many of them are small scale and do not require dams and resident resettlement. Segadelli added that in fact, the local communities in and around project sites tend to be very supportive due to the availability of hundreds of jobs in the construction phase.

“OWL is rapidly increasing the portfolio of hydro projects it has worked on. To date these have been in Laos and the Philippines, however we are in discussions to perform similar roles in Myanmar.

Our experience is that smaller projects, especially run of river, tend to be much easier to construct, are more abundant and give higher IRR to our clients and so this is expected to be a growing sector for OWL,” Segadelli said.

Growth in mini-grid Under the mini-grid segment, Segadelli said that mini-grids are becoming more technically challenging and are also increasing in capacity due to the continued decrease of RE and battery costs. OWL’s mini-grid projects are all currently in the Philippines and include a combination of solar, batteries, biomass, and recips. According to Segadelli, the same approach may be transferable to Indonesia, Cambodia, and Myanmar.

Clear role in coal In the midst of all these developments, Segadelli said that coal will not be pushed off the radar. In fact, it will continue to be a major provider of the region’s baseload power for years to come. Despite its reputation in the global community, coal has continued to grow in importance in Southeast

New projects, new spots for growth

Asia. For instance, Indonesia has been promoting a combination of ultra-supercritical and mine mouth projects and has recently amended contracts for a revenue-boosting permit system. Segadelli added that the Philippines continues to expand its coal base, Vietnam continues to develop coal projects, and Myanmar maintains coal plant development amidst news of otherwise.

“OWL is looking to be both on the developers and lenders side of these developments. In the Philippines we have worked on development, acquisitions and operational enhancement projects on CFB and PC power plants. Coal will continue to be a major provider of baseload power in SE Asia for many years. OWL is expecting to pick up development role work in Myanmar and the Philippines this year. After which we will focus on Indonesia and SE Asia generally,” Segadelli said.

Playing two roles simultaneously Regardless of the type of energy, OWL stands ready to offer topnotch services for topnotch results. OWL will continue to focus on roles as Owner’s Engineer, Lenders’ Engineer, and Technical advisor on all four segments: hydro, solar, mini-grid, and coal. Segadelli said that where it makes sense, OWL will also work on EPC(M), which means that OWL will do the detailed design, provide technical inputs for the procurement phase, and manage construction as well as the overall process. Segadelli added that there will also be a likely increase in the use of batteries, either standalone or with intermittent generation sources.

“OWL is rapidly increasing of the portfolio of hydro projects that we have worked on.”

ASIAN POWER 9

FIRST

Are tender schemes beating FiTs? ASIA

W

hen policymakers look into the future of solar photovoltaic (PV) development in Asia, the role of feedin tariffs (FiTs) is slowly but surely diminishing as tender and auction schemes provide an attractive alternative. Benjamin Attia, global solar markets analyst at GTM Research, said the 49 national markets where tendering or auction schemes are in place were in May 2017, up from 32 in the second half of 2016. During the first five months of the year, 29 reverse auction or tender procurement programmes were launched or planned.

Citing the spate of record-breaking bid auctions such as a Chinese-Japanese consortium’s bid to build a solar panel farm in Abu Dhabi for US$0.0242 per kw/h and the fact that most Asian countries now have a tendering or auction schemes in place, Attia reckoned these trends “demonstrate that unsubsidised grid parity has arrived or is fast approaching in many of these markets, questioning the long-term sustainability of FiT.” Whilst solar and other renewable energy auctions have encountered implementation hurdles in the past, they have recently become a popular policy tool mainly because of their potential to achieve deployment in a costefficient and regulated manner, the International Renewable Energy Agency (IRENA) said in a report.

x renewables’ reality

“Auction schemes have benefited from the rapidly decreasing costs of renewable energy technologies, the increased number of project developers, their international exposure and know-how, and the considerable policy-design experience acquired over the last decade. When well-designed, the price competition inherent to the auction scheme increases cost efficiency and allows price discovery of renewable energy-based electricity, avoiding potential windfall profits and underpayments,” stated IRENA. Project bankability As tender and auction schemes become more popular in Asia, project bankability is also bound to become more important. Rohan Singh, managing partner at Finergreen, said several of the top criteria for lenders when evaluating a solar PV project’s bankability include having a stable and predictable cash flow, satisfactory coverage ratios, guarantees, and mitigation strategies for risks. Analysts believed that designing auctions and raising project bankability will enable Asia to pursue its strong renewable ambitions. Singh added that the region is looking to install 900GW by 2030 — a target that will require roughly US$147b. Given the large amount of investments required to fuel Asia’s renewable goals, he said the region faces two key challenges: access to financing solutions remains difficult to small or mid-size projects, and a lack of local experience in renewable deals structuring. In the case of Pakistan and Malaysia, Islamic financing has risen as an attractive option to bankroll their renewable and solar PV projects.

Pakistan’s US$955m hydropower plant has been financed through the issuance of Islamic bonds, an infrastructure deal that was notably one of the largest in the country’s history. The Malaysian government likewise encourages Sharia’compliant financing.

xxx singapore

Mike xxx Thomas, The Lantau Group

Asian Power interviewed talked to YTLMike Power Thomas, International partner Berhad’s at The Lantau CEO Tan Group, Sri Francis about the Yeoh realities about versus the company’s largest expectations on Asia’s projects. move to renewables.

Is there Tell us about a disconnect the company’s in Asia’smost realities stellar and power projects expectations onto renewables date and where shift? they are located.

With respect to renewables there’s not a whole At present, lot of realitywe at the are moment. constructing There theisfirst still oil a big shale mine mouthwith disconnect power what plant the with policies a capacity could beofand 2x 235 MW what they(net) currently utilising are,the there circulating are risksfluidised that bedbeing are boilersdifficult (CFB) technology to managein with thethe Hashemite various Kingdom of Jordan. stakeholders.

On theThe other project hand,isone located of the at Attaratspots bright um Guhdran is that this which is oneis of 110 thekm places southeast of Amman. where growth At isa more total investment dramatic and of US$2.1b, the need to it is the largest private decarbonise is alsosector thorough. project So in yesJordan we have to date a and challenge real is expectedright to meet now 15% matching of Jordan’s the regulatory annual electricity demand. requirements with the Attarat commercial Power Company requirements (APCO) which without necessarily is thepenalising project company the industry has entered players into amade who 30-year thePower systemPurchase work and Agreement reliable. (PPA) with the Jordanian national utility and single buyer, NEPCO for the sale of the entire electric In Singapore, when do you think will it start capacity and net electrical output. The other needing a new power plant? project wehas are developed currently developing is in Cirebon Singapore an economic Regency, West Java, Indonesia.

The 2 x for 660aMW opportunity--it’s electricity requirement (net) coal-fired utilise state-ofcountry whose power GDP is plant fallingwill down and it doesn’t the-art ultra-supercritical project have a significant amounttechnology. of capacityThe at the company, ItPThas Tanjung Jati Power Company has moment. aspirations to introduce more executedsolar. a Power rooftop And Purchase when weAgreement look at the (PPA) possible with PTgrowth PLN (Persero) in December 2015. We future rates, there is a very narrow are alwaysThat’s on the lookout for newhave opportunities growth. a fact that people not fully in generation bidding for existing recognised yetwhether in termsitofis commercial risk and assets implications. or investing in new projects. policy

China’s massive solar power ambition dimmed by transmission challenges When China turned the switch on what is now the world’s largest floating solar farm, it was a clear message that the country is serious in turning away from coal. The new solar farm in Huainan sits atop a lake formed by a collapsed coal mine, as if taunting the coal-fired power industry. China apparently is getting aggressive on hitting its solar target of 110GW by 2020. Recently it completed a 200MW solar facility on top of a fish farm. This solar aqua-culture project spans 299.5 hectares and is expected to provide the energy needs of 100,000 homes.

Unless China shifts from large scale power plants towards distributed solar, the massive amounts of solar energy produced may not reach the homes of its intended consumers. Only 16.6% of solar energy is produced at, or near, the point where it is used. The rest is produced by big solar arrays that pose problems the transmission to Eastern China, along the coast, where electricity is most needed. “The advantage of distributed energy, and the Chinese government knows this, to its big 10 ASIAN POWER

power plant counterpart is that it is installed on buildings and in neighbourhoods, providing greater efficiency from being close to the consumption site and not losing electricity over long transmission distances. They are also smaller scale and, in theory, easier to finance,” says Winston K.H. Chow, head of China Country Program at Global Green Growth Institute.

Use of DGPV Because of this, China has mandated that 60% of their solar target be distributed generation solar photovoltaic (DGPV). Mun Ho, senior economist from Dale Jorgenson Associates, agrees that green growth should be incorporated into policy.

“Although current efforts have been substantial, they have not matched the scale and complexity of the pollution problem generated by rapid economic growth in China. They have started down this path of reform, but the scale of the prob­lems requires greater efforts and some fresh thinking and experimentation,” he says.

Winston K. H. Chow Josh Carmody

Mun Ho

Regional solar installation vs power generation Most preferred energy soucrce

Source: NEAClimate CEC CSCI RESEARCH Source: The Institute

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Country report: Taiwan

A series of unfortunate events for Taiwan

Taiwan’s nuke-free vow under fire as energy supply issues arise amidst massive blackout An operational error caused the country’s biggest natural gas power plant to stop powering households and businesses, and as Taiwan struggles to fix the damage, one question arose: Was Taiwan right in ditching nuclear?

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hen a power outage crippled more than 6 million households in Taiwan on August last year amidst the sweltering summer heat, it brought to fore the dilemma the aspiring renewable energy leader now finds itself in: can it ditch nuclear power and reduce coal dependence whilst managing to avert future blackouts? The Ministry of Economic Affairs attributed the massive power outage to an operational error

Taiwan might need to reevaluate its bold plan to nix nuclear, shift away from coal, and focus on renewables and natural gas.

Net power generation (by company & fuel)

Source: Bureau of Energy

12 ASIAN POWER

in Tatan Power Plant, the country’s biggest natural gas power plant located in Taoyuan’s Guanyin District. Six generators stopped working and affected the supply of 4 million kilowatts of electricity.

Households and businesses throughout the island had to bear through three hours of power rationing, disrupting business operations and household activities.

In the aftermath of the power outage, the economy minister resigned and analysts sounded off warnings that Taiwan might need to re-evaluate its bold plan to nix nuclear, shift away from coal, and focus on renewables and natural gas.

“The current objective of phasing out nuclear power whilst at the same time drastically reducing coal consumption in Taiwan’s energy mix by 2025 looks overly ambitious,” Dr Guo Yu, principal Asia analyst at Maplecroft, a UK-based risk and strategic consulting firm said. “The Taiwanese government, led by Prime Minister Lin Chuan, aims to drastically alter the country’s energy mix. It looks to raise the share of renewable energy to 20% by 2025 from 5% currently, hike up the share of natural gas to 50% from 32%, lower the share of coal to 30% from 45%,

and remove the 15% share of nuclear power.

Verisk Maplecroft’s Energy Security Index already categorises Taiwan as “high risk” with a score of 3.42/10.00 due to its “extreme” dependence on seaborne natural gas imports. The country will only become more vulnerable to supply disruptions due to geopolitical tensions and price volatilities if it follows through on its plan to source half of its electricity production through natural gas. “A greater reliance on energy imports would further undermine the country’s energy security,” Yu said. The analyst also warned that growth of power generation from renewable sources “is unlikely to fill the nuclear-coal shortfall.” This is contrary to the government’s more sanguine targets to quadruple renewable energy’s share in the energy mix, which it expects to reach by attracting $59b in private capital to help finance new renewable projects.

Kerry-Anne Shanks, head of Asia Gas and LNG at Wood Mackenzie, reckoned the August 15 mass blackout highlights some key issues in Taiwan’s power sector such as construction delays. “The cause of the blackout was human error which

Country report: Taiwan Gross power-generation (by company)

Dr Guo Yu

Mei-Chih Hu

Source: Bureau of Energy

stopped gas supplies into the Tatan power plant. Subsequently, the plant with a total of 4,384MW of gas-fired capacity went offline completely. Power cut-offs of this scale are difficult to back-up, but Taiwan’s power market has also been stretched,” she said.

Blame it on the old guys Shanks blamed ageing thermal capacity and capacity addition delays as major culprits in the summer power outage.

Taipower, for example, has been constructing 2,293MW of new capacity to help cope with the summer peak but these projects have been pushed back and were not available for peak demand in July and August.

“The track record of adding new generation capacity on the schedule is poor. There have been frequent delays of new capacity construction,” she said.

Shanks also points out that Taiwan has a capacity problem, not a fuel supply one, which means the plan to import more LNG or coal in the near term may not be the ideal option. To highlight the issue, she explained that during peak months of June and July, reserve margins, which measure the amount of power a grid has over and above its demand, went as low as 2.5%, far below the 10 to 15% comfort levels. These falling reserve margins increase the risk of outages.

“In 2016, Taiwan had 80 days where reserve margins fell below 6%, which is unhealthy,” said Shanks. In the face of this fuel supply problem, Taiwan’s planned nuclear phase out has become harder to defend, according to analysts.

To make Taiwan nuclear-free by 2025, the government has stopped operations for three of the country’s six nuclear power plants before they have reached the end of their service lifetime.

Yu noted that the government must cover the cost of mothballing and decommissioning the nuclear power plants, whilst Shanks said replacing nuclear generation with gas and renewable

capacity leads to more expensive electricity — a combination that leaves the nuclearfree plan open to increasing opposition.

“The government will also be wary of backlashes from the public and business communities over potential electricity price hikes during the transformation,” Shanks said. “Pressures to increase tariffs will likely mount over the coming years as hefty up-front investment is needed in the development of gas-fired plants and renewable power generation.”

Can renewables save it?

Taiwan’s energy transition is driven by four core values, according to Dr Chuan-Neng Lin, director general of Bureau of Energy. First, strengthening energy security and providing access to stable, affordable, and low-risk electricity.

Second, building a green economy, driven by technology innovation and a growth driver to local employment. Third, increasing environmental sustainability by moving towards clean energy and providing a healthier environment for Taiwan’s population. And fourth, raising social equity through the ensuing “market revolution” in Taiwanese energy sector and lower electricity prices.

Illustrating the progress the government has made in the energy transition, Lin ran down some of the key accomplishments in renewable energy development. In the area of offshore wind power development, 36 potential sites for investment have been identified and there are preparations to begin offshore wind power zonal development after finishing environment impact assessment evaluations and permit clearances.

In solar power development, he said the two-year solar photovoltaic (PV) project to add 1.52GW of capacity is going along well through a deployment strategy that prioritises roof type and specific ground type installations over large-scale ground type. The roof type installations will be popping up in agricultural facilities (450MW), residential and business

Kerry-Anne Shanks

buildings (240MW), factories (160MW), and government buildings (60MW).

Meanwhile, the ground type installations will be spread out in the lands of salt industry players (230MW), severe subsided areas (200MW), water bodies like ponds and dams, and brown field areas (30MW). In a review late last year, Mei-Chih Hu, professor at the Institute of Technology Management, National Tsing Hua University said “Taiwan could be an important player in renewable energy.”

“For years it has been missing opportunities due to the focus on nuclear power and fossil fuels (which probably owed more to Taiwan’s geopolitical situation than to strictly energy-related concerns). But now the way is open to build the country’s generating capacity utilising renewables whose impact can be increased by investment in smart grids.

This would allow Taiwan to complement its manufacturing capacities in producing solar PV cells as well as (potentially) wind turbines and other renewable energy devices,” said Hu. She explained that Taiwan is positioned well to pursue its renewable energy dream. For one, it has well-tested industrial development models involving the promotion of new industries through market stimulation and domestic technology leverage. “Now is the time to apply these skills to the urgent needs of cleaning up its energy system and creating new pillar industries for the future.”

Yu reckoned there is strong support for this energy future the Taiwanese government envisions, but this could wear thin if the current administration fails to work out the flaws that the recent blackout has laid bare. “Whilst politically embarrassing for the Tsai administration, the fallout from the blackout does not pose an immediate threat to government stability,” said Yu. “However, the incident raises questions of the government’s wider energy policy, which will prove an important issue that may determine the political fortunes of President Tsai and the ruling Democratic Progressive Party as we approach.”

Installed capacity

Source: Bureau of Energy ASIAN POWER 13

Demand dilemma in the planning issue is also a hurdle we have to overcome. The goal of being able to revise the electricity master development plan to adjust the 35 GW program to the current lowering electricity demand heightens concerns over robustness of the planning aspect.

Heru Dewanto President Director Cirebon Power

CEO INTERVIEW

Indonesia needs more gas-fired power projects Cirebon Power’s president director Heru Dewanto believes that Indonesia may be struggling to meet the its capacity growth ambitions and it needs to fire up more gas-fired projects as these make up 25% of the programme.

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5 years of being in the energy industry has shaped Heru Dewanto into the leader and expert that he is today. He has managed a wide range of infrastructure projects including power plants, toll roads, waste and water management, and housing among others. Currently, Dewanto is the president director of Cirebon Power, an energy utility operating 1x660MW clean coal power plant using supercritical technology, and 1x1000MW ultra supercritical power plant in Cirebon West Java.

renewables sources.

National capabilities is something we also treat as a challenge.

Massive infrastructure program must also become a momentum to significantly improve and increase national capabilities, such as Indonesian IPP, EPC, manufacturer, and engineers.

Lastly, there is market structure. Current market structure may need to be revisited to consider clear separation between regulator and operator and vertical unbundling.

How long have you been in the industry and how long have you been with Cirebon Power?

I’ve spent 25 years of my career in the infrastructure industry in the area of toll roads, railways, multi-storey housing, sanitation and water supply, terminal, and lastly energy infrastructure.

I entered the infrastructure sector in 2008 by joining Indika Energy, a coal based energy company, third largest Indonesian coal producer. Through Indika Energy I was involved in the construction and commissioning of the first unit of Cirebon Power 660MW until achieving commercial operation in 2012.

Since then, I’ve led the development of the second unit of Cirebon Power 1000MW until today.

Is Indonesia on track to meeting the 35GW ambition?

I would say the Indonesian government is well on the way in terms of regulation and de-regulation. Although the permitting process to create one power plant is still long, the new one-stop service should help reduce this. The Ministry of Energy and Mineral Resources Regulation No. 3 of 2015 is expected to simplify and shorten the procurement process. Issuance of Presidential Regulation No. 4 of 2016 may potentially solve the spatial planning problem and clear the way for many infrastructure projects, including 35-GW projects, to start an environmental impact assessment. Acquiring land is still difficult for power plant projects, especially obtaining land for the transmission line, which may travel up to 50 km to the connection point. The government still treats power plants like private players, while it handles land acquisition for toll roads. Moreover, transmission lines are considered special facilities, so after private companies construct them and clear the land, they have to hand them over to the stateowned power company Perusahaan Listrik Negara (PLN).

However, there is a big gap between making regulations and implementing them. Of the first 10 GW of power plants to sign the power purchase agreement (PPA) none have yet reached financial close. If the first coal-fired power plant starts construction in 2016 it will not start commercial operations until the end of 2020.

Considering that coal’s share in the energy mix in the Energy Supply Business Plan is 50%, we can easily see that 50% of the 35-GW projects will not meet the 2019 target. Meanwhile, gasfired power projects – 25% of the programme – are still lacking gas sources and infrastructure. Another 25%, to come from renewables, faces more implementation challenges than coal and gas. So we need to strengthen the strategies to make this noble programme a success. This is an absolute necessity for the country that we all have to support.

What were the previous positions you held that led you to being the current CEO? How did these experiences help you be the leader that you are?

I lead the power division of Indika Energy as CEO of Indika Power and directed a number of power project developments. I started a director position in Cirebon Power first unit up to a vice president director position. I’ve led Cirebon Power second unit from the very beginning as the president director until today. My previous experiences with various infrastructure projects at various levels in several corporations ranging from multinational to national corporations in Cirebon Power until now have certainly helped me climb the corporate ladder.

What are your top three priorities for Cirebon Power’s generation side as the CEO? To complete the project at the highest quality, ahead of time, within the budget and with zero accident; To operate the power generating asset at the highest reliability and the lowest emission reliability and at lowest emission; To cause the project to impact and empower the life of the people of Cirebon and Indonesia at large What are the biggest industry challenges Cirebon Power is currently facing and how do you plan to overcome these?

Regulatory changes are definitely amongst the challenges off the top of my head. For the last 5 years, there have been close to 125 regulatory changes. Although the intention of issuing or amending new regulation is meant to improve the investment condition, it is important to understand that regulatory changes have given significant and drastic impact to a regulated industry like electricity.

Demand dilemma in the planning issue is also a hurdle we have to overcome. The goal of being able to revise the electricity master development plan to adjust the 35 GW program to the current lowering electricity demand heightens concerns over robustness of the planning aspect.

Balancing development with sustainability is also an issue at the moment. There is a need to have a firm determination in workable balancing between the need for development which may rely more on coal as the main source and for sustainability which rely on

What do you think is Indonesia’s biggest energy problem at the moment and how should this be addressed?

The primary energy supply in Indonesia is mainly based on fossil fuels like oil and gas. In 2015, 41% of Indonesian energy consumption was based on oil, 24% on natural gas and, 29% on coal. Renewable energy, particularly hydro and geothermal, has a share of 6%. Transportation sector is the biggest contributor to this. As such, government programmes program for mass transport and electric cars need to be supported.

The prolonged price subsidies and availability of oil resulted in low oil prices in Indonesia. Currently, the gasoline market has been opened for private players and gasoline price for transportation is fluctuating, adapting to changes in oil prices. Additionally, Indonesia has a hard time to produce 1 million barrels per month to meet the demand of 1.6 million barrels per month. Indonesia has once been member of OPEC and now is a net importer of oil.

On the other hand, Indonesia is still a net exporter of natural gas.

That is why the national utility PLN is switching power generation from expensive oil to gas and coal of which Indonesia has large reserves.

ASIAN POWER 17

Country report: KOREA

How should the big move to natural gas and renewables be facilitated?

South Korea drops nuke, cools off on coal Will the government be able to take on the resistance from companies that will be badly hurt?

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hen the new South Korean President Moon Jae-in stepped onto the stage during the closing of the country’s oldest nuclear power plant, he announced that no new nuclear plants will be built, making good on a campaign promise to take the nation down the path of a “nuclear-free future”.

However, there is a concern that this new energy policy, which also involves huge slashes in coal power production, could leave the economy limping.

The plan to drastically reduce nuclear and coal power in the energy mix over the coming years will likely receive ample public and industry support with the right incentives. The biggest concerns,

Some experts are fearing that halting new coal-fired and nuclear power plant construction may threaten energy supply and push up electricity prices.

Energy generation by source South Korea

Source: EIA

18 ASIAN POWER

according to analysts, will be if the government can effectively handle the resistance from firms with stakes in the plants that will be nixed, and if it can quickly grow renewables from its current small base.

The President’s pledges President Moon won the recent elections on a platform that pledged to lower South Korea’s dependence on nuclear and coal power, which he said posed risks to the safety and health of citizens. Support for nuclear plants, which provide around a third of the country’s energy, has waned in the past few years following the Fukushima disaster in Japan in 2011 and a corruption scandal in 2013 involving faked certificates on reactor parts. There has also been growing opposition towards coal plants due to rising air pollution levels.

It was amidst this dissatisfaction that Moon offered a pleasant vision of a future South Korea: one that is more liveable and safer as the nation strengthens its natural gas sector and develops its renewable power sources. The new president can likely count on strong public support for his new energy policy, but there is skepticism among insiders on whether he can pull off the full pivot as promised due to foreseen corporate resistance and

economic disruption.

“Some experts are fearing that halting new coal-fired and nuclear power plant construction may threaten energy supply and push up electricity prices,” said Enerdata. South Korea unveiled in June an energy policy that would, by 2030, cut coal-fired generation to nearly half or 21.8% of the energy mix from its current 40% and reduce nuclear to 21.6% from 30%. In contrast, the share of renewables, including hydropower, would rise fourfold to 20% from 5%. Enerdata said the plan to move away from coal and nuclear will be a U-turn for South Korea, but notes that the government could levy environmental taxes on both to facilitate the shift towards natural gas and renewable energy.

Legal implications?

The plan to phase out coal plants may not only induce economic sluggishness but also lead to a legal tiff. South Korean private-sector companies have already sunk more than $1b into building new coal plants and could file lawsuits in response should the government try to freeze the pipeline, said Michael Cooper from S&P Global Platts, citing an industry source.

“Designed to meet rising demand for electricity from South Korea’s expanding

Country report: KOREA South Korea’s natural gas consumption, 2000-2015

Michael Cooper

Source: US Energy Information Administration, international Energy Agency

economy, including its industrial giants such as Samsung and LG, the coalfired plants are being sponsored by state-owned utilities and some private companies,” he added.. According to S&P Global’s PIRA Energy Group, South Korea was targetting to build a total of 20.17GW of coal-fired electricity generators over the years starting 2017 to 2022.

The nation’s seventh electricity supply plan published in 2015 had specified that coal-fired power generation would grow from an installed capacity of 25.1GW in 2015 to 37GW in 2020, and then to 43.2GW by 2025. This would have merited a corresponding increased consumption of imported thermal coal to 120 million mt/year by 2020, from 80 million mt/year currently.

“But obviously, those numbers are in doubt, with the new president’s desire to limit coal-fired power generation for reasons related to curbing the problem of air pollution in South Korea,” said Cooper. “Coal consumption underlies the country’s transformation into an industrial heavyweight. The president may face some difficult dilemmas if he moves ahead with curbing South Korea’s future use of thermal coal, as the fuel is closely linked to the country’s economic prosperity,” he added..

Not a maverick move Cooper, citing insider sources familiar with the thermal coal market in South Korea, said it is unlikely that President Moon will be able to completely halt the expansion of coal-fired power generation in the country. Instead, he said that a more likely scenario seen by insiders would be that the government will only look at the new coal plants but not cancel them, in consideration of how the latter action will hurt the country’s economic competitiveness.

Analysts note that President Moon’s energy policy is not a maverick move but follows a trend sweeping across Asia:

a declining fascination with coal and a blossoming affair with renewables, the latter nurtured by advances in technology, from energy storage systems (ESS) to smart grids.

“Moon’s policies, whilst newsworthy, are in no way revolutionary,” said Yulanda Chung, energy finance consultant at the Institute of Energy Economics and Financial Analysis (IEEFA). “In fact, they are entirely consistent with the technology-driven energy market transformation that is taking place globally and in Asia in particular.”

IEEFA forecasts Japanese thermal electricity generation falling 2 to 3% annually over the next decade, whilst China’s coal consumption had already peaked in 2013. Taiwan, for its part, recently committed to focus investments in renewable energy and energy efficiency, targeting 20% renewables as part of its energy mix by 2025. India has also reiterated its commitment to a target of zero thermal coal imports by 2020.

“Governments all across Asia are seeking to rejigger their energy economies toward domestic renewable energy for the simple reason that it is increasingly cheaper than burning coal. The sooner policymakers and companies face up to the reality of an export coal market in structural decline, the more they will gain from a transition to renewable energy that is gathering pace,” said IEEFA. Korea’s Renewables Shift As part of its new energy policy, the South Korean government revealed it will be investing KRW 42t (US$36.6b) to develop renewable energy industries and build an array of new renewable power stations. There has also been a pickup in new renewable projects, including a recent 97MW offshore wind farm at Saemangeum costing an estimated US$365m that will supply power to 62,000 households.

South Korea may be determined to significantly increase its share of

Yulanda Cheung

Helena Tillborg

renewable power to increase energy security and reduce climate impact, but it faces several major challenges, including coming from a very low level starting point, said Helena Tillborg, analyst, head of office of science & innovation at the Swedish Agency for Growth Policy Analysis. “Besides technology and grid related aspects, there is the fact that South Korea is densely populated with limited areas to install wind power plants and solar power facilities. Furthermore, energy infrastructure development is also subject to protests from the affected inhabitants,” she said.

Incentives for solar Last year, the South Korean government unveiled incentives to encourage solar power plant operators to set up bulk energy storage systems (ESS) facilities, granting compliant solar power plant operators with additional points on assessment of their renewable energy certificates (RECs). With these incentives in place and higher renewables investment, the Ministry of Trade, Industry and Energy estimates the additional demand for ESS will reach a combined KRW440b (US$391.6m) over the next three years until 2020.

This will be in strong support to the country’s big switch to renewables.

Strengthening support for ESS, which would then grant businesses relatively lower-priced electricity from renewables, is one of the ways the government can encourage businesses to support the new energy policy, said Tillborg. Poor households will likewise find it easier to embrace the transition by receiving energy vouchers. “The step towards market-oriented pricing is necessary to enable efficient energy use and energy security, but might be painful and jeopardise industrial competitiveness at a first glance,” she said. “The challenge for the government and its agencies is to overcome the first strong resistance and promote the opportunities smarter energy use can bring to the new and growing industry of Korea,” added. Tillborg.

South Korea total primary energy consumption by fuel type 2015

Source: BP Statistical review of world energy 2016 ASIAN POWER 19

sector report: Solar

The sun is not setting on Southeast Asian solar

Southeast Asia’s solar industry thrives amidst dimming market expectations Just when everyone thought that the solar boom will start fizzling out due to markets nearing saturation, Southeast Asian countries show they are not yet done harnessing as much as they can from the sun.

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hen forecasters proclaimed slower solar photovoltaic (PV) installations worldwide this year as developed markets near saturation, it put investors under even more pressure to determine whether Southeast Asia would be the next fountain of solar growth. Analysts see the potential of this region of roughly 600 million people, especially as governments and developers have started to untangle the web of strict regulations, outdated technology, and poor infrastructure that has been constricting investment in Southeast Asian solar projects. But the sheer amount of work to be done puts the region a long way off from reaching a solar renaissance.

“As renewables markets mature, renewables investors are looking to new markets for their next source of growth. Solar PV generation has great potential and has been the most attractive renewable energy source amongst the Southeast Asian nations,” said Eric Ho, director at Renewable Energie Singapore. “Growth prospects are tremendous in Southeast Asia with a combination of fast-growing economies with resulting investment in manufacturing, transportation and energy infrastructure, rapid growth in electricity demand and good solar resource,” he furthered, noting that annual solar radiation levels in the region ranges from 1,460 to 1,900 kWh/m2 per year.

FiT to expand Feed-in tariff (FiT) schemes have been instrumental to solar PV growth in Southeast Asia. In Thailand, which is by far the largest producer of solar energy in the region due to strong government support, solar capacity has leaped in the past three years: from 1,299MW in 2014, and 2,021MW in 2015, to over 2,800MW 20 ASIAN POWER

Solar PV generation has great potential and has been the most attractive renewable energy source amongst the Southeast Asian nations.

in 2016, which is higher than those of all other Southeast Asian countries combined. Thailand is not looking to slow down its solar PV expansion anytime soon with a target to install 6,000MW by 2036. The country is also becoming a regional role model for Southeast Asian nations that are starting to scale up their programs.

“Because of Thailand’s experience with large solar farms and its promoting policies, it forms a hub for PV testing services and a source for information. Solar energy projects are offered the highest feed-in tariff (FiT) subsidies,” stated Ho. “In the past years, several FiT programs for smaller solar energy projects were created with very attractive rates. By giving the highest FiTs to the smallest producers, the government aimed to promote green energy communities and small-scale rooftop programs.”

Investors are also flocking to the Philippines, which until a few years ago had no solar industry until the country launched its FiT program. Installed solar capacity kicked off at 62MW in 2014, climbed to 108MW in 2015, then soared to 903MW in 2016 as 17 additional projects were awarded that year. This fast pace of expansion made the Philippines one of the the top 10 markets in the world in additions. “The FiT program drove solar PV development in the Philippines into high gear,” Ho noted.

“Solar PV is expected to reach 3 GW of utility solar by 2022.”

Dave Maslin, country manager for OWL Energy, reckoned the FiT process generated investor excitement when it was first unveiled but it was far from perfect. For one, the process had issues in transparency and guidance. After securing a service contract and Department of Energy (DOE) approval on its commerciality, the project developers were caught in a limbo:

sector report: Solar Thailand’s total installed capacity by source (in MW)

Malaysia’s total installed capacity by source (in MW)

Source: Solar Plaza

Source: Solar Plaza

It had no obligation to proceed but had the go-signal to begin construction.

“No one knows what’s going in this stage, because during this period you don’t have to tell anyone what is happening,” said Maslin, explaining that whilst listed corporations were bound to tell their shareholders, private firms can wait until the construction is 80% complete before inviting the DOE for inspection. Despite these imperfections, the government was emboldened by the positive turnout of the first FiT program. It raised the target to 500MW and created the second FiT program.

“Investors got really excited, but there are a few sticky points in this. There was no clarification on what happens in excess of this new target or whether the target referred to DC power that is constructed in terms of panels or AC that the grid purchases,” said Maslin.

Singapore: No room for growth?

Southeast Asia also benefits from the presence of a solar technology leader in the form of Singapore. With regional cooperation on the rise and Singapore’s significant allocations to renewables research and development — it allocated more than US$700m to strengthen innovation capacity in clean energy, smart grids and energy storage — technology and knowledge exchange should start to flourish. But on its home turf, Singapore is facing an uphill battle on how to foster solar PV growth amidst land area limitations. The nation has a small land area of 719 sq km, of which only 45 sq km is usable for solar PV installations, according to Gautam Jindal, research associate at Energy Studies Institute, National University of Singapore. The country is exploring offshore installations such as multimillion-dollar floating solar projects on its reservoirs. Late last year it debuted the world’s largest floating solar PV cell testbed at Tengeh Reservoir in Tuas.

“As a highly dense city state with limited space for solar deployment, Singapore is placing emphasis on building up urban solar capabilities which include floating solar as a key focus area.

Singapore is also positioned as a living lab for companies to test and commercialise innovative urban solutions,” noted Goh Chee Kiong, executive director for cleantech at EDB, which led the initiative together with the national water agency PUB, was quoted as saying during the project unveiling.

One of these urban solutions is energy storage, which can help incorporate increasing solar output into the grid by addressing its solar energy’s inherent limitation as an intermittent generation source. “It is something that’s been said in the open, and it is going to happen,” said Jindal, noting remarks by the trade and industry minister that Singapore can now incorporate 1GW of solar PV, up from 350MW in 2014. When asked what other moves Singapore can undertake to strengthen its local solar industry, Jindal suggested reducing dispatch intervals to match global best practice to encourage the use of energy

Eric Ho

Gautam Jindal

Dave Maslin

David Harrison

Van Hai Nguyen

market for low frequency variability rather than having to use regulation or reserves. “Most markets in the US and Australia, for example, go for 5-minute intervals for dispatch rather than having an hourly or half-an-hourly dispatch,” he said. Jindal also recommended pushing for shorter gate closures that can improve forecast accuracy, adopting a more dynamic process to determine regulation, and incentivisation of and improved policy consultation for energy storage systems.

Malaysia: Casting a wider net In Malaysia, net metering scheme has emerged as a supportive growth complement, and eventual replacement, to FiT. The country introduced the net metering scheme (NEM) last year with 500MW targeted in 2020 in Peninsular Malaysia and Sabah.

It then introduced guidelines earlier this year that outlined who would be eligible to apply (registered consumers of distribution licensees that are on good bill payment standing) and what PV systems will be accepted (rooftop and garage panels, car park systems and other similar buildings are accepted, but groundmounted systems will be assessed individually).

Overall though, the NEM is seen as a smart move to fuel the Malaysian solar market’s ambitious aspirations. The country wants to roughly quadruple the current 338MW solar PV capacity installed to 1,356MW by 2020, which it hopes is enough to make it the second largest producer in the world.

Malaysia is embarking on NEM “as an attractive method to drive solar energy growth” says Datuk Seri Dr Zaini Ujang, secretary general of Malaysia’s Ministry of Energy, Green Technology and Water. “With the NEM in place, consumers can generate their own electricity with one meter installed and sell excess power to the national utilities,” said Ho, adding that Malaysia’s overarching policy framework for clean energy development has provided “a strong foundation for significant deployment of renewable energy and energy efficiency.”

Vietnam and Indonesia: Growing pains The importance of a sound policy framework, especially in wooing investors and fostering sustainable growth, is coming to the fore in Vietnam and Indonesia. Both countries are experiencing growing pains when it comes to finding the right approach to spurring solar PV to hit their ambitious long-term targets and ensuring cheaper and wider access to electricity for all. In June this year, Vietnam saw the implementation of a critical policy for solar power project development and private investment in the form of Decision No. 11.

The FiT for grid-connected projects at the delivery point was approved at 2,086 VND/kWh or 9.35 US¢/kWh, exclusive of VAT, for solar cells and modules that reach more than 16% and 15% efficiency, respectively. Ho explained that tariff is adjustable for foreign exchange fluctuations in accordance to the standard power purchase agreement, which has a 20- year term with ASIAN POWER 21

sector report: solar REGULATORY ROUNDUP

Indonesia’s total installed capacity by source (in MW)

What Vietnam’s Decision 11 means for solar companies Decision 11 is the first Vietnamese legal instrument that specifically governs the development of the country’s solar power sector. It sets out the general legal framework for developing solar power projects and provides for a feed-in- tariff under which the single offtaker (i.e. Electricity of Vietnam (EVN), a 100% state-owned entity) will purchase solar power from generating companies. The tariff is set at US$0.0935 per kWH. Prior to Decision 11, there was no regulatory guidance on how to invest in, and operate, a solar power project in Vietnam, according to David Harrison, partner at Mayer Brown JSM. “Prior to its issuance, a few projects were developed on an ad hoc basis. Overall, Decision 11 is a positive development as it sets out a roadmap with expectations and understandings on the tariff, investment incentives, and the regulatory process that will guide sponsors, financiers, and government agencies,” he said. The introduction of a general framework for solar power projects is a welcome and–in the minds of some investors–an overdue legal development.

Source: Solar Plaza

EVN as the sole buyer. For investors, this represents incentives in investment capital mobilisation, import duty exemption and tax reduction.

The Decision also provides for a net-metering scheme for certain rooftop projects, with a scheme that award credits to owners that generate more electricity that they consume, and allowing those credits to be carried over to the next payment cycle or even sold to EVN at the FiT rate at the end of the PPA. Like its Southeast Asian neighbors, Vietnam is looking to build its solar PV industry at a fast and furious pace. It installed approximately 4.5MW of solar PV capacity at end of 2014, 7MW at end of 2015, and a target of 850MW by 2020.

“Decision 11 left many details unaddressed and given the un-bankability of standard PPA for wind and biomass, industry pundits are not expecting much from the solar standard PPA,” said Ho. “Policy is not that big of a difficulty as the strategic challenge to muster the political will to put policy into practice whilst effectively adapting it to evolving situations. Large scale solar investments are highly FiT sensitive. The challenge is to find an appropriate FiT level which still attract investments whilst maintaining grid stability in a rapidly declining solar price environment,” he added. Meanwhile, Indonesia approved a new renewable energy law that changes the remuneration tariffs for renewable energy projects, and brings hope on higher solar PV adoption, which until has been “slow and uneventful,” said Ho. “Stringent regulations, tariff uncertainty and more lucrative alternatives have left the solar sector grossly underdeveloped,” he added. “Currently only about 27MW solar capacity was installed, with a majority from state-sponsored power plants, the remaining capacity are small projects and home rooftop systems.”

The recent tariff cuts have cast doubts on the prospects of future large-scale solar projects, Ho noted.The new law provides that the FiT cap is introduced based on the average electricity supply costs of the region where the renewable power project is to be developed. Where a region has supply costs above the national average, the FiT will be capped at 85%, but if these supply costs fall lower than the national average, then the renewable energy project will receive a FiT equal to the regional cost.

Taking into consideration the national average supply cost in 2016 was 13,307 IDR/kWh or 7.4 US¢/kWh, Ho says the new decree implies a significant reduction in solar PV technology tariff from the previous FiT. “The new law puts solar power in direct competition with coal-fired power plants being the predominant form of power generation in Indonesia, making it extremely challenging for solar.” For Kirana D. Sastrawijaya, partner at Baker McKenzie, the new law seems geared towards supporting more smaller-scale solar PV projects and spreading those in more far-flung areas of the archipelagic nation.

22 ASIAN POWER

Vietnam is looking to build its solar PV industry at a fast and furious pace.

Is there a loophole in the guidance?

Decision 11 still has certain limitations, said Van Hai Nguyen, associate at Mayer Brown JSM, some of which pertain to the Vietnamese power market in general, and others that result from gaps in the legal framework governing this Industry. “For example, Decision 11 does not provide for a direct PPA which would have allowed large corporate customers such as industrial parks or manufacturing facilities to purchase solar power directly from independent power producing sellers (IPPs). This structure was once considered in the context of wind power, but all power sales must flow through EVN,” Nguyen explained. Two significant and inter-related hurdles for solar power in Vietnam are lack of clarity about the ability of investors to benefit from a government guarantee of EVN’s obligations as the sole offtaker, and the quality of the draft template PPA. Decision 11 requires that the purchase of all grid-connected power must be based on a standard PPA template.

Harrison said that the draft PPA template circulated in June resembles that of Vietnamese IPP wind power projects, as opposed to the more international standard, seller-friendly PPAs that are generally used on larger BOT projects after thorough negotiations.

“Whilst local onshore banks may be comfortable with this form of PPA, it will likely raise significant concerns on bankability with offshore financiers as well as international sponsors. Below are some key concerns regarding the draft standard form PPA: Aligning the Standard Form PPA with International Market Practice. The PPA requires changes to the commercial operation date to be announced six to 12 months in advance of the scheduled date,” he added.

Nguyen raised however, that this approach may not be workable in practice as delays are often unforeseeable. It is common practice for scheduled commercial operation dates to be extended after the plant’s construction has already been delayed if triggered by factors beyond the seller’s control.

The PPA does not adequately address lender step-in rights or provide commitments on the part of EVN or other governmental agencies to enter into direct agreements. The PPA does not include a market standard exclusion of consequential losses that exempts each party from liability to the other for lost profits, revenues and other consequential losses. The PPA does not provide for offshore dispute settlement such as submission to the jurisdiction of an international arbitral forum.

“There is no “take or pay” obligation and the PPA relieves EVN from its payment obligations even where it is unable to take power due to a breakdown of the transmission or distribution grid.

Transmission and distribution risk would generally be assumed by the purchaser. Where the purchaser cannot take power due to a breakdown of the transmission or distribution grid, minimum take-or- pay obligations should remain in place as long as the plant exists,” Nguyen further commented.

ASIAN POWER UTILITY FORUM: MANILA

The Philippines looks to improve energy efficiency without compromising energy output

Can the use of energy storage be maximised in the Philippine renewable industry?

The right commercial and regulatory mechanisms must be implemented to boost both adoption and investor confidence..

T

he energy storage market in the Philippines is still in nascent stage and regulators have a big role to play to boost its adoption. This was amongst the highlights of the first leg of the 2018 Asian Power Utility Forum held at Makati Shangri-La Manila on 27 February.

According to Sarah Fairhurst, partner at The Lantau Group, most local energy storage projects are delayed due to pending approval from regulators or only in the proposal stage.

Globally, Fairhurst noted “the storage revolution is being driven by regulators who understand that they actually have to keep up with technological advances.

That’s not happening here yet in the Philippines.”

In her presentation, Fairhurst said that some energy firms see battery storage as the solution to improve the economics of a larger scale roof-top solar solution particularly if they have non-day time load. Basically, battery storage provides a backup energy resource for intermittent power sources such as the solar power, which saw a dip on output during cloudy conditions.

Similarly, Jeff Miller, partner at OWL, believes battery energy storage system 24 ASIAN POWER

Over the next 10 years, I think there’s going to be tremendous opportunities where solar plus battery storage could replace expensive coal with low cost.

(BESS) is the best solution for hybrid power plants using solar power to maintain the energy source throughout the day. He thus noted the use of BESS makes solar output more stable, provides additional power at night time, and helps in controlling frequency on the microgrid.

“Over the next 10 years, I think there’s going to be tremendous opportunities where solar plus battery storage could replace expensive coal with low cost,” said Bill Ruccius, executive vice chairman/ treasurer of the Independent Power Producers Forum.

The state of the solar market Leandro Leviste, founder and CEO of Solar Philippines, expects the solar energy to penetrate 20% of Filipino households over the next five years. Leviste said they are now “under supply agreement with Meralco at a price as low as PHP2.99 (US$0.058) per kilowatt hour with a new CSP now being conducted by Meralco at PHP 2.98 (US$0.057) showing indeed the attractiveness of these rates and we have no doubt that the price will continue to drop.”

However, amongst the top concerns looming around solar energy is whether

it is viable to be used with battery storage for peaking and midnight utilisation in the next two to three years. “If you’re going to be integrating storage for a day time firming application you wouldn’t even need 1MWH of storage for 1MW of PV, you would only need perhaps half an hour per megawatt of PV,” he explained.

Moreover, some companies leveraged solar energy to power their corporate social responsibility (CSR) projects on provinces with inadequate source of electricity. The Power Sector Assets and Liabilities Management (PSALM) Corporation, for instance, used solar panels as an energy source to power the machines they have to use on their livelihood programme (i.e. tailoring) in the municipality of Estancia in Iloilo province.

Helena Tolentino, vice president for CSR of PSALM, said they spent PHP485,000 (US$9,331) for the solar panels and hopes to extend it to the government’s socialised housing units.

Finding the balance Jaime T. Azurin, president of the Global Business Power Corporation said, “[The] energy sector has an impact on both economy and the environment. We do

ASIAN POWER UTILITY FORUM: MANILA The utility of the future will be a fully digital system

Energy players clamour for a health regulatory environment

recognise that energy is the lifeblood of all economic growth. Without power, our factories, offices, and railways will simply not run but generating power to support these activities would cost pressure to the environment” The United Nations Development Programme (UNDP) in 2015 launched 17 Sustainable Development Goals, which zero in on climate change and sustainable consumption amongst others. As such, Azurin elaborated four strategies to help energy firms embark on sustainable approach to development in line with the UNDP’s goals.

Firstly, find the right balance in the energy mix. In the Philippines, renewables take 30% of the current energy mix said Attorney Jose Layug Jr., chairman of the National Renewable Energy Board. However, the government is looking to raise it to 35% by 2030 as stated in the National Renewable Energy Programme.

Secondly, promote a healthy regulatory environment. Azurin mentioned several regulations in the pipeline that could help balance out environment and economic development. “Under the RPS, distribution utilities must source a portion of their power supply from eligible RE producers whilst under the Green Energy Option end-users must have the option to choose renewable energy as their energy source,” he said.

Thirdly, improve energy efficiency by finding ways to consume less fuel without compromising the energy output. “This is done through careful and routine maintenance of our facilities to ensure that they are running in optimal condition. This can also be achieved through innovation of various energy technologies measures in our day-to-day operations,” Azurin explained. Lastly, continuously leverage technologies that could help improve the energy sector.

Bracing for new technologies Third platform technologies – which include social media, mobile, cloud

computing, and big data – are already a thing of past, thus energy firms must brace for the new wave of technologies that could disrupt the market.

Gavin Barfield, chief technology advisor at Meralco, identified blockchain, Internet of Things, edge computing, virtual and augmented reality, bots, and artificial intelligence as emerging technologies that energy firms must keep an eye on. “The utility of the future will be a fully digital system,” he said.

In Meralco, for instance, over 90,000 smart metres were deployed. The data from smart meters combined with the data from beyond-the-metre devices such as smart plugs & smart appliances further enable the electric company to better personalise their services to consumers.

On top of that, the smart meter data help Meralco determine fraud at an early stage based on patterns and unusual behaviours in the meters. Barfield revealed 200,000 more smart meters will be deployed this year, after getting approval from the regulator, and Meralco aims to roll out 3.3m smart meters by 2024.

Furthermore, Celine Paton, manager at The Lantau Group, underscored the importance of having more flexible systems in order to adapt to the everchanging technology landscape in the energy sector.

Revisit current rules Anabele Natividad, vice president for project development at Bronzeoak Philippines said in a separate interview that while there has been a policy shift towards renewable energy in the last few years, there is a need to revisit existing rules. Doing so will enable the country to tap into the investor interest, which has been growing over the years, and create a bigger market for renewable energy.

While advocates for renewable energy wait for stronger policy backing that will bring down costs, the reality on the ground is that regions like Visayas and Mindanao cannot rely

solely on renewable energy. Reliability is paramount for these fast-growing regions and has made coal-fired power plants a necessity to avoid costly power disruptions.

Reliability is paramount “Although there has been progress in renewable energy projects, the region needs to supplement these developments with base load capacity; otherwise, if the wind or solar power supply is down, reliability will be compromised,” said Francisco C. Sebastian of Metro Pacific Investments Corporation in an interview with The Oxford Business Group. “For a developing country like the Philippines, the cost of renewable energy and indigenous power sources is high, and additional base load is required to ensure power security and to deliver a stable supply.”

With its expanding economy and climbing energy demand, the Visayas region has been attracting more energy developers and many projects are currently under construction or expansion. In the past, the main challenge for power generators, especially those that want to put up coal-fired power plants, was changing the mindset of local communities and governments that oppose such plants. But a more open dialogue and a larger allocation for environmental protection seems to have softened their adversarial stance.

Power shortages “There have been significant efforts put into information campaigns where the public has been educated about coal and global warming,” said Sebastian, adding that for coal-fired plants, an estimated 30% of the project cost is spent on clearing up carbon emissions and raising environmental standards ahead of existing regulations, particularly in terms of soil and water testing.

In Visayas, government officials have been providing support to facilitate private-public collaboration in power generation to increase reliability, while also tapping into technology to minimise pollution. “Reliability is crucial in power generation, especially in the islands throughout the Visayas region. Although transmission lines exist, one would need power plants on the islands themselves in order to ensure technical reliability and energy security. Cities deprived of power cannot be reliable places of business,” said Sebastian.

Meanwhile, in the Mindanao region which sits south of Visayas, power outages are nothing new. But a slew of independent power producers (IPP) are attempting to address the power supply gap with a slew of coal-fired power plants.

ASIAN POWER 25

Analysis: INDIAN DISTRIBUTION COMPANIES FY19, even under a blue-sky scenario where in solar addition increases to 18GW annually while a new coal-based capacity of 8GW is added. However, coal-based thermal power plants plants operating at sub 60% PLFs would continue to face challenges in meeting their debt service obligations.

Lower power purchase costs helped boost the firms

Are Indian distribution firms’ cash flow finally improving?

There are visible improvements in the financial health of Indian distribution companies and lower dependence on imported coal, but analysts remain worried.

I

ndia Ratings and Research (Ind-Ra) has maintained a stable-to-negative outlook on the power sector for FY19, despite visible improvements in the financial health of select distribution companies (discoms) and lower dependence of generating companies on imported coal. The improvement in the financial health of certain discoms is attributed to lower transmission and distribution (T&D) losses, tariff hikes and cost rationalisation.

The stable-to-negative outlook continues to reflect Ind-Ra’s expectation of a continued low plant load factor (PLF) of 60%-62% over FY19 for coal-based thermal power plants, because of large capacity additions in the past five years.

However, the central government-owned utilities are positioned favourably than private developers, given their ability to manage counterparty, fuel and off-take risks.

Effective management Ind-Ra has maintained a Stable Outlook on most of its rated power sector entities for FY19, as the agency expects the entities would continue to manage fuel and counterparty risks due to a favourable tariff mechanism, a comfortable liquidity position and support from central and state governments.

Ind-Ra opines that there is a visible improvement in the financial health of certain discoms, driven by : (i) a lower power purchase cost through 26 ASIAN POWER

Coal PLFs are at the bottom and are unlikely to drop below 60%.

power purchase agreements (PPA) reassignments, (ii) lower usage of imported coal, (iii) fuel linkage rationalisation, (iv) lowering of T&D losses, (v) tariff hikes allowed over FY12FY16, (vi) collection of past arrears, and (vii) decommissioning of old, inefficient plants.

The agency expects discoms’ cash flows to improve further in FY19, driven by i) marginal tariff hikes, ii) increasing proportion of single-part tariff power purchases, (iii) installation of prepaid/smart meters to improve collection efficiency and lower billing errors, iv) softer merchant tariff rates, (v) continued usage of higher domestic coal than imported coal, and (vi) stable or marginally higher PLFs, leading to lower per unit cost as fixed cost gets absorbed over larger volumes.

The PLFs of coal-based thermal power plants are unlikely to fall below 60% in Domestic thermal capacity addiction

Source: CEA, Ind-RA

Capital structure issues The agency expects a change in ownership and recalibration of capital structure in such assets, which could entail a lower enterprise value, leading to lowering the value available to both equity and debt holders. Post this, coal-based thermal power plants are likely to have a new developer which would have a lower fixed cost to service and the plant could meet its debt service obligation even at lower PLFs. India’s solar power capacity would expand on account of declining tariffs, lower variability in solar radiation patterns, and hence better PLFs predictability than wind, and government’s thrust on solar power.

Although the recent imposition of provisional anti-dumping duty on the import of solar panels could result in higher capital costs and thus higher tariffs, solar power would still be competitive than coal. Solar capacity addition could face challenges in (i) debt tie-ups, (ii) equity raise, (iii) land acquisition, (iv) evacuation infrastructure, and (v) power scheduling.

Coal PLFs are at the bottom and are unlikely to drop below 60%, even in a scenario where annual solar capacity addition is about 18GW and the demand grows by 5.75%. Ind-Ra expects thermal capacity to increase by 8GW annually, given the small pipeline of fresh capacity additions. PLFs of coal-based power plants are a function of: (i) demand growth and (ii) capacity addition.

Capacity addition on the thermal side has slowed down considerably over FY179MFY18, because of the issues such as the absence of long-term PPAs and fuel supply agreements. By India Ratings & Research

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EVENT COVERAGE: WORLD SMART ENERGY WEEK 2018

There were concerns on how solar panel development may adversely affect natural and historical landscapes.

Japan urges investors to diversify renewable assets Cash-rich investors have all been lured by the bright outlook in the solar industry, but the government reveals it is currenty being plagued with headwinds.

I

n 2012, Japan introduced a feed-in tariff system in an effort to spur large-scale renewable energy growth as people started distrusting the nation’s nuclear energy dependence. The new FiT system obliged utilities to buy solar, wind, geothermal, mini-hydro, and biomassgenerated electricity at a fixed rate and for a set number of years. Since then, renewable energy’s share in the power mix has risen to 15% compared to just 10% prior to the Fukushima meltdown in 2011. According to Takuya Yamazaki, director, New and Renewable Energy Division Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry, “The 5% addition is relatively an impressive growth in renewables compared to other countries.

By 2030, the government aims to hit 20%30% renewables share in the energy mix.”

These numbers look rosy on the surface, but figures for solar signal that the industry’s future isn’t too bright. In a report in September 2017, Japan Renewable Energy Institute revealed that there were rising concerns on how solar panel development may adversely affect natural and historical landscapes. It also pointed out disaster management issues, noting that flood damage and severe typhoons are constantly damaging or destroying solar panels, particularly those of mega-solar farms.

Additionally, despite solar PV cells popping the champagne on an installed capacity of 33.5GW early last year, the government warns both investors and consumers to not depend on solar as a 28 ASIAN POWER

Despite power generation costs falling down, we have to remember that the feed-in tariff is not here forever.

single renewable source. “Despite power generation costs falling down, we have to remember that the feed-in tariff is not here forever. Investment in other sources is highly encouraged,” Yamazaki said in a keynote session at the World Smart Energy Week 2018.

Wind as a good bet It was just recently when US developer Pattern Energy announced its foray into the Japanese energy market by acquiring 167MW of wind project owned by one of its investment funds and Japanese subsidiary. This deal includes ownership of the 122MW Tsugaru wind farm bought in a separate agreement for an estimated $194m. Mitsuru Sakaki, president of Green Power Investment Corporation, said that the Tsugaru Wind project is under

development on a farm land in Aomori Prefecture near the coast of the Sea of Japan. The wind facility will extend over 12km. “Once complete, the facility will sell 100% of its electrical output under a feed-in-tariff (FiT) secured power purchase agreement (PPA) to the utility Tohoku Electric,” he revealed.

Green Power Investments is a Japanese renewable developer in which Pattern Energy owns a majority stake. Low costs of wind power coupled with declining capital expenditures involved in installing wind mills and turbines are driving the government to encourage investments in the wind power sector. Further, lowered generation and equipment costs coupled with favorable government policies also remain key drivers. Increased competition has lowered prices, enabling Japan to diversify its power generation sources and adhere to global carbon emission targets.

Japan’s wind power generating facilities that are currently in operation hit 3,378MW as of March 2017, whilst those under development are at around 10.5GW. However despite these impressive figures, the wind power industry is grappling with grid constraints according to Yoh Yasuda, project professor, Research Programme of Renewable Energy Economics, Graduate School of Economics, Kyoto University.

The country’s cross-regional grid operation has long been in the pipeline but rules and regulations have yet to be reformed comprehensively. For Hokkaido, an area often targeted for wind projects due strong winds in the area, new wind facilities should have battery to avoid variations of output to the grid. “The government has worked out certain alternative ideas to cope with the situation. The wind industry is anxiously waiting for constructive and feasible proposals by electric utilties based on discussions,” Yasuda said.

The World Smart Energy Week was held in Tokyo Big Sight in Tokyo, Japan from February 28 to March 2. It gathered 1,590 energy companies and drew 70,000 visitors from around the world.

Exhibitors and delegates flocked to Tokyo, Japan for WSEW 2018

OPINION

Gautam Jindal A guide to Singapore’s recently announced Carbon Tax

L

astyear,whilstpresentingSingapore’sbudget for 2017, the Singapore Finance Minister announced that Singapore will impose a tax on greenhouse gas emissions starting from 2019.

However, whilst presenting the 2018 budget last month, the Finance Minister surprised many by setting the carbon tax at S$ 5 per tonne of carbon emissions for the first five year period of 2019 to 2023. By 2030, Singapore will revise the tax level to a value between S$ 10 – 15, based on the status of international climate change negotiations and contribution of other emission reduction tools.

The initial low tax rate which surprised many, also brought out the usual set of questions – Is the tax value stringent enough to drive action? Will it hurt the competiveness of local industry? How will the tax impact household expenses?

The price level, though it may not be treated favourably by either the environmental community or the industry; strives to find the right balance between the concerns of both these

A

bout 130 years ago, the electricity network was created and it changed the world.

The network has evolved to become very sophisticated in the recent decades and it is one of key foundations to human progress. In the coming decade, the electricity network as we know it is likely to be transformed radically. This article will argue that the current model of the centralised utility will not exist in a decade.

In the current landscape, simplistically, there are two models: (i) vertically integrated utility that generates, operates the grid and distributes power to customers, and (ii) deregulated model in which the distribution utility buys power from the generation and transmission network, and sells to customers.

In both models there is one distributor of electricity or at most a handful of distributors. The contention of this article is that this monopolistic distribution model will be replaced with tradingbased distribution model in which large numbers of customers sell to and buy from each other. It will resemble an eBay like model for transacting electricity.

Drivers of Change The electricity market will transition to a decentralised model because of these drivers: Falling prices of renewables, at both levels, wholesale and retail. Utility-scale wind and solar plants sell electricity in several markets at prices that are already at or below cost of utility-scale fossil-fuel based generation. The cost of electricity produced 30 ASIAN POWER

stakeholders. In a public consultation session held earlier this year in January, a number of large emitters including power generation companies argued for adopting performance benchmarks, stating that emissions above the benchmark levels ought to be taxed heavily to appropriately incentivise inefficient companies to invest in emissions reduction initiatives. Companies that perform better than the benchmark should pay less or no tax at all.

Knowing limitations However, the Singapore government noted that defining such benchmarks can be a complicated task with a number of limitations. Firstly, the determination of the benchmark levels cannot be done transparently as businesses may have confidentiality concerns regarding their performance data. Secondly, for certain sectors such as specialty chemicals, internationally recognised performance metrics may not even

be available. In such a case, each business may have its own interpretation of how to define a performance benchmark, which no doubt would suit their respective interests. Consequently, the government chose to impose a smaller but uniformly applicable tax level with no rebates, arguing that this would be simpler and more efficient to implement.

With regards to the impact of the tax on consumers, the Singapore government has calculated that the tax will result in a 1% increase in average residential electricity & gas prices. To offset this increase in retail cost, the government will increase the amount of rebates offered to low income households. However, there is no doubt that the government’s intention is to have the carbon tax passed through from power generation companies to the consumers, so that they can be nudged to invest in energy efficient appliances and practices. Towards this end, one can expect that the default electricity tariffs published by Singapore’s energy market regulator every quarter will eventually include a carbon tax component to accurately “reflect the actual cost of electricity”.

Since this regulated tariff serves as a benchmark for various plans offered by retailers, the retailers would undoubtedly have the opportunity to charge an additional carbon tax component from their consumers that is equal to the carbon tax component of the regulated tariff. However, the extent to which the generators and retailers would be willing to pass-through remains to be seen.

Pramod Jain

What is the future of power sector, renewables, energy storage, and IoT? from roof-top solar PV is tending below the cost of purchasing electricity from the distribution utility.

This trend is likely to continue in the next ten years.

Falling prices of energy storage. Energy storage has seen sharp drop in prices and the promise is that it will accelerate in the next ten years.

Furthermore, in the next ten years it is likely that the cost of renewable + storage will be below the wholesale cost of electricity for utility-scale plants, and below the cost of purchasing electricity from the utility for smaller plants. This trend will make utility-scale renewable generation dispatchable, leading to large (greater than 50%) penetration of renewables + storage without impacting reliability of the grid.

Large penetration of IoT and smart appliances that will make demand much more responsive to generation, eliminate duck curve and allow consumers to optimise usage.

Lets examine the implications of these drivers for change in the next ten years for the retail customers.

When the cost of electricity generated by roof-top solar PV + storage system is below the price of electricity, then the current business model of the distribution utility will collapse.

Losing the lustre This is because the utility will lose the most lucrative consumers, higher income consumers who have the assets to become producers. These prosumers would install enough roof-top PV and storage to be self-sufficient, and either disconnect from the grid or rely on the grid only for emergency power. In such a scenario, the current model of the distribution utility may not be financially viable.

So the question is how does a utility stay viable?

Lets examine three business models of the utility of the future that are in vogue to manage the falling costs of roof-top PV+storage for prosumers. The first business model is to charge a flat monthly fee for electricity, akin to the model adopted by cellular voice and data providers.

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OPINION

ERIC HO

Solar power development in Southeast Asia

A

s renewables markets mature, renewables investors are looking to new markets for their next source of growth. Solar photovoltaic (PV) generation has great potential and has been the most attractive renewable energy source amongst the Southeast Asian nations.

Annual solar radiation levels in the region ranges from 1,460 to 1,900 kWh/m2/per year. Growth prospects are tremendous in Southeast Asia with a combination of fast-growing economies with resulting investment in manufacturing, transportation and energy infrastructure, rapid growth in electricity demand and good solar resource.

Singapore’s appeal In 2015, installed capacity of solar power in Singapore was almost 60MWp as it doubled at the end of 2016 to 126MWp. Singapore plans to install 350MWp by 2020, increasing the generation threshold to 600MWac based on the largest

M

ichael Graetzel of Switzerland, is announced as the winner of the 2017 Global Energy Prize for his “transcendent merits in the development of low cost and efficient solar cells”. The Global Energy Prize is the world’s leading prize for advanced energy research awarded annually and he will be honored as this year’s laureate with a nice gold medal (and the US$693,000 is a nice touch too).

The announcement had all the trappings of typical of a big media release as well. However, like many prestigious prizes though, is it only a look down a nostalgic past – or for the solar industry, is this a sign of going back… to the future?

Memory Lane Especially in the case of this year’s award, in the solar field, Michael Graetzel is renowned as the creator of the “Graetzel cells” which revolutionized solar energy research… 20 years ago. The fall of the Berlin Wall, dial-up internet, solar PV at $9 million per solar panel MW. Looking back, it’s rather unbelievable how much development there has been in the solar energy field, much less the transformation of renewable energy overall. Global solar capacity went from less than 200MW to over 300GW today with even more expected with commercialization of production and implementation now becoming quite commonplace. Solar is no longer a tech curiosity, it is an industrial sector.

While the field of solar energy has since boomed, it has however, moved on as well, with his direction 32 ASIAN POWER

available reserve unit in the system. The city-state has made significant investments in research and innovation around energy sustainability. In 2016, Singapore announced more than US$ 700 million of new public-sector R&D funding for the next five years for Urban Solutions and Sustainability.

This funding is expected to strengthen Singapore’s innovation capacity in areas such as clean energy, smart grids and energy storage.

The potential for urban solar plants and floating solar on its precious reservoirs are presently being tested. A project to accommodate more intermittent sources in energy storage for the efficient consumption of energy is also being studied in a microgrid system. Singapore expects to fully liberalize its electricity market in 2018 allowing all consumers including households to choose their electricity suppliers.

Instead of direct subsidies to spur solar PV installation, Singapore offers competitive, marketdriven tariffs, together with measured policies to

promote a competitive solar market. Consumers with embedded intermittent generation sources are allowed to receive ‘net-settlement’ of the energy component i.e. consumers are either charged for their net consumption or paid the energy price for their net generation within each trading period.

The average energy prices in June 2017 was about US$ 61per MWh. Net metering scheme in Malaysia Malaysia’s overarching policy framework for clean energy development has provided a strong foundation for significant deployment of renewable energy and energy efficiency. It adopted a renewable energy feed-in tariff (FiT) mechanism under the country’s 2011 Renewable Energy Act and revised the solar FiT with a degression approach in 2014 in response to falling panel price and changing market conditions. The net metering scheme (NEM) was introduced in 2016 with 500MW NEM targeted in 2020 in Peninsular Malaysia and Sabah. With the NEM in place, consumers can generate their own electricity with one meter installed and sell excess power to the national utilities. The country presently has 338MW solar PV capacity installed and targets 1,356MW by 2020.

Under its FiT scheme, the installed capacity increased modestly by about 30% each year in 2015 and 2016, to 335MW at the end of 2016. Basic FiT in 2017 for installation below 72 kW is 52.18 sen/ kWh (12.17 US¢/kWh) with a potential bonus FiT of up to 34.55 sen/kWh (8.06 US¢/kWh).

WILLIAM BYUN

Back to the future? – A shakeup in industrial solar in the Graetzel cells having been since somewhat sidetracked.

Graetzel cells are dye-sensitized thin-film technologies which conceptually separate the functionality of silicon in providing the electrons and also the electric field to separate the charges and create a current, by having the dye-sensitized part provide the electrons and the semiconductor provide the transport. Practically, while such cells have had some issues due to sensitivity and stability, these are not necessarily deal-stoppers – more simply, the scaled industrial production went along the now “traditional” silicon route.

The main production industry, especially in China, has moved on along traditional silicon solar cells development and efficiency gains in their refinement. Current trends even point to conversion efficiencies approaching the respectable high teens and sufficient to engender massive production and implementation scale up to take place. China in particular, has gone down such path as the practical means to drive industry

scale and it may be a sign of sector maturity that we think of silicon solar as being a respectably traditional industrial sector now.

Remembrance of things past?

Meanwhile, research and work has quietly continued along the Graetzel cell lines and efficiencies, stability and production sensitivities have also been quietly addressed and improved. In particular, the fertile nature of the Graetzel cell research field has led to a very recent surge in perovskite material based solar cells (PSCs) that have revolutionized the whole field of photovoltaics, with practical efficiencies reaching over 22% efficiency in 2016 from a start of 4% in 2009. Also, perovskite based Graetzel cells also open up a range of consumer convenience due to their flexibility and range of colors for instance in building structures, even transparent cells for use in window glasses. Like Henry Ford’s Model T, traditional silicon solar cells only came in black too – with peroskite, clear, rainbow, tutti-frutti, whatever colors and shapes may be opening up.