Asian Power - September to October 2014

ISSUE 65 | DISPLAY TO 31 OCTOBER 2014 | www.asian-power.com | A Charlton Media Group publication

US$360P.A.

ytl power seraya’s game plan how will ceo Chan spearhead the growth of the firm’s non-regulated business?

MICA(P) 248/07/2011

analysis Examining Asia’s maturing energy market

sector report Why energy-hungry Asia calls for the nuclear show to go on

first CSP losing out to PV in China solar race

country Report Malaysia as a substantial power generation force

PAge 14

PAge 22

PAGE 6

PAge 24

Agriculture

Construction

Material Handling

Powergen Powergen

Critical power every second, minute, hour, day and year around the world.

Our engines make a difference.

www.perkins.com

FROM THE EDITOR Three and a half years have already passed after the Fukushima Daiichi nuclear power plant meltdown in March 2011 but opposition to restarting the nuclear reactors remain strong.

Publisher & EDITOR-IN-CHIEF Tim Charlton ASSOCIATE PUBLISHER Laarni Salazar-Navida production editor Roxanne Primo Uy GRAPHIC ARTIST Tamara Pangilinan Editorial Assistant Joana Rizza Bagano Editorial Assistant Queenie Chan

ADVERTISING CONTACTS Laarni Salazar-Navida lanie@charltonmediamail.com

ADMINISTRATION Lovelyn Labrador accounts@charltonmediamail.com Advertising advertising@charltonmediamail.com Editorial editorial@charltonmediamail.com

SINGAPORE Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road Singapore 069113 +65 62237660

HONG KONG Charlton Media Group 19/F, Yat Chau Building, 262 Des Voeux Road Central Hong Kong. +852 3972 7166 www.charltonmedia.com

Prime Minister Shinzo Abe’s plans to quickly restart the country’s atomic energy program faces resistance while policies on the increasing role of renewable energy are very much applauded.

This issue of Asian Power looks into the country’s initiatives to secure its energy supply and diversify its energy sources. In particular, the team has gathered experts’ thoughts on the future of the solar power sector, amidst recent moves by the government to cut tariffs for solar power projects by a fifth in two years and impose time limits on installations. Energy experts are positive that Japan could surpass Germany as the world’s biggest consumer of solar power but our channel checks found that only 10% of approved solar projects have started operations so far due to tightened rules.

While public opposition surrounds nuclear energy, an interesting piece in this issue explores what makes nuclear energy so appealing – not only in Japan but elsewhere in Asia – even after the region witnessed the aftermath of the Fukushima disaster. A study by DBS showing that Asia will soon account for more than a third of the world’s nuclear capacity by 2020 belies its enormous energy needs.

Flip through the pages to find other stories about the Indian government’s budget allocation for the electricity sector and how Indonesia’s newly elected president will gradually eliminate fuel subsidies.

Enjoy!

Tim Charlton

Asian Power is available at the airport lounges or onboard the following airlines:

Can we help?

Editorial Enquiries If you have a story idea or just a press release please Email: ap@charltonmedia.com and our news editor will read it. For a personal message to the editor put the word “Tim” in the subject line.

Media Partnerships Please Email: ap@charltonmedia.com and put “partnership” on the subject line and it will forward to the right person.

Subscriptions Email: subscriptions@charltonmedia.com Asian Power is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Asian Power can accept no responsibility for loss. We will however take the gains.

*If you’re reading the small print you may be missing the big picture    

ASIAN POWER 1

EDITORIAL CONTENTS

country report 1

solar power shines as the 16 Japan’s future for its nuclear energy dims

Feature

REPORT 1 22 SECTOR why energy-hungry Asia calls for the nuclear show to go on

out why China’s strong energy 20 Find sector is still underperforming

FIRST 06 Electricity futures set for Singapore

OPINION 32 JOHN GOSS: A growth forecast for solar power in China

06 CSP losing out to PV in China solar race

ANALYSIS

07 Swallowing costs of going green 07 The Chartist: Renewable energy in Southeast Asia 08 China’s wind power slumps 09 Limited space could stunt Singapore’s solar growth 10 India’s power sector corrects its course 10 Jokowi cuts fuel subsidies to spur growth for infrastructure

Published Bi-monthly on the Second week of the Month by Charlton Media Group #06-09 E, Maxwell House 20 Maxwell Road

2 ASIAN POWER

13 CEO Interview: YTL PowerSeraya eyes Jurong investments influx 14 Examining Asia’s maturing energy market 24 How can Malaysia be transformed into a substantial

power generation force?

28 Challenging ASEAN 2020: Why some goals may not be achieved

on schedule

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

www.asian-power.com

Outstanding efficiency, economy and reliability.

The MWM Series TCG 2020.

Maximum efficiency, impressive economy and high overall availability through extended maintenance intervals. When you want one of the best energy solutions. www.mwm.net

TCG 2020

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

POWER UTILITY

Korea’s POSCO making swift moves on restructuring It has been observed that Korea-based POSCO is making strides in achieving what the new CEO had stated in May 2014 as his goal – divesting non-core assets, improve efficiency and generate an operating profit margin of ~20%.

According to a research note from Nomura, along with this, it sees POSCO’s overseas steel business and non-steel segment improving in terms of earnings.

If Nomura sees any cyclical recovery – brought on by a series of positive macro news – the shares should re-rate further.

4 ASIAN POWER

PROJECT

India’s Reliance Power to acquire 1791MW hydro projects portfolio A media release by India-based Reliance Power (RPWR), Reliance CleanGen (RCL), a 100% subsidiary, has signed an exclusive MoU with Jaiprakash Power Ventures, a subsidiary of Jaiprakash Associates, for acquiring 100% of JPVL’s hyrdopower portfolio comprising three run-of-the-river operational projects.

According to a research note from Nomura, the projects have an asset base of over INR100bn and asset life of over 50 years – Baspa-II (300MW), Vishnuprayag (400MW) and Karcham Wangtoo (1091MW).

IPP

Siemens transfers combined cycle plant to Thailand’s EGAT Siemens, together with its Japanese partner Marubeni, has erected turnkey the combined cycle power plant Chana 2 in Thailand and handed it over into commercial operation to the Electric Generating Authority of Thailand (EGAT).

According to a release from Siemens, the natural-gas-fired Chana 2 plant consists of two units in a singleshaft configuration.With total capacity of around 800 megawatts (MW) and an efficiency of 57.3 percent, Chana 2 is one of the most efficient and environmentally friendly power plants.

Same power. Same products. New owner.

PW Power Systems continues to bring you advances in products and capabilities for the energy and power markets. Now an MHI group company, PWPS, with over 50 years of experience, is driven to provide the high-quality products and support you’ve always depended on. It’s the same trusted technology you know, always moving forward. Visit www.pwps.com or call 1.866.PowerALL (1.866.769.3725) to learn more.

FIRST meet peak output capability makes the project a loser even with inexpensive PV panels.

Analysts note that while both PV and CSP industries have their fair share of challenges, CSP seems to have it slightly worse. According to Frank Haugwitz, director at Asia Europe Clean Energy (Solar) Advisory, CSP’s promising outlook over ten years ago is struggling to fulfil its potential. He says CSP is hamstringed by the infancy of indigenous technology and operational inexperience, and unfavourable climatic conditions taking a toll on materials.

Although PV was able to overtake CSP despite the latter’s apparent cost advantage, it also shares CSP’s struggle with unfavourable climatic conditions, shares Haugwitz. In addition, PV’s proximity to areas with high power demand is not ideal, requiring PV firms to invest additionally on long distance transmission.

Electricity futures set for Singapore

Futures electricity markets reduce risks

Generation companies, electricity retailers and consumers may clash over many issues but regarding the Singapore Exchange’s (SGX) electricity futures market, they may actually come together in support. All three sides have plenty to gain when the electricity futures market – the first centralised of its kind in Asia outside Australia – comes online this October.

“With a futures market, the generation companies are able to reduce market risk by locking in prices for their production.

Electricity users will benefit when price transparency and competition lead to lower electricity prices,” says Magnus Bocker, CEO of SGX. Even industry analysts view the electricity futures market a milestone development in how it lowers the overall risk inherent in the industry--the same risk that has nipped company profits and raised electricity prices for consumers.

A rundown of benefits Breaking down the impact of the electricity futures market, Reinhard Klemmer, executive director at KPMG says there are three potential benefits.

Firstly, large electricity consumers gain a more cost-efficient way to fix prices, resulting in greater certainty on costs and cash flows, as well as more stable returns for stakeholders. Power generators and retailers, meanwhile, protect their revenues by hedging against low spot prices.

The second point of advantage is increasingly diverse product choice as electricity retailers offer new products such as fixed-price variable-volume physical contracts. Thirdly, increased competition will help keep electricity prices stable. While the electricity futures market holds a lot of promise, it needs some time to gather steam as participants test the waters and err on the side of caution.

Bocker foresees a crush of financial participants and international energy players entering the futures market once spreads are tightened and related markets such as gas and liquefied natural gas open up.

“A prudent risk policy will make use of the futures market as part of a well-designed risk mitigation strategy. Furthermore, the prices quoted for the exchange traded instrument are transparent and anonymous, thereby creating a level playing field for traders.”

6 ASIAN POWER

Solar water heaters on roofs in Tieshan, China

CSP losing out to PV in China solar race

T

he world’s best photovoltaic (PV) firms have converged in China with a promise of a large untapped market and strong government support but risks abound even in this particularly lucrative sector.

Some companies that fail to overcome the obstacles may well burn up even before making significant profit.

This year, over six of the top ten PV engineering, procurement, and construction (EPC) companies are based in China, according to Jonathan Cassell, senior editorial manager at top research firm IHS Technology.

Together, these companies are set to install a cumulative total of eight gigawatts (GW) of solar capacity, serving over 20 percent of the world’s non-residential demand .

An interesting competition Of particular interest in China is the competition between PV and Concentrated Solar Power (CSP). PV projects are better suited for China’s desert environment characterized by a sunny but cold climate and relatively high latitude, says Donald Hertzmark, international energy specialist and professor at Johns Hopkins University, although this has not stopped firms from testing the viability of CSP. Hertzmark adds that PV will need some storage as it is far from load centers plus the need to oversize to

CSP’s promising outlook over ten years ago is struggling to fulfil its potential.

Potential bright spots Despite the challenges facing PV and CSP, several areas could serve as significant opportunities for development, as cited by Haugwitz. For both PV and CSP, the Chinese central government as well as institutions like the Asian Development Bank and the World Bank have expressed intention to support the sector through policy and technical assistance.

This will further incentivise foreign firms to enter the market, facilitating valuable technology and knowledge transfer.

For CSP specifically, its cost advantage over PV is still realizable although CSP firms will have to scale up production capacities with the goal of exporting generated power. On the other hand, PV has greater potential for energy storage, as well as distributed generation, which the Chinese government prefers.

Solar CSP capacity and electricity generation

Source: International Energy Agency

FIRST Electricity tariffs increased due to the renewable energy’s higher production costs and uncertainty of energy sources.

Si Nakharin Dam and Hydropower Station, Kanchanaburi, Thailand

Swallowing costs of going green

T

here is little reason for Thailand to ignore its renewable energy potential given its teeming resources and need for higher energy security. That is unless it balks at the increased electricity tariffs that come with replacing fossil fuels with renewable energy sources.

Projections show electricity tariffs increased due to the renewable energy’s higher production costs and uncertainty of energy sources that are subject to seasonal changes and weather conditions which translate directly to a higher electricity price,” says Supanida Wongsomboon, senior accountant at the

energy economic division of the EGAT and author of the tariff study.

But Wongsomboon cautions that the “cheaper” tariff associated with fossil fuels does not factor in external costs on quality of life. “Reductions in air quality, contribution to negative climate change, and impacts on public health should be taken into account,” she says.

Fiddling with tariffs Professor Chatchawan Chaichana, head of Energy Technology for Environment (ETE) research at Chiang Mai University adds that Thailand is already conducting several studies to prepare FiT for other

renewables.

In fact, Thailand’s solar rooftop programme has started FiT for small producers. “The current tariff for household installations (0-10kW) of solar roofs is THB6.96p (US$0.22) per kWh, for 10kW-450kW the tariff is THB6.555 and for 450kW-1MW installations the rate is THB6.16/kWh fed into the grid, for a period of 25 years,” says Chatchawan, believing that these tariffs will encourage the public to participate in energy production previously limited to big firms.

However, some believe that rather than fiddling with the tariff structure, Thailand should focus on creating a more attractive subsidy mechanism to spur renewable energy production.

“Pricing mechanism needs to adjust for capital investment and operating expenses. The more subsidies, the more regulations for the safety and environment to make the project viable on both financial and social terms,” says Khomgrich Tantravanish, director of licensing at the Department Energy Regulatory Commission Thailand.

The structure of Thailand’s electricity sector

Source: Tongsopit and Greacen

The Chartist: renewable energy iN southeast asia The expected contribution of new and renewable sources to Asia’s energy demand seems to remain flat, according to Ipsos. Hence over time the proportional contribution of renewable sources will actually decrease as coal, oil and natural gas grow to higher levels. IPSOS adds that the tropical climate of Southeast Asia is also beneficial for plant growth, which gives it the potential for the conversion of biomass to produce electricity, fuels for transportation or chemicals.

A simple assessment of the climate of the region suggests that it is probably better suited to renewable energy sources than many other parts of the world. Given the favourable climate for renewable energy it is somewhat surprising that the member states are not more advanced in this respect.

Primary energy demand

ASEAN’s suitability for renewable energy

mtoe = million tons of oil equivalent, NRE = New Renewable Energy Source: ADB

Source: Ipsos estimates, WEO Southeast Asia Energy Report, EIS, NUS

ASIAN POWER 7

FIRST

China’s wind power slumps

IPP WATCH

Lanco Infratech sold Udupi power plant for US$991m

D

espite a stellar performance, China sees poor growth in the wind energy sector this year, amid declining use and weakening speeds.

BNP Paribas reports that it sees a 2% year on year decline in utilization hours, from a 2% increase previously.

With slow capacity expansion in 2013, this has resulted in weak wind power generation growth in 2014. “We expect 2014 to be a low wind year, with most provinces recording weak wind speeds YTD. Although some provinces saw an uptick in May, this has dropped off again in June,” says Daisy Zhang, analyst at BNP Paribas.

But GlobalData reported in June that, despite a slump in installations in 2013, China remains “the largest single wind power market responsible for 45% of total global annual capacity additions in 2013.” And the country is expected to have a cumulative wind capacity of 239.7 GW by 2020.

BNP Paribas says the setback is partly due to increasing yearly maintenance costs of up to more than 30%, accounting for 3-4% of total operating expenses. Zhang adds that they do not see significant wind curtailment improvement in 2014, as the latest ultra-high voltage power grid transmission lines are only slated to come into operation in late 201516. Furthermore, with more units

Wind power at Guanting Reservoir

coming out of warranty, BNP Paribas estimates that maintenance expenses will be another concern for operators.

Kim Eng Securities meanwhile has advised investors to “look past the near-term volatility and focus on the structural growth,” which include UHV transmission cable build-out and more strategic approvals of wind power projects. “The UHV transmission line development could help lower wind curtailment from 10.7% in 2013 to 8.2% in 2015E upon completion, helping to transmit wind electricity from Hebei, Gansu and Inner Mongolia to southern or eastern China,” says Kim Eng analyst Howard Wong.

Furthermore, Wong adds that the two recent batches of wind project pre-approvals are mainly in regions with a low wind curtailment ratio and higher utilization hours. “We expect wind farm operators’ asset quality will keep improving to induce higher profitability,” he says.

Lanco Infratech has sold its 1200 MW Udupi Power Plant to Adani Power in a deal valued at >US$91 million. According to a research note from Nomura, Lanco expects to receive ~US$330 million in cash and APL will take over the Udupi project’s long-term debt of ~US$660 million.

From Lanco’s perspective, the sale of the Udupi project within 2QFY15 has been well anticipated and the indicative consideration is also not a surprise.

JV formed for US$200m wind project in Thailand The UHV transmission line development could help lower wind curtailment from 10.7% in 2013 to 8.2% in 2015E.

Limited space could stunt Singapore’s solar growth Singapore has all but demolished the financial and technological roadblocks to solar energy adoption, but it continues to grapple with a logistical dilemma: where to put those large solar power systems, given the lack of open space?

“One of the biggest bottlenecks in the long run will be the limited space in a densely builtup urban environment like Singapore. There will be no large ground-mounted photovoltaic (PV) systems due to scarcity of land and the competing use for commercial or industrial use,” says Dr. Thomas Reindl, deputy CEO & cluster director at Solar Energy Research Institute of Singapore.

The Singapore government simply had to look up to discover the solution. The nation might lack open ground space, but its buildings have plenty spaces of empty rooftops to spare.

This has led to an ambitious target to generate at least 350 MW of solar installations on rooftops of government buildings by 2020, according to Chee Kiong Goh, executive director, building & infrastructure solutions at EDB and executive director at Cleantech.

8 ASIAN POWER

The Blue Circle, the Singapore-based renewable energy developer operating in the Mekong region – Vietnam, Thailand and Cambodia – is entering into a partnership with Annex Power, a renewable energy group in Southeast Asia, which is expected to lead to approximately US$200 million of wind project investments in Thailand.

Under the new partnership, both firms agree to commit resources to develop wind energy projects in Thailand.

Sembcorp Industries raised its stake in India power plant

Chee Kiong Goh Executive Director, Cleantech

Thomas Reindl Deputy CEO, SERI Singapore

Sembcorp Industries (SCI) has raised its stake in the JV power plant Thermal Powertech Corporation India (TPCIL) to 60% from 49% previously. The total investment for the incremental 16% stake is close to S$84m. SCI has injected a total investment of S$377m in TPCIL, now a subsidiary of of the former.

TPCIL is a 1320 MW (2x 660MW units) coal-fired power plant located near the coast of the Bay of Bengal, in Krishnapatnam in Andhra Pradesh.

SUPERCRITICAL: an energy transformation Clean, efficient, economical and reliable boilers.

More than 50 years ago, B&W delivered the world’s first commercial supercritical boiler. Since then, we continue to transform supercritical steam generating technology to help our customers reduce fuel consumption, and improve plant efficiency and environmental performance.

Our

supercritical circulating fluidized-bed (CFB) boiler offers the advantages of steam cycle efficiency with the flexibility to utilize a wide range of difficult-to-burn fuels. And in the United States, we designed and constructed the first ultra-supercritical boiler, the most advanced steam cycle conditions available today. Contact us to learn more about B&W’s supercritical CFB, SWUP™ and VTUP™ boilers.

Babcock & Wilcox Power Generation Group, Inc. www.babcock.com

Supercritical CFB Boiler

© 2014 Babcock & Wilcox Power Generation Group, Inc. All rights reserved.

SWUP™ Boiler

VTUP™ Boiler

FIRST

India’s power sector corrects its course

W

hen the Indian government unveiled its budget for the electricity sector, industry insiders and policy experts were relieved because the measures at least try to address the gaping problems that currently trouble the sector. Tax holiday extensions and new duty exemptions for certain renewable energy materials, for example, will make it more appealing for investors to back new energy projects. But the devil is in the details, and critics argue that India may still lack determination to solve its longstanding energy crisis and benefit from the budget’s promised payoffs.

Directionally correct but lacks details “The measures announced relating to India’s electricity sector in the budget for FY2015 are directionally correct but involve relatively small steps or lack specifics to support a meaningful improvement in the short-term. There are entrenched structural issues affecting the performance of the power sector of India and the solution would require a sustained and disciplined policy focus,” says Fitch Ratings.

Fitch Ratings lauds the two-year extension of the tax holiday for power projects to March 2017.

It also commends the call to provide an adequate quantity of coal to power plants commissioned

by March 2015. But the lack of “very specific” execution details explaining how the measures will be carried out leaves the ratings agency doubtful as to their overall viability.

“It will not be possible to raise the production

of coal significantly within a year. Aside from inadequate domestic production, infrastructure bottlenecks such as rail infrastructure also continue to act as a constraint to ensuring adequate coal supplies to power plants,” says Fitch Ratings.

Big boosts for wind and solar Despite misgivings in execution, the budget measures take a significant step towards supporting clean energy alternatives, particularly wind and solar. “The budget proposal to increase clean energy cess from Rs50 per ton to Rs100 per ton for financing and promoting will indeed be a major boost for wind energy in particular,” says Tulsi Tanti, chairman and managing director of Suzlon Group.

The budget also included an exemption to the special additional duty of 4% on parts and materials required for the manufacturing of wind operated generators. Tanti expects these measures to boost wind energy investment and help it grow by 50% until 2015.

The budget also provides much-needed incentives for solar energy projects, including an Rs500 core allocation for ultra-modern solar power projects, which should convince solar companies to increase generation capacity, according to Anil Chaudhry, country president and managing director at Schneider Electric India.

Additional budgetary allocations for the development of 1 MW solar parks and solar

Jokowi cuts fuel subsidies to spur growth for infrastructure With the election of President Joko Widodo, Indonesia seeks to put a cap on politically volatile fuel subsidies to dramatically boost investments across sectors.

Moody’s Investors Service senior analyst Ray Tay says the new government “is credit positive for the country’s infrastructure because investment in transportation and energy is likely to increase.”

Indonesia has one of the cheapest energy rates in ASEAN due to high subsidies, putting a strain on the budget amid rising fuel consumption with the rising economy. DBS research shows the government’s fiscal account remains under pressure from large fuel subsidies, with a risk that the deficit crosses the 3% (of GDP) mark in 2014, past the current legal limit.

With limited funding left for infrastructure, Jokowi plans to reverse this by gradually reducing and eventually eliminating subsidies.

But Tay says it remains unclear how the infrastructure investments will be funded. Jokowi says the reduction of fuel and electricity subsidies could potentially free up $30 billion for infrastructure spending.

“And he certainly has to make cuts in energy subsidies to make investment in infrastructure and agriculture.

This approach is likely to bring more investment in power sector too,” according to Harsh Thacker, senior research analyst, Energy & Environment Practice, at Frost & Sullivan Asia Pacific.

Jokowi has envisioned a sizeable list of other infrastructure investments related to natural gas pipelines, rural electrification, and refurbishment.

10 ASIAN POWER

Wind turbines outside Udumalpet, India

power-driven pump sets will also increase solar energy utilization.

“The removal of customs and excise duties on solar equipment, on the other hand, will incentivize indigenous companies to increase domestic manufacturing and reduce reliance on import.” says Chaudhry, while giving a caveat that proposals are nothing without strong willpower and execution. “The reeling power sector will find some respite, if the measures announced in the budget are implemented properly.”

Energy as part of Indonesia’s budget

Source: International Business Times

Harsh Thacker Senior Analyst, Frost & Sullivan

ASIAN POWER 11

Chan Swee Huat

CEO, YTL PowerSeraya

12 ASIAN POWER

CEO INTERVIEW

YTL PowerSeraya eyes new investments influx The new CEO Chan Swee Huat plans to take YTL PowerSeraya’s non-regulated business to another level of unprecedented growth while attracting and retaining top talent.

Y

TL PowerSeraya, one of Singapore’s largest electricity generators, supplying about 30% of the country’s energy needs, has appointed Chan Swee Huat as chief executive officer in October last year. Prior to his current appointment, he was senior vice president of the Trading & Fuel Management Group, where he was responsible for the planning, development and implementation of effective business strategies in the areas of physical oil storage, bunkering and chartering.

Having trained as a mechanical engineer, and with over 25 years of experience in business development, planning, and management of power plant assets, he initially joined the company in 2001, heading the Business Development Group.

He also served as vice president of the Power Generation group for three years, where he played a pivotal role in ensuring high plant efficiency and availability and maintained the competitive standing of the company in the new electricity market from 2004 to 2006.

Asian Power recently caught up with the new CEO to discuss what he will do differently. Mr Chan revealed how he plans to spearhead the growth of YTL PowerSeraya’s non-regulated business, which includes tank storage and steam sales. The firm, with a licensed generating capacity of 3100MW, aims to expand its role to become the leading integrated energy company in Singapore, offering steam, water and physical oil trading and storage services.

Can you describe to us your experience since you assumed the role as new CEO of YTL PowerSeraya in October last year?

I am humbled and honoured to have been appointed as the CEO. Having been with the company for 13 years working in various business units, I have been fortunate to have been able to work with people who have consistently inspired me, as well as people who have faithfully worked alongside me for many years.

I am thankful for their support, as I continue to build upon the strong foundation of the company since I assumed the role, being fully involved and working from the ground level up to gain a deeper understanding of the multi-faceted business.

These include looking in greater detail at aspects such as talent retention and corporate social responsibility.

also focus on attracting and retaining talent in the company.

What will you do differently in this position?

I’d like to work with the senior management team to build a network of leaders within the company. I believe people are the cornerstone of a company’s success and they should be given the appropriate opportunities to grow both professionally and personally. Talents that are groomed will ensure a system of continuity and sustainability of the business. At the same time, driving productivity and efficiency improvements will be key.

What changes are you planning for?

I will continue to grow more revenue streams through expanding our non-regulated business, while ensuring excellence in our business operations. Working closely with our parent company YTL Power International, our operational synergies will allow us to deliver a sharper focus on productivity, efficiency and quality, to provide services such as operations and maintenance, cooling water and other relevant services to help industrial customers on Jurong Island to be more efficient and sustainable in their operations.

By expanding our capabilities and optimizing the assets of our core businesses, we hope to bring more cost-efficient solutions, as well as innovative services, to our customers.

Preparing the organization to be more productive in our operations with prudent cost management in mind will also be key to maintaining our growth in this competitive business environment.

Were there any difficulties or challenges you faced? How did you address them?

The increasingly challenging business environment due to changing regulatory frameworks, excess power generation capacity, as well as the further liberalization of the electricity market, have resulted in more intense competition.

As such, we are focusing our efforts on increasing revenue streams which include growing our non-regulated business and expanding our customer base, as well as managing costs.

What are your key business philosophies?

I see the future of YTL PowerSeraya in our people. I believe training and development is important so the company can build a network of strong leaders or talent that can take the company to the next level of growth.

I’m also a strong advocate of having an effective work-life balance. Through our recreation club Vibrancy@Seraya, we encourage staff to lead a healthy lifestyle while cultivating team camaraderie.

Employees who lead more fulfilling and healthy lifestyles are likely to be more engaged and productive in the company.

I’m also glad to also learn that our various CSR activities which encourage staff participation resonate with some of their personal values, which can help promote a greater sense of belonging in the company.

Externally, I believe in giving good value to customers beyond just providing basic products and services. Our retail arm Seraya Energy has consistently been able to capture a sizeable share of the electricity retail sector – a testament to its ability to provide value added energy solutions to customers despite intense competition in the industry.

What three main goals are you focused on?

I look forward to spearheading the growth of our nonregulated business which includes tank storage and steam sales to support the new influx of investments from companies on Jurong Island.

On the back of further liberalization of the electricity market which has introduced a new retail framework, efforts will also be focused on increasing our retail brand awareness and expanding our customer base. At the same time, I would like to

What previous positions prepared you for this one, and how?

Prior to assuming the role of CEO, I was heading the Trading & Fuel Management Group, responsible for the planning, development and implementation of business strategies in the areas of physical oil storage, bunkering and chartering.

Heading the Business Development Group as well as the Power Generation Group to manage power plant assets in the company has put me in good stead to gain a thorough understanding of the Group’s business across the value chain.

ASIAN POWER 13

analysis: energy in asia Europe and 2% in the Americas.

By 2030, China will overtake the US as the world’s largest oil consumer. India will become the largest importer of coal by the 2020s. The region will account for more than a third of the world’s new nuclear energy capacity by 2020. China’s embracing of renewables will result in increased use of these sources – a rise greater than the combined increases of the US, Europe and Japan.

Nuclear energy seems to provide the answers to Asia’s thirst for energy

Examining Asia’s maturing energy market

The region will grow for a few more decades then experience a slower but hopefully more sustainable expansion.

A

sia’s rise from economic backwater to powerhouse has been, in recent years fuelled by, and helped to fuel the world’s energy markets. We’re no longer surprised to hear about China’s voracious appetite for coal to power its booming cities. Or that it builds more houses in a year than exist in all of Spain. Or, for that matter, when Mumbai’s economy is tipped to dwarf that of Portugal.

We are surprised, though, when that growth starts to tail off. China provoked widespread astonishment when it announced its economic growth had slipped to just 7.4%. That’s a mile off the 12% it enjoyed a few years back.

India, the region’s other behemoth, has languished below 5% growth for a few quarters now. Smaller Asian economies have also been decidedly earthbound for a while.The good news is that Asia will continue to grow strongly for a few more decades. Its GDP numbers are still perfectly respectable by most measures.

The region is entering a more mature growth phase marked by lower but hopefully more sustainable expansion.

Led by China and India, Asia’s growth averaged 7.5% for the past 25 years. With China’s slower growth trajectory, it has

14 ASIAN POWER

Asia will likely add three Eurozones to the global economy in the next 25 years.

averaged around 6% for the past three years.

Going forward, a reasonable assumption might be that growth falls to 5% over the next decade and to 3.5% over the subsequent 15 years. But that would still put Asia’s GDP at about $54 trillion in 2038. In other words, Asia will likely add three Eurozones to the global economy in the next 25 years.

Fuelling energy demand The impact of this growth on global energy flows will be nothing short of transformative. Global energy demand will soar to new heights. The International Energy Agency sees global energy demand expanding by a third between 2011 and 2035, while the US Energy Information Agency envisages a 56% rise in consumption by 2040, spurred by longterm economic growth in the developing world.

Asia will be at the coalface of this boom. A huge appetite for all types of fuel puts it at the forefront of the global energy story. Asian oil demand has climbed by more than 40% since 2000 – or around 8 million extra barrels of oil a day. By comparison, oil demand has fallen over the same period by more than 12% in

Rewiring global energy Overall, Asia’s energy demand is on track to rise by 2.1% a year between 2010 and 2035, more than half a point faster than the rest of the world. Developing Asia’s energy use should expand by 2.3% a year through to 2035. China’s energy consumption briefly intersected with that of the US in 2010, but will leave it far behind in the coming decades. Continued economic expansion of almost 6% a year among developing countries in Asia will help to sustain this appetite.China, as it eyes new growth targets, leads this transition. Much of the country’s rapid industrialization has been driven by power plants fired by coal found almost entirely at home.

It still produces millions of tons of coal each year, but is now one of the largest importers of thermal coal from export markets.The metamorphosis has taken only a few years, prompted by the global financial crisis which sent international coal prices plunging. Suddenly, cheap foreign coal was a viable option, and has remained so. Falling freight rates have added to its appeal.

China’s use of coal will plateau in a decade or so, after which India will take over as the largest coal importer. Similarly, China will soon become the world’s biggest oil importer as the international crude trade reorients away from the developed world and towards Asia.

As with coal, oil consumption is set to taper off in China as it moves to lowercarbon forms of energy. But it will rise in India, which is not as far down the path towards sustainable energy use, making it the leading single source of global oil demand by 2020. Similarly, Southeast Asia will alter the geography of global energy demand as it becomes the fourthbiggest oil importer by 2035, behind China, India and Europe.

The shift in demand to emerging economies, particularly Asian ones, is rewiring the global energy trade.

Countries that have long been importers are revving up their energy exports, while many exporters are becoming leading demand drivers. For Asia, the latter scenario is more often at play as they replace domestically sourced fuels with imports. By DBS Asian Insights

co-published Corporate profile

Discover why a new day dawns for the Japanese solar energy market

It’s time for the serious investors to come and play, says OWL Energy CEO Tony Segadelli.

C

ompanies looking to invest in renewable energy will find fertile ground on Japanese soil. A green energy revolution has been brewing in the archipelago for the past couple of years, but critics now fear that the boom might come to a standstill.

This is because of the Ministry of Economy, Trade and Industry’s (METI) move to cut power tariffs earlier this year. Though naysayers claim that lower prices will choke off investment and bring the renewable energy boom to a halt, OWL Energy CEO Tony Segadelli believes otherwise.

Segadelli stresses that Japan’s renewable energy market has been bogged down by a flood of speculators who rushed to the country in the wake of Fukushima.

“What happened was that the government issued a policy that is too generous. It brought in a lot of speculators who have no idea of what the power industry is and no real interest in what the power industry is,” Segadelli notes.

When Japan first rolled out its renewable energy program, its tariffs were among the highest in the world. Solar power was going at ¥40 per kWh, which the brought down to ¥36 per kWh, then finally to ¥32 per kWh this year, excluding consumption tax.

“There were a lot of speculators who were clogging up the system. By bringing the tariffs down to a reasonable level, the METI will actually get rid of a lot of these speculators. Now the real players can come and take a look at the market. It will be a good move in the long term.”

An owl rises from the ashes of Fukushima The Japanese renewable energy boom is far from being over. Segadelli notes that the fundamentals

remain intact for a full restructuring of the Japanese power sector.

“Before Fukushima, there were basically the big 10 utilities that took up 96% of the market.

Nobody else could get into the market. It was an oligopoly. Since the Fukushima disaster, the government has resurrected the restructuring of the power sector,” he notes. “So Fukushima has basically fundamentally changed the power sector.

In legend the phoenix rises out of the ashes but when it came to Fukushima it was an owl that rose up.

As a matter of fact, Japan has seen billiondollar investments from the world’s biggest banks in recent months. In a playing field where big companies get the spotlight, Segadelli states that plenty of opportunities remain even for smaller power players.

“There is about 63 GW of non-residential solar power that have been licensed. The big utilities aren’t taking up all of that,” he says.

“There is still plenty of room for other investors to come in. As a matter of fact, one of the things that we do in Japan at the moment is that we’re going through the list of all licenses that have been approved by METI, working out which projects are viable but haven’t been installed because of financing or other concerns, and then we work to resolve those issues and get the projects going.”

All eyes on solar Investors remain focused on solar energy, though the Japanese government has also made an effort to get firms interested in other forms of renewable energy. “Solar is the quickest and the easiest to build. You need the least amount of technology; you can basically plug and play with

“There were a lot of speculators who were clogging up the system. Now the real players can come and take a look at the market.”

solar. Construction periods are 6-12 months depending on the size of the plant. Even a 20 MW plant would only take around 12 months to build,” he states.

“Whereas in Japan if you look at wind, it takes 2-3 years of wind data before you can even start construction. For geothermal, you have to find a field first which takes a lot of exploration costs.

And for biomass you have to find agricultural waste to use. So it really is much easier to build solar,”he notes But he also cautions that the solar energy boom is bound to slow down sooner or later. “At some point, there is going to be a limit put on the amount of solar that can be built,” Segadelli says.

“Whether it’s due to grid instability, whether it’s due to land restrictions, it’s basically going to just slow down at some point. And by that time the other technologies are going to pick up.”

OWL Energy opened its Japan office in May 2014, becoming the first multi-national high end power engineering consultant to enter the Japanese market through its wholly owned subsidiary Oriental OWL Energy KK. The Japanese operation will initially focus on the solar boom, but it is expected to grow into wind and biomass in the near future. The office will be headed by Ichiro Kayaba, who has worked with Segadelli on two power projects in Western Australia.

ASIAN POWER 15

COUNTRY REPORT 1: Japan

Aikawa solar power plant, Aikawa Town, Kanagawa

Japan’s solar power shines as the future for its nuclear energy dims

Since the Fukushima nuclear disaster, Japan has turned to renewable energy to diversify its energy sources. In fact, the country is expected to surpass Germany as the world’s biggest consumer of solar power.

W

ith the future of nuclear energy tottering beneath massive public opposition, Japan is seeking to secure its energy supply by imposing stricter rules on renewable energy.

The Ministry of Economy, Trade and Industry (METI) has cut tariffs for solar power by a fifth in two years and has set time limits on installations, a move that experts say does not deter but rather spurs growth in the sector.

Anne Hung, principal at Baker & McKenzie, said the cut in tariffs is due to solar panel prices significantly decreasing over the past few years.

Regarding the new six-month deadline of approved installations, Hung said these were imposed to push developers to speed up project development, as only 10% of approved solar projects have started operations so far.

Business-as-usual regulations Frenk Withoos, chairman of the Energy Committee of European Business Council in Japan, agreed that several project owners are “intentionally delaying the process to get a better price for the photovoltaic 16 ASIAN POWER

“Japan needs to increase interconnection capacity between regions to create a more competitive and integrated electricity sector.”

system and gain more profit later.”

In a paper written by William Byun, managing director of Asia renewables and Benjamin Bulow, Asia renewables researcher, both at the University of Chicago, the tightening of rules is described as simply “business as usual.”

“The move by the METI to cut incentives and tariffs and speed up installation requirements is actually in line with other similar practices in other countries as the take-up matures,” they note.

The Japanese government itself acknowledged that in the first year of development under the new regime of tariffs, from 2012 to 2013, only about 400 MW was actually installed; or merely a fraction of the total approved capacity.

The deadlines, according the study, are set to weed out power developers who do not have the capacity or intention to actually build the approved projects.

“In other words, the stiffening now is not necessarily to hurt solar, but rather, to better promote a healthier overall sector,” argue the authors.

Experts believe that having a mixed generation portfolio,

including reviving nuclear stations that comply with new, stringent safety requirements, could actually aid the renewable energy sector.

Byun and Bulow actually see the solar sector, at barely 2% the size of the nuclear sector, to be “simply a footnote-sized add-on for show.”

“The closure of Japan’s nuclear power plants has resulted in a sharp increase in Japan’s energy imports, a key factor in its record 11.5 trillion yen trade deficit in 2013,” says Randall Jones, head of the Japan/Korea Desk at the OECD. He believes that for the renewable sector to grow, Japan needs to increase interconnection capacity between regions to create a more competitive and integrated electricity sector. Jones says this should be coupled with green growth policies, including a strong and consistent price on carbon through a carbon tax, in combination with an emissions trading system.

Since the Fukushima nuclear disaster, Japan has turned to renewable energy to diversify its energy sources. Japan, in fact, is expected to surpass Germany as the world’s biggest consumer of solar power.

COUNTRY REPORT 1: Japan “We see no linkage between the actions taken by METI regarding solar power to the restarting of some nuclear power plants,” Hung says, adding that it is unlikely that nuclear power plants could withstand the strict assessment process amid widespread protest.

Regulatory restructuring Martin Adams, Energy editor of The Economist Intelligence Unit, says that despite popular opposition against nuclear energy, Japan expects nuclear restarts to kick in eventually.

“Our view is that the financial imperatives to switch at least some reactors back on will prove too great to resist. [But] even when nuclear plants start returning to action, though, it will not herald a sudden resurgence of atomic energy.

Nuclear will never recapture its role of supplying around 30% of Japan’s electricity, as it did before the Fukushima accident,” he says.

“There is, of course, much uncertainty as to how many will come back online, how soon. Perhaps only 15 of Japan’s 48 reactors will be back in action at the end of the decade, we forecast, supplying less than 10% of its power.”

For Jane Nakano, senior fellow of the Energy and National Security Program at the Center for Strategic and International Studies, the safety approval necessary is not yet sufficient to restart a series of nuclear reactors that have come offline following the Fukushima nuclear accident.

She explains that the review of the Sendai plant by the Nuclear Regulatory Authority, the new nuclear regulatory body in Japan, was an important test case for the new approval

process put in place a year ago.

“Political and regulatory developments in for the Sendai restart process are being watched closely by all of the stakeholders in this matter as more than a dozen other reactors are currently awaiting the review or approval. However, the restart alone does not foretell the longer term future of nuclear energy in Japan,” according to Nakano.

She points out that almost all of the nuclear reactors in Japan will be retired by 2040 unless the regulators extend the limit of operational licences from the current 40 years.

This means this could lessen the interest for new nuclear investments in the country.

Byun and Bulow say that the nuclear sector itself could continue to limp along via ongoing subsidies for studies and research, “while it gradually fades into just another zombie subsidy sector.”

No comeback for nuclear Tony Segadelli, managing director of consultancy firm OWL Energy agrees that, with controversy surrounding nuclear power plants and with the restructuring of the power sector in 2016, it is likely that the vast majority of nuclear reactors will never be restarted.

He says that, while the two reactors that have recently been granted approval are relatively new plants and are not located on tectonic plates, these still need approval from the local communities. As it is the process for the safety approval is already causing delays.

“The time frame for starting up each nuclear unit will be slow and tedious.

Japan Installed Solar Capacity by 2020 based on Bear/Base/Bull scenarios

Martin Adams

Tony Segadelli

Jane Nakano

Anne Hung

Randall Jones

Moreover, the cost of upgrades will be prohibitive for many units,” he adds.

Nakano adds that even if several nuclear reactors return online in the next few years, the long term prospect for nuclear energy remains highly uncertain.

Potential reforms Segadelli says that Japan’s ailing energy sector is compounded by the lack of indigenous fuel sources, as there are no coal mines or oil and gas reserves.

After the Fukushima meltdown, 50 nuclear units were immediately eliminated. Japan has sustained the supply by doubling its use of fossil fuels.

“The measures taken after Fukushima included TEPCO building 1040 MW worth of emergency power plants between the earthquake and the summer peak.” To keep up with the demand, Segadelli says a number of reforms must be in place. One of them should be replacing old, inefficient units, as the Tokyo Electric Power Co. (TEPCO) alone has 10 GW of fossil fuel plants that are over 40 years old.

Another issue involves settling “high levels of debt carried by the utilities many of which are close to being bankrupt.”

With Japan having the highest power prices in Asia, Segadelli says the first phase of the latest restructuring plan is to unbundle the transmission and distribution networks from the generating assets.

This will make third party access far simpler and potentially cheaper.

And with the deregulation of the power sector come 2016, more reforms will follow. For one, he sees the generation mix becoming much more diverse. “It should boost the renewable energy sector as the access to the transmission and distribution lines becomes simpler,” he notes. “The ultimate policy goal is to have a decentralized, smart grid system that is based on renewable energy including residential solar.”

Non-household solar

Source: METI, Morgan Stanley Research

Source: METI, Morgan Stanley Research ASIAN POWER 17

CO-PUBLISHED CORPORATE PROFILE

A virtual power plant control room built on software innovation

Advanced software makes it possible to telecontrol the operations of unmanned power generation plants of all sizes.

W

e are accustomed to online networks that help us work remotely from home, pay our bills, transfer cash or visit friends. Remote connections via computer are now a part of our daily lives. But did you know they are also part of the industrial landscape? For industrial sectors like power generation, remote service tools routinely monitor and analyze critical plant equipment or processes, and provide an early warning system of impending trouble.

Now this monitoring and analysis role has evolved to include full control functions in a web-based platform. Advanced software makes it possible to telecontrol the operations of unmanned power generation plants of all sizes, including hydropower, photovoltaic (PV), wind and geothermal plants.

Based on the Symphony® Plus control platform, a new ABB Operations and Maintenance (O & M) remote service tool links isolated, unmanned generation sites to skilled ABB staff in a remote control room, manned 24 hours a day, 365 days a year.

In addition to predictive, preventive and corrective maintenance, process analysis / support and remote diagnostics, the control room can now provide remote operational control, and access a patented energy production forecasting tool based on selflearning algorithms which improve results as data is accumulated.

18 ASIAN POWER

The ability to analyze, fine-tune and control energy production remotely, no matter what generating technology is involved, or where it is located, is a real service breakthrough.It is the next best thing to having a control room there, on site.

It means now even plant production functions, using data from the plant itself, can be managed by trained staff thousands of miles away, perhaps even on different continents, where they are still able to detect faults or malfunctions, create energy production reports, and manage alerts from security and access control systems.

The remote O & M service tool ties together all the essentials: an effective, remote maintenance program plus a system that remotely manages all variables related to energy production, crucial in unmanned sites.

The result is enhanced plant performance, reduced costs and improved uptimes. It is also an open solution that can be implemented in

“The ability to analyze, fine-tune and control energy production remotely is a real service breakthrough.

It is the next best thing to having a control room there, on site.”

power plants using either ABB or third-party equipment, provided the plant can receive information from the field via common communication standards.

Constantly exceeding thresholds All this is offered by ABB as a one-stopshop vendor independent service to clients, ranging from classical utilities to IPPs, financial and private investors that have access to a hassle free plant management by expert technicians.

The first PV generation plant to install this solution was commissioned in 2011, and since then new photovoltaic and wind power plants having a combined generating capacity of several gigawatts (GW) have signed on – all of them connected to ABB Power Generation`s remote control rooms.

The new solution is proving its effectiveness in the field. PV plant generation performance is on average between 86 and 94 percent of production capacity, significantly above ABB’s contractual guarantee of about 80 percent. And it has consistently exceeded the contractual threshold of 98 – 99 percent plant availability, with spikes of 99.9 percent availability at some plants.

To learn more about ABB’s remote control solutions, contact your local ABB power generation office or go to www.abb.com/powergeneration

速

FEATURE: china energy

Wind turbine farms in Guazhou, China

Find out why China’s strong energy sector is still underperforming Unclear regulatory frameworks, lack of cost pass-through mechanisms, and expansion risks abound.

C

hina’s electricity demand and supply is in balance and the economy is rebalancing. As such, the need for capacity additions is moderating. The industry’s capex is therefore shifting from capacity additions to fuel mix optimization.

Early this century, China experienced accelerated GDP growth and inadequate levels of installed capacities; a situation reflected in the more than 5,000 hours of capacity utilization between 2003 and 2006. In response, Chinese power generating companies – notably the five largest power generating groups by installed capacities – rapidly increased their installed capacities.

Installed capacities in China tripled to 1,247 gigawatts (GW) during 2003–2013, resulting in capacity growth outpacing demand growth, as the overall total number of hours of utilization declined between 2005 and 2013. Total utilization hours have been below 4,650 for the last six years (since 2008), against the backdrop of continuing growth in power consumption.

China and Russia’s signing of an agreement on 22 May 2014 for Russia to provide gas supplies to China over a 30-year period from 2018-2048 should expedite investments in China for gas-fired genera20 ASIAN POWER

“Tariff adjustments have lagged behind coal prices in terms of magnitude and timing over the past several years.”

tion capacities. Before the agreement was reached, the development of gas-fired power was constrained by China’s increasing reliance on imported gas, and limited logistics infrastructure for liquefied natural gas imports. At end-2013, gas-fired electricity accounted for only 2% of the gross power generated in China.

Market structure and key players In 1997, the State Power Corporation of China was established to take ownership of state-owned power generation assets and virtually all of the high voltage power transmission grids and local electricity distribution networks.

In 2002, State Power Corporation of China was reorganized into two grid companies – State Grid Corporation of China and China Southern Power Grid (unrated) – and five large independent power generating groups (Big 5 IPP), namely, China Huaneng, China Datang, China Guodian, China Huadian and China Power Investment. All five are unrated.

China’s entire power generating sector is dominated by state-owned enterprises (SOEs). The Big 5 IPP are all whollyowned by the central government and accounted for about 50% of the country’s total installed capacity in 2013. The

specialist power generating companies are also owned by the central government, and include the hydropower giant, China Three Gorges, the two nuclear power groups China General Nuclear Power Corporation and China National Nuclear Corporation, and the largest wind power company, China Longyuan. All except China Longyuan are central SOEs. China Longyuan is a subsidiary of China Guodian, one of the Big 5 IPP. Regulatory framework China’s electricity regulatory framework is evolving and lacks clarity. It also lacks automatic cost pass-through mechanisms for tariffs. Coal-fired power generating companies have faced volatile earnings due to sharp coal price movements over the last several years.

China’s power sector is regulated and supervised by the National Energy Administration and the Price Bureau.

Both entities come under the purview of the National Development and Reform Commission (NDRC), which in turn is responsible for setting industry and safety standards, approving capacity additions and new projects, setting and adjusting on-grid tariffs. NDRC sets the benchmark and approves the adjustments for on-grid tariffs.

FEATURE: china energy For coal-fired generating units, the benchmark for on-grid tariffs is set on a province-by-province basis, with reference to operating costs and fuel gas emissions standards such as the levels of desulphurization, denitrification and dust filtering. While NDRC has introduced guidelines linking coal to electricity prices, the tariff adjustments have lagged behind coal prices in terms of magnitude and timing over the past several years.

To encourage renewable power generation, the government has offered more favourable regulatory measures for renewable energy. According to the Renewable Energy Law, grid companies are required to purchase all electricity generated from renewable power plants approved by the government.

Tariffs for wind and solar power generating companies are significantly higher than those for thermal power generating firms.

Critical mass and growth potential The very large size and growth potential of the Chinese electricity market offers a resilient and steadily growing revenue base for power generating companies. In addition, the critical mass of their revenue base partially offsets the impact of volatile profit margins on their earnings and liquidity levels.

China is the largest producer and consumer of electricity in the world. Yet in terms of per capita power consumption, levels in China are well behind the developed countries. Given this situation and the country’s continuing urbanization and industrialization, power consumption in China should continue to grow over the next five years, although at a slower rate than the past decade, due to the country’s slowing GDP growth rate.

Furthermore, because the level of economic and industrial development

varies across provinces, the Big 5 IPP are somewhat insulated from the volatility associated with certain industries or regional economies.

Evolving regulations Like most other emerging economies, China’s regulatory regime for the power sector is evolving and lacks transparency, particularly in the implementation of a cost pass-through mechanism.

However, any reform will likely be gradual. The lack of a transparent regulatory framework and the uncertainty to recover the increased costs will remain key rating constraints for Chinese power generating companies.

While there are laws and guidelines covering the electricity regulatory framework, their implementation is subject to the regulator’s discretion rather than being a rule-based mechanism. A notable example is the lagged tariff adjustment for coal-fired generation during 2007-10 when coal prices were rising while the domestic economy was under inflationary pressure; resulting in squeezed profit margins for coal-fired power generating companies.

Rising interest rates Many large power generating companies have in the past, engaged in aggressive debt-funded expansions to meet the strong demand for electricity and therefore the pressing need for capacity additions. This situation – combined with their good access to the onshore credit markets – has resulted in highly leveraged capital structures and substantial annual interest payments. Such factors and the lack of automatic cost pass-through mechanisms have made these issuers’ credit metrics sensitive to the movement of interest rates and coal prices.

Financing costs in China are rising.

“The lack of a transparent regulatory framework and the uncertainty to recover the increased costs will remain key rating constraints for Chinese power generating companies.”

China Huaneng and China Power Investment – the former being the largest of the Big 5 IPP and the latter being the smallest – have had to pay higher coupon rates for bonds with the same tenors in 2014 versus 2013.

In contrast, financing costs in offshore markets are more favourable. The State Grid Corporation of China – the largest grid company in the world by revenue – obtained cheaper and more long-term funding through offshore USD bond issuances than through onshore bond issuances in 2014.

Offshore USD bond issues entail foreign exchange risk and their funding cost depends on the USD/RMB exchange rate.

However, offshore USD bond markets provide a liquid funding channel. Moreover, the emergence of offshore RMB bond markets provides an additional offshore funding option for Chinese power generating companies.

We expect some large central and local government-owned Chinese power generating issuers to follow State Grid’s example in tapping into the offshore bond markets.

Risks from increased overseas expansions In recent years, Chinese power generating companies have begun investing abroad in response to the government’s push to encourage large state-owned enterprises to develop into global players through cross border expansions.

These overseas investments and operations will therefore become an increasingly important component of their credit profiles. While each investment project has generally not exposed the companies to significant execution and financial risks, such risks will accumulate as the firms continue to expand globally.

In an effort to support their internationalization strategies and to mitigate domestic funding and exchange rate risks, the power generating companies are also more eager to establish offshore funding channels. By Ivan Chung, senior vicepresident, Moody’s Asia Pacific

China’s electricity sector: From supply storages to a balance demand and supply

Foziling dam and hydroelectric power dam, China

Source: National Bureau of Statistic, China Electricity Council

ASIAN POWER 21

sector report 1: NUCLEAR ENERGY expect it to give the greenlight to new reactors in a couple of years at the earliest.

“The Japan accident has not swayed governments from embracing nuclear as a clean–though obviously not hazard-free–and relatively low-cost way of obtaining energy security,” according to experts at DBS. Currently more than 100 nuclear reactors are operating in East and South Asia, with dozens under construction and plans to build 100 more.

DBS Asian Insights cites estimates that China, India, South Korea and Japan will account for more than a third of new capacity globally, representing several of the largest growth markets for nuclear energy in the world.

Monju nuclear power reactor, Japan

Why energy-hungry Asia calls for the nuclear show to go on

The Fukushima disaster has shaken Asia but massive energy needs are knocking loudly, pushing governments to build more nuclear power plants than ever before.

S

afety fears may grip much of Asia for now after Japan’s Fukushima nuclear power plant meltdown. Yet a greater scare looms over the horizon: that the region’s fast-growing countries will not meet the energy demand required to power their economies if they choose to sideline nuclear development altogether. This is why analysts believe the current caution about nuclear power will be temporary, and most governments will get back on track to build more nuclear power plants than ever before.

Nuclear powerhouse Ongoing hiccup notwithstanding, DBS notes that Asia will account for more than a third of the world’s new nuclear energy capacity by 2020 and emerge as a nuclear powerhouse region. China and emerging Southeast Asian countries will largely drive this demand spike as their booming, powerhungry economies force governments to tap all available energy sources.

The Fukushima disaster is the world’s largest nuclear accident since Chernobyl, but even after this disaster, what makes nuclear energy still appealing and tempting to use? The almost irresistible promise of cleaner energy than fossil fuels 22 ASIAN POWER

The Japan accident has not swayed governments from embracing nuclear as a clean and relatively lowcost way of obtaining energy security.

at less cost than renewables, capable of being produced in massive quantities.

“At face value, nuclear energy seems to provide the answers to Asia’s thirst for energy. It is an environmentally neutral way of producing energy on a large scale since most reactors run on uranium rather than carbon fuels.

For the same reason, it is not at the mercy of global oilprices, making it relatively cost-effective,” experts at DBS Asian Insights claim.

“Simple pragmatisms explain the staying power of nuclear energy.”

No easy replacement Experts at DBS Asian Insights note that electricity demand is likely to rise by more than two-thirds over the next two decades.

Given the fact that nuclear energy currently meets around 12% of the world electricity demand, it would be near foolish to think that governments can easily find a replacement for such a major power source that has little pollutive impact on the environment.

China, for one, should come off its nuclear power hiatus soon. Despite halting the approval processes for new reactors pending safety reviews, analysts

Offering extra diversity “Nuclear will be big in China. Its expansion plans could see as many as eight new reactors commissioned annually through to 2025, and up to double that number in subsequent years,” say experts at DBS. The soon-to-be nuclear energy superpower is also expected to build almost half of global greenfield nuclear capacity over the next 20 years to meet a target of 200 GW in new nuclear capacity–a staggering number that belies its enormous energy needs.

Zooming out to the region as a whole, nuclear energy use in Asia should increase 3.5% a year with Southeast Asian nations like Malaysia, Thailand and Vietnam also gearing up for nuclear power development.

“Despite its pitfalls, the nuclear option offers extra diversity in the energy mix of smaller economies–a potentially valuable commodity with global fossil fuel prices rising and competition intensifiying for access to oil and gas resources,” according to DBS experts.

Asian nations seem to agree that nuclear power offers relatively efficient and clean energy when compared with renewables and carbon-based fuels, respectively, but some differ on their choice of nuclear fuel source.

In India, thorium-powered nuclear reactors will be the preferred choice because thorium is more naturally abundant than uranium.

“India has large reserves of thorium and wants to use it to generate a quarter of its electricity–up from 3% currently–as it builds out its nuclear capacity by as much as 47 GW over the next 25 years,” according to DBS experts. India is expected to have 150 GW nuclear capacity online by 2020.

Contrast this with China which should prefer uranium over thorium.

China’s pipeline of new nuclear reactors will be predominantly uranium-

sector report 1: NUCLEAR ENERGY fuelled, and help the country meets its goal of more than doubling nuclear capacity by 2020 to 8.64 GW. From dirty to clean The resiliency of nuclear energy’s appeal can also be attributed to an attitude shift from dirty fuels to cleaner alternatives.

While Asia owes much of its explosive growth to the use of coal and oil, it is rapidly exploring the use of renewables like solar and wind, and nuclear.

The region led the world in attracting clean energy investments at 42% of the global total, according to DBS experts, led by Northeast Asia.

Nuclear power benefits from a tailwind effect as Asians become increasingly aware of the impact of dirty fuels on the environment, and, in their quest for a higher quality of living, support governments in lowering reliance on coal and oil.

Asian nations hoping to harness nuclear power not only have to address safety concerns exacerbated by the Fukushima disaster, but also address financial concerns from investors, companies and consumers.

Even with all the advantages that nuclear power offers, consumers think twice when having to pay for more expensive electricity that is often part of the growing pains of introducing cleaner energy.

This is part of the reason South and Southeast Asian countries have been slower to adopt green growth initiatives in general. In these less developed regions where governments heed public demand for affordable energy, advocating for cleaner but often more expensive energy is an uphill battle.

A silver lining is that technological advances and improving best practices in solar, wind and hydropower is helping close the cost gap between dirty fuels and renewables.

The resulting lowered generation costs will make it that much easier to sell the idea of cleaner energy, and with it, the case for nuclear energy.

Public backing is critical in getting nuclear projects off the ground, due

Mina Sekiguchi

Fugen prototype reactor, Fugen, Japan

to their immense financial costs and significant political and regulatory risks. “It is unlikely that the private sector alone would be willing to provide the required levels of capital to support new build programs without government support,” says Mina Sekiguchi, head of energy & natural resources, Asia Pacific, KMPG in Japan.

It is unlikely that the private sector alone would be willing to provide the required levels of capital to support new build programs without government support.

Learning from neighbours Asian nations also would need to attract high levels of investment to realize their nuclear expansion plans, and Sekiguchi notes that they can learn a lot from the UK government, which has has achieved some success in attracting investment through a raft of initiatives.

This includes meeting an agreed “strike” price for electricity as well as providing financial guarantees to debt providers to help smooth the risks attached to nuclear projects.

“The experience within the UK should provide a platform to demonstrate that nuclear power is credible technology. However, the support of governments is vital to the sucess of such projects,” says Sekiguchi.

She suggests Asia’s nuclear future will likely depend on assuaging safety fears to engender popular support for new reactors, and then creating

a secure and attractive investment environment to reduce the government’s burden in financing these somewhat intimidating mammoth projects.

Building knowledge “Beyond the role of governments in securing project financing, any country keen on developing nuclear power capabilities must generate greater awareness and build up knowledge of the nuclear sector.

Doing so will go a long way towards obtaining support from its citizens.”

Sekiguchi adds that the experience within the UK should demonstrate that nuclear power is a credible technology which may be replicated almost anywhere.

However, the support of governments is vital to the success of such projects.

According to KPMG, with energy demand continuing to grow in most parts of the world, nuclear is still viewed as a key part of the overall energy policy required to sustainably serve this growth in a carbon-effective manner while trying to reduce costs.

Within the Asia Pacific region, nuclear power has an important future role, although safety and economic viability will remain key challenges.

Reactors planned or proposed to be operational by 2030

Research reactors and fuel cycle by country in Asia

Source: World Nuclear Association 2013

Source: International Energy Agency 2013 ASIAN POWER 23

COUNTRY REPORT 2: Malaysia

Malaysia struggles to keep up with its regional peers

How can Malaysia be transformed into a substantial power generation force?

Major regulatory changes should lift the industry past mediocrity and into the country’s hopes of keeping up with its fast-strengthening peers, but only amid stronger enforcement.

T

he Malaysian government steered the power sector into a dramatic regulatory shift earlier this year in a bid to raise profitability, cost efficiency and competitiveness. But critics argue that despite the soundness of the plan, the agency tasked to ensure compliance is still slacking on the job, and its continued ineptitude could stymie any gains from the regulatory changes. Industry insiders also insist that regulatory changes are but the first step in transforming Malaysia into a substantial power generation force – more focus on the renewable energy sector, for example, is needed if the country hopes to keep up with its faststrengthening regional peers.

New reforms Early this year, the government rolled out power sector reforms, including incentive-based regulation (IBR), a new electricity tariff-setting framework by the Malaysian Energy Commission. IBR aims to enhance regulatory governance and improve the earnings of Tenaga Nasional Berhad, the largest electric utility company in Malaysia and largest power company in Southeast Asia, according to analysts. IBR also stipulates a fuel-cost pass-through mechanism that will review 24 ASIAN POWER

Catherine Ridu

S Piarapakaran

tariffs every six months for fuel price fluctuations.

In preparation for IBR, the Malaysian government raised Peninsular Malaysia’s blended tariffs by 14.9%, which along with the pass-through of liquefied natural gas cost, has significantly raised the earnings prospects for Tenaga. Maybank estimates that Tenaga’s new earnings base is at MYR5.5 billion, which is deemed to be substantially above historical levels.

Once the IBR is implemented and further reduces volatility for the utility, it should continue to sustain this increased level of profits, according to Tan Chi Wei, research analyst at Maybank Investment Bank Berhad.

Aside from providing equitable returns for Tenaga, IBR is meant to reduce the government’s subsidy to the power sector by reviewing the electricity tariff to reflect true costs, says Chong Lee Len, analyst at Affin Investment Bank. This is a further step towards the government goal of gradually lowering its gas subsidy, seen by many as inefficient.

Still, Tenaga faces some level of risk when it comes to enacting any future tariff hikes since under the IBR, electricity tariffs will be subject to Cabinet approval so government vetoes are still a strong

possibility. This is especially notable given how tariffs have been historically political in Malaysia, says Chong. “The government has been reluctant to approve any tariff hikes close to election periods given the resulting burden on both citizens and businesses alike. Thus, electricity tariff setting has been erratic in the past.”

Power hungry IBR and other regulatory reforms have been fast-tracked to help address Malaysia’s growing power needs. The issue came to a head in May this year when several parts of the country suffered power outages when all three blocks at Tenaga’s Janamanjung plant tripped.

Malaysia’s demand for energy will grow between 3 to 4%, says Piarapakaran S., president of the Association of Water and Energy Research Malaysia (AWER), citing forecasted figures, with a possibility for increased electricity consumption if the El Nino warming phenomenon bears down again on the country. He notes that electricity loading was 2% higher than forecasted in 2009 due to El Nino.

In terms of supply, natural gas and coal currently form the main fuel mix with hydro power playing a small role,

COUNTRY REPORT 2: malaysia with the coal mix expected to double to 64% by 2019. This supply model has been particularly costly as coal is fully imported. Malaysia’s heavy reliance on natural gas has also spurred on the government to wean off natural gas subsidy, with a target of phasing out the subsidy by early 2016.

“The skewed energy balance towards natural gas is now showing its pitfalls, both from a cost perspective as well as a supply perspective. In the early years, the ‘fuel of choice’ for medium to large scale power generation has been natural-gas fired combined cycle plants, as it was seen as an indigenous fuel, where cost could be easily controlled. The fuel brought with it a hefty cost subsidy, to keep production costs at a reasonable level,” says Ir. Andrew Amaladoss, project director at Tawau Green Energy Sdn. Bhd. Renewable energy As the government attempts to lessen its dependence on coal and natural gas, renewable energy has risen to prominence as a possible alternative. Proponents argue that the country’s renewable energy sources are large, if untapped, but there seems to be a consensus that much work needs to be done before renewable energy can replace traditional sources.

“Although Malaysia has fossil fuel resources, the reserves are dwindling, therefore renewable energy is seen as one approach to achieve some level of energy security and autonomy for the country,” says Catherine Ridu, CEO of the Sustainable Energy Development Authority (SEDA), which oversees renewable energy development.

While renewable energy constituted only 0.2% of the country’s total electricity generating capacity or a mere 58 MW in 2012, Ridu says the government has set a target of 2,080 MW or 6% of total electricity generating capacity for renewable energy by 2020. As at end of July 2014, SEDA has approved 805.63 MW of RE projects. 195.83 MW of these projects have achieved commercial operation, the rest will be planted by latest by 2017.

Still, Ridu concedes that meeting the 2020 target will be “very challenging” due to a number of hurdles facing renewable energy development. Foremost is a lack of funding support. Renewable energy measures require substantial investment costs, and currently SEDA is constrained by the size of its financing. It does not help that contributions to the nation’s renewable energy fund in the form of additional electricity bill charges will likely be nipped due to a slew of reform-led tariff increases. “The public may not be able to accept another increase of 0.4% on electricity bills as there are other subsidy

rationalization exercises.”

Other analysts view renewable energy as a very young industry that will need intensive nurturing before it can hope to, if at all, provide a substantial portion of Malaysia’s power needs. Planning, in particular, has been disparaged for being haphazard and lopsided towards solar.

“Renewable energy cannot be seen as an alternative to fossil fuels, but should rather be viewed as a supplementary source of fuels for power generation. Renewable energy will never achieve the economies of scale which fossil fuel-fired power plants can. Furthermore, some of the renewable energy technologies have yet to mature. As such, I do not see a significant shift from gas to renewable energy in the medium term,” says Amaladoss.

“We do not see sound planning to develop renewable energy in Malaysia.

It is more of hoodwinking and getting some solar panel on top of someone’s roof while paying a good sum of money to them. Until a total reform of renewable development is carried out, renewable development in Malaysia will still remain doubtful,” says Piarapakaran.

Part of the required reforms is a diversification beyond solar. “Solar is not home grown technology and so much allocation from Feed-in-Tariff (FiT) is spent on solar. The focus on biomass development is still very poor,” says Piarapakaran, noting that politics has played a role in allocation.

Weak will From regulatory reforms to renewable energy development, it is becoming clear that a lack of discipline and ethics is one of the biggest barriers to progress. While the Malaysian power industry is improving its cost efficiency, among other standards, critics bemoan the regulatory Energy Commission’s complacency to enforce

Kimanis Power Plant, Sabah, Malaysia

“A more competitive Malaysia will require the government to work on building transparency and confidence among the public.”

rules. The lackadaisical oversight has been hurting the competitiveness of the Malaysian power sector and impeding its growth.

“More severely, the Energy Commission fails to play their role accordingly to stop unnecessary costs from being passed through to electricity tariff,” says Piarapakaran.

“So, even if the electricity industry model in Malaysia is suitable, the incompetence of regulatory and policy makers is affecting the cost effectiveness and industry growth holistically.”

A more competitive Malaysia will require the government to work on building transparency and confidence among the public, and IBR, if implemented correctly, is a big step in this direction. In addition, Piarapakaran suggests a more rigorous bidding process for new power plants, which can help result in more reasonable tariffs. The tariff-setting process itself needs more oversight and involvement from the public and private sectors.

“Equitable and transparent electricity tariff will be one of the factors for investors to invest in Malaysia as well as for the affordability of all users.”

Historical snapshots of tariff hike and gas hike funnelled to end customers via tariff hikes

Sources: Tenaga Nasional Berhad

co-published Corporate profile

See how power plants are using Liqui-Cel® Membrane Contractors to boost margins Find out how they are cutting costs through new technology.

Contractors, involve the use of ambient air to achieve the elimination of dissolved gasses from water. The problem with this process is that the ambient air used in forced draft deaerators come into direct contact with the water, which significantly increases the risk or possibility of contamination brought about by contaminants present in ambient air.

Relative to forced draft deaerators, Liqui-Cel® Membrane Contractors protect the water from this contamination risk because the membrane is equipped with tight pores, and is also hydrophobic which basically means that the membrane does not allow for the water to come into direct contact with air.

A

t the heart of any business enterprises the strict and inescapable requirement of managing operating costs in order to achieve a consisatently healthy bottom line and attractive margins. Although this can be done in a number of ways (for instance, cutting or reducing labour costs), some ways prove to be more acceptable than others. For instance, improving the technology of a business’s production process eliminates the need for heavily emotional and controversial lay-offs.

An emerging example of such is turning up in the water purification line of business, also known as the industrial water treatment industry. Power plants in various parts of the Asia Pacific region are quickly recognising the benefits of the Liqui-Cel® Membrane Contractor system.

Liquid Purification Engineering International Co., Ltd. is the company responsible for designing and developing the Liqui-Ce® Membrane Contractors system.

Liqui-Cel® Membrane Contractors are part of an Integrated Membrane System. Integrated Membrane Systems are becoming increasingly attractive as compared to traditional water treatment processes. Liqui-Cel® Membrane Contractors function within this integrated 26 ASIAN POWER

system as microporous Hollow Fibre membrane contraptions that are able to eliminate dissolved gasses found in the liquids that are subject to purification.

Liqui-Cel® contractors are used to lower such carbon dioxide content adding an ionic load to the electroionization system thus reducing performance level. These contractors use a hydrophobic polypropylene membrane to eliminate dissolved gasses from water. This works by allowing water to flow on one side of the membrane while a vacuum or strip gas is passed on the other side of the membrane.

The air sweep under the vacuum catalyses the dissolved carbon dioxide found in water and moves it into its gaseous phase.

The conventional alternative for this process, before the Liqui-Cel® Membrane Contractors started being adopted, was forced draft deaerators. Forced draft deaerators, in comparison to Liqui-Cel® Membrane

“The Liqui-Cel Membrane Contractor system increases a plant’s recovery rate of water, almost to 100%.”

Why it is better Several major power plants in China and Thailand have begun to replace their conventional, outdated systems in favour of systems that integrate Liqui-Cel® Membrane Contractors into their process. It is expected that more power plants will adopt the use of this system because several key benefits are already being enjoyed by those who have adopted the technology already.

Firstly, the use of the Liqui-Cel® Membrane Contractor system increases a plant’s recovery rate of water, almost to a hundred percent. Traditionally, systems like the conventional double pass reverse osmosis system have seen waste known as reject water. Relative to these conventional systems, Liqui-Cel® Membrane Contractors do not see the incidence of reject water.

Secondly, costs are also further reduced because the chemical components traditionally needed in conventional systems are no longer needed in the Liqui-Cel® Membrane Contractor system.

In conventional systems, caustic soda is utilized to raise the pH level of water before the second pass reverse osmosis process.

Liqui-Cel® Membrane Contractors eliminate the need for this since it already removes the carbon dioxide content in water.

Thirdly, the Liqui-Cel® Membrane Contractor system eliminates the requirement for a second pass reverse osmosis and a reverse osmosis pump.

Since it is able to replace these, it opens up more room for businesses to reduce capital expenditures.

The absence of a need for a second reverse osmosis pump can also reduce recurring operating costs so power expenditure requirements are significantly reduced, versus in the previous system.

ASIAN POWER 27

sector report 2: ASEAN 2020

Son La Dam in Vietnam

Challenging ASEAN 2020: Why some goals may not be achieved on schedule

Is it wishful thinking to envisage a region capable of cooperating in conservation and renewables initiatives?

T

he ASEAN leaders of 1997 had high hopes for the region by the year 2020. Their Vision 2020 statement foresaw “interconnecting arrangements in the field of energy and utilities for electricity, natural gas and water within ASEAN through the ASEAN Power Grid and a Trans-ASEAN Gas Pipeline and Water Pipeline”. There was to be “cooperation in energy efficiency and conservation, as well as the development of new and renewable energy resources.”

The environment was to be respected with mechanisms to promote sustainable development, protect the region’s natural resources and deal with problems of environmental pollution.

One goal down, tens more to go ASEAN has certainly achieved one of its main objectives in providing a platform for dialogue amongst the member states, which arguably has kept the region peaceful for many years. This has certainly contributed towards its growth and visibility in a region straddled by the twin giants of China and India. ASEAN has also kept a constant dialogue going amongst the member states on the topic of energy and the options, technologies and best practices available. But there are many areas where the dialogue has yet to turn into action. As with other objectives 28 ASIAN POWER

“As the ASEAN countries economies grow, and their technologies and infrastructures improve, their wastage rates should drop.”

set by ASEAN, the vision of 2020 might be better viewed as a process rather than a race with a countdown clock.

From the perspective of 2014, it seems difficult now to envisage a region that is powered by a network of energy pipelines, let alone one that is managing its environment and cooperating in initiatives for energy conservation and renewable resources. Critics might argue that the ASEAN of 2020 may not look much different from the ASEAN of today, except that it will be more crowded, more polluted and probably even less unified in its approach to energy.

Efficiency in transmission and distribution GE’s investment in wind power exploration in Vietnam is a harbinger of the role that technology and engineering skills from the private sector will play in the region. Although all the member states would likely welcome such investments, there are many other ways that they could make better use of existing technologies to ensure more productivity from their energy requirements.

Better efficiency in the use of energy can come from a number of different areas. ASEAN’s losses as a percentage of total net generation of electricity range from a highly efficient 4% in Malaysia to double

digit figures for Indonesia, Vietnam, The Philippines, Cambodia and Myanmar.

Myanmar is particularly problematic with an estimated 34% of its energy being lost in transmission and distribution. According to the International Energy Agency, a more efficient use of primary energy could reduce the region’s energy use in 2035 by almost 15%, the equivalent of the current energy use of Thailand.

Countries that tend to be more efficient users of energy also tend to enjoy higher GDP rates. Hence as the ASEAN economies grow, and their technologies and infrastructures improve, their wastage rates should drop. Identifying and fixing the areas that cause the biggest energy loss need to be treated as a priority before the end of this decade.

At the global level, the energy required per unit of GDP (the energy intensity) has been decreasing by 1.3 percent per year since 1990. Improvements have been achieved in all regions, with the largest reductions in the regions being the countries with the highest energy intensities (China, CIS and India). Hence there is further cause for hope that as the ASEAN countries mature and their GDPs rise, their consumption of electricity does not have to rise exponentially.

The main ways of addressing energy efficiency comes from a combination of

sector report 2: ASEAN 2020 improved technology and infrastructure as well as government initiatives.

As a country grows economically it has more ability to invest in the systems that create more productive power. It is also likely to generate a local knowledge base of energy engineering which in turn can create its own eco-system of supporting companies. It can also afford to rethink its whole energy program and look at alternative sources as China has done recently wit hydropower. Of course, new investments in areas such as hydropower require substantial investments in infrastructure and technology.

Efficiency in consumption One of the biggest consumers of electricity in the ASEAN region is for cooling buildings. Traditional tropical buildings were designed in the past for maximum energy efficiency.

Houses were often oriented along the north-east and south west axis to take advantage of the cooling monsoon winds.

Low roofs and verandas provided shade for the interior from the sun. Ventilation in the roof prevented a build-up of hot air in the house.

Houses were built on stilts to allow a flow of air underneath and to provide some protection from floods and the local wildlife. The building materials were sourced from nearby forests and would retain water from a tropical shower to allow for a natural cooling when the sun came out again.

Up until the latter decades of the last century, before air-conditioning became prevalent, buildings in Southeast Asia were designed to seek natural ways of cooling. ASEAN countries can expect to see more energy service companies (also known as ESCOs) integrating multiple solutions and providing energy saving systems for retrofitting buildings. A common business model for ESCOs is that the payment is dependent on the energy cost savings derived from the refit, which makes it a risk-free decision for the building owner.

But is energy efficiency the big idea that will help the ASEAN group to power its growth into 2020 and beyond without increasing pollution and expenditure?

Clearly it will help, but energy efficiency will not be the only factor.

John Browne, the former CEO of BP, an oil company, believes that money saved on energy will not reduce the overall requirement for energy and may even lead to more profligate use. In developing parts of ASEAN though, cheaper costs will provide less of a burden to both rural and urban households.

Technological advances with hybrid electric cars will help to reduce CO2 emissions and fuel consumption.

Singapore’s Energy Market Authority is testing out the concept of fully electricpowered cars in the city state. An electric vehicle in the tests costs about S$5 in electricity per 100 kilometres compared with about S$20 in petrol costs per 100 kilometres for a normal car. Bosch Singapore, which is operating the charging infrastructure in Singapore, said there are currently 75 charging stations with 118 charging spots around the country. However, the cost of a car at around S$200,000 seems prohibitive at this stage, largely due to the cost of the battery as well as the high taxeswhich are unique to Singapore.

Already popular in the region, electric two-wheel vehicles are likely to experience a more rapid upsurge than their 4-wheeled counterparts by 2020. Commuters in urban and suburban areas are leading the uptake, frustrated by the higher costs of combustion engine twowheelers and the inefficiencies of public transport. Electric two-wheelers will likely spread into rural areas later, as access to electricity becomes more readily available.

Governments in ASEAN have been slow to recognize the potential for electric two-wheelers to replace the higher polluting petrol equivalents, perhaps out of a concern as to how they should be taxed or regulated.

Government sticks and carrots Government policies have a huge impact on the production, distribution and use of power. Governments can encourage or nudge their citizens to be more efficient with their use of power (by adjusting the temperature of air conditioning) or use less water.

Governments can also encourage businesses to be more energy efficient through infrastructure programs such as district cooling, which enables buildings to share cooling plants rather than making their own air-conditioning investments. These initiatives can be regulated to ensure that the operators are maintaining service levels and providing the planned levels of cost reductions.

Governments can also introduce taxes or other systems to encourage more efficient use of resources.

Feed in tariffs, which effectively subsidise and encourage the production of electricity from renewable sources, are in their infancy in ASEAN compared with other parts of the world. Singapore’s electronic road pricing, which is one of the factors that is limiting vehicle growth, has recently been copied in London although without the same high taxes on car ownership that help reinforce the message. Social awareness and consumer trends can also play a part. When the general public start to ask for more efficient power consumption or renewable alterna-

“The front runner for growth is expected to be Indonesia with a projected growth rate of 6.4% between 2013 and 2017.”

tives for home use, then governments and developers are forced to take note.

The Trans ASEAN Gas Pipeline In September 2013, ASEAN energy ministers signed a memorandum on the Trans ASEAN Gas Pipeline (TGAP) project to extend its development to 2024.

The bulk of the infrastructure is in place, but there has been no effort so far from the ASEAN countries to actually link the pipes.

The Joint Ministerial Statement issued after the meeting noted that: “the Ministers tasked HAPUA (Heads of ASEAN Power Utilities/Authorities) to develop an efficient and effective framework for taxation and customs tariff in order to accelerate investments in the development of ASEAN Power Grid projects”.

Without regional consensus on taxation and tariffs, and with the existing infrastructure in most countries underwritten by the promise of local state subsidies and guaranteed pricing for specific end users, the power grid and pipeline for trading energy will remain just a wishful thinking.

Although it is politically difficult for a government to take away or reduce subsidies, it might make more sense to offer alternatives such as loans for achieving cost savings with energy through new technologies or installing renewable energy systems.

ASEAN governments would be better off identifying the technologies and systems that can be best implemented

Value of fossil-fuel subsidies in Southeast Asia, 2007-2012

Source: South-east Asia Energy Outlook, WFO special report

Transport sector energy consumption

Source: Energy Studies Institute Singapore ASIAN POWER 29

sector report 2: ASEAN 2020 to achieve more cost-efficient energy programs which will enable them to phase out subsidies, rather than signing up to regional vision programs which their national policies prevent them from fulfilling.

Power grid or micro-grids?

The world has recently seen the impact of the combination of two technologies, hydraulic fracturing (“fracking”) and horizontal drilling to unlock natural gas and oil from shale deposits in the USA. The International Energy Agency estimates that by 2020, the USA will have replaced Saudia Arabia as the world’s biggest oil producer. What other new technologies are being designed or experimented with right now that might help the ASEAN countries and others to fuel their future growth?

Solar power is starting to show the potential for more mainstream use in the region. Siemens, which is a key stakeholder in the project, believes that this system will likely produce electricity that is cheaper than the supply from traditional coal-fired generators.

Solar energy obviously cannot replace fossil fuels completely until the problem of banking some of what is collected during the day, for use at night, is solved.

But at this sort of cost it can make a useful contribution.

The advent of the DC local grid is of particular interest to some of the develop-

“The core idea is that the region’s energy can come from many more sources than it currently is, and can be more productively extracted, distributed and consumed.”

Pump prices

Source: World Bank

Vehicle population in key ASEAN economies

Source: Asia Pacific Energy Research Center, APEC

30 ASIAN POWER

ing markets in ASEAN that don’t have full access to electricity. Remote rural locations would have the opportunity to run low voltage DC circuits, perhaps powered by solar panels, to bring enough electricity to operate LED lights, cellphones and computers without having to get connected to the main AC grid, effectively ‘leapfrogging’ the legacy systems installed in the cities.

The future for ASEAN may not lie in small numbers of centralized power plants feeding national or regional grids, but from larger numbers of decentralized renewable or hybrid power units that feed surplus requirements into batteries and distribute electricity to local users through small DC networks. The challenge for the local governments will lie in how they will integrate these micro-systems into their energy programs and cope with a system of multiple suppliers, along with the impact this might have on the profitability of the utilities.

Fast forward The year is 2020. It is a pivotal year in ASEAN’s energy program. After spending the previous decade experimenting with different approaches, the leading ASEAN countries are now forming energy strategies that will manage demand and provide for their future growth.

The ASEAN Power Grid is connected to most member states and is now being tested for running parallel DC and AC electricity supplies. Electricity will feed from a variety of sources. There are increasing bilateral arrangements for energy trading amongst the states which will ultimately lead to the regional cooperation envisaged in 1997.

The growth of localized power sources and micro-grids, often a hybrid combination of fossil and renewable sources is also relieving the pressure on the governments to invest in expensive infrastructure to extend the grid to rural areas.

Individual solar power and battery storage systems are now spreading throughout the region enabling many households to run independently from the grid, especially in the more remote rural areas.

The uptake has been spurred on by government incentives which are starting to replace the legacy fuel subsidies.

The core idea is that the region’s energy can come from many more sources than it currently is, and can be more productively extracted, distributed and consumed.

The future is definitely more complex and involves many more stakeholders than present day systems.

The energy systems of the future are also likely to be disruptive to the national utilities and methods of operating. But the roadmap for where governments should

be investing their energy dollars does at least have more clarity than it did in 1997.

It’s the economy The ASEAN website is predictably bullish about the future of the region claiming that “ASEAN’s economic performance continues to outpace the rest of the World… GDP in ASEAN countries will grow 5.3% in 2013 and 5.6% in 2014.”

The introduction of a single market resulting from the introduction of the ASEAN Economic Community (AEC) planned for the end of 2015, is shaping the region as a key investment opportunity, according to “Investing in ASEAN 2013/2014”. ASEAN’s outlook for the future seems to hinge on the successful implementation of the AEC which doesn’t seem likely to take shape by the end of the decade, let alone by 2015. The outlook goes on to claim that, “Over the next 20 years, Southeast Asia will be one of the world’s fastest growing consumer markets.”

“The combined GDP of member nations is already significantly larger than India and by 2018 will exceed Japan. The AEC will unleash a new era of growth by creating a competitive market of more than 600 million people in the ten member countries comprising Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.”

The region will undoubtedly continue to grow, with or without the AEC. The only debate is the growth rate it can expect to achieve in the short term. The only debate is the growth rates it can expect to achieve in the short term. The OECD is a bit more cautious about calling the growth ofASEAN, pointing out the different stages of development of the ASEAN countries which create different challenges.

Before the developing countries of ASEAN achieve the Singapore plateau experience they will first likely go through big increases in energy. This will come about as income levels increase, giving people more money to spend on nonessentials, and as infrastructure improves giving more households access to electricity and non-biomass sources for cooking.

There is a long way to go to get a level playing field. According to the International Energy Agency, a startling 160M out of 567M total in ASEAN have no electricity at all. Electrification rates in ASEAN range from 100% in Singapore down to 10% for rural Myanmar. This lack of electrification does of course bring continued opportunities for vendors of off-grid solutions such as diesel generators, biomass power generation systems and solar power systems. By Ipsos Business Consulting

fo up r A 10 E on sia % xc qu n DI lus ot Po SC ive in w O g “W er UN SG rea T _A de SP rs ”

13 - 15 October, 2014 Cyberport Conference and Exhibition Centre, Hong Kong

Keynote Speaker Daniel Lai Government Chief Information Offi cer City of Hong Kong

Harnessing Technology to Transform Urban Infrastructure LEARN FROM: Vicente Guallart, Chief Architect, City of Barcelona

Dan Hill, Executive Director of Futures, Future Cities Catapult, City of London

Stuart Williams, Safety and Security Planning Specialist, City of Abu Dhabi

Dominic Weiss, Head of Public Affairs & Smart City, City of Vienna

Frans-Anton Vermast, Strategy Advisor, Smart City, City of Amsterdam

Colin Fairweather, Chief Information Officer, City Of Melbourne

CUTTING-EDGE CONTENT TO ADDRESS YOUR TOP CHALLENGES ❱❱ Benchmark against some of the world’s leading cities including Hong Kong, Cebu, Pasig, Singapore, Melbourne, Auckland, Abu Dhabi, Barcelona, Vienna, Amsterdam, London and many more ❱❱ Assess and review the business case for why cities should want to become smart ❱❱ Understand why the focus is on cities and what smart means to different cities ❱❱ Get the verdict on whether the smart city is genuinely our future or whether it’s just empty hype ❱❱ Learn what future technologies will be needed and how in future cities ❱❱ Do smart cities need smart citizens, and if so, what are the implications for your organisation?

“We were impressed by the quality of speakers as well as visitors and especially by the service rendered by the WBR team on a daily basis.”

Dotan Sagi, Co-CEO, Lotan Group

Supporting Partners:

Register Now! www.futurecitiesasia.com

wbrinfo@wbresearch.com

+65 6722 9455

OPINION

JOHN GOSS

A growth forecast for solar power in China

john.goss@ceejay.com.hk

A

new policy in China that now encourages distributed power generation projects is a massive boost for many energy related sectors in the country. In the new policy, which is expected to be announced at any moment, small businesses and households will be encouraged to install distributed power solar projects, industry insiders have told the local media.

The industry term ‘distributed generation’ normally refers to locally sited power plants which are close to the ends users. In the past the power was generated by very large ‘centralized’ power plants which transmitted the power to large areas. Due in part to past policies, China has a low rate of installation rate of these distributed power plants, which are becoming commonplace in many parts of the world today.

There has been a policy to promote and implement distributed solar power generation in china for some time now. However, the new plan will be providing much more detailed support that will enable far easier project implementation and easier grid connection, according to the sources.

Earlier in August, the Head of the National Energy Administration (NEA) Wu Xinxiong, said the government will be encouraging local solar power to be built on barren hills, abandoned land and other suitable local sites.

In the future, more support will be provided to the planned installations of solar power panels being sited upon public infrastructure such as hospitals, schools railway stations and airports.

With regard to future projects, the government will be encouraging the utilization of low-cost financial for distributed power projects. The government will be encouraging the formingtion PV Industry investment funds among insurance companies and trusts.

It is worth noting that the electricity being generated by distributed photovoltaic (PV) power plants now accounts for less than one percent of China’s total PV generation. This compares with some 70 percent in Germany and 80 percent in the USA. The Chinese Government has set targets for installed solar capacity in 2014. The government’s stated overall target for the country is an impressive 14 GW of solar power capacity. This target figure is broken down into two parts: there will be six GW being generated in utility scale PV projects and eight GW coming from the distributed PV plants.

China’s PV plants achieve 23 GW in H1, 2014 The nation’s push to add new renewable energy resources is being driven by the nation’s policy makers as they seek ways to combat the country’s growing problems with air pollution. In the PV industry alone, utility scale PV power plants now account for 2.3 GW of the new PV capacity installed during the first half of this year.

China’s Xinjiang Uygur autonomous region, in the northwest of northwest of the country, set the pace with some 900 MW of PV power plants being installed in the first six months of 2014. This swiftly followed by the Inner Mongolia autonomous region, Qinghai and Shanxi provinces. The country’s eastern province of Jiangsu added 270 MW of PV distributed power, according to the NEA. The NEA has stated that it plans to install 13 GW of solar power capacity this year. This ambitious figure will be achieved by the NEA 32 ASIAN POWER

supporting the continual development of distributed solar power generation. This plan was reported by the Xinhua News Agency, citing the NEA’s head, Wu Xinxiong.

It was reported by China Daily that China may soon be announcing policies, as early as the beginning of Q4 to encourage such installations, said people familiar with the matter, who asked not to be named as they were not authorized to speak publically.

Positive demand this year The President of JA Solar Holdings Co., Xie Jian said that demand will be quite positive in China from August this year.

The nation’s largest profitable manufacturer of solar panels, Trina Solar Ltd, report they will be supplying modules with 200 MG of capacity to Zonergy Co. Ltd. The panel shipments are expected to have been completed by December, 2014 said Trina Solar in a recent statement.

The solar panels will be utilized in a number of Zonergy’s PV power projects in several of China’s solar rich provinces including: Jiangsu, Xinjiang, Qinghai and Sichuan.

There is a general feeling in many of the recent media reports that solar power projects are poised to fuel a rebound in the prices of solar panels. JA Solar Holdings says that the company expects the prices of solar-panels in China to recover. This recovery will happen as developers scale up their projects and the various government measures start to encourage developments.

Solar cells in Turfan, China

WindEnergy, Hall B7, 416 September 23 – 26, 2014

The driving force behind your wind turbine generators Creating the most from wind – with wind equipment from Siemens siemens.com/wind-equipment

How can your turbines get more from the wind? By using the right components from a single source – and by getting efficient support.

Siemens gives you everything you need for high-availability wind turbines. Our industryproven products and systems are designed to work perfectly together, up to and including integrated platforms like Totally Integrated Automation and Totally Integrated Power.

You can also count on us to engineer, manufacture, and operate your wind turbines.

You benefit from maximum equipment availability and minimum lifecycle costs – and you also get all the ingredients for optimized mass production. Twelve out of 15 leading manufacturers of wind turbines use wind equipment from Siemens as the driving force behind their products.

When everything revolves around just one thing – creating the most from wind – we’re the right partner for you.

Making optimal use of the limitless potential of wind – with wind equipment from Siemens

Everything for your turbines – power distribution systems and generators, pitch, yaw, and auxiliary systems, automation, and communication

Answers for industry.

IC1000-E220-F179-X-4A00

www.siemens.com/eneas

The key to cost-effective, reliable and safe power supply ENEAS solutions for distribution automation

As technology leader in the field of energy automation, Siemens provides solutions for current and future distribution grid challenges. Whether to cost-effectively automate and operate primary equipment or to increase supply reliability and power quality in order to quickly adjust changes in the distribution grid: ENEAS solutions for distribution automation have proven effective in numerous applications worldwide. They are installed where it counts – with automation equipment directly in the field.

In addition, new superordinated applications such as automatic self-healing, voltage compensation and quality measurement make energy systems safer and more reliable. As a result, all fault detection, localization and correction functions are covered.

Also, bidirectional load flow operation and active control are supported – allowing for the integration of distributed generators and electric vehicles. All in all, ENEAS solutions in distribution grids ensure energy supply with maximum reliability.

Answers for infrastructure and cities.