Power Insider Asia 5 by Pimagazine Asia

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A S I A’ S L E A D I N G P O W E R R E P O R T

AUSTRALIA COUNTRY FOCUS

MAY/JUNE 2011

PLUS • LNG developments in Australia • Stuxnet – all quiet for now? • IEA & Climate Change

FEATURES INSIDE: Adelaide Desalination Plant developments, Why locals oppose wind, CHP modules to Indonesia manufacturer, Plus many more!

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WELCOME From past editions you will have seen a slight change in how we put Power 27 Insider together. We believe that as a ‘Regional’ publication there are many different issues effecting Asia, the only way to truly understand the individual issues of each country is to be on the ground locally speaking to the people that live and breath the market day to day.

CONTACT US: Editor: Charles Fox Journalist: Robin Samuels Creative Director: Colin Halliday Designer: John Dickinson Sales Director: Jacob Gold Business Development: Alec Piercy Account Manager: Sam Thomas Accounts & Customer Service Manager: Katherine Godfrey Managing Director: Sean Stinchcombe SKS GLOBAL LIMITED Kingswood House South Road Kingswood Bristol UK BS15 8JF E: info@sks-global.com W: www.pimagazine-asia.com W: www.sks-global.com T: +44 (0) 1179 606452 F: +44 (0) 1179 608126

Our bi monthly strategy now includes a series of roundtables and forums in the country of choice where we look at the real pressing issues and discuss government strategy, funding issues, joint ventures, but importantly what international companies need to do in order to succeed in each country. These discussions are being filmed and edited and placed on our website to ensure you, our readers, get the knowledge when you need it. This issue we look at Australia. There has been a lot of discussion regarding CO2 emissions and carbon taxing, what is the government doing to ensure the entire energy sector can reach targets? Renewable energy incentives are not set in stone, apart from the targets of implementation. We speak to the Australian PV association to look at their point of view and look at where they think the market should be moving. We also take time to look at the LNG sector in Australia and include some great coverage and market knowledge on how the market is moving. As usual, we also include some articles from around the region and cover 78 some other areas such as ‘Stuxnet’ and other forms of generation. I hope that you enjoy this edition, if you have news or other information that you feel we should look at, please do not hesitate to drop us a line.

CHARLES FOX SKS Global Power Insider Asia magazine is published bi-monthly and is distributed to senior decision makers throughout Asia and the Pacific. The publishers do not sponsor or otherwise support any substance or service advertised or mentioned in this book; nor is the publisher responsible for the accuracy of any statement in this publication. Copyright: the entire content of this publication is protected by copyright, full details of which are available from the publisher. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electric, mechanical, photocopying, recording or otherwise without the prior permission of the copyright owner.

EDITOR

POWER INSIDER MAY/JUNE 2011 3

CONTENTS 6

News

Australia: a natural resource hub?

Asia’s carbon tax

Australia’s LNG sector

Smart grid city project

IEA launch new technologies report

Asia smart grid

The stuxnet conspiracy

Community power

Events

POWER INSIDER MAY/JUNE 2011 5

NEWS DESK BLACK & VEATCH WINS POWER PROJECT IN VIETNAM Long Phu 1 Coal-Fired Power Plant to help meet country’s growing electricity demand HO CHI MINH CITY, VIETNAM (26 May 2011) – PetroVietnam Technical Services Corporation (PTSC) has selected Black & Veatch to provide project management and design services for the Long Phu 1 Power Plant. The plant is located in the Long Phu District, Soc Trang province in the south of the country and will supply much-needed additional power to the national electric grid, especially to more than 16 million people in the Mekong Delta Region. “Apart from engineering and project management consulting experience, Black & Veatch has experience as an EPC contractor in the power sector, which is of great importance in assisting PTSC with the engineering and construction of the Long Phu 1 Power Plant Project,” said Nguyen Tran Toan, Deputy General Director of PTSC. PTSC is the engineering, procurement and construction contractor for the project and is a member of the Vietnam Oil & Gas Group (PetroVietnam), the project owner. PetroVietnam Power, also a member of PetroVietnam,

will operate the plant and deliver electricity to the Vietnam grid system. “Black & Veatch Program Management professionals will be an integral part of the PTSC team, supporting them in meeting the operational goals,” said John Morrow, Project Manager for Black & Veatch. The Vietnam Government projects the country’s economy will grow at a rate of 7.5-to-8 percent annually, over the next five years. The Long Phu 1 Power Plant will provide an essential source of energy to support Vietnam’s growing economy. Provisional acceptance for the two, 600-megawatt units is scheduled in 2014. “Rapid urbanization, manufacturing growth and a strong interest in the nation’s rich deposits of rare earth metals are putting pressure on Vietnam’s power grid,” said Gary Morrow, Senior Vice President and Director of Power Generation Services for Black & Veatch. “PTSC’s strong technical capabilities and their leadership in Oil & Gas combined with Black & Veatch’s leading design and implementation knowledge and our global reach is an example of how international partnerships can deliver innovative, quality solutions to meet Vietnam’s growing power needs.”

COMPANY NEWS FROM AROUND THE WORLD

Reduced UK feed-in tariffs for solar PV and anaerobic digestion announced

The UK has announced its new, reduced solar photovoltaic (PV) feed-in tariffs for systems larger than 50 kW. The new tariffs, which also includes tariffs for anaerobic digestion, will come into effect for new

installations from 1 August. The change will not affect existing projects. UK Energy and Climate Change Minister, Greg Barker, says: “I want to drive an ambitious roll out of new green technologies in homes, communities and small businesses and the FiT scheme has a vital part to play in building a

6 MAY/JUNE 2011 POWER INSIDER

more decentralised energy economy. “We have carefully considered the evidence that has been presented as part of the consultation and this has reinforced my conviction of the need to make changes as a matter of urgency. Without action the scheme would be overwhelmed. The new tar-

iffs will ensure a sustained growth path for the solar industry while protecting the money for householders, small businesses and communities and will also further encourage the uptake of green electricity from anaerobic digestion.” The Department of Energy and Climate Change (DECC) says the number of

planned ‘large-scale’ solar PV projects – i.e. projects over 50 kW – would have overwhelmed the system very quickly. It projects that a 5 MW solar PV installation under the previous tariff would have coast around £1.3 million per year.

MORE POWER FOR NEW YORK: SIEMENS TO BOOST MANHATTAN’S POWER SUPPLY WITH POWER HIGHWAY Siemens is to link the power supply networks of New Jersey and New York. Starting in summer 2013, an additional 660 megawatts (MW) of electric power will be transmitted to the megacity New York. The link, ordered by Hudson Transmission Partners, LLC of Fairfield, will incorporate HVDC (high-voltage directcurrent) technology. Siemens is to supply the complete HVDC technology for this short “power highway”, while Prysmian Cables & Systems as partner in the consortium is to supply the cable. The 345-kV high-voltage cable, spanning a total distance of twelve kilometers, will cross the Hudson River. The total contract value for the consortium of Siemens and Prysmian is approximately USD400 million. Siemens’ scope of supply includes the open- and closed-loop controls for the HVDC system, the thyristor valves, eight converter transformers and the AC filters as well as operation and maintenance for five years. “Together with our consortium partner Prysmian, we will create another power highway to meet New York’s growing power demand,” said Udo Niehage, CEO of the Power Transmission Division of Siemens Energy. The Siemens HVDC turnkey back-to-back link will enable control of the power flow on the new power highway to New York. The HVDC technology with its fast control function will also contribute toward stabilization of the connected systems, which is a key benefit in the event of grid disturbances or blackouts. Furthermore this high capacity power link will make sure to avoid bottlenecks on the power supply for New York. In 2005, Siemens received an order from the same project developer to install an HVDC link between New Jersey and Long Island, which was commissioned in 2007. That HVDC submarine cable link transmits as much as 660 MW of electrical energy at a direct voltage of 500 kV. It provides a low-loss, eco-friendly power link for transmitting power from New Jersey to Long Island.

TARIFFS FROM 1 AUGUST: Solar PV (total installed capacity – TIC) >50 kW - 150 kW £0.19/kWh >150 kW - 250 kW £0.15/kWh 250 kW - 5 MW £0.085/kWh

Anaerobic digestion 250 kW £0.14/kWh >250 kW - 500 kW £0.13/kWh

Energetx Composites of the USA and wind turbine blade designer Aeroblade of Spain have entered into

a Manufacturing Master Supply Agreement through which Energetx will become Aeroblade’s manufacturing partner in North America.

The agreement comes a year after Energetx Composites, a composites manufacturer located in Holland, Michigan, licensed Aeroblade’s technology

for its 45.3 m wind turbine blade design. Energetx Composites is set to launch the 45.3 m blade this summer. Energetx Composites will supply all of Aeroblade’s customers throughout the USA and Canada. Kelly Slikkers, Vice President of Business De-

velopment at Energetx Composites says Energetx is excited about broadening its relationship with Aeroblade. “With Aeroblade’s tremendous engineering capabilities built through years of experience in the aerospace and wind energy markets, coupled with our

POWER INSIDER MAY/JUNE 2011 7

NEWS DESK DRIVES SUSTAINABLE DEVELOPMENT IN EXPANDING INDONESIAN MARKET WITH ECO-FRIENDLY AND COST-EFFICIENT POWER GENERATION SOLUTIONS SINGAPORE/JAKARTA (INDONESIA), 04 May 2011. MTU Onsite Energy, the power generation specialist, has received an order for eight gaspowered combined heat and power (CHP) modules. The order was placed with Tognum subsidiary MTU Asia Pte. Ltd. based in Singapore. The CHP modules are powered by 20V 4000 L62 gas engines, each with a maximum electrical power output of nearly two megawatt. The end customer is the Indonesian textile manufacturer PT Spinmill Indah Industry based in Tangerang near Jakarta. “Efficient utilization of energy, water and raw materials is becoming more important in Indonesia’s expanding market,” said Christof von Branconi, member of the Tognum Executive Board responsible for

the Onsite Energy & Components business unit. “With our eco-friendly and cost-efficient systems solutions for power generation, we are helping to promote sustainable development in Southeast Asia while continuing strategic expansion of our distributed power generation business.” The core elements of the combined heat and power modules built at Tognum’s Augsburg site are MTU 20V 4000 L62 engines with generators, cooling systems and plant control. They have been installed in the combined heat and power station serving PT Spinmill Indah Industry’s cotton spinning mill, where they are to operate continuously to provide power for all production processes and electrical loads. The waste heat generated is con-

verted by an absorption chiller plant to provide cooling power for the air-conditioning system - a combination which makes possible around 90 percent energy efficiency. PT Spinmill Indah Industry is one of Southeast Asia’s biggest textile manufacturers, whose core business is the production of hand towels, clothing and yarn for export to Europe, Japan and the U.S. The company began some years ago to organize its production for maximum sustainability, which is why the power generation solution it needed for its spinning mill near Jakarta was to be especially low in emissions and noise and easy to maintain. Becoming independent of the public power grid, especially in case of power outage, was another important factor.

COMPANY NEWS FROM AROUND THE WORLD long-standing history of manufacturing high quality composite components, our customers will receive a final product that is of the highest quality, providing long-term value,” notes Slikkers. Aeroblade has developed designs for wind turbine blades from 37 to 60 m and

more, which Energetx and Aeroblade believe will allow them to serve nearly any wind turbine OEM in the market today.

Siemens installs 6 MW offshore wind turbine prototype

Siemens has installed the first prototype of its 6 MW

8 MAY/JUNE 2011 POWER INSIDER

offshore wind turbine, the SWT-6.0-120, with direct drive technology. The prototype has been installed at Høvsøre in Denmark. The offshore wind turbine’s nacelle and rotor weigh under 350 tonnes, something that could cut the cost not only of the nacelle, but also the tower

and supporting structures, Siemens says. “In tendency large wind turbines have always been heavier per megawatt than small ones. The SWT-6.0120 breaks this rule, having a weight per megawatt similar to that of many turbines in the 2 to 3 MW range,” says Henrik Sties-

dal, Chief Technology Officer at Siemens Wind Turbine Business Unit. “Reaching this low weight with a strong and robust machine is the result of targeted innovation combined with our more than 30 years of wind industry experience.” He adds: “We’ve devel-

‘KILL A CAMEL’ TO CUT POLLUTION CONCEPT IN AUSTRALIA SYDNEY — Australia is considering awarding carbon credits for killing feral camels as a way to tackle climate change. The suggestion is included in Canberra’s “Carbon Farming Initiative”, a consultation paper by the Department of Climate Change and Energy Efficiency, seen Thursday. Adelaide-based Northwest Carbon, a commercial company, proposed culling some 1.2 million wild camels that roam the Outback, the legacy of herds introduced to help early settlers in the 19th century. Considered a pest due to the damage they do to vegetation, a camel produces, on average, a methane equivalent to one tonne of carbon dioxide a year, making them collectively one of Australia’s major emitters of greenhouse gases. In its plan, Northwest said it would shoot them from helicopters or muster them and send them to an abattoir for either human or pet consumption.

oped the SWT-6.0-120 wind turbine specifically for the offshore projects of the future. Our direct drive technology offers a smart, straightforward design that minimises the number of moving parts in the wind turbine. We expect that our new SWT-6.0-120 will set new standards for per-

formance, robustness and optimised maintenance concepts, which are major advantages in the harsh conditions offshore.” The wind turbine uses the B58 blade used on the SWT-3.6-120 and includes Siemens’ IntegralBlade® design for wind turbine blades manufactured with-

“We’re a nation of innovators and we find innovative solutions to our challenges -- this is just a classic example,” Northwest Carbon managing director Tim Moore told Australian Associated Press. The idea was among those accepted for discussion by the government, which is seeking to “provide new economic opportunities for farmers, forest growers and landholders” if they come up with ways to cut emissions, according to the document. Heavily reliant on coal-fired power and mining exports, Australia is one of the world’s worst per capita polluters and the government is looking at ways to clean up its act. Legislation for the “Carbon Farming Initiative” is set to go before parliament next week.

out glue joins. The nacelle also features a helicopter hoisting platform integrated in the nacelle rear. Serial production of the 6 MW offshore wind turbine is scheduled for 2014.

GE and eSolar cooperate on solar combined cycle

technology

GE Energy and eSolar will cooperate on deploying integrated solar combined cycle (ISCC) technology under an investment and licensing agreement. eSolar provides tower-

POWER INSIDER MAY/JUNE 2011 9

NEWS DESK

PVXCHANGE EXPANDS ITS INTERNATIONAL MARKET POSITION ONLINE-TRADING PLATFORM for photovoltaics expands and enlarges its range Berlin, 25 May 2011. After a successful previous year and with a new experienced investor on board, the market leader for the brokerage of photovoltaic products, pvXchange, is now entering the second half year of 2011 in a much stronger position. WHEB Partners, one of the leading venture capital companies in Europe for environmental technology, has invested several million Euros in pvXchange since May 2011. pvXchange will be using the new resources to further expand its position on international markets. Thanks to a total installed power of around 180 MW, the Berlin-based company was able to broker more than twice as many photovoltaic modules on its online trading platform in 2010 as they did in the previous year. The transactions of inverters have increased eight-fold, to 85 MW, in the same period of time. pvXchange puts its success down to a clearly designed component exchange platform, product selection independent of manufacturers and a transparent price policy bundled in an international network of manufacturers, dealers and installers. “Worldwide, many companies have recognised the chances a moderated network of potential buyers and sellers offers them”, explains Kai Malkwitz, managing director of pvXchange GmbH. Currently, about 50 new companies from the solar branch join the trading exchange weekly. “For years we have shown that our business model can react flexibly to the fluctuations in the market. We will be invest-

ing more and more in new markets in the next few months and improving processes for our customers.” In addition to the branch office recently opened in San Francisco, pvXchange will be expanding further trade hubs in Europe and Asia in the course of the following months. The online trading exchange is being modernized step-by-step and expanded with new functions. In cooperation with its network members, pvXchange has been adjusting to changing market conditions in Europe, Asia and North America. Together with the manufacturers and distribution partners, the company is developing new ways to offer the buyers even more choice and options on the market. “With additional personnel and optimised processes, we are setting the course for sustainable growth”, says Malkwitz pvXchange on the Intersolar Europe in Munich, Hall A6, Stand 250. About the company: pvXchange was founded in 2004 in Berlin and is the world’s market leader in the brokerage of photovoltaic products in the business accounts sector. In 2010 the company had a turnover of solar modules with a total power of around 180 MWp as well as inverters with an output of around 85 MWAC. Besides Europe, pvXchange is also present in Asia and the USA. In May 2011, WHEB Partners, one of the leading venture capital companies in Europe for environmental engineering, invested several million Euros in pvXchange.

ADB SUPPORTS SHANGHAI PUDONG DEVELOPMENT BANK LENDING FOR GREEN BUILDINGS SHANGHAI, PEOPLE’S REPUBLIC OF CHINA The Asian Development Bank (ADB) is providing CNY300 million in partial credit guarantees to Shanghai Pudong Development Bank, or SPD Bank, to support private-sector financing of energy-efficient buildings across the People’s Republic of China (PRC). SPD Bank is the first Chinese partner in a program set up by ADB to encourage financial institutions to lend to companies seeking to retrofit old buildings so that they use less energy or to construct so-called green buildings which are designed, constructed, and maintained to optimize energy and water efficiency over the buildings’ lifespan. Retrofitting buildings typically leads to energy savings of 20%-40%. Under the CNY800 million Energy Efficiency Multi-project Financing Program, ADB is partnering with Johnson Controls, a private sector energy management company listed on the New York Stock Exchange. Johnson Controls identifies buildings with energy savings potential while ADB shares the project credit risks with the financial institutions. The PRC government is keen to reduce the greenhouse gases that have accompanied the country’s rapid rise in energy consumption in recent years. Given the PRC’s rapid urbanization, improving the energy efficiency of buildings will help significantly in cutting the gases that contribute to climate change. However, companies have found it hard to access the finance to do that given they can offer little collateral to back their loans, while banks themselves have little experience in project finance for energy-efficiency projects.

COMPANY NEWS FROM AROUND THE WORLD based concentrating solar power (CSP) technology. MetCap Energy Investments, a Turkish investor and developer of power projects, plans to collaborate with GE in making the investment. “When we look at the long-term future of power

generation, we see the importance of integrating natural gas and renewable energy sources in new and innovative ways to provide energy that is cleaner, more cost effective and more reliable,” says Paul Browning, President and CEO – thermal products for

10 MAY/JUNE 2011 POWER INSIDER

GE Energy. Under the agreement, GE will license and incorporate eSolar CSP technology into its offers of ISCC and standalone solar thermal power plants. The companies expect the transaction, which will establish GE as a minority shareholder, to

close within a month. Financial terms are not being disclosed.

Wärtsilä, Versa Power to integrate solid oxide fuel cells in power and marine products

The Finnish marine power and energy company Wärt-

silä has announced a cooperative agreement with US-based solid oxide fuel cell developer Versa Power Systems, to develop and integrate Versa Power fuel cell technology into Wärtsilä products for the distributed energy and marine markets.

“By sharing credit risk with our partner bank under this program, we aim to ease the financing bottleneck and expand critical private sector investment in energy-saving green buildings in industry, commercial, and also social infrastructure, such as sectors schools and hospitals in the People’s Republic of China,” said Hisaka Kimura, Senior Investment Specialist in ADB’s Private Sector Operations Department. “Doing that will have a long-lasting and cumulative effect on the PRC’s bid to slash greenhouse gas emissions.” SPD Bank, listed on the Shanghai Stock Exchange, was the first domestic bank in the PRC to offer a full range of green credit solutions to companies. “SPD Bank has declared that it will build itself into the first low-carbon bank in the PRC, guided by an innovation-driven strategy,” said Liu Xinyi, Executive Vice President of the bank. Recognizing the huge potential of green construction in the PRC, SPD Bank is supporting cooperation with ADB to boost the development of green buildings using innovative finance.” As a responsible corporate citizen, we will try our best to contribute to the sustainable development of our society,” Mr. Liu said. Michael Harris, Vice President and Managing Director, Global Energy Solutions of Johnson Controls Building Efficiency Asia said: “The PRC’s 12th Five-Year Plan’s Energy Saving and Emission Reduction Plan makes energy saving and emissions reduction the focus of development in the construction, industry, and transportation sectors. We are pleased to work with ADB and SPD Bank to work toward a low-carbon economy, contributing our expertise in the operation of energyefficient, sustainable buildings.”

The agreement allows Wärtsilä to integrate Versa Power fuel cell stack modules, especially for larger power range products. The agreement gives VPS a partner with the ability to commercialize

fuel cell products in large global markets. ‘ VPS is leading the development of large SOFC stacks, and the company ’s capabilities support Wärtsilä’s strategy of developing large SOFC systems for the

PVXCHANGE EXPANDS ITS INTERNATIONAL MARKET POSITION Online-trading platform for photovoltaics expands and enlarges its range Berlin, 25 May 2011. After a successful previous year and with a new experienced investor on board, the market leader for the brokerage of photovoltaic products, pvXchange, is now entering the second half year of 2011 in a much stronger position. WHEB Partners, one of the leading venture capital companies in Europe for environmental technology, has invested several million Euros in pvXchange since May 2011. pvXchange will be using the new resources to further expand its position on international markets. Thanks to a total installed power of around 180 MW, the Berlin-based company was able to broker more than twice as many photovoltaic modules on its online trading platform in 2010 as they did in the previous year. The transactions of inverters have increased eight-fold, to 85 MW, in the same period of time. pvXchange puts its success down to a clearly designed component exchange platform, product selection independent of manufacturers and a transparent price policy bundled in an international network of manufacturers, dealers and installers. “Worldwide, many companies have recognised the chances a moderated network of potential buyers and sellers offers them”, explains Kai Malkwitz, managing director of pvXchange GmbH. Currently, about 50 new companies from the solar branch join the trading exchange weekly. “For years we have shown that our business model can react flexibly to the fluctuations in the market. We will be investing more and more in new markets in the next few months and improving processes for our customers.” In addition to the branch office recently opened in San Francisco, pvXchange will be expanding further trade hubs in Europe and Asia in the course of the following months. The online trading exchange is being modernized step-by-step and expanded with new functions. In cooperation with its network members, pvXchange has been adjusting to changing market conditions in Europe, Asia and North America. Together with the manufacturers and distribution partners, the company is developing new ways to offer the buyers even more choice and options on the market. “With additional personnel and optimised processes, we are setting the course for sustainable growth”, says Malkwitz pvXchange on the Intersolar Europe in Munich, Hall A6, Stand 250.

distributed power and marine markets,’ says Erkko Fontell, Director of Fuel Cells at Wärtsilä. Wärtsilä is already running POWER INSIDER MAY/JUNE 2011 11

NEWS DESK GE’S FRAME 6FA GAS TURBINES TO HELP MEET GROWING POWER NEEDS OF SABAH, MALAYSIA • Kimanis Power Project to Add 300 Megawatts of Electricity for the State of Sabah • CSA to Provide 18 Years of Service Support for the Plant KUALA LUMPUR, MALAYSIA—June 14, 2011—GE (NYSE: GE) will supply three Frame 6FA gas turbines, associated generators and services for the 300-megawatt combined cycle gasfired power plant project in Sabah, Malaysia. Using natural gas as its primary fuel, the new plant will reinforce Sabah’s energy infrastructure and help the state meet its growing electricity demand, which is increasing by more than 7 percent annually. The Kimanis Power plant will consist of three combined-cycle blocks of approximately 100 megawatts each. This configuration enhances the plant’s operational flexibility, reliability and availability. In addition to supplying equipment, GE has signed a contractual service agreement (CSA) with Kimanis Power Sdn Bhd to support the plant for 18 years. The plant is to be developed by Kimanis Power Sdn Bhd, a subsidiary of PETRONAS Gas Berhad, the Malaysian natural gas company, on a build, own, operate and transfer (BOOT) basis. Electricity will be sold to Sabah Electricity Sdn Bhd.

The project is located on the coastal area of Kimanis Bay, adjacent to the proposed site for an on-shore gas terminal. “We are delighted to be working once again with GE Energy, our technology partner in Malaysia for more than 30 years,” said Encik Samsudin Miskon, chairman of Kimanis Power Sdn Bhd and the MD/CEO of PETRONAS Gas Berhad. “This new project will benefit the state of Sabah not only by supplying a cleaner source of energy to meet increasing demand for electricity, but also will provide development opportunities for the state and the surrounding community. In addition, under the CSA agreement, Kimanis Power Sdn Bhd and GE Energy are working as partners to ensure the long-term reliability and availability of the gas turbines.” GE’s CSAs are structured to provide customers with predictable maintenance costs, while ensuring high availability and a steady revenue flow from power plant operations. To date, GE has long-term service agreements in place at more than 700 sites worldwide. The Frame 6FA gas turbine is the mid-sized member of GE’s F technology fleet. With its output range, high exhaust energy and robust design, the 6FA gas turbine is well suited for combined-

cycle, industrial and cogeneration applications. More than 100 units have been installed worldwide and have completed more than three million hours of service, making the 6FA gas turbine one of the most experienced gas turbines in its class. The 6FA gas turbines for the Kimanis Power project are expected to be shipped in the first quarter of 2012, with commercial operation scheduled to begin in the fourth quarter of 2013. “We believe that our advanced 6FA technology will offer the most efficient, competitive and reliable power for Sabah’s mid-sized grid requirement, and it also provides greater synergy with the existing GE gas turbine fleet in Malaysia,” said Bill (Wataru) Horie, general manager for GE Energy’s power generation business in Asia. “The Kimanis Power project builds on the strong role GE has played in Malaysia where we have been active since 1975, building relationships with leading Malaysia companies, such as PETRONAS.” GE’s Frame 6FA gas turbine technology previously was applied to the Ranhill Powertron II plant, also located in Sabah. Like the Kimanis Power plant, this project supports the Malaysian government’s energy strategy to promote cleaner and more efficient power generation.

COMPANY NEWS FROM AROUND THE WORLD successful pilot projects using fuel cell technology supplied by the Danish SOFC developer Topsoe Fuel Cell, and this cooperation will continue as planned. Wärtsilä is operating a WFC20 unit on landfill gas to produce electricity and heat in the Finnish city of Vaasa. Power solutions based on

fuel cell technology are expected to offer significant benefits in the shipping industry, where international emission regulations are becoming increasingly stringent. Last summer, a WFC20 solid oxide fuel cell unit – operating on methanol – was installed onboard the

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Wallenius Lines car carrier Undine, for tests within the METHAPU project. Wärtsilä has also developed 50 kW WFC50 power units for internal validation.

Oerlikon Solar’s 120 MW solar thin-film production line to Asia

Oerlikon Solar has received

a turnkey order for its 120 MW Micromorph ThinFab production line for manufacturing solar thin-film silicon modules from an undisclosed Asian customer. “Our customer chose Oerlikon ThinFab™ technology due to low module costs, competitive energy efficiency especially under

real operational conditions, and because we offer a clean-tech, cadmium-free solution. This first 120-MWThinFab™ order underlines the potential of our solar business,” says Helmut Frankenberger, CEO Oerlikon Solar. The ThinFab is said to reduce the ‘total cost of own-

TOP 5 WORLDWIDE SMART METER VENDORS MARKET SHARE, Q1 2011 Vendor Landis+Gyr Itron Inc. Sensus Enel GE Others Total

WORLDWIDE SMART METER MARKET CONTINUES TO GROW WITH FIRST QUARTER 2011 SHIPMENTS UP 22.7%, ACCORDING TO IDC ENERGY INSIGHTS The global smart meter industry continues to gain steam as meter manufacturers shipped nearly 5 million meters in the first quarter of 2011 (1Q11), an increase of 22.7% over the same quarter in 2010. This marks the second highest quarter of shipments to date, falling just shy of the record figure of 5.1 million meters shipped in the second quarter of 2010. IDC Energy Insights’ Worldwide Quarterly Smart Meter Tracker forecasts that the global smart meter market will exceed 71 million by 2015, reflecting a 5-year compound annual growth rate (CAGR) of 25.3%. “Despite the initial industry and public reluctance for change in North America, smart meters can serve the interests of both the utility and the customer. This dual purpose will drive utilities around the world to adopt smart metering technology and launch the next generation of grid infrastructure.” While the smart meter market has historically been driven by North America and Europe, IDC expects significant progress towards global adoption within the forecast period. In the Asia/Pacific region, the market for smart meters is rapidly developing, led by gains in China, Japan, Australia, and South Korea, while Brazil and Mexico appear poised to drive smart metering in Latin

ership’ for solar modules to 0.50/Wp and a ThinFab lab cell has achieved an efficiency of 11.9%. “This success is a further important step forward for Oerlikon Solar. It is significant that this order comes from Asia, the fastest growing, highly competitive and very important region for

1Q 2011 Market Share 30.0% 22.9% 13.0% 9.9% 6.7% 17.5% 100.0%

1Q 2010 Market Share 19.0% 23.9% 24.8% 3.7% 6.3% 22.3% 100.0%

America. Despite regional differences in the communication technology landscape, one thing is the same – momentum is building. In North America, “smart” metering is rapidly becoming the standard. While major utility deployments, such as Landis+Gyr’s recent win at Hydro Quebec and Itron’s upcoming deployment at BC Hydro, continue to drive the market, small and mid-market utilities are also moving towards smart metering solutions. Cooperatives like SECO Energy (Sensus) and Muni’s like the Kansas City BPU (Elster) are adopting smart meters to encourage energy efficiency while simultaneously creating a backbone for future load control and outage management systems. Dean Chuang, senior research analyst on IDC Energy Insights Trackers team, notes, “Despite the initial industry and public reluctance for change in North America, smart meters can serve the interests of both the utility and the customer. This dual purpose will drive utilities around the world to adopt smart metering technology and launch the next generation of grid infrastructure.” Roberta Bigliani, research director of IDC Energy Insights for Europe, Middle East & Africa notes that similar progress towards smart metering has been made in EMEA. “Europe, Middle East and Africa (EMEA) have seen significant progress in terms of units shipped growing 43.8% last quarter. In Spain, Endesa has progressed with its rollout plan and Iberdrola has proceeded to the final stage of its initial pilot. In France, mass deployment is just around corner. And the UK does not want to be left behind. British Gas has proceeded with the announced rollout using Landis+Gyr multi-energy solution and Trilliant communication. Based on country-level research that was launched this quarter, in the UK the growth of the installed base for Q1 was 17.3%.”

the solar industry today. We look forward to building on this success,” adds Oerlikon CEO Michael Buscher.

POWER INSIDER MAY/JUNE 2011 13

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AUSTRALIA NATURAL RESOURCES

AUSTRALIA: A NATURAL RESOURCE HUB? By Charles Fox

ustralia has considerable petroleum, natural gas and coal reserves and is one of the few countries belonging to the Organization for Economic Cooperation and Development (OECD) that is a significant net hydrocarbon exporter, exporting about two-thirds of its total energy production. Australia was the world’s largest coal exporter and the fourth largest exporter of liquefied natural gas (LNG) in 2009, after Qatar, Malaysia, and Indonesia. Australia’s prospects for expanding these energy exports in the future are promising as Asian demand for both coal and LNG is rising along with Australia’s proven natural gas reserves. While Australia also exports crude oil and refined petroleum products, it is a net importer of oil. Hydrocarbon exports accounted for

16 MAY/JUNE 2011 POWER INSIDER

19 percent of total export revenues in 2009. Australia’s stable political environment, substantial hydrocarbon reserves, and proximity to Asian markets make it an attractive place for foreign investment. According to The Oil and Gas Journal (OGJ), Australia had 3.3 billion barrels of proven oil reserves as of January 1, 2010, more than double the 2009 OGJ estimate of 1.5 billion barrels. Increases in reserve estimates are reportedly based on additional oil liquids reserves, mainly natural gas liquids and other liquids, discovered through the ongoing drilling taking place in already producing oil and natural gas basins. The majority of these reserves are located off the coasts of Western Australia, Victoria, and the Northern Territory.

SECTOR ORGANISATION Australia’s management of oil exploration and production is divided between the state and Commonwealth (Federal) governments. Australia’s state governments manage the applications for onshore exploration and production projects, while the Commonwealth Government shares jurisdiction over Australia’s offshore projects with the government of the adjacent state or Territory. The Ministry of Industry, Tourism and Resources (MITR) and the Ministerial Council of Energy (MCE) both function as regulatory bodies over Australia’s oil sector. In place of a national oil company, the Australian government supports privately held Australian companies, of which the largest are Woodside Petroleum and

Santos. ExxonMobil is the largest foreign oil producer; other international oil companies include Shell, Chevron, ConocoPhillips, Japex, Total, BHP Billiton, and Apache. PRODUCTION In 2009, oil production totalled 589,000 barrels per day (bbl/d), of which 81 percent (476,000 bbl/d) was crude oil. Oil production in Australia peaked in 2000 at 828,000 bbl/d and has since been declining. According to the Australian Petroleum Production and Exploration Association (APPEA), a continued decline in oil liquids production is expected over the next decade. Australia’s main frontier for exploration has moved in recent years to the deepwater area of the Timor Sea, although the nearby Carnarvon Basin off the coast of Western Australia remains the busiest area in terms of overall drilling activity. After a spike in drilling activity in the past decade, several major discoveries are now in the process of being put into commercial operation. The Pyrenees and Van Gogh projects offshore Western Australia came online in the first quarter of 2010 and are expected to make a significant contribution to oil production. Pyrenees has a production capacity of 96,000 bbl/d and Van Gogh has a production capacity of 150,000 bbl/d. In fiscal year 2010-2011, these projects are expected by the Australian Bureau of Agricultural and Resource Economics (ABARE) to increase oil exports by 7 percent in line with higher production, aided by the Kipper and Turum fields starting up in the beginning of 2011 at 10,000 and 11,000 bbl/d, respectively. These additions to production are expected to offset the fall in output in other fields at least in the short term. In 2010, 31 new exploration areas in 5 offshore

basins were offered for bidding, with closing dates either November 2010 or May 2011, depending on the exploration status and data available in these areas. PIPELINES Australia has a well-developed domestic oil and gas pipeline network. The Australian Pipeline Trust, with 6,200 miles of pipeline, is the largest operator. Epic Energy is the second largest, with 2,500 miles of pipeline. Santos operates two major domestic pipelines that are used for carrying oil and oil products, which include the Jackson to Brisbane line that spans 500 miles, and the Mereenie to Alice Springs line that covers 167 miles. Esso Australia Ltd. operates the 115-mile Longford to Long Island Point pipeline. IMPORTS AND EXPORTS In 2009, according to EIA estimates, Australia had net oil imports of about 360,000 bbl/d, close to 40 percent of its domestic consumption of 946,000 bbl/d. The high proportion of imports as a share of total oil production reflects the location of the majority of Australia’s oil production off its northwest coast, which is closer to Asian refineries than to Australia’s domestic refineries, located on its east coast. Conversely, the majority of Australia’s refinery capacity is located close to its major domestic consuming markets on the east coast. Australia’s crude oil and condensate imports mainly come from South East Asia; Viet Nam is currently the largest source, while Singapore is the largest source for Australia’s refined product imports. According to EIA estimates, in 2008, Australia had gross exports of 249,000 bbl/d of crude oil, about 42 percent of its total oil production, going to Asian markets, mainly South Korea, Singapore, and Taiwan.

Australia’s 2008 gross exports of petroleum products were 62,800 bbl/d, about 11 percent of its total oil production; its largest markets were New Zealand and Singapore. REFINING According to The Oil and Gas Journal, in January 2010, Australia had 7 major refineries, with a total crude oil refining capacity of 725,000 bbl/d, up from 696,000 bbl/d in 2008. Crude oil feedstock for these refineries primarily comes from oil produced in the Bass Strait offshore south-eastern Australia as well as imports. NATURAL GAS According to The Oil and Gas Journal (OGJ), Australia had 110 trillion cubic feet (Tcf ) of proven natural gas reserves as of January 2010, triple OGJ’s 2009 reserves estimate of 30 Tcf.The upgrade is largely a result of increased exploration and development of its unconventional as well as conventional gas sources. It has been reported that unconventional gas deposits, i.e., coal seam and shale gas deposits, have become an increasingly larger component of gas reserves due to technological advances. Australia was the twelfth largest holder of natural gas reserves in the world in January 2010. However, significant new discoveries have been announced as recently as July and August 2010. SECTOR ORGANIZATION The Australian government has no ownership stake in the domestic natural gas industry. The industry is regulated by the Ministry of Industry, Tourism and Resources (MITR) and the Ministerial Council of Energy (MCE). The Australian government created the MCE in 2001 in order to build

POWER INSIDER MAY/JUNE 2011 17

AUSTRALIA NATURAL RESOURCES policy coordination between the Commonwealth Government and the state governments. The MCE functions as the director of natural gas policy. Major domestic and foreign players operating in Australia include Santos, Woodside, Chevron, ConocoPhillips, ExxonMobil, Origin Energy, BG Group, Apache, INPEX, Total, and Shell. PRODUCTION Natural gas production in Australia reached 1.5 Tcf in 2009 and is on a rising trend, with significant new projects coming on-stream in the short to medium term. Queensland and New South Wales are the main sources for coal seam gas (CSG), which accounted for 13 percent of gas production in 2009, while conventional gas is largely located in the Carnarvon Basin offshore North Western Australia. Much of Australia’s natural gas production is converted into LNG for export as well as for domestic consumption. A number of major new LNG projects are under construction or planning as the Asian LNG market continues to expand; 4 projects will use conventional gas from offshore the northwest coast and 4 will be based on LNG extraction from CSG in Queensland. CONVENTIONAL NEW LNG PRODUCTION PROJECTS INCLUDE: The Pluto project is under construction near Karratha offshore Western Australia. Woodside Energy owns 90 percent of the venture supported by 15-year contracts with Kansai Electric and Tokyo Gas at 5 percent equity each. The project includes an offshore platform connecting 5 subsea wells and a 112-mile pipeline to an onshore LNG facility on the Burrup Peninsula. The first train is expected to come online in March 2011 with estimated new capacity of 200

18 MAY/JUNE 2011 POWER INSIDER

billion cubic feet (Bcf ) of LNG per year. The Gorgon project, led by Chevron (50%), with Shell and ExxonMobil (25% each), is currently under construction. The Gorgon gas field, which is 80-124 miles off the northwest coast, is believed to contain 40 Tcf of natural gas and is currently Australia’s largest known natural gas resource. The project includes of the Gorgon gas fields with subsea pipelines to Barrow Island; a gas processing facility on the island with production capacity of 700 bcf per year, consisting initially of three, 234 Bcf per year LNG trains; LNG shipping facilities to transport products to international markets; and greenhouse gas management via injection of carbon dioxide into deep formations beneath Barrow Island.

It was reported that both the Western Australia Environmental Protection Authority and the Australian Environmental Ministry approved the project in August 2009. A final Investment Decision was made on September 14, 2009 and the project is expected to be completed in 2014. The Icthys project, still in the planning stages, is led by Japan’s INPEX (74%) and Total (26%), is also located offshore the northwest coast in the Browse Basin. It is expected to produce LNG, LPG, and condensate for export to Japan and elsewhere via a 528-mile undersea pipeline connecting the fields to a new export LNG terminal to be built near Darwin. When the project comes onstream in 2016 its production is expected to be at least 377 Bcf per year.

between Origin and ConocoPhillips, and the other is the Queensland Curtis project being developed by BG Group and China’s CNOOC. The distances between Australia and its key natural gas export markets in Asia discourage any pipeline trade; all exports are in the form of LNG. Over the past decade, Australian LNG exports have increased by 48 percent and they are expected to continue to increase over the short to medium term. According to Cedigaz, in 2009, Australia exported 856 Bcf of LNG, up from the 755 Bcf reported by EIA in 2008. Japan is the primary destination, but other purchasers include China, South Korea, India, and Taiwan. Australia currently has 2 LNG export facilities. The largest is the North West Shelf Venture (NWSV), a consortium of 6 energy companies (Woodside, Shell, BP, Chevron, Japan Australia LNG, BHP Billiton), which operates 5 offshore LNG trains with a total capacity of 761 Bcf per year. It relies on natural gas supplied from nearby fields in the Northwest Shelf (NWS). The majority of LNG produced by the NWSV is exported to Japan by long-term contracts. Darwin LNG is the second facility, a consortium of ConocoPhillips, Santos, Eni, SPA, and INPEX. It has 1 production train with a total capacity of 140 Bcf per year and exports LNG under contracts to Tokyo Gas Corp. and Tokyo Electric. Darwin is located on Australia’s northern coast and is supplied with natural gas from fields in the Timor Sea. However, as the new LNG facilities come online beginning with the Pluto project, Australia’s LNG export capacity will be expanding substantially. COAL As of the beginning of 2009, Australia contained 76 billion short tons (Bst) of recoverable coal reserves. Australia is the world’s fourth largest coal producer, after China, the United States, and India, but it is the largest exporter.

The Wheatstone project, still in the planning stages, is led by Chevron (75%) and Apache (25 %) and is supported by LNG contracts with Tepco and Kogas. When complete, its LNG export plant’s capacity will reportedly be 1,177 Bcf per year and there will be a smaller plant for domestic production. Final investment decision is due in 2011, but the project has already attracted third party gas as local subsidiaries of Apache and KUFPEC have signed deals to join the project as gas suppliers from their nearby Julimar and Brunello fields and 25 percent equity participants, which will extend the life of the project. UNCONVENTIONAL NEW LNG PRODUCTION PROJECTS STILL IN THE PLANNING STAGES INCLUDE: The Gladstone project will be the world’s first major CSG to LNG operation. Located onshore Queensland, this project is currently a joint venture between Santos (60%) and Petronas (40%), although

discussions with Shell to take a one-third equity share are reportedly ongoing. The project received environmental approval from the Queensland government in May 2010. Gladstone LNG has plans for 2 plants with capacity of 175 Bcf each. Sinopec and Korea Gas Corp. are expected to buy small stakes in the project. Arrow CSG to LNG project is another Queensland-based venture in the planning stages. A joint venture between Shell and PetroChina is reportedly in the process of acquiring Arrow. The Arrow project involves building up to 4 LNG processing plants, each with a capacity of 195 Bcf per year. A recent statement by Santos about collaboration between projects has fueled speculation that a deal between Santos and Shell could be followed by a merger of Gladstone and rival Arrow to save on infrastructure and equipment costs. Analysts expect a merger may also occur between 2 other rival projects in Queensland: one is the Australia Pacific project, a 50-50 joint venture

SECTOR ORGANIZATION Australia has around 107 privately owned coal mines located throughout the country. About 74 percent of Australia’s coal production comes from open pit operations, with the remainder coming from underground mines. International companies such as BHP Billiton, Anglo American (UK), Rio Tinto (Australia-UK), and Xstrata (Switzerland) play a significant role in Australia’s coal industry. PRODUCTION In 2009, Australia produced 450 million short tons (MMst) of coal. Over the last 2 decades, coal production in Australia has grown by 34 percent, with new projects continuing to come online every year. The states of Queensland and New South Wales (NSW) together account for 97 percent of Australia’s black coal production. Black coal production has been increasing by an average of 3.2 percent per year between fiscal years 2003-04 and 2008-09, supported by the addition of new capacity, and is expected to continue to increase over the medium term. Australia also has brown coal deposits in South and Western Australia, Victoria, and Tasmania, where it is used for domestic electricity generation. EXPORTS Australia exported about 66 percent of its coal POWER INSIDER MAY/JUNE 2011 19

AUSTRALIA NATURAL RESOURCES to the importance of energy, the commonwealth government oversees all states, they decide the overall policy and of course oversee investment. Many international businesses have often struggled because of a lack of understanding on how to really approach the Australian market, as no 2 utilities are the same, many companies have to ensure people on the ground with local knowledge to guarantee success. If you want to succeed in Australia, then it may be worth considering the following key pointers; Know your customer, Understand his needs, have a flexible product offering, be flexible in implementation, be very patient. Government are working hard to ensure that Australia has an improved policy frame work, investments are transparent, and they are implementing the right technologies now to secure the future. The country certainly offers a host of opportunities for those brave enough to enter the market. production in 2009, or about 300 MMst, accounting for 28 percent of global coal exports. According to the Australian Coal Association, Japan was the destination for over 40 percent of Australiaâ&#x20AC;&#x2122;s coal exports during Australian fiscal year 2008-2009. Other important export markets included South Korea (15%), Taiwan (10%), and India and China (9.5% each). About 8 percent of Australiaâ&#x20AC;&#x2122;s coal exports went to Europe. The export coal industry is serviced by 9 coal loading terminals located in Queensland and NSW. These terminals in June 2009 had handling capacity of 364 cubic feet per year. Several new port infrastructure projects are in various stages of development and are expected to add about 130 million short tons to annual coal export capacity by 2014. ELECTRICITY DISTRIBUTION Due to the vast scale and landscape of Australia, its supply system is not connected across the country.

The landscape dictates that each coastal region has separate systems. Western Australia & the Northern Territories have separate systems to supply the many remote areas which do not have connections to other states. The Eastern states have integrated in to the National Electricity Market (NEM). Competitive wholesale and retail electricity markets have been established in all eastern and southern states to form the NEM. A competitive wholesale market has been established in Western Australia. There remains an ongoing program on market reforms under guidance of the state and national government to further streamline market and regulatory arrangements. Due to the ever pressing issue of carbon tax and government change, there are many issues that still need confirming in government in Australia. The Australian energy market is unique, as unique as any other marker in the world. As mentioned, there are 6 states (territories) which have their own individual characteristics and peculiarities. Due

ENERGY OVERVIEW Proven Oil Reserves (January 1, 2010E) 3.3 billion barrels Oil Production (2009E) 589 thousand barrels per day, of which 81% was crude oil. Oil Consumption (2009E) 946 thousand barrels per day Crude Oil Refining Capacity (January 1, 2010E) 725 thousand barrels per day Proven Natural Gas Reserves (January 1, 2010E) 110 trillion cubic feet Natural Gas Production (2009E) 1.50 trillion cubic feet Natural Gas Consumption (2009E) 0.94 trillion cubic feet Recoverable Coal Reserves (2009E) 76 billion short tons Coal Production (2009E) 450 million short tons Coal Consumption (2009E) 152 million short tons Electricity Installed Capacity (2007E) 53.5 gigawatts Electricity Production (2008E) 250 billion kilowatt hours Electricity Consumption (2007E) 222 billion kilowatt hours Total Energy Consumption (2007E) 6.1 Quadrillion Btus*, of which Coal (40%), Oil (31%), Natural Gas (20%), Hydroelectricity (2%), Biomass (5%) Total Per Capita Energy Consumption (2007E) 295 million Btus Energy Intensity (2007E) 8,317 Btu per $2005-PPP**

ENVIRONMENTAL OVERVIEW 20 MAY/JUNE 2011 POWER INSIDER

INFORMATION CREDITS Eia.doe.gov Oil& Gas Journal

Energy-Related Carbon Dioxide Emissions (2008E) 437 million metric tons, of which Coal (55%), Oil (30%), Natural Gas (15%)Per-Capita, EnergyRelated Carbon Dioxide Emissions ((Metric Tons of Carbon Dioxide)(2008E) 20.8 metric tons Carbon Dioxide Intensity (2008E) 0.6 Metric tons per thousand $2005-PPP**

OIL AND GAS INDUSTRY Major Oil/Gas Ports Sydney, Melbourne, Geelong, Fremantle, Hastings, Brisbane, Darwin, Dampier Major Oil Fields NSWDP, Gippsland, Laminaria/Corollina, Enfield, Mutineer/Exeter Major Natural Gas Fields Gippsland, NWSDP, Cooper/Eromanga, John Brookse, Linda Major Refineries Kwinana (132,778 bbl/d), Altona (78,000 bbl/d), Geelong (118,000 bbl/d), Kurnell (105,500 bbl/d), Lytton (108,609 bbl/d), Bulwer Island (96,850 bbl/d), Clyde (85,000 bbl/d)

ASIA CARBON TAX

ASIA’S CARBON TAX AND IMPLICATIONS M

ining companies have warned Julia Gillard the design of the carbon tax threatens the resources boom and could cut more than 23,500 jobs this decade. The Minerals Council of Australia says the carbon pricing scheme’s design could cost the industry $30 billion to 2020, “threatening an investment pipeline worth $140bn and directly contradicting the government’s own strategy of maximising the opportunities of the Asian Century”. In a submission to the government on the carbon tax, the council cites government modelling warning coalmining output would fall 35 per cent by 2020 and investment would fall 13 per cent. Citing research conducted as analysis for Kevin Rudd’s 2009 carbon pollution reduction scheme, it warns repeating the design could cost the coal industry $18bn, the gold sector $2bn and the nickel sector $1.34bn. Queensland would have 11,440 fewer jobs, NSW 4260 and WA would lose 3410. The council warns the design of the scheme is not linked to international developments, and is a “tax grab” generating $523 in revenue per person in its first year and will hit jobs growth. The council’s submission adds to a growing list of industry representatives calling for full compensation of trade-exposed businesses for the costs of a carbon price in the absence of

22 MAY/JUNE 2011 POWER INSIDER

mirroring schemes in trade competitor countries. The council argues for a redesign of the carbon pricing scheme, with at least 94.5 per cent free emissions permits allocated to trade-exposed firms, in the absence of a global scheme. It challenges the government’s claim that Australia is lagging the rest of the world, arguing Australian efforts to cut the emissions intensity of the economy have outperformed Europe and the US. It argues the policy, based largely on the 2009 carbon pollution reduction scheme, could impose costs on Australia without achieving a reduction in global emissions unless the trade-exposed industries received compensation to maintain their international competitiveness. Given the slow progress of global negotiations, it calls for full or 94.5 per cent allocation to be fixed for five years, when an independent review would assess progress by other nations on binding emissions reduction commitments. Auctions of permits could then increase as trade competitors adopted comparable commitments. The council’s submission challenges the notion that the European Union’s emissions trading scheme is out in front of Australia, arguing that the EU ETS makes 164 industry sectors eligible for up to 100 free permits from 2013 to 2020. Climate Change Minister Greg Combet said the council’s claims

about the economic impact of a carbon price on the resources sector were “exaggerated” and the government would support jobs in the most affected industries. He hit back at suggestions the EU ETS offered greater protection for trade-exposed industries, saying assistance measures in Europe were “inferior” to those offered in the Australian scheme. The council says even non-trade-exposed industrial firms in the EU will receive 80 per cent of permits free in 2013 and will not be required to buy all their permits until 2027. But the CPRS-style assistance model would provide assistance to less than 60 Australian firms out of 42,600 exporters, and more than 80 per cent of Australia’s merchandise exports would face the full brunt of carbon costs from the outset of the scheme. “The difference between the Australian and EU schemes is highlighted by the fact that the Australian scheme, if set at $25 per tonne, will raise more tax from liable Australian companies in its first three months than the EU’s emissions trading scheme generated since its launch more than six years ago,” the submission says. It challenges suggestions China is outstripping Australian efforts, citing research by Warwick McKibbon for the Brookings Institution and Harvard University. Critics say without a binding global agreement the proposed levy will cost jobs and erode the competitiveness of Australian businesses. The government says Australia needs the tax and an emissions trading scheme. Protesters say they are just ordinary Australian workers and taxpayers who feel betrayed by the government’s plans to put a price on carbon. They insist it would damage the economy and drive up the cost of living by making energy far more expensive. “There is a groundswell of people that have finally had a gutful,” said one demonstrator. “Since the Labor government has come into this country the union rules. We just cannot do it anymore. We have no more money left to pay the taxes,” another protester said.

THE MINERALS COUNCIL OF AUSTRALIA SAYS THE CARBON PRICING SCHEME’S DESIGN COULD COST THE INDUSTRY $30 BILLION TO 2020

POWER INSIDER MAY/JUNE 2011 23

ASIA CARBON TAX

‘LEFT BEHIND’ The demonstrators have the support of the conservative opposition leader, Tony Abbott. He says that without a global carbon pricing agreement, Australian businesses would be less competitive. “A one-sided carbon tax, a unilateral carbon tax is an act of economic self-harm,” he said. Supporters of the tax believe it will cut pollution in Australia, which is one of the world’s worst per capita emitters of greenhouses gases. They say it will also encourage the development of a low carbon economy. Prime Minister Julia Gillard says that opposition will not derail the plan. “Now, I understand there is always going to be a variety of views in the community,” she said. “We’ll see that on display today but pricing carbon is the right thing for our nation’s future and that is why I am determined to do it.” The prime minister hopes to bring in a tax on carbon next year before introducing an emissions trading scheme as early as 2015. She insists that without these key economic reforms, Australia will be left behind by its international competitors. More than 50 per cent of Australian businesses feel ready for a low-carbon economy, but nearly two-thirds say regulatory uncertainty is hindering further planning. The study by the Economist Intelligence Unit, paid for by GE, shows that 70 per cent of the businesses surveyed are already taking steps to cut their carbon emissions, particularly by reducing energy usage. 24 MAY/JUNE 2011 POWER INSIDER

Of the 131 (mostly) large companies surveyed, 54 per cent rate their readiness for a low-carbon future as excellent or good, with only 12 per cent saying their preparedness is poor or very poor. The survey also found some optimism about reducing carbon dioxide emissions, with 54 per cent of company’s saying the opportunities of moving to a low-carbon economy outweighed the threats, 24 per cent saying the risks are balanced, and only 22 per cent feeling the threats outweighed the opportunities in the long run. The chief executive of GE Australia and New Zealand Steve Sargent says the survey points to a need for carbon pricing policy to be finalised and announced. “The findings suggest a broad acceptance and preparedness for the transition to a low carbon economy,” he noted in a statement. “The survey found that a majority of businesses feel the opportunities outweigh threats but uncertainty is holding us back. A clearly defined carbon policy framework is a crucial element to encourage further change in business behaviour.” Of those companies that saw the positives of a shift towards lower carbon dioxide emissions, the two biggest benefits were seen as improved customer relationships and the potential to develop new products and services. Cost was overwhelmingly seen as the biggest threat from a low-carbon economy. The surveys authors say it was conducted in February, before the Federal Government announced its plan for an interim carbon tax before an emissions trading scheme.

THE STUDY BY THE ECONOMIST INTELLIGENCE UNIT, PAID FOR BY GE, SHOWS THAT 70 PER CENT OF THE BUSINESSES SURVEYED ARE ALREADY TAKING STEPS TO CUT THEIR CARBON EMISSIONS, PARTICULARLY BY REDUCING ENERGY USAGE.

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More than good ideas

AUSTRALIAâ&#x20AC;&#x2122;S LNG SECTOR

LNG: A NEW WORLD ORDER A

ustralia has long been considered a lucky country thanks to its wealth of natural resources. Consisting of vast land space only slightly smaller than the United States of America, with a fraction of the population, it has seen prodigious exports of iron ore, coal and other commodities throughout its history which recently helped it sail through the global downturn without a recession.

26 MAY/JUNE 2011 POWER INSIDER

A country rejoicing in low sovereign risk and political environment that inspires investment confidence has seen more economic revenue heading its way in the form of resource gold, through phenomenal developments in the shape of large scale LNG production facilities. Australia is emerging to become a real powerhouse in the global LNG game, no new production would be expected in Qatar for some

time after placing a moratorium on expanding its exports until 2013. No new LNG plants had been built in Russia since Shellâ&#x20AC;&#x2122;s investment in the Sakhalin project in the 1990s while Iran was facing constant political unrest and likewise with civil unrest strong in Nigeria. Yemen and Oman are slowing down, while any new activity in leading export countries such as Malaysia and Indonesia is set to be dwarfed by developments in Australia over the coming years.

As population’s swell and economies prosper in neighbouring Asia, demand for commercial gas is at an all time high in power generation and industrial use, as it is considered a cleaner fossil fuel in comparison with coal. With virtually no natural resources discovered, countries such as Korea and Japan are almost completely dependent on fossil fuel imports, with Australia ideally located for the transportation of LNG to satisfy thirst of the world fastest growing continent. CHEVRON’S STATEMENT OF INTENT Some of the globes largest liquefied natural gas developments are located along the West coast of Australia, with extensive hydrocarbon fields located up to 130miles offshore. Chevron have made a statement of intent by developing Gorgon, one of the world’s largest natural gas projects and the largest single resource natural gas project in Australia’s history. The complexity and sheer scale of Gorgon is

unprecedented, an indication is given through a projected AUS$64 billion boost to Australia’s Gross Domestic Product and direct and indirect employment of around 10,000 people at peak construction. Not without difficulties, Barrow Island (location of the huge 15 million-metric-tonper-year processing plant) is home to some of the country’s most important wildlife with rare native fauna and flora, it was declared a Class A nature reserve in 1910. Although Chevron have provided a successful example in the coexistence of industry and the environment through the country’s largest onshore crude oil production facilities. Operative for almost 45 years, the islands ecology remains essentially intact. The existing facilities provide an opportunity to utilise existing infrastructure such as the roads, airport and barge landing. Balancing the dual goals of development and conservation is key for the Gorgon project as it covers 1.3 percent of the island’s uncleared land mass. Chevron will reinforce their position as a leading LNG supplier and operator in Asia Pacific with the simultaneous development of neighbouring Wheatstone, processed at an onshore facility located at Ashburton North, 12km west of Onslow in Western Australia’s Pilbara region. The foundation project will include two LNG trains with a combined capacity of 8.9 million metric tonnes per year and a domestic gas plant. Bechtel

Oil, Gas and Chemical are near to the completion of the Front End Engineering and Design phase, and a final investment decision is expected to be made in August of 2011. The maximum capacity, if full potential becomes developed, is expected to reach 25 million tonnes per annum (MTPA). Woodside is Australia’s largest publicly traded oil and gas exploration and production company. Their operations on the West Coast are by no means dwarfed by Chevron’s spectacular arrival. Chief operators at the North West Shelf, representing an investment of AUS$27 billion, the Carnarvon basin facilities constitute Australia’s largest oil and gas resource development and currently account for more than 40 per cent of Australia’s oil and gas production, delivering more than 3000 LNG cargoes since 1989. Production from the North West Shelf Project accounts for about one per cent of Australia’s gross domestic product and contributes more than AUS$5 billion each year in State and Commonwealth taxes and royalties. Almost AUS$800 million a year is injected directly into Australian business through operating costs, and thousands of jobs are created during construction and as part of ongoing operations. END OF AN ERA - DON VOELTE Somewhat controversial and long standing

POWER INSIDER MAY/JUNE 2011 27

AUSTRALIA’S LNG SECTOR Chief Executive Officer Don Voelte stepped down from his seven tenure at the helm of Woodside through retirement this year, and on May 30th they appointed long-time petroleum executive Peter Coleman, from US energy giant ExxonMobil, to be the successor. Don Voelte was most certainly a colourful character, but there was no doubt the Nebraskan native has reinvigorated the Perth-based company, driving its market capitalisation from around $13 billion to beyond $30 billion. A few years before his arrival a failed takeover attempt by Royal Dutch Shell (who already owned 34% of Woodside) indicated their dwindling position on the Australian stage and content to be just a chief operator of The North West Shelf. He was faced with decisions of magnitude that would essentially determine the fate of the company. Fresh avenues of growth through exploration in the Gulf of Mexico and Africa where considered, but Voelte had the vision of bringing focus back home through Western Australia, regaining the independent can-do spirit depicted by Woodside of old. It was well documented that there was strong opposition and indecisiveness from ranks in house about his direction, but the wheels were put in motion during the 2005 discovery of the Pluto and Xena gas fields. At first Voelte offered the Pluto gas to the NWS partners to underpin development of a sixth LNG train, with Woodside receiving 80 per cent ownership. But the partners, comprising multi-nationals like Shell, Chevron and BHP Billiton, demanded 80 per cent of the train. This prompted Mr. Voelte’s decision to retain 100 per cent of the exploration well, unusually high by industry standards, and also to convince Woodside’s board to go it alone and develop Pluto as a stand-alone LNG project.

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The company’s newest investment is on track to become one of the world’s fastest developed LNG projects, with discovery in 2005, development approval in July 2007, to first LNG in September 2011. Currently 97% complete, the foundation project will process gas located in the Carnarvon Basin about 190 km north-west of Karratha, Western Australia. It was scheduled to be producing in March 2011, but experienced delays through the flare stack, designed to deal with an unsafe build up of gas, which needed to be modified because insurers were refusing to provide cover over cyclone concerns, commonly occurring up to five times a year in that particular region. The company is making progress in securing gas for a second train and is also considering options to expand the project to a 4-train, 17 million tonne-per-year facility. The commissioning of this project is a fantastic authentication of the vision that Woodside could construct such a complex development in such a limited timeframe. Using the diverse engineering skills of Foster Wheeler and Worley Parsons, it really does demonstrate that Woodside have arrived as a global leader in the LNG industry. The Pluto development will be symbolic of Don Voelte’s time at the helm and transformation of Woodside. Their ambition is clear with the design phase underway for the Browse LNG venture, in which Woodside take a 50% ownership, also located in the North West of Australia at The James Price Point 60km North of Broome. AUSTRALIA PIONEERING INNOVATION IN FLOATING LIQUEFIED NATURAL GAS As locations for natural gas reserves become further inaccessible, revolutionary advances in technology are being made through the construction of

floating liquefied natural gas (FLNG) vessels, a facility that promises to open up a large number of isolated natural gas fields to development. FLNG units will eliminate the need for expensive subsea pipelines and supporting coastal infrastructure, enabling the producer to exploit stranded natural gas reserves located in remote areas. Any natural gas production is liquefied and transferred directly to an LNG carrier for delivery to its end market. Royal Dutch Shell are the pioneers in this technology and Australia is the home to Prelude

Group had attempted to acquire Origin beforehand with a bid of $13.1billion; ConocoPhillips outfoxed them with a smaller bid of $9.1billion, but with a play that appealed to Origin supremo Grant King. BG Group were not to be disheartened and made intentions known through investment in the Queensland Gas Company. Their joint development dubbed the Queensland Curtis LNG project, includes a 540km buried natural gas pipeline network linking the gas fields in Surat to the Gladstone production facilities on Curtis Island. Arrow received a buy out from Shell and PetroChina as did Santos by Kogas in the Gladstone LNG movement, which received a final investment decision on the 13th of January 2011. This development approval triggers major works for upstream field development, pipeline and LNG plant facilities at Gladstone.

project, which will be the longest floating structure in the world. Shell’s world first FLNG facility will span more than four soccer fields, weigh more than six times as much as the world’s largest aircraft carrier and tower seventeen stories above the water. The hulking vessel will operate in Shell’s 100 percent-owned Prelude field offshore Northwest Australia, which was discovered in 2007 and is estimated to contain about 3 trillion cubic feet of natural gas equivalent reserves. Management expects the vessel to extract about 3.6 mtpa of liquefied natural gas, 1.3 mtpa of condensate and 400,000 mtpa of liquefied petroleum gas. Amounting to a total cost of $10.8 to $12.6 billion. Delays and cost overruns are always a possibility especially with untried projects of this magnitude, but the construction process will occur in the controlled environment of a shipyard to mitigate these concerns. Woodside are also making advances in alternative production of LNG through this revolutionary method. Plans are firmly in place for The Sunrise LNG project in East Timor. Although it is currently facing disputes and dilemmas about whether to engage in the ultra advanced floating liquefied natural gas technology in the Australian shared Timor Gap, or succumb to government preference to construct an onshore production facility and pipeline. East Timor President Jose Ramos-Horta, voiced his reservations about the world’s potentially biggest FLNG facility being mechanically safe and commercially viable, with it comprising of untested technology to that scale. Nevertheless, underlying intent for the pipeline lies within the countries 20-year strategic development plan to provide energy and jobs to power the economy. A former Portuguese colony which gained independence from Indonesia in 2002, has in recent years struggled to maintain stability and boost living standards for its 1.1 million people. About half the population lives

below the poverty line and many still lack access to quality health services. Government budget almost completely relies on petroleum funds and the construction of the pipeline would greatly assist economic development. A MODERN DAY GOLD RUSH Conventional gas reserves in Western Australia have been documented for some time, but coupled with these colossal projects are equally ambitious and somewhat controversial ventures located in the western state of Queensland. Technology advances in recent years has seen attainable world gas reserves soar through the extraction of methane embedded in coal seams, Miners were used to the thinking of natural gas as a potentially deadly impediment to digging up coal. It is present in many seams, and while traditional gas is becoming increasingly scarce, coal remains abundant; so many firms are reversing the normal pattern and harvesting the gas, but ignoring the coal. Commercial scale extraction has been achieved through directional drilling techniques adopted from the oil industry. In Australia there are expansive coalfields in the Surat and Bowen basins located in Queensland and New South Wales, holding trillions of tonnes of methane, domestic supply far outweighs the demand so conversion to condensed super chilled natural gas makes commercial and economical sense. This has sparked a huge frenzy with operators for the world’s first CSG – LNG facility, as most of the proposed developments will resource gas from this area. Takeover bids and joint ventures have been rife in the race for a slice of the lucrative export business ConocoPhillips have embarked on an exciting joint venture with the largest integrated Australian energy company, and significant stakeholder in the coal fields, Origin Energy. They will be using the ConocoPhillips proven Cascade© LNG technology that is excellently suited to a CSG application. BG

ENVIRONMENTAL CONCERN But despite the financial dividends on offer for operators and economy, the industry is not without its problems. Unlike the west coast developments, Queensland and New South Wales behold densely populated areas with agriculture and dwellings which in turn has presented difficult opposition. Long pipelines are key to each development, in connection of upstream extraction to coastal production facilities for transportation to Asia. This means substantial negotiation and co-operation with land owners. Also the extraction process of CSG draws up large volumes of underground water. Apart from the salinity problem, the sheer volume of produced water extracted, and the capacity to dispose of this produced water, are a CSG project’s primary environmental concerns. Of equal concern is some companies techniques through hydraulic ‘fracking’, the method used to extract CSG from the coal seams underground. It involves injecting large volumes of water, sand and chemicals into the coal seam at high pressure. The fracking fluid includes chemicals, additives and biocides. Communities living and farming near the Australian coal basins started paying attention as they worry about toxic spills and the scenario that drinking and irrigation water could be contaminated; productive farmland could be destroyed. Operators understand their responsibility in environmental concern and are aiming for a successful coexistence of the coal seam gas industry and the agriculture sector. BG Group, for example has announced that it will spend over $1 billion on CSG water to bring it up to drinking standard. Santos is also making efforts in the treatment of CSG water by establishing the world’s first large-scale CSG water irrigation project at its Fairview and Springwater stations near Injune in Queensland. In hindsight what must be considered is the financial impact these world leading CSGLNG developments will have on Australian economy, with government revenue sums of up to AU$154 billion and 25,000 jobs created at peak construction it really is a window of opportunity for the countries continued progression. In collaboration with the conventional offshore gas fields in Western Australia, it will only be a matter of time before the balance shifts in the power of the global LNG export market. POWER INSIDER MAY/JUNE 2011 29

AUSTRALIA SMART GRID

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SMART GRID: SMART CITY PROJECT A

ustralia has assumed international leadership with its $100 million Smart Grid-Smart City project, the rollout of which commenced in late 2010. In mid-2010 a consortium led by Ausgrid won the tender for the project. The consortium consists of technology companies including Smart Grid Australia members IBM, Newcastle City Council and GE Energy Australia, as well as AGL, Sydney Water and Hunter Water. The three-year project runs across five sites in Sydney and the Hunter Valley (Newcastle, Scone, Sydney CBD, Ku-ring-gai and Newington). It will represent Australia’s first commercial-scale smart grid. It also is one of the largest and most integrated smart grid projects anywhere in the world. The technology will allow residents to see realtime analysis of electricity usage for their households and even for individual appliances, to help them make better decisions about energy efficiency in their homes and minimise their environmental impact. The smart grid demonstration will also test realtime, complex information about grid performance in order to improve control over the network for Australian energy transmission and distribution companies. The first steps of the demonstration project involved finalising detailed planning, as well as rolling out a two-way communications network

and 12,000 smart sensors on the electricity network. For that purpose the company acquired 7MHz of spectrum from Wireless Broadband Australia. With this they are able to build a machine-to-machine communications network to transmit information between field devices, backend systems and households. Under the plan and its contract with the government, the company has committed itself to: • Rolling out up to 50,000 smart meters to homes across the five sites in Sydney and the Hunter; • Trialling new in-home displays and products at 20,000 homes, including at 2,000 ‘smart homes’, where households will be able to turn appliances on and off remotely using websites and iPhones; • Battery storage trials in households in Scone, Newcastle and Newington – local homes with solar power will participate, with battery storage installed to help power local streets; • Virtual power station trials – local homes in Newcastle and Scone will be asked to participate to have new ceramic fuel cells installed at homes. A total of 25 fuel cells and five wind turbines will be installed on the grid and at homes to test distributed

generation; • Installing 12,000 smart sensors across Ausgrid’s network to allow better monitoring of the network and faster responses to power interruptions; • Electric car trials using 20 vehicles. Involves building 50 standard charging points and eight fast charging points to test charging from multiple locations on the grid; • Building a two-way communications network to transmit information between smart devices. • The widespread deployment of smart grids is crucial to achieving a more secure and sustainable energy future. With current trends in the supply and use of energy becoming increasingly untenable – economically, environmentally and socially – there is a general belief smart grids can play a significant role in enabling nearly all clean energy technologies, including renewables, electric vehicles and energy efficiency. As well as addressing current concerns with existing electricity systems, such as ageing infrastructure and increasing peak demand, smart grids are an important element for expanding the use of a number of low-carbon technologies, such as electric vehicles.

THE THREE-YEAR PROJECT RUNS ACROSS FIVE SITES IN SYDNEY AND THE HUNTER VALLEY (NEWCASTLE, SCONE, SYDNEY CBD, KU-RING-GAI AND NEWINGTON). IT WILL REPRESENT AUSTRALIA’S FIRST COMMERCIAL-SCALE SMART GRID.

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AUSTRALIA SMART GRID

It is recommended that smart grids play a critical role in the deployment of new electricity infrastructure in developing countries and emerging economies. As well as enabling more efficient operations, grids can also help to keep downward pressure on the cost of electricity. There is a huge potential for smart grids in rural areas of developing countries. “Small remote” systems – not connected to a centralised electricity infrastructure and initially employed as a costeffected approach to rural electrification – could later be connected easily to a national or regional infrastructure. Smart grids could be used to get electricity to sparsely populated areas by enabling a transition from simple, one-off approaches to electrification (e.g. battery-based household electrification to community grids that can then connect to national and regional grids. While many countries have plans to develop smart grids, the report argues that there is a need for increased co-ordination to enable countries to share lessons they have learned on a global basis. There is an immediate need for greater international collaboration in sharing experiences of pilot programmes and in leveraging national investments in the development of required technology. Another pressing issue is a need to develop common standards between countries that will help optimise and accelerate both the development and deployment of necessary technology while at the same time, reduce costs for all stakeholders including governments, industry, and the public. New research from Zpryme Research & Consulting called ‘Global Next Generation Smart Grid Technology’ found - driven by proactive home energy consumers, emerging market manufacturing and engineering advances, cloud 32 MAY/JUNE 2011 POWER INSIDER

based applications, renewable energy integration and the electrified transportation system, the global market for Next Generation Smart Grid Technology is poised to grow from $4.9 billion in 2011 to $43.3 billion in 2020. Next generation Smart Grid technologies are those that will be deployed after the first layer of Smart Grid technology are deployed (such as AMI, smart meters, communication systems and access networks). Market growth will be slow over the next 5 years, but is expected to accelerate rapidly starting in 2016.

Additionally, the market will be led by developed countries such as the U.S., China, South Korea, Japan, Canada, U.K., France, Spain, Denmark, Germany, Australia and New Zealand. These countries are relatively further along with their national Smart Grid deployments compared to their peers in the developing world. Opportunities in the market will be the largest for firms who invest in forward looking R&D activities and innovation intended to leverage the first layer of Smart Grid technology currently being deployed by utilities across the globe.

BATTERY STORAGE TRIALS WILL BE HELD IN HOUSEHOLDS IN SCONE, NEWCASTLE AND NEWINGTON – LOCAL HOMES WITH SOLAR POWER WILL PARTICIPATE, WITH BATTERY STORAGE INSTALLED TO HELP POWER LOCAL STREETS

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HEATING & COOLING TECHNOLOGIES

IEA LAUNCHES NEW HEATING AND COOLING TECHNOLOGIES REPORT E

arlier in May the IEA launched a new report showing how heating and cooling technologies that are energy-efficient and that emit little or no carbon dioxide can dramatically reduce energy consumption and CO2 emissions within residential, commercial and public buildings, a sector that currently accounts for around one-third of total final energy consumption. The IEA Technology Roadmap Energy-efficient Buildings: Heating and Cooling Equipment shows how technologies such as solar thermal, heat pumps, thermal energy storage, and combined heat and power for buildings have the potential to reduce CO2 emissions by up to 2 gigatonnes (Gt) by 2050 around a quarter of today’s emissions from buildings - and save 710 million tonnes oil equivalent (Mtoe) of energy by 2050. Much of the potential energy savings identified in the report could be achieved rapidly, both because the required technologies are available today and because heating and cooling equipment is typically replaced between 7 and 30 years - much more rapidly than the buildings themselves, which may last 30 to 100 years or more. “Energy efficiency and CO2-free technologies for heating and cooling in buildings offer many low-cost options for reducing energy consumption, consumers’ energy bills and CO2 emissions in buildings, with technologies that are available today. Given that space heating and cooling and hot water production consume perhaps half of all energy consumed in buildings today, the savings potential is very large,” Bo Diczfalusy, the IEA’s Director of Sustainable Energy Policy and Technology, said at the launch of the report.

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The IEA prepared the roadmap in consultation with representatives of government, industry, academia and non-governmental organizations. The document provides an overview of the current status of different mature, commercially available heating and cooling equipment, as well as emerging technologies. It charts a course for expanding the deployment of these technologies to 2050 with the ambitious goal of completely transforming the market for heating and cooling in buildings. Here Charlie Fox looks at some of the details of the report for our Asian readers. Current trends in energy supply and use are unsustainable – economically, environmentally and socially. Without decisive action, global energyrelated greenhouse gas (GHG) emissions will more than double by 2050 and increased oil demand will heighten concerns over the security of supplies. In the building sector, the global number of households will grow by 67% and the floor area of service sector (commercial and institutional) buildings by almost 195%. We can and must change our current energy and climate path; energy-efficient and low/zerocarbon energy technologies for heating and cooling in buildings will play a crucial role in the energy revolution needed to make this change happen. To effectively reduce GHG emissions, numerous items will require widespread deployment: energy efficiency, many types of renewable energy, carbon capture and storage (CCS), nuclear power and new transport technologies. Every major country and sector of the economy must be involved and action needs to be taken now to ensure that today’s investment decisions do not burden us with sub-optimal technologies in the longterm. There is a growing awareness of the urgent need to turn political statements and analytical work into concrete action. To address these challenges, the International Energy Agency (IEA), at the request of the G8, is developing a series

of roadmaps for some of the most important technologies needed for achieving a global energyrelated Carbon dioxide (CO2) target in 2050 of 50% below current levels. Each roadmap develops a growth path for the technologies covered from today to 2050, and identifies technology, financing, policy and public engagement milestones that need to be achieved to realise the technology’s full potential. These roadmaps also include special focus on technology development and diffusion to emerging economies, to help foster the international collaboration that is critical to achieving global GHG emissions reduction. Buildings account for almost a third of final energy consumption globally and are an equally important source of CO2 emissions. Currently, both space heating and cooling as well as hot water are estimated to account for roughly half of global energy consumption in buildings. These end-uses represent significant opportunities to reduce energy consumption, improve energy security and reduce CO2 emissions due to the fact that space and waterheating provision is dominated by fossil fuels while cooling demand is growing rapidly in countries with very carbon-intensive electricity systems. The Energy-Efficient Buildings: Heating and Cooling Equipment Roadmap sets out a detailed pathway for the evolution and deployment of the key underlying technologies. It finds that urgent action is required if the building stock of the future is to consume less energy and result in lower CO2 emissions. The roadmap concludes with a set of near-term actions stakeholders will need to take to achieve the roadmap’s vision. It is the IEA hope that this roadmap provides additional focus and urgency to the international discussions about the importance of energy efficiency as a technology solution. Key actionsin the next 10 years- Policy working groups should be convened that include stakeholders from all areas of government to develop policy and ensure that energy-efficient and low-carbon technology priorities are aligned with environmental policies and do not face barriers because of conflict with other policy goals (e.g. fire, equipment safety and local planning). Governments should develop national roadmaps, tailored to local circumstances, to help to drive market expansion, advance systems development

POWER INSIDER MAY/JUNE 2011 35

HEATING & COOLING TECHNOLOGIES

and integration, shape supportive policy and enhance collaboration. Policies should set measurable and meaningful targets, such as CO2 emissions reductions, or ensure that programme effectiveness is verified regularly. Governments should implement systems to collect comprehensive and timely data on energy consumption by end-use in the buildings sector, as well as data on building characteristics, technology deployment, market breakdown, costs and efficiency. This will help improve policy development and allow the monitoring of progress towards roadmap goalsz A wide variety of standardised information packages, tailored to individual decision makers’ needs, should be developed to allow decision makers to compare the potential of technology alternatives, identify performance targets and energy and CO2 savings at the time of design or purchase. Governments should improve standard education of key professionals, such as architects, designers, engineers, builders, building owners and operators/users in the potential of existing and soon to be commercialised heating and cooling equipment. zz Policies such as minimum energy performance standards, labelling, utility programmes and financial incentives are needed over the next 10 years to address market barriers – such as high initial costs and low priority of energy efficiency in decision-making – and market failures (e.g. principal-agent problems, transaction costs, search costs, compliance issues). Governments need to highlight the role of technologies in reducing financial risks, such as energy and carbon price volatility. Over the next 10 years governments should expand and/or implement mandatory quality assurance and certification schemes for equipment and installers (including training). These should be harmonised 36 MAY/JUNE 2011 POWER INSIDER

across the heating and cooling technology industry, so that decision makers are faced with a simplified decision process. Industry and governments need to work together and share information on an international level to help lower costs, accelerate technology deployment, and provide quality and performance assurance for installed systems. Key areas for collaboration include research, market deployment, performance and test procedures, setting of energy and CO2 emissions reduction targets/standards, harmonisation/ comparability of heating and cooling system tests, and policy development. Low/zero-carbon and energy-efficient heating and cooling technologies for buildings have the potential to reduce CO2 emissions by up to 2 gigatonnes (Gt) and save 710 million tonnes oil equivalent (Mtoe) of energy by 2050. Most of these technologies – which include solar thermal, combined heat and power (CHP), heat pumps and thermal energy storage – are commercially available today. An additional USD 3.5 billion a year needs to be made available for research, development and demonstration (RD&D) by 2030. R&D efforts should focus on reducing costs and improving the efficiency and integration of components. R&D into hybrid systems could lead to highly efficient, low-carbon technologies (e.g. integrated solar thermal/heat pump systems, CHP). Beyond 2030, R&D needs to focus on developing technologies that go beyond the best that are currently available. Governments need to create the economic conditions that will enable heating and cooling technologies to meet environmental criteria at least cost. Policies need to be “broad” to address specific barriers (e.g. lack of installer awareness) and “deep” to reach all of the stakeholders in the fragmented building sector.

TECHNOLOGY DEVELOPMENT: MILESTONES AND ACTIONS INVEST IN ADDITIONAL RESEARCH, DEVELOPMENT AND DEMONSTRATION This roadmap recommends the following actions:

Milestones

Develop cross-stakeholder consensus on the importance of energy sector R&D to secure stable long-term funding. Increase RD&D expenditure on heating and cooling technologies by USD 3.5 billion per year over today’s levels by 2030.

2011-30

Review existing RD&D investment in heating and cooling for buildings. Align funding priorities with long-term goals, specifically: rebalance current heating and cooling technology R&D funding to focus on energyefficient and low/zero-carbon heating and cooling systems where this is not the case today.

2011-12

Develop national or regional integrated RD&D strategies for buildings, identifying short- and long-term priorities for investing in heating and cooling systems and integrating them into the smart energy systems of the future.

2011 onwards

Improve IEA statistics on public and private investment in RD&D for heating and cooling systems for buildings.

2011 onwards

Public and private sector investment in RD&D for heating and cooling technologies needs to increase

by USD 3.5 billion per year above today’s levels by 2030 if additional improvements to today’s systems are to be achieved and demonstrated in a timely manner, while maintaining progress on developing solutions beyond the best available technology.31 RD&D should focus on reducing system costs and improving performance as well as optimising existing technologies for all heating and cooling applications and market segments. If these programmes are successful, a reduction in funding could be envisaged by 2050, as the heating and cooling sector would be substantially decarbonised by then. Governments, utilities, associations, industry and researchers should pursue national and international collaboration on RD&D, which helps to accelerate learning by sharing experiences and avoiding the need to “reinvent the wheel”, while using scarce resources more effectively. The IEA multilateral technology initiatives, which bring together researchers from across countries 31. No reliable data exists on total current public and private RD&D spending on heating and cooling technologies. and regions, are one example, 32 but other useful initiatives exist under the aegis of APEC, the United Nations, the World Bank, the Asian Development Bank and other organisations. The European Union has a wide range of projects covering the building sector that bring together universities, other research organisations and industry on specific projects linked to long-

term priorities for the energy sector. Government support of research and development is vital to enable specific heating and cooling technologies to cross the “valley of death” – the journey from initial scientific research to self-sustaining levels of market deployment. The impact on heating and cooling systems of widely varying applications, consumer requirements, building characteristics and climate means that large-scale demonstration programmes will also be required to ensure adequate information is available to minimise the risks of deploying new technologies. Governments will need to partner with manufacturers, home-builders and energy utilities to ensure these demonstration programmes are as comprehensive and relevant as possible. Of the additional investment in RD&D needed, around 60% will be required to support accelerated R&D efforts to improve performance and reduce the cost of existing technologies, 33 with the balance for demonstration projects. Large-scale demonstration projects of energyefficient and low/zero-carbon technologies are needed to help reduce technical and market barriers by providing robust data to evaluate their performance in each market segment. This will allow designs to be adapted, or made more flexible, reduce costs, ensure they perform as consumers expect and deliver the energy and CO2 savings anticipated. They can also be effective in educating local builders and installers. An important first step, however, is to ensure that current RD&D funding is being spent wisely and effectively and in alignment with the goals identified for heating and cooling equipment; public funding should go primarily to energy-efficient and low/ zero-carbon technologies, rather than to fossil fuels. Stable long-term funding commitments are critical to developing research capacity and achieving the maximum value from R&D investment. Specific R&D goals for individual technologies will be highlighted in later sections. roadmap process is the development of consensus among stakeholders – including political consensus – on the importance of increased R&D investment. This will allow the development of stable long-term plans and funding commitments for country, or even regionlevel, R&D strategies that take into account local conditions, existing technological capability and available resources. Priorities can then be identified for market segments and individual technologies as well as for private sector participation. Continuity is vital in order to avoid wasteful situations where RD&D and funding are ramped up and then scaled back, with negative impacts on the industry, as has sometimes occurred. Integration with the overall goals of the BLUE Map scenario needs to be an overarching goal. RD&D should aim at enabling energy-efficient and low/zero-carbon heating and cooling technologies

MATURE SOLAR THERMAL TECHNOLOGIES ARE COMMERCIALLY AVAILABLE, BUT FURTHER DEVELOPMENT IS NEEDED TO PROVIDE NEW PRODUCTS AND APPLICATIONS, REDUCE THE COST OF SYSTEMS AND INCREASE MARKET DEPLOYMENT.

to link seamlessly with the smart energy networks of the future, so that they can send, receive and respond to information upstream from utilities and grid operators, and downstream from home energy management and building operating systems. The more intelligent heating and cooling systems become, the greater the flexibility that will be offered to the energy system which should help to reduce costs. ACTIVE SOLAR THERMAL This roadmap recommends the following actions on R&D:

Milestones

R&D into the integration of solar thermal collectors into building shells and the development of low-cost multifunctional building components incorporating collectors. R&D into alternative materials for use in collectors that can reduce costs and improve performance.

From 2011, deployment of new collectors between 2015 and 2030. Single-family dwelling cost:2020 -30%2030 -50%

R&D for desiccant and sorption systems, and high-temperature solar collectors for solar cooling (reduced costs, improved performance, development of small-scale thermally-driven chillers).

2012-20

Development of systems and designs suitable for large-scale mass production that incorporate the latest materials.

2011-20

RD&D into customisable, optimal control systems capable of exchanging information with energy networks and building management systems. Optimising hybrid systems (e.g. solar thermal/ heat pump systems) to achieve very high efficiency heating and cooling systems, with large CO2 emissions reductions.

2012-25

Mature solar thermal technologies are commercially available, but further development is needed to provide new products and applications, reduce the cost of systems and increase market deployment. Depending on location, new buildings constructed to low-energy or passive house standards could derive all of their space and water heating needs from solar thermal by 2030 at reasonable cost. Solar thermal renovations resulting in a solar coverage of well over 50% should become a cost-effective refurbishment option for single- and multi-family houses and smaller-scale commercial buildings. These goals are ambitious but realistic if the right mix of RD&D, industry development and consistent market deployment programmes are applied. To reach these goals the following technologies need to be developed: Integration of solar collectors in building components. Building envelopes need to become solar collectors themselves, so both the performance of collectors and their direct integration into POWER INSIDER MAY/JUNE 2011 37

HEATING & COOLING TECHNOLOGIES

buildings needs to be improved. This should lead to the development of multifunctional building components which act as elements of the building envelope and as solar collectors. Alternative materials: The development of new components for use in collectors – such as polymers or plastics, the coating of absorbers (optimised to resist stagnation temperatures) and new materials to tackle deterioration resulting from UV exposure – could help to reduce the cost and improve the economics of solar thermal systems. Solar cooling systems: Solar thermal systems will require more compact thermally-driven cooling cycles (sorption chillers and desiccant systems), with higher coefficients of performance, operating at lower temperatures. This will require R&D into new sorption materials, new coatings of sorption materials on heat exchange surfaces, new heat and mass transfer concepts and the design of new thermodynamic cycles. This will need to be complemented by design guidelines and tools specifically developed for solar cooling systems and applications. Low-cost compact thermal energy storage will be critical to AST meeting a larger proportion of space and water heating and cooling. Intelligent control systems that communicate with building energy management systems will increase the useful solar energy available. These centralised and integrated control systems need to be able to benchmark and self-diagnose problems, while facilitating the integration of complementary systems (e.g. hybrid solar thermal/heat pump systems) and communicating upstream to utilities. Improving the automation of manufacturing will help to reduce initial system costs and expand the economic application to a wider range of customers, particularly for retrofitting existing buildings.

38 MAY/JUNE 2011 POWER INSIDER

COMBINED HEAT AND POWER This roadmap recommends the following actions on R&D:

Milestones

Development of PEMFCs and SOFCs (around 1 kW to several hundred kW class for residential use) with higher efficiency and durability, and lower costs. R&D on lower-cost fuel cell stacks (membranes, bipolar plates and gas diffusion layers) and balance of plant (inverters, controls, etc.), as well as reduced parasitic losses.

2015- 20

RD&D to improve microturbine performance and efficiency, as well as reducing costs. Increase flexibility of systems to adapt to varying demand and electricity/heat demands.

2011-25

R&D to improve efficiency and costs of fossil fuel-fired reciprocating engines and gas turbines. Reducing local pollutant emissions, particularly for reciprocating engines.

2011-25

Development of large scale SOFC (hundreds kW class for commercial use) by establishing technologies for integration of cell- stack modules as well as R&D for hybrid fuel cell-gas turbine systems, with MWscale capacities and very high efficiencies.

2015-25

Develop standardised CHP packages and operational strategies for different market sub-sectors and application profiles; provide professionals with simulation and optimisation tools.

2012-25

CHP includes technologies such as fuel cells, microturbines and Stirling engines that have yet to be widely deployed in buildings and have, in some cases, significant opportunity for reducing costs and improving performance.34 The key challenges are optimising components and lowering costs, through more R&D but also through large-scale, highvolume production. In addition, further R&D into flexibility of operation and variable heat/electricity balance would improve their economics. Similarly, R&D and demonstration will be required on microCHP integration into smart grids and real-time data exchange with the network. For engines, the current upsurge in work on emissions reduction must continue and overcome several significant engineering and chemical engineering challenges. The following areas need to be addressed by increased RD&D efforts: Reciprocating engines are a mature technology, but incremental improvements in efficiency, performance and costs should be possible. The US Department of Energy’s Advanced Reciprocating Engine Systems programme (ARES) aims to deploy an advanced natural gas-fired reciprocating engine with higher electrical efficiency, reduced emissions and 10% lower delivered energy costs. Manufacturers of liquid fuelfired reciprocating engines are incorporating design modifications and new component technologies to improve performance and reduce emissions. Microturbines and gas turbines: Technology development for microturbines is focused on improving efficiency (through higher temperatures and pressures, new materials such as ceramics and thermal barrier coatings), advanced blade design, recuperators (to boost electrical efficiency at expense of overall efficiency) and ultra-low emissions (through lean-pre-mix dry low-emission combustors and reduced-cost SCR systems). Gas turbines are more mature, but there could be modest declines in capital and maintenance costs, while recuperated dry low-emission combustors could meet very low emissions standards without the need for exhaust gas clean-up. Large-scale CHP technologies are generally mature and will not experience major improvements in either their performance or costs. Many of these improvements will filter down from improvements in large-scale gas turbine development. Stirling engines are at the market introduction stage and R&D to reduce their costs and improve their electrical efficiency is required. This can be achieved by increasing the working hot-end temperature by using high-temperature materials in the hot-end components; these exist today, but their costs need to come down. To help identify the best applications for Stirling engines, more demonstration programmes are required. The development of a wider range of systems will also help expand the range of applications in which Stirling engines can compete. Fuel cells: The R&D priorities are to reduce costs and improve durability and operational lifetimes. Better fuel-cell system design, new high-temperature materials and an improved understanding of component degradation and

failure could considerably enhance the durability of fuel cells. Fuel cells and their balance of plant will need to have an operating life of 40 000 to 80 000 hours to be competitive in buildings; current designs are expected to meet the lower end of this range, but further progress is needed. Improving PEMFC tolerance to impurities is a priority, while the development of a wide range of commercial SOFC and MCFC designs is required. Lowercost catalysts, membranes, bipolar plates and gas diffusion layers all need to be developed further. Balance-of-plant system costs can be lowered by reducing the costs of power conditioning systems (inverters) and the fuel pre-treatment system. Another important goal is to increase net system efficiencies by reducing parasitic loads. HEAT PUMPS This roadmap recommends the following actions on R&D:

Milestones

R&D into more efficient components and systems for heat pumps for heating and cooling applications, as well as to reduce first-costs for heat pumps for heating and cooling.

20% improvement in COPsby 2020; 50% by 2030 15% reduction in costs by 2020; 25% improvement by 2030

More efficient integrated heat pump systems (capable of simultaneous space/ water heating and cooling) capable of meeting needs of low-energy buildings and interfacing with smart grids/ home energy management systems.

Begin deployment in 2015, widespread deployment from 2020

Efficient low-temperature space heating systems and high-temperature space cooling systems integrated with heat pumps.

All new buildings capable of accepting lowtemperature heating/hightemperature cooling by 2020 in OECD

Development of hybrid heat pump systems (e.g. with solar thermal) with very high efficiency and CO2 savings

Widespread deployment from 2020-25

heating simultaneously for small-scale applications. These goals will also require extensive demonstration programmes to refine designs and optimise systems for different applications and customers. Improved performance is important, but efficiency will increase more slowly now that highly efficient systems are available. Just as important is the technology effort to reduce costs of systems, so that they are competitive in a wider range of applications. Research is needed on the following technical areas: Equipment and components: Decrease costs and increase reliability and performance through more efficient components. The key component areas are: Heat exchangers; Compressors; Expansion devices/valves; Fans, circulators and drives; Heat pump cycles; Variable speed compressors; Defrosting strategies; Advanced system design (including for colder climates); Smart controls. Systems/applications: Optimise component integration and improve heat pump design and installations for specific applications to achieve higher seasonal efficiency in wider capacity ranges. Improve optimisation with ventilation systems in larger applications. Control and operation: Develop intelligent control strategies to adapt operation to variable loads and optimise annual performance. Develop automatic fault detection and diagnostic tools. Improve communication with building energy management systems and upstream to smart energy grids. Integrated and hybrid systems: Develop integrated heat pump systems that combine multiple functions (e.g. space-conditioning and water heating) and hybrid heat pump systems that are paired with other energy technologies (e.g. storage, solar thermal and other energy sources) in order to achieve very high levels of performance. Improved design, installation and maintenance methodologies: Develop and promulgate information defining and quantifying benefits for good design, installation and maintenance of systems in order to realise the full efficiency potential of the heat pumps. In parallel, improvements in building design and operation that reduce the temperature lift performed by the heat pump will increase the average operating efficiency (the seasonal or annual performance factor). THERMAL ENERGY STORAGE

This roadmap recommends the following actions on R&D:

Milestones

Foster collaboration on basic science (thermodynamics and material development) and applied R&D (system integration, and centralised and building applications) for sensible, PCM and thermal-chemical stores.

2012 onwards

Invest in R&D to develop promising materials for compact thermal energy stores, particularly phase change materials and thermo-chemical stores. Validate stability of materials, performance characteristics and cycle life.

2012- 2020

Establish R&D collaboration with end-use technologies that will benefit from thermal energy stores (improved performance, reduced cost, greater CO2 reductions). Key technologies are AST, heat pumps and CHP in buildings.

2013 onwards

Develop and demonstrate heating and cooling systems with integrated, advanced compact thermal energy storage systems (based on PCMs or chemical reactions) in order to optimise performance and identify pathwaysto reduce costs for compact thermal energy storage.

2015-25

RD&D for thermal energy storage should focus on reducing costs and improving the ability to shift energy demand — for electricity, gas, etc. — over hours, days, weeks or seasons and facilitating the greater use of renewable energy. Both central and decentralised energy storage systems are likely to play a role. As well as ongoing R&D into the underlying science of thermal energy storage, the integration and optimisation of storage with heating and cooling technologies still needs to be perfected. This optimisation relates both to the storage itself (size, materials, etc.) as well as the operation and control of the overall system, including storage and

RD&D priorities for heat pumps are to continue improving the components and systems of existing technologies, and design systems that maximise COPs across a wide range of applications, climates and operator behaviour, to widen their potential market. This will require improving the design and sizing of systems, their integration with the building design and in their operation and control. The development of hybrid systems (e.g. heat pump/ solar thermal systems) offers the potential for very high year-round COPs. R&D also needs to focus on developing packaged integrated heat pump systems capable of providing cooling and space and water

POWER INSIDER MAY/JUNE 2011 39

HEATING & COOLING TECHNOLOGIES interaction with the building occupancy profile. A high number of charging and discharging cycles is critical for most TES applications, so the stability of materials in the systems is very important – not only the storage medium itself but also materials used in systems components such as containers, heat exchangers and pipes. Once thermal energy storage technologies have reached the level for prototype or demonstration, further improvements will be necessary to bring them to market. Better materials are the most promising way to achieve this, but cost barriers may prevent otherwise effective solutions from being implemented. More R&D into the real boundary conditions of material properties in TES systems is also necessary, given that it is essential to have very high confidence in the stability of materials and the number of charge/discharge cycles that systems can achieve. Operating conditions and hence performance are sometimes quite different from the assumptions made during early development. Worldwide R&D activities on novel materials for PCMs and thermochemical approaches are insufficiently linked at the moment and this needs to change. Many projects are focused on material problems related to one specific application and potentially miss wider opportunities for material applications in storage. Over the last few years, the emphasis of cooperative RD&D efforts has shifted towards storage technologies that improve the manageability of energy systems or facilitate the integration of renewable energy sources.

40 MAY/JUNE 2011 POWER INSIDER

Meeting the strategic goals for the BLUE Map scenario will require research focused on key areas of technical advancement: Phase-change materials and other material advancements; Stability of materials and system components over lifetime charge/discharge cycles; Analysis of system-specific storage parameters for different applications; Optimised control and operation; High-temperature energy stores. The key performance expectation for the household sector is that low-cost compact thermal energy storage will become available for smallscale applications in heating and cooling systems by 2020-25. This will allow initial deployment between 2020 and 2025 and large-scale deployment from 2030. The most promising areas of R&D are in PCMs and thermo-chemical stores, with hybrid systems (combining PCM and sensible heat systems) likely to allow early deployment of systems at a reasonable cost. CONCLUSIONS: NEAR-TERM ACTIONS FOR STAKEHOLDERS This roadmap has responded to government leaders’ requests for more detailed analysis regarding future deployment of energy-efficient heating and cooling technologies. It outlines a set of strategic goals, actions, and milestones to reach higher levels of market penetration around the world by 2050. The existence of a roadmap document is not enough on its own. This roadmap is meant to be a process that takes into account new developments from research breakthroughs, demonstration projects, new types of policies and international collaborative efforts.

The roadmap has been designed with milestones that the international community can use to ensure development and deployment efforts are on track to achieve the greenhouse gas emissions reductions that are required by 2050. As such, the IEA will report regularly on the progress that has been made in achieving the roadmap’s vision. To ensure co-ordination and harmonisation of activities, there needs to be a clear understanding of the roles of different stakeholder groups, along with commitments to achieving various objectives and targets over time. Table 8 identifies near-term priority actions for the full set of stakeholders that will need to be taken to achieve this roadmap. The IEA has benefited from major inputs from representatives from government agencies, industry, the buildings sector and other experts. These groups should continue to collaborate, along with others, to work together in a harmonised manner in the future. Specifically, the IEA proposes to develop a Roadmap Implementation and Monitoring Committee that would work together in an ongoing fashion. The Committee could undertake various data collection and monitoring activities, as well as coordination activities. It could build on — and include participants from — existing efforts. • For more information about the ongoing roadmap process and progress in implementation, and to read the report in full please visit www.iea.org/roadmaps/index.asp.

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ASIA PACIFIC SMART GRID

ASIA PACIFIC REGION GRADUALLY SHIFTING TOWARDS SMART GRIDS .

rost & Sullivan’s NewsAlert recent analysis finds that utilities in the Asia Pacific region are gradually shifting towards smart grids. To meet the green energy objectives, various governments in the Asia Pacific region have issued regulatory mandates requiring utilities to modernize their grids. The utilities, spurred on by government funding and the cost saving benefits of the advanced technology, have started moving toward smart grids, Frost & Sullivan officials said. The new report, “Asia Pacific Smart Grid Market” finds that smart grids will revolutionize the face of the current power sector from a unidirectional transmission system to an intelligent energy Internet. Smart grid involves two-way digital communications between the energy supplier and the consumer. The smart grid monitors the electricity usage and informs consumers about power usage. It empowers customers with the ability to have better control over their energy expenses. Transition to smart grid brings in immense business opportunities for a wide array of firms in the Asia Pacific region, the research agency said. It changes the way utilities function in the region. The new technology provides a massive growth opportunity to a variety of businesses including 26 MAY/JUNE 2011 POWER INSIDER

metering companies, network and software solution providers, system integrators, consultants, and equipment manufacturers, researchers at Frost & Sullivan said. “Currently, Australia, New Zealand, Singapore, South Korea, and Japan have announced major packages to stimulate Smart Grid development,” said Rajat Gupta, a Frost & Sullivan consultant. “The deployment of Smart Grid can result in significant cost savings for a utility through a reduction in manpower costs and peak load of power plants.” In the Asia Pacific region, Australia has made it mandatory for utilities to install smart meters. Frost & Sullivan expects that other countries in the region will follow the suit as the business case for smart grid emerges stronger in the region. Smart grid initiatives in developing countries of Malaysia (above), Indonesia, Thailand, and the Philippines are hindered by economic factors. However, once these countries learn from the experience of other nations and realize the cost and environmental benefits of large-scale smart grid implementations, their governments are likely to increase support to utilities through funding plans,

the agency said. For many countries in the Asia Pacific region, smart grids are bound to bring in returns in the long term, so it is crucial for utilities to invest heavily in them in the short term, finds the report. It also says vendors that are part of the smart grid value chain need to customize products and service offerings to each country’s and utility’s need, as the market evolves from an emerging to a more mature stage. Recently Lux Research predicted that global smart grid market will grow from today’s $4.5 billion to $15.8 billion by 2015. The report focuses on three segments of smart grid market – measurement and communication, analysis and services, and local management.

EHGUXFN

THE STUXNET CONSPIRACY

A sophisticated worm designed to infiltrate industrial control systems could be used as a blueprint to sabotage machines that are critical to U.S. power plants, electrical grids and other infrastructure, experts are warning.

44 MAY/JUNE 2011 POWER INSIDER

he discovery of Stuxnet, which some analysts have called the “malware of the century” because of its ability to damage or possibly destroy sensitive control systems, has served as a wake-up call to industry officials. Even though the worm has not yet been found in control systems in the United States, it could be only a matter of time before similar threats show up here. “Quite honestly you’ve got a blueprint now,” said Michael J. Assante, former chief security officer at the North American Electric Reliability Corporation, an industry body that sets standards to ensure the electricity supply. “A copycat may decide to emulate it, maybe to cause a pressure valve to open or close at the wrong time. You could cause damage, and the damage could be catastrophic.” Joe Weiss, an industrial control system security specialist and managing partner at Applied Control Solutions in Cupertino, Calif., said “the really scary part” about Stuxnet is its ability to determine what “physical process it wants to blow up.” Said Weiss: “What this is, is essentially a cyber weapon.” Researchers still do not know who created Stuxnet, or why. The antivirus security firm Symantec analyzed the worm this summer and, by taking control of

servers it had been connected to, determined that the malware had infected about 45,000 computers around the world. Most of those infected - about 30,000 - were in Iran. Those computers were not the targets, but the finding suggested that the target was nearby. Speculation has focused on Iran’s nuclear enrichment facilities, and this week Iranian officials said they suspect a foreign organization or nation designed the worm. The United States has a covert program to sabotage the systems that undergird Iran’s nuclear facilities. Some experts have also suggested that other countries, including Israel, could be behind Stuxnet. He added that although they can’t trace the worm to one particular person or group, given Stuxnet’s complexity they believe the worm originated with a group with enough time, money, expertise and manpower not only to write the program, but to do the real-world reconnaissance work and testing behind it. “It’s hard to say exactly who would be behind it, but when you look at the resources behind it ... it doesn’t leave you with many entities to look at,” he said. “There’s speculation that it could be a government, a government agency or nation-state, based on the amount of researchers needed. But it could also be a private entity who is interested in going after industrial control systems.” Kaspersky’s Schouwenberg said that although the worm may herald a new age of cyber sabotage and should elevate cyber weapons concerns, vulnerability to this particular worm is not especially high. “As soon as the Stuxnet news hit, I think everybody checked their systems and made the necessary preparations,” he said. “If there are any positives so far from Stuxnet, I hope it will raise further awareness with governments and

THE UNITED STATES HAS A COVERT PROGRAM TO SABOTAGE THE SYSTEMS THAT UNDERGIRD IRAN’S NUCLEAR FACILITIES. SOME EXPERTS HAVE ALSO SUGGESTED THAT OTHER COUNTRIES, INCLUDING ISRAEL, COULD BE BEHIND STUXNET plan management so they allocate more and more budgets to protect our systems. Joel F. Brenner, former national counter intelligence executive and a former senior counsel at the National Security Agency, said he thinks it is unlikely that the United States created the worm. “We don’t do anything on purpose that we can’t really target and control,” he said. Brenner, who has long warned of such a threat to the electric grids, also cautioned against assuming a nation state was behind it. A group at a “premier technical institute” in the United States, China, Israel or Russia, could have carried it off, he said. Iranian officials deny Stuxnet virus has affected major systems at nuclear plant, but analysts believe Iran may be suffering wider sabotage. Iran’s first nuclear power plant will begin supplying energy in early 2011, a senior official said, signaling a delay of several months after the spread of a global computer virus believed to have affected mainly Iran. Iranian officials said the Stuxnet virus had hit staff computers at the Bushehr plant, a symbol of Iran’s growing geopolitical sway and rejection of international efforts to curb its nuclear activity, but not affected major systems there. When Iran began loading fuel into Bushehr in August 2010, officials said it would take two to three months for the plant to start producing electricity and that it would generate 1,000 megawatts, about 2.5 percent of the country’s power usage. “We hope that the fuel will be transferred to the core of the Bushehr nuclear power

POWER INSIDER MAY/JUNE 2011 45

THE STUXNET CONSPIRACY plant next week and before the second half of the Iranian month of Mehr (Oct. 7),” Ali Akbar Salehi, head of Iran’s Atomic Energy Organization, was quoted on Wednesday as saying by the semi-official news agency ISNA. “The ground is being prepared in this regard and, God willing, the fuel will be loaded to the core of the reactor completely by early November and the heart of Bushehr power plant will start beating by then.” Salehi added: “Two to three months after that electricity will be added to the networks.” This would mean Bushehr generating electricity from January or February. Security experts say the Stuxnet computer worm may have been a state-sponsored attack on Iran’s nuclear program and have originated in the United States or Israel, the Islamic Republic’s arch-adversaries. Iran’s program includes uranium enrichment - separate from Bushehr - that Western leaders suspect is geared towards developing atomic bombs. Iran says it is refining uranium only for a future network of nuclear power plants. Diplomats and security sources say Western governments and Israel view sabotage as one way of slowing Iran’s nuclear work. Little information is available on how much damage, if any, Iran’s nuclear and wider infrastructure has suffered from Stuxnet and Tehran will probably never disclose full details. Some analysts believe Iran may be suffering wider sabotage aimed at slowing its nuclear advances, pointing to a series of unexplained technical glitches that have cut the number of working centrifuge machines at the Natanz enrichment plant. Bushehr was begun by Germany’s Siemens in the 1970s, before Iran’s Islamic Revolution, but has been dogged by delays. Russia designed and built the plant and will supply the fuel. To ease nuclear proliferation concerns, it will take back spent fuel rods that could otherwise be used to make weapons-grade plutonium. Bushehr is also being monitored by inspectors of the UN nuclear watchdog. Washington has criticized Moscow for pushing ahead with Bushehr despite Iranian

46 MAY/JUNE 2011 POWER INSIDER

defiance over its nuclear program. Siemens, a German-headquartered multinational company, has identified 15 cases of infections on customers’ plants worldwide; the single largest concentration - five - was found in Germany. Each customer was able to detect the worm and remove it without harm to their operations, spokesman Alexander Machowetz said. Still, the possibility that Stuxnet could be used by copycats, even those who don’t intend to do harm with it, is causing concern among experts. “Stuxnet opened Pandora’s box,” said Ralph Langner, a German researcher whose early analysis of the worm’s ability to target control systems raised public awareness of the threat. “We don’t need to be concerned about Stuxnet, but about the next-generation malware we will see after Stuxnet.” Sean McGurk, director of the U.S. National Cybersecurity and Communications Integration Center at the Department of Homeland Security, said that the department posted its first report to industry recommending steps to mitigate the effects of Stuxnet on July 15. But “not even two days later,” he said, a hacker Web site posted the code so that others could use it to exploit the vulnerabilities in Microsoft. “So we know that once the information is out in the wild, people are taking it and they’re modifying it,” he said. While analysts still do not know what the creators of Stuxnet were targeting, this much is known: • It exploited four Microsoft “zero-day” vulnerabilities, allowing Stuxnet to spread automatically without computers users’ knowledge. • One vulnerability allowed the worm to spread via the use of a thumb drive or other removable device. That flaw and one other have since been patched. • It is autonomous - it requires no hidden hand at the control stick to direct its moves. • It targeted a specific kind of Siemens software that runs on industrial control systems from water sanitization to oil

pipelines and nuclear plants. • Once it found its target, it was designed to inject code into the controller to change a process. What that process is, is not yet known. • Time stamps on pieces of the code suggest it was created in early 2009. • It was first reported in June by VirusBlokAda, a Belarus security firm. Assante, formerly of the North American Electric Reliability Corp., also known as NERC, noted that Stuxnet was built to take advantage of weaknesses in industrial systems. For instance, the worm banked most industrial plants’ reliance on third parties to perform maintenance and assist in troubleshooting, and these outsiders often plug thumb drives or other removable media into the systems. The irony, he said, is that industry has long known about these gaps and high-risk practices. “We know so much about what we need to address,” said Assante, now president of the National Board of Information Security Examiners. “We just need a more organized way of addressing the weakness.” Recently, in light of Stuxnet, NERC issued an update to electric power companies, making recommendations for protection, but said that companies would “not be subject to penalties for a failure to implement” them. Stuxnet underscores the need to strengthen the defense of critical industrial systems, lawmakers say. “While industry attitudes and awareness have improved in the last few years, the same broken systems are in many cases

LAST YEAR, THE WALL STREET JOURNAL QUOTED US INTELLIGENCE OFFICIALS DESCRIBING HOW CYBER SPIES HAD CHARTED THE ON-OFF CONTROLS FOR LARGE SECTIONS OF THE US GRID AND ITS VULNERABILITY TO HACKING. still in place, leaving our nation vulnerable to attacks,” said Rep. Jim Langevin (D-R.I.), who this week introduced legislation to allow the administration to regulate these critical systems and to expand the Department of Homeland Security’s authority to enforce the rules. Several weeks ago, a control system monitoring pressure in a natural gas pipeline in San Bruno, Calif., malfunctioned, resulting in an explosion and fire that killed eight people. “This is what you could do unintentionally,” said Weiss, the industrial control system security specialist. “Think about Stuxnet, where you could start doing things intentionally.” In an exercise named Cyber Storm III, involving government agencies and 60 private sector organisations including the banking, chemical, nuclear energy and IT sectors, it presented a scenario where America was hit by a co-ordinated cyber shock-and-awe campaign, hitting 1,500 different targets. The results of the exercise have not been released. One of those who believe that cyber war has finally come of age is James Lewis of the Centre for Strategic and International Studies in Washington. Lewis said that while previous large-scale hacking attacks had been an

annoyance, Stuxnet and the attack on Centcom represented the use of malicious programmes as significant weapons. “Cyber war is already here,” said Lewis. “We are in the same place as we were after the invention of the aeroplane. It was inevitable someone would work out how to use planes to drop bombs. Militaries will now have a cyber-war capability in their arsenals. There are five already that have that capacity, including Russia and China.” Of those, Lewis said he believed only three had the motivation and capability to mount the Stuxnet attack on Iran: the US, Israel and the UK. He added that a deliberate hack of an electric generator at the Idaho National Laboratory, via the internet, had previously demonstrated that infrastructure could be persuaded to destroy itself. “There is growing concern that there has already been hostile reconnaissance of the US electricity grid,” he said. Last year, the Wall Street Journal quoted US intelligence officials describing how cyber spies had charted the on-off controls for large sections of the US grid and its vulnerability to hacking. The head of the Pentagon’s newly inaugurated US Cyber Command, General Keith Alexander, has recently said that it is only a matter of time

before America is attacked by something like the Stuxnet worm. One of the problems that will confront states in this new era is identifying who is behind an attack. Some analysts believe Israel is the most likely culprit in the Stuxnet attack on Iran – perhaps through its cyber war “unit 8200”, which has been given greater resources. They point to a file in the worm called Myrtus – perhaps an oblique reference to the book of Esther and Jewish pre-emption of a plot to kill them. But it could also be a red herring designed to put investigators off the scent. “The US and the UK are now putting large amounts of resources into cyber warfare, in particular defence against it,” said Clemente, pointing out that there is now a cyber security operations centre in GCHQ and a new office of cyber security in the Cabinet Office. He added: “What I think you can say about Stuxnet is that cyber war is now very real. This appears to be the first instance of a destructive use of a cyber war weapon.” On 07 July 2009 the Israeli news-site ynetnews.com posted a lengthy piece on possibly cyberwar against the Iran nuclear programme. Intriguingly, even contaminated USB-Sticks were mentioned. In retrospect, the piece sounds like an indirect announcement of a covert victory to allies and enemies. That there are serious anti-proliferation efforts by all available means undertaken by western intelligence is not in doubt. . There is further indication in the way stuxnet is actually working on the SPS-level. The current state of analysis seems to support the assumption, that the attack was meant to work synchronized and spread over many identical nodes. In a nuclear power plant, there are not many identical SPS-nodes, as there is a wide variety of subsystems of different kind. Compared to this, an enrichment centrifuge plant consists of thousands of identical units, arranged in serial patterns called cascades. Each of them is by necessity the same, as enrichment centrifuges are massively scaled by numbers. stuxnet would have infected each and every one, then triggering subtle of massive failures, depending on the choice of the attacker. To get an impression how the Natanz facility looks from the inside, Iranian President Ahamadinendjad has visited the place in April 2008. So in summary, my guess is that stuxnet has been targeted at Natanz and that it achieved success in reducing the operational enrichment capability successfully. We will probably never be able to find out what really happened for sure, unless Iran comes forward with a post-mortem. Stuxnet will go down in history as the first example of a new class of malware, that has been engineered to weapons-grade performance with nearly no side-effects and pinpoint accuracy in delivering its sabotage payload. Until we get to the bottom of this, Stuxnet will remain to be a dangerous worm of no one will claim the responsibility, and until the bottom is reached the conspiracists will continue to point fingers.

Charles Fox

POWER INSIDER MAY/JUNE 2011 47

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INDIA COUNTRY FOCUSKOREA – A WEALTH OF OPPORTUNITY 26TH-27TH JULY ‘OVERVIEW 2011 SEOUL, KOREA & CURRENT STATUS’ Innovation, Strategy, Investment

BE POSITIONED AS A THOUGHT LEADER IN YOUR AREA OF EXPERTISE

The world presently and simultaneously faces both a resource and environmental crisis. International energy supply and demand continues to increasingly become unbalanced as populations grow worldwide and as emerging markets and developing countries realize rapid economic growth. What is more, the destruction of our ecosystem creates more frequent and abnormal weather conditions that foster environmental disasters due to increasing greenhouse gas emissions. Energy is at the centre of all these crises. The seriousness of the aforementioned concerns remains par-

ticularly relevant to Korea since it depends on imports for 97% of its total energy consumed; additionally, 85% of Korea’s total greenhouse gas emissions are released through energy consumption. Considering that energy consumption is directly related to the economy, it is impossible to significantly reduce consumption without creating additional problems. In order to ensure environmentally friendly economic growth, we need to convert our consumption to clean energy that reduces the release of carbon emissions. Technological development remains key to achieving this goal.

With the correct implementation, we can both preserve the global environment for future generations and achieve sustainable growth by both developing “green” technology and “green” industry. Tackling such issues today in the energy sector will help prevent food crises in the future and create new economic growth engines, which will eventually drive green growth in Korea. Power Insider executive forums and roundtables are viewed as key platforms for networking, exploring business opportunities and keeping abreast of local developments.

Speakers include: MR. CHONG – YOUNG KIM KEPCO (Korea Electric Power Corporation) EVP & Chief Technology Officer

MR. NAMHOON KANG Ministry of Knowledge Economy Director General for Energy Policy Division

MR. HONG SUNG EUI KEPCO (Korea Electric Power Corporation) Head of Strategy

MR. PARK YUNG JUN Ministry of Knowledge Economy Vice Minister of Trade and Energy

MR. KIM WOO – KYUM KEPCO (Korea Electric Power Corporation) Executive VP + COO

MR. LEE MAN EE Ministry of Environment Minister

T: +44 (0) 1179 606452 E: info@sks-global.com

MARCH/APRIL 2011

PLUS • Smart Grid developments • Solar Power India

FEATURES INSIDE INCLUDE: Fukushima Crisis, www.power-insider.com Asia Biomass, Regional Review, Malaysia Oil & Gas

COMMUNITY POWER

WWEA HIGHLIGHTS THE IMPORTANCE OF COMMUNITY POWER AND PUBLISHES COMMUNITY POWER DEFINITION Study reveals that Community Power ownership significantly increases the acceptance of wind farms T

he Fukushima tragedy has highlighted the urgent need to increase wind power and other renewable energy sources to transform the global energy system. In light of such prospects, Community Power is increasingly being viewed as an essential framework for developing such decentralized forms of energy. Empirical studies have underlined the contribution of community ownership models of wind farms (Community Power) to social acceptance. A comparative study conducted in Germany by researchers from the University of Amsterdam reached the conclusion that the social acceptance of wind power is very high in general, and even higher when community members are directly involved. In fact 62 % of the residents at the community owned wind farm expressed a positive or very positive opinion on the wind farm in their neighbourhood and only 1 % had a negative or very negative attitude. In the case of the non-community owned wind farm, most people (47%) expressed a neutral opinion, while 26 % were positive or very positive and 27 % were negative or very negative. Stefan Gsaenger WWEA Secretary General: “If we want to reach a 100 % renewable energy supply worldwide with wind energy as a cornerstone, we have to make sure that the local communities actively support this endeavour and that they benefit from the wind farms in their vicinity. Community Power ownership models offer an excellent approach to achieving this objective.” In light of the strategic importance of this topic, WWEA created a working group on Community Power. On the event of the 2nd Annual Community Power Conference in Toronto (Canada) last autumn, the working group members met to discuss the definition of Community Power.Kris Stevens, Chair of the WWEA Community Power working group and Executive

50 MAY/JUNE 2011 POWER INSIDER

Director of the Ontario Sustainable Energy Association: “We know now that Community Power is of crucial importance. Some jurisdictions, like in Ontario where I am living, have even taken the lead in setting up special support schemes for Community Power. We need more of such policies around the world in order to empower local communities.” The members of the working group, representing all continents, agreed on the importance of defining Community Power in order to give clear guidance to policymakers as well as to others involved in renewable energy and the general public. They agreed on the potential of Community Power to further accelerate the deployment of wind and other renewable energy technologies. It was also mentioned that Community Power can lead to a more democratic energy supply structure.The WWEA Community Power working group agreed on the following definition: A project can be defined as Community Power if at least two of the following three criteria are fulfilled: 1. Local stakeholders own the majority or all of a project A local individual or a group of local stakeholders, whether they are farmers, cooperatives, independent power producers, financial institutions, municipalities, schools, etc., own, immediately or eventually, the majority or all of a project. 2. Voting control rests with the community-based organization:The community-based organization made up of local stakeholders has the majority of the voting rights concerning the decisions taken on the project. 3. The majority of social and economic benefits are distributed locally: The major part or all of the social and economic benefits are returned to the local community.

‘A COMPARATIVE STUDY CONDUCTED IN GERMANY BY RESEARCHERS FROM THE UNIVERSITY OF AMSTERDAM REACHED THE CONCLUSION THAT THE SOCIAL ACCEPTANCE OF WIND POWER IS VERY HIGH IN GENERAL, AND EVEN HIGHER WHEN COMMUNITY MEMBERS ARE DIRECTLY INVOLVED.’

POWER INSIDER MAY/JUNE 2011 51

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PV POWER

ACHIEVING AN UNSUBSIDISED PV MARKET IN AUSTRALIA Peter Newman, CEO – Australian PV Association

ustralia is a country almost perfectly designed for solar energy. It is a vast continent with an excellent environment highly suitable for using the sun to generate energy through photovoltaic (PV) technology. In the twenty years leading up to 2008, Australia had a small but steady growing trend of people taking-up PV technology to generate energy. The Australian Government introduced Renewable Energy Certificate legislation in 2000 and by 2009, State and Territory Governments had begun introducing feed-in tariffs which further stimulated the community’s interest in PV. Add strongly increasing household power prices and

the Australian public embraced PV with a huge response. However, the supportive incentive arrangements are changing. As the Australian Government gradually reduces their financial incentives the State and Territory Governments are also carefully looking at their role in supporting PV in the renewable energy generation market. 2010 can be described as a massive year for PV. What then is in store for PV in 2011 and into the future? How should Governments manage their feed-in tariff schemes to support PV as the market approaches the point where PV systems become

Salvation Army Oasis Centre Sydney - 10kW

Sub-market Off-Grid domestic Off-Grid non-domestic

1993

1994

1995

1996

1997

1998

1999

2000

2001

2008

2009

1,56

2,03

2,6

3,27

4,08

4,97

6,07

6,93

9,22

11,07 12,45 14,28 16,59 19,89 23,88 27,71 32,68

40,76

44,23

5,76

6,87

8,08

9,38

11,52 13,32 15,08 16,36 17,06 19,17 22,74 26,06 29,64 33,07 36,65 38,73 40,66

43,14

43,57

0,01

0,02

0,03

0,08

0,20

0,85

1,49

2,39

2,80

3,40

4,63

5,41

6,86

9,01

15,04 29,85

101,21

479,34

0,02

0,20

0,21

0,52

0,54

0,66

0,76

1,01

Grid-connected centralised TOTAL (MWp)

7,30

8,90

2003

HIGHLIGHTS AND PROSPECTS The grid connected PV market in Australia grew more than 500% in 2010, from 67 MW to 353 MW. This was driven by a combination of support via renewable energy credits and feed-in tariffs, bolstered by rapid international PV price drops, a high Australian dollar exchange rate and streamlining of local PV system delivery chains. Such streamlining was achieved most notably by reduced reliance on PV distributors, as well as by sales of standardised systems, without individual designs for the site. Government support for PV will begin to wind down in 2011 and discussion now focuses on how best to regulate an unsubsidized market as it approaches grid parity. Issues of high PV penetration in sections of the electricity network are also of increasing interest for researchers and for the electricity utilities. To date most of the PV incentives have focussed on small scale, residential PV systems. Interest in larger systems has been raised by the Australian Government’s Solar Flagship program, with winners of the first stage, for 150 MW of PV, to be announced in 2011. State Governments have also shown interest in developing commercial-scale PV markets. These will provide better economies of scale for the industry, as well as better matching electricity load profiles. Research funding from the Australian Solar Institute will begin to see enhanced research outcomes, encompassing a range of PV technologies. The new Australian Centre for Renewable Energy will also begin to provide venture capital and product development support from 2011. There are no specific PV targets for Australia, although each State-based feed in tariff program has

1992

Grid-connected distributed

2002

affordable in their own right?

2004

2005

2006

2007

1,32

2,53

10,70 12,70 15,70 18,70 22,52 25,32 29,21 33,58 39,13 45,63 52,30 60,58 70,30 82,49 104,5 187,64

Table 1: The cumulative installed PV power in Australia across 4 sub-markets. 54 MAY/JUNE 2011 POWER INSIDER

2010

3,79 570,93

Adelaide Desalination Plant - 204 kW

had its own target. Australia has an overall renewable energy target of 45,000 GWh (approximately 20% of electricity use) by 2020. The market for PV installations connected to central grids in Australia continues to increase and represented the largest market for PV in 2010. The majority of installations took advantage of incentives under the Australian Government Renewable Energy Target mechanism, with further drivers provided by Feed-in Tariffs in some States and Territories. The main applications are rooftop systems for private residences. There are also installations on community buildings, including schools. The commercial and light industry sector has grown more slowly, with support available to selected projects in certain areas through the Solar Cities program and State government programs.

regulatory arrangements for Retailers and Network Service Providers PV prices and installation costs are now falling to a point where PV should begin to reach ‘grid parity’ in different areas of Australia in the next few years. This is the price at which the levelised cost of PV electricity reaches retail electricity rates and PV system owners can use locally generated PV electricity instead of grid electricity and so achieve lifetime cost savings. Transitional support for PV via rebates, Solar Credits and Feed-in Tariffs has been critical to arriving at this point, and is still needed in the short term. However, current feedin tariffs applying to small-scale PV systems across most Australian States are likely to end in 2011 as programs end or installation caps are reached, while Australian Government rebates have ended and Solar Credit support will reduce. In order to support TOTAL PHOTOVOLTAIC POWER the development of a sustainable PV industry in INSTALLED Australia, the APVA advocates gradual, planned The Australian market is dominated by the high reductions in support policies, rather than sudden uptake of grid-connected distributed curtailment. In addition, clarity is systems, with installations in this needed immediately on how PV is sector increasing from 67 MWp to be treated once current support in 2009 to 353 MWp in 2010, does cease. due to the availability of rebates, In addition to ensuring that renewable energy certificates and existing levels of support are feed-in tariffs. The total market was reduced gradually, State and 383MWp. Territory Governments should now A summary of the cumulative set in place the long-term electricity installed PV Power, from 1992distribution and retail regulatory 2010, broken down into four subarrangements to be followed for markets is shown in Table 1 and grid-connected PV and other Figure 1: Cumulative PV Figure 1. distributed energy solutions. Policy Installations in Australia A strategic approach to certainty is required to underpin 1992 – 2010.

industry investment and there is a strong case for consistency across the various jurisdictions. The absence of such certainty will undermine the viability of an industry that is currently employing more than 10,000 people Australia-wide and with a turnover of over $2 Billion. Principles were established by the Council of Australian Governments (COAG) in 20081. COAG is the peak intergovernmental forum in Australia, comprising the Prime Minister, State Premiers, Territory Chief Ministers and the President of the Australian Local Government Association. These Principles include the following, which are consistent with net metering at a one-forone rate being a minimum for grid-connected PV: “That Governments agree that residential and small business consumers with small renewables (small renewable consumers) should have the right to export energy to the electricity grid and require market participants to provide payment for that export which is at least equal to the value of that energy in the relevant electricity market and the relevant electricity network it feeds in to, taking into account the time of day during which energy is exported.“ and that “assignment of tariffs to small renewable consumers should be on the basis that they are treated no less favourably than customers without small renewables but with a similar load on the network.” 1 COAG Meeting, Canberra, November 2008, National Principles for Feed-in Tariff Schemes͘

POWER INSIDER MAY/JUNE 2011 55

PV POWER THE GOVERNMENT CONTEXT The installation of small-scale PV systems has been encouraged by most States and Territories, and by the Australian Government, over the past decade. PV prices and installation costs have now fallen to a point where PV will reach ‘grid parity’ over the next 5 or so years. However, before this ‘grid parity’ point is reached, government support mechanisms for PV are pulling back and there is no regulatory framework in place to specify how electricity retailers and network service providers treat distributed PV customers. Such a framework is urgently required if the momentum which has been built up over the past decade is to continue and if PV is to become mainstream, providing clean energy and jobs for Australia. The right to connect and a net-metered default rate for distributed generators are two key components of that framework. Continued growth of this market will ensure the industry development, job creation and skills base is maintained and enhanced in coming years. Without clear and consistent regulatory frameworks in each state, the PV industry risks collapse at the point when self-sufficiency is almost within reach. Such a premature pull-out would waste the millions of dollars invested in industry development over the past decade. The PV industry currently employs over 10,000 people Australia-wide, has a turnover of over $2 Billion and generates electricity worth over $16 million a year, and so is a significant contributor to Australia’s employment and wealth creation. Uncertainty about PV customer rights Flemington Racecourse Melbourne - 30kW

56 MAY/JUNE 2011 POWER INSIDER

will undermine industry and consumer confidence and allow electricity retailers and network service providers to adopt ad-hoc, potentially self serving arrangements for grid-connected PV. Perhaps more importantly, an ongoing and gradual expansion of the PV industry is fundamental for the maintenance of safety standards and quality control. A buoyant industry will be able to continue to invest in R&D, including developing an understanding of the impacts of higher penetrations of PV on electricity networks, so that the benefits can be maximised. As the Australian electricity market has moved towards commercialisation and privatisation, the contribution to electricity prices of retail, distribution, transmission and bulk energy supply costs have become more difficult to ascertain. For an individual PV customer, the price of grid electricity and the standing charges for grid connection are the only values available against which they can make energy investment decisions. PV systems should be fully compensated for the retailer’s avoided perkWh usage charges because electricity customers already pay a significant service availability charge for network access as part of their bill, which is intended to cover the retailers’ fixed charges (including network charges). The right to connect a PV system to the grid and a net metered default value for exported electricity is readily understood and administratively simple to implement. It remains the responsibility of governments and electricity regulators to cut through the more complex background values so that grid electricity prices and standing charges are cost-reflective.

Issues arising from an unregulated approach In the absence of specific regulation, electricity networks can choose whether or not to allow PV systems to be grid-connected, while retailers can offer any amount for PV electricity that is exported to the grid, or nothing at all. While net metering is available in some States, retailers in other States are already beginning to make their own offers for electricity produced by PV systems or for electricity sold back in excess of customer requirements. These offers are as low as 6c/kWh, in contrast to retail prices over 20c/ kWh. A perverse situation can then arise whereby electricity retailers could pay 6c/kWh or less for solar generated power, and sell that same electricity to the PV system owner for 20c/kWh or up to 40c/ kWh at peak times. This will discourage ongoing PV investment. Reports such as (AECOM, 20102) appear to suggest that the wholesale rate is the default. This assumption ignores the benefits of distributed energy in reducing the need for transmission and distribution, as well as reducing line losses and, for PV, the fact that the avoided cost of conventional generation is higher during daylight hours. It also ignores the fact that from a PV investor’s perspective the value of a product is the avoided cost, in this case the retail electricity price, while the network costs are already paid for via standing charges. 2 ECOM, 2010, Solar Bonus Scheme: Forecast NSW PV Capacity and Tariff Payments, prepared for the NSW Department of Industry & Investment, 25 October, 2010.

ƵŝůĚͲhƉ ŽĨ Ws sĂůƵĞ ŝŶ ĂůŝĨŽƌŶŝĂ KƚŚĞƌ

ZĂŶŐĞ ŽĨ dŽƚĂů sĂůƵĞ ŽĨ Ws͗ ϳ͘ϴ ʹ ϮϮ͘ϰ ΪͬŬtŚ

sĂůƵĞƐϭ

sĂůƵĞ ŽĨ ,ĞĂůƚŚ ĞŶĞĨŝƚƐ sĂůƵĞ ŽĨ ǀŽŝĚĞĚ EKy ŵŝƐƐŝŽŶƐ sĂůƵĞ ŽĨ ǀŽŝĚĞĚ KϮ ŵŝƐƐŝŽŶƐ sĂůƵĞ ŽĨ ǀŽŝĚĞĚ tĂƚĞƌ hƐĞ sĂůƵĞ ŽĨ &ŽƐƐŝů &ƵĞů WƌŝĐĞ ,ĞĚŐĞ sĂůƵĞ ŽĨ 'ƌŝĚ ^ƵƉƉŽƌƚ ǀŽŝĚĞĚ ĞƉůŽǇŵĞŶƚ ĂƐĞ ĂŶĚ ^ƉĞĞĚ

d Ϭ͘ϬϮ ʹ Ϭ͘Ϭϰ Ϭ͘Ϭϭ ʹ Ϭ͘Ϭϯ Ϭ͘ϯϯ ʹ ϭ͘ϳϳ Ϭ͘Ϭϭ ʹ Ϭ͘Ϭϱ Ϭ͘ϰϭ ʹ Ϭ͘ϵϱ Ϭ͘Ϭϵ ʹ Ϭ͘Ϯϴ ^ŝƚĞ ^ƉĞĐŝĨŝĐ

ǀŽŝĚĞĚ 'ĞŶĞƌĂƚŝŽŶ ĂŶĚ dΘ >ŽƐƐĞƐ

Ϭ͘ϱϮ ʹ ϭ͘ϯϲ

ǀŽŝĚĞĚ 'ĞŶĞƌĂƚŝŽŶ &ƵĞů ŽƐƚ ;EĂƚƵƌĂů 'ĂƐͿ

ϯ͘Ϯϰ ʹ ϵ͘ϳϭ

ǀŽŝĚĞĚ 'ĞŶĞƌĂƚŝŽŶ sĂƌŝĂďůĞ KƉĞƌĂƚŝŽŶ Θ DĂŝŶƚĞŶĂŶĐĞ ŽƐƚ ǀŽŝĚĞĚ ŝƐƚƌŝďƵƚŝŽŶ ŽƐƚ ; ůů ŽƐƚƐ ůůŽĐĂƚĞĚ ƚŽ ^ƵŵŵĞƌ WĞĂŬͿ

Ϭ͘ϬϬ ʹ Ϭ͘Ϭϴ Ϭ͘ϭϵ ʹ Ϯ͘ϵϱ

basis (see DSIRE , REN21 ). This provides a stable underlying framework on top of which specific support mechanisms to stimulate the PV market have been instigated in some jurisdictions, including feed-in tariffs and capital grants. In Australia, support for PV deployment has occurred before the regulatory framework has been properly developed. Now that the support is being wound down, in part due to the successful efforts of the PV industry to reduce prices and streamline deployment, there is little regulatory base which the industry can count on in continuing to build and consolidate the PV market.

CONCLUSIONS Solar power has the potential to provide significant benefits to all stakeholders in the Australian electricity sector and the community. It is critical that the retail electricity sector be regulated to recognise the value of solar energy and reduce barriers to its implementation. A common approach across all Government jurisdictions would facilitate deployment, reduce costs and meet the Australian Government’s call for uniformity with regard to PV metering and buy-back rates. 1. The APVA recommends mandatory grid connection rights for all PV systems up to 10 kWp (which are installed on buildings). 2. The APVA advocates net metering at a one-forone rate as the default minimum tariff where no specific feed-in tariff mechanism exists. 3. These should be mandated across all States and Territories, and supported by the Council of Australian Governments. These regulations would provide a straightforward and administratively simple means of compensating PV generators for both their energy and their network value.

3 First Solar, 2008, Presentation to an Australian PV Association Seminar, November 2008.

4. www.dsireusa.org/incentives 5. REN21, 2010, Renewables 2010 Global Status Report.

ǀŽŝĚĞĚ dƌĂŶƐŵŝƐƐŝŽŶ ŽƐƚ ; ůů ŽƐƚƐ ůůŽĐĂƚĞĚ ƚŽ ^ƵŵŵĞƌ WĞĂŬͿ

Ϭ͘Ϭϰ ʹ Ϭ͘ϳϮ

ǀŽŝĚĞĚ 'ĞŶĞƌĂƚŝŽŶ ĂƉĂĐŝƚǇ &ŝǆĞĚ KƉĞƌĂƚŝŽŶ Θ DĂŝŶƚĞŶĂŶĐĞ ŽƐƚ

Ϭ͘ϭϵ ʹ Ϭ͘ϰϰ

ǀŽŝĚĞĚ 'ĞŶĞƌĂƚŝŽŶ ĂƉĂĐŝƚǇ ĂƉŝƚĂů ŽƐƚ ;ϲϱй ĨĨĞĐƚŝǀĞ >ŽĂĚ ĂƌƌǇŝŶŐ ĂƉĂĐŝƚǇ ĂƉƉůŝĞĚ ƚŽ Ăůů ǀŽŝĚĞĚ ĂƉĂĐŝƚǇ ŽƐƚƐͿ

ΪͬŬtŚ

Ϯ͘ϳϯ ʹ ϰ͘Ϭϭ

ŵŽŶŐ ƚŚŽƐĞ ĚŝƐƚƌŝďƵƚĞĚ ǀĂůƵĞƐ ŶŽƚ ǇĞƚ ƋƵĂŶƚŝĨŝĞĚ ĂƌĞ ƚŚĞ ŝŵƉĂĐƚ ŽŶ ůŝŬĞůŝŚŽŽĚ ŽĨ ƐǇƐƚĞŵ ŽƵƚĂŐĞƐ͕ ƚŚĞ ŝŵƉĂĐƚ ŽŶ ƵƌďĂŶ ΗŚĞĂƚ ŝƐůĂŶĚƐΗ ĂŶĚ ƚŚĞ ŝŵƉĂĐƚ ŽŶ ůŽĐĂů ĐŽŶƚƌŽů ŽĨ ƌĞƐŽƵƌĐĞƐ͘

^ŽƵƌĐĞ͗ ŵĞƌŝĐĂŶƐ ĨŽƌ ^ŽůĂƌ WŽǁĞƌ ĂŶĚ ĂůŝĨŽƌŶŝĂ WƵďůŝĐ hƚŝůŝƚŝĞƐ ŽŵŵŝƐƐŝŽŶ

Figure 2: The Real Value of PV Generated Electricity. Source: BP Solar

As the Australian electricity sector confronts the investment hump required to refurbish and expand network capacities across Australia, the advent of distributed energy solutions, and the different opportunities they present, runs the risk of being sidelined to trials of ‘smart grids’. The roll out of interval meters, which are only one component of truly smart grids, has been treated as a means of introducing time-of-use tariffs, but not to implement wider distributed energy solutions. These tariffs have often been applied as a default when customers connect a PV system, with customers required to opt out rather than opt in, and have caused considerable customer anxiety when subsequent electricity bills have been higher than before the PV system was installed. Thus, the encouragement being provided by governments for customers to invest in distributed energy is being undermined by varied and often lax regulations concerning their connection to the grid and associated metering and tariff arrangements. DISTRIBUTED ENERGY VALUES Distributed energy provides a range of potential values to the market. An illustration of the PV value chain is provided by PV companies BP Solar and First Solar below in Figures 2 and 3. Retail regulation is needed for Australia to capture these benefits and provide adequate recognition of the value of individual investments in distributed energy. As these diagrams illustrate, solar power has the potential to provide significant benefits to all stakeholders. In such a context, obstacles should be removed and supportive frameworks established. In the majority of US States, in Europe, and in many countries around the world, small PV systems have been supported by mandatory grid connection rights and minimum tariffs set on a net metered

AS THE AUSTRALIAN ELECTRICITY MARKET HAS MOVED TOWARDS COMMERCIALISATION AND PRIVATISATION, THE CONTRIBUTION TO ELECTRICITY PRICES OF RETAIL, DISTRIBUTION, TRANSMISSION AND BULK ENERGY SUPPLY COSTS HAVE BECOME MORE DIFFICULT TO ASCERTAIN.

Figure 3: PV Values in California. Source: First Solar1

POWER INSIDER MAY/JUNE 2011 57

EVENTS LISTING July 2011 06 JULY 2011 - 07 JULY 2011

RENEWABLES 2011 London, UK www.marketforce.eu.com/conferences/ renewables11/

August 2011 26TH-27TH JULY 2011

03 AUGUST 2011 - 04 AUGUST 2011

PIMAGAZINE ASIA WIND ENERGY FORUM Seoul Korea www.pimagazine-asia.com

OWET 6TH ANNUAL OCEAN RENEWABLE ENERGY CONFERENCE Portland, OR, USA http://www.oregonwave.org

26TH-27TH JULY 2011 12 JULY 2011 - ONE DAY EVENT

WESTMINSTER ENERGY, ENVIRONMENT & TRANSPORT FORUM KEYNOTE SEMINAR: NEXT STEPS FOR SMART GRID DEVELOPMENT London, UK www.westminsterforumprojects.co.uk/forums/ index.php?fid=westminster_energy_environment_ and_transport_forum 12 JULY 2011 - 14 JULY 2011

INTERSOLAR NORTH AMERICA 2011 San Francisco, CA, USA www.intersolar.us

PIMAGAZINE ASIA SOLAR PV FORUM Seoul Korea www.pimagazine-asia.com 26TH-27TH JULY 2011

PIMAGAZINE ASIA SMART ENERGY FORUM Seoul Korea www.pimagazine-asia.com

11 AUGUST 2011 - 13 AUGUST 2011

3RD GUANGZHOU INTERNATIONAL PHOTOVOLTAIC EXHIBITION 2011 Guangzhou, China www.gzxny.com 28 AUGUST 2011 - 02 SEPTEMBER 2011

ISES SOLAR POWER CONGRESS 2011 Kassel, Germany www.swc2011.org/cms/

27 JULY 2011 - 29 JULY 2011

PV JAPAN 2011 Chiba, Japan http://www.pvjapan.org/en/index.htm

31 AUGUST 2011 - 01 SEPTEMBER 2011

BRAZIL WINDPOWER 2011 CONFERENCE & EXHIBITION Rio de Janeiro, Brazil www.brazilwindpower.org/en/index.asp

ADVERTISER INDEX Freudenberg

Page 2

Leoni Struder

Page 41

Tempress

Page 4

AE Photonics

Page 43

Powergen

Page 14

Machine Alignment

Page 48

Ercam

Page 15

Lubrication Engineers

Pages 52

Baltec

Page 21

Asia Smart Grid 2011

Pages 55

FTI

Page 33

Kaeffer

Pages 56

58 MAY/JUNE 2011 POWER INSIDER

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