Asian Power (April - June 2022)

Issue No. 104

ISSUE 104 | DISPLAY TO 30 JUNE 2022 | www.asian-power.com | A Charlton Media Group publication

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CLEAN POWER

Asian Power

HOW RUNNING THE JAWA-7 COAL PLANT HELPS IN INDONESIA’S CLEAN ENERGY TRANSITION

SOUTH KOREA’S RENEWABLE ENERGY GROWTH IS LAGGING AUSTRALIA’S COAL PLANTS ARE RAPIDLY DYING OUT INDIA IS RUNNING A LOSING RACE TOWARDS ITS ROOFTOP SOLAR TARGET HOW PHASE-OUTS WILL IMPACT ASIA’S NUCLEAR ENERGY GROWTH

FROM THE EDITOR

PUBLISHER & EDITOR-IN-CHIEF PRINT PRODUCTION EDITOR COMMERCIAL EDITOR COPY EDITOR PRODUCTION TEAM

GRAPHIC ARTIST

ADVERTISING CONTACT

Tim Charlton Jeline Acabo Janine Ballesteros Tessa Distor Vann Villegas Charmaine Tadalan

Reiniela Hernandez

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ADVERTISING EDITORIAL

India is looking to agrivoltaics as a key renewables sector.

Experts point out to geography as a major factor as to why the country is best to adopt agrivoltaics. South Korea’s renewable energy sector faces slow growth due to lack of space, high costs, and its latest presidential election. Australia’s coal plants are dying out rapidly to make way for low-cost renewables.

Simon Engracial

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ADMINISTRATION

The Asia-Pacific region is ramping up the adoption of renewable energy to meet net-zero targets amidst the recent Ukraine-Russia conflict that could potentially throw a wrench in global climate goals.

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We’ve sat down with Zhao Zhigang, President Director of PT Shenhua Guohua Pembangkitan Jawa Bali to talk about their new coal power plant project, Jawa-7, and how they contribute to Indonesia’s net-zero goals. Read the exclusive interview on page 18. We’ve also chatted with analyst Karan Satwani of Rystad Energy discussing the impact of nuclear reactor phase-outs on Asia’s nuclear capacity growth. See the full interview on page 28.

Asian Power is proud to honour the esteemed companies with influential roles that led to the transformation of Asia’s oil and gas industry in the inaugural Asian Oil & Gas Awards.

See the list of winners on page 30.

Read on and enjoy!

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ASIAN POWER 1

CONTENTS

20

18

22

CEO INTERVIEW HOW RUNNING JAWA-7 HELPS IN CLEAN ENERGY TRANSITION

GENERATION REPORT GEOTHERMAL POWER NEEDS POLICY BOOST TO STAY ON THE NET-ZERO TRACK

COUNTRY REPORT RENEWABLE ENERGY GROWTH IS LAGGING IN SOUTH KOREA

COUNTRY REPORT

FIRSTS 06 Energy-related emissions reach all-time high 07 The macroeconomic, financial risks of dependence on imported LNG 08 Thailand to build up its green economy

24 Australian coal plants are rapidly dying out

INTERVIEW 28 How phase-outs will impact Asia’s nuclear energy

EVENT COVERAGE

VOX POP 10 How natural gas fares as transition fuel in the shift to renewable

30 Asian Power honours the winners of the first-ever Asian Oil & Gas Awards

OPINION

energy sources

32 Financing the future of green hydrogen

REPORT 12 Three reasons why agrivoltaics could be key renewables sector in India

26 India may be running a losing race towards its rooftop solar target

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

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News from asian-power.com Daily news from Asia MOST READ

POWER UTILITY

Asian coal prices surge as UkraineRussia conflict drive demand Coal prices in Asia spike amidst the continuing conflict between Ukraine and Russia as global consumers switch from Russian supplies, Rystad Energy reported.

Coal prices have surged by 81% from 1 March, which was largely due to constraints in Russia and traders rushing to reduce their exposure to Russian coal.

POWER UTILITY

What makes Indonesia a ‘gamechanger’ in SEA’s sustainability?

With its size and natural resources, Indonesia could potentially become a “game-changer” in Southeast Asia’s drive towards sustainability. In its Perspectives on the Green Economy 2021 report, Bain & Co., along with Microsoft and Temasek, said Indonesia has the potential to become a geothermal powerhouse.

4 ASIAN POWER

POWER UTILITY

Bangladesh to continue relying on gas power: report The power mix of Bangladesh will continue to be dominated by gas even as it set a 30% renewable energy target by 2030, Fitch Solutions reported.

According to Fitch, the Bangladeshi government will likely prioritise energy security amidst rising power consumption.

POWER UTILITY

Where does biomass energy stand in Asia’s power mix?

Biomass edges out sources of renewable energy such as wind and solar. It also proved to be viable in some parts of Asia, yet reports show that it may not grow as rapidly as solar energy has in recent years.

According to The Stimson Center, biomass is already a viable source of energy in Asia.

POWER UTILITY

Asia’s coal reliance to remain despite clean energy transition Coal will remain dominant in Asia as the region continues to be highly reliant on coal in the next few years, despite “ambitious” clean energy targets, the HSBC reported. In the first instalment of Asia’s energy transition report, HSBC projected that the total consumption of coal in Asia will peak in 2025.

ENVIRONMENT

India faces solar waste crisis as recycling is not economic India has crossed 100GW of installed renewable energy capacity and is on its way to increase that to 450GW by 2030. Whilst this is great news for helping the country reduce its fossil fuel consumption, it is creating a huge amount of plant waste in a country that is not set up to recycle.

FIRST PHILIPPINES MAY BECOME ‘REGIONAL LEADER’ IN WIND POWER PHILIPPINES

Dr Bikal Kumar Pokharel, Wood Mackenzie

T

he Philippines has the potential to be a regional leader in wind energy in Asia but barriers remain in expanding the country’s wind energy capacity, according to the Global Wind Energy Council (GWEC).

In the Capturing Green Recovery Opportunities from Wind Power in Developing Economies report, GWEC said the Philippines has an “appropriate permitting and auctioning infrastructure in place and was on track a decade ago to rely primarily on renewable energy.”

However, it identified policy commitment as one of the reasons that hindered the progress in wind energy adoption.

Whilst the government is pushing for renewables, nuclear and liquified natural gas projects have been promoted as alternatives to coal. It added that it is difficult for renewable energy projects to win contracts as auctions are “technology-neutral and biased towards baseload technologies.”

“In addition, the Department of Energy (DoE) currently takes a passive approach to wind energy expansion, refraining from any significant steps to improve the wind energy pipeline and not actively promoting renewables as a necessary energy source,” it said.

GWEC said the current permitting system for renewable energy is “lengthy, complex, and bureaucratic” as permits were needed from 15 different national and local government agencies.

The Philippines’ bidding process also contained excessive conditions which put off prospective developers, it said.

It added that the availability of grid connections and bottlenecks in the transmission network also poses a challenge and delays projects, reducing investor confidence.

Road to green recovery To accelerate the installation of wind energy and green recovery, GWEC said the Philippine government must commit to supporting renewables as the preferred energy source in the country and must remain stable despite changes in administration.

This could be done through setting higher capacity targets for renewables in the Philippines Energy Plan and by updating feasibility studies and measurement campaigns to explore the potential of wind energy using the latest technology.

The country should also consider holding technology-specific auctions or pots within auction for the wind industry, GWEC said, adding that having more transparency on the design and implementation of the Green Energy Auction “will clarify the prioritisation of renewable energy.”

The online Energy Virtual One-Stop Shop for permitting and bidding should also be expanded, the report said.

6 ASIAN POWER

China’s CO2 emissions rose above 11.9 billion tonnes, accounting for 33% of the global total

Energy-related emissions reach all-time high

G

ASIA PACIFIC

lobal carbon dioxide (CO2) emissions related to the energy sector rose by 6%, reaching the highest-ever level of emissions of 36.3 billion tonnes as markets relied on coal power amidst economic rebound from the pandemic, according to the International Energy Agency (IEA).

In a statement, the IEA said the over two billion tonnes increase in global CO2 emissions was the largest in absolute terms, offsetting the decline due to the pandemic. It added that the recovery in energy demand was exacerbated by adverse weather and energy market conditions which led to the increase in coal use.

The IEA said that coal accounted for over 40% of the overall growth in the CO2 emissions, reaching an all-time high of 15.3 billion tonnes, whilst emissions from natural gas saw a rebound as well to 7.5 billion tonnes, exceeding the 2019 levels.

Emissions from oil, meanwhile, were at 10.7 billion tonnes, remaining significantly below pre-pandemic levels because of the limited recovery in global transport activity, especially in the aviation sector.

“The use of coal for electricity generation in 2021 was intensified by record high natural gas prices. The costs of operating existing coal power plants across the United States and

Coal accounted for over 40% of the overall growth in the CO2 emissions, reaching an alltime high of 15.3 billion tonnes

many European power systems were considerably lower than those of gas power plants for the majority of 2021,” the IEA said.

“Gas-to-coal switching pushed up global CO2 emissions from electricity generation by well over 100 million tonnes, notably in the United States and Europe where competition between gas and coal power plants is tightest,” the IEA further added.

It noted that the increase in carbon dioxide emissions was largely driven by China which saw a 750 million tonnes increase between 2019 and 2021, adding that it was the only major economy that experienced economic recovery in the last two years.

The increase in emissions in China was due to the sharp rise in electricity demand that is largely reliant on coal power, according to the agency, noting that coal was used to meet more than half of the rise in electricity demand as the growth exceeded the increase in supply from low emissions resources.

China experienced the largest ever increase in demand at almost 700 terawatt-hour, it said.

“The emissions increases in those two years in China more than offset the aggregate decline in the rest of the world over the same period. In 2021, China’s CO2 emissions rose above 11.9 billion tonnes, accounting for 33% of the global total,” the IEA said.

India’s emissions also rebounded in 2021, rising above 2019 levels, as coalfired generation reached an all-time high, increasing 13% more than its 2020 level.

Meanwhile emissions in advanced economies rebounded “less sharply, signalling a more permanent trajectory of structural decline.”

The CO2 emissions of the United States in 2021 were 4% below their 2019 level, whilst the European Union were 2.4% lower, and Japan saw its emissions dip by 3.7% in 2020 and rebounded by less than 1% in 2021.

Despite this, the IEA said renewable energy sources and nuclear power had a higher share of global electricity generation than coal last year, with renewables-based generation reaching an all-time high and exceeding 8,000TWh, which is 500TWh beyond its 2020 level.

The use of coal for electricity generation in 2021 was intensified by record high natural gas prices

FIRST The increasing sustainable investing makes long-term LNG financing “unreliable” due to pressure for cross-border financiers to support decarbonisation goals

The US dollar-dominated LNG charges expose consumer prices to macroeconomic impacts, mostly felt through inflation

The macroeconomic, financial risks of dependence on imported LNG

E

ASIA PACIFIC

merging Asia is expected to be one of the largest growing markets for the demand for liquified natural gas (LNG), introduced to be the “bridge fuel” to reduce reliance on coal power and aid their clean energy transition, but there are risks on dependence on imported LNG, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

In its analysis of the LNG-to-power proposed projects pipeline in seven countries, IEEFA said that around 62% of the proposed LNG import terminal capacity and 66% of gas-fired power capacity may not push through because

of “fundamental project, country-level and financial market constraints.” It studied the projects in Vietnam, Thailand, the Philippines, Cambodia, Myanmar, Pakistan, and Bangladesh.

IEEFA identified the macroeconomic and financial risks of increasing dependence on imported LNG. It identified commodity price volatility as a risk which “significantly impacts delivered gas and power prices.”

Foreign exchange volatility is also a risk because the US dollar-dominated LNG charges “expose consumer prices to macroeconomic impacts, mostly felt through inflation.”

There is also a risk for higher power tariffs for end-users as expensive LNG imports can push final gas and power tariffs. There are also higher government subsidy burdens as government bodies in subsidised markets have to pay for fuel price fluctuation through additional national budget allocation.

The institution also noted that there is also limited project financing available for fossil gas assets.

It also cited the stranded asset risk for LNG-to-power investments because the volatility of global fuel prices and the penetration of low-cost renewables can limit the use of these assets.

“If gas producing countries in emerging Asia can see their way to revise currently unattractive production pricing formulas, renewed growth in domestic gas production can reduce or even eliminate the need for LNG import assets,” it said in a statement.

IEEFA also said that the imported fossil fuel lock-in may limit the entry of renewables. It also said there is declining economic competitiveness of domestic industries because higher fuel costs can raise industrial operating costs.

Fuel supply insecurity is also another risk as disruptions in the trade of LNG can result in gas shortages. The increasing sustainable investing also makes long-term LNG financing “unreliable” as there is pressure for cross-border financiers to support decarbonisation goals and targets and sustainable development.

Energy Finance Analyst Sam Reynolds said countries planning to grow their energy resources “must determine the most sustainable, reliable funding pathway for infrastructure growth,” citing the risks LNG-to-power projects may be subjected to and the highly volatile global LNG markets.

THE CHARTIST: ASIA TO BRING 103GW RE CAPACITY ADDITIONS IN 2022

A

sia is expected to account for 103 gigawatts (GW), or 46% of the total new capacity in renewable energy this year, Rystad Energy reported.

Of this, China will account for 64GW, or 62% and 29% of total capacity gains in Asia and globally, respectively.

This is despite China’s move to phase out national subsidies for onshore wind and solar photovoltaic in the beginning of the year, the research firm noted.

At present, the country is also the leading developer of offshore wind with over 14GW of additional capacity in 2021 and 11.5GW estimated in 2022.

It is also seen as the largest contributor to new renewable energy capacity in 2022 with 40% of additions to be expected.

Globally, the new utility scale renewables capacity is expected to break record in 2022 as

it is projected to reach an all-time high of 220GW as investments are estimated at over $300b for solar and wind power.

Of this, 195GW are already underway, whilst the remaining 12% are still in various stages of development. Solar will account for 46% of the total capacity already under construction, whilst wind accounts for 34%.

Rystad Energy noted that almost 50% of the capacity under construction are in Asia, particularly China and India.

“Despite record capacity additions in 2022, the outlook is not all positive. Projects expected to start construction this year will face challenging economics, delays and even cancellation risks,” Gero Farruggio, head of renewables research with Rystad Energy, said.

He noted the first sign of this challenge is seen in the projected fall in large-scale renewable capacity breaking ground in 2022 against 2021.

Global renewables capacity additions by year, region and type

Source: Rystad Energy ASIAN POWER 7

FIRST INDIA’S NON-HYDRO RENEWABLES TO REACH 229GW BY 2030 INDIA

Thailand to build up its green economy THAILAND

B

I

ndia will see robust growth in non-hydropower renewables on the back of government support for renewables, with total capacity estimated to reach 229 gigawatts (GW) by end2030, according to a report by Fitch Solutions.

Fitch said that India, which has a 102GW capacity of non-hydropower renewables, will be a “key renewables growth market” due to the robust growth of solar and wind power supported by the government and investor interest.

It noted that Solar Energy Corporation of India under the Ministry of New and Renewable Energy launched solar and wind power tenders which “have been met with increasing interest,” citing the 1.2GW power tender launched in May 2021, which is the second during the year.

Non-hydropower renewables generation is also expected to grow in the coming decade to 17% of the power mix in 2030 from 13%, it said.

India’s power consumption will rebound in 2022 beyond the 2019 levels with the increasing electricity access and recovering manufacturing sectors. Consumption is expected to increase to 2,171 terawatt-hours by 2030, Fitch Solutions said.

Rising energy demand India’s push to boost its manufacturing industry is also expected to lead to an increase in the electricity demand, it said, citing the “Make In India” initiative by the government in 2014.

Fitch Solutions also noted that the increased supply to electricity-intensive sectors such as automobiles, electronic systems and construction, as well as the government’s increasing commitment to promoting chip production in India will also boost electricity consumption.

It noted that India has been advancing grid expansion plans to ensure sufficient supply for the electricity demand so electricity generated from new solar and wind projects is fully utilised.

“In spite of this development, we still expect a key downside risk to renewables and consumption growth to be slow grid developments, which will hamper the utilisation of non-hydropower renewables electricity,” Fitch Solutions said.

Transmission and distribution (T&D) infrastructure across India “are ageing and in need of upgrades,” it said adding that of the 814 energy and utility projects worth US$378b, the majority are power plants and only 107 are transmission grid projects.

Fitch Solutions also noted that the Asian Development Bank partnered with the Indian government for the construction of new T&D infrastructure, the “Green Energy Corridor and Grid Strengthening Project” which will connect renewable power to the nation’s grid.

8 ASIAN POWER

anking on sustainable energy sources and improving waste management are amongst the several opportunities for Thailand to develop its green economy, as well as climate resilience, according to a report

by Bain & Company.

“Thailand’s location offers it regional connectivity, but also exposes it to high risks of climate events such as flooding and drought. It can build up its climate resilience, ramp up waste management, and export energy and agriculture,” it said in a report.

Bain identified opportunities that Thailand could focus on which include production of solar power, citing the completion of the hydro-floating solar hybrid project at Sirindhorn Dam, which shows domestic demand for solar power. The country has also become an “export hub for Chinese photovoltaic (PV) players due to proximity and its anti-dumping duties.

Thailand faces challenges from extreme heat, whilst its capital Bangkok is vulnerable to flooding due to climate change. This poses risk to water resilience and security, Bain said, noting that two of its largest sectors—agriculture and high-tech

The completion of the hydro-floating solar hybrid project at Sirindhorn Dam shows domestic demand for solar power (Photo by BangkokPost.com)

manufacturing—are water-insensitive.

“Advanced water management solutions that address both water resilience and security, such as predictive analytics and treatment plants, have huge latent potential,” the report said.

Thailand’s agricultural practices is another key opportunity to develop as its smart farming market is expected to reach $270 million by 2020. But Bain said that this could be fully “unleashed if technological, economic, and social problems of smallholder farmers will be addressed.

Electronic-waste management is another area of opportunity to develop the green economy of Thailand, a country with less than 400,000 tonnes of electronic-waste, which also contains hazardous metals such as lead, mercury and cadmium.

Bain said having smart sensors and artificial intelligence sorting systems would be a “huge boost” to Thailand’s energy sector, as the current system is too labour-intensive.

PLANT WATCH

IEA stands ready to act to ensure that global oil markets are adequately supplied

G8, Holim Tech’s Azure Power’s 1.5GW offshore plant 600MW solar project

​​ PNEC to develop S 10GW solar project

SOUTH KOREA

INDIA

PHILIPPINES

Singapore-based Subsea engineering solutions provider G8 Subsea and South Koreabased industrial business group Holim Tech have signed an agreement to develop a 1.5GW offshore wind power plant in South Korea.

G8 said in a statement that the plant can provide renewable energy source to 500,000 homes and businesses.

“The overall power plant will be paired with the next generation ultra-long-life Lithium-Ion energy storage system to provide stable and high-quality power management to the grid,” it said.

Azure Power has commissioned a 600MW solar power project by the Solar Energy Corporation of India (SECI) located in Bikaner, Rajastan.

The power generated from the Interstate Transmission System connected solar project will be supplied to the SECI at a tariff of US3.5 cents (INR 2.53) per kilowatt-hour for 25 years. The company also commissioned the project in phases and the last 100MW will be commissioned in January this year.

The project brings Azure Power’s operational solar assets in India to 2,510MW.

Solar Philippines Nueva Ecija Corporation (SPNEC) is planning to complete forming joint ventures and conduct possible stock offerings for its plan to develop 10GW of solar projects within 2022.

In a disclosure to the local bourse, SPNEC said the 10GW solar project development plans is nearly a 10-fold increase from the country’s grid-connected solar capacity at 1.021GW as of December 2020. SPNEC said that the scale of the solar projects “would only be made possible by partnering with the country’s leading power companies.

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VOX POP

How natural gas fares as transition fuel in the shift to renewable energy sources ASIA PACIFIC

Mike Thomas Managing Director The Lantau Group: I think we are at a point in time where it is possible to phase out fossil fuels, but the cost is still relatively high.

A coal plant is largely only good for burning coal. There are some exceptions, but they are few. A gas plant can burn gas but may be able to burn gas and hydrogen at some point. Inherently, gas plants (the physical plant) have built-in transitional or optionality features. We do not know precisely when such a transition will start or how fast it will ramp up, but the fact that the transition is possible reduces the risk of gas-fired capacity investment (the physical plant). We also know that as renewable energy and storage increase, there will be a relatively long period of need for mid-merit to peaking capacity that will almost certainly be gas-fired. With many gas-fired plants able to burn liquid fuel, there may also be a role for biofuels for super peaking or critical standby reserve that is very infrequently needed. These are possibilities, not probabilities. Even so, they make it less risky to build out gas-fired capacity today. Much less risky than building, say, a coal-fired plant that has limited alternatives other than coal, and makes little economic sense in a reduced operational mode, such as being a flexible peaking unit.

That makes gas-fired capacity very valuable as a transitional strategy, with natural gas and liquefied natural gas being the optimal transitional fuel. What we do not know is how many years and how much total volume of gas will be needed. We can reasonably expect renewable energy and battery storage to eat into the volume of gas required over time. We can expect the operating model for gas-fired capacity to develop a more distinct profile reflecting solar versus non-solar hours. We can expect the volume of gas required at any point in time to be subject to wider variations in percentage terms as the amount of ‘baseload’ gas or long-term take-or-pay gas falls off.

One way or another we are far from being past gas Phasing out gas will likely happen quite naturally—much as phasing out coal did not start with the governments but with investors ceasing to see robust investment cases for long-term cost recovery of coal-fired capacity given the energy transition and falling costs of renewable energy and storage. Rather than phasing out gas, we would hope that the value of reducing carbon emissions will shift focus towards gas hydrogen blends and, eventually, to a more complete transition. This is still looking like a process that will run out to 2035 and beyond.

10 ASIAN POWER

Bruce Robertson Energy Finance Analyst - Gas/LNG, Institute for Energy Economics and Financial Analysis: If we look first at the economic aspect, gas is very problematic for people in Asia. In the case of Pakistan, it had three long-term contracts with Qatar, ENI, and GUNVOR. The one with ENI and GUNVOR defaulted on to them and did not deliver cargoes as per the contract and just paid the fine in the contract. This has left Pakistan without fuel for its power stations and therefore without power. It is not a reliable fuel for the developing world because as soon as the price goes up, there is a chance that the people that are supplying you with the gas are going to default. Pakistan found this out the hard way.

The second point is, obviously, it is a political risk. We are seeing that play out in Europe. Germany gets 75% of its gas from Russia. For the rest of Europe, it’s around 44%. Obviously, that is a major issue when your neighbours are being invaded, like Ukraine. There’s that political risk always with gas. A lot of gas comes out of Qatar, which is a stable place. But that region is unstable. The political risk is always very great, so for economic and political reasons, gas is problematic to use as a transition fuel.

From a climate point of view, I have been saying for a very long time now that the industry has been radically understating its emissions. It is actually not being honest with the public about just how gas is emissionsintensive. And the International Energy Agency (IEA) basically backed me up because I have always said that the top-down numbers do not add up to the bottom-up numbers. In other words, if you add up, all the countries say their methane emissions are lower than the total and that the gap between what the industry says it emits in the energy industry, and what it actually emits is 70%. So it is not a small gap. It is a massive gap between what they actually emit and what they say they emit.

Emissions savings Gas is actually a high-emitting fuel. So if we’re talking about transitioning out of coal to save emissions, the emission savings are marginal at best, right? If we are talking from a climate point of view, it is not really a transition fuel because it is a high-emitting fuel. That’s what the IEA report is saying. If you zoom further out, they are saying that methane is now 30% of all greenhouse gasses. It used to be between 20% and 25%. Now, the IEA is saying it is 30%. So The proportion of global warming caused by methane is increasing.

Methane emissions grew at the fastest rate last year and the COVID recession year in 2020, the fastest rate since records began in 1982. Last year, we may well see that record broken, and we may see an even faster rate of growth as the world recovered from the recession. Those figures have not actually come out yet, but they will come out and it will show further strong growth in emissions from methane. The whole idea of the Paris Agreement in our climate commitments is that we actually produce fewer, not more, emissions. Methane emissions are growing very strongly, so we cannot afford to put more gas into the global energy system because that means we will get more growth in emissions. It is really that simple. The whole point about the Paris Agreement is we need to reduce emissions and increasing gasses is not the way to do that.

ASIAN POWER 11

REPORT: AGRIVOLTAICS

Three reasons why agrivoltaics could be key renewables sector in India Geography is a major factor why the country is best to adopt agrivoltaics, IEEFA says.

I

ndia has set its target locked on increasing the capacity of renewables to 500-gigawatts by 2050. And one sector that it could tap in its energy transition is agrivolatics or the installation of solar panels in lands used for agriculture, the the Institute for Energy Economics and Financial Analysis (IEEFA) claimed.

To back this up, IEEFA gave three reasons. The most obvious reason would be the country’s geography—the majority of India’s land area is used for farming.

Second reason is that this renewable sector will address the expected increase in India’s energy demand growth and, finally, provide socio-economic opportunities, especially for the rural sector.

However, there is a need for implementation of policies that would encourage adoption of agrivoltaics such as allowing non-farming commercial activities in most states, providing incentives, and funding programmes.

Globally, agrivoltaics installed capacity has grown from about 5 megawatts (MW) in 2012 to approximately 2.9GW today, led mostly by Germany, France, and Italy, whose COVID-19 pandemic recovery plan devotes over €1b to establishing 2GW of agrivoltaic projects, said IEEFA Contributor Charles Worringham, citing recent reports.

There has also been an increasing number of research and empirical experience, as seen in the 2021 Agrivoltaics Conference. It is just in its second year but

India is capable of producing solar power in higher quantities and more reliably than most European countries

Indian conditions may favour particular types of agrivoltaic technology

12 ASIAN POWER

it has already attracted 84 abstracts and delegates from 39 countries.

In India, a joint German-Indian report has listed 16 existing installations, and has also developed a publicly accessible online map of these projects. An additional 7MW solar power project for Gro Solar Energy in Maharashtra with low-height crops between modules has been announced, and others are in various stages of development.

Even at a very early stage and composed mostly of small-scale research and demonstration projects, agrivoltaics remain relevant to India for three reasons according to IEEFA: scale and scope of electricity system growth, geographic, and socioeconomic opportunities for the rural sector.

India is expected to see significant energy demand growth over the coming decades, along with the intensifying calls to accelerate clean energy transition.

The country will see a far more extensive power infrastructure growth of all types and strong incentives to build a geographically diverse and robust network, at speed. This will favour generation types that can be built quickly and at a range of scales, which could favour growth of agrivoltaics.

For the second reason, 60% of India’s land area is farmed, higher than the world average of 39%, according to World Bank data. Whilst areas such as Rajasthan offer especially high levels of generation potential, large tracts of the country are capable of producing solar power in higher

quantities and more reliably than almost any European country with the exception of Spain and Portugal.

This also presents socio-economic opportunities to the country’s rural sector.

Indian cities are seeing additional growth stress due to large-scale seasonal migration of millions of rural citizens who seek work in cities for that period. As India faces declining farm size, with over 70% of rural households owning less than one hectare of land based on government data and unreliable weather, variable access to market and price instability any innovations that could strengthen the rural economy, stabilise agricultural employment and grow non-agriculture work could contribute to relieving the pressures of rapid growth on India’s cities.

Tech development Indian conditions may favour particular types of agrivoltaic technology. A variation of special interest to India is the use of bifacial panels arrayed in widely spaced rows, which in addition to the different generation properties explained below, reduces dust accumulation, an important aspect of maintenance, especially in more arid regions.

Vertical bifacial panel arrays, a layout being tried by India’s National Institute of Solar Energy as well as by Germany’s Next2Sun GmbH and Märladalen University in Sweden, have the property of generating maximum power in a morning and an afternoon peak, complementing the typical solar profile of midday peaking.

The late afternoon generation this configuration allows could partly relieve evening peak demand to the extent that loads can be shifted earlier, as may be possible for some residential cooling, or by reducing the time between generation and discharge of batteries, enabling more flexible charging schedules.

A research group at Lahore University of Management Sciences has undertaken extensive modelling of these layouts for relevant latitudes, suggesting high levels of generation relative to conventional configurations. If time-of-day pricing is introduced for feed-in tariffs, as well as on the consumer side, vertical bifacial arrays could be a particularly attractive option for agrivoltaics developers in India.

Meanwhile, in India, several groups have already made a strong start in research to establish the circumstances in which agrivoltaics can be viable. There are

REPORT: AGRIVOLTAICS Layout of Vertical Bifacial Panels and Generation Pattern Compared to Coventional Arrays

States should have primary responsibility for agrivoltaics, with support from the Union government

Source: Author

multiple variables whose individual effects and interactions have to be considered, and these are best studied by specialised research organisations.

These include the effects of different panel layouts because maximising power generation favours densely arrayed panels, whilst maximising yield requires dispersing the panels to prevent excessive shading.

Many other factors, especially appropriateness for different crops with varying levels of shade tolerance, interactions with soil and water conditions, maintenance tasks and costs all influence viability. Establishing their effects goes beyond agricultural and technical research, because the financial outcomes require analysis of how optimising the various trade-offs affects farmers’ incomes under different ownership and tariff regimes.

Ensuring food security The roll-out of agrivoltaics in India cannot proceed without taking account of the need to protect food production and food producers. India accounted for 22% of the global burden of food insecurity, the

highest for any country, in 2017 to 2019, it said, citing a report. Median farm size is under one hectare, with high levels of self- consumption of produce, most farm labourers owning no land, and multiple structural and market access issues confronting the sector, according to a report in the Indian Forum.

Any policies governing agrivoltaics must take account of these realities, as well as the needs of the 300 million additional citizens (still anticipated in coming decades despite recent falls in the total fertility rate), and be designed in such a way that farming livelihoods, food quality, and output are all equally sustained.

Balancing energy production and food production is an optimisation exercise. A quantity that has emerged in considering the economics and viability of agrivoltaics projects, which can be estimated for a given piece of land at the proposal stage and potentially used in the approval process, is the Land Equivalent Ratio, which compares the energy output of an agrivoltaics project to that of a pure solar farm, and the crop yield of the agrivoltaics project to that of

What analysts say: Jun Yee Chew Head of Asia Renewables Research, Rystad Energy: India can study and adapt Japan’s model on agrivoltaics (APV). When Japan introduced favourable [feed-in-tariff] FIT in 2012, APV adoption increased. Since then, the Japanese government has worked actively to promote this area via a series of policies. Effective this April 2022, APV will be given preferential treatment in the FIT amendment. In the second amendment of the FIT Law, one of the requirements for 10 to 50 kilowatt PV assets (which APV would fall under) to fulfill self-consumption of at least 30%. However, APV is waived from this self-consumption requirement.

Theoretically, an APV-owner could sell 100% of its generated electricity from 1 April 2022.

Richard Edwards Senior Partner, Asia Clean Energy Partners: If implemented carefully, agrivoltaics have strong potential in India given the country’s wealth of solar resources, land, and the need to both augment power supply and income for Indian farmers. However, given the predominance of small holder farms in India, it will be critically important in any agrivoltaic development scheme to balance food production with power production. Farmers’ primary business is food production, and it will be important to ensure that the expansion of agrivoltaics does not contribute to further food insecurity in the country by diverting resources from agriculture to power production. If done right, agrivoltaics can complement and even enhance food production.

To ensure that agrivoltaics schemes are viable, local capacity building for product and service providers, along with farmer training in operations and maintenance of the agrivoltaics installed on their farms is essential. The high upfront costs for photovoltaic power systems could be prohibitive, especially for small holders, so access to finance for agrivoltaics on favourable terms is also an important consideration.

farming only, all for the same piece of land.

However Indian policy-makers proceed, it is essential to adopt a carefully considered set of standards and definitions, matched with an approval process that safeguards agriculture. Without an agreed and clear process, many potential projects will wither on the vine.

Similar restrictions could be developed by India’s states to suit regional circumstances, with the possibility that the Union Government might set “backstop” standards as a means of safeguarding agricultural production.

Reforms of land-use classification could give farmers, in most cases, farmers’ groups, the right to own and operate agrivoltaics facilities, rather than energy developers, discoms or other intermediaries, perhaps by enabling them to apply for redesignation of land in a special agrivoltaic land category.

Accelerating agrivoltaics, protecting the country’s farmers Regional variation in crops and conditions, farming practices and markets for produce suggest that states should have primary responsibility for agrivoltaics, with support from the Union government limited to items such as minimum standards and definitions, incentive schemes, and centrally funded research and development and agricultural extension.

Specific grant schemes could promote the evaluation of current practices in local conditions as well as nurturing a uniquely Indian research programme that can take economic and social, as well as technical, factors into account.

Funding for agrivoltaics programmes within the Agriculture Ministry’s Sub Mission on Agricultural Extension could give farming communities greater confidence in trialling agrivoltaics methods, as has been implemented elsewhere, and state extension organisations should provide localised advice and support.

Most states do not allow non-farming commercial activity on farmland if it is not reclassified as commercial land.

States could enable farm communities to establish income-generating agrivoltaic projects whilst retaining Indian farmers’ land ownership, by introducing a specific agrivoltaic land category.

Governments could also give financial incentives for the adoption of agrivoltaics by providing early-stage support to farmers indirectly through loan guarantees via commercial lenders, or by direct support mechanisms, such as extensions to the Union government’s PM-Kusum scheme.

Direct support mechanisms would be the preferred option if small farmers are not to be frozen out of opportunities to adopt agrivoltaics, because additional loans would simply aggravate debt burdens for many.

ASIAN POWER 13

THOUGHT LEADERSHIP ARTICLE

Towards a carbon-zero future: the role of natural gas in reducing CO2 emissions Mitsubishi Power has advocated the use of natural gas in lowering carbon emissions whilst ensuring energy security and flexibility.

Natural gas is one of the keys to APAC’s net-zero transition

D

emand for natural gas has seen an increase in recent years amidst environmental concerns around more traditional sources of power such as coal or oil. As many corporations and countries alike have pledged to be carbon-neutral from 2050 onwards, searching for alternative sources of energy has been more critical than ever.

Natural gas, fortunately, just might be one of the keys to gradually transitioning towards net-zero emissions. It provides opportunities and benefits against other sources of energy that produce more carbon emissions and it offers a transitionary solution for the region to explore more zero-carbon sources like hydrogen in the coming decades.

The “Natural Gas and the Clean Energy Transition” report from the International Finance Corporation (IFC) pointed out that gas can be economical even when the capacity is utilised flexibly, leaving room for more renewables.

“PV solar, wind, and natural gas-fired turbines and engines have lower unit capital costs than coalfired equipment, and there are natural incentives to combine solar, wind, and gas such that the required capital expenditure is least-cost compared to a coalheavy mix,” the report stated.

IFC’s report also mentioned that total fuel costs can be minimised since the all-in cost of PV solar and wind in many markets is below the marginal cost of natural gas.

Natural gas emits about 50 to 60% less carbon dioxide (CO2) when combusted in a new, efficient natural gas power plant compared with emissions from a typical new coal plant.

A report from the IEA stated that the flexibility of the global gas market in the coming years will 14 ASIAN POWER

continue to be crucial, as natural gas will play a critical role in the transition towards a cleaner and more sustainable energy system.

This sentiment is echoed by Malakoff Corporation Berhad, Head of Special Projects, Renewable Energy, Ashwin Narayanan.

Citing Malaysia as an example, Narayanan mentioned that there are plans for 2.4 GW of gas power plants planned between 2025 and 2026 to replenish the retiring older plants, together with another 3.3 GW for the years 2029 and 2030.

“There is no doubt that gas would be the fuel for (the) energy transition, and APAC’s best bet to meet the net-zero target in 2050,” Narayanan said.

He added that there would be a combination of combustion technologies coupled with air quality systems within the natural gas power plant to address the transition.

Gavin Thompson, Asia Pacific vice-chairman at energy consultancy Wood Mackenzie, mentioned in his opinion article “What a difference a year makes – Asia’s energy leaders discuss an uncertain future” that whilst support for the acceleration of renewables and a consensus around the role of natural gas in reducing coal demand in Asia are deemed positive signs in the energy transition, the overall pace of change across the region remains “far too slow”.

“Over 70% of the region’s emission footprint is coal-based and with electrification the cornerstone of the energy transition, Asia’s rising power demand

risks prolonging dependence on coal for the next decade at least. And the current power crunch is not helping, reminding Asia’s leaders of coal’s dependability in ensuring energy security and grid stability,” Thompson said.

Natural gas ‘in the mix’ Despite these projections, many countries are incorporating more natural gas in their energy mix amidst its proven contributions to reducing carbon emissions and ensuring a stable power supply.

Narayanan noted that when the 1990s approached, it brought with it a natural gas bubble within Southeast Asia. Malaysia, Thailand, Indonesia, Singapore, and Vietnam were amongst the beneficiaries of the grid system, coupled with various gas to power projects.

“These plants were not only cost-effective given the low cost of natural gas but also extremely flexible to operate. Natural gas formed the backbone of energy as industrialisation was at its peak,” he said.

Meanwhile, Mitsubishi Power Asia Pacific Managing Director and CEO, Osamu Ono pointed out that whilst coal has dominated the Asian market over the last two decades, natural gas is already a critical component of Asia Pacific’s energy mix.

This is particularly so in countries such as Singapore and Thailand – with demand growing and new liquefied natural gas (LNG) terminals picking up as more markets make the transition toward a more

Asia Pacific is home to a diverse and unique mix of people, infrastructure and economic potential, making the energy transition a complex one that calls for marketspecific approaches to decarbonisation

Osamu Ono, Managing Director and CEO at Mitsubishi Power Asia Pacific

sustainable energy future.

“Under the same power output, combusting natural gas produces less carbon dioxide emissions than coal. The efficiency of gas turbines has also improved over the years – this helps reduce direct emissions from natural gas combustion and lowers costs involved with meeting energy demand,” Ono said.

He added that combusting natural gas also enables the rising adoption of cleaner fuels, such as hydrogen and ammonia, with new innovations that allow gas turbines to utilise these fuels and support the region’s energy transition.

Some Southeast Asian countries are now making commitments towards increasing the share of natural gas in their energy mix.

Indonesia, which has large reserves of natural gas, recently approved plans to develop the Ubadari natural gas field and raise output at the Vorwata gas field using carbon capture utilisation and storage as it continues efforts to reduce carbon dioxide emissions.

This has an estimated potential additional recovery of 1.3 trillion cubic feet of gas in total from the new Ubadari field and the enhanced Vorwata field.

Meanwhile, Malaysia is committed to operating gas power plants to replace coal power plants and Malaysian LNG imports are projected to increase by more than 1 million tons annually to reach 4.8 million tons in 2022.

A look into Mitsubishi Power’s expertise To address carbon reduction goals, energy solutions company Mitsubishi Power combines cutting-edge engineering with its deep knowledge of local needs to accelerate decarbonisation and deliver reliable and affordable power around the world.

The company works closely with power producers in the region to best address their needs.

“Our work in countries across the region has

helped guide a shift away from coal to natural gas, and our gas turbine installations have helped reduce carbon emissions in power plants by up to 65% when compared with coal power plants,” Ono said.

To date, Mitsubishi Power has delivered more than 1,600 gas turbine power generation systems globally, with over 650 gas turbines installed in Asia.

Amongst these projects include Southeast Asia’s first M701 JAC gas turbines, which commenced operation in Thailand as part of an order of eight turbines for a power plant in Chonburi Province.

This is said to help produce more reliable, stable and cleaner energy for the country.

Mitsubishi Power also completed the installation and commission of a 500 MW natural gas-fired GTCC power generation system for the Muara Karang Power Plant – the most efficient in Indonesia and part of the government’s project to boost power supply capability to 35 GW. It will help meet the rising demand for electricity across the West Java region and facilitate infrastructure development for urban transport systems.

Furthermore, the company has all its J-Series gas turbine designs tested at a grid-connected T-Point 2 facility in Japan before commercialisation, to ensure world-class reliability. They undergo a long-term operation of at least 8,000 hours of validation, equivalent to nearly one year of normal operation.

These turbines have amassed over 1.6 million operating hours with 83 units sold worldwide, enabling power plants to achieve the world’s highest power generation efficiency of greater than 64% and offer a reliability of 99.6%.

To further support the energy transition, its heavyduty gas turbines can now also operate on a mixture of up to 30% hydrogen and 70% natural gas with the necessary equipment modifications, and this can be increased to 100% hydrogen in the future.

“This technology is compatible with the use of existing facilities without large-scale modification of power generation facilities, which helps lower costs and ensures a smooth transition to a hydrogen society,” Ono said.

Meanwhile, ammonia has also gained traction as a future fuel in the energy transition as it is a highly-efficient hydrogen carrier and can be directly combusted as a fuel. It is also easier to liquefy than hydrogen and therefore much easier to store and

transport.

Leveraging this carbon-free fuel, Mitsubishi Power has commenced the development of a 40 MW gas turbine fueled by 100% ammonia and is targeting commercialisation around 2025. As the firing of ammonia produces no CO2, carbon-free power generation is achieved. “It will also aid in decarbonisation whilst addressing smaller-scale energy needs, such as small to medium-scale power stations for industrial applications, remote islands and more,” Ono said.

Ono also recognises the challenges that come with the production of NOx emissions during the direct combustion of ammonia. To address this, Mitsubishi Power aims to combine selective catalytic reduction with a newly developed combustor that reduces NOx emissions.

Transitioning to a carbon-zero future Mitsubishi Power acknowledges that the Asia Pacific is home to a diverse and unique mix of people, infrastructure and economic potential, which makes the energy transition a complex one that calls for market-specific approaches to decarbonisation.

In this regard, Mitsubishi Power is a power solutions brand of Mitsubishi Heavy Industries, one of the founding members of the Asia Natural Gas and Energy Association, which is actively helping Asian nations lower carbon emissions by promoting natural gas. The association advises governments as they develop energy policies and solutions vital for a stable, consistent and affordable transition.

The company is also exploring cleaner, alternative fuels to promote a further reduction in carbon emissions.

It has partnered with Indonesia’s Bandung Institute of Technology (ITB) to research next-generation clean energy technologies, as well as how AI and big data analysis can enhance technologies used to diagnose the operation of power plants in Indonesia.

Mitsubishi Power also promotes the adoption of biomass co-firing at Indonesia’s thermal power plants.

“A variety of approaches should work in parallel for the region to viably decarbonise, progressively introducing more renewable sources into the mix, whilst reducing carbon footprint in existing plants,” Ono said.

Mitsubishi Power accelerates decarbonisation and delivers reliable power globally

ASIAN POWER 15

REGULATION WATCH

New customs duty on solar equipment threatens India’s RE goals The government will be introducing a 25% rate on solar cells and 40% on solar modules in April.

India’s targets will require between 35GW to 40GW of annual installation of renewable energy (Photo: India One Solar Thermal Power Plant)

I

ndia’s pursuit of its ambitious 450-gigawatt (GW) renewable energy target by 2030 is at risk of slowing down with a new measure that will levy custom duties on solar equipment with rates up to 40%, argued Institute for Energy Economics and Financial Analysis (IEEFA) Energy Economist Lead India Vibhuti Garg. She even posed a warning that this could do more harm than good for India’s renewable energy goals.

Beginning 1 April 2022, a 25% basic customs duty (BCD) rate will be imposed on solar photovoltaics (PV) cells and 40% on solar modules. Although these rates are intended as a stimulus to domestic manufacturing, Garg said manufacturers might be unable to meet the demand for renewable energy growth in India.

“The imposition of BCD will increase the costs and thereby tariff from renewable energy projects. The renewable energy developers will find it increasingly difficult to find off-takers for such expensive power,” Garg told Asian Power in an exclusive interview.

She added that a huge resistance is expected down the line as electricity distribution companies that are already burdened with poor financial health also face difficulty in passing on tariffs to ultimate consumers.

Unprepared local manufacturers India’s targets, according to the IEEFA, will require between 35GW to 40GW of annual installation of renewable energy. The Central Electricity Authority, meanwhile, noted in its Optimum Energy Mix report, that the country will need an additional 25GW of solar energy capacity annually until 2030 to fulfill its target.

This poses a challenge considering India’s manufacturers produce only about 18GW of solar modules and 4.3GW of solar cells. Garg said the country could miss its target because the actual production of solar equipment at any given time is “significantly lesser” as most solar manufacturing facilities in India operate at a capacity utilisation factor of less than 50%.

The country has also been heavily reliant on imported solar equipment. In a report, Fitch noted that in 2021, India imported more than 80% of its solar cells, amounting to 604 million units.

To address this, the BCD on solar PV cells and modules intend to supply chain disruptions, as well as project delays, according to Fitch Solutions. The Ministry of New and Renewable Energy (MNRE) said that the BCD serves as safeguard duties after the country’s solar capacity additions were affected by limitations in trading solar modules and cells.

The MNRE also plans to turn India from an importer of solar equipment to an exporter, providing other countries with an 16 ASIAN POWER

Vibhuti Garg

India is still on the trajectory for a strong solar power generation growth, reaching 221 TWh in 2031

alternative avenue for their solar power needs.

Whilst this is the case, Fitch Solutions shared the view that India’s domestic market “might not be ready for such an aggressive push.”

“Going forward, as duty taxes grow higher and policies on solar equipment imports grow stricter, domestic manufacturers will need to accelerate their manufacturing quantity and product quality,” according to the report.

Fitch forecasted that in the short-term, India could see an average of 11% annual growth in solar power capacity to 140GW in 2031 from 59GW in 2022; but the inability of domestic manufacturers to meet the demand could expose this projection to downside risk—a supply and demand mismatch.

Despite this, Fitch expects the manufacturing industry to overcome this risk as private companies, such as Reliance Industries, invest in India’s renewable manufacturing sector. This is also on top of the move of the MNRE to set quality assurance processes for solar manufacturing to keep the solar panel’s quality within the International Electrotechnical Commission’s standards.

Fitch maintains that India is still on the trajectory for a strong solar power generation growth, reaching 221 terawatt-hour (TWh) in 2031 from 93TWh in 2022.

Deferment may be in order Notwithstanding its concern over the capacity of domestic manufacturers to meet solar equipment demand, Fitch no longer expects India’s government to postpone the effectiveness of the new BCD. But IEEFA’s Garg is of the position that the “government needs to defer its decision to impose BCD,” subject to measures that will protect the interest of domestic developers that could lose cost advantage against their imported counterparts.

“The imported technologies are more efficient. So the government should provide fillip to domestic manufacturing by schemes,” Garg said.

This may be in the form of direct support to the country’s domestic manufacturing, such as the production-linked incentive scheme, access to finance at lower rates or support to scientific and technological research and development.

“This would give a fillip to domestic manufacturing and help the government achieve its goal of self-reliant India and at the same time ensure achievement of renewable energy target,” she added.

“The Indian domestic manufacturing is lagging behind technology, so the government should create conducive policies for technology innovation and availability of finance. Imposition of BCD will not serve any purpose.”

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ASIAN POWER 17

CEO INTERVIEW

How running Jawa7 helps in clean energy transition The coal-fired power plant ensures lower carbon emissions, with 45% efficiency.

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ndonesia is veering away from coal as an energy source by committing to a 2060 net-zero emission target, but Jawa-7, a coal-fired power plant, is playing a part in the country’s push towards emissions reduction. The first ultra-supercritical power plant is able to minimise its carbon emissions as it boasts of its plant efficiency of more than 45% and is gearing towards adopting clean and energy-saving measures.

Asian Power sat down with PT Shenhua Guohua Pembangkitan Jawa Bali (PT SGPJB) President Director Zhao Zhigang to talk about the consortium’s coal-fired power plant project, called the Jawa-7. He also shared insights on how the joint venture will gradually work towards carbon neutrality.

PT SGPJB is a consortium owned by China Shenhua Energy (70%) and PT Pembangkitan Jawa Bali Investasi (30%). Zhao said PJB’s clean energy transition plans drove China Shenhua to seek partnership with the electricity and energy investment firm.

“Originally, we knew that PJB had the intention to seek cooperation with power industrial companies from all over the world,” he said, as translated. “Its target is also to seek the transition from traditional power industry to renewable power.”

The power plant, which has the largest installed capacity in megawatts (MW), is also the first coal-fired power plant to operate the longest without shutdown.

Can you tell us what sets the Jawa-7 apart from other coal plants in Indonesia?

The Jawa-7 coal power plant has the largest single-unit capacity in Indonesia. Our unit’s capacity is 2 x 1,050MW. The power plant’s efficiency is very high. It’s already above 45% and also our coal consumption efficiency is higher, which has already reached 273 grams per kilowatt-hour. So, this high efficiency is also a measure to reduce carbon emission because our power plant’s power generation efficiency is high.

The other point is that, as far as we know, the previous Indonesian units used imported equipment from South Korea, Japan, and other Western countries. But in our power plants, all of our equipment is imported from China and they are the best equipment in China and they are provided by the companies with mature and advanced technology. In our infrastructure construction periods, we have placed a team from China regarding the construction, the commissioning, and the design.

The reliability of Jawa-7 is very high and after the production of our Unit 1, it has run 302 days consecutively. It now has a long continuous operation.

Because our power plant is built next to the sea, we have our coal jetty; and we used advanced technology from China. It is called the belt coal conveyor technology and we have the longest coal conveyor belt in Asia. As for the water resources in the projects, we have also used advanced dissimulation technology provided by our company that has ensured that we have enough water resources for our company.

What is the current progress of the completion of the power plant and how will you ensure it is finished soon?

Right now, we still have some work left to be finished. Whilst still under the influence of the COVID-19 pandemic, some tactical support personnel are having difficulty coming to our sites, 18 ASIAN POWER

PBJ seeks cooperation with global power industrial companies to transition from traditional to renewable power (Photo: PT SGPJB President Director Zhao Zhigang)

Jawa-7’s coal consumption efficiency reaches 273 g/kWh. This high power generation efficiency is a measure to reduce carbon emission

whether it is from Indonesia or China.

Another problem is those particular financial settlements because we have regulations from our Chinese superior company.

We must have second party audits personnel to review our project’s financial settlement progress. But for our targets, our initial plan is to finish the financial settlements next year−the first half of next year.

To ensure the completion of the projects, we introduced two measures. The first one is to coordinate human resources in Indonesia and China. Right now, the pandemic situation in Indonesia is getting better, so it is more convenient for us to have human resources from all sides. The second measure is that for the financial settlements when the pandemic situation gets better, then we will have some professional audit team from China that is assigned by our superior company as we target to finish the plant in the first half of next year.

How will you ensure the reliability and readiness of the plant?

We use three strategies. The first is to improve our employees’ technical skills, especially for our local employees because the major difficulty is the language barrier. So, our Chinese employees have learned English and our Indonesian employees have learned Chinese. It will be easier for our experienced employees and our fresh graduates to exchange information. The second strategy is to enhance our operations, regulations patterns, and also enhance our maintenance standard. The third strategy is about the material supplier, spare parts supplier.

Our strategy is to improve supply chain reliability. Our next

CEO INTERVIEW plan is also to find other companies that have the same demand as us and, in that way, we will share the supply chain and share the material and spare parts storage. For our supply chain for the special power plants products, it’s mainly from China, but for other regular resources, we purchased them in Indonesia.

Governments are taking measures to transition to cleaner energy. As you are running a coal-fired power plant, what efforts are you implementing for Jawa-7 to reduce the country’s carbon emissions?

The Indonesian government plans that there will be no new coal-fired power plants in 2025 and in 2040, the current coalfired power plants will be phased out. I think it is very hard for the Indonesian economy to achieve these targets in such a short time. Maybe in the future, we can learn from the Chinese environmental protection policy. The first one is to adopt energysaving measures because if we can use our energy more with higher efficiency, then it will be better for the country’s carbon emission reduction targets.

We can also learn from other countries and from all of the works about carbon emission reduction knowledge. We will also comply with the Indonesian government’s new environmental protection policy to upgrade our coal power plants.

With Indonesia’s potential to phase out coal by 2040, what technologies and strategies are you looking at to comply with the country’s decarbonisation goals?

Recently, Chinese President Xi Jinping has also said that there will be no more overseas coal-fired power plants from China and the world. We will also use the same strategy as what has already been done in China, which includes gradually promoting carbon neutrality and adopting some energy-saving operations in coal-fired power plants to improve the power plant’s efficiency, and then gradually we will phase out the power plants with lower efficiencies. Then maybe in the future, we will also use some more advanced and mature technologies such as carbon capture and other carbon emission-related technologies.

For decarbonisation, the consortium will use the same strategy in China to promote carbon neutrality through energy-saving upgrades. Can you elaborate on these energy-saving upgrades that you are looking at?

I think that the major targets for carbon capture are to capture the carbon dioxide and use high pressure on the grounds so that it can prevent carbon emissions to the atmosphere. If we will promote the carbon emission-related upgrades, later in the future, we will have a special professional team to study the feasibility of this project and the possible projects, and then we can adopt carbon emission reduction-related knowledge to do the upgrade.

Indonesia is committing to a 2060 net-zero emission target, and Jawa-7 is playing a part in the country’s push towards carbon emissions reduction

The government plans that there will be no new coal plants in 2025 and 2040. It is very hard for the Indonesian economy to achieve these targets in such a short time

Indonesia’s net-zero emission targets

To accelerate investments in renewables, Indonesia may rely on feed-in tariffs and auction schemes

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ccording to the International Energy Agency’s (IEA) Electricity Market Report January 2022, Indonesia’s electricity demand was expected to have grown by 3.6% last year and to continue to grow over 4% this year, whilst the annual electricity demand growth is seen to be slightly above 4% from 2022 to 2024.

The IEA also said that Indonesia’s total generation capacity as of July 2021 was at 74 gigawatts, with coal accounting for the largest share of generation at 58%, whilst the share of renewables remained stable at around 17% for the last four years. The share of solar photovoltaics was around 0.1% last year.

For Indonesia to achieve its renewable target of 23% in 2025, a presidential regulation on renewables could be expected this year. To accelerate investments in renewables, Indonesia may rely on feed-in tariffs and auction schemes.

The agency also noted that the Indonesian government announced its commitment to attaining net-zero emission by 2060 or sooner with financial and technological support from developed nations. To achieve this, the government identified five principles: increasing the share of renewables, reducing the use of fossil fuels, promoting electric vehicles, electrification in the residential and industrial sectors, and using carbon capture, utilisation and energy storage.

The state-owned electricity company, PT Perusahaan Listrik Negara, has also announced that it will not build new coal plants after 2023, when all plants under its 35GW programme and 7GW Fast Track Programme are expected to be completed, according to the report.

It noted that under Indonesia’s recent electricity supply plan, around 5GW of coal-fired capacity from independent power producers were expected between 2024 and 2030. However, no new fossil power plants will be built beyond 2030, with the first stage of coal-fired plant retirements starting in 2031.

IEA added that interconnection and grid development are amongst the key challenges in Indonesia both between islands in the country and across borders, noting that grids are “an important flexibility resource for integrating renewables in a reliable and cost-effective manner.”

The country’s net zero plan indicates that interisland interconnection should start commercial operation in 2031, the report further said.

Overall, electricity demand was estimated to have risen by 2.8% in 2021 and a stronger recovery is expected from 2022, with an annual demand growth close to 5% from 2022 to 2024.

Coal continues to hold the lion’s share in Southeast Asia’s electricity supply as it accounts for around 43% of the supply mix, followed by gas at 31%, and renewables at 25%. The agency, however, said that the share of both coal and gas in the mix dipped last year, whilst renewables saw an increase by over two percentage points.

“While renewables growth is set to continue up to 2024, we expect the sum of coal- and gas-fired generation to meet around two-thirds of new demand over this period,” according to the report.

ASIAN POWER 19

GENERATION REPORT: GEOTHERMAL POWER

It is important for Indonesia to seek ways of developing geothermal power whilst still protecting its forests and environment (Photo: Geothermal Power Station of Ulubelu Unit 3-4, Lampung Province, Indonesia)

Geothermal power needs policy boost to stay on the net-zero track Its annual capacity additions averaged only 500MW annually in the last five years.

T

he geothermal power sector, whose share in the global power mix remains small, will need a boost from policies that will reduce cost and cushion pre-development risks to drive the industry closer to the net-zero track.

In its Tracking the Clean Energy Progress report, the International Energy Agency (IEA) estimated that geothermal electricity generation grew by only 2% year-on-year to approximately 200 megawatts (MW) in 2020. This is below the 500MW average growth recorded in the last five years.

“This technology is not on track with the Net Zero Emissions by 2050 Scenario, which requires 13% annual increases in generation over 2021-2030, corresponding to average annual capacity expansions of ~3.6 gigawatts (GW),” the report read.

Growth in geothermal electricity generation will be driven by Turkey, Indonesia, and Kenya, which are all expected to take the lead in geothermal due to the countries’ abundant resources that remain untapped. In this light, the IEA recommended that policies, which help reduce costs and mitigate pre-development risks, are needed to increase geothermalbased power generation.

20 ASIAN POWER

Narsingh Chaudhary

The near-term development of the geothermal sector in Asia will depend on the policies and programes that governments will put in place, as well as the rate that new tech is adopted in the market

Global geothermal capacity, according to Fitch Solutions projection, will grow by 4.5GW over the next decade, increasing at an annual average rate of 2.8% to 18.7GW in 2030. This growth will largely come from the Asian region, particularly Indonesia and Turkey, and Central and Eastern Europe. This comes as the regions are expected to have 1.8-GW and 1.1-GW net capacity additions, respectively.

Sustaining geothermal power The contribution of geothermal power in the global power mix has historically, which will likely be sustained despite growing interest in the technology coming from Asia. According to Black & Veatch, the sector could retain its current allocation in the global energy portfolio through investments in oil industry technologies that improve the economics of geothermal.

This includes technologies, such as geological sensing, horizontal drilling, and high-intensity fracturing.

New technologies, like enhanced geothermal energy, and closed-loop systems, also have the potential to alter the economics of geothermal energy as it enables the energy resource to be drilled from anywhere in the world.

“Capitalising on these market factors will also require clear policy support and regulatory frameworks for financial incentives that will improve project bankability and enable Asia to increase its geothermal capacity,” Black & Veatch Executive Vice President and Managing Director for Asia Power Business Narsingh Chaudhary told Asian Power.

“In addition, developers will need to adapt many of the emerging technology innovations and project management best practices to improve overall project economics and help geothermal compete with other evolving generation options like nuclear and hydrogen.”

Chaudhary added renewable energy mandates, as well as reports that indicate geothermal energy companies are getting support from investors, could also help the geothermal market.

The near-term development of geothermal power in Asia, Chaudhary further emphasised, will depend on the policies and programmes that governments in the region will put in place as well as the rate that new technology is adopted in the energy market.

The future of geothermal will also vary on its cost competitiveness, in comparison to other renewable energy sources. In addition, partnering industry leaders experienced with every aspect in the lifecycle of projects from early financing through commercial operation will also be a key to convert promising geothermal potential to commercial facilities serving the grid and customers throughout Asia.

GENERATION REPORT: GEOTHERMAL POWER “As a non-intermittent renewable energy resource, geothermal energy can generate stable baseload power and be paired with intermittent renewable energy sources to accelerate Asia’s energy transition.

The key is understanding the right mix in a balanced energy portfolio,” Black & Veatch’s Chaudhary said.

He explained that accommodating an increased capacity of intermittent renewable energy, like solar and wind power, needs a new, integrated suite of solutions across generation, energy storage, transmission and distribution to sustain safe, reliable and resilient power that makes our modern economies and communities work. The deployment of gas-fired generation and continued advancements in hydrogen and nuclear are options that could contribute to the more diverse and balanced mix of power generation technologies, he added.

Challenges to geothermal The development of geothermal energy in Asia, however, could be dampened by high development costs that make other renewables, such as solar and wind power, more cost-competitive. The difficulty in securing permitting and other processes in relation to tariffs and the bankability of power purchase agreements, and unattractive incentives packages may also prove to be a challenge.

“Taken even further, like many other renewable energy sources, geothermal generation capacity is often located far from major demand centres. The development would need planning and financing for any effective integration of new geothermal facilities into regional or national power grids,” Chadhaury said.

GlobalData Practice Head Pavan Kumar said the geothermal development

has a higher stake risk whilst the payoff only comes long-term. He further explained that it is more likely that energy investors will lean towards other renewable energy sources without financial incentives like subsidised power rates, competitive feed-in tariffs, or tax incentives.

According to GlobalData, geothermal capacity across the globe grew at a compound annual growth rate (CAGR) of 3.15% and at 2.9% in the Asia Pacific region between 2000-2020. “It is expected that global geothermal capacity will increase at 5.3% CAGR and Asia Pacific region will increase at 5.8% CAGR during 2020-2030,” Kumar said.

“Geothermal power has a miniscule share in the global power capacity mix at 0.2% in 2020 and will be in the same range with a share of 0.22% in 2030. Similarly, the share of geothermal in the Asia Pacific region is 0.16% in 2020 and its share is expected to be around 0.17% in 2030.” The market is expected to attract some $23b during the next five years at an average annual investment of $4.6b.

The case of Indonesia Indonesia’s renewable power market reached around 4.772.92MW by end-2020 from 3,126.10MW in 2010. It is expected to grow at a rate of 12.81% from 2020 to 2030 and reach installed capacity of 15,940.16MW by end-2030, according to GlobalData’s Geothermal Power in Indonesia report.

Geothermal power leads the country’s renewable power market with a total installed capacity of 2,130.70MW as of 2020 and is seen to reach 5,872.94MW by 2030 at a CAGR of 10.67%.

“The renewable power market in Indonesia is dominated by geothermal power which held a share of 44.6% in

Geothermal generation capacity is often located far from major demand centres. The development would need planning and financing for any effective integration of new geothermal facilities into regional or national power grids

Geothermal power leads Indonesia’s renewable power market and is seen to reach 5,872.94MW by 2030

Pavan Kumar

Geothermal power has a miniscule share in the global power capacity mix at 0.2% in 2020 and will be in the same range with a share of 0.22% in 2030

total renewable capacity in 2020. Although this share is expected to decline to 36.8% in 2030; geothermal power will continue to hold the largest share in Indonesia’s renewable capacity mix,” the report read.

Total renewable electricity generation rose to 27,515.33 gigawatt-hours (GWh) in 2020 from 16,296.73GWh at a CAGR of 5.38%. The total generation is expected to reach 66,622.07GWh by 2030 at a CAGR of 9.25%.

Geothermal energy is also leading in terms of electricity generation, reaching 14,832.80GWh in 2020 from 9,357GWh in 2010. Its electricity generation is also expected to reach 40,758.20GWh by 2030 with an annual growth rate of 10.64% over the same period.

The Indonesian Government backed the development of geothermal power which in turn also helped the growth of the energy sector’s technology.

The New Geothermal Law No. 21 in 2014 removed geothermal activities from the mining activities classification which resulted in the rapid growth of the technology as it allows geothermal activities to be conducted in high conservation value forest areas, it said.

The government also provided a $275m Geothermal Fund in 2017 and has also found support from the World Bank, the Green Climate Fund and the Clean Technology Fund through loans of around $278m in 2019 to boost investments for the power sector.

“The development of geothermal energy has led to environmental concerns in Indonesia. Majority of the country’s geothermal reserves are in conserved forests, and the development of projects in these areas requires a presidential decree,” it said. “Therefore, it is important for Indonesia to seek ways of developing geothermal power whilst still protecting its forests and environment.”

ASIAN POWER 21

COUNTRY REPORT: SOUTH KOREA

Renewable energy growth is lagging in South Korea

This could be due to geographical barriers, prices, and the presidential election.

F

or South Korea, renewable energy deployment remains an uphill battle as the country scours to find space for it. With a total land areas of 223,170 square kilometres, South Korea consists of mountains and narrow plains that prove difficult to install cleaner energy sources, an expert claimed.

Even the government’s active efforts to achieve carbon neutrality appear to fall short. One example is the Presidential Committee on Carbon Neutrality’s two new road maps calling for the abolition of coal-fired power generation, with one framework seeking to eliminate liquefied natural gas (LNG) and the other opting to retain LNG with carbon capture technologies. Despite this, Rystad Energy still sees South Korea’s coal capacity increasing in the short term as additional coal power units are currently under construction. Whilst natural gas, which has a much lower carbon footprint, is projected to become its largest power source by the late 2020s.

“When it comes to renewable development, South Korea has been lagging compared to its peers,” Rystad Energy Analyst Fabian Rønningen said.

South Korea’s natural environment as “not very favourable” for the deployment of solar photovoltaics and wind generation

Renewable barriers According to Rystad Energy, amongst the key factors behind the slow development of renewable energy in South Korea is its geography. Largely consisting of mountains with small valleys and narrow coastal plains, South Korea offers very little space for the deployment of renewable energy sources, such as solar and wind power.

On top of this, spaces that could potentially be suitable for renewable energy sources are already densely populated, making it even difficult for the country to transition.

“That is one of the reasons the country has put so much emphasis on the development of hydrogen and ammonia use in the power sector, as already existing infrastructure can be used, and thermal power plants have a much smaller footprint than large scale solar and wind farms,” Rønningen said.

Fuel mixing with less polluting fuels, like biomass, is a solution to reduce the damage caused by operating coal-fired power plants. In South Korea, ammonia mixing in coal-fired power plants is expected to become increasingly more important as the country set a “very

ambitious” target to generate 22 terawatthour through ammonia by 2030. “The pathway to this is yet to be seen,” he said.

The Lantau Group partner, David Kim, based in Seoul, likewise raised South Korea’s natural environment as “not very favourable” for the deployment of solar photovoltaic and wind generation. This is considering the high cost of land where new sources can be deployed as well as the weak insolation, which could in effect slow down the transition to cleaner energy sources, Kim said.

“But we cannot stop the shift. As more renewable energy is generated, the key issue will be how we manage and operate the electricity market in Korea,” Kim said.

“At the moment, the wholesale market and the retail market are not fully linked.

There is a lack of price signals between generators and consumers, which disincentivise the improvements and the innovations in the energy market.”

Kim said that to attract more investments and talents, South Korea also has to devise a way to operate the electricity market in the long run.

Apart from geographic hurdles, South Korea also struggles with the cost of renewable energy sources, a challenge that most countries have now moved beyond.

Despite this, the country has already made strides in renewables driving demand for coal and LNG down. Rystad Energy expects this to lead to a large reduction in emissions, but not quite enough to bring it down to zero.

South Korea’s geography offers very little space for the deployment of renewable energy sources (Photo: Dobongsan mountain by Giuseppe Milo)

22 ASIAN POWER

COUNTRY REPORT: SOUTH KOREA

Fabian Rønningen

David Kim The presidential election will have an effect on the direction the country will take in the clean energy transition

“This is where green hydrogen and ammonia come into the picture,” Rønningen said, adding the Green New Deal and Ninth Basic Plan, as well as the proposed Emissions Trading Schemes, could help speed up renewables growth in the country.

“If the South Korean Energy Agency is arranging capacity auctions with larger volumes, a faster deployment can be achieved. The continued cost reduction of renewables, especially floating offshore wind in non-utility scale solar PV will help South Korea transition faster,” he said.

Presidential election The presidential election in March is expected to have an effect on the direction the country will take in its clean energy transition targets.

“I believe that the goal for the greenhouse gas reduction and the clean energy transition will be firmly pursued in the long term view,” Kim said.

In a report, Fitch Solutions noted that the country’s policies over its clean energy transition will continue changing, particularly around nuclear energy as South Korea remains “politically divided” over the subject.

“As such, we are seeing increasing pressure around the continued need for nuclear power, which might be reintroduced in a new administration, presenting some upside risks to our current outlook,” according to Fitch Solutions.

“Nonetheless, there remain significant uncertainties around South Korea’s future power mix, and we will continue to monitor developments closely and revise our forecasts accordingly if necessary.”

South Korea’s power mix The country’s energy sector largely consists of imported fossil fuels such as oil, coal and natural gas. It is also known for being amongst the largest power sectors,

dominated by coal, gas, and nuclear, Lantau Group’s Kim said.

At present, South Korea targets to keep the share of natural gas down to only 19.5% of its power generation; which Rystad Energy’s Rønningen sees as a difficult pursuit as natural gas is seen to have a higher share in 2022.

Coal accounted for the largest share in the current power mix, which is expected to decline amidst phase-out plans. Meanwhile, the nuclear output is expected to grow near-term with several new units in the pipeline, but will likewise play a reduced role in South Korea’s power sector in the long run as the country’s nuclear fleet ages. This will then leave South Korea to rely on other sources of power to meet the generation gap created by the reduced output from coal and nuclear power.

“Overall, the long-term expected reduction of both coal and nuclear means that other sources will need to meet power demand, and that is expected to be natural gas and renewables, such as solar, wind,

South Korea’s new draft green taxonomy, K-Taxonomy, classifies liquefied natural gas as ‘green’

hydrogen, and ammonia,” he said.

Early this year, the South Korean government published the K-Taxonomy, a new draft green taxonomy, which classified LNG as “green.” This opens opportunities for new LNG-to-power projects as the “green” classification qualifies these projects for green financing and tax incentives. The draft taxonomy, however, does not classify nuclear energy source as “green.”

Fitch Solutions in a report said that the new classification could lead to a large number of new gas-fired power plants in the market, especially as ageing coalfired power plants are replaced by gas.

This could bring the share of coal energy source down to 30.1% from 36.7% and the share of gas up to 30% from 26.7% of the power mix by 2031.

Rystad Energy’s Rønningen said the reduced role of coal and increase in gas will have a “drastic” impact on demand for both sources, especially considering South Korea has a relatively young fleet of coal-fired power plants. An important factor for coal in South Korea is the relatively young fleet of coal power.

Phasing-out coal could pose risks of stranded assets for a large proportion of the power plants.

He added this could be addressed through refurbishment projects that allows fuel to switch from coal to natural gas directly. In contrast, the new classification could increase the demand for gas, which Rønningen said exposes South Korea to global energy markets, which has been a rollercoaster for the entire year of 2021.

“Switching from coal to gas would result in a deep cut in emissions and depending on the future pricing in the gas and coal will reveal if it is also the correct financial decision if costs of electricity will rise as a result in South Korea,” he said.

The future pricing in fuel will reveal if switching from coal to gas is the correct financial decision if costs of electricity will rise as a result

ASIAN POWER 23

COUNTRY REPORT: AUSTRALIA

Australian coal plants are rapidly dying out Coal plants’ profitability is declining with the entry of low-cost renewable energy.

A

ustralian consumers have been enjoying lower electricity prices and are even expecting to pay 6% or $77 less in 2024, the Australian Energy Market Commission said. Thanks largely to the entry of low-cost renewable energy sources, like solar and wind, that penetrate the market. But whilst ordinary households are rejoicing, coal plants are suffering—so much so that they are planning their closures earlier than planned.

In Australia’s National Electricity Market (NEM), a grid that connects the whole east coast of the country, five of its 16 coal generators have brought forward their closure dates since the beginning of 2021, according to Johanna Bowyer, lead research analyst for Australian Electricity at the Institute for Energy Economics and Financial Analysis (IEEFA).

“We’re seeing that coal is coming out of the market much more quickly than many expected. And this is happening because there’s a lot of low-cost renewable energy coming online,” Bowyer told Asian Power.

Bowyer said the low-cost renewable energy is pushing down the wholesale prices in the spot market, particularly in the middle of the day, which would compel generators to ramp down their output in the same period. This is difficult for coal generators in particular as the nature of their operations does not have a lot of flexibility.

“Coal… can’t easily be turned off or on, so generators will sometimes bid into the wholesale spot market at a loss, simply to stay online. This is rapidly eroding the profitability of coal-fired generators,” the IEEFA analyst said.

“But we don’t have a clear long-term view of when exactly the coal exits are going to happen, as they keep being moved forward,” she added. The exit of coal plants is nominated by the generators themselves.

They are required to notify the market operator three and a half years before their targeted closure.

Retiring coal plants In February, Origin Energy proposed to the Australian Energy Market Operator (AEMO) that it will be retiring the 2,880-megawatt Eraring coal-fired plant in August 2025, much earlier than the originally targeted shutdown in 2032.

Origin CEO Frank Calabria said in a statement that the proposed early exit reflects the “rapid transition of the NEM” to cleaner sources of energy. The company has “well-progressed” plans of putting up a 700 megawatts (MW) large-scale battery at the Eraring power station.

24 ASIAN POWER

In Australia, generators bid for the price they can generate electricity in the wholesale electricity spot market, and coal and gas generators are expensive to run (Photo: Eraring Power Station)

Johanna Bowyer

Coal can’t easily be turned off or on, so generators bid into the wholesale spot market at a loss to stay online

AGL in February moved forward the closure dates of coal plants Bayswater Power Station from 2035 to between 2030 and 2033, and Loy Yang A Power Station from 2048 to between 2040 and 2045.

At the end of February, Brookfield Asset Management and Mike Cannon-Brookes’ Grok Ventures proposed to acquire AGL, to close the company’s coal capacity by 2030 and ensure AGL reaches net zero by 2035.

They proposed to close 7GW of AGL fossil fuel capacity and replace it with at least 8GW of clean energy and storage, requiring $20bn capital.

They initially bid for 100% of AGL’s share at A$7.50 per share. AGL rejected the proposal saying it “materially undervalues the company on a change of control basis and is not in the best interests of AGL Energy shareholders.”

The bid was subsequently increased to $8.25 per share, which was also rejected

by AGL. Brookfield and Grok Ventures have now put their “pens down,” CannonBrookes said in a social media post. Bowyer said if the bid was successful, the energy transition in the National Electricity Market is going to accelerate further.

Electricity market In Australia, all generators bid for the price they can generate electricity in the wholesale electricity spot market, and the lowest bidding generators are usually allowed to generate electricity. Solar and wind have the lowest operational cost form of generation

and bid into the market at low prices, so are usually called on to generate electricity, Bowyer said in a commentary.

Meanwhile, coal and gas generators, which depend on purchasing fuel, are more expensive to run, thus, they bid at higher prices to generate electricity.

Batteries, on the other hand, absorb excess electricity when spot prices are low and deliver them when the prices are high.

They also free up surplus energy which reduces system costs.

“In theory, higher prices for sustained periods incentivise [the] building of new energy resources. If lower-cost energy resources are built to replace a retiring generator, and all else remains constant, prices will drop below the level before the generator’s retirement,” she stated, adding that more low-cost renewable energy into the NEM has historically pushed wholesale electricity prices down, especially in the middle of the day in the solar period.

Bowyer added that the total cost of supplying electricity to households in December 2021 was at the lowest point in the past 8 years, according to the Australian Competition and Consumer Commission.

Australia currently has a 25-gigawatt (GW) coal capacity, 23GW of which is in the NEM, the IEEFA said. Out of the 23GW NEM coal capacity, 14GW could be withdrawn by 2030, according to the AEMO’s Draft 2022 Integrated System Plan (ISP) Step Change Scenario for the NEM released in December 2021.

COUNTRY REPORT: AUSTRALIA Australia is projected to “overachieve” on its 2030 emissions target of up to 35% reduction on 2005 levels

Prudent planning takes into consideration the potential impacts of less coordinated closures on consumers

Step Change Four scenarios that could playout for the transformation in the energy market were provided in the AEMO’s 2022 Draft ISP for the NEM, which will be finalised in mid2022. Amongst the four, the Step Change scenario is the most plausible, according to the energy industry stakeholders.

Under the Step Change scenario, there is a “rapid consumer-led transformation of the energy sector and coordinated economy-wide action.”

“Step Change moves much faster initially to fulfilling Australia’s net-zero policy commitments that would further help to limit global temperature rise to below 2° compared to pre-industrial levels,” the draft read. “Step Change sees a consistently fast-paced transition from fossil fuel to renewable energy in the NEM.” Most consumers are expected to be relying on electricity for heating and transport, and the global manufacturing of internal combustion vehicles will be stopped by 2050 under the Step Change scenario. Domestic hydrogen production is also seen to support the transport sector and as blended pipeline gas.

AEMO also said in the draft ISP that the retirement of coal plants is happening two to three times faster than expected. At this current rate, and under the Step Change scenario, 14GW of coal capacity will likely be withdrawn by 2030.

Data from the draft showed that coal capacity by 2029 to 2030 will be down to 8.98GW, and 7.03GW by 2030 to 2031 under Step Change.

It also said that the share of renewable energy of the total annual generation will rise from around 28% in 2020 to 2021 to 79% by 2030, 96% by 2040, and to 97% by 2050, noting that half of all NEM generation will switch to renewable energy sources in the 2020s alone.

Distributed energy resources (DER) or consumer-owned devices that can generate or store electricity is expected to deliver 30% of renewable capacity by 2050 under Step Change, with 54GW

needed to increase the current 15GW capacity, reaching 69GW. DER includes small-scale generation such as rooftop solar photovoltaic (PV) systems, PV nonscheduled generation, distributed battery, electric vehicles, and virtual power plants.

Distributed PV is expected to reach 35.1GW by 2029 to 2030, and 37.2GW by 2030 to 2031, according to the AEMO, but by 2050 over 65% of detached homes are projected to have PV in Step Change, most of which will be coupled with a battery.

“The sector is undergoing a more rapid change than has been previously expected.

Owners of coal generators have already either brought forward their announced retirements or indicated they would. Their decisions remain necessarily uncertain, as they grapple with operating dynamics in the face of cheap renewable generation, their own competitive strategies, plant conditions, regulatory and remediation costs, and the wishes of local communities (to either close or remain open),” the draft read.

“Given these uncertainties, the effective coordination of closures will be extremely challenging, and prudent planning takes into consideration the potential impacts of less coordinated coal plant closures on consumers,” it added.

DISER projections Australia’s electricity sector accounts for 34% of the country’s emissions in 2019, according to the Department of Industry, Science, Energy and Resources’ (DISER) Emission Projections 2021 report released in October last year.

Whilst emissions in the sector have been declining since 2016, this downward trend is expected to continue to diminish to 88 metric tonnes of carbon dioxide equivalent (MTCO2e) in 2030. This is equivalent to 55% below 2005 levels, and 23 MTCO2e lower than previous projections.

This projection is due to the stronger outlook for renewables and the increased investment in renewable energy which is backed by the government-initiated post-2025 electricity market reforms and

underwriting support for new construction of transmission infrastructure, according to DISER. But overall, DISER projects that Australia will “overachieve” on its 2030 emissions target of 26% to 28% below 2005 levels and achieve a 30% reduction on 2005 levels under a baseline scenario. Under a technology investment roadmap-aligned scenario, the country could achieve a 35% reduction on 2005 levels.

Challenges, policies needed Whilst the AEMO has a rough plan based on information from the coal generators, other coal generators could bring forward their closure dates, as seen with Eraring and Bayswater recently. This, in turn, affects plans as there is a need to ensure that the country has the right amount of renewable energy in the system to fill the gap left by the plants that shut down.

There is also a need to build the right transmission lines to access renewable energy and bring it to load centres.

“One of the big challenges for the National Electricity Market at the moment is getting a clear plan. What is really needed is an enforceable coal exit schedule over a longer timeframe. That includes all the coal generators in the National Electricity Market,” Bowyer said.

Support should also be provided to communities reliant on coal-fired power jobs, Bowyer added.

In a report published in September 2021, the IEEFA provided options to reduce uncertainty around coal exits, one of the challenges in the National Electricity Market that had been identified by the Energy Security Board.

The IEEFA recommended that an audit review of generators should be commissioned by the government to assess their future viability every three years instead of depending solely on the plant operator’s own statement to the AEMO. The assessment should cover the financial and engineering aspects of all power stations over 20 years and over 500MW capacity.

“Such an audit would assess both the financial and physical durability of these power plants and effectively stress test their ability to withstand likely future market conditions.” the report read.

IEEFA also recommended that the government introduce a regulated market mechanism for coal generator closure in line with commitments to contain global warming and climate change.

The “race to replace” concept could be adopted, wherein the closure of ageing coal generators should be linked with the entry of new replacement capacity. Under this concept, when an adequate amount of replacement capacity is built, ageing high emissions capacity is guaranteed to retire.

ASIAN POWER 25

REPORT: ROOFTOP SOLAR

The Indian solar market is viewed as a high-growth potential market by international investors

India may be running a losing race towards its rooftop solar target IEEFA worries that the growth is sluggish with only a 1.8GW annual additional capacity.

I

ndia is racing to install some 40 gigawatts (GW) of rooftop solar by the end of 2022, but over the past years, the country only added between 1.3GW to 1.8GW of capacity annually.

Up until the end of September 2021, India’s installed capacity for rooftop solar stands at a mere 6GW. At this rate, the Institute for Energy Economics and Financial Analysis (IEEFA) is afraid the country will not be able to catch up on its 2022 target.

“The market needs more liquidity with more players coming in as the potential is large. The big and small players need to improve their credit rating demonstrating their strong financial health for banks and financial institutions (FIs) to lend money,” IEEFA Energy Economist Lead India Vibhuti Garg said.

Between 2015 to 2021, rooftop solar developers have managed to raise more than US$2b of funding, largely from equity funding (US$985m) and from debt (US$599m). Approximately, 45% of these were raised within the first eight months of 2021 alone. The IEEFA noted that nearly all of the equity investments were generated from foreign entities looking to tap the Indian market due to its high growth potential and healthy return on equity. As for the debt funding, the rooftop solar sector in India can access two major credit lines, which are the US$625m World Bank-State Bank 26 ASIAN POWER

Solar installations generally have healthy rates of return on equity investments compared to investment options in other developed countries

of India and the Green Climate Fund (GCF)-Tata Cleantech credit lines.

Meanwhile, the operating expenditure (OPEX) model accounts for only 10% to 15% of the total number of borrowers.

In terms of quantum of loan, however, the share of OPEX is as high as 80% to 85%, due to the large project sizes. This translates to larger loan sizes. Of the cumulative ~2GW of OPEX rooftop solar installations in India, almost 40% were financed via the two biggest concessional credit lines—the World Bank-SBI credit line and the GCF-Tata Cleantech line.

Installation trends in the C&I rooftop solar sector The rooftop solar installations witnessed a slight year-over-year decline of 13% due to COVID-related disruptions. However, this period has also seen interest from customers in solar rooftops on account of the increasing need to optimise cost.

Also, the lapse of safeguard duty on solar modules at the end of July 2021 signifies the onset of the duty-free period for solar modules, which can bring the overall installation costs down. This period will last until 31 March 2022, after which a new basic customs duty of 40% will be applied to solar modules. These factors combined could translate into an estimated 2,500 megawatts (MW) of new capacity during 2021, a 37% year-on-year increase in installations.

Equity investments An interesting trend to note here is that almost all equity investments come from foreign entities (99%) that are looking to enter the Indian market for the following reasons. The Indian solar market is viewed as a high-growth potential market by international investors. Also, solar installations generally have healthy rates of return on equity investments (as much as 14%) compared to investment options in other developed countries. In India, these entities can own as much as a 100% stake in renewable energy projects, which is not possible in other countries due to their respective regulations, along with longer power purchase agreement (PPA) durations (usually 10 to 15 years).

Foreign organisations are looking for investments to meet their Paris Agreement and net-zero emission pledges. More than 45% of the total equity investments were raised in 2021. The key reasons behind equity investments being concentrated within the players are their relatively higher experience in the Indian solar market, sizeable portfolios, bankable track records, and the distribution of portfolios across different states in India, which reduces risks for energy investors.

Long-term financing Financing under this category is usually obtained from concessional credit lines made available by development banks and multilateral agencies. The associated loan tenure is typically longer, ranging from 10 to 25 years. The World Bank-State Bank of India (SBI) fund for rooftop solar is a US$625m fund, with an additional US$23m allotted for technical assistance and first-loss coverage. The programme started in May 2016 and the deadline was November 2021.

The programme is likely to be extended, given the number of unspent funds. The World Bank had disbursed US$463m to SBI, of which US$228m (49%) was disbursed

by SBI for a cumulative project portfolio of 451MW. Whilst there is no distinction as such between OPEX and CAPEX, minimum project sizes are 100 kilowatts for CAPEX models and 1MW total portfolio for RESCOs. Within the SBI network, 116 SME branches across the country have been designated to handle the World Bank credit line. To boost smaller projects, a customised loan product for projects as large as 1MW capacity is eligible for funding.

Tata Cleantech-GCF Tata Cleantech is another major lender in this space, which has obtained funds from the GCF. These loans are offered at an interest rate of 9% to 10%, and the loan tenure depends on the length of the PPA term and the creditworthiness of the customer. A majority of the projects financed by the fund are based on the OPEX

REPORT: ROOFTOP SOLAR India’s rooftop solar market is getting saturated; most big project developers are either taking the openaccess route or tapping into the international market to scale up growth

Rooftop solar installations trend in India

Source: JMK Research

model. As of August 2021, Tata Cleantech has contributed to the development of around 300MW of rooftop solar projects.

Tata Cleantech received another line of debt funding from the Commonwealth Development Corporation Group, amounting to US$30m, which will be used towards financing clean energy projects, as well as water and e-mobility solutions.

It also signed an agreement with Japan International Cooperation Agency (JICA) for as much as 10b yen (approximately US$91m) in a loan for renewable energy projects. The loan will be disbursed through the private sector investment finance scheme of the JICA and will be co-financed with the Sumitomo Mitsui Banking Corp.

Other than the concessional credit lines, there are also public NBFCs like the Indian Renewable Energy Development Agency that offer loans to the C&I segment.

Indian Renewable Energy Development Agency (IREDA) With the equity infusion of Rs15b by the government of India during the Union Budget FY2021/22, IREDA will be able

to extend an additional loan facility of Rs120b, in addition to its existing book size of Rs270b. The additional equity will also improve its capital adequacy, which will help IREDA in borrowing at lower interest rates, thus lowering the interest rates for developers. It is expected to now be able to finance around 4.5GW of renewable projects worth Rs180b-190b.

The nature of the micro, small, and medium enterprises (MSMEs) is such that they are in constant need of finance to grow their business whilst looking out for frugal ways to run their day-to-day operations.

Given that electricity costs account for between 5% and 20% of operation costs (depending on the nature of the industry), rooftop solar offers MSMEs an excellent cost-optimisation avenue.

Under its current rooftop solar fund, the World Bank has allotted US$23m as a risk cover against default as a first-loss cover. This enables SBI to lend prospective customers who are perceived as a risk.

This was a pilot project to allow the bank to absorb the initial risk. After its success, reports suggest that the World Bank is

lining up another US$100m fund to allow MSMEs to obtain concessional credits under the scheme.

The C&I market has made significant strides in adopting rooftop solar in the last four or five years in India. These are mostly good creditworthy customers with BBB+ ratings that have easy access to finance. Top project developers are also focusing on this segment. However, with this market getting saturated, most big project developers are now either taking the open-access route or tapping into the international market to scale up growth.

The MSME sector represents a future gold mine for rooftop solar adoption, considering its significant potential in electricity cost savings. Textile, food and packaging are key industries in which there is substantial rooftop solar adoption potential. However, a major barrier to rooftop solar adoption in the MSME segment was financing due to a lack of good credit ratings. Credit enhancement schemes needed to cater to the risks of this segment.

Key lenders in the rooftop solar sector in India

Source: JMK Research

What analysts say: Vibhuti Garg Energy Economist Lead India, IEEFA: Raising funds via loans from banks or non-banking financing companies (NBFC) is another possible route other than the concessional credit lines. There are also public NBFCs, like the Indian Renewable Energy Development Agency, that offer loans to the commercial and industrial (C&I) segment. Developers need to raise money through such funding, gain experience, and build a credible portfolio. This will enable them to raise debt from banks and FIs at a reasonable rate. Small developers can raise funding through consolidation to de-risk capital.

Shubhang Dwivedi Junior Analyst, Rystad Energy: Amongst the measures that can be taken to finance the rooftop sector in India include holding outreach campaigns to make MSMEs, aware of the intricate details, such as financial benefits to be accrued from investing in rooftop solar infrastructure, as well as the expenses incurred in the maintenance of the equipment. MSMEs are reluctant to take a step towards investing in rooftop solar. A well-thought-out media and outreach strategy is required to percolate the information regarding benefits and incentives that MSMEs may accrue from its installation.

Richard Edwards Senior Partner, Asia Clean Energy Partners: Regulatory certainty and a predictable enabling policy environment are critical to growth in rooftop solar electricity in India’s C&I segment. The uncertainty of net metering regulations at the time served to constrain further growth, but recent measures to clarify them should help increase demand going forward. Similarly, a lapse in duties on solar modules has given a boost to new installations by lowering costs. This duty-free period is slated to last until the end of March 2022, at which time a new basic customs duty of 40% on solar equipment is planned.

Narsingh Chaudhary, Black &Veatch’s Executive Vice President & Managing Director, Asia Power Business; Harry Harji, Associate Vice President for Black & Veatch management consulting business in Asia: India’s current cumulative rooftop solar capacity is approximately 5.1GW. The pace of implementation of such projects has remained slow due to policy uncertainty on net versus gross metering. To meet its decarbonisation targets, policies and regulations across states must be consistent and implemented from a long-term perspective.

ASIAN POWER 27

INTERVIEW

How phase-outs will impact Asia’s nuclear energy

It is expected to bring 30GW in electricity yearly with 32 reactors under construction, says Rystad analyst.

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hen France, the US, Sweden, and Russia shut down their 40-year-old nuclear reactors, the global nuclear capacity inevitably lost 5.4 gigawatts (GW). Now that plans to phase-out nuclear reactors in South Korea and Japan hang in limbo, will Asia also risk losing a portion of its capacity? Rystad Energy says it may not be the case —phase-outs will barely scathe the region’s nuclear capacity growth.

This is thanks to emerging markets, such as Pakistan and Bangladesh, that have scaled up production of energy from nuclear reactors, and even Vietnam, which is making progress in exploring small nuclear reactors.

“Many countries in Asia are ramping up the contribution from nuclear power so the nuclear phase-out plans or to reduce the dependency on nuclear power will not have a significant effect in the near term,” Karan Satwani, Rystad Energy, Analyst, Energy Services, told Asian Power in an exclusive interview.

Next to Europe with more than 170 nuclear reactors in operation, Asia leads the growth of installed capacity. The region has about 140 nuclear reactors and is the main driver of growth with 32 nuclear reactors in the works that will generate 30GW in electricity annually.

This is largely driven by China, which has at least 150 new reactors planned in the next 15 years, as well as India, and South Korea.

In an exclusive interview, Satwani discussed further with Asian Power the growth potential of nuclear energy in the region as well as continuing challenges that it faces.

Could you tell us which markets are driving the investment in nuclear energy in Asia?

Investments in the nuclear sector are driven by large Asian countries like China and India where the government bodies are planning to increase the share of nuclear power. China aims to have 70 gigawatt electrical (GWe) of operational nuclear power capacity by 2025, with ambitions to reach about 180GWe of operational capacity by 2035.

Meanwhile, India is counting on its nuclear programme to help the country meet its Paris climate commitments to reduce the emissions intensity of its economy by a third from 2005 levels by 2030. It plans to have 14.5GWe of nuclear power capacity by 2024 and about 22.5GWe by 2031, aspiring towards a 25% contribution of nuclear energy by 2050.

Apart from China, India, and South Korea, Pakistan also aims to increase its energy production from nuclear reactors to four times its current capacity by the end of 2030 to 8.8GW. Bangladesh is also set to become a new entrant in the nuclear market as their first 2.2GW nuclear plant is expected to be commissioned in 2023 and has plans to extend the nuclear capacity to 7GW by 2041. Meanwhile, Southeast Asian countries like Vietnam are progressing with early studies related to a small nuclear reactor.

As mentioned in your report, there are countries in the US and France where nuclear reactors are being closed down. Is this a scenario that can be expected in Asia and how will it affect its growth in nuclear energy?

The early adopters of nuclear power technology were primarily centred in Europe and the Americas where many plants were commissioned in the 1970s are approaching the end of their technical life leading to the closure of these plants. In Asia, some nuclear power plants in Japan are approaching the end of their life 28 ASIAN POWER

Nuclear reactor phase-outs will barely scathe Asia’s nuclear capacity growth (Photo: Karan Satwani, Analyst, Rystad Energy)

Investments in the nuclear sector are driven by large Asian countries like China and India

cycle and with the country’s plans to reduce dependency on nuclear power, we could see some plants being closed down after 2030.

A decline in installed capacity is expected, provided the countries like South Korea and Japan stay firm on their plans to phase out nuclear power. Many countries in Asia are ramping up the contribution from nuclear power so the nuclear phase-out plans or to reduce the dependency on nuclear power will not have a significant effect in the near term and the installed capacity in Asia could see positive year-on-year growth and reach the peak by 2040.

What is the role of nuclear energy in the clean energy transition?

Should it be considered “green”?

Nuclear plants generate electricity through fission, without any fossil fuel combustion. Having the lowest land requirements of the low carbon energy sources can generate power 24/7 unlike wind power and solar energy.

Although it requires high capital cost upfront, nuclear operations can be cost-competitive with renewables over the long run.

Many countries have committed to increasing the share of power from nuclear energy to meet the Paris Agreement targets. But the political and economic environment, and the public lack of support, could make the prospect of accomplishing these ambitious objectives difficult. However, there is a need for innovation in replacing power plants reaching the end of their lives, and adding new power plants to the existing fleet.

Nuclear power has been identified as a clean, low-carbon power source with a long lifespan. It may be on the brink of a resurgence as the EU prepares a draft proposal to classify it as a green investment.

ANALYSIS: RENEWABLE ENERGY

Renewables growth in Asia risks collapse without transmission system expansion Black & Veatch says this will need government policies, investment, and storage capacity.

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hen Vietnam grew its solar power to 16.8 gigawatts (GW) between 2019 and 2020, it showed great potential in renewable energy.

But significant growth such as this needs to be backed up by a reliable transmission system—a lesson Vietnam learned the hard way as its grid overloaded, forcing it to restrict power.

After seeing its solar power rise to approximately a quarter of its grid capacity when Ninh Thuan and Binh Thuan overloaded, the country was forced to restrict some 365 million kilowatt-hours of power. Black & Veatch, Asia Power Transmission & Distribution Director Jerin Raj said this is in part due to the absence of enhancements to its power grid and transmission network.

As renewable energy grows rapidly across the region, countries in Asia may need to take note of Vietnam’s experience and strive to have better planned and designed systems, Raj urged.

“With wind and solar resources often located far from existing transmission lines, alongside other factors, such as the expansion of distributed energy resources and increasing bidirectional flows, Asia’s transmission and grid systems need more investment to manage a successful energy transition,” Raj said.

In its 2022 Asia Electric Report, Black & Veatch found that nearly 44% of respondents from the electric power industry agreed that issues in government policies, stemming from debates over decarbonisation, are the biggest challenge for reliable grid operations and performance in Asia.

This is followed by underinvestment in more reliable transmission networks and insufficient energy storage capacity as cited respectively by 36.8% and 31.6% in the report. The report surveyed 57 senior electric industry professionals.

Raj said transmission and distribution systems will need to expand as well as be invested in to support the growth of decentralised power that will help in optimising generation and enhancing grid stability and reliability.

Hurdles to reliable grid Amongst the key issues that set back Asia in further improving and developing transmission networks are concerns over land acquisition and right-of-way access (37.3%). This is followed by the poor understanding of the integral and rising

Asia’s transmission and grid systems need more investment to manage a successful energy transition

role of enhancements to the electric system (25.5%), as well as the lack of government policy support (19.6%).

“There is a clear need to increase awareness amongst government and other public stakeholders around the role of transmission in improving the effectiveness of renewable integration and achieving a successful energy transition,” Raj said.

Aside from these, other major challenges to a grid’s reliability include ageing infrastructure (26.3%), investment in network capacity that fails to keep up with demand growth (24.6%), and the introduction of too much variable renewable energy (19.3%).

Raj said as grid operations have become more complex due to a shift to more distributed and intermittent renewable plants and distributed energy resources from larger power plants, the electricity industry is called to reevaluate its system.

“These dynamics call for Asia’s electricity industry to re-evaluate transmission and distribution systems and conduct more advanced and interconnected planning and design across these systems,” he said.

“Partnering with industry leaders experienced with every aspect in the lifecycle of projects from early financing through to commercial operation will be key to expanding Asia’s transmission networks for renewable integration success.”

What more can be done?

There is no doubt that investment is needed for a more reliable transmission system, and according to Black & Veatch, private equity money is ready to be allocated with

Jerin Raj

Narsingh Chaudhary

Investment is needed for a more reliable transmission system

investors interested in generating facilities.

On the government side, funding for such infrastructure either comes from publicprivate partnerships as well as international financial institutions, like the World Bank and Asian Development Bank (ADB).

“As with any infrastructure, there has to be a revenue plan which allows for a build, own, and operate kind of model,” Narsingh Chaudhary, Executive Vice President & Managing Director, Asia Pacific, Black & Veatch said.

“I see some state grids having a strong enough balance sheet to be able to do it on their own, but there are others who will really need financial support.” This is where the World Bank and ADB could come in to help these state utilities in upgrading their infrastructure.

Chaudhary compared having enough generation without a strong and stable transmission to running a manufacturing business without access to roads and ports which is key in distributing your products.

“There is engagement required from financial institutions for those state grids who can’t afford it. And for those who can afford it, they need to really ensure that they are matching up step-by-step with the generation plans which are there,” Chaudhary told Asian Power.

Chaudhary said amongst the markets that have performed well in improving their transmission systems are the Philippines, China, and Australia. Singapore is also amongst the markets that are ahead of the game after its Energy Market Authority stepped in to help in importing clean and renewable energy.

ASIAN POWER 29

Asian Power honours the winners of the first-ever Asian Oil & Gas Awards

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ith the world’s constant motion fueled by innovation in energy, the Asian Oil & Gas Awards shines the spotlight on companies with influential roles that led to the transformation of Asia’s oil and gas industry—a major industry that powers the global economy. Despite the challenging environment especially in the last couple of years, these outstanding companies have remained steadfast in their purpose and have risen above the hurdles.

The winners established their crucial contributions to the industry after the scrutiny of an esteemed panel of judges consisting of Sanjeev Gupta, Partner, Asia Pacific Oil and Gas Leader, ASEAN Energy Market Segment Leader of Ernst & Young; Tim Rockell, Managing Director of Energy Strat Asia Pte. Ltd. Singapore; and Gervasius Samosir, Partner of YCP Solidiance.

Awards presentations were held virtually on 20 December 2021.

ASIAN OIL & GAS AWARDS COVID Management Initiative of the Year - India • Indian Oil Corporation Ltd. COVID Management Initiative of the Year - Singapore • Shell Eastern Trading (Pte) Ltd Digital Transformation Initiative of the Year - India • HPCL Mittal Energy Limited Digital Transformation Initiative of the Year - Saudi Arabia • Saudi Aramco - Yanbu Refinery Digital Transformation Initiative of the Year - Singapore • Shell Eastern Trading (Pte) Ltd.

HMEL

Downstream Project of the Year - India • HPCL Mittal Energy Limited Health and Safety Initiative of the Year - India • Technip Energies Innovation of the Year - Saudi Arabia • Saudi Aramco - Yanbu Refinery New Product of the Year - India • Indian Oil Corporation Ltd. Operations and Maintenance Initiative of the Year - India • Technip Energies Operations and Maintenance Initiative of the Year - Thailand • The Shell Company of Thailand

Indian Oil Corporation Ltd.

Plant/Facilities Upgrade of the Year - Thailand • The Shell Company of Thailand

Technip Energies

30 ASIAN POWER

OPINION

TIM BUCKLEY Financing the future of green hydrogen TIM BUCKLEY

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n this ongoing global energy system transformation, the outcome is as inevitable as it is overdue.

A number of factors are accelerating the shift from the current green hydrogen (GH2) cottage industry to the global gigawatt-scale commercialisation that will take place this decade.

Energy cost deflation Investors understand the power of experience curves, coupled with ongoing technology innovation and massive manufacturing supply chain scaling up.

The power of industry disruption was proven with mobile phones and the internet. Now the focus is on decarbonising energy, propelled even faster as the power and transport sectors converge, with ongoing deflation in battery costs and improved performance.

China is massively committed to dominating zero carbon growth industries of the future. It is on track to quadruple global polysilicon manufacturing capacity by 2024 vs last year. Solar installs globally could double or treble again within three years.

Tie this to the huge change in the economics of GH2 and ever-lower variable renewable energy (VRE) costs, and we have electricity market deflation and disruption.

Australia is clearly showing the world’s electricity market the future. On sunny days –10am to 3.30pm daily – electricity prices are now negative. EVs, batteries and pumped hydro can absorb some of this negative cost electricity, but low-capacity factor GH2 facilities will profiteer on spilled electricity as electrification of everything drives decarbonisation.

Electrolyser manufacturing is scaling up The move from tiny batch manufacturing to gigawatt (GW) scale manufacturing is moving at lightspeed, a key driver of the expected massive initial capital cost reductions in GH2.

Nel moved from 40 megawatts (MW) to 500MW in 2021; ITM Power from 100MW to 1000MW. Thyssenkrupp targeted a fivefold expansion to 5GW of manufacturing capacity online by 2025, and FFI and Plug proposed 2GW of manufacturing capacity at Gladstone, Australia.

Electrolyser facilities are scaling up, too Electrolyser unit sizes are moving from 0.2MW to 5MW − a massive twentyfold scaling up again. BNEF estimates electrolyser capacity globally at 15GW by 2024.

Global production was 70MW in 2020, which itself was a doubling from the prior year, according to the IEA. The capital cost of electrolyser units will come down dramatically with manufacturing supply chain scale and facility scaling up.

In February 2020, the largest operational GH2 facility (10MW) opened in Japan. In January 2021 Air Liquide opened a 20MW facility in Canada.

At the same time as this facility was commissioned, construction started on a 100MW facility in Germany and Shell’s Rhineland electrolyser, known as Refhyne. Assuming completion on time, this is another fivefold expansion in just four years.

In January 2022, thyssenkrupp and Shell announced a 200MW unit in Rotterdam, to be commissioned by 2024/25 − another doubling even before the 100MW facility is built.

New Zealand is even more ambitious, with Meridian and Contact Energy proposing a 600MW facility for a 2025/26 start-up.

IHS Markit in mid-2020 aggressively predicted 100MW facility sizes by 32 ASIAN POWER

Director Energy Finance Studies, Australia/South Asia, IEEFA

2030 −18 months later that timetable has been accelerated five years.

All-in electrolyser capital costs by 2030 could be down 50% from today, or even 80%. And the learning experience will be huge, with tenfold expansion every couple of years.

Government decarbonisation commitments give GH2 policy support Last year’s ambitious pledges for net-zero emissions by mid-century were staggering, if long overdue. With this comes the policy framework to reset the rules of industry engagement, destroying some companies’ social licence to operate. It is also accompanied by government funding of everlarger pilot projects.

China pledged peak emissions by 2030 and net zero emissions by 2060.

Japan and Korea pledged net zero emissions by 2050. These countries are Australia’s largest fossil fuel export destinations, and have now become a trade risk for the country.

In December 2021 China’s State-owned Assets Supervision and Administration Commission of the State Council (SASAC) committed the five largest utilities in China (and the world) to have more than 50% of their total capacity (not generation) in renewable energy by 2025, just three years from now. They will probably double China’s VRE installs annually.

Japan’s JERA and MHI this month announced government approval and sponsorship for two GW-scale pilot projects for 50% ammonia co-firing of coal-fired power plants, central to Japan’s pledges.

Although the U.S. is late to the GH2 party, President Biden announced the Department of Energy’s Earthshot of $1 for 1kg of clean H2 in one decade in October 2021. This is predicated on electrolyser capital costs dropping 90% this decade, coupled with renewable energy costs dropping another 60%.

Pricing of CO2 emissions is building, globally Most economists agree the most effective way to deal with climate change is to price in this massive externality. Currently, fossil fuel firms and their product users don’t pay the externalised cost of CO2 emissions.

That is changing with a trebling of the EU emission trading scheme (ETS) price in 2021 and, interesting in the absence of policy, a trebling of the Australian carbon credit unit (ACCU).

The huge momentum in CO2 pricing globally over 2021 demonstrates the snowballing of policy, finance and technology. The EU ETS at one point last year trebled to a record €90/tonne, a tenfold rise in five years.

The largest ETS in the world was launched in July 2021 in China, and in January 2022 government reports already suggest a pending significant tightening of free permits.

In Australia gas company Santos expects taxpayers to subsidise its carbon capture for enhanced oil recovery (CCUS-EOR). In the rest of the world, CO2 remaining an un-costed externality is rapidly losing currency.

Corporate commitments require a credible pathway, and global investors are demanding corporates now have a credible path to zero carbon with credible interim targets.

The world’s largest financial institution, BlackRock with US$10 trillion of assets under management has demanded all corporates it invests in have credible short, medium and long term plans dealing with CO2 emissions, a path to net zero emissions, alignment with the Science Based Targets initiative (SBTi), observance of the Task Force on Climate-related Financial Disclosures (TCFD) and newly formed International Sustainability Standards Board (ISSB) standards, and a ramping-up of the Climate Action 100+, corporate engagement and proxy voting.

While IndianOil takes stride towards being an integrated energy company with increasing focus towards clean energy to realize India’s vision of net-zero emissions in the future, the company also lays equal emphasis on conservation of natural habitat.

Adopting the Indian Single Horned Rhino as its Brand Mascot was indeed a step towards protecting this endangered species.

The Corporation will also be steering the ‘Cheetah Introduction Project’ at Kuno National Park in Madhya Pradesh, India.