Asian Power (January-February 2015)

Issue No. 67

ISSUE 67 | DISPLAY TO 28 FEBRUARY 2015 | www.asian-power.com | A Charlton Media Group publication

US$360P.A.

maxpower launches in myanmar Asian Power

Can CEO Hendriks meet the 10% annual growth in electricity demand?

MICA(P) 248/07/2011

analysis Governments keep an iron grip on the Asian power sector

country Report India urged to turn to wind for powering 31,000 rural villages

first Sarulla to prove Indonesia’s geothermal prowess

ANALYSIS Is energy price volatility the new normal for Asian energy?

PAGE 14

page 18

page 6

PAGe 20

Agriculture

Construction

Material Handling

Powergen Powergen

FROM THE EDITOR The Asian Economic Community 2015 is finally here, and the energy sector is just as much in anticipation as all the other sectors in terms of evaluating what has been achieved and what is yet to come into fruition.

Publisher & EDITOR-IN-CHIEF Tim Charlton ASSOCIATE PUBLISHER Laarni Salazar-Navida production editor Roxanne Primo Uy Editorial Assistant Joana Rizza Bagano

In this issue, we feature a comprehensive outlook for the Asian power sector, including pieces on India’s power dilemma and the region’s largest integrated desalination and power plants.

Editorial Assistant Queenie Chan EDITORIAL ASSISTANT Jason Oliver

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We also take a look at investing in Myanmar’s power industry, and whether there is a way out of the labyrinth of investor concerns. We talked with the CEO of one of the largest power companies set to take a foothold in Myanmar, hoping to ramp up the emerging country’s power consumption and work it out to full potential.

Our editorial team also set off to CEPSI 2014 in Jeju, South Korea, and met with industry leaders to talk about their plans for their respective companies and the sector as a whole.

Flip through the pages and read what’s up and coming for Indonesia’s geothermal sector, Thailand’s renewables, and China’s plans to muscle into the forefront of nuclear generation, among others.

Enjoy!

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EDITORIAL CONTENTS

CASE STUDY

LARGEST INTEGRATED 28 ASIA’S desalination and power plants

16

country report Myanmar’s nascent power sector remains problematic for private investors

CHINA’S GREAT LEAP FORWARD 10 First

FIRST 06 Phil power fails privatisation test

ANALYSIS 13 CEO Interview: MAXpower Group plans to be the leading gas fired distributed power provider in Asia

06 Sarulla to prove Indon’s geothermal prowess 07 Thailand misses its solar potential

20 Is energy price volatility the new normal for Asia’s growing

07 The Chartist: Considerations for M&As in the energy sector 08 Shenzen tries rev cap model 08 China muscles into nuclear front

REGULAR

power industry?

OPINION 30 JOHN GOSS: A significant expansion of natural gas supplies in China 32 AKIRO TOKUHIRO: The announced capped revenue

experiment in Shenzhen

14 What to expect from Asian power utilities in 2015 18 India urged to finally ditch coal and turn to wind for

powering 31,000 rural villages

organizers: 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

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

power utility

POWER UTILITY

India must inject USD83.35b in renewable energy market until 2022 India has set a target of achieving overall renewable energy installed capacity of 41,400 MW by 2017 and 72,400 MW by 2022. To achieve this, India will have to add 40,130.39 MW of renewable energy installed capacity.

To achieve this target, India will have to add 40,130.39 MW of renewable energy installed capacity. To achieve a target of 72,000 MW of installed capacity for renewable energy India will have to invest around US$ 46.22 billion.

power utility

Chinese manufacturer Trina Solar could be 2014’s largest PV supplier As the Q314 earning season draws to a close for leading solar PV companies, with re-stated full year forecasts made for the final time, the group has released its global top 10 module rankings based on full year shipment estimates.

In 2014 top 10 module suppliers are expected to be almost the same group of companies in 2013, though several ranking changes will have occurred.

SunPower entered the top 10 with the same ranking as Kyocera.

Asia Pacific’s nuke capacity predicted to hit 50GW The global market for nuclear Reactor Pressure Vessels (RPVs) was valued at $4.45 billion between 2006 and 2014, and will possibly increase to approximately $16.53 billion during the 2015 to 2020 period.

Due to high RPV demand for commercial nuclear reactors, AsiaPacific will command almost half of the global market between 2015 and 2020. Europe and North America will also be major players, with 34% and 10% shares, respectively.

FROM THE BLOG Will there be a continued boom or bust for Japan’s renewables?

BY ARTHUR MITCHELL When Japan instituted the Renewable Energy Act (REA) in 2012, the stated policy was to encourage the development of renewable energy but to avoid the “boom and bust” cycles seen in other countries. Looking back, there is no question that the government created a

4 ASIAN POWER

The announced capped revenue experiment in Shenzhen

BY AKIRA TOKUHIRO In November 2014, China’s National Development and Reform Commission (NDRC) announced via a Notice for Transmission and Distribution Rate Reform Pilot in Shenzhen, a first-of-a-kind (FOAK) initiative to induce ‘change’ in the existing business model.

The first step to becoming a smart nation: Protect the grid

BY ARUN KUNDU Singapore is making headway in developing its own smart grid infrastructure.

State-owned energy utility Singapore Power (SP) is currently involved in a project to upgrade and renew the country’s ageing grid infrastructure.

Meeting the challenge of powering Asia’s next 100 million

BY DEBAJIT DAS Over one-fifth of Southeast Asia’s 600 million people do not have access to electricity.

This lack of readily-accessible power means basic needs go unfulfilled and long-term quality of life remains low, with business productivity hindered in markets expected

FIRST

FIRST PT PLN as the sole buyer of electricity, which Devine says has strained the finances of the nationally owned corporation and raises doubts about its ability to pay higher tariffs, especially given high subsidies in the energy sector.

“Gaining reassurance as to bankability, as with any project, has been a cause of delay. This in turn has been caused by uncertainty of the ownership of projects under development and whether the government will ensure the viability of projects by minimising the exposure to risk in relation to state electricity company PLN,” says Shamim Razavi, senior foreign legal counsel of Norton Rose Fulbright Australia in association with Susandarini & Partners.

pHil POWer fails privatisation test

If the Philippines were to be graded solely by its ability to craft good energy policies, then it would pass with flying colors, but experts warn that the country still lags in three key areas and must catch up if it wants to truly build a sustainable energy future.

“The Philippines has taken great stride towards meeting its future energy needs but must do more on implementation, competition and infrastructure to turn its goals into sustainable and affordable reality,” says Anthony Jude, senior advisor at Asian Development Bank.

Jude notes that there are encouraging signs of progress in these three key areas. He says there “substantial progress” has been made in implementing the Electric Power Industry Reform Act, including basic market rules and infrastructure for the wholesale electricity spot market. “But much more remains to be done and the initial target dates for reforms and privatisation have proven to be overly ambitious.”

Political will and resolve The challenge for the Philippines to step up comes as the country’s primary energy demand is projected to rise by 105% between 2010 and 2035, driven by robust economic growth that has pushed peak electricity consumption to start exceeding supply.

In response, the government has rallied to build more power projects and is counting on 5,198.40 MW from committed power projects across the country and a further 12,023.60 MW from indicative power projects through to 2020.

But if the country wishes to truly break free from its high electricity prices and ramp up its renewables sector, as mandated by its policy vision, then it must firm up political will and resolve issues surrounding implementation, competition and infrastructure.

“Policy makers in the Philippines and elsewhere in Asia must take climate change seriously and develop policies to support a low-carbon path. It may not be possible to make an immediate shift but it can be done in phases. It may not be possible to shut an ineffi cient power plant and build a new one but actions can be taken to modernise it and reduce its fuel consumption. Instead of grid extensions to rural areas, an off -grid renewable energy system can be introduced and later integrated into the grid,” adds Jude.

6 ASIAN POWER

Lack of developed infrastructure hinders Indonesia

Sarulla to prove Indon’s geothermal prowess

L

ike an untapped geyser waiting to burst, Indonesia’s geothermal power sector has so far lacked a drill to unleash its full potential.

According to analysts, the landmark Sarulla project could be the answer.

“Numerous challenges have hindered development of geothermal resources in Indonesia, including lack of coordination between central and regional governments, lack of good legal framework, limited institutional capability to plan geothermal development and engage suitable developers,” says Luke Devine, Finance & Projects, Hadiputranto, Hadinoto & Partners, on the problems contributing to the current geothermal project backlog.

Devine adds that one of the critical issues facing Indonesia is the lack of a developed infrastructure that would allow its local communities access to electricity.

Risk averse Investors are also cautious about engaging in geothermal projects, which are classified as a high risk investment due to extensive upfront capital outlay for survey and site development.

Drilling projects exploring a single location could cost around €15-20 million, excluding the risk of nondiscovery.

There are also concerns about having

Luke Devine

Shamim Razavi

Replicating the Sarulla success If Indonesia is to fast-track its geothermal development, it would do well to learn from the 330 MW Sarulla project, one of its most ambitious and successful projects to date.

Devine says the project is widely regarded by the international project financing community as one of the most complex financing and project structures to be seen in Indonesia, involving a multiple project entity borrower structure instead of the usual single, with two state-owned entities, PT PLN and PT Pertamina Geothermal Energy, playing pivotal roles in the project. Razavi, who worked on the Sarulla project as a lawyer, reveals that financiers initially struggled to understand how the project would be viable in light of local laws and uncertainties.

But these issues were successfully worked through, making Sarulla a game-changer if the solutions applied to the project are more widely adopted.

He notes that Sarulla’s success has already generated renewed interest in many shelved geothermal projects.

Primary energy mix: target by 2025

Source: Center for International Forestry Research

Thomas Chrometzka

Thidarat Sawai

Where are all the solar farms?

Thailand misses its solar potential

T

hailand is gearing up to revive renewable energy projects across the nation, with the help of private investors and a feed-in premium model that encourages long-term investment in green energy.

“The new power development plan will focus on energy security.

The economy energy price should be acceptable by all sectors and reduce impact on the environment with the objective of increasing country cost competitiveness, energy efficiency and the share of renewable energy,” says Thidarat Sawai, solar energy advisor in Thailand’s Ministry of Energy.

Thailand was one of the first Asian countries to have a feed-in premium model called the “adder” program, which ensured guaranteed purchases and attractive tariff rates for solar power projects.

Setbacks “By 2010, purchase power agreements for 2,537 megawatts were granted to solar farms – out of a total of 3,600 megawatts of applications,” says Thomas Chrometzka, director of renewable energy for the Deutsche Gesellschaft für Internationale Zusammenarbeit (German Federal Enterprise for

International Cooperation) Thailand.

However, only 1,083 megawatts achieved the anticipated commercial operation date, with another 400 megawatts currently still under construction.

Thailand has also yet to implement green projects like the solar rooftop programme and the solar community programme, which was supposed to be implemented by the Thai Village Fund in cooperation with the Provincial Electricity Authority.

Chrometzka says the project faced issues in how the financing can be structured while ensuring the transparency of the scheme.

“In order to move ahead and still realize the aims of the scheme – such as local value creation and generating new income opportunities for local communities – the programme has been transformed.

It now aims at realizing solar farms with up to 5 megawatts in size in the form of public private partnerships with the governmental sector or agricultural cooperatives,” he says.

Sawai says the government is allocating 1,300 megawatts of power purchase agreements, in accordance with a resolution by the National Energy Policy Council.

Renewable energy demand

Source: RE & AE Development Plan, purple = RE demand, red = total energy demand

The Chartist: DEALS TO ACQUIRE ALTERNATIVE ENERGY COMPANIES TO RISE in 2015 Deals in the energy sector have risen over the past years and are anticipated to grow further over the next 12 months. A survey by Norton Rose Fulbright reveals that almost nine out of ten respondents anticipate an increase in energy M&A in the coming year, as economic conditions improve and energy corporations become more willing to use cash to grow through acquisitions.

Norton Rose Fulbright adds that deals to acquire alternative energy companies will be a main feature of future activity, especially as innovation and development create attractive targets for investment.

In fact, since 2012, alternative energy deals have accounted for one in five energy transactions globally.

In Asia-Pacific alone, similar activity accounted for one in three deals.

Will there be an increase in M&A in the next 12 months?

Source: Norton Rose Fulbright

Asia-Pacific energy M&A by sector

Source: Norton Rose Fulbright

ASIAN POWER 7

FIRST

co-published Corporate profile

Shenzhen tries rev cap model

IPP WATCH

China Resources Power’s resilience under test

W

hen China’s National Development and Reform Commission (NDRC) announced a pilot regulated revenue scheme for Shenzhen’s power grid, industry observers viewed it as a potentially groundbreaking precedent for a more transparent, more efficient and cleaner electricity transmission and distribution sector.

The revenue cap will incentivize the grid company in Shenzhen to shift its focus away from maximizing the amount of electricity it supplies and improve power quality, according to Lilia Xie, research associate, energy storage intelligence team at Lux Research. “I think it is an important and necessary step in the right direction if China wants to be serious about clean energy and improving efficiencies all around.”

The scheme provides an attractive market incentive for efficiency and the introduction of renewable technologies, says Akira Tokuhiro, professor of Mechanical and Nuclear Engineering at the University of Idaho Falls.

It could eventually lead to more incentives for the installation of renewable sources, as well as ‘smart’ metering and hybrid micro-grids.

“It seems self-evident that this is NDRC’s recognition and attempt to institute a business model that

The control design boasts of improved reliability, unit stability, responsiveness, and operational flexibility while reducing system complexity.

I China’s next big city

Even with a track record as one of the best operators in China, CR Power could underperform on utilization hours in the next 2-3 years, says Barclays. The key concern is the potential risk to utilization hours in the medium to long term, due to its c50% exposure to Jiangsu, Guangdong and other provinces that are potentially affected by the import of power using UHV lines and the nuclear build-out, explains Barclays analyst Ephrem Ravi.

supports end-use energy efficiency, integration of renewables and some small effort toward ‘cleaner energy’,” says Tokuhiro.

Why Shenzen?

Xie says it is not surprising that Shenzhen was chosen for the pilot program. The city is one of China’s technology hubs and a major power user. The successful implementation and stakeholder acceptance of the scheme in Shenzhen, despite initial resistance to the new business model and practices, could make a solid case for wider adoption.

“If all goes well, it seems likely that future national reforms will bring a similar regulation scheme into more areas of the country,” says Xie. “It’s important that regulatory entities carefully consider the individual context in each case. Setting appropriate tariffs and fees will be necessary to avoid costly disruption for both utilities and customers.”

OWL Energy clinches contract for Asia’s largest solar project

Akira Tokuhiro

Lilia Xie

Regulatory uncertainties plague Hong Kong’s power sector Investors should be wary of a possible diminishing risk-reward in the Hong Kong utilities sector which could affect earnings after 2018, says Evan Li, analyst, equity research at Standard Chartered Bank in Hong Kong.

“Regulatory risks include capital expenditure uncertainties about the asset base based on the results of the fuel-mix consultation and potential changes in allowable returns under the current Scheme of Control,” says Li. While the Hong Kong government has an option to extend the prevailing Scheme of Control agreement for another five years to 2023, it will not likely enter into new contract or extend the existing one prior to new Chief Executive selection in 2017, says Pierre Lau, head of regional utilities at Citi.

But a silver lining can be seen with regard to the fuel-mix consultation meant to lower pollution from coal-fired plants. One of two proposed options is to use more natural gas for local generation, which will replace 30% of the existing generation mix from coal. If this option is chosen, it would be more favourable for the two Hong Kong power companies, CLP and Power Assets, says Lau. 8 ASIAN POWER

Take a clear window look into turbine control logic with Emerson’s Ovation Turbine control system

Oriental OWL Energy KK has been awarded a contract by GE Energy Financial Services to provide oversight on multiple solar energy projects under construction in Japan. The 230MWDC project, located in Setouchi City, Okayama prefecture, will be the largest solar project in Asia. In addition, OWL will be providing oversight for construction of the 32MW Kumenan and 42MW Mimasaka projects located in the Okayama prefecture.

Xinyi Solar levels up by expanding its solar farm

ncreasing competitive pressures in the power generation industry have driven dramatic changes in the operational needs of power plants. Power plants need to enhance reliability, avoid unplanned outages, reduce maintenance costs and improve unit responsiveness, all of which are not possible with legacy turbine control technology.

Emerson’s years of experience and dedication to the power industry understand the impact of efficient turbine control in achieving the maximum levels of reliability and availability.

Emerson’s Ovation™ technology uses the same hardware and software platform for turbine control as it uses for other plant controls such as boiler or HRSG controls, burner management systems, combustion controls, and balance-of-plant. Emerson’s fully integrated turbine control system achieves unit-wide compatibility, which reduces time and costs.

Emerson has specifically designed I/O modules for turbine control applications.

Ovation Speed Detector and Valve Positioner I/O modules provide accurate monitoring, control and protection of turbine process to maximize the life of turbines. Ovation turbine-specific I/O modules interface seamlessly to existing magnetic speed pickups, position feedback devices, and servo valve actuator coils.

Emerson’s Ovation Valve Positioner I/O module provides closed-loop position control of major servo-operated valves. The Valve Positioner I/O module serves as the interface between the ovation controller and an electro-hydraulic servo valve actuator on a single turbine valve. The Valve Positioner I/O module features include PI control loop with

Evan Li, analyst, equity research, Standard Chartered HK

Tangled up in regulation

Xinyi Solar (XYS)’ solar farm operations will expand from 35MW to well over 200MW over the next 12-18 months, as the company takes advantage of the favorable return metric for solar farm developments, forecasts Citi.

“It should see contributions from its engineering, procurement, and construction (EPC) services, leveraging on its contacts with solar module manufacturers and other solar glass companies,” explains Citi’s analyst Timothy Lam.

Computer control center

10 millisecond loop time. These specifically designed I/O modules decrease project risk and cycle time so that the unit can be more quickly returned to service while executing turbine control modernization projects.

Emerson offers huge retrofit capability for steam, gas and hydro turbine control systems. The steam turbine control replacements include speed and load control, rotor stress and automatic turbine startup and sequencing, vibration monitoring, protection and prediction as well as mechanical and hydraulic system upgrades.

The gas turbine control replacements include automatic turbine startup and sequencing, precise control of turbine acceleration and temperature, speed and load control, accurate spread monitoring of all exhaust temperatures, integrated vibration monitoring, integrated turbine protection and prediction, fuel system conversions, water injection systems, mechanical upgrades, electrical system refurbishments, and control system upgrades based on specific OEM modification recommendations.

Emerson’s Ovation control technology replaces unreliable, vintage turbine governor controllers to offer the highest level of water

“Emerson’s years of experience and dedication to the power industry understand the impact of efficient turbine control in achieving maximum levels of reliability and availability.”

control and management, maximizing turbine life. With Ovation technology, hydroelectric plant operators have access to a clear, concise view of key turbine parameters. With Emerson’s hydroelectric control solutions, generating units can be automatically started or stopped with a single click, which initiates a sequence that starts auxiliaries, operates valves, performs safety checks, and synchronizes to the power grid.

Unlocking the black box Emerson’s Ovation Turbine control solution has built-in redundancies and safety logic control design like two-out-of-three logic for tripping and overspeed protection independent of turbine speed governor.

It offers consistent use of hardware and software plant-wide enabling common engineering and operator environment with power plant DCS hence eliminates additional cost of training and spare parts.

Emerson’s Ovation Turbine control system provides ease of operation for fast troubleshooting to prevent outages before they occur. It accesses data that indicates when turbine acceleration is passing through vibration criticality, views text prompts of critical time check milestones (such as time remaining during startup), and sees all temperatures in a single graphic.

Ovation collects trends of important turbine information. Descriptive alarms at Ovation workstations allow operators to monitor overall turbine activities and respond to problematic conditions including rotor stress and vibration monitoring information.

Ovation provides safe turbine shutdown or runback regardless of turbine supplier.

Emerson’s CSI6500 Machinery Health Monitor is Ovation integrated Protection, Prediction and Monitoring device. It provides a simple graphical view of process parameters, machinery protection parameters, machinery health information and machine performance information.

The CSI 6500 Machinery Health Monitor is the ideal solution for plants looking to replace their existing protection system while also leveraging the benefits of predictive diagnostics and real-time monitoring. It builds on Emerson’s proven foundation of providing protection and prediction solutions for both steam and gas turbines.

Emerson’s Ovation Turbine control system provides a clear window into turbine control logic and lets user manage and optimize their own process rather than relying on the turbine OEM to ‘unlock the black box’.

ASIAN POWER 9

FIRST

co-published Corporate profile

Condensate polishing: A highly important safety net for more efficient plants

China’s great nuclear leap forward

L

ess than a decade from now, China will have tripled its nuclear generating capacity while other major economies lean towards less expensive options such as natural gas and renewable energy.

“In China, the government’s commitment to reduce carbon emissions is the main driver of an expected gradual shift in the nation’s energy mix away from coal and toward cleaner energy, including nuclear power,” says Michael Haggarty, associate managing director at Moody’s Investors Service. Among the seven major markets in its November 2014 assessment, Moody’s ranks the governments of China and South Korea as among the “most supportive” of nuclear expansion.

By comparison, the governments of Japan, United States and United Kingdom were ranked as “more supportive”; France’s as “less supportive”; and Germany’s as “unsupportive” with a plan to shut down all of its nuclear reactors unlikely to be reviewed.

Haggarty says despite government support for nuclear generation in most major economies, they are putting nuclear power on the backburner due to lower prices for natural gas, so “as a result, nuclear generation is growing only in a few major markets, notably China and South Korea.”

China’s fervour can be seen in the more than 29 nuclear reactors under construction, with more planned. China’s State Council expects the country’s nuclear generating capacity to more

than triple by 2020.

China General Nuclear Power Corporation (CGN Power) and China National Nuclear Corporation (CNNC) are constructing a large number of new nuclear units that will dramatically increase the country’s nuclear generation output, which today stands at about 2% of China’s total energy mix. The State Council of China expects that the country’s generating capacity will more than triple to at least 58 gigawatts by 2020, from 14.6 gigawatts in 2013, according to the China Electricity Council.

Nuclear power would contribute around 207 billion kWh/year of electricity to the coastal provinces, and will effectively reduce the call for coal-fired power, says Ephrem Ravi, analyst, Asia ex-Japan power & utilities at Barclays. Fujian, Guangdong and Zhejiang would see the biggest substitution of nuclear for coal-fired power, at 22%, 13%, 9% of their 2013 consumption, respectively. Ravi says most of the nuclear power plants (NPPs) under construction are located in coastal provinces due to safety and power demand reasons.

“China originally planned to roll out nuclear power across the country, but the Fukushima accident in 2011 raised safety concerns, prompting the China State Council to halt all inland NPPs until further notice,” says Ravi.

As a sign of its burgeoning nuclear power expertise, China has begun securing nuclear power contracts abroad.

The State Nuclear Power Technology Corp

Condensate polishing is the unsung hero of efficient plant operations, as it can remove impurities, prevent leaks, and avert shutdowns.

C

Ready to go all-out in nuclear?

recently signed a cooperation memorandum with US-based Westinghouse and Turkish national power company EUAS to build four nuclear power reactors using CAP1400 and AP1000 technologies. “We believe the agreement shows China is gaining global recognition for its nuclear power,” says Howard Wong, head of research at Maybank Kim Eng. “CGN Power and CNNC are also developing GEN III power plants and we expect it will lead to more overseas opportunities.”

Running Japan’s cut-throat renewables race Once a paradise for renewable energy developers, Japan is fast becoming a more brutal arena where only the financially fittest can survive as the government tightens the once-lax requirements for feed-in tariff eligibility. This has forced developers to shape up and meet stringent government demands or be pushed out by more compliant competitors.

The Ministry of Economy, Trade and Industry now requires most new solar PV projects to secure the site and order panels within 180 days of receiving the FIT, says Arthur M. Mitchell, senior counselor at White & Case and former general counsel of the Asian Development Bank.

Still lucrative amid increasing risks “Many developers who require financing or need numerous local permits consider these requirements to be onerous.

Furthermore, the regulator has announced that it intends to clear the market by cancelling the FIT for some projects which do not seem likely to be completed,” he adds.

Despite increasing risks amid a tightening regulatory environment, the Japanese renewables market still offers lucrative opportunities and still looks promising acorss several sectors, particularly in solar. Japan arguably has the most generous, and consequently a very attractive, renewables incentive package in the Asia-Pacific region, says Stephen Webb, partner and head of energy (Asia) at DLA Piper.

This has led major backers such as Goldman Sachs Japan Co and IBM Japan Ltd, as well as major local banks, to compete for a share of the solar PV market.

10 ASIAN POWER

Arthur Mitchell, senior counselor, White & Case LLP

Stephen Webb, head of energy, DLA Piper

ondensate polishing is an understated but extremely vital aspect of plant maintenance. Polishing condensate prevents the concentration of soluble impurities, which could corrode internals and cause damage to boilers and turbines.

Corrosion, in turn, could cause insoluble impurities such as copper, iron, and silica to re-circulate in the stream.

If left unchecked, these impurities could eventually result in plant failure. Condensate polishing is especially crucial in supercritical or ultra-supercritical generators, where all impurities from the boiler directly enter the turbine. This process results in the buildup of hard deposits which bring about inefficient operation, increased costs, and even cause unplanned and disastrous shutdowns.

A condensate polisher also protects the system against condenser leaks. In the event of a leak, a condensate polisher gives operators time to shut down the boiler for cooling waters with high total dissolved solids (TDS). For low TDS cooling waters, a condensate polishing systems can even allow the condenser to continue operations while awaiting maintenance work.

By removing these dangerous impurities, condensate polishing systems aid in preserving cycle purity and efficiency.

Although polishers do not make plants immune to chemistry issues, they nonetheless lessen the impact of chemistry problems and often allow a plant to continue operating with a minor condenser tube leak or air in-leakage problem that might otherwise require an immediate shutdown. Plants with condensate polishers can also be started up more quickly, which will save utilities time and money and allow more operation flexibility.

Introducing SeparIX Veolia has been designing, building and commissioning condensate polishing plants for over 30 years. Using this knowledge base, a range of standardized mixed-bed units for condensate polishing has been created.

Standardized units reduce time to market, optimize cost, facilitate maintenance and represent proven solutions.

“We try to focus more on condensate polishing to actually recover the condensate.

This is especially critical for coal-fired power plants. We want to focus our time and technology into this area, where we can bring a more sustainable plant to our customers,” says Aaron Seah, Regional Market Manager at Veolia.

“If a condenser breaks down, the whole power plant can be shut down. We see many unreliable plants in Asia, so we really want to improve the quality of these plants for our customers,” he added.

Veolia’s newly-developed SeparIX technology is a simple and exceptionally robust process which uses a high degree of separation to externally regenerate the mixed bed resins of condensate polishing plants.

The system consists of two vessels for resin separation and regeneration as well as a third vessel for interim storage of the interface resin.

SeparIX’s edge Compared to previous solutions, SeparIX does not require difficult and costly sensor technology or additional chemicals as its separation process is based solely on the physical characteristics of the resins. The high purity of regenerated resins enables ammonia cycle operation.

Exhausted mixed bed resins are preregenerated to achieve constant resin layer heights in the separation vessel, independent from their grade of exhaustion. Only after regeneration are resins separated. This process eliminates the need for costly sensors

“Standardized units reduce time to market, optimize cost, facilitate maintenance and represent proven solutions.”

or specialty chemicals to identify and separate the resin types.

This procedure eliminates the main source of resin cross contamination. The regenerated cation resin is conveyed to the anion regeneration vessel and after subsequent mixing of both resin types the regenerated batch is ready to be transferred back to the mixed bed ion exchangers.

The highly efficient transfer from the regeneration vessel back to the service vessel ensures the high purity of the next batch.

A spare resin charge can be stored in the SeparIX system to reduce thedowntime of the service polishers during regeneration.

SeparIX has several benefits compared to other processes. The system does not require sensors to detect resin types, it requires no additional chemicals for separation of cation and anion resins.

Its robust mechanical process has low maintenance requirements and high reliability, and has a simple displacement of operational resin loss through resin hopper of interface resin vessel. The simple construction of its separation vessel is also similar to conventional mixed bed ion exchangers with internal regeneration Veolia’s condensate polishers are in line with the company’s goal to help develop more sustainable and reliable plants in Asia.

Veolia has been present in the ASEAN for over 20 years.

Water is integral to the efficiency of power plants, and Veolia Water Technologies is at the forefront of providing unique solutions to the ASEAN’s booming power industry.

ASIAN POWER 11

CEO INTERVIEW

MAXpower Group plans to be the leading gas fired distributed power provider in Asia

CEO Arno Hendriks treats Myanmar as a priority market with its 10-15% annual growth in electricity consumption.

A Arno Hendriks

CEO, MAXpower Group

s Myanmar slowly emerges from five decades of dictatorship, foreign investors are becoming increasingly interested in the country’s fast evolving power sector. Multinational companies planning to build more power plants from hydropower to other energy sources, including coal, natural gas, solar, and wind power are making headlines. To shed more light on the country’s vast potential, Asian Power caught up with Arno Hendriks, CEO of MAXpower Group, a South East Asian gas-to-power specialist which claims to be the first foreign company to sign a a long-term agreement with the Myanmar Ministry of Electric Powerin 2013.

Formerly called Navigat Group, MAXpower Group is the parent company of Myanmar Power Pte Ltd (MPPL) which operates a 50 MW gas-fired generation plant and sells electricity to Myanmar Electric Power Enterprise under a power purchase agreement with a 30-year term. MPPL’s approximate project costs to date are valued at about US$35 million.

Hendriks believes that MAXpower enjoys early-mover advantages in the buoyant investment climate. The opportunity has allowed some diversification in MAXpower’s asset footprint, which had previously been 100% Indonesiabased.

Moving forward, Hendriks, who assumed the role as MAXpower Group’s CEO in May last year, plans to grow it into the leading gas-fired distributed power provider in the region.

In order to achieve this, the new head is treating Myanmar as a priority market.

Recently, MAXpower sealed a new strategic partnership with Mitsui & Co, the largest Japanese investor, to fast forward the development of their project pipeline in Myanmar. Mitsui has acquired a 44% stake in MPPL. What made you decide to enter the Myanmar power sector?

We consider there to be huge potential in the Myanmar market.

It is a country with massive power needs, which at the same time is endowed with fairly abundant gas reserves. The lack of a national grid makes it very suitable for distributed gas-fired power, which is our business strength.

What makes the 50 MW gas-fired power generation project in Myanmar significant? What are the developments after more than a year of commercial commencement?

The 50 MW gas-fired power generation project is the largest asset in MAXpower’s portfolio to date. At present, it is an important source of power supply to MEPE. Operations have been smooth and payment records from MEPE have been spot on.

The operation is strategically located close to Yangon’s Thaketa Industrial Zone, thus playing a key role in meeting the electricity demand in the region. At the moment, MAXpower Group is in discussions with MEPE to increase capacity in the region.

How do you see Myanmar’s power sector growing over the next couple of years? How would you benefit? What are the opportunities?

Between 2007 and 2012, electricity consumption in Myanmar saw a compounded annual growth rate of around 13%. Going forward, we expect robust growth in power demand at an

12 ASIAN POWER

estimated 10-15% per annum.

Currently, 70% of Myanmar’s population live in rural areas and 74% is not connected to the grid. Yangon and Mandalay, two of the largest cities, have a combined population of 5.6 million. The average electrification rates are 67% in Yangon and 31% in Mandalay. On the contrary, roughly 15% of the population is connected to the grid in the rural regions. In total, only around 2 GW of the 3.4 GW installed capacity is available due to the inefficiencies of very old and ill-maintained power plants. Even then, supply is intermittent for the population connected to the grid. During the dry season, some neighbourhoods in the lower socioeconomic areas receive as little as one hour of power per day.

The lack of a national grid creates several opportunities for distributed power in the gas-to-power space. MAXpower is well-positioned to capture these opportunities and can look to lend its expertise in the replacement of old and ill-maintained power plants. An example would be the Thaketa plant, where an inefficient and old gas turbine was replaced by MAXpower’s GEJ engines, doubling the plant’s efficiency. We will also look to replace diesel generator sets, which are very typical for countries that rely heavily on distributed power but are looking to move towards cheaper fuel sources.

Tell us more about the 44% stake acquisition of Mitsui in Myanmar Power. What makes it significant? How do you expect it to strengthen your position in the power generation business?

As one of the largest conglomerates in the world, Mitsui is MAXpower Group’s partner of choice in the region. It has over US$106.8bn of assets in energy, chemicals, metals, etc, and a network of over 147 offices in 67 countries. Going forward, we see potential for collaboration with Mitsui on further power projects in Myanmar and across the region.

These opportunities, along with Mitsui’s strong reputation and credibility, will bolster MAXpower’s position in the Myanmar power sector.

Mitsui will bring strong additional technical expertise to the partnership, which will aid MAXpower in developing its project pipeline in Myanmar. Separately, in addition to the Myanmar Power acquisition, we have also entered into an MOU with Mitsui in Indonesia which will open the door for further business collaboration opportunities in other countries.

What are the challenges and how do you plan to overcome them?

In general, competition in the Myanmar power space has increased over the last couple of years as a result of improved investment climate. We have seen an increase in the number of potential bids for new power projects. That being said, we think that pricing levels remain attractive enough for MAXpower to continue to further pursue commercially viable opportunities in Myanmar. Furthermore, Mitsui’s strong reputation and technical expertise, coupled with MAXpower’s experience in the gas-to-power, puts us in a strong competitive position.

Aside from Indonesia and Myanmar, what expansionary plans do you have in Asia?

In the near future, MAXpower’s efforts as an IPP developer will continue to be focused on our home market of Indonesia and on Myanmar.

ASIAN POWER 13

ANALYSIS: power utilities in asia

ANALYSIS: power utilities in asia

Outlook for India remains negative

Governments keep an iron grip on the Asian power sector

Most state-owned electric utilities will maintain their near monopolistic positions in their respective regions for at least the next 12-18 months.

F

undamental business conditions in the industry over the next 12 to 18 months are seen to be solid and steady, except for India. Our outlook for the Asia (ex-Japan) power utilities sector over the next 12-18 months is stable. This reflects our view that the fundamental business conditions in the industry will remain stable during the period. We have maintained a stable outlook for the sector since 2009.

The primary drivers of our stable outlook are (1) the supportive policies of governments, leading to stable market structures and unlikely adverse adjustments for tariff structures and subsidies; (2) solid to steady growth in demand for electricity in most countries; (3) slow progress to implement consistent, transparent tariff systems, limiting positive momentum in the sector; (4) most rated state-owned power companies maintaining an adequate financial buffer in light of high capital expenditure and the absence of automatic cost pass through tariff systems; and/or (5) power purchase agreements (PPAs) or favourable cost pass through tariff systems ensuring IPPs adequate returns in many countries.

We maintain stable outlooks for the 14 ASIAN POWER

IPPs will assume an important supplementary power supply role as they build new power plants.

individual power utility sectors in China, Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand, reflecting the primary drivers.

We believe policies governing the industry will remain broadly supportive across the region, given significant government ownership in the power sectors in most countries and the increasing importance of reliable and stable electricity supply to sustain economic growth and development across the region.

However, we maintain a negative outlook for the Indian power sector, owing to the continued structural challenges across the value chain, from fuel supply to retailing, and our view that new measures, albeit positive, are unlikely to offset these challenges over the next 12-18 months.

Steady market structures We expect most state-owned electric utilities to maintain their dominant or near monopolistic positions in their respective regions for at least the next 12-18 months.

Most governments have no plans to privatize the sector and will likely maintain control through ownership

of major power companies and/or supportive regulatory frameworks to ensure stable and reliable power supply.

In China, the power generation segment will continue to be dominated by the major state-owned power companies (all unrated) – China Huaneng Group, China Datang Corporation, China Guodian Corporation, China Huadian Corporation and China Power Investment Corporation – and by state-owned non-conventional power generating companies, which include hydropower company CTG, nuclear power company CGN, and wind power company Longyuan, which is a subsidiary of China Guodian. Also, SGCC will continue to be the major duo-monopoly player within China’s transmission and distribution networks.

In Hong Kong, CLPH will maintain a monopolized franchise in Kowloon and the New Territories, while Hong Kong Electric Holdings Ltd (unrated) has a monopolistic market position on Hong Kong Island.

NTPC will remain a dominant thermal power company in India, accounting for around 18% of capacity as of end-March 2014. Other unrated state-owned power companies, such as National Hydro Power Company (unrated), play a key role in supplying power to the country’s economy.

For Indonesia, Korea, Malaysia and Thailand, state-owned PLN, KEPCO, Tenaga and Electricity Generating Authority of Thailand (EGAT, unrated) will continue to dominate the respective markets. They are near monopoly operators in the countries’ transmission and distribution networks, while generating the majority of electricity for those countries.

In Singapore, SingPower has a monopoly in the transmission and distribution industry, while the large privatized power generation companies have strong market positions.

The Philippine power sector is moving towards an unregulated, competition-based market. PSALM, which is responsible for the privatization of the power sector, has privatized more than 70% of its power assets.

However, given the tight power supply in the market, we do not expect such a move to lead to excessive competition and thereby significantly erode the power companies’ profit margins.

Increasing private investments across the region, particularly in Indonesia, India, Korea and Thailand, will not threaten the dominant power companies or trigger structural changes, in our view.

That said, IPPs will assume an important supplementary power supply role as they build new power plants, while likely

recording stable operating performance, owing to consistent tariff systems and/ or long-term contracts with state-owned power companies for the sale of electricity.

Slow tariff-system developments The absence of a consistent tariff system in most power sectors reduces the predictability of operational cash flows during the outlook period, particularly for most rated state-owned power companies.

Ongoing efforts to introduce consistent and transparent tariff systems are credit positive. Such tariff systems would enable electric utilities to pass fuel cost increases onto customers on a consistent basis and therefore reduce exposure to volatility in fuel costs, particularly for major power companies in China, Korea and Malaysia.

However, effective implementation of such tariff systems is subject to execution risk, as governments in most countries tend to keep electricity prices low to support economic activity and/ or to reflect consumers’ ability to pay.

In addition, many countries do not have strong track records of established and consistent tariff structures, except Hong Kong and Singapore and most IPPs across the region. The Chinese government has committed to reform the tariff systems to encourage private investment in its power sector.

We expect such a move will improve the transparency and predictability of cost pass-through mechanisms in the country. However, the government will likely implement the change progressively in the next two to three years, because of the affordability issues and for a smooth transition to a cost pass-through tariff system.

The Indian government launched the Financial Restructuring Plan in October 2012, mainly to help SEBs to improve their financial health.

However, the financial profiles of the SEBs will likely remain weak, owing to their limited ability to pass cost increases onto end-users.

The Korean government amended its regulation in May 2014, in order to allow KEPCO to request tariff increases in future years for any losses incurred in previous years. Previously, KEPCO did not have grounds to submit such a request, even having recorded net losses from 2008 to 2013. However, tariff adjustments consistent with the regulation need to be tested over at least the medium term, because of the government’s tendency to limit material tariff increases to curb inflation.

The Malaysian government has implemented cost pass-through under its Incentive Based Regulation from 1 January 2014, for Tenaga. We view this development as credit positive for the

power sector, although the effectiveness of such a tariff system will need to be tested over an economic cycle.

In Thailand, tariff adjustments for EGAT will likely remain at the government’s discretion, as there has been limited development of a tariff system in the power sector. Unlike the power sectors in emerging countries, Hong Kong has a transparent tariff system. CLPH and Hong Kong Electric Holdings operate under a scheme of control agreement with the Hong Kong government, which stipulates the utilities’ ability to charge tariffs to recover operating costs.

The current agreement for CLPH will remain effective until 30 September 2018. Similarly, the Singapore power sector enjoys a stable tariff system.

SingPower and the privatized power generation companies continue to achieve predictable and adequate returns under the transparent tariff system.

Adequate financial buffers The credit metrics of most power companies we rate will likely benefit from stable to declining fuel costs and additional cash flows from newly commissioned power facilities, over the coming 12-18 months. As such, the credit metrics of the power companies will remain stable despite the absence of automatic cost pass-through tariff systems in most power sectors and high capital expenditure (capex) burdens.

We expect to see flat to declining fuel prices over the next 12-18 months, given waning demand from China and a slowing global economy. Benchmark Newcastle thermal coal prices have declined by 29% year to date. In addition, Japan-Korea Marker LNG prices have also been on a declining trend since February 2014, although October 2014 witnessed an uptick ahead of winter.

“Many countries do not have strong track records of established and consistent tariff structures, except Hong Kong and Singapore and most IPPs across the region.”

Most power companies will likely benefit from lower prices for coal and LNG, which together account for at least half of installed capacity across the region.

However, we expect the Chinese government will reduce tariffs for coalfired generation during the outlook period, to reflect the decline in coal prices. Nevertheless, we expect the overall financial impact on coal-fired power generating companies will be modest, as a tariff cut will likely be moderate.

Low coal prices and steady electricity demand would partially offset any decline in profitability that results if regulators do reduce the tariff for power generated

by CR Power’s coal-fired plants. Capex by the power companies will likely remain high over the next 12-18 months, mainly because of capacity expansion to address tight supply of electricity and/ or to satisfy growing demand. However, we expect the average capex growth for installed capacity will moderate in 2014-2015, when compared with the three years to 2013. This reflects improved alignment of capacity with demand following expansion, particularly for the power utilities in China and Korea.

By Moody’s Investors Service

Coal and natural gas will remain major fuel sources

Source: EIA, Bloomberg, Moody’s estimates

Renewables? Japan says, “no problem!”

ASIAN POWER 15

Country report 1: MYANMAR

Country report 1: MYANMAR latest announced goal is to increase capacity to 20,000 MW by the year 2030. Dodd says this is a “monumental plan”, given that the current installed capacity is only 4,000 MW. Government funds are currently over-stretched, according to Dodd, with no cash available to bankroll the substantial investments required to upgrade Myanmar’s power infrastructure in order to keep pace with its economic development. “The private sector has a significant role to play in injecting the necessary capital, and that will be by means of both private company investment as well as international bank funding,” says Dodd.

What’s up with all the unfinished business?

Myanmar’s nascent power sector remains problematic for private investors

Potential entrants to the market worry about a battery of concerns that are plaguing the operating environment.

D

espite significant leaps in legal and regulatory improvements, Myanmar’s power sector may still pose too many risks for foreign investors.

Myanmar desperately wants foreign investors to help modernize its power sector, yet many remain on the sidelines due to lingering risks that remain unaddressed by the sector’s improving, albeit still quite perilous, operating environment.

“As Myanmar increasingly liberalizes, decentralizes and opens its power sector to foreign investment, foreign independent power producers (IPPs) are faced with a legal and regulatory framework that is in full transition,” says Edwin Vanderbruggen, legal partner at VDB Loi, a legal advisory firm in Myanmar.

Myanmar’s government has passed a number of fundamental pieces of legislation to improve the legal environment for foreign investors, such as the Foreign Investment Law in 2012 and its implementing rules.

Still, potential entrants worry about a battery of concerns, says Vanderbruggen, including unpredictable commercial terms of power investments such as unregulated tariffs, lack of regulatory standards in resettlement compensation related to power projects, and untested implementation of newly revamped rules 16 ASIAN POWER

Edwin Vanderbruggen

Nathan Dodd

on international financing.

“Myanmar is at the stage in its development where it is still building up experience with respect to certain issues that are important to foreign investors in the power sector,” says Vanderbruggen.

“Contractual precedents and specific regulations still need to be developed. The government is still finding its way with regard to adjusting its internal administrative and decision-making processes to the new needs, the volume of proposals and the new profile of the foreign investors.”

Regulatory and administrative reform Vanderbruggen argues that these issues will be remedied by the passage of time, but with roughly 40 million in Myanmar still without access to electricity, the government may want to speed up the targeted regulatory and administrative reform so more foreign investors will be willing to take the leap.

He says that foreign investors will welcome the use of public contract templates, published tariffs and public key commercial terms – similar to those used in Myanmar’s more investor-friendly oil and gas contracts. Alongside this, there also needs to be a standardization and shortening of the decision-making process for concessions to reduce the negotiating

time. Foreign investors and their lenders will also feel more comfortable engaging in power projects with additional regulation and international agreements that address security, enforcement and environment issues.

“The government will need to create additional or more detailed regulations in a number of areas that are still mired in uncertainty,” says Vanderbruggen. “This is particularly the case with environmental compliance, land use and resettlement, and the practical implementation and enforcement of secured interests.”

Foreign investors are the key The Myanmar government has little choice but to heed such recommendations, because they sorely need private foreign investors to expand and upgrade the country’s power services. Presently only 30% of Myanmar’s population has access to electricity – with a dismal 6% access in rural households – and the country experiences widespread rolling power cuts.

“Power cuts and brownouts are an unfortunate feature of daily life,” says Nathan Dodd, partner at Mayer Brown, and these have led to widespread demonstrations.

This is why the power sector has become a top priority for the government, whose

International bank funding paves way While private investors play the waitand-see game, international banks and multilateral donors have been leading the charge in Myanmar power projects.

Dodd points to the 120 MW Ahlone power project being developed by Toyo Thai, which he says is one of the most progressed power projects involving international sponsors, with 80 MW already being dispatched. Another notable project under development is a 500 MW gas-fired power project in Thakayta province, being developed by a South Korean consortium.

The World Bank, the Asian Development Bank (ADB), and other international donors have pledged large amounts of money and technical support to transform Myanmar’s power sector, notes Vanderbruggen.

The World Bank launched a $1 billion “multi-year” development program to support the expansion of electricity generation, transmission and distribution, as well as the development of a National Electrification Plan and regulatory reforms critical for sustainable private sector participation. The World Bank also extended a $140 million interest free loan to replace an existing generator facility with a more efficient 106 MW gas turbine power plant in Mon state that is intended to produce 250% more electricity.

The ADB, for its part, extended a $60 million loan to improve the power distribution network, with the aim of cutting distribution loss by 4%. Another $2.85 million grant from the Japan Fund for Poverty Reduction through the ADB will be used to formulate a 20-year long term energy plan and improve the power grid.

Even with these large pledges from international donors, Myanmar cannot hope to fully unlock its power potential without the full participation of private investors.

Almost all aspects of the sector need some form of expansion or upgrade.

“Power plants have numerous breakdowns and abysmal efficiency. Trans-

mission and distribution networks are antiquated and omit large expenses,” says Vikas Sharma, associate director, public sector & government practice at Frost & Sullivan. Sharma says power plants have several operational issues and need to be shut down frequently for maintenance, and the problems are especially severe for gas-powered plants that also suffer from lack of compression in pipelines.

Hydropower plants, meanwhile, are unable to operate at full capacity during the dry season due to lack of water. The output in dry season months can be as low as 80% of the output in wet season months. This has pushed Myanmar to manage shortfalls through frequent rolling blackouts, which can last as long as 12 to 16 hours a day in some regions.

Sharma blames many contributing factors, including haphazard planning and highly-subsidized electricity tariffs which have resulted in fiscal deficits, and which, in turn, have crippled public investment in infrastructure.

The inflow of private investors could solve many of these issues through the implementation of capital-intensive system and technology upgrades, but investors continue to hold back due to skepticism about Myanmar’s political stability, heavy-handed government terms, and deficient financing ecosystem.

Myanmar’s bid to harness its abundant renewable resources has also been hampered by the lack of ample legal support, according to the International Finance Corporation (IFC)’s latest report titled Green Power for Mobile. The IFC says Myanmar does not have a fully transparent institutional and legal framework which would encourage exploration, development, and deployment of renewable energy. Moreover, the country has limited financial capital to support research and development, market-based investment programs, and the development of physical infrastructures. There is also a gap in human resources to develop and operate renewable energy projects. The heavy subsidy in power and petroleum prices acts as a tall barrier as well, making it difficult for wind and solar energy alternatives to compete.

Dodd says micro power projects for smaller off-grid systems in rural areas hold great promise, and notes that suitable sites for solar and biomass power projects have been identified. Given the urgency in reducing the hurdles that prevent private investment from flourishing in Myanmar, Sharma advises several measures which would help in this regard.

The first would be to allow for long-term contracts to be granted, which would reduce the uncertainty of IPPs having to renew contracts with regional govern-

“Myanmar’s bid to harness its abundant renewable resources has also been hampered by the lack of ample legal support.”

ments yearly and lead to increased investment scale. The government should also consider setting up better revenue-sharing terms for private investors. Sharma says joint venture partners are currently obliged to provide hefty royalties on top of commercial and income taxes, which then reduce profitability.

Creating sweeter incentive packages is useless if potential investors are not aware of them, or if other countries offer even better terms. This is why Myanmar should consider studying the successful campaigns of other nations to attract foreign direct investment, and then tailor incentive packages comprising measures such as tax shelters, profit repatriation, and relaxed foreign employment rules.

“Investment promotion is fast becoming a competitive activity, with nations vying for limited capital,” says Sharma.

Being rated 182nd out of 189 by the World Bank for ease of doing business does not help Myanmar’s case. Given that it takes 72 days to start a business in Myanmar, compared with 3 days in nearby Singapore, and that the enforcement of contracts in Myanmar is one of the worst worldwide, it is clear why many private investors, other than some pockets of Asian investors, remain unconvinced that it would be worth their trouble to enter the power market.

Size of the off-grid and unreliable grid network

Source: IFC

Total power generation (by type)

Source: Vikas Sharma

ASIAN POWER 17

COUNTRY REPORT 2: INDIA

COUNTRY REPORT 2: INDIA

Off-shore wind machines are lacking in India

India urged to finally ditch coal and turn to wind for powering 31,000 rural villages

The country needs to overcome longstanding implementations barriers, inefficient habits, and heavy reliance on coal.

I

f India is determined to attain universal access to power by the end of the next two decades, ordinary measures are not likely to cut it. The country must implement sweeping changes in power development, allocate larger investments in transmission and distribution and explore renewables with greater urgency in order to reach its ambitious target, argue industry insiders.

“Our analysis and sector experts suggest that India could increase access to power for more than 300 million additional people by 2034, with annual per capita consumption of 1,800 kWh for those connected to the grid. To achieve this, India will have to tackle challenges related to fuel supply, power generation, transmission, and distribution and will need an additional 450 gigawatts (GW) of power supply,” according to PwC’s report titled ‘Future of India:The Winning Leap’.

Universal access challenge Only 75% of India’s households have access to power. This is skewed heavily towards urban areas, with 94% of urban households having access to electricity compared with only 67% of rural households. India also lags behind its global counterparts in per capita power consumption, says PwC, at roughly 700 18 ASIAN POWER

Philippe Le Houérou

Jenny Grönwall

kilowatt hours (kWh) for 2013 compared to 2,400 kWh in Brazil and Thailand.

Frequent power cuts still plague the country. These suggest that despite large improvements in the last two decades, the country is far from reaching its powergeneration potential.

“The sector has come a long way, with significant achievements on many fronts: a tripling of conventional generation capacity with active private participation, renewables increasing from zero to 12 percent of the energy mix, the development of a state-of-theart grid linking the entire country, the transformation of market structure, and the extension of service to more than 250 million users,” says Philippe Le Houérou, vice president, South Asia region at the World Bank. Le Houérou says that India can consider several states, programs, and utilities as beacons of success that are “worthy of emulation.” However, many practices, policies and companies in the industry need to be either discarded or be made more efficient as the country looks to a fast-growing future supported by universal access to power.

Bottlenecks and bad habits The Indian power sector has been hobbled by multiple bottlenecks and

bad habits, including coal shortage, distribution losses, inadequate power demand, delay in approvals and low priced power purchase agreements, says Venkatesh Balasubramaniam, analyst at Citi Research.

The Indian government has undertaken several measures over the last 18 months to remove some of these bottlenecks to notable effect, and there is hope that more reforms will be undertaken at a faster speed in the near future, given that the newly elected government has managed to obtain clear majority after nearly 30 years of coalition compromising.

Balasubramaniam says that the new government is expected to undertake reforms such as increasing the involvement of the private sector in power development, particularly in electricity distribution, and enabling open access.

It could also explore increasing domestic coal production through the restructuring of Coal India, as well as restructuring of electricity distribution companies to reduce losses.

Among these potential reforms, one of the most promising is encouraging higher private participation in transmission and distribution, which should boost flagging efficiency.

“Utility customers want a better

experience, including more pricing options, and private sector companies could satisfy this unmet need,” according PwC. “India has historically invested more in power generation than power distribution. If private companies handled more distribution, the entire value chain could be strengthened.”

But some guidance is necessary to ensure that the private sector takes the lead in effectively providing services once delivered by the public sector, overcoming entrenched infrastructure in the Indian power sector that is often hostile to new solutions, new business models, and new approaches. PwC notes that as much as 24-30% of power generated is lost in transmission and distribution, including 15% lost to theft.

A breakthrough solution for this problem is to use digital information and communications technology to automate information gathering, which will then help reduce losses, improve efficiency and reliability in production and distribution, and lower costs. For example, the implementation of a smart grid in the US is estimated to save US$46-$117 billion over the next 20 years.

Admittedly, it may not be financially feasible for India, at least in the near term, to implement such a comprehensive smart grid as the one in the US. But there is no stopping India from adopting components of smart-grid solutions such as integrated communication systems, sensing and measurement instruments, and smart meters. PwC argues that these measures will help improve efficiency, reduce costs, balance demand and supply, and reduce wastage and loss of power.

Focus on renewable power Another major catalyst to India’s power development and chances of hitting its universal access to power goal will be to reduce its reliance on coal power, while placing more importance on renewable development.

“India will need to shift its powergeneration capacity toward noncoal sources. Only then can it meet the increased need for power in an environmentally sustainable way,” says PwC. Nearly three-fifths of India’s power plants are coal based, says PwC, warning that the nation must mitigate its dependence on coal to avoid resource shortages and environmental challenges.

Such a diverse energy mix will entail more aggressive exploration and investments of renewable energy. Wind energy, for one, holds great promise for India.

“The growth in installed capacity of wind machines on land has been spectacular and the potential needs to be exploited fully,” says S.P. Sukhatme,

professor emeritus at IIT Bombay. “It is expected that the potential off-shore could also be significant because wind speeds off-shore are usually higher and steadier.

However, no machines have been installed off the coast of India as yet.”

India should also look into building more solar thermal power plants.

Sukhatme says it has made little headway in this sector. He notes small pockets of success such as the 50 MW plant using parabolic trough concentrators located near Jaisalmer, Rajasthan.

But NISE data shows that India has an estimated solar power potential of 748 GWp, with the highest potential in the states of Rajasthan (142.31 GWp), Jammu & Kashmir (111.05 GWp), Maharashtra (64.32 GWp) and Madhya Pradesh (61.66 GWp).

While India has indeed expanded access to power at an impressive rate in the past decade, the more urgent challenge now is to ensure more equitable access for far-flung, rural poor households.

In 2014, almost 31,000 villages in India had no access to electricity, and that per capita consumption in rural households is estimated to be only one-third of average consumption in urban India. The problem lies in missing infrastructure that leaves large rural areas and many poor households behind, according to Dr Jenny Grönwall, programme manager, water, energy and food at the Stockholm International Water Institute.

“Dwindling water tables and cheaper but ever more powerful pumps together with high energy subsidies contribute significantly to unsustainably rising electricity consumption. This not only adds to the fiscal burden of the state but results in load shedding that disrupts wellbeing and production,” says Grönwall.

One solution lies in rural electricity segregation whereby separate feeders

“India will need to shift its power-generation capacity toward noncoal sources. Only then can it meet the increased need for power in an environmentally sustainable way.”

provide agricultural and non-agricultural consumers. Grönwall notes that several Indian states have already developed programmes for electricity segregation, most notably the Gujarat, although with significant pockets of improvement still needed before these can be replicated countrywide.

PwC, meanwhile, suggests the deployment of advanced technologies to improve rural access to power.

“Distributed power solutions generate power at or near the point of use and can be installed quickly, sometimes in weeks compared with years for traditional centralized power generation and distribution setup. Distributed power also enables a local level of control, management, and demand planning.”

PwC points to China as a model for distributed power. In 2015, China aspires to have 1,000 distributed power projects fuelled by natural gas, a solar-power capacity of 10 GW, and 100 so-called showcase cities receiving distributed power. Notably though, this breakneck speed in distributed power development was made possible through strong government policy support, a catalyst that may be trickier to secure in India.

Scheduled notified power cuts to industries decreased

Source: CEA, Citi Research

India has an estimated solar power potential of 748 GWp ASIAN POWER 19

ANALYSIS: the price of energy

ANALYSIS: the price of energy

Up to what point are Asians willing to pay?

Is energy price volatility the new normal for Asia’s growing power industry?

Together with that, energy leaders are also worried about climate framework uncertainty and stop and go subsidies.

T

he emerging economies in the Asia region remain as the world’s leading growth centre. Their energy consumption is also increasing at a remarkable rate, and the gap between the amount of domestic energy production and consumption has been widening. The self-sufficiency rate in energy is decreasing as a result.

In 2015, price volatility remains a key concern, demonstrated by the more than 50 percent drop in price over seven months where a barrel of crude oil (Brent) was priced at $108 in January 2014, reached its peak price of $112 in June before falling below the $50 benchmark in early 2015.

These dynamics have set the precedent for an anticipated low price environment, the start of which we have seen with an effective price war between OPEC and North America as the focus shifts from OPEC price control to that of maintaining market share.

Energy leaders keep a watchful eye Commodity price and price volatility are consistently perceived to have a high impact across the world, which highlights the link between both energy and non-energy commodities (e.g. oil or gas) and the issue of pricing and its relative 20 ASIAN POWER

“The increasing shares of intermittent energy sources at a global scale is further driving the need for storage facilities to secure the supply of energy.”

importance to energy leaders.

The costs of non-energy commodities are falling in line with plunging energy prices, reflecting the weaker demand from China and the trend of oversupply found with regards to a number of energy markets. This is perhaps seen most notably for those countries and industries with the strongest links to this relative slowing demand, for example in Australia the price of iron ore fell by more than 49 percent during phases of 2014 and in South Africa where commodity prices are the second highest uncertainty issue.

Energy prices was unquestionably the top critical uncertainty in 2014. With the improving standard of living, the progress of motorisation and the importance of crude prices, or with the policies and measures to curb CO2 emissions such as Feed-in-Tariff and emission trading, energy prices is understandably the most critical uncertainty that keeps energy leaders in this region awake at night.

The second critical uncertainty is largescale accidents. During the last couple of years, large-scale accidents had moved towards the centre of the map, suggesting the diminishing impact of the Fukushima nuclear accident; however, this year, its level is comparable to that of 2011, the year the nuclear accident occurred.

This move may reflect the tremendous damage typhoon Haiyan did to the Philippines in November 2013 – an assumption corroborated further by the positioning of extreme weather risks as high in the critical uncertainty space both in itself and compared to the world average.

Electric storage is a top critical uncertainty and high change issue on the global map, having increased in impact and uncertainty compared to 2014. The increasing shares of intermittent energy sources at a global scale, which is expected to quadruple by 2035 is further driving the need for storage facilities to secure the supply of energy.

The role of electric storage to secure the supply of electricity becomes even more important in combination with the recent commitments towards energy security (G7) and access to energy (UN development goal). At the same time, incentives to deliver required storage and back-up capacity are not strong enough with traditional market designs, which is a driving factor of uncertainty.

The region’s biggest players The OECD countries in the region, namely Japan and Korea, are poor in domestic fossil fuel endowments and they have been suffering from a low energy self-suf-

ficiency rate. This is particularly the case in Japan because the operation of all the nuclear power plants has been suspended since September 2013 as a consequence of the Fukushima accident. Thus the region as a whole has been increasingly becoming more susceptible to the global energy market and trade. Furthermore, with the rapid growth of energy demand or decrease in supply capacity, the region is struggling to secure the stable supply of energy.

China/India growth is the most important need for action issue, which is not a surprise, considering the ever-increasing impact of these two countries particularly in this region. However, what may be noteworthy is the fact that, although this issue had been in the critical uncertainty space in the past, it has become less uncertain and entered the need for action zone for the first time this year, with a gradually increasing magnitude of impact. In addition this issue is increasingly perceived as less urgent. These signals indicate that the growth and impact of these two countries have become given conditions, which the energy leaders in this region take for granted.

The coal dilemma Another need for action issue is coal.

When compared to the world map, coal is perceived to have much greater impact in this region. This is reinforced by considering the fact that China alone accounts for half of the world coal consumption, and in terms of coal imports, Asia holds all top five positions (China, Japan, India, Korea and Chinese Taipei).

One of the highest (and surprising) change issues is climate framework. This issue used to be one of the top critical uncertainties and indeed it is still so in the world map, but its position is near the centre of the Asia map this year.

Similarly, issues such as renewable energies, sustainable cities and energy efficiency have all become weaker (i.e. moved toward the weak signal quadrant) this year. Whether the underlying reason of this trend is the people’s changing perception about environmental issues, or the changes in the constituency of this survey would need further analysis.

Electric vehicles has made fairly big strides from a subdued, uncertain and limited impact position toward need for action in Asia in contrast to the world map where the issue has slightly moved in the opposite direction. This may be an indication of both public and private sectors’ enthusiasm for the research, development and diffusion of the electric vehicles in this region. In comparison to the global map, the additional issues which show significant differences include the

positions of energy subsidies, regional interconnection and currency uncertainty.

Although energy subsidies seems to have less of an impact in Asia than in the world, the situation differs greatly from country to country. Indonesia and Thailand, for example, recognise this as one of the top critically uncertain issues.

The impact of currency uncertainty is perceived to be much bigger in Asia than the world as a whole, which may reflect the ever-increasing dependence on imported energy.

India Top critical uncertainties in India include climate framework, Middle East dynamics, and energy prices. Coal is a high impact issue that lies between critical uncertainty and need for action.

Uncertainties related to climate frameworks could be linked to the China–US agreement to cut carbon emissions that was struck between the two parties in November 2014. China’s move towards a more concrete carbon reduction target is putting pressure on India, the worlds’ third largest carbon emitter to commit to halting carbon emissions too.

Additional pressure stems from the US which is taking active steps to ensure that India contributes towards securing the final UN climate treaty in 2015, which may help to explain why US policy is perceived to be a need for action issue for India.

Middle East dynamics is an issue that moved from a borderline weak signal issue in 2014 to a high impact, high uncertainty issues in 2015, making it one of the highest change issues in this year’s map. India sources 62% of its petroleum and other liquid fuels from the Middle East. Continuing geopolitical instability in the region could therefore significantly affect the energy supply of India, potentially explaining the high uncertainty linked to this issue.

In the India map, coal is perceived to be an issue at the borderline between high uncertainty and need for action. Coal is a major energy source for India, accounting for 44% of energy consumption in India whereby energy production accounts for approximately 70% of the country’s coal consumption. Due to the energy sectors’ heavy reliance on coal, supply shortages are a main reason for shortfalls in electricity generation, resulting in widespread blackouts.

Besides coal, top need for action issues include energy subsidies and energy efficiency. Energy subsidies, perceived to be a critical uncertainty in 2014, now have moved towards the need for action quadrant of the map. The drop in uncertainty could be explained through the decision of the Modi government to

“Energy subsidies, perceived to be a critical uncertainty in 2014, now have moved towards the need for action quadrant of the map.”

continue with the diesel subsidy reforms initiated through the previous government. The cost of energy subsidies in India are planned to decrease to less than 0.5% of Indian GDP by 2016. Hence there is a need for action to ensure that planned changes are being implemented accordingly. Energy efficiency is a key player in India’s plans to secure the country’s energy supply in the long run, whereby there is a need for action with regards to energy efficiency in urban areas within India. Economic activities within cities account for approximately 62% of its GDP and building stock is expected to triple by 2031.

In this context the Indian government is discussing policies to promote the construction of energy efficient buildings which is in line with Modi’s policies to promote the building of smart cities.

The close link between energy efficiency, sustainable cities and the need for smart grids thereby could also explain the renewed interest in smart grids, which is one of the highest changes issues, having moved from the weak signal area to a critical uncertainty.

Indonesia The Indonesian economy uses a large amount of energy, heavily dominated by industrial and transportation sectors. In

Asia’s top spenders on energy subsidy

Source: International Energy Agency, Wall Street Journal

Plunge in energy stocks over the past several months

Source: Factset, Wall Street Journal

ASIAN POWER 21

ANALYSIS: the price of energy

ANALYSIS: the price of energy maintaining a balance between energy supply and demand, Indonesia still depends on fossil fuels which conflict with environmental priorities.

Managing the energy system, while ensuring a sustainable energy development, is one of the key roles of the government. As the demand for energy grows, maintaining energy security and energy independence will require the use of domestic energy sources, the management of national reserves, increased use of renewable energy and the expansion of a reliable energy infrastructure.

Overall the Indonesian Issues Map is largely consistent with that of 2014. Many of the top issues remain the same; with critical uncertainties including energy prices, energy subsidies and LNG, while top need for action issues include energy poverty, energy efficiency and coal.

Two issues that are newly introduced in the 2015 issues map; LNG and coal, both feature in the high impact half of the map, which highlights the relevance of the new issues to Indonesian energy leaders.

Energy price has been a key uncertainty in 2014 already. As in the previous year, the main concern is related to the price volatility rather than absolute energy prices. This can be explained by the country’s economic activity being strongly linked to the energy sector and the government’s dependence on fossil fuel use as a source Food and energy prices in CPI basket

Source: ADB

ASEAN oil and gas balances

Source: World Economic Outlook 22 ASIAN POWER

“While energy affordability has been an important issue in 2014 already, energy poverty has increased strongly with regards to its perceived impact.”

of revenue.

Energy prices, which send market signals to encourage changes in energy supply and demand, as well as helping to enable market conditions that attract long-term investments, present a high priority for energy leaders.

The costs of corruption Corruption is continuing to be a top priority for Indonesian energy leaders. As identified in the 2014 analysis, concerns that corruption may hinder sound decision making may be driving the uncertainty associated with the issue.

The negative impacts of corruption on investments in the sector and policy making may additionally influence the issue’s position on the latest map.

The work of the Corruption Eradication Commission is thereby essential in creating higher levels of accountability in the energy sector management. The new Energy Minister has also appointed a special taskforce to reform the governance of the oil and gas sector, which reports directly to him.

Energy poverty (i.e. access to energy) and energy affordability are key need for action issues for Indonesian energy leaders. While energy affordability has been an important issue in 2014 already, energy poverty has increased strongly with regards to its perceived impact. Energy poverty/access to energy is an important issue for Indonesia with an electrification rate of 80.51% in 2013 and 33% of total energy consumed in 2013 stemming from fuel.

The national electrification target is approximately 100% by 2020. This is in line with the national programme to increase accessibility of electricity supply across the population and to maintain the reliability and security of the electricity supply through additional capacity expansion and transmission and substation developments across regions of Indonesia.

These measures will ensure a balanced supply and demand of energy and thereby prevent power disruptions.

At the same time energy affordability plays an important role, particularly with respect to the end consumers. In line with the announcement by the government of Indonesia at the end of December 2014, the prices of premium oil were reduced in early 2015 to Rph. 7,600.00 per litre when the international oil prices hit about US $50.00 a barrel.

Further reductions to around Rph. 6,600.00 per litre, which also includes the prices of solar oil from Rph. 7,250.00 to Rph. 6,400.00 per litre, are planned if international oil prices hit around US $40.00 per barrel benchmark.

With rising energy demand and reduced fossil fuel production capacity,

the country is increasingly dependent on energy imports. Energy efficiency and renewable energies therefore play an important role with regards to the country’s energy security, access to energy and environmental targets, which is reflected by the high impact and need for action associated with the issues.

In 2014, the government of Indonesia had issued the Government Decree No. 79 on National Energy Policy to promote energy efficiency and increase the role of new and renewable energy. The Decree No. 79 stipulates an economy-wide target of a 1% per year reduction in final energy intensity up to 2025, and that the country’s share of new and renewable energy in the energy mix should be at least 23% by 2025. There is thus a need for actions to ensure that the targets are reached by 2025.

Two new issues featuring in the map are coal and LNG. Both issues are highly relevant to the map which is demonstrated through the high impact that is perceived with the issues. Coal is perceived to be a need for action issue by the Indonesian energy leaders.

With Indonesia being the world’s largest thermal coal exporter, this resource plays an important role to the country’s economy and energy sector. Currently the country is exporting approximately 73% of the coal produced. However, with increasing domestic energy demand the government of Indonesia is restructuring the coal sector to ensure domestic demand is met.

Japan In April 2014, the Abe government, which was organised in December 2012, formed the ‘Basic Energy Plan’ and positioned nuclear power as an important base-load power source, reversing the previous government’s policy of abolishing it by 2030.

The plan also heavily focuses on promoting renewable energy sources.

However, the problem is that the ‘Basic Energy Plan’ does little to reduce the uncertainty over future energy policy in Japan, given that numerical targets for the energy mix will not be determined until the prospects for nuclear re-starts becomes clear.

On September 10, 2014, NRA announced that the first two PWR nuclear units passed the safety examinations.

However, the future composition of Japan’s energy sector, especially the future of nuclear power, is still unclear as it is not easy to get agreements on the restart from neighboring municipalities and prefectural governors.

Critical uncertainties and urgent need for action issues in Japan are nuclear, energy prices, large-scale accidents, unconventionals and US policy. All of these

are mutually linked through the occurrence of Great East Japan Earthquake and the complete shutdown of nuclear plants after the Fukushima accident.

The burden of the nuclear shut-down is growing, and the effects of the nuclear shut-down are felt strongly. Payment for fossil fuels for power generation has more than doubled – from 3.7 trillion yen in the 2010 fiscal year to 7.8 trillion yen in the 2014 fiscal year.

Japan faces a formidable challenge as it has recorded a trade deficit for 26 straight months, as of August, 2014. Its inevitable consequence has been a hike in electricity rates as utilities grapple with rising fuel costs, exacerbated by the depreciation of the yen. Electricity rates for large industrial consumers have risen by 15%–17% while a typical household is paying around 20% more.

Compared to the world map, largescale accidents and nuclear are top priority need for action issues which is unique for Japan. On the contrary, renewables and energy subsidies are not perceived to be hot issues in Japan. The main reason is that Japan already introduced a Feed-inTariff (FIT) in 2012 which resulted in an unexpected volume of PV installations.

It is estimated that if all of PV installations currently certified to connect to the grid (approximately 69GW) should be installed, the levy on them will reach 2.4 trillion yen and the burden on the people will be huge.

Thus, the discussion to review FIT has already started. Energy efficiency is also low-key in Japan. This might be because Japan has already achieved the world highest energy efficiency both in the supply side and demand side. However, further efforts for efficiency improvement, such as building insulation or air-tightening, are still underway, while increasing the kind of equipment in the Top Runner Program under the Energy Saving Act. It is noteworthy that the public opinion in Japan still shows its excessive preference to the renewable energy rather than nuclear after Fukushima accident. One of the reasons might be insufficient communications and outreaches of energy issues to the public. Availability of electricity is mostly taken for granted. More effort is, thus, essential to seek people’s better understanding of its benefits and importance.

Thailand The Thailand National Committee identifies that energy efficiency and energy subsidies remain consistently relevant and renewable energies are becoming increasingly important to the Thai energy leaders. On the other end of the spectrum, issues such as Brazil and EU cohesion are

weak signals and are perceived to be less important to Thailand as the country is less affected by the direct regional impacts resulting from these issues.

The Thai map shares similarities with the regional Asia map and the world map with regards to energy prices. The country is vulnerable to energy price volatilities as it heavily relies on energy imports to sustain its demand.

In order to address energy price problems, the government tends to employ national measures. These include on the one hand measures to liberalise the energy market and on the other hand energy subsidies. The government thereby aims to promote the country’s competitiveness while also promoting the supply of and access to affordable energy.

Energy subsidies have however been found to bring benefits across various consumer classes and play an essential part in ensuring that 99% of the population has access to electricity. Reducing subsidies to ensure a more efficient energy market therefore proves difficult which explains the uncertainty associated with the issue.

In the context of high energy price volatility and uncertainties related to the future of subsidies it becomes clear that energy affordability is an important factor with a high perceived impact and need for action.

Energy affordability is similarly positioned on the regional map and world map. It indicates that this issue is perceived to be a challenge with a need for action for energy leaders around the world. With increasing energy demand this issue is becoming increasingly important.

LNG is an important energy source for Thailand with 70% of power generation being fuelled through natural gas. Over the next 10 years the existing gas supply

“In the context of high energy price volatility, it becomes clear that energy affordability is an important factor with a high perceived impact and need for action.”

contracts with Myanmar, who currently supply 25% of Thailand’s natural gas, will expire. LNG imports are thereby expected to help offset the losses from Myanmar’s supply, making LNG a key uncertainty and priority in Thailand. In order to meet the demand of natural gas in future, the Electricity Authority of Thailand (EGAT) is considering building a receiving LNG terminal, which further explains the uncertainty and high impact perceived with this issue.

Thailand’s energy leaders also expect to see a new, wide-ranging climate framework, which will impact to the long-term direction of the national energy plans such as the Alternative Energy Development Plan and Energy Efficiency Development Plan.

In this context there is a high uncertainty associated with renewable energies, for which the share is expected to increase from a modest 2% share of total energy demand. At the same time there is a high need for action with regards to energy efficiency which could help to achieve climate targets and secure the supply of energy in the long run.

By World Energy Council

Share of global hard coal trade

Source: World Economic Outlook

Source: IFC

Asia might need a significant nuclear boost ASIAN POWER 23

24 ASIAN POWER

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PAST PARTICIPANTS INCLUDE  Engage in one to one business meetings with top level participants

 Learn about emerging trends in the Asian markets from Technical & Commercial experts

 Network with the heads of Industry and Governments from various parts of Asia

 Know about major forthcoming issues from global energy experts

 Discuss trends in the global energy market, identify prospects and develop solutions along with policy makers, industry captains and academic forerunners in the energy community

WHY ATTEND

Myanmar

 Mr Kyaw Aung Win, Assistant Director, Department of Hydropower Planning, Ministry of Electric Power,

Republic of Tajikistan

 Amb Phunchok Stobdan, Senior Fellow, Institute for Defense Studies and Analyses, New Delhi

 HE Amb. Shaida Mohammad Abdali, Ambassador of Afghanistan to India  Mr. Parviz Atoev, Head of International Department of the Ministry of Energy and water Resources of the

USA

 Mr Shyam Ratan Mehra, Former Secretary – Security, Govt. of India

 Mr. Tom Cutler, Former Director for European and Asia Pacific Affairs at the U.S. Department of Energy,  Mr Kayhan Barzegar, Director, Institute of Middle East Strategic Studies, Iran

 Ms Ping Xiaojuan, Research Assistant, East Asian Institute, National University of Singapore, Singapore

 Mr Sher Singh Bhat, Chief, Generation Directorate, Nepal Electricity Authority  Amb Meera Shankar, Former Ambassador of India to US

 Amb S D Muni, Distinguished Fellow, Institute for Defense Studies and Analyses, New Delhi

 Mr Atem S Ramsundersingh, Chief Executive Officer, WEnergy Global Pte Ltd, Singapore  Mr Narendra Taneja, National Covener, Energy Cell – BJP, India

 Green Growth Strategies for sustainable development

 Hydro Power development : A trade off within the environmental factors  Energy Efficiency – an immediate opportunity. What is deterring its promotion?

CONFIRMED SPEAKERS

 Academicians  Development of the SAARC and ASEAN grids – connecting Tajikistan to Singapore  Territorial Disputes in the South China Sea and their impact on regional stability

 Technical & Energy Experts

 Head of Industries

 Overcoming Maritime Security Challenges – Threats & Trends in the Indian Ocean  Cyber-attacks and counter measures for protection of critical energy infrastructure

 Senior Diplomats

 Decision makers

 Policymakers from Energy Ministries

 Caucasus conflict and its impact on Central Asia  China’s Road to Energy Security and its impact on Asian countries  Geopolitical implications of the ‘Global Shale Gas Revolution’

WHO SHOULD ATTEND

 Government Authorities

 Geopolitics of Energy Security for Asia  Middle East Dynamics and related uncertainties

to discuss Energy Security, Geo-politics of Energy & Security of Critical Energy Infrastructure

A CEREBRAL TRACK II DIPLOMACY PLATFORM

Gokarna Forest Resort, Kathmandu, Nepal

M a r c h 2 01 5

EMPOWERING ASIA

Organised by:

Government of Nepal Ministry of Energy

TOPICS TO BE DISCUSSED AT THE 5th AESS

The quest for sustainable solutions The first panel session, which was focused on strategies for sustainable growth, tackled potential solutions on responsible corporate actions that are needed for sustainable development. The electric

Jeju’s edge A special session hosted by KEPCO discussed Korea’s smart grid vision in great length. The country aims to have a nationwide smart grid network by 2030, and this goal was started in idyllic Jeju. There is more than meets the eye in this resort destination: Jeju Island holds the distinction of being the world’s largest smart grid test bed.

Jeju Governor Hee-Ryong Won noted how Jeju envisions to be a carbon-free island by 2030, and aims to transform its power supply system which is currently still dependent on fossil fuels.

“We are endeavoring to execute action plans such as converting all cars on Jeju Island to electric vehicles and installing smart meters to all households to make Jeju a low carbon green island,” he said.

– 4

are now inseparable from national economic growth. While countries are free to choose their own methods for achieving their respective goals, most issues including carbon reduction, energy access for the poor, and difficulties related to the construction of electric power facilities require the understanding and participation of all stakeholders as well as international collaboration in order to be resolved,” said HwanEik Cho, President of the AESIEAP and President & CEO of KEPCO. The event featured four panel sessions.

These sessions tackled strategies for sustainable growth, climate change impact and adaptation, smart grid innovation, and promising electric power technologies. The event also gathered 55 CEOs of major electric power companies in the region for a roundtable discussion to share insights and solution on the challenges that the power industry is facing.

2

The electric power industry is faced with increasing demands to create and maintain more value and greater prosperity for society.

th

T

he 20th Conference of the Electric Power Supply Industry (CEPSI) was held by the Association of the Electricity Supply Industry of East Asia and the Western Pacific (AESIEAP) from October 26 to 30, 2014, in Jeju, South Korea. This year’s CEPSI was the biggest in the event’s history, with over 2,500 attendees from 36 countries.

This year’s conference revolved around the theme ‘The Role and Responsibilities of the Electric Power Industry to make a Smart & Green Society’. The event was attended by chief executives, government officials, and experts from the academic and research community.

A large group of delegates from East Asia and the Western Pacific participated in the event. ASEAN countries, including Thailand, Indonesia, Malaysia, and the Philippines sent the CEOs of their major electric power companies.

Developing countries such as Cambodia and Nepal that have never attended the event also participated this year.

“Development of sustainable energy is an investment in everyone’s future.

There isn’t a country in the world which isn’t contemplating the issues of sustainable energy supply, environment, and carbon reduction, all of which

nd

The five-day conference explored the power industry’s role in using smart technologies to build sustainable societies.

2015

Over 2,500 attendees flocked to Jeju Island for CEPSI 2014

A s i a E n e rg y S e c u r i t y Summit 2015

VIP Tour, Jeju

power industry is faced with increasing demands to create and maintain more value and greater prosperity for society.

Panelists discussed the industry’s obligations to the environment and communities, as well as the evolving role of the grid in a sustainable energy system.

Climate change impact and adaptation was the focus of the second panel session. This discussion stated that the industry is under greater threat from climate change, which has adverse effects on power infrastructure, energy mix, and renewable policies.

The session also highlighted the need for carbon capture and storage systems and the challenges in employing renewable energy sources to adopt to climate change.

Smart grids were the main topic of the third panel session. Panelists discussed the strategy of smart grid deployment in Korea, Thailand, and Taiwan, as well as the need to leverage on big data to deliver customer value. Though many other countries have been developing and deploying smart grids to facilitate energy efficient and low carbon power systems, many utilities are grappling with various barriers to efficient smart grid implementation.

The fourth panel session highlighted a number of future electric power technologies, which play an extremely important role to realize a smarter and greener society and achieve green growth engines.

The event also featured seven technical sessions in which a total 350 papers were presented.

The papers covered five main topics, namely, policy, business and utility management, nuclear and thermal power generation, power grids and integrate communication technologies, and green energy and the environment.

Supported by:

post-event feature: cepsi 2014

SPECIAL REPORT: POST-CEPSI

SPECIAL REPORT: POST-CEPSI from the existing centralized generation of electricity to distributed power generation. Therefore, legal & systemic supports to accept and lead these changes actively must be parallel,” Hwang notes.

Industy leaders unite in CEPSI 2014

Asian electric utilities stumble in the challenging quest for smarter grids

The road to smarter grids is blocked by regulatory barriers, consumer concerns, and interoperability problems.

A

sian utilities face the daunting task of successfully integrating renewable energy sources into the region’s coal-dependent grids. Smart grid technologies are crucial not only in the successful integration of renewables but also in improving energy efficiency, grid operations and overall reliability.

Smart grids aim to optimize the entire power production, distribution, and consumption process by leveraging on information and communication technologies. The importance of incorporating smart grid technologies into the grid was discussed at great length during the 20th Conference of the Electric Power Supply Industry (CEPSI) held last October in Jeju, South Korea.

However, Asian utilities will have to clear a number of hurdles before smart grids become the norm in the region. According to Martin Hauske, Managing Director of Accenture Smart Grid Services, the biggest hurdle facing Asian utilities are regulatory rules, which restrict their capacity to offer renewables at affordable rates and high reliability. Consumer cooperation is also another issue—successful smart grid implementation is highly dependent on the accurate monitoring of consumer behaviors, which has proven to be a challenge for many utilities.

Hauske adds that being constrained by 26 ASIAN POWER

“While a smart grid is expected to improve the reliability, efficiency and flexibility of future grid systems, it involves a significant investment beforehand.”

regulatory rules forces utilities to focus on a narrow core business. This delays effective implementation of technology and in the long term drives customers to new service providers. Additionally, this also drives up the cost of integrating renewables and overall energy costs.

Regulatory barriers Guang-Ming Chuang, Vice President at Taiwan Power Company, notes that while a smart grid is expected to improve the reliability, efficiency and flexibility of future grid systems, it involves a significant investment beforehand. “Nevertheless, uncertainties due to a number of factors—for instance, ICT development, capacity constraints, regulation or policy changes, lack of universal standards--may cause significant impact in decisionmaking or even change of direction in implementing smart grid system. This situation makes any evaluation of cost benefit and effectiveness nearly impossible,” he states.

Chuang adds that the lack of standards is also a major obstacle to smart grid implementation. “This issue is more critical to Taipower comparing to other power companies because she is a state-owned company and is required by the law to make any purchase through open tendering. The purchase of equipment through

open tendering causes meters to come from a variety of sources, and the lack of universal standards makes the interoperability of different meters a big challenge,” he notes.

This sentiment is seconded by WooHyun Hwang, Head of Smart Grid and Energy Storage Systems at KEPCO. Guided by Korea’s goal of having a nationwide smart grid system in place by 2030, KEPCO has completed a smart grid demonstration project in South Korea’s Jeju Island from 2009 until 2013. Though the initiative was largely successful, Hwang notes that one of their major challenges was the lack of interoperability among participating firms.

“One of the biggest challenges is that the existing systems of the participating companies are not interoperable. To ensure interoperability among heterogeneous systems, we had to tune and make an agreement among 168 companies which participated in the demonstration project,” he says.

He also highlights that successful smart grid implementation is highly dependent on government investment and support.

“The strategic investment of the government is needed in the initial stage to actively elicit private investment. Smart grid is a business that is accompanied by a paradigm shift of the power industry

Irrational consumers and renewable integration The old adage claims that the customer is always right, but power companies are learning the hard way that irrational consumers are truly a force to be reckoned with. “The new world is about providing energy services, not electricity as a commodity. The energy customer today is a prosumer—for instance, they have the ability to produce solar energy and be an energy consumer at the same time,” Hauske states.

This hurdle is perfectly illustrated by KEPCO’s Jeju demonstration project.

Hwang notes that KEPCO had difficulty eliciting the cooperation of the island’s ageing population. He says that “Because of the aging population, it was difficult to make the smart grid to be understood and draw consumer’s cooperation. As a result, power consumption reducing effect due to AMI and smart home appliances that are installed in households did not meet expectations somewhat.

KEPCO had made various efforts to improve customer’s understanding for the smart grid business. We conducted several local explanatory meetings and operated a customer promotion center to make the advantage of the smart grid to be understood.”

Taipower also had difficulty engaging their customers and predicting their behaviors. Chuang relates how irrational customers proved to be one of the greatest hindrances to deploying a smart grid in Taiwan.

“Many of the benefits of a smart grid, especially smart metering, come from the expected changes in consumer behavior.

How to accurately predict customers’ reaction to price signals was proved to be somehow difficult,” he says.

Other utilities are grappling with the efficient integration of renewable sources into the grid. For instance, EGAT Assistant Governor Suthep Chimklai notes that the main challenge for implementing a smart grid in Thailand is the need to prove the correlation of smart grid technology with the current and future constraints of the grid in the country. Supply fluctuations from renewable sources are a particular cause for concern. He highlights that while EGAT has a number of renewable energy sources in its arsenal, their effective implementation is hindered by system reliability concerns.

Chimklai stresses that there is still a need to prove the feasibility of using smart grid technologies in Thailand. “If

it works, we can expand the smart grid implementation to other areas with a high density of RE penetration to ensure the system reliability aspect. The investment cost in smart grid shall be reflected in future tariffs, so every step that we are going, we need results from the test bed to be confident to go on Smart Grid in Thailand,” he says.

While system reliability is the main issue in Thailand, the same cannot be said for highly-developed Hong Kong.

CLP Hong Kong Chief Operating Officer TF Chow says that reliability is not a concern in the territory given Hong Kong’s well managed power grid and its automated distribution system. However, this efficiency gets in the way of successful RE integration in the region. “There are limitations for RE development in Hong Kong due to geographical and space constraints. These constrain further network side benefits of making substantial investment on Smart Grid in Hong Kong,” he says.

The bumpy road to success Taipower’s Chuang highlights three important variables for the successful implementation of smart grids. Aspiring utilities should first roll out a test project, then ensure interoperability between different vendors. Close cooperation and partnerships between industry and academic institutes are also crucial to successful implementation.

Utilities looking to deploy smart grids will also do well to take a leaf out of Korea’s book. KEPCO’s smart grid test bed has effectively turned Jeju, an idyllic resort island south of the Korean peninsula, into a microcosm of how renewable energy sources can be effectively integrated into the grid.

Following the Jeju demonstration project, KEPCO has now embarked on a nationwide advanced metering infra-

Martin Hauske

Suthep Chimklai

TF Chow

Woo Hyun

Guang-ming Chuang

structure deployment project, which is expected to last until 2020. A project for smart grid expansion based on the results of the demonstration project is slated from 2015 to 2017. Hwang notes that KEPCO’s partner selection for the SG expansion project is currently under progress. The AMI deployment project is going well as planned, which includes installation of 2 million smart meters every year.

Korea’s success may be hard to replicate for utilities in less affluent countries.

Hauske notes that utilities in emerging markets will do well to leverage on microgrids, which can power remote islands and other isolated locations. Microgrids can reduce cost to serve customers, improve electricity network and reliability while reducing emissions.

Asian utilities may be a long way away from making smart grids the norm in the region, but several inroads have already been made. Chimklai states that EGAT is proposing a three-year test bed for smart grid implementation in Thailand’s northern Mae Hong Son Province, which may be followed by smart grid implementation to other areas in the country.

Taipower has already deployed a low voltage AMI system for 10,000 residential users and a high voltage AMI system for all 24,000 consumers. In Hong Kong, CLP has already launched the first Smart Grid Experience Centre and is piloting automatic supply restoration systems to increase the supply reliability in remote areas that may be affected by adverse weather conditions.

Smart grids are the way of the future.

Hauske adds that energy technologies are evolving rapidly and have the potential to disrupt the traditional utility business.

The value chain is rapidly changing, and for utilities, it’s high time to shape up to the changing needs of the marketplace.

By Marianne Angeli Estioco

AESIEAP leaders officially inaugurate CEPSI 2014 ASIAN POWER 27

case study: integrated plants

The Tuaspring Water Desalination and Power Plant in Singapore (photo courtesy of Hyflux)

Asia’s largest integrated desalination and power plants

Increasing demands for potable water and energy to satisfy Asia’s rapidly growing supply needs has created the need for an efficient solution.

S

ignificant improvements in the energy efficiencies of desalination plants have contributed to an increase in the numbers of desalination plants being commissioned, according to a DesalData report from the International Desalination Association, which was quoted by Global Water Intelligence.

Desalination plants commissioned during 2013 alone would have produced six million cubic meters of water a day, which is the equivalent of 28 months of rain in London, says the report.

Seawater is the largest source of water for desalination purposes at 59 percent, brackish water is next at 22 percent, then river water at nine percent and wastewater at five percent, says the report.

Asia is home to some of the world’s fastest growing populations. Rapid growth has lead to enormous demands for energy and potable water to Asia’s swiftly growing urban areas; which are often located on the coast or close to the sea. Massive long-term investments are needed to supply these needs.

Large investments are needed to provide ample supplies potable water, power generation, transmission and distribution, transportation and housing.

Siemens has been at the forefront of 28 ASIAN POWER

Rapid growth has lead to enormous demands for energy and potable water to Asia’s swiftly growing urban areas; which are often located on the coast or close to the sea.

integrating high efficiency power plants with modern seawater desalination technologies into an integrated power and desalination plant. The company has been involved in some of the most innovative and successful seawater desalination projects in the Middle East.

In the United Arab Emirates (U.A.E.) Siemens erected one of the world’s largest power plants with seawater desalination as an integral unit. The Suweihat S2 plant has an electric power generation capacity of 1,500 MW and has a daily production capacity of 100 million imperial (MIGD) of potable water.

Asia has now been added to the list with the construction of the Tuaspring Power Plant and Seawater Desalination Plant in Singapore. This project is an excellent example of the kind of sustainable infrastructure many Asian cities will need to be installing in order to maintain the quality of life, ensure competitiveness and to conserve natural resources and the environment.

An Integrated Water and Power Plant (IWPP) in Singapore The power block and other main components for the new combined cycle power plant (CCPP) in

Tuaspring, Singapore, were supplied

by Siemens. The power plant will deliver 411 megawatts (MW) of environmentally friendly electricity.

The natural gas fired Tuaspring Combined Cycle Power Plant (CCPP), located in Singapore, is built in a single shaft configuration which is also integrated into the seawater desalination plant. The CCPP plant will supply the desalination plant with power and will draw cooling water from the seawater supply to the desalination plant. This process will optimize the balance of energy for the overall plant.

The scope of supply for Siemens included a Model SGT5-4000F gas turbine, the heat recovery steam generator, one SST5-3000 steam turbine, a SGen5-2000H-series hydrogencooled generator plus the SPPA-T3000 instrumentation and control system, as well as all the associated auxiliary and ancillary systems. Siemens has concluded a long-term service agreement with the client which covers the plant’s major components as well as also supplying the plants electrical switchgear and transformers.

The Tuaspring Integrated Water and Power Plant (IWPP) is scheduled to go online during 2015 or early 2016. The purchaser is Hydrochem (S) Pte. which is a subsidiary of Hyflux Ltd. The new Tuaspring CCPP and desalination plant in Singapore is the largest IWPP in Asia.

“We are delighted to have awarded this contract to such an experienced and reputable company as Siemens”, notes Olivia Lum, Executive Chairman and Group CEO of Hyflux.

“We view this first order from Hyflux to be a demonstration of their trust in our know-how and technology. Siemens places the greatest value on tried-andtested and highly reliable technology, and this will be a decisive factor on the electrical market in Singapore.

“The Tuaspring plant will contribute significantly towards providing Singapore with an efficient and thus economical power plant as well as a clean power supply”, says Lothar Balling, Head of Gas Turbine Power Plant Solutions at Siemens Fossil Power generation Division.

An excellent example for Asia Hyflux went through very detailed studies of the various turbines on the market from differing companies.

In the end, they choose Siemens because of its ability to bring value to Hyflux’s investment in the project.

Siemens supply of the CCPP for the largest Integrated Water and Power Plant (IWPP) in Asia is an important contribution to Singapore’s long-term energy sustainability.

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OPINION

JOHN GOSS

A significant expansion of natural gas supplies in China

john.goss@aod.com.hk

T

he long promised arrival of significant natural gas supplies and the effective utilization of the gas, as a cleaner alternative to coal, in China does seem to be happening now. Every month, there are new reports of natural gas related projects, across the country, that serve to demonstrate the efforts being made to reduce China’s impact upon the environment.

The Chinese Government said in December last year that it will be encouraging investments from the private sector into liquefied natural gas (LNG) terminals together with oil and gas storage plus distribution facilities.

A spokesperson for China’s National Energy Administration (NEA), Liu Deshun said that there is now a huge potential for growth in the infrastructure for oil and gas supply industries in the country.

Increasing the effective storage and ready supply of natural gas to many regions in China is now being seen as a viable option for this energy hungry country. In recent years, the Chinese Central Government has invested heavily into a variety of environmentally friendly natural gas projects.

In many cases, these investments have been into natural gas pipelines which provide China with large amounts of natural gas from Central Asia. More recently the natural gas supply contracts are being signed between China and Russia.

It has been announced that Beijing and Moscow have now agreed upon two major natural gas pipeline projects. These gas pipelines from Russia into China will supply China with vast amounts of natural gas annually. The first agreement was for $ 400 billion which involved Russia delivering up to 38 billion cubic meters of natural gas annually via the eastern routed pipeline; which will start in 2018.

An agreement made earlier was for Russia to deliver an additional supply of 30 billion cu m of narutural natural gas to China via the western Russia to China pipeline. However, no timetable information for this considerable delivery has been released to date.

Shale gas developments in China It is no secret that the Chinese Governments has grand ambitions to exploit the nation’s vast shale gas reserves. It has recently reported in the local media that China’s Ministry of Land and Resources could be launching a third round of shale gas licensing as early as in the first half of this year.

It seems that the Ministry has its sights set upon offering shale gas blocks to as many of the major players in the market as is possible.

However, this bold move would require the revision of existing rules and law said an Ministry official, Yang Yonggang at a recent industrial forum. The Ministry will be exploring the creation of a regulatory system in cooperation with provincial governments.

The Land and resources Ministry would still maintain the registration of exploration rights, said Yang.

In another significant development in the ongoing exploitation of China’s shale gas reserves, it has been reported that PetroChina Co and three partners will be investing in excess of $4 billion to drill for shale gas reserves in China’s most productive shale fields.

It is reported locally that PetroChina has joined up with Sinochem Group together with two State owned enterprises in order 30 ASIAN POWER

to put together the venture in China’s south western municipality of Chongqing. This news is according to a statement on the city’s website. Apparently, this domestically developed e shale gas project will begin commercial production during 2017.

The municipal government has estimated that China’s Chongqing block alone holds more than two trillion cubic meters of exploitable shale gas. China’s Ministry of Land and resources has estimated that China’s reserves of shale gas are approximately 25 trillion cu m, which is the largest volume of shale gas potential in the world.

Oil and gas investments are welcome The Chinese Government will encourage investments by the private sector into developing liquefied natural gas (LNG) terminals, plus oil and gas storage and distribution facilities. The National Energy Administration says there is huge potential for growth in the oil and gas storage and distribution sectors.

In recent years, China’s energy authorities and energy companies have demonstrated a responsible and mature approach towards the exploration and development of the country’s latent energy reserves. Their partnering with key global players in the field has paid off in that the nation’s energy companies can now stand shoulder to shoulder with the world’s energy elite. We can be sure that there will be more positive energy news to come out of China in the coming months and years.

Most China taxis use natural gas

OPINION

Make a commitment to the future, with Alstom

akira tokuhiro

All you need to know about the capped revenue experiment in Shenzhen

Efficiency and renewables

32 ASIAN POWER

I

n November 2014, China’s National Development and Reform Commission (NDRC) announced via a Notice for Transmission and Distribution Rate Reform Pilot in Shenzhen, a first-of-a-kind (FOAK) initiative to induce ‘change’ in the existing business model. In a country of more than 1 billion inhabitants, the intended reform will affect some 15 million in Shenzhen.

This reform is receiving a measure of interest because it institutes a means for the utility to realise a steady revenue stream, thus financial stability and means to establish ‘good’ practices.

Up to this point, the government increased prices for transmission and distribution services but not to the end-use customer.

This eventually caused hardship for some utilities.

However in 2011, the central government instituted an energy efficiency obligation that required utilities to integrate energy efficiencies. But efficiency at the consumer level means less revenue for the utility. And revenue and profit margin were two metrics by which the government assessed the utility. It is self-evident that there was zero incentive to promote energy efficiency down to the consumer level.

The new regulation will essentially cap the total revenue of the Shenzhen utility as they command electrical transmission and distribution grid hardware down to the customers. Until now the quantity of electricity supplied was directly tied to the utility’s revenue; thus, there was no market incentive for efficiency or renewables.

Henceforth ‘decoupling’ means reducing the direct link to ‘kiloWatt-hours’ sold, and in so doing, creating a means to incentivise efficiency and introduction of renewable technologies. Generically, the pricing of electricity that pits customer and supplier is a classic problem in economics. Here I use the

BY AKIRA TOKUHIRO Professor University of Idaho

concept of LENDIT©1– length, energy, number, distribution, information, and time. LENDIT is a general framework that ties both technical and non-technical issues. It is particularly useful for consistently analysing energy or entities that have an inherent aspect risk (or negative risk, thus benefit). This was noted in previous contributions to Asian Power.

Further with respect to information (I)2, it is often relevant to note several aspects as follows: who (is the information source), for whom (is the information meant), when was it distributed (D), why (self-explanatory), which (issue), and when (is action expected). These might be called, ‘W5’. Here, the area is Shenzhen (area = L2) and the issue is how energy (E) is to be distributed (D) via a number-scale (N, pricing) in time (T). The W5 ‘elements’ seem self-evident from the leading paragraphs.

In the case of Shenzhen, the utility’s total revenue will be capped, based on the government’s determination of allowable cost and the definition of revenue streams.

This is at the operational infrastructure level. Lower, at the customer level is an ‘access fee’ that provides partial to full support of transmission and distribution services, as announced, and provides the utility some measure of assurance on achieving its revenue objective.

The operational cost, and direct and indirect revenue streams (N), are difficult to deconstruct and typically, if the ‘live balance account’ (difference between actual and approved revenue) differs by a preset amount (say 6%), the Guandong government will adjust the fee that the customer is charged. The government is also providing an incentive to integrate ‘efficiencies’ into the operational infrastructure by allowing utility to keep 50% of the savings (N).

Obviously as a FOAK initiative, there will be both ‘happy and unhappy’ clients and stakeholders, until the institutional and public mindset changes to adapt to the new business model and practices.

Here, the announced change by NDRC is expected to to change the dynamic of the LENDIT characterised metrics of electricity distribution and consumption. This takes time (T) and often requires an effective top-down campaign (D,I) as there is an element of risk (as historically documented) as manifested through public and/or stakeholder resistance. As societally noted, there can also be contrived means to circumvent the imposed cap when the financial advantages are not immediately evident.

China’s electrification history is somewhat similar to the U.S. in extent (D) and in terms of regional utilities (D, N). Thus establishing a ‘quasi-fixed’ revenue model in practice, from a ‘handto-mouth’ will have both utility- and consumer-level significance and impacts Such a capping of revenue ‘levels the playing field’ amongst regional utilities and via the intended integration of ‘stability’, the assumption is that vertically-integrated practices will shift toward efficiency in both tangible and intangible terms. Because of the economies of scale, and as China is a key driver of the global economy, this commitment to change as noted is overall, very positive. This can only lend itself (LENDiT) to change in the global energy practices. The only constant is the need for change.

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