ISSUE 105 | DISPLAY TO 30 SEPTEMBER 2022 | www.asian-power.com | A Charlton Media Group publication US$360P.A. SOLAR PHILIPPINES FLAGGED THE PRIVATE SECTOR’S LACK OF FORESIGHT TO PREPARE SOLAR PROJECTS TO MEET HIGH DEMAND LONG WAY TO GO MASDAR GAINS FOOTHOLD IN SEA WITH THE LARGEST FLOATING SOLAR PV PLANT IN INDONESIA THIS YEAR WHAT HAPPENS TO CLP POWER AS HONG KONG TARGETS CARBON NEUTRALITY BEFORE 2050 HOW RUNNING THE JAWA-7 COAL POWER PLANT HELPS INDONESIA’S CLEAN ENERGY TRANSITION REGIONAL GRID CONNECTION CAN BOOST ENERGY TRANSITION, ECONOMIC GROWTH IN APAC Leandro Leviste CEO and Founder, Solar Philippines PowerAsian105No.Issue
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FROM THE EDITOR
In this issue, we highlight some significant obstacles to the ongoing sustainability and net-zero initiatives of AsiaPacific’s power sector and the potential stakes if carbon pricing is not imposed. Southeast Asia, in particular, faces an uphill battle in the deployment of carbon capture, usage, and storage technology without carbon pricing. We sat down with Masdar President Director for Indonesia Eng. Fatima Al Suwaidi to discuss the company’s expected launch of what would be the largest floating solar photovoltaic power plant in Indonesia this year. Read the exclusive interview on page 14. We also chatted with Solar Philippines CEO and Founder Leandro Leviste to talk about the lack of foresight in the Philippines’ private sector to meet the increasingly high solar energy demand. Read the full interview on page 18.
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ASIAN POWER 1
We also feature industry experts discussing the ongoing decarbonisation efforts of AsiaPacific’s power sector, and the solutions to boost the region’s energy transition and economic growth in this year’s Asian Power Summit. See the full event coverage on page 26. Read on and enjoy!
2 ASIAN POWER CONTENTS Published Quarterly by SG: Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building Singapore 069533 For the latest news on Asian power and energy, visit the website www.asian-power.com HK: Room 1006, 10th Floor, 299QRC, 287-299 Queen’s Road SheungCentral,Wan, Hong Kong 06FIRSTS Pakistan’s energy security at stake 07 ‘It’s now or never’: UN panel urges immediate action on climate change 08 APAC electricity demand to grow 3.4% in 2022 CEO INTERVIEW PRIVATE FIRMS ECLIPSE THE PH’S SOLAR POWER INDUSTRY18 16 INDUSTRY INSIGHT SOUTHEAST ASIA FACES UPHILL BATTLE IN CCUS DEPLOYMENT WITHOUT CARBON PRICING 26EVENTOPINIONCOVERAGE Road to energy transition: Why are Asia’s decarbonisation efforts falling short 28 Regional grid connection can boost energy transition, economic growth 30 As high LNG prices lure exporters into the market, Asian buyers may look for the exit 32 Three imperatives for the utilities sector in the clean energy transition 14 INTERVIEW MASDAR GAINS FOOTHOLD IN SEA WITH SOLAR PROJECT 20VOXINTERVIEWPOP Asia to consume over half of the world’s energy 22 The future of CLP Power amidst net-zero transitions 24 How running Jawa-7 helps in clean energy transition 25 Will phase-outs harm Asia’s nuclear energy growth 10 What is at stake if carbon pricing is not imposed?
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When Vietnam grew its solar power to 16.8 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.
REGULATION ENVIRONMENT PROJECT POWER UTILITY
The conflict between Ukraine and Russia that sparked in February have hit the global gas markets, including Asia, Rystad Energy said. Spot prices of Asian liquefied natural gas (LNG) is expected to reflect the widespread volatility and risk premiums on the title transfer facility benchmark in Europe.
Renewables growth risks collapse sans transmission system expansion Asia’s coal reliance to remain despite clean energy transition Ukraine-Russia conflict to hit Asian LNG market
Whilst Indonesia coal export ban is expected to be temporary, China is seen to be negatively affected as Indonesia became a “key alternative supplier” of seaborne thermal coal to China due to trade relations issues between China and Australia in 2020. India has already crossed 100GW of installed renewable energy capacity and is on its way to increase that four-fold to 450 GW 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 that will have to be dealt with in the future.
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 at the earliest.
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The 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. The GWEC said it has an “appropriate permitting and auctioning infrastructure in place and was on track a decade ago to rely primarily on renewable energy.” China will be most affected if Indonesia’s coal export ban becomes indefinite India faces solar waste crisis as recycling is not economic Philippines may become ‘regional leader’ in wind power
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The agency also said that LNG price increases and supply insecurity can also affect the economy which widely utilises natural gas. It cited the power sector which saw LNG fuel shortages forcing 3,500 megawatts of power capacity to go offline since December 2021 and contributed to local load shedding of 10 to 18 hours daily in recent weeks.
2020 FIRST Haneea
LNG
IRENA added that Asia, North America, and Europe will account for more than 80% of installations by 2030, with North America having to increase its capacity by five times to reach 1,882GW by 2030, and Europe by three times to reach 1,573GW capacity.
Pakistan’s reliance on imported liquefied natural gas (LNG) to replace the declining reserves of natural gas put at stake the country’s energy security and financial stability, according to a report by the Institute of Energy Economics and Financial Analysis (IEEFA).
The country imported 7.4 million tonnes of in Isaad Sam Reynolds
It also noted that textile mills in Punjab also had to close for over two weeks in January due to fuel shortages that resulted in the loss of $250m worth of materials exports or 20% of the textile sector’s annual revenue.
IEEFA noted that LNG has been unreliable and suppliers under long-term contracts with Pakistan have defaulted on at least 11 cargoes since January 2021, which contributes to fuel and power shortages in the country. Other problems surrounding Pakistan’s energy sector include final tariffs not reflective of gas costs, inefficient cross-subsidisation of gas tariffs, and high volumes of unaccounted for gas that were lost in transportation.
Ensuring energy security Using existing LNG supply more efficiently by changing regulatory incentives, rationalising tariff structures, and implementing energy efficiency programmes, should be the focus of Pakistan in the near term.
It added that coal-fired generation will drop sharply over the decade, with its share in the total electricity generation falling to 11% in 2030 from 37% in 2019, before being phased out by 2050. Natural gas will account for 16% of total electricity needs in 2030 from 24% in 2019, whilst nuclear capacity will remain steady at around 10%. more LNG is injected to this faulty network, financial issues in Pakistan’s gas sector are likely to worsen
“As more LNG is injected to this faulty network, financial issues in Pakistan’s gas sector are likely to worsen significantly,” Reynolds said. “Circular debt, chronic cashflow shortages that have historically plagued Pakistan’s power sector, is now rampant in the gas sector.”
“Renewables-based electricity is now the cheapest power option in most regions,” the IRENA report“Thesaid.global weighted-average levelised cost of electricity from newly commissioned utility scale solar photovoltaic (PV) projects fell by 85% between 2010 and 2020. The corresponding cost reductions for concentrated solar power were 68%; onshore wind, 56%; and offshore wind, 48%,” it added. Overall, an annual average of at least 800GW of new renewable capacity through 2030, an increase from around 264GW addition in 2020 is needed to decarbonise the global power sector mid-century and fulfill the 1.5°C Scenario. Increasing RE capacity by 2030 The installed generation capacity of renewable power has to reach 10,770GW in 2030, and 27,800GW by 2050, an increase by four-fold, and 10-fold, respectively, according to IRENA. Electricity generation will have to expand to over 42,100 terawatt-hours (TWh) by 2030 from 26,900TWh in 2019, with 65% of the total electricity supply coming from renewable sources, compared to 26% in 2019, according to one of the key performance indicators.
ASIA NEEDS TO INCREASE RE CAPACITY BY 2030 TO FULFIL CLIMATE TARGETS
Isaad added that having more coherent strategies for LNG procurement and tenders and maximising the use of existing terminals can also help improve energy security without adding new majorTheinfrastructure.IEEFAaddedthat accelerating the adoption of new utility-scale and behindthe-meter renewable energy and battery storage projects can also help limit demand for LNG in the country’s largest gas consumer which is the power sector.
In the World Energy Transitions Outlook 2022 report, IRENA said, the region would also have to increase its renewables capacity by nine times to reach 12,556GW to achieve the 1.5°C scenario.
Pakistan’s energy security at stake
IRENA added that solar and wind energy will lead the renewables installed capacity, with solar PV seen to exceed 5,200GW by 2030, and wind installations to reach 3,300GW.
6 ASIAN POWER
ASIA PACIFIC As
The country’s LNG imports could increase to more than $32b by 2030, from nearly $2.5b in 2021, according to a report co-authored by Energy Finance Analysts Haneea Isaad and Samuel Reynolds, with Isaad noting that LNG sourced from global markets has become five to 10 times higher than domestically produced gas.
“Pakistan’s vulnerability to commodity market shocks has only been increasing in the wake of the Ukraine crisis,” Reynolds said in a statement. “Coupled with the global economic recovery from the COVID-19 pandemic, price-sensitive countries such as Pakistan may be unable to compete with wealthier buyers in Europe and Northeast Asia.” LNG imports in Pakistan reached 7.4 million tonnes in 2020, and its demand is expected by the government to grow at a fast pace over the next decade. The agency added that at least four major LNG import terminal projects are at various developmental stages.
“In Pakistan’s textile sector, power generation costs can amount to roughly 30-40% of the production costs,” Isaad said. “Since the textile industry depends on gas-based power generation, rising LNG prices can grossly reduce the sector’s profit margins.”
The Middle East and Africa have to increase their capacity by 13 times to reach 993GW by 2030, whilst Oceania/Pacific has to ramp up its capacity by four times to react 172GW in the same period. Latin America needs to increase its capacity by three times to push its renewables capacity to 708GW by 2030.
Reliance on imported LNG would “only reinforce credit risks for investors in the country’s LNG-to-power value chain,” IEEFA said. It added that it may take time for projects and terminals in the pipeline to materialise due to geopolitical conflicts and unviable economics which worsen stranded asset risks for LNK infrastructure.
Asia has to increase its renewable energy capacity by four times to reach 5,442 gigawatts (GW) by 2030 from 1,338GW in 2020 to meet the target of limiting global warming to 1.5 degrees Celsius, according to the International Renewable Energy Agency (IRENA).
PAKISTAN
Achieving net-zero Various policies and laws have been put in place that have enhanced energy efficiency, reduced deforestation rates, and accelerated renewable energy deployment, it said. “We are at a crossroads. The decisions we make now can secure a liveable future. We have the tools and know-how required to limit warming,” said IPCC Chair Hoesung Lee. “I am encouraged by climate action being taken in many countries. There are policies, regulations, and market instruments that are proving effective. If these are scaled up and applied more widely and equitably, they can support deep emissions reductions and stimulate innovation,” Lee added.
ASIAN POWER 7
We are at crossroads.a
INDIA NEEDS UP TO $250B INVESTMENT TO REACH 2030 RE GOALS: MOODY’S India would need $225b to $250b in renewables investment from both public and private sectors over the next eight years to reach its renewables capacity target of 500 gigawatts (GW) by 2030, according to a report by Moody’s Investors Service. Aside from investments, this would also need continuous policy support from the government, Moody’s said, noting that the country’s significant expansion of renewable energy footprint in the last four to five years was due to the supportive government policies that encouraged the domestic private sector and overseas investors to participate in the sector.
Despite efforts in place, initiatives to cut greenhouse gas emissions in all sectors must be stepped up to meet the world’s target of limiting warming to around 1.5 degrees Celsius, according to the United Nations Intergovernmental Panel on Climate Change (IPCC). The IPCC released its Climate Change 2022: Mitigation of climate change report, assessing the measures put in place to reduce carbon emissions globally as well as their long-term impact to emissions goals. In a statement, the panel said global gas emissions should peak before 2025 at the latest and be reduced by 43% by 2030, whilst methane should be reduced by about a third to limit the warming to around 1.5 degrees Celsius. However, it said that it is almost unavoidable that the limit will “temporarily exceed” the temperature threshold but it ‘It’s now or never’: UN panel urges immediate action on climate change
Meanwhile, using materials more efficiently, reusing and recycling products, and minimising waste can reduce emissions in the industry sector which accounts for about a quarter of global emissions. For basic materials such as steel, building materials, and chemicals, the IPCC said low to zero-greenhouse gas production processes are at the pilot to near-commercial stage. could return to below the target by the end of the century. “It’s now or never, if we want to limit global warming to 1.5°C (2.7°F),” IPCC Working Group III Co-Chair Jim Skea said. “Without immediate and deep emissions reductions across all sectors, it will be Accordingimpossible.”tothe panel, global temperature will stabilise when carbon dioxide emissions reach net zero and this means achieving it in the early 2050s for the 1.5 degrees Celsius threshold, and early 2070s for the 2 degrees Celsius target. To limit warming to around 2 degrees Celsius, greenhouse gas emissions should also peak before 2025 and be reduced by a quarter by 2030. The IPCC said that the average annual global greenhouse gas emissions were at the highest levels in 2010 to 2019 but the
The decisions we make now can secure a liveable future growth rate has slowed. It said that in 2010, there have been sustained declines of up to 85% in the costs of solar and wind energy, and batteries.
“The country aims to triple its renewable energy capacity to 500GW by 2030 from 157GW as of March 2022, and to have 50% of the electricity generation from non-fossil fuel sources,” said Abhishek Tyagi, a Moody’s Vice President and Senior Credit Officer.
“The key enabler will be the competitiveness of wind and solar generation over coal-fired power generation because of technological developments, supportive government policies, private sector participation,” he added. Moody’s said the private sector has led the investments in renewable energy, contributing over 90% of the installed renewable capacity, excluding hydropower, whilst sovereign wealth funds have been active despite typically having a low cost of State-ownedfunding.distribution companies’ weak financial health will remain a challenge for India’s renewable energy sector, it said. It added that the common delays in payments to these companies lead to a build-up of receivables from off-takers and an increase in working capital debt for renewable energy firms. India plans to reach net-zero carbon emissions by 2070.
ASIA PACIFIC Gas emissions globally should be reduced by 43% by 2030
The county targets a 500GW renewable energy capacity by 2030 Jim HoesungSkea PriyadarshiLeeShukla
The panel also said that cities and other urban areas also offer “significant opportunities” for emission reductions through lower energy consumption, electrification of transport in combination with low-emission energy sources, and enhanced uptake and storage using nature.
FIRST
Priyadarshi Shukla, co-chair of the IPCC Working Group III, greenhouse gas emissions can be reduced by 40% to 70% by having the right policies, infrastructure, and technology that will allow lifestyle and behaviour changes.
FIRST
“Solar and wind power is no longer a sole matter of incremental power supply, but also an insurance policy for jobs, hard currency earnings, economic growth, and a conduit for sustainable investments,” she added.
The future of Vietnam’s manufacturing sector will depend on the country’s renewable energy strategy as its economy has “unparalleled exposure” to multinational companies who are joining the call for carbon neutrality, according to the International for Energy Economics and Financial Analysis (IEEFA).
The project will be led by Terra Solar Philippines (Terra Solar), which is a unit of Terra Renewables Holdings, Inc.
Vu said the revenue stream of Vietnam, currently the largest exporter of goods in developing Southeast Asia, for this decade will depend on its “ability to plug factories to a low-carbon grid.”
Credible decarbonisation strategies Corporate adoption of clean energy can be observed in the rapid growth of distributed power solutions such as commercial and industrial (C&I) rooftop solar systems which will help ease demand, grid congestions, and relieve the pressure on state utility Electricity of Vietnam to develop and fund new capacity, she said.
Electricity demand in the Asia Pacific region is expected to grow at around 3.4% in 2022, a downward revision by over one percentage point from the early 2022 forecast, according to a report by the International Energy Agency (IEA).
The C&I rooftop solar segment has also been driving capacity quietly this year amidst a temporary policy freeze on utility-scale projects as developers and their financiers tap into Vietnam’s “largely under-served and growing industrial space.”
The scheme, which will relieve EVN of tariff pressures according to Vu, is highly anticipated by energy-intensive corporate consumers who have insufficient access to adequate onsite renewable resources.
The IEA said the downward revision is mainly driven by the lower economic growth, high energy prices, strict sanitary measures, and extended effects of coal shortage for power generation. Demand in China is expected to increase by 3% this year, according to IEAChinareport.posted a 0.5% year-on-year increase in the first five months of 2022, as it has seen a decline in April and May as zero-COVID strategy measures were in place due to new outbreaks, which strongly affected energy consumption, with some industries forced to top their“Theoperations.outlookfor the rest of 2022 remains highly uncertain and will depend on the stringency of sanitary measures. Potential reform of China’s ‘dual control’ policy, which would replace caps on total energy consumption and energy intensity by caps on total carbon emissions and carbon intensity, could trigger an increase in total demand,” it said.
“These brands’ journey toward sustainability progress is one in which Vietnam cannot afford to ignore or miss out on,” she said.
8 ASIAN POWER The outlook for the rest of 2022 remains uncertainhighly APAC ASIA3.4%demandelectricitytogrowin2022PACIFIC
VIETNAM
Multinational companies who are responsible for up to $150b of the countries have made pledges on carbon neutrality and decarbonisation with varying timelines said Energy Finance Analyst Thu Vu in her report.
The government, meanwhile, is undertaking regulatory and technical preparatory work for an offsite corporate renewable energy procurement scheme known as the Direct Power Purchase Agreement, which is expected to be deployed from 2023 to 2024 with an initial cap of one gigawatt (GW).
She also said that the corporate renewable procurement market in the Asia Pacific region is increasing, led by India which currently has a 5.2GW capacity.
CREDIBLE RE STRATEGY WILL BOOST MANUFACTURINGVIETNAM’SSECTOR
Jurong Island’s energy storage Athena’s largest rooftop solar World’s largest solar facility PLANT SINGAPOREWATCH
Athena Energy Holdings has commissioned a 26.15-megawatt (MW) rooftop solar project, which is considered as the largest one in Vietnam.Thelandmark project, known as the Shundao Rooftop Solar Project, is expected to produce an average of 34 million kilowatt-hour of energy every year. It is estimated to offset some 33,898 tonnes of carbon emissions, which is equivalent to to at least 8,000 cars on the road per year for the next two decades.
For 2023, demand growth will be close to 4% in APAC
Eco-industrial parks are also rising in the country as owners explore clean energy solutions to attract environmental, social and governanceconscious tenants.
VIETNAM PHILIPPINES
If renewables supply the additional demand, a rise in total demand beyond the existing caps is possible, it said. India, on the other hand, is expected to have its demand grow to 7%, up from the previous forecast of 6%, following the heatwave the country experienced. With temperatures increasing up to 50 degrees Celcius, air conditioning use is boosted, creating a surge in electricity demand, including new-all-time highs along with supply shortages, the energy agency said. Overall for 2023, the IEA expects demand growth of close to 4% in the region, “making up for some of the 2022 slowdown.” China’s electricity demand is expected to be over 4% next year, on the back of recovery from suppressed demand in 2022. The IEA, meanwhile, revised its growth forecast for India to 5% in 2023 from 6%, due to the expected impact of high global prices and a correction against temperaturedriven growth in 2022.
Sembcorp Industries, through its wholly-owned subsidiary Sembcorp Utilities, has been chosen by Singapore’s Energy Market Authority to build a 200-megawatt (MW)/ 200-megawatt-hour (MWh) energy storage system on Jurong Island. In a statement last week, Sembcorp Industries said the project is expected to be completed by the end of 2022. The company’s battery storage portfolio in Singapore and the UK is now 474MW/624MWh,atmaking it one of Asia Pacific’s largest battery operators.
Philippines-based Prime Infrastrastructure Holdings, Inc. (Prime Infra) plans to develop the world’s largest solar power facility with a 2,500MW to 3,500MW capacity, along with a battery energy storage system that will augment the country’s renewable energy supply. In a statement, it said that the facility will have a capacity of 2,500 megawatts (MW) to 3,500MW, combined with a 4,000MW-hour (MWh) to 4,500MWh of battery capacity.
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As of 2022, 68 different carbon pricing initiatives (Carbon Tax/ETS) have been implemented, covering 46 national jurisdictions and 12GtCO2e or 23% of global emissions – Asia-Pacific nations such as China, South Korea, and New Zealand have deployed a national carbon pricing initiative.
Ideally, if countries can start anywhere between US$10 – US$30 per tonne in the short term and ramp it up to US$100 per tonne by 2030, it will provide the right signals to industries to decarbonise the value chain whilst also promoting cleaner energy options across the economy.
[Without carbon pricing, the world risks] missing climate goals and, subsequently, people suffering from the impact of climate change.
According to the World Bank carbon pricing dashboard, there were 33 national jurisdictions covered by already implemented carbon pricing initiatives globally as of 1 April 2022. Only a handful of these is seen to be within the Asia Pacific region.
ASIA PACIFIC Aman BostonModiConsulting Group, Managing Director and Partner: Carbon price/tax is only one of the many tools to enable or accelerate the transition to cleaner energy. The reason carbon price/tax gets disproportionate attention is that it is the most secular measure. Asia is far from being the only place with limited such mechanisms, and the picture across Asia needs to be deaveraged.
China’s emission trading scheme establishment has marked a significant milestone. Whilst the scope and carbon price are largely still limited, with prices fluctuating below $10/tonne, the signal is very clear that change is underway. South Korea has the most well-established carbon pricing regime in the Asia-Pacific region. In 2022, Singapore’s finance minister stated the plan to aggressively increase their carbon price from sub $4/tonne to reach between $37-60/tonne in 2030.
When it comes to clean energy transition policy, the carbon price is the elephant in the room that many politicians tend to dodge. But one way or another, some forms of pricing will need to be embedded in the emissions to support the transition. Some companies choose to embed ‘internal carbon price’ in their decision process, but there is no substitute to sound government policy in attaching a price on emissions to level the playing field.
Most countries in Asia are expected to include a carbon pricing policy to help meet their net-zero aspirations. However, a single carbon price may be difficult to impose as it will have to be tailored to each country’s national circumstances and economic context. By most estimates, a target carbon pricing of US$100 per tonne is expected to help fast-track the decarbonisation and energy efficiency as well as the green agenda better. However, it will take around a decade to reach that level of carbon pricing in Asia.
Putra IEEFA,AdhigunaEnergyAnalyst:
As the EU starts implementing measures such as CBAM to charge carbon taxes on goods sold in the EU regardless of the location of production, we expect an acceleration in the application of carbon taxes in export-oriented economies across the world, including in Asia – this will be critical to maintaining the competitiveness of these economies.
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What is at stake if carbon pricing is not imposed?
Yvonne Lam Rystad Energy, analyst: In General, the carbon prices in APAC are very low compared to Europe. Developed nations in the region, such as Japan, Korea, and Singapore, have already implemented carbon pricing for years, whilst China just started its national ETS last year. There have been some hurdles in China’s ETS system, and the pricing remains relatively low ($10/tonne). SEA countries plan to implement carbon pricing in this decade, but it is also expected to be at a low level. Carbon pricing is very crucial in the energy transition. It is basically putting a price on emissions, making it a commodity, and creating a market that was absent previously. A high penalty for carbon emissions could accelerate the energy transition, especially for heavy emitters. For technology such as carbon capture, which doesn’t generate any revenue and only adds cost to emitters, the carbon price justifies the investment.
Indonesia’s plan for a $2/tonne carbon price for the power sector faced some delays but is expected to be rolled out this year. Each APAC country will undoubtedly look at its peers in anticipating future changes, as the world pays greater attention to carbon emissions.
To see a change in behavior and also a change in attitude towards climate change, the ideal price would be above $75 per tonne. Still, for some countries whereby citizens are struggling even to have food on the table, this can be a considerable challenge.
Further, countries such as Singapore and Indonesia have already announced carbon taxes, albeit starting with low bases of $5 per tonne or below before rising to higher numbers – several other countries such as Japan, Thailand, Malaysia, and Vietnam are actively considering implementing a tax or Emissions Trading Scheme (ETS).
Sharad Somani KPMG Asia, Partner and Head of Infrastructure: The majority of jurisdictions in the Asia Pacific are still considering carbon pricing initiatives or have yet to implement scheduled initiatives. With the Asia Pacific responsible for about 40% of global emissions, much more can be done in implementing carbon pricing in the region.
No country will find carbon pricing is easy to implement, but it’s best to get prepared sooner rather than later.
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Powering up on maintenance to optimise power plants
It will also lead to a significant reduction in CO2 emissions. When you do good service planning and execution, you can save money by improving efficiency. You’re saving on fuel consumption, saving money, and still producing the same energy that you’re expected to sell. Less fuel burned also means reduced emissions. The maintenance, it’s always tied to the economics of the power plant and compliance with regulations and policies.
How do you help power plants in the region improve reliability?
We collect the data from the plant, monitor it remotely, analyse it; and then we provide customers with different services that would come out of this data collection and analysis process. It helps plants operate more reliably and achieve efficiency improvements. To execute this, we also have a global network of TOMONI HUBs with these services, including one in Alabang, Philippines. How can a power plant operator justify the costs of after-sales services to their stakeholders? The biggest cost in operating a power plant is the fuel consumed. Previously, in a plant I managed, about 80% of the cost of operating it came from fuel. So even if you take 50% to 60% of the operating cost of a plant which is fuel cost, and you can save 1% or 2% of that fuel you’re consuming, that is a lot of money.
12 ASIAN POWER THOUGHT LEADERSHIP ARTICLE
Asian Power spoke to Ziad Khalaf, Senior Vice President, Operations for Mitsubishi Power, Asia Pacific for insights into how after-sales and maintenance services benefit power plant operators. How have after-sales and maintenance services evolved over the years?
After-sales and maintenance services are crucial for power plant optimisation.
The reliability of a power plant means that Technology and skills transfer are critical to power plant optimisation
We have TOMONI ®, which is a package of different modules that leverage remote monitoring, advanced digital control systems, predictive analytics, and AI to optimise plants.
How has Mitsubishi Power powered deep innovation in after-sales and maintenance service? Technology advancements allow us to maintain power plants faster and cheaper through solutions such as robotic inspections of generators. Rather than having to disassemble the generator and spend a month crawling around in it, inspecting it, and risking causing damage, we use robots. These are little measuring instruments that can go into the generator, crawl on their own, and do the inspection. This can be done in three to four days, which saves a lot of money and avoids a month-long disassembly. We’ve done robotic inspections in Singapore as well as in other parts of the world. What stands out about your after-sales and maintenance service in Asia? We are a leading service provider with a strong presence and commitment in Asia. In the Philippines, we have capabilities that service the region and provide services to other parts of the world. This includes remote monitoring of power plants, advanced technologies of data collection, analytics and artificial intelligence. It is a self-learning system that monitors the power plant and provides feedback on how to improve the operation maintenance in the plant. It is therefore a system that learns, evolves, and supplies additional information to the power station. Do you have data-based solutions?
The equipment manufacturer has the main responsibility to evolve and develop improved solutions for the equipment. For example, gas turbines used to be maintained following a certain number of operating hours. Over time, we develop enough operating experience and knowledge of the behaviour of the machine and can stretch the maintenance cycle which reduces the downtime of the equipment. This saves money and avoids unnecessary maintenance.
All of that can fall into the service side of things.
ASIAN POWER 13 the plant can keep running well and not unexpectedly shut down and be forced to stay down. We recommend for our customers to have good operating maintenance practices to improve and keep their plant reliability high. If we have a new product learning from our experience in a power plant somewhere in the world, we issue bulletins to all our customers worldwide to inform them of key updates. We also have a global users group meeting that provides members with an opportunity to learn about new improvements or changes to improve reliability. We’re learning from each other and sharing information. Customers may be sharing information with one another. But if they send it back to us, we have access to all of these plant operators. When someone raises an issue about a problem in their plant and there is no solution for it yet, we take it on and solve it, and share the solution. That helps improve the reliability of power plants. How does Mitsubishi Power encourage technology and skills transfer? Skills transfer is happening at different levels of the business. A power plant operator that has our equipment needs to know how to operate it. We work with our customers to teach them and train their operators on how to operate the plant through the construction, warranty and troubleshooting phases. The customer may assign their operators to work with our technical experts across the lifecycle of the plant. We also offer training opportunities, and it’s up to the customer to decide what they need. It’s a combination of technology transfer and the development of skills amongst people. In the Philippines, we have training centres with hundreds of engineers and people with different skill sets working in our facilities. They’re all learning the technology. In Indonesia, we are hiring and training local engineers to become technical advisors to support the local market. We have a large installed base in Indonesia and manufacturing facilities in the Philippines. We invest a lot in local manpower in these countries to help them become skilled at solving problems. That includes technology transfer such as teaching new technical skills. We also do a lot of research. In Indonesia, we work with PLN Group and the Institute of Technology in Bandung, Indonesia, to conduct feasibility studies and research on alternative energy technology and uses. How can you support the energy transition? Mitsubishi Power is helping to develop solutions for the energy transition. One major clean fuel that the company is focusing on to help customers transition to net-zero emissions is hydrogen. Emissions from producing hydrogen can vary, with green hydrogen-producing zero missions. Hence, we are advancing our natural gas turbine technology to co-fire with hydrogen, which will lower the overall emissions of gasfired plants. For example, we are increasing the ratio of hydrogen co-firing into gas turbines – our J-series gas turbines are already capable of operating on a gas and hydrogen mix of 70% and 30% respectively, which helps reduce around 10% of CO2 emissions. We also have plans that by the year 2025, firing will reach 100% commercially. Can you talk about your regional presence?
Mitsubishi Power supports the region’s transition towards cleaner energy sources
Mitsubishi Power has been in the region for more than 50 years, providing equipment which ensures the stable, reliable, and efficient supply of energy to countries around the Asia Pacific
We’ve been in the region for more than 50 years, providing equipment which ensures the stable, reliable, and efficient supply of energy to countries around the Asia Pacific. We have taken significant steps and increased our local support network — hiring people in each country to be closer to our customers. We stand by our equipment and spend a lot of effort in our production and research facilities to improve existing technologies or develop new technologies to improve plant performance. We know what our customers need –efficiency, availability and reliability are important. They also have to save costs and produce as much energy as possible to meet demand. With time, there will be new needs for these power plants, whether it’s additional environmental enforcement or the impact of upcoming climate agreements. We can provide solutions to keep the plants running while reducing emissions — you don’t have to tear them down to put in something new. For example, you can clean up the gas coming out of the plant to comply with standards.
Mitsubishi Power’s TOMONI HUB helps make power plants more reliable and profitable
THOUGHT LEADERSHIP ARTICLE
In Indonesia, we’re planning to help customers integrate biomass burning into their thermal plants. There is a limit to how much you can do without changing anything in the power plant.
Later, if you want to introduce more biomass or other clean fuels such as ammonia, you might need to make modifications. This falls into aftersales services. So you have the immediate needs of reliable operation and efficient operation and the future needs, which is the energy transition that Mitsubishi Power can support.
Also, we are a major player in new technology solutions. So, as power plants transition to more advanced technologies, whether it’s renewable or hydrogen-based, we can help.
It is set to launch what would be the largest floating solar PV plant in Indonesia this year.
Yes, our portfolio strategy, which has served us extremely well to date, is growing into more than 40 countries, with a capacity of projectCiratawas our first benotAsia,ininvestmentSoutheastandit’sgoingtoourlast Eng. Fatima Al Suwaidi, President Director for Indonesia, Masdar
INTERVIEW
The scheduled commercial operation date of Cirata is in the second half of this year. This is as per the requirement in the power purchase agreement with PLN. Also, this technology is quite interesting and attractive to a number of other countries in Asia Pacific region that we know are looking into floating solar PV plants as a solution to the scarcity of land with expanding populations, meaning land resources become more and more obsolete, right?
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Land is becoming much more allocated for other critical needs, such as agriculture and food security of countries, and even housing. So going forward, we’re looking at growing a floating solar portfolio significantly in this region, given the need and the interest. Another benefit that comes to Indonesia out of this project is that, once Cirata is completed, it will save approximately 40% of the fuel required by the local diesel power plant. From the environmental perspective, we’re going to be powering around 50,000 homes in the West Java province. Cirata, being the first and the largest, is becoming a showcase for the government that such a unique technology can be deployed at scale. Also, considering the unique challenges of the Cirata reservoir, once it’s fully operational, it will demonstrate to the government that such challenges have solutions. Masdar can address such constraints by looking at the specifics of the location of the country of the technology and making sure we are able to connect all the dots and we look ahead and we’re able to benefit the country as a whole.
Masdar withfootholdgainsinSEAsolarproject
The Cirata project is considered to be one of the largest floating solar projects in the region, and one of the largest also in the world. If I’m not mistaken, it’s number five in terms of size. Once fully operational, it will be the largest in Indonesia. This project, of course, demonstrates Masdar’s capacity as an innovator to deploy the latest technologies at scale across diverse geographies. This project is tailored toward Indonesia’s characteristics. As we know, Indonesia is unique from the perspective of the geography, the environment, and the regulatory framework, as well as where there is limited land availability. The project is solving a problem that is seen in many parts of the region, actually in Asia Pacific, and in nations dependent on coal and gas power—it will contribute to the reduction of carbon emissions.
You mentioned it is targeted to be operational by the second half of this year, is Masdar on track?
We are working very closely with the contractor to be able to achieve all the requirements of the power purchase agreement that we have with PLN. We also have a very good support system in Indonesia— the government, all different stakeholders from the Ministry of Energy, Ministry of Industry, Ministry of Investment, PLN, of course, as an off-taker, and our partner in the joint venture. We have quite a good support system that allows us to be confident that our timeline should be achieved. In any project, there are challenges, we make sure that we’re able to mitigate potential risks before they happen. We are, of course, working in unforeseen circumstances with the pandemic. Also, the different regulations that different countries would impose because of the pandemic present a unique circumstance to the project. However, again, we’re working very closely with the team on-site, on the ground. I’m talking to you from Jakarta. I’m already based in Jakarta to oversee the project so there’s a lot of commitment from everyone involved. Our partner PJBI, which is a subsidiary of PLN, has been very much supportive of the project so far and has been able to help us maneuver and find a way around the challenges that we’re facing. Aside from the Cirata floating solar power plant, Masdar also signed a memorandum of understanding to explore the exportation of renewable energy from Indonesia to Singapore. What were the reasons behind this move to tap Indonesia during this exploration for Singapore’s energy resources.
Masdar has been critical in keeping the United Arab Emirates’ stance as a global leader in the energy sector. Now, the company has set its sights on expanding into Southeast Asia. But out of all the renewable energy markets in the region, why did Masdar start with Indonesia? Masdar President Director for Indonesia Eng. Fatima Al Suwaidi shared with Asian Power her recent move to Indonesia to oversee the completion of the Cirata floating solar photovoltaic (FPV) power plant, the first of many projects the company had lined up for the region. She also discussed the ropes the company had to learn as it entered the Southeast Asian market, beginning with Indonesia. “Masdar [has] a footprint in almost 40 countries. We’re looking at probably doubling or tripling our existing gigawatts in the next five or 10 years,” Al Suwaidi said. “The Cirata project was our first investment in Southeast Asia, and it’s not going to be our last.” Tell us more about the Cirata floating solar photovoltaic power plant in Indonesia. How will floating solar power benefit the country?
The
Given these two projects, why did Masdar choose Indonesia in implementing these renewable energy projects? I would say the projects choose their location, more or less, right?
ASIAN POWER 15 almost 14 gigawatts (GW) of operation and under development of renewable energy. That equates to around $20b of investment. It is to grow assets to a meaningful scale, in relevant geographic and technology verticals, meaning that we are expanding exponentially across the globe. We are able to see synergies between different countries, we are also able to assess in a much more efficient manner, how we can contribute to countries that are moving in the direction of renewable energy, climate change, and climate action, right? We’re looking into doubling down in key geographies and technologies we know very well. We seek long term bankable projects with clearly defined risk boundaries, as well as strong partnerships in the countries where we operate. We rely on our expertise in Abu Dhabi which also extends across the globe. Our local presence and our ability to scale to make the right connections and find the right opportunities, wherever we find them. This specific opportunity with Indonesia and Singapore was established from the relationships between the countries. Different players are also proposing to bid on this project. From our side, we have participated in a very strong consortium of partners that we have right now. We’re looking at this very strategic project from many angles. One angle is the huge benefit it brings to the Singaporean energy market, as well as on the other side of the Indonesian side. We’re using the expertise and the knowledge that we’ve gathered so far through the Cirata project, and our presence in Indonesia to help us facilitate such collaboration. We see this to be quite a strategic project as well, because, if I’m not mistaken, it probably will be the first of its kind, throwing cables from Indonesia to Singapore. And we’re talking about up to 1.2 GW of solar. It’s not going to be easy for sure. But we’re known to venture into challenging areas that we’re able to pioneer and innovate and to also amplify our existence and presence in those countries.
We believe in partnerships. Partnerships bring projects and projects would really define the location. Indonesia is quite a strong market. It has huge potential on the renewable side, they also have quite high targets in achieving new and renewable energy, as we know, 23% by 2025 and also to expand or grow more over the next 10 years.
Of course, we will continue to be participating in IPP tenders that are issued by PLN. That is, of course, one venue that we are always prepared to participate in the Asia Pacific. There are quite a lot of opportunities that are being discussed on a B2B basis. In some parts, in some countries, depending on the bilateral relations, we’re also looking at G2G partnerships. are able
What kind of plans does Masdar have to tap into the renewables potential of Indonesia and Southeast Asian regions in services like to share with us? In terms of Indonesia, we have a lot of plans and even in the Asia Pacific, we have quite a long pipeline in the making. In Indonesia, we have partnered recently with an Indonesian conglomerate and created a joint venture called Solar Radiance. Solar Radiance is a developer of solar installations that are behind the meter, for example solar rooftop, and ground mount. This is focused on the commercial and industrial (C&I) sector. This is following the regulations that we see opening up in the C&I market. That market is emerging quite quickly, there is huge potential and we are tapping into it through this joint venture. We believe that this will give us quite a wide reach around Indonesia, because we’re talking about solar installations for the C&I market that is spread across Indonesia. Indonesia is a big market and that is the same for the other Asian countries that we’re looking at. We’re also contemplating, maybe going into hydropower. As I mentioned, the Indonesia renewable plan has quite a big chunk dedicated to hydropower energy. And from the Masdar perspective, when we venture into a market, we try to understand how the market is functioning, and also what sort of directions they’re moving forward to and we see whether it aligns with Masdar’s interests and mandate or not. So Indonesia has quite a lot of potential on hydropower, that could be one venue that we would venture in if opportunities arise.
INTERVIEW We
The Cirata FPV power plant is the first of many projects Masdar has lined up for Indonesia
Especially for Indonesia, the market that a lot of the investors are actually quite interested to invest in its development. And you see the regulation moving towards more flexibility as we saw from the release of the omnibus law, for example, that would be much more flexible for foreign investors. We see the government putting a lot of effort into providing a welcoming regulatory framework for foreign investors to be able to boost innovation, and advance clean technologies within the market. The same thing we see in other countries in this region. Having said that, Indonesia is not the only country on our radar, we are also planning to grow quite a lot in the Asia Pacific and Southeast Asia. We have a dedicated team focused on that. We have high ambitions and targets to significantly grow our presence in this market. And for us, Indonesia is just a start. What are the challenges faced by Masdar in pursuing these projects in Indonesia? And as well as in the ASEAN region? And how did the company address these? Other countries might be more advanced when it comes to the implementation of renewable energy, such as Vietnam, Thailand, and Singapore. We see that this region, again, just like any other region, requires constant presence from our teams. Hence, for example, I’m based here, and we have a team based in Indonesia and in Singapore. This is because it’s very important that we maintain the momentum, we understand the market from within, we understand what sort of dynamics this market brings, who are the influential stakeholders we need to understand and partner with, what sort of considerations we need to keep in mind. We are making sure that when we venture into a market, we’re really taking into account all the local factors that need to be considered for us to succeed in that market. Because when we come in, our objective is to come in for the long term. We want to make sure that we are building a local team with a local presence in a way that will not only support the economy of that country but also boost Masdar’s portfolio in that region.
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The new renewable energy plan, also known as RUPTL, in Indonesia, has quite a lot of targets for renewable energy on the solar, wind, hydropower, and geothermal side. Indonesia is definitely one of the key markets, it’s one of the most populous countries in the world and brings with it a lot of potential. The UAE and Indonesia have established and are also strengthening their bilateral relationships. That would definitely boost the collaboration opportunities between both countries.
South Korea, meanwhile, has laid out plans to invest in CCUS both within its borders and overseas. According to IEEFA, utility firm Korean Electric Power Corporation (KEPCO) planned to exit coal by 2050 and commercialise CCUS technology for 500MW of coal power and 150MW of gas power by 2030.
“It will be very difficult for gas processing CCUS to be continually expanding because at the end of the day, as we move toward the net-zero target, there are two questions that cannot be answered by the gas processing CCUS– firstly, is that these gas are to support the oil and gas industry to produce,” he said.
“Secondly, we also need to keep in mind that whenever there’s a discussion about CCUS, and public funding is involved, the public will, in the end, ask the question, of whether they’re spending their tax money to support the transition toward net-zero, or whether they’re supporting a transition towards something that gives more long term liabilities than anything else.”
16 ASIAN POWER INDUSTRY INSIGHT: CCUS Carbon pricing is a hurdle for SEA economies taking part in the clean energy transition
“Because Singapore is a hub for many products, whether it’s exported or whether it’s being used domestically, it may present a quite an exemplary case if CCUS is going to be deployed there,” Adhiguna said, noting that the market enjoys substantial support from the government, particularly in R&D.
China has small-scale CCUS capacity but has not seen strong development over the past decades. IEEFA also observed that CCUS development is not the government’s priority as China falls short in providing a clearer direction for a wide-scale development of CCUS.
It is unlikely that the carbon price in the region could reach $40 per tonne of carbon dioxide.
“It is important to know where these three countries are heading because where they go may give an indication of where Southeast Asia may be heading.”
Outside Southeast Asia, the IEEFA noted in its Carbon Capture in the Southeast Asia Market Context report that Japan, China, and South Korea have the potential to become leaders in CCUS. Japan takes the lead in terms of developing CCUS technology both in Asia and across the globe with its technology being utilised by companies in the US.
Southeast Asia faces uphill battle in CCUS deployment without carbon pricing
Gas processing vs. power generation Looking more closely, CCUS development in Southeast Asia is largely dominated by gas processing CCUS rather than CCUS for power generation. More than 60% of the current CCUS capacity deployed is for gas processing, which Adhiguna said is intended to support the oil and gas industry production. This is opposed to the ongoing discussions on CCUS as a way to reduce emissions.
There is no getting around the need for a carbon price in funding the deployment of carbon capture, usage, and storage (CCUS) technology, the Institute for Energy Economics and Financial Analysis (IEEFA) said. And this is a hurdle faced by economies taking part in the clean energy transition, more so in Southeast Asia where only Singapore has so far imposed a carbon price. Singapore, however, only imposes a mere $3.7 per tonne of carbon dioxide (tCO2), an amount much too small compared to the $60-100tCO2 cost incurred in power generation, IEEFA Energy Analyst Putra Adhiguna told Asian Power The International Energy Agency (IEA) had projected the high carbon price could to stand at $40tCO2 by 2070, down from $65 /tCO2 in 2020. But even then, he said that $40 is still costly. “For the power generation, $40tCO2 is still expensive and we believe that it is unlikely for Southeast Asia to be able to keep up with this, keeping in mind that CCUS becomes mature in the next two decades, and the power plants will already be three decades or four decades [old], which is going to be another question,” IEEFA’s Adhiguna said. Adhiguna explained countries that have been applying carbon capture for gas processing could work around existing finance infrastructure to secure a proper financing deal, which is not the case in power sectors. “In the power sector, it’s very expensive and we do not believe that there is any other way to work around the question about the carbon price. In the absence of a proper carbon price and in the absence of a properly priced power to be distributed to the society, it’s very difficult to see that carbon capture in power generation will prevail,” he said. Singapore and other markets Whilst the $3.7 carbon price is still insufficient, Singapore serves as the exception as the IEEFA sees its potential to establish a CCUS hub. For one, Singapore is ahead of its neighbours in terms of carbon pricing as its government announced an “aggressive plan” to raise the carbon price to $18/ tCO2 by 2024 and to $37-60/tCO2 by 2030. Singapore also has a higher GDP compared to other Southeast Asian states, but above all, the market has a concentrated industrial base, such as refineries, and petrochemical industries.
In the absence of a carbonproperprice, it’s difficult to see that carbon capture in prevailgenerationpowerwillPutraAdhiguna
Aside from Singapore, Indonesia has also announced a cap-and-tax scheme with a $2.1/tCO2e which is set to commence in 2022; whilst Malaysia, the Philippines, Thailand, and Vietnam are all considering carbon pricing.
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 Adoptinghabitat.theIndian Single Horned Rhino as its Brand Mascot was indeed a step towards protecting this endangered species. The Corporation will also be steering the Introduction‘CheetahProject’ at Kuno National Park in Madhya Pradesh, India.
It’s all in the general area of Nueva Ecija. But it includes some in the neighboring province of Bulacan because the project will eventually connect to a substation in Bulacan, which is the drawdown point for the demand of Metro Manila.
Solar Philippines was founded in 2013, at a time when the Philippines only had 4MW of installed solar power. It has since added some 400MW installed solar capacity, either in operation or under construction. Solar Philippines completed its first utility-scale project in 2016 with a capacity of 63MW, after the Department of Energy announced its feed-in tariff (FiT) scheme. The company then persisted in developing more projects post-FiT, entering into power supply agreements with major distribution electric companies, such as Meralco. This allowed Solar Philippines to reduce the price of solar to 2.99 centavos per kilowatt-hour from around 9.68 centavos initially.
Leandro Leviste, CEO and Founder, Solar Philippines
Solar Philippines CEO and Founder Leandro Leviste told Asian Power what holds the development of solar power in the country back lies not in the hand of the government, but amongst businesses that failed to see the demand growth potential.
You recently signed a PPA for a 50MW solar farm in Indonesia. What other markets will you tap into? It is not significant in scale compared to our other projects. But it is, we hope, reflective of number one, our company’s ability to develop projects, even outside of the Philippines. So, if we can do it in Indonesia, or more hopefully we can do it in the Philippines, and there are so many opportunities. I think that Indonesia is the second most attractive market in the region for our business model, which is to focus on the places where there is a huge future potential, very limited land, and an underdeveloped solar industry. Because where there’s already a lot of solar, we think there is little value to be added. But where there is a challenging market, and where land is scarce in islands or densely populated areas of Southeast Asia, that’s where we see there is value to be created in solar development. But of course, as our name suggests, we are focused on solar in the Philippines.
CEO INTERVIEW
Private firms eclipse the PH’s solar power industry
“The limiting factor is that the private sector has lacked the forward-thinking to prepare solar projects for the time when the solar projects are already needed now. And that’s where our company comes in,” Leviste said.
What projects can we expect from Solar Philippines/SPNEC this year and in the following years?
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So that is really the value proposition and the business model of our company, which is to go to the place where you can build very large scale solar projects, if only you have a few years of a head start to consolidate the land, the permits, and the right of way for the transmission.
Solar Philippines flagged the lack of foresight amongst businesses to meet high demand. With only around 1,370 megawatts (MW) of installed solar capacity, the Philippines still has a long way to go before meeting its 20-gigawatt target by 2030. This is even as the government has provided enough support to enable the industry, leaving the fault to the private sector for having a supply that falls short of meeting high demand.
“That resulted in even lower prices for solar, which we think paved the way for a lot more large-scale solar developments up to where we are now, where, hopefully, it can be seen that the [seeds] that we have been planting over the years are now bearing fruit.”
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The proceeds of our IPO are financing the Nueva Ecija solar farm, which we have positioned as the largest solar project in Southeast Asia because it has two phases. The second phase should be also constructed next year, for a total of 500MW. In the same general area, we are acquiring expansion land, so that the total development can supply even 4,000MW, which is possible because of the availability of land that is unproductive in the area, as well as its proximity to the demand of Metro Manila.
Tell us more about Solar Philippines, its subsidiary, Solar Philippines Nueva Ecija Corporation Corp. (SPNEC), and the share-swap agreement between the two. The defining characteristic of our company is that we’re very entrepreneurial and responsive to market conditions. We did the first IPO of a pure-play solar company in the Philippines in December 2021, and wanted to see how the market would respond. I think it showed that there was a lot of demand for a pure-play solar company in the Philippines, and saw that as good timing to fold in the rest of our developments to also respond to what many people were asking for, which was the listing of the rest of our developments, all in one company. So now our investors have also shown that it’s an even better proposition that you have some operating assets, some contracted assets, and the rest of the pipeline. We hope that stock reception will continue to be strong as we will partner with our public shareholders to expand the solar projects of our company and the solar power industry of the Philippines at large.
We actually have [also] constructed a mini-grid project in Shan State, Myanmar. But our bread and butter is solar in the Philippines. We do the other things just to learn more about other markets in hopes that when we have saturated the market in the Philippines, we may have new markets to enter. But the principle is for as long as the highest value that we can add is right here in our backyard, then we should devote as much as possible of our resources to saturating our backyard.
How can the Philippines balance meeting its energy transition goals whilst also maintaining energy security amid the impact of the Russia-Ukraine conflict? By going renewable. It’s obvious that around the world, the external shocks from the origin of natural gas and other fossil fuels have given impetus to accelerate the transition to renewable energy. But more so in the Philippines, where we do not have significant reserves of coal, oil, or gas. So I think if there is a country that should become energy independent through renewables first, it should be a country like the Philippines.
“We now forecast non-hydro renewables capacity to total 10.2GW by 2031, from an estimated 4GW as of the end of 2021, driven largely by wind and solar projects,” Fitch noted.
New decarbonisation targets
In what ways can the government, as well as energy firms like Solar Philippines, help the country is shifting to renewables?
CEO
If there is a
“This is subject to further upside risks, although we will await the establishment of concrete policy and incentives to achieve growth first.” Aside from its 2040 plan, the department also launched the Green Energy Pricing Programme that seeks to set a ceiling price for renewable energy, helping generators secure favourable power supply agreements.
The energy department has also set new targets for renewable energy, under the National Renewable Energy Program. Under the program, clean energy sources are expected to account for 35% of the country’s power mix by 2030. This is targeted to be further raised to 50% by 2040.
“We believe the growing investor interests in the renewables sector is largely underpinned by the improving regulatory environment for the sector,” the report read. “The Department of Energy has been working on two key renewable energy policies—the Renewable Portfolio Standard and the Green Energy Option—to encourage the development of the market.”
How would you assess the Philippines compared to other Southeast Asian countries in terms of its clean energy transition, particularly in terms of solar power?
In terms of demand, the Philippines should have at least the highest percentage of potential solar, because it has the highest price of electricity in Southeast Asia. In terms of supply, it should have the most difficult environment because of its density in population and general difficulty in repairing project sites, which, of course, both make it a very attractive market for those that are able to get things done in the Philippines. And it’s for that reason why, yes, we are focused on solar in the Philippines.
On top of this, the latest draft of the Philippines Energy Plan (2040) suggested there will likely be a stronger focus on the development of solar projects with plans to increase its capacity by nearly 10.2GW. This is much higher than the planned increases in other renewable fuel types, such as wind (2.8GW), biomass (343MW), and geothermal (200MW). The draft also covered plans for a 500MW battery energy storage system.
In other countries, the question of what the government can do is more appropriate, because, without government intervention, people will not go solar, because it’s not commercially viable.
In the Philippines, government intervention is not the limiting factor. Without government intervention, it already makes economic sense. The limiting factor is that the private sector has lacked the forward-thinking to prepare solar projects for the time when the solar projects are already needed now. And that’s where our company comes in. Because we have been developing these projects years in advance. And we hope that the time to harvest what we have sown is now that the country is entering a power crisis and solar technology has become cost-competitive. But compared to our colleagues in the industry, we really think that the regulatory environment has already been laid out. Unlike in other countries, we have a very pro-renewable energy policy here. And it’s really just up to the private sector to execute on this opportunity.
Solar power in the Philippines could expect more focus as the country is poised to accelerate the decarbonisation of its energy sector amidst increasing investor interest and a rapidly expanding project pipeline, according to Fitch Solutions. The Philippines’ solar power grew significantly as Fitch Solutions’ Key Projects Database showed more than a ten-fold increase in capacity in the project pipeline with some valued at over US$30m, compared to what was recorded in March 2021. This growth was also driven by efforts of the government with initiatives such as launching a 2-gigawatt (GW) tender in January 2022, including 130 megawatts (MW) of hydro, 1.26GW of solar, 380MW of wind, and 230MW of biomass. These projects will be located across Luzon, Visayas, and Mindanao. Fitch added that these also mark a shift away from the existing feed-in-tariff scheme.
In light of the growth potential seen in renewable energy and efforts to deviate from coal, Fitch sees the Philippines will rely less on coal generation even as the energy source is expected to remain dominant.
The Philippine government is amongst the countries that participated in the Asia Development Bank’s Energy Transition Mechanism facility. The facility seeks to acquire existing coalfired power plants with the intent of retiring them ahead of the end of their operational life cycle.
Clean energy sources will account for 35% of PH’s power mix by 2030
INTERVIEW
Solar power shines brighter in the PH as it accelerates decarbonisation
The private sector, not the government, is the limiting factor in shifting to renewables
ASIAN POWER 19
renewablesthroughindependentbecomethatcountryshouldenergy first, it’s the Philippines
Nevertheless, states and the private sector have successfully driven the energy transition. For example, there are 15 gigawatts Asia energyaddaggressivelywillcleansources
Indeed, in the book, I discussed one key upside factor to consumption growth, electric mobility, and one limiting factor, energy efficiency. I argued that the upside factor is highly likely whilst the limiting factor is unlikely to be effectively implemented region-wide. On e-mobility, one example of an “upside” move is Singapore. All vehicles, like buses, taxis, etc., will be clean energy vehicles by 2040. It means that the rate of electrification in the transport industry in places like Singapore is also going to go through the roof, and that is being replicated in other places like China. Japan is a little bit slow off the mark in terms of hard targets, but there are countries like Thailand, Sri Lanka, and even Pakistan, with electric vehicle (EV) targets. So we will see a lot more goals-setting and battery-powered electric vehicle numbers going through the roof. This means that more generations will be needed.
China had about 50 gigawatts of nuclear energy at the end of 2020 and targets 75 gigawatts by 2025. The big question is whether the amount will be 300 or 500 gigawatts by 2050. China has been concerned about nuclear safety so they are not going to put up gigawatts of nuclear energy if they are not 100% comfortable with the safety of the technology.
At a bare minimum, you have got to go low carbon. Then Southeast Asia will have to really come up with a more credible blueprint as to what it wants.
Asia is likely to annually spend at least $1t through 2050 in its energy transition (Photo: Joseph Jacobelli)
However, Asia’s Energy Revolution author noted that net-zero goals are still in progress. In terms of energy consumption, Asian markets are at the forefront and are expected to consume more of the world’s energy in the coming years. Asia accounts for almost half of the energy consumption globally, 11% of which were from developed countries and 89% from emerging Asia, according to analyst and author Joseph Jacobelli. China alone is expected to see its energy consumption grow by around threefold by 2050. Whilst consumption is expected to increase, the shift to clean energy resources are also taking place to reduce carbon emissions and in the long-run achieve their net-zero goals. Jacobelli has published a new book titled Asia’s Energy Revolution. He sat down with Asian Power’s Managing Director Tim Charlton to talk through the changes taking place as the region slowly wakes up to net-zero. Where is Asia right now in its energy transition? The region is likely to annually spend at least one trillion dollars through 2050 in its energy transition. Right now, Asia consumes almost 50% of the global energy consumption. What that number does not tell us is that 11% of that is from developed Asia, so 89% is from emerging Asia. A lot of these emerging economies are incredibly sizeable like China, India, and Indonesia. China is going to at least grow its consumption threefold, if not more, by 2050. Then there are some emerging markets like Sri Lanka, where consumption may rise as much as 20-fold. The region will aggressively add clean energy sources and gradually shift its energy mix away from fossil fuelbased generation. The elephant in the room is, of course, China. China right now has about 1,080 gigawatts of coal power generation. The planners have said that it is going to peak at 1,100 gigawatts in 2025. So there’s an extra 20 gigawatts, but it is a net number. They are actually building newer plants and closing down older or smaller ones. The big question is with nuclear because they will need some very chunky amounts of generation in order to offset the coal generation plants likely to close down.
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For coal, now there is a bigger global pressure, which is net-zero emissions by 2050. So countries are very aggressively exploring green alternatives—and that’s not limited to solar and wind. We know that some countries, such as Thailand and Vietnam, have been very successful when it comes to introducing more green and sustainable power. I expect a substantial rise in the region in offshore and floating wind, more decentralised solar systems, and more energy storage.
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Asia to consume over half of the world’s energy
The issue, however, has been one with the federal government because the coal and the gas industries are humongous for the economy down in Australia; so, there has been this distortion.
Let us talk about specific markets starting with Australia, which is the most advanced along its energy market deregulation journey.
In your book, you talked about the dramatic rise of electric vehicles. How will this impact the consumption of power?
Some, especially the politicians, say that Australia has had unsuccessful deregulation, but I actually disagree because the Australian consumer now has a choice. Whether residential, commercial, or industrial, today, users shop around for the best price. Also, the quality of service has vastly improved.
For Hong Kong to use more green electricity, it can import more nuclear energy from Mainland China and it can also import solar or wind power. So the first thing that needs to be addressed is the fate of these contractual agreements between the utilities and the government post-2033. Then, the other big question is whether Hong Kong is going to 100% adopt the Chinese energy policy, which, so far, it has not. Meaning adopting a deregulated power market and prioritising clean energy resources.
Whilst consumption is expected to increase, the shift to clean energy resources is also taking place
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The green portfolios of companies will list in stock markets over the next few years
One final point is that there is an enormous amount of capital in the private equity markets right now in Asia looking for green and sustainable projects. Apart from private equity funds, we are also witnessing more green and sustainable investments from corporations, and, not just from electric power or other energy companies but also from companies in other sectors.
ASIAN POWER 21 of rooftop solar as we speak today, so it is absolutely amazing.
We have seen some moves out of the Singaporean banks like DBS and OCBC to cut loans to coal-fired projects and we have seen Chinese banks being aggressive in looking at setting net-zero targets. However, other banks have been a little bit slow. So, I think the second trend that we should see over the next five years or so is a lot more Asian banks declaring their net-zero emissions targets. That is going to help a lot with the funding of green and sustainable projects in the region.
Let us talk about how you see the green financing revolution. I will split that into two concepts. One is plain vanilla financing. For example, at the end of the day, green bonds are just bonds. Now you’ve got a whole new generation of bonds, including sustainability-linked bonds, where a company will issue a bond and if it meets XYZ target, by whatever year, they will pay a slightly lower coupon rate. If they do not match it, they will pay a slightly higher coupon rate. I expect the Asian credit market to boom in the coming years. I recently estimated the amount of such bonds issuance could reach $350b in 2025 from $53b in 2020.
I live in Hong Kong and the two major utilities here are CLP Power Hong Kong and Hongkong Electric. They have been shifting their energy mix towards gas, slowly but surely, and that is going to continue. The companies operate on a rate-based return, which means that the companies are allowed a return on investments from the net assets, under long term contracts with the government. The two Schemes of Control Agreements will expire in 2033. The big question is if these will be extended or not? Currently, the two companies have a virtual monopoly over generation and supply. So, will that be broken and what happens to stranded assets?
Examples of this are small green and sustainable energy projects by the Hong Kong real-estate firm, Swire Properties, both in Hong Kong and in China.
There are also massive clean energy projects being planned. These include the Asian Renewable Energy Hub, which will take ten years and cost about A$36b ($25.2b). It will involve building massive wind and solar facilities of about 26 gigawatts in the East Pilbara region of Western Australia. Another is the 10 gigawatts Sun Cable project, called the Australian–ASEAN Power Link, which will take about seven years and cost about A$22b ($15.4b) to develop.
On the mainland, generators can sell directly to commercial and industrial users, just like in Singapore or in Australia. They are just not allowed to do so with residential or the agriculture sectors yet. That is one piece of deregulation that you have in Mainland China that you do not have in the Special Administrative Region. The second piece is clean energy. China is the undisputed global clean energy leader in terms of how much it has built, in how it manages its capacity in terms of its planning. For example, there are offshore wind farms near Hong Kong but they are not selling power to Hong Kong, they are selling power back into Mainland China. The country had 570.5 gigawatts in solar and wind capacity at the end of August; and in the first eight months of 2021, it added 36.7 gigawatts.
On the lending side, Asian banks have been slow in adopting net-zero emissions targets, whereas, in Europe, a whole bunch of banks have said that by 2050 they will have a net-zero emissions portfolio. It also means lending to green and sustainable companies is going to be significantly higher.
On the public equity side, we haven’t seen a massive amount of green and sustainable companies listing in the region. I think what is going to happen is that the green portfolios of companies, such as some of the big electric power groups in the region, will list in stock markets over the next few years.
Now, let us look at Hong Kong. What is happening there?
The future of CLP Power amidst netzero transitions
CLP Power became the first power company in Hong Kong to use natural gas for power generation in 1996 when Black Point Power Station began operations. Since then, we have continued to improve emissions performance by optimising our fuel mix, installing emission-reduction facilities, and enhancing plant efficiency. Remarkably, our emissions have fallen by more than 90% since 1990, whilst electricity demand over the same period has grown by over 80%.
As Hong Kong works towards a target of becoming carbon neutral before 2050, we are increasing our low-carbon electricity supply and helping customers reduce their carbon footprint. Raising the ratio of gas-fired generation is an important near-term measure in CLP Power’s energy transition journey. It also aligns with the CLP Group’s updated Climate Vision 2050, in which CLP commits to achieving net-zero greenhouse gas emissions across its value chain by 2050.
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Since 2020, the company has increased its gas-fired power generation proportion. With 15% of its generation mix coming from coal in 2020, CLP Power is in the middle of its energy transition journey when the Hong Kong Government declared its intention to be carbon neutral before 2050. It seems that the company already has its strategies in place to align itself with the government’s net-zero emissions target. To replace coal, CLP Power will ramp up its generation from natural gas—which already accounts for 48% of its mix in 2020, CLP Power Chief Operating Officer Paul Tomlinson told Asian Power “CLP Power will be in discussion with the government on phasing out coal-fired generation from our Castle Peak B Power Station’s units in the 2030s whilst our older coal-fired generation units at Castle Peak A Power Station will gradually be closed over the next few years,” he added. Tomlinson also discussed the company’s plans and other sectors it will tap into to align its operations with the Hong Kong Government’s carbon neutrality plan. How will you accelerate phasing out your coal-based assets? We will increase the use of natural gas in the interim period, which is supported by our further investment in Black Point Power Station where a new gas-fired generation unit has been commissioned, and another unit is expected to go into operation by the end of 2023. We have already announced plans to phase out coal for power generation at Castle Peak A Power Station progressively in the next few years. We also aim to phase out coal at Castle Peak B Power Station from the mid-2030s onwards. At present, CLP Power receives gas from China National Offshore Oil Corporation’s different gas fields in the South China Sea through the Yacheng sub-sea pipeline. We also take supplies through a subsea pipeline connecting to the Second West-East Gas Pipeline under a long-term gas supply agreement with PetroChina. To access competitive supplies from the global liquified natural gas (LNG) market in long term, CLP Power is developing an offshore LNG terminal in Hong Kong waters, jointly with Hongkong Electric. Considerable progress has been made with the jacket and topside structures installed to form the terminal. The subsea pipelaying works have been completed, and the corresponding jetting and rock dumping works are in progress. Under this energy transition, CLP Power’s carbon intensity is projected to further decrease steadily in the coming years with the increased use of natural gas, the commissioning of additional gasfired generation units, and when an offshore LNG terminal and a Floating Storage and Regasification Unit are in place.
The first new unit D1 went into service in 2020. It has a generation capacity of 550 megawatts (MW), the largest of all existing gas-fired units in Hong Kong and sufficient to power 900,000 homes. The unit uses Combined Cycle Gas Turbine (CCGT) technology with an advanced design capable of achieving an efficiency rate of around 60%, making it one of the most efficient gas-fired power plants in the world. With Unit D1, we significantly reduced our reliance on coalfired generation. As a result, the proportion of natural gas in our fuel mix rose to around 50% in 2020, from less than 30% in 2019. Also, the carbon intensity has fallen significantly from 0.95 kilograms (kg) in 1990 to 0.37kg per unit of electricity consumption in 2020.
What sets D1 apart from other gas-fired generation units? Unit D1 deploys state-of-the-art H-class CCGT technology with a more advanced design and is capable of achieving an efficiency rate of around 60%, making it one of the most efficient gas-fired power plants in the world. Fuel efficiency and flexibility are central to the design of Unit D1. It is engineered to use a wide range of gas supplies
Paul Tomlinson, COO, CLP Power (Photo from CLP Power)
To continue the phasing out of the coal-fired generation units, we are building a second new gas-fired generation unit, Unit D2, at Black Point Power Station. The second unit is expected to go into operation in 2023 and will further increase the proportion of natural gas in CLP Power’s fuel mix to over 50%.
We planned to build two additional gas-fired generation units to meet the demands of continuing social and economic development, whilst reaching the government’s target of increasing gas-fired generation to around half of the city’s total fuel mix.
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Tell us about the new gas-fired generation unit at Black Point Power Station. How is this instrumental in Hong Kong’s overall clean energy transition?
How are you going to encourage consumers from the commercial and industrial sectors to shift to cleaner energy?
CLP Power will be in discussion with the government on phasing out coal-fired generation from our Castle Peak B Power Station’s units in the 2030s whilst our older coal-fired generation units at Castle Peak A Power Station will gradually be closed over the next few years.
We also strive to explore practical local renewable energy opportunities despite limited renewable energy resources and land scarcity in Hong Kong. We launched the Feed-in Tariff (FiT) scheme to encourage our customers to develop distributed renewable energy (RE) systems. The scheme has been well received by the community. Since opening applications in May 2018, we have received over 19,600 applications as of end-March 2022. Around 91% of the applications have been approved. If all approved applications are installed, the amount of electricity generated is equivalent to meeting the annual electricity consumption of about 64,800 average households. As of end-March, 287MW of capacity had been approved or connected to the grid under the FiT scheme, up from 175MW by end-December 2020.
CLP Power will be in discussion with the gov’t on phasing out coal-fired generation units in the 2030s gas-fired generation unit D1 (Photo from CLP Power)
To support Hong Kong’s transformation into a smart city, CLP Power is upgrading all its residential and small to medium-sized business customers’ conventional metres to smart metres from late 2018 to 2025, with a total of 2.6 million smart metres. We also engage the wider community for low-carbon living through energy efficiency and conservation public education programmes.
Nuclear energy will also play a key role in Hong Kong. It is highly reliable, virtually carbon-free and is not subject to the volatility of international fuel prices. Daya Bay Nuclear Power Station has been providing a quarter of Hong Kong’s electricity since 1994 and nuclear is a very important and mature zero-carbon technology that we should not Importingignore.nuclear energy to Hong Kong has helped avoid carbon dioxide in the city by over 7.5 million tonnes a year whilst ensuring a reliable power supply at a competitive price. Without such nuclear import, the city’s carbon emissions would have increased by about 20% a year. Over the years, Daya Bay has been maintaining its track record of a safe and reliable operation.
We will keep abreast of developments in technologies that utilise renewable energy for electricity generation. At the same time, we are working on ways to convert our local gas generation infrastructure to support the use of zero-carbon fuels such as green hydrogen.
Green hydrogen has the potential to be a key part of Hong Kong’s decarbonisation plan in the medium to long term. As the cost of producing RE goes down and the demand for hydrogen goes up, there is hope that zero-carbon green hydrogen will become an important contributor to emissions reduction.
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CLP Power also plays an important role to facilitate the decarbonisation of the transportation sector which accounts for 19.7% of Hong Kong’s greenhouse gas emissions in 2020. CLP Power has set up 54 electric vehicle (EV) charging stations in our supply area and the charging service is free for users until the end of this year. We are also working with the government and private sector
on developing e-transport trials of buses, public light buses, taxis and ferries. We anticipate that EV technology will develop rapidly, and we will adjust our strategy from time to time.
As of today, nuclear energy accounts for about a third of CLP’s fuel mix in Hong Kong and has been safely meeting 25% of Hong Kong’s electricity needs for more than 20 years. Daya Bay produces around 15 billion kilowatt-hours of electricity annually. To ensure that cleaner and more cost-competitive energy is provided to Hong Kong, Daya Bay has increased its electricity supply to Hong Kong from 70% to around 80% of its output from late 2014.
We believe that nuclear power should continue to be a part of our fuel mix in the longer term and we will continue to explore ways of importing it in a manner that is acceptable to the community. It will offer an important element of diversity as we seek to minimise generation costs and emissions. With the technology and equipment of wind generation getting more mature and more cost-effective, this allows the offshore wind farm project to apply larger but fewer turbines. Generation is also expected to be higher.
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What other sectors will CLP Power tap into to further contribute to Hong Kong’s net-zero emissions goals?
To meet the emission caps in 2020 and afterwards, and the longterm environmental policy set out by the government, we need to maintain the current import of nuclear power to keep the proportion of zero-carbon energy in our fuel mix that we already have.
We will continue to support the government by helping customers manage energy demand and promote energy saving with a host of energy-efficient solutions and support measures including the Eco Building Fund, Electrical Equipment Upgrade Scheme, and training courses under the Retro-Commissioning Charter Programme, as well as innovative technology applications.
We will strive to identify more zero-carbon energy sources such as nuclear energy and RE projects in neighbouring regions to power Hong Kong both locally and through regional cooperation in our holistic approach to a decarbonisation strategy. This includes seeking joint investment and development opportunities for participating in and operating zero-carbon energy projects near Hong Kong.
Also, we have seen a growing interest in sustainable products, such as Renewable Energy Certificates (RECs). As of end-March 2022, over 24.8 GWh units were sold, and our customers are helping to reduce about 9,900 tonnes of carbon dioxide emission. Sales of RECs grew over 170% in 2021 when compared with that of 2020 (2020: 8.6 GWh).
In future, when the hydrogen power generation technology becomes mature, the cost of retrofitting the existing gas-fired generation units (like Unit D1) to run on hydrogen is expected to be much lower than building a new one.
ASIAN POWER 23 and is also a dual fuel unit with the capacity to switch to emergency backup fuel and with the capability for automatic on-load fuel transfer to ensure a reliable supply of electricity to our customers.
For the full exclusive interview, go to https://asian-power.com/
Unit D1 is also equipped with a low nitrogen oxides combustion system and a selective catalytic reduction system that reduces 40% more nitrogen oxides emissions than CLP Power’s other gas-fired generation units. In addition, Unit D1 attains the Final Platinum rating of the BEAM Plus, which is the green building assessment tool in Hong Kong. The green and sustainable features include access to natural light, energy-efficient electrical fixtures and appliances, an extensive rainwater harvesting system, roof-top solar panels, and vertical greening, supporting energy-saving and promoting sustainability.
CLP has committed to investing in several key gas power infrastructure projects, which are the most effective way to quickly reduce the carbon intensity of Hong Kong’s electricity supply. These gas infrastructures could potentially be repurposed to use 100% hydrogen.
How will you ensure the reliability and readiness of the plant?
Indonesia 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.
How running Jawa7 helps in clean energy transition
“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 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.
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.
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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.
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The coal-fired power plant ensures lower carbon emissions, with 45% efficiency.
PBJ seeks cooperation with global power industrial companies to transition from traditional to renewable power (Photo: PT SGPJB President Director Zhao Zhigang)
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Our strategy is to improve supply chain reliability. Our next 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.
What is the current progress of the completion of the power plant and how will you ensure it is finished soon?
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.
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, whether it is from Indonesia or China.
Another problem is those particular financial settlements because we have regulations from our Chinese superior company.
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.
Can you tell us what sets the Jawa-7 apart from other coal plants in Indonesia?
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.
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.
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Phasing out reactors will barely scathe the region’s nuclear capacity, says Rystad analyst.
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.
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 cycle and with the country’s plans to reduce dependency on nuclear power, we could see some plants being closed down after 2030.
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.
Could you tell us which markets are driving the investment in nuclear energy in Asia?
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 Althoughenergy.itrequires 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.
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“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.
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.
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?
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.
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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.
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.
Should it be considered “green”?
What is the role of nuclear energy in the clean energy transition?
Nuclear reactor phase-outs will barely scathe Asia’s nuclear capacity growth (Photo: Karan Satwani, Analyst, Rystad Energy)
When 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.
Road to energy transition: Why are Asia’s decarbonisation efforts falling short
Meanwhile, Graeme York, President and CEO of Senoko Energy, said that it is important for everyone to “work in concert with one another.”
Technological
‘Biggest lever’ There is not just one solution to decarbonise as offsetting emissions through renewables is only one of the options which include energy efficiency, capture and storage, substituting fuel, and optimising operations, according to Wichard von Harrach, Chairman of the Supervisory Board at APLBI, the association of coal-fired power plants in Indonesia.Butpower plants can contribute by ensuring energy efficiency–the “biggest lever to decarbonise,” Harrach said.
Indonesia is heavily reliant on coalfired power plants, with 67% of the electricity generated in 2020 coming from coal, with renewable at 13%, gas at 17%, and diesel at 3%. Coal generation is expected to fall to 59% by 2030, and renewables will rise to 25%, whilst gas is seen at 15%, and diesel at 1%, according to the RUPTL 2021-2030.
“We are doing everything in parallel. This is an energy transition so of course, we are fostering solar and wind and forest conservation, but the biggest lever is inefficiency,” he said.
More than solutions, the markets need stronger energy security and targets, expert claims.
Emissions in Indonesia’s energy sector were at 450 million tonnes in 2010 and reached 640 million tonnes in 2020. This is expected to reach around 1.7 billion tonnes in a business-as-usual scenario by 2030 and the government has proposed to reduce it by 11% to 14%. Harrach said that based on estimates, offsetting the existing 1,000-megawatt (MW) coal-fired plant in Indonesia meant the need to generate 7,000 gigawatt-hours (GWh) of electricity with renewables which would require about 4GW of wind and 5GW of solar.
“Energy efficiency is done in the entire value chain, from coal handling, to waste management, and the approach that our members are taking is to continuously analyse and look where efficiency can be improved,” he added.
He added that offsetting 1MW of coal with 1MW of solar will only reduce carbon footprint by 1,300 tonnes, whilst 1MW of wind will reduce carbon dioxide emissions by 1,440 tonnes. Offsetting emissions through the existing forests could only reduce emissions by about seven to 11 tonnes per hectare.
The transition to a “green economy” will drive the demand for green minerals, which Adaro Power can cater to, said its President Director Dharma Djojonegoro
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The framework elements, meanwhile, would be important in the next two to three years when countries recover from the pandemic, he said.
The numbers may sound small but, for Indonesia, which has around 170MW of solar and 240MW of wind capacity, it will be difficult to achieve.
solutions are available to tap into to increase renewable energy capacity, but what is needed by the markets in the Asia Pacific region is a strong decarbonisation agenda that takes into account energy security, as well as frameworks that will support their energy transition. Mike Thomas, Managing Director of The Lantau Group, explained that some markets only have decarbonisation elements such as renewable energy certificate (REC) markets, renewables portfolio standards or some markets. “Very few [countries] have set binding targets or have fixed the sort of the balkanisation of what I call the REC markets where everybody’s got their own thing,” Thomas said at this year’s Asian Power Summit He cited Singapore as an example which has a “well-defined problem” on supply and plans to import energy as it has limited renewable resources which put the security of supply and decarbonisation agenda together, offering a solution to the problem. This challenge also poses risks to investors and potential investments for the renewable energy markets, Thomas said. Unless there is a policy built and if a market is looking at possibly adding capacity in response to the market need or supply security or variability, they may not be able to secure the long-term, financial instrument it needed.
Harrach cited as an example a threeyear project taken up by one of its members to improve the energy uptake of their boiler for energy efficiency. This was done by increasing the heating surface area of boiler tubes, as well as Mills and ID Fans capacities. The process could avoid the use of 40,000 tonnes of coal which is equivalent to 80,000 tonnes of carbon dioxide emissions. But still, APLBI recommended that all generation opportunities for emissions reduction should be taken in “one holistic approach.” Whilst doing everything in parallel, Harrach said that there is a need also to do international certificate trading which will make opportunities attractive for Indonesia. Other Indonesian efforts
“You need clear government objectives supported by policy, but then supported by all the infrastructure and creating the environment for business for universities, entrepreneurs to come together to, to come up with solutions,” he said. York, however, said if there is no framework or a target for the energy transition, it would be pointless to have thoseWithsolutions.thethreats posed by the RussiaUkraine conflict to the energy security, York said it has increased the importance of veering away from coal and relying on renewable energy sources. “People are very supportive. They want to move away from reliance on fossil fuels, be that coal, oil or gas and head more towards renewables, but it’s still a long journey to get there,” he said.
Energy efficiency is the biggest lever decarboniseto
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He also said that in another scenario, some investors, when confronted with uncertainty, resort to shorter-term decisions “unless they can get offsetting longer-term protection” as demand growth does not make critical decisions easier, whilst long-term commitments are becoming “riskier” because of the expanding future possibilities.
Meanwhile, state-owned energy firm PT Perusahaan Listrik Negara (Persero) implemented two programmes that support the sustainability of communities.
Some are building bridges, such as natural gas to hydrogen facilities, whilst others are finding value in their existing assets and optimising them through portfolio rebalancing, and diversification, amongst others. Others, meanwhile, are doing “a little bit of everything.”
Thomas said that when going through an energy transition, there is a need to move away from merchant exposure and towards maintaining supply security and longer-term“Otherwise,contracts.wedon’t get the investment and we certainly are seeing a shortening of people’s willingness to invest long-term without long term contracts. And that, in a fast-growing market, can create some problems if you’re getting close to running out,” Lantau Group’s Thomas said.
Without long-term contract protection, companies may get their money back faster at a premium cost and accelerate transition as conventional generation asset value stranding becomes a rising concern. But having a long-term contract of 25 years with exposure for example at the end of 15 years, the company may not have gotten the retur n on investment they are expecting.
The wind sector would also be needing lots of steel, around 90 tonnes of metallurgical coal to produce steel for each megawatt of wind power, 120 tonnes for each megawatt of wind power, and one tonne of aluminium in a single wind turbine. For solar power, seven tonnes are needed for each megawatt of the solar PV plant, and four million tonnes of aluminium demand from the solar power sector by Djojonegoro2040. said that Adaro will continue to develop renewable energy projects including participating in Singapore’s renewable electricity import project. The company is also one of the two consortiums that passed the pre-qualification of the waste to energy project in West Java. Adaro is also looking at developing a hydro project in North Kalimantan which will also include a large green industrial estate.
Challenging future Thomas said electricity demand in many Asian markets is expected to “grow robustly post-pandemic” and exceed prior trends on the back of digital and future electrification trends. He noted Singapore, which has a low projected demand compound annual growth rate (CAGR) from 2020 to 2031 at 2.77%, whilst its high projected growth rate at the same period was 3.47%, citing data from the Singapore Electricity Market Outlook. The actual CAGR demand between the years 2018 and 2020 was 0.2%.
“One way or the other, if back end uncertainty isn’t mitigated in some way, conventional generation resources start pricing themselves out of the market in the future more quickly than then people would think, but at a premium cost to customers and to society over time,” Thomas said. “The momentum for the energy transition is building. It’s not always orderly. It’s not going to be smooth. Probably won’t be cheap. But it’ll be interesting. There’ll be plenty of opportunities,” he said.
The second programme is the fly ash and bottom ash (FABA) waste utilisation program wherein FABA is collected from chimneys at the generator of power plants and turned into bricks and other building materials.
However, Thomas said that the environment for the commercial power sector is “more challenging now” as many big “forces” are reshaping the energy sector such as new technologies and fuels, decarbonisation policy, security of supply, and digitalisation and optimisation. This uncertainty raises the questions of where the sector can find value in their strategies, with some going for the “endgame” orientation and opting to pursue renewable energy only. Others will go for
EVENT COVERAGE: ASIAN POWER SUMMIT an “emerging critical need” orientation and prioritise flexibility by specialising in storage or data-driven dynamics for other markets that may need such services.
Djojonegoro noted that an electric vehicle would require 30% more aluminium than normal cars and their batteries need 35 kilos of nickel for a pack, as well as eight kilograms of lithium in a single-car lithium-ion.
ASIAN POWER 27
“The one thing we know is that the capital intensity of the sector is going to dramatically increase over time, it’s inevitable because all of the zero-carbon or low carbon technologies are extremely capital intensive,” Thomas said.
Protection On the other hand, there are “hold up risks” to the investments as companies are exposed to competitors or policy changes that can appropriate their values.
When it comes to decarbonisation, which framework is designed to “kick things that don’t fit,” there is a need for contractual protection.
The first project is the Waste to Energy Programme, which aims to reduce waste in the community and turn them into a conversion material in the electricity production process.
Iga Bagus Jaya, Assistant Analyst for the Corporate Social Responsibility Monitoring and Reporting Program at PLN (Persero), also said that PLN has taken concrete steps in reducing carbon emissions in its business processes by integrating renewable energy sources such as wind and hydropower which contribute to its target of reaching clean energy sources by 23% by 2024. The energy firm is also applying the cofiring method in its steam power plants. Jaya said co-firing is adding around 1% to 5% of biomass as a potential replacement for fuel or coal mixture. Biomass can be produced using organic and non-organic waste management and converted into a pellet to be used for co-firing. He said co-firing steam power plants can be used in as many as over 114 generators of PLN and can produce around 18,000MW of electricity.
“The need for commercial power has never been greater. I think demand growth is part of the Asian story and will be part of the energy transition story. What mix will emerge versus what mix should emerge versus what mix could emerge are open questions,” he said.
“The price of electricity in Thailand can fluctuate every three months based on the structure of the tariffs. So having solar can eventually stabilise the cost of electricity,” LYS Energy’s Chedefeaux said.
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EVENT COVERAGE: ASIAN POWER SUMMIT
Asia’s solar potential In Southeast Asia, the Philippines is the most “fundamentally attractive” for the solar energy market as the power generation costs are double compared to other countries, Solar Philippines CEO Leandro Leviste said. Due to this, the power generation company will be more focused on developing the Philippines’ solar market despite engaging in solar development projects abroad such as in Indonesia.
Improved electricity supply A project requiring over $22b in investments aims to supply zero-carbon electricity from Australia to Singapore. Once completed, it will be the world’s largest solar farm of 17 to 20 gigawatts (GW); the largest battery with a 36 to 42 GWhour capacity; and the longest undersea cable of 4,200 kilometres dispatched to Singapore through Indonesia.
Utility solar costs reduced by 81% from 2010 to 2020, with PV modules falling by 93%, Thompson said. Lithium-ion cell costs rapidly decreased by 87% from 2010 to For2019.HVDC, cable voltage increased by around 10% annually over the last 20 years, which meant fewer transmission losses of energy over long distances. Depth of cable laying rose to 3,000 metres, whilst fault rates declined by 80% in the same period.
“It’s the private sector that is lagging in terms of implementing the sufficient supply to meet the demand that has been set by these policies,” he said.
It’s the private sector that is lagging in terms of implementing the sufficient supply to meet the demand
Having a 15% regional grid connection will create 870,000 jobs in the Asia-Pacific region.
This is Sun Cable’s flagship project called Australia Asia (AA) Powerlink, located at Power Creek, Northern Territory in Australia. The AAPowerLink Solar Precinct covers 12,000 hectares of land in the Northern Territory. Supplying Singapore’s total electricity demand by 2040 would require less than 0.05% of the Northern Territory’s landmass, and less than 1% to meet Southeast Asia’s energy demand, Thompson said. “Because of the HVDC improvements, we now have the ability to access an incredible resource and share it with the rest of the world,” Thompson said. “We have a great solar resource in the Northern Territory, but importantly, a scalable resource that can meet the demand magnitude that we’re expecting to see in Asia over the coming decades,” Sun Cable’s Thompson added.
Arange of technologies are available for the Asia Pacific (APAC) markets for their shift to cleaner energy sources, but experts are emphasising the need to integrate a regional grid connection. This would address energy transition needs and support economic growth by creating more jobs. APAC lags in terms of cross-border connectivity. The average of the region’s nodes connected to a network is only 0.3%, whilst Europe is 12% with a target of 15% interconnection by 2030, Fraser Thompson, Chief Strategy Officer at Sun Cable, said at the Asian Power Summit. Assuming APAC has a 15% interconnection target similar to Europe, this would help the region avoid 3,070 metric tonnes of carbon dioxide by 2040. The drastic decline in the prices of renewables technology—such as solar and energy storage, and highvoltage, direct current (HVDC) electric transmission cables—presents more opportunities for the region to step up grid integration, Thompson said. Grid interconnection would require $116b in investments in transmission networks and could create 870,000 jobs, heThompsonadded. noted that Laos exports 47% of hydropower to Southeast Asia, and Bhutan exports around 50% of hydropower to India. Japan and Korea are not exporting or importing electricity, whilst China imports 0.1% of its electricity.
The Philippines targets renewable energy to account for 35% of the total energy mix by 2030, 20GW of which will be solar. Currently, the government is leading auctions for solar development.
“It’s vital for us to focus on saturating our home grid with solar energy and branching out to other markets, once the power prices in the Philippines have been saturated by the influx of solar,” Leviste said.
For Thailand, Fabien Chedefeaux, Country Head at LYS Energy, said the country is reliant on burning fossil fuels, with renewable energy accounting for 18.6% of the gross energy generation and purchase as of November 2021, citing data from the Electricity Generating Authority of Thailand.
The solar adoption trend in Thailand is “going upward,” Chedefeaux said. This is because of increasing environmental awareness and concern, cheaper electricity costs from solar, and the local government’s incentives for sustainability efforts.
Regional grid connection can boost energy transition, economic growth
There are other risks in LNG imports, such as massive potential reserves in the region. If domestic gas production resumes, it may render import infrastructure unnecessary. There is volatility in prices which creates major budgetary risks.
The United States Agency for International Development (USAID) claimed in a white paper that US LNG would cost under $6 per MMBtu to be delivered to the Philippines.
The price of green hydrogen is currently ranging between $3 to $5 per kilogram and is targeted to be further reduced to $1. Joseph said this could be possible by using low-cost off-peak renewable energy and through carbon pricing.
This is because many countries across the region are facing rapidly declining domestic gas production. For example, the Philippines, Bangladesh, and Thailand are all “within five years of wells running completely dry” and have turned to LNG as the “most convenient replacement” for domestic gas. Countries like Pakistan, Myanmar, and Vietnam have significantly more reserves but are having trouble developing them.
This makes the company Malaysia’s largest renewable energy developer, according to Sarawak Energy Group COO James Ung. “We maintain energy affordability by providing amongst the most competitive tariffs in the region by leveraging on hydropower development,” Ung said.
South and Southeast Asia are expected to account for a combined 190 million tonnes of demand from now until 2040.
Justin Payne, Partner, Capital Project Delivery, Low Carbon Economy Transition at ERM–APAC, said that hydrogen is potentially the vector for the energy transition in the region. He noted that Australia can produce green hydrogen and work out the best vector to ship to neighbouring countries.
Tony Segadelli, Chief Engineer and Managing Director at OWL Energy said, LNG will remain a major player citing the Philippines where various companies are building LNG terminals. With the expected demand for power, Segadelli said that renewables will be taking up a significant portion of the energy share.
The large-scale renewable hydropower energy enabled Sarawak Energy to decarbonise its power system, with over 70% reduction in carbon emission intensity from 2010 to 2020. Ung said that they aim to increase renewable energy share and reduce emission intensity by 45% by Sarawak’s2030.efforts
Another technology being looked at to decarbonise energy, industrial, and transport sectors is hydrogen. Michael Joseph, Sales Director in Southeast Asia at SS&A Power Group, said that the global green hydrogen market is expected to reach $10.2b by 2028 at a compound annual growth rate of 55.2%, citing a report by Facts & Factors. Development of green hydrogen Joseph noted that the European Union has committed to ramping up green hydrogen and building at least 6GW of electrolysers by 2025, generating 1 million tonnes of green hydrogen. The EU plans to increase electrolysers to 40GW by 2030 and produce 10 million tonnes of green hydrogen. For Asia, he said South Korea stands out as the world leader in the hydrogen economy as a future massive importer of hydrogen by 2050, whilst Japan targets to reduce the cost of hydrogen from around $3 per kilogram in 2030 to about $2 by 2050. China targets to produce 200,000 tonnes of green hydrogen by 2025, whilst the Malaysian government has crafted its hydrogen roadmap.
The development of hydrogen today is “fairly limited” but there are large portfolios of projects at various stages of development that would enable its production in the coming decade, Payne said.
Subhendu Goswami, Head of Business Development & CRM at Husk Power Systems, said the company is focusing on providing power to areas not connected to the grid, especially in India. The company introduced solar power to its system which helped “generate power at virtually no cost.” Husk Power also introduced a smart metering system which helped reduce human interference and reduced capital and operating costs.
ASIAN POWER 29
LNG as a replacement for domestic gas Sam Reynolds, Energy Finance Analyst at the IEEFA, said that emerging Asia will play the most important role in the demand growth for liquefied natural gas (LNG).
LNG has been promoted as a “bridge fuel” from coal to renewable energy alternatives, Reynolds said. He cited AG&P LNG in the Philippines which claimed that renewables are highly volatile and LNG is more reliable and affordable as a power supply.
Hydropower, hydrogen economies Malaysia’s Sarawak Energy operates mainly on hydropower to ensure a balanced and sustainable generation mix, with hydropower accounting for 70% of its total. This is complemented by the thermal resources of coal and gas.
“LNG is not just an easy replacement fuel, but it’s instead a steep structural increase in the price of fuel, and a knock-on impact, the price of power in many of these countries,” Reynolds said.
“To reach these ambitious targets and to increase it by multiples, we need the support of government agencies and industrial organisations,” Joseph said. “We need to have a political framework that supports the hydrogen market ramp-up.”
“That is a ridiculous price when considering that it includes the gas costs, the liquefaction fees, as well as the shipping costs from the US to Asia,” he said. “The result of these rosy macro fundamental and upstream circumstances in the region is that we’ve seen a frenzy of proposed infrastructure investments in the LNG sector.”
To
to increase renewables include investing in a 50-megawatt floating solar farm, biomass, mini-hydro, and green hydrogen production and export, to position the company as the “hub for the hydrogen value chain.” “We aspire to become a regional powerhouse by advancing renewable hydropower development and becoming the battery of ASEAN. We are focused and moving forward with our plan to establish an interconnected Borneo via the Borneo Grid, and subsequently, the ASEAN Grid,” he said.
Reynolds said that there are $380b of ongoing gas infrastructure investments in Asia and 80 million tonnes of import capacity are aimed to be completed in the next two years. However, he noted that LNG projects have “historically been very difficult to get off the ground” and often take decades.
Goswami added that the rooftop solar system and solar pumpkins system would be game-changers for India.
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Some buyers in China and South Korea have signed new long-term contracts to avoid spot markets. New 20-year purchase agreements may help push a limited number of export facilities over the finish line. However, a large majority of proposed projects, for example in the US, remain uncontracted. Despite new contracts, China’s LNG imports have fallen consistently every month since December, whilst its capital city Beijing aims to ramp up pipeline imports from Russia.
If prices remain high and volatile, buyers may continue to avoid LNG spot markets whilst gradually backing away from LNG altogether.
The bigger picture: lack of long-term demand creation in Asia Southeast and South Asia are widely expected to drive global demand growth through 2040, but new LNG demand creation requires developing Asia to shoulder high, volatile fuel costs denominated in foreign currencies.
Sri Lanka is a prime example. US-based New Fortress Energy aims to stimulate LNG demand by establishing an import terminal and reiterated its commitment to the project in March, with targeted completion in 2023. This is despite the fact that Sri Lanka is on the brink of bankruptcy amid its worst economic crisis since independence. Due to a near depletion of foreign currency reserves, Sri Lanka has had to borrow from the World Bank and India to purchase imported fuels. This is emblematic of a bigger regional issue: whilst companies and policymakers may push LNG imports, unaffordable fuel prices and macroeconomic instability may present hard limits to demand growth.
Others buyers are also revealing potentially permanent shifts away from LNG. In Japan, a majority now supports a return to nuclear power for the first time since Fukushima, as fears that the country could struggle to maintain power supplies escalate due to high imported fuel costs. Although the country continues to invest in upstream LNG projects, the latest Strategic Energy Plan envisions a decline in the share of LNG in power generation from 37% to 20% by 2030.
Vietnam and the Philippines are expected to become new entrants to the LNG market this year, with new terminals expected online before the fourth quarter of 2022. However, there are signs that national tolerance for LNG risks is waning.
The good times are rollin’ for LNG suppliers, but the question remains: for how long?
SAM REYNOLDS
Volatility in liquefied natural gas (LNG) markets isn’t going away any time soon. On April 26, the World Bank warned of years of tightness and turbulence in global gas markets. As if to emphasise the point, Russia cut off gas supplies to two European Union nations the next day, sending yet another jolt into global gas prices and signalling Moscow’s willingness to wield gas exports as a weapon.
As high LNG prices lure exporters into the market, Asian buyers may look for the exit
Fuel price volatility is undermining Vietnam’s ability to finalise long-term power sector plans. In the Philippines, the Department of Energy has promoted energy efficiency to lessen reliance on globally sourced fuels whilst promoting domestic renewable energy alternatives.
High prices are destroying Asian LNG demand, but for how long? Following the Russian invasion of Ukraine, European nations vowed to ramp up LNG imports to wean themselves off piped imports from Russia.
With global LNG suppliers already operating near full capacity and only modest new capacity additions slated for completion in the next several years, European buyers must pay hefty premiums to pull existing supply from other importers, primarily in Asia. Prices, not government dictates, are directing traffic. To avoid high prices, Asian buyers have exited LNG spot markets en masse. Spot purchases have fallen to their lowest point since April 2020. Weather forecasts and storage levels will largely determine Asian buyers’ willingness to compete on price, at which point the arbitrage window for sending cargoes to Europe may begin to close.
For the export industry, today’s high prices have been a defibrillator for LNG supply projects that had languished on life support for years. But for importers, particularly in Asia, high prices are beginning to crimp LNG demand. In the short term, sky-high prices have curbed their appetite for the fuel. Yet the more lasting problem for LNG exporters is erosion of demand creation in emerging markets.
Price spikes and supply disruptions have dramatically strengthened the economic and security case against LNG. Some developing Asian nations may begin to reassess plans to boost LNG imports. By the time newly sanctioned LNG export projects arrive in the market—unlikely for at least five years—prospective customers may already have moved on.
Sam Reynolds Energy finance analyst, Institute for Energy Economics and Financial Analysis (IEEFA)
Conclusion In the United States, no final investment decisions (FIDs) have been taken for new liquefaction projects since 2019. Now, LNG developers are pushing new projects to capture high global prices. Whilst some may reach FID this year, industry expansion relies on high global prices and long-term purchase contracts. But these same conditions could potentially defeat the outlook for longer-term demand growth in Asia.
30 ASIAN POWER OPINION
New projects are unlikely to come online before 2026. As price volatility continues, mature and emerging LNG importers are seeking the nearest exit. If they take more permanent steps to limit LNG demand, exporters may find liquefaction assets increasingly unnecessary or unviable.
Pakistan has recently had to impose fuel and power cuts due to its inability to afford LNG and recurring defaults by contracted suppliers. Nearly 10% of the country’s power supply was stranded due to LNG shortages, resulting in nationwide load shedding. In March, Prime Minister Imran Khan’s ouster was due partly to the energy crisis, and the country is now at high risk of default. In addition to ongoing demand destruction, the country does not expect to build more LNG-fired power plants, and instead aims to bring the share of renewable energy to 60% of the national power mix.
The utilities sector has an important role to play in our collective transition to clean energy – one that cannot be understated: by decarbonising the production of power, it enables other industries to decarbonise through electrification. Recognising this, utilities across Southeast Asia are embracing the energy transition, and making commitments to embark on this journey in earnest.
To incentivise consumer behaviour for more balanced peak demand loads, utilities will also need to consider developing new rates and implementing flexible load programs. Depending on their peak demand patterns, they may also need to reconsider maintenance schedules for assets that are utilised more often in the year, and therefore potentially have shorter life cycles.
3. Electrification
In the long run, energy-efficiency policies will be an important tool in reducing the energy load on the system. The challenge, however, is that building stock, building codes, and related policies vary widely across Southeast Asia. Looking ahead, a greater convergence towards shared regional standards could be one way to help facilitate greater levels of knowledge-sharing, and increase the sector’s uptake of energy-efficiency best practices.
SAPTIPPAYARATTANASOPHAPHAN
weather events expected to increase, regional utilities are urgently looking at ways to enhance their resiliency strategies to ensure the reliability of electricity delivery even under extreme climate conditions.
Nevertheless, the cost of grid upgrades remains a major concern. To unlock capital, governments, utilities, and non-government organisations should consider initiating community resilience plans as a source of collaboration, and scaling up public-private partnerships to increase funding for grid resilience projects.
Three imperatives for the utilities sector in the clean energy transition
To cope with the uncertainty, utilities across the globe are pursuing various resiliency strategies. These include, for example, grid hardening, which ranges from replacing and reinforcing transmission and distribution infrastructure to burying wires underground.
Non-wire alternatives are also becoming more common, including distributed energy resources (DER), such as rooftop solar, battery storage, and microgrids. Some utilities are mapping optimal DER locations to support grid resiliency, and many are looking to third-party DER ownership to reduce costs.
2. Resiliency Southeast Asia is one of the world’s most climate-vulnerable regions: according to the Intergovernmental Panel on Climate Change, 19 of the 25 cities most exposed to a one-metre sea-level rise are in Asia – seven of which are in the Philippines. With the frequency, intensity, and unpredictability of extreme
32 ASIAN POWER OPINION
Looking ahead, regional utilities are also likely to intensify their focus on floating solar PVs or floatovoltaics modules. Singapore, for instance, recently unveiled one of the world’s largest floating solar panel farms spanning an area equivalent to 45 football fields, and with the capacity to produce enough electricity to power five water treatment plants. A number of similar developments are also taking place across most major regional markets, including Indonesia, Malaysia, the Philippines, Thailand, and Vietnam, where deployments have been planned for the coming years. Whilst these are all efforts in the right direction, several tough challenges remain. Specifically, utilities now find themselves not only needing to reexamine their supply chain ecosystems for renewables, but also support greater electrification, and intensify their focus on resiliency and reliability. In this article, we will examine each of these three imperatives in turn: 1. Supply chain ecosystems for renewables To facilitate the energy transition, utilities must first and foremost evolve their supply chain ecosystems for renewable energy. The solar power industry, for example, continues to grapple with supply shortages of components (semiconductors and modules), raw materials (polysilicon and commodities), and labour – in addition to rising shipping costs.
Ultimately, however, for renewable energy sources to function more like a baseload power, regional utilities will also need to consider the need for more storage buildouts: by pairing storage with renewable energy generation, utilities could better position themselves to benefit from cost synergies, operational efficiencies, and lowered curtailment risks.
In tandem with their energy transition and uptake of renewable energy sources, such as solar and geothermal, leading regional utilities in Southeast Asia are currently in the process of deploying battery energy storage systems to stockpile excess energy for use when the demand for power exceeds supply.
With the greater uptake of electric vehicles (EVs) and other smart digital applications, electrification looks set to boost demand for electricity across Southeast Asia. This could be good news: as utilities decarbonise, the electrification of other industries may result in a lower overall carbon footprint. The issue, however, lies with capacity: to enable grids to handle this increased demand, additional investments may be needed in home weatherisation and grid-responsive appliances to manage energy use and shape load.
When it comes to substitute materials, leading solar players have been observed to be exploring the scaling up of perovskite solar-cell manufacturing in tandem with existing silicon cells as an alternative pathway for solar PV (with silicon) to reduce silicon demand and increase efficiency. Some renewable energy players are also developing low- or no-cobalt cathodes to offset the high costs of battery production, and address ethical concerns around cobalt mining.
SaptippayarattanaSophaphan Power, Utilities & Renewables Sector Leader, Deloitte Southeast Asia
The main challenge, however, is that global weather patterns are now in uncharted territory, and planners can no longer use the past to predict the future.
In the renewable energy space, for example, solar power can be observed to be gaining significant momentum. Following a dramatic cost decline over the past decade, solar photovoltaic (PV) systems are currently amongst the most cost-competitive energy resources in the market. This has resulted in a solar PV boom across Southeast Asia. Vietnam, in particular, now possesses one of the world’s highest installed capacity for solar power.
In addition, utilities are expected to increasingly rely on smart meters and other control systems that could help reduce demand during an emergency, combined with flexible load programs.
In order to alleviate these pressures, utilities will need to double down on efforts to seek out alternative suppliers, reassess their supply needs, and develop substitutes. Indeed, ongoing industry initiatives to support renewable energy supply chains – for instance, the development of end-to-end supply chains for advanced batteries and their multiple critical production materials – are already extending beyond energy components to also include raw materials.
Convergence ahead In an economy increasingly moving towards electrification, we are likely to witness greater convergence across the broader energy ecosystem as new entrants and incumbents seek to position themselves to serve a growing clean power market. For instance, automakers’ increased shift towards EVs may help to enhance the grid through charging infrastructure and battery storage development, and technology companies may even seek to become renewable and electric service providers by enabling vehicles and buildings to be served as DER.
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