MALAYSIA’S RENEWABLE FUTURE
CFB Technology Gas Generation
Cyber Security
VOLUME 10 ISSUE 4
Power Barges & Power Ships
100 years of control technology innovation
#1 ranked DCS in the power generation sector ABB Ability™ Symphony® Plus
ABB
— Creating value from digital takes ability. ABB Ability™.
Access to dependable power is one of the defining attributes of modern society. In today’s digital age, we have the technology to manage the vast amounts of data being produced by power plants - offering insights that lead to valuable customer actions. By making plants more intelligent, and blurring the lines between the physical and digital worlds, ABB is helping generate more reliable power. Creating value from digital insight takes ability. ABB Ability. abb.com/power-generation, abb.com/symphonyplus
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CONTENTS Editors Note �������������������������������������������������������������������������������������������������������������������������� 3 Pay Attention: LockerGoga and Trisis/Triton demand an improved cyber security strategy ������������������������������������������������������������������������������������� 5 Retrofit RRB V47/ PS600 for Coca Cola wind site, India ������������������������������������������ 11 The Importance of Gas-fired Generation in a . Transformed Energy Landscape ������������������������������������������������������������������������������������� 14 News Release: GE and Uniper Unveil ‘GT26 HE’ Solution �����������������������������������������19 Energising ASEAN’s power sector with technology ���������������������������������������������������� 22 CFB technology in a low carbon world ��������������������������������������������������������������������������24 The role of Generator Sets in the new landscape of Microgrids ������������������������������29 Powering the future: ���������������������������������������������������������������������������������������������������������33 Hydrogen �����������������������������������������������������������������������������������������������������������������������������58 Power Barges and Powerships: ���������������������������������������������������������������������������������������64
Advertisers Index ABB �������������������������������������������������������������������������������������������������������������������������������� 2, 10 Karpowership �������������������������������������������������������������������������������������������������������������������� 13 Caterpillar ��������������������������������������������������������������������������������������������������������������������21, 67 Sumitomo Shi FW ����������������������������������������������������������������������������������������������������������� 28 MD&A ���������������������������������������������������������������������������������������������������������������������������������32 Enexio �������������������������������������������������������������������������������������������������������������������������������� 36 Ansaldo Energia ���������������������������������������������������������������������������������������������������������39, 68 Powergen Asia 2019 �������������������������������������������������������������������������������������������������������50 Smart Utility Systems (SUS) ������������������������������������������������������������������������������������������57 Edra Power Holdings ������������������������������������������������������������������������������������������������������ 63
4 | POWER INSIDER VOLUME 10 ISSUE 4
Pay attention: LockerGoga and Trisis/Triton demand an improved cyber security strategy The need for a solid cyber security strategy has been discussed and debated for almost half a century now and yet the basic worm-type attacks first documented back in 1972 are still with us today. Why? Because even the most basic measures
ticket” item t hat would be expensive
thinking, for some reason, often is not
to protect control systems from
to replace — you protect that asset with
applied. Cyber experts are still struggling
these types of attacks are still not
insurance. And even though you can’t
to convince senior management they
systematically employed.
see it or feel it, you know, instinctively,
need to spend money to protect their
that it’s worth the money. You sleep
control system assets.
It’s hard to believe that there are still
better at night knowing you have it and it
thousands of systems in operation
would be a high-priority item to reacquire
But major security events starting in
today without any basic security
if you lost it — especially if it contributed
2017 set off alarm bells in board rooms
controls in place. If you own a car, a
to your livelihood. But, when it comes
across the industrial world. Two viruses,
house or a boat — just about any “big-
to control system cyber security, this
WannaCry and NotPetya, wreaked
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FEATURE: CYBER SECURITY
havoc on companies that were running older Microsoft Windows operating systems but failed an entry-level cyber security test: keep your systems patched and up to date. More recently, newer ransomware such as LockerGoga and malware like Trisis/Triton have taken down entire company networks. All of these viruses were destructive. WannaCry and LockerGoga were standard ransomware, but NotPetya was a wiper bug that masqueraded as ransomware. Its purpose: cause maximum damage to the systems it
was disrupted and the total financial
infected. It forced thousands of large
impact is still unknown
on an event that may not happen.
A major international package
Of course, everyone knows that
to halt production by scrambling data
delivery company announced the
cyber security is important and that it
and offered no way out to its victims,
loss of US$300 million
falls into the general category of risk
complex operations in many industries
5.
management. But, as an event such as
such as paying for decryption keys. Similarly, Trisis is malware that targets
That is a lot of money — money that
the massive oil spill in Alaska’s Prince
industrial control systems, specifically
could have refreshed legacy systems,
William Sound in 1989 proves, the cost
the safety systems that allow industrial
acquired new assets, invested in R&D,
of doing nothing is far greater than the
facilities to shut down safely in
paid employee bonuses, delivered
cost of being proactive (super tankers
emergency situations. Reports show that
stockholder dividends, etc. Certainly,
are now made with double hulls to
the group behind Trisis/Triton continued
some of it should have been spent
prevent a repeat of that ecological
to attack distributed control systems
hardening these organization’s systems
disaster). It isn’t that control system
(DCS) throughout 2018 and 2019.
against such events. So why wasn’t it?
owners don’t deploy cyber and security solutions; they do. They are aware of
Companies that were impacted disclosed the financial impact of these attacks. It’s not pretty: 1.
One of the world’s largest producer of light-weight metal suffered losses worth US$52 million in the first quarter of 2019
2.
One of the world’s largest
It’s hard to convince companies to spend money on something that has no measurable return on investment.
the problem and take actions to avoid risks. But many in the industrial world are still too focused on the big attack or hack — the nation state that blacks out an entire region or shuts down the water supply to a city — when the bigger risk is common malware that impacts a control system because it is running older, unprotected and unpatched operating systems.
container shipping companies, with substantial oil and gas assets wiped
This risk exists even if the system is “air-
its books in the third quarter of 2017
Why companies don’t invest in cyber security
A French building materials
Part of the answer is pretty simple:
People going about their daily routines
manufacturer lost about €250
it’s hard to convince companies to
often introduce data and software using
million in sales
spend money on something that has
removable media such as USB drives
The worldwide pharmaceutical
no measurable return on investment.
to make changes to their systems,
production of a major drug producer
Basically, it’s hard to put a dollar value
introducing the potential for viruses
out as much as US$300 million off 3.
4.
6 | POWER INSIDER VOLUME 10 ISSUE 4
gapped” from the business’s network.
PAY ATTENTION: CYBER SECURITY
along the way. And, as these air-gapped systems become more interconnected to enable integration with business applications, they become increasingly exposed to the internet. This is why it is far more likely that common malware is the threat that will cause the most damage in the long run — just as we’ve seen with the string of cyber-attacks over the last several years. This is because there is a fundamental disconnect in securing operational technology (OT) vs. information technology (IT). But, as OT becomes more exposed to the internet, it faces the same cyber security threats as any other networked system. This is because operators have adopted the
data when there is a threat. That makes
same hardware, software, networking
sense if it’s a credit card database, but
employees on cyber security
protocols and operating systems that
it doesn’t work out so well if a firewall
best practices?
run and connect everyday business
blocks PLCs from opening and closing
technologies, such as servers, PCs and
valves in an oil refinery or pulp mill.
networking gear.
1.
2.
Do you regularly train your
Do you have a comprehensive list of cyber assets?
3.
Luck is not a strategy
Have you performed an operational risk assessment?
At the same time, many machines
And then there is just human nature.
and legacy systems are so old and so
Many operators simply rely on wishful
proprietary, no self-respecting cyber-
thinking that goes something like this:
criminal would ever write malware to
“We haven’t had an incident; therefore, we
attack them. Why? There just aren’t
must be doing the right things.” Well, not
enough of these systems around to
really. If you assume not having been
malware prevention and do you
make it profitable (typically the main
attacked or hacked means you are doing
update the signatures on a daily basis?
motive of hackers everywhere today)
enough, think again. You could just
or notorious (if they have more harmful
be lucky. Being lucky is great, but you
motives).
should not rely on luck as a strategy. Talk to a professional gambler and they
That leaves control system operators in
will tell you the same thing: eventually
a tough position. If they try to deploy
your luck runs out.
the same security measures as IT then
4.
Have you performed a cyber security assessment?
5.
Have you implemented proper network segmentation?
6.
7.
Have you implemented end-point
Do you patch your systems on a regular basis (minimum quarterly, ideally monthly)?
8. Are you monitoring your system logs and network traffic? 9.
Do you have a backup of all your assets such as switches, routers,
a) they may not work or b) IT security
So, how do you know the difference
firewalls, programmable logic
measures, when effective, may actually
between luck and “doing the right
controllers (PLCs), remote terminal
shut down a running production
things?” Ask yourselves the following
units (RTUs), intelligent electronic
process. This could be more harmful for
questions. If you answer “no” or “don’t
devices (IEDs) and every other digital
the business than the cyber-attack.
know”, then perhaps you should
control asset with a configuration file?
consider yourselves “lucky” and start
10. If your system were compromised
The problem is that IT cyber security
taking a hard look at your cyber security
today, do you have a recovery and
solutions tend to focus on locking down
posture and policies:
response plan ready?
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FEATURE: CYBER SECURITY
If you answered “no” to one or more of these questions, you are not alone. Most control system owners do not employ this level of cyber security readiness. But, at a base level, if you do not have proper network segmentation, updated system software, end-point protection and hardened systems, then you are probably lucky that your system hasn’t been compromised.
Cyber security best practices frameworks can all be distilled into these basic steps: identify, protect, detect, respond and recover. Getting up to cyber speed When thinking about how to get started, don’t just look for some new technology that claims to mitigate all your risks — it doesn’t exist. Doing the basics well before investing in advanced cyber technologies is the key. In order to minimize your risks and get the most protection in the least amount of time, you first need to plan and develop a cyber security program that: 1.
Identifies what assets you are trying to protect
2.
Determines how you are going to protect those assets
3.
Enables intrusion detection and monitoring
4.
Defines incident response process and procedures
5.
Verifies mechanisms to restore and recover assets
8 | POWER INSIDER VOLUME 10 ISSUE 4
PAY ATTENTION: CYBER SECURITY
These five steps follow well-trodden
Conclusion
are safe from attack, it is only a matter
ground. All of the cyber security best
The list of things you should do to
of time before you won’t be pretending.
practices frameworks can all be distilled
protect your operational technology
Eventually, your luck will run out, and
into these basic steps: identify, protect,
is long and beyond the scope of
maybe it will be your systems that go
detect, respond and recover.
this article, but if you continue to do
down this time, and your company that
For example, putting in a firewall to
nothing, pretending that your systems
ends up in the headlines.
separate your control system from the corporate/business network is a great idea. But, if you don’t have an inventory
AUTHOR
of critical assets and applications, you may still be vulnerable to risks from employees and contractors who use laptops and removable media. Developing strong security policies and
John Brajkovich
practices and mapping out a 3-to-
Operations Manager –
5-year journey that leads to security
Advanced Services group, ABB
maturity is also highly recommended. John Brajkovich is the Operations
Security and he has joined the
Some effective technology tactics to
Manager of the US Advanced
extensive reach of ABB’s global
consider are hardened perimeters,
Services group at ABB. He has
team in developing cyber solutions
adopting a defense-in-depth approach,
over a decade of experience in
for their customers. Outside of
whitelisting, investing in network intrusion
Operational Technology.
supporting solutions,
system and security awareness training
John oversees a team of highly
John is also involved in consultative
for all employees. Also, make sure to
skilled engineers that deliver a wide
efforts in corporate Security Control
include specific contractual language about
range of services including: process
Frameworks and Emergency
cybersecurity in your OT/control system
optimization, system performance
Procedures for OT cyber security
requests for proposals (RFPs). To execute
optimization, and cyber security.
breaches. His background in
prevention (IPS), air-gapping control
your plan, leverage your IT and OT teams,
industrial control systems is an
but also look for OT suppliers who can offer
Over the last several years, a large
asset for cyber security working
comprehensive cyber security services.
focus has been put into OT Cyber
alongside IT.
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100 years of control technology innovation
#1 ranked DCS in the power generation sector ABB Ability™ Symphony® Plus
ABB
— Creating value from digital takes ability. ABB Ability™.
Access to dependable power is one of the defining attributes of modern society. In today’s digital age, we have the technology to manage the vast amounts of data being produced by power plants - offering insights that lead to valuable customer actions. By making plants more intelligent, and blurring the lines between the physical and digital worlds, ABB is helping generate more reliable power. Creating value from digital insight takes ability. ABB Ability. abb.com/power-generation, abb.com/symphonyplus
Retrofit RRB V47/ PS600 for Coca Cola wind site, India Retrofit for Coca Cola turbines increases green energy production by 10% Green power for Coca Cola’s factory
this season requires proactive service
performance in a tough environment
and maintenance in the off-season to
the turbines are worn out. Turbine spare
Since 2007, DEIF Wind Power
prepare the turbine to perform in the
parts and service costs have increased
Technology has collaborated with the
windy season.
and some spare parts are no longer in
Vestas licenced manufacturer of the
production. This is a normal challenge
PS-600 turbine, which runs without
The Indian Coca Cola manufacturer,
for IPP’s and owners of older turbines.
VRCC and therefore limited to 600
Brindvadan Beverage, is an
Furthermore, the turbines showed high
kW. The PS-600 kW is the Indian
Independent Power Producer (IPP),
variation in the AEP as well as the CoE
version of the Vestas V47 and builds
who owns their own wind site of RRB
was extremely high.
on Vestas’ platform and technology.
PS-600 kW turbines in South India.
Adapted to the Indian conditions and
The wind turbines are producing green
approved as wind class 2, the PS-600
power for the Coca Cola bottle factory’s
Midlife upgrade for extended turbine life-time
kW is designed to produce energy in
energy consumption.
The optimal solution for the customer was to perform a midlife upgrade based
the Monsoon season, where the wind can blow up to 10-15m per second. The
The turbines at the wind site have
on a control solution upgrade to extend
intensive performance of a turbine in
been running 15 years. Combined with
the turbine operational lifetime. A
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FEATURE: TURBINES INCREASE GREEN ENERGY
new control solution including control
PS-600 kW turbine with the advantage
now perform reports, read data and
strategy has been designed to replace
of being an approved supplier to RRB
follow the turbine availability. This way,
the COTAS controller of the PS-600
turbines the last 10 years. With a
the IPP can secure optimal energy
kW turbine. DEIF’s control strategy is
professional service team in India, DEIF
production, lower service costs and
approved according to GL2010 from
provide support and offer spare parts by
thereby lower the COE. With a new
the German company Aerodyn. With a
day-to-day delivery.
control solution the PS-600 kW the
controller retrofit solution DEIF secure
performance lifetime is extended with
the IPP’s investment with a pay-back
Benefits
an increased AEP by 10 %. With these
period of maximum 2 years. DEIF Wind
With the optimal retrofit solution,
benefits, Coca Cola can continue to
Power Technology was selected as the
the IPP has received improved data
produce green energy.
retrofit partner to upgrade the V47/
access with new technology and can
12 | POWER INSIDER VOLUME 10 ISSUE 4
Karpowership
www.karpowership.com
power for asia
THE IMPORTANCE OF Gas-fired Generation in a Transformed Energy Landscape The world’s electricity system is rapidly changing. Amid the shifts, gas-fired generation will be an important part of the overall energy mix. In fact, according to the International Energy Agency’s (IEA) most recent World Energy Outlook (WEO), published in November 2018, the contribution of gas to powering the world through 2040 is vital by almost any measure, across markets and sectors. Considering this demand, GE
pushing us towards a more efficient and
binary, with stark choices required
stands behind the significant role of gas
autonomous grid, in which generation
between fossil fuel sources of power
because of its sustainability, generation
and transmission and distribution (T&D)
generation and renewable ones.
flexibility, low capital costs, natural
are optimized in real time. Finally, as the
Instead, it is a tapestry of generation
resource efficiency and “right-sized”
world races to confront climate change
combinations reflecting market realities
and rapid deployment capabilities. All of
caused by CO2 and other emissions,
and the marriage of old and new
these factors will help gas power meet
the system is adapting to incorporate
technologies. Only with a hybrid system
the world’s demand for electricity over
zero- and low-carbon power sources
made possible by gas can we build the
the coming decades.
and innovations that make traditional
power grid of the future while at the
thermal sources more efficient and
same time diligently working toward
The Grand Transformation
sustainable.
decarbonization.
The overall structure of the power
With these profound changes, the
industry is transitioning from one based
emerging and future electric grid will
Demand for Gas-fired Generation
primarily on a hub-and-spoke central
be one powered by a mix of generation
Given the size, complexity, and
generation model with one-way energy
sources—from gas, wind and solar
lifetime of electricity systems, the
flows, to a hybrid system comprised
tohydropower and nuclear—that will
grand transformation of the energy
of both distributed and centralized
work in tandem, across many different
landscape will not happen overnight.
resources with two-way flows. At the
energy markets in the developed and
In fact, according to the International
same time, new digital innovations are
developing worlds. This world is not
Energy Agency (IEA), traditional thermal
14 | POWER INSIDER VOLUME 10 ISSUE 4
sources—including fossil fuels and nuclear power—still account for 75% of total electricity generation; and even aggressive scenarios don’t envision the global generation share of thermal sources falling below 50% until 2030.1 It is worth digging into the IEA’s most recent forecasts—part of the organization’s annual World Energy Outlook (WEO) published in November 2018—to highlight the essential role gas power will play. The IEA’s base case scenario, the New Policies Scenario (NPS), looks to the future. It considers the effects of all existing climate policies and policy intentions of countries around the world, including those widely agreed on in the 2015 Paris Agreement.
Gas overtakes coal by ~2025 as the #1 technology in terms of installed capacity globally in the IEA’s New Policies Scenario (their reference case), and holds the #1
Under the NPS scenario, the IEA
position through at least 2040, the end of the IEA’s forecast period.
explores different markets and sectors.
Source: IEA WEO 2018
For electricity generation, it predicts that natural gas, wind and solar
roughly 2,750 GW, edging out solar PV
NPS, natural gas demand for the power
photovoltaic (PV) will supply 70 percent
at around 2,500 GW. Coal hangs on at
sector quadruples between now and
of the additional electricity generated
2,250 GW, followed by hydro power
2040, increasing from 50.3 bcm to
between now and 2040 in nearly
at 1,800 GW. Finally, wind comes in at
194.4 bcm.4
equal shares. By 2040, a total of 1,510
1,750 GW, and battery storage kicks in
gigawatts (GW) of new capacity for gas-
at 250 GW.3
2
The IEA has also considered the outcomes if electricity demand grows
fired power plants will be needed, when factoring in the retirements of many
Probing deeper into the IEA’s regional
even faster than in the NPS. This “Future
existing plants.
forecasts reveals an important shift
is Electric” (FIE) scenario reflects the
underway in investment in gasfired
trends of electrification in transport
According to the IEA: “gas-fired power
power plants: while advanced
and heating, an increasingly digital
plants are the only fossil fuel technology set
economies—led by the U.S. and
economy that requires more electric
to grow in almost all regions, thanks to the
EU—accounted for about 60 percent
power, and expanded electricity access
low upfront investment cost for new plants,
of cumulative investment in gas
for the nearly one billion people still
the increasing availability of gas, and the
from 2000 to 2017, developing
without it today. Here, renewables will
role of gas in [power] system flexibility.”
economies—led by China, India, and
meet a projected 45% of the additional
Southeast Asia—make up 60 percent
demand for electricity that is imagined,
The NPS also envisions natural gas
of future investment. To take China as
but if supply is to keep up, gas will still
overtaking coal in providing the most
an example, while growing electricity
have a key role to play, making up 30
capacity by the mid-2020s, with
demand will “primarily be met by
percent of the extra demand.5
renewables rising rapidly as well.
renewables and nuclear,” there is “scope
Specifically, in 2040, the IEA projects
for gas to contribute.” The numbers
that gas-powered capacity will be
belie this cautious language. Under the
1–5 IEA WEO 2018.
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FEATURE: GAS-FIRED GENERATION
Key Features
Gas Takes the Capacity Lead in IEA’s New Policies Scenario
Amidst the grand transformation, existing and new gas-fired plants will play an increasingly important role in maintaining reliable, low cost, and sustainable electric power around the globe. The fact is that natural gas-fired plants have key
1,690
460
1,510
2,740
Today
Expected Retirements
Expected Additions
Gas Capacity in 2040
GW
GW
GW
features and capabilities that make both
GW
Source: IEA WEO 2018
centralized and distributed gas power the centerpiece of transformed electric power networks around the world.
Case Study: The World’s First Hybrid Battery-Gas Turbine Power Plant In 2017, Southern California Edison (SCE)—which provides 15 million residents with
There are several key features of
energy in the greater Los Angeles area—launched the world’s first hybrid battery-gas
gaspowered generation that make it
turbine power plant. The technology pairs GE’s 10 MW/4.3 MWh battery system
uniquely positioned to usher in our short-
with its LM6000 “peaker” gas turbine, which can ramp up to 50 MW in under five
and intermediate-term energy future.
minutes. This flexible solution allows the battery to supply the grid with electricity for up to 30 minutes when solar and wind energy from the two sources ebbs. With
Sustainability
the additional help of sophisticated software that matches demand and supply,
The carbon-led economic growth
the hybrid plant not only enables more use of renewables but also obviates the
that powered the 20th century is
previous need to keep the gas turbine operating in spinning reserve mode, burning
unsustainable in the 21st. GE agrees with
fuel and producing CO2 and other emissions.
the global scientific consensus, stated in reports by the Intergovernmental Panel on Climate Change (IPCC), that ever-greater emissions of greenhouses gases like CO2 will continue to lead to global climate change. To confront this challenge, the power system must decarbonize. Natural gas-fired generators have the lowest CO2 emissions of all fossil power generation fuels—a natural
Generation Flexibility
are an ideal complement to variable
gas-fired combined cycle plant has
The global system is evolving toward
renewable resources because they
roughly 50% of the CO2 emissions of
an integrated and hybridized network
can change power levels quickly, turn
a similarly sized coal plant, and lower
containing elements of old and new
down to low levels when demand is
emissions levels for other pollutants such
technologies working synergistically
less, and start up very rapidly. All of
as mercury, NOx, SOx and particulate
to provide reliable, affordable, and
these attributes enable gas turbines
matter. Meanwhile, coal-to-gas switching
sustainable electric power to factories,
to work in concert with renewables to
was responsible for two thirds of the 27%
businesses, and communities around
maintain reliability in a power system.
6
reduction in CO2 in the U.S. across all
the world. Increasing levels of variable
As an example, a 570 megawatt (MW)
sectors (power, transportation, industry,
renewable energy like wind and
7HA.02 combined cycle power plant,
agriculture) since 2005.
solar will challenge power markets
which is capable of powering more than
and operators, requiring them to
half a million U.S. homes, can start in
7
more rapidly respond to changes in
less than 30 minutes, can ramp up or
Renee Gomez and Nathan Westbrook, Chemistry
supply and demand. Natural gas-fired
down at 60 MW per minute, and can
Department, Texas A&M University (see link).
generators are ideally suited to provide
turn down to less than 200 MW while
7 GE Power Strategic Marketing Analysis.
increasing power market flexibility over
maintaining emissions limits.8
8 GPS Product Catalog, 2018.
time. For starters, gas-fired generators
6 “ Coal vs. Natural Gas Energy Production,” Daniel Frazier,
16 | POWER INSIDER VOLUME 10 ISSUE 4
THE IMPORTANCE OF Gas-fired Generation in a Transformed Energy Landscape
Low Capital Costs9
storage system. As urbanization and
technologies provide developers with
In a capital constrained world, a key
electrification accelerate around the
the flexibility to install both small and
feature of gas-fired generators is their
world, it will become more difficult
large increments of power very quickly.
relatively low up-front capital costs
to satisfy electricity demand with
Gas-fired generation options range
as well as the ability to upgrade older
dispersed renewables that are often
in size from hundreds of kilowatts to
assets. Simple cycle and combined
located far from the demand. As
hundreds of megawatts. A 30 MW
cycle natural gas-fired power plants
an example, to meet NYC’s goal of
simple cycle power plant can be
have the lowest upfront capital costs on
electrifying its bus fleet by 2040 would
transported by land, sea or air to remote
a $/kW installed basis. As an example,
require covering 15% of Manhattan
locations and can be generating power
in the U.S., a combined cycle plant
with solar panels. Fuel can account
in a matter of weeks. A large combined
costs approximately $1,000/kW, while
for up to 50% of the total lifecycle
cycle power plant can be commissioned
simple cycle is $825/kW. Onshore
cost of a natural gas power plant.11 The
in 2-3 years, 1-2 years faster than a
wind is approximately $1,350/kW and
most efficient combined cycle power
comparably sized coal power plant and
utility scale solar is $1,100/kW. New
plants are capable of achieving 64%
3-4 years faster than a comparably
nuclear is $9,500/kW and offshore
efficiency.
sized nuclear plant.15
in the capacity factor of a combined
In combined heat and power
9 L azard’s Levelized Cost of Energy (LCOE) Analysis,
cycle plant (~70%) and a utility scale
applications, greater than 80% fuel
solar field (~19%), roughly seven times
efficiency can be achieved. This
10 G E Power Strategic Marketing Analysis.
the upfront capital is needed to provide
fuel efficiency results in real cost
11 L azard’s LCOE Analysis, November 2018.
the equivalent power capacity from the
savings and lower emissions per MWh
12 G E Gas Power Systems Product Catalog, 2018.
solar field.
generated. Additionally, according to
13 https://www.epa.gov/chp/chp-benefits
Climate Central, current natural gas
14 http://www.climatecentral.org/news/water-
10
12
wind is $3,025/ kW. When factoring
13
Natural Resource Efficiency
power plants use four times less water
Gas-fired generators are resource
fired counterparts.
per MWh generated than their coal14
Version 12.0, November 2018.
usedeclines- as-natural-gas-grows-19162 15 These are the estimates GE Power uses in its forecast model, based on experience.
efficient, conserving fuel, water and is the most land efficient power
Right-Sized and Rapid Deployment
generation source. It requires 50–100
In a power plant landscape with a
times less space per MWh generated
large degree of uncertainty around
compared to a renewables and battery
future supply and demand, gas-fired
land relative to alternatives. Gas
Case Study: Two World-Records for Efficiency GE’s HA gas turbines helped achieve world records for combined-cycle efficiency in both the 50Hz and 60Hz segments. EDF’s Bouchain plant in France reached a net combined-cycle efficiency of 62.22% in 2016 using the 50Hz 9HA gas turbine; and Chubu’s Nishi-Nagoya plant, which features the 60Hz 7HA, reached a gross combined-cycle efficiency of 63.08% in Japan in 2018. GE’s HA is the world’s largest, most efficient, and most flexible gas turbine available today. Each point of efficiency can generate up to $50 million in fuel savings over 10 years for a 1 GW plant. The high power density of the HA can help bring power online for millions of households in just a few years, making it a cost-effective and efficient solution for utilities and power producers around the world.
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FEATURE: GAS-FIRED GENERATION
Case Study: Gas Closes a Power Gap in Pakistan High population growth, rapid urbanization and increased manufacturing placed a giant strain on Pakistan’s electricity grid. In 2014, GE embarked on its largest infrastructure development project in a decade to help plug this gap, building three combined cycle gas power plants in record time that together are expected to add 3.6 GW to the national grid, the equivalent power needed to supply up to 7.3 million Pakistani homes. The plants are equipped with GE’s HA technology, the world’s most efficient heavy duty gas turbines. The rapid startup times
renewable sources, the share of which is growing in
of HA turbines offer a flexible component to intermittent
Pakistan’s overall energy mix.
Conclusion
Visit ge.com/power to learn more
The importance of natural gas-
about how we’re helping customers
Mobile Power In places where
fired generators in the transformed
navigate the changing energy
extending grid connections the “last
energy landscape emerging today
landscape with our equipment,
mile” can be cost- and time-prohibitive,
and tomorrow cannot be overstated.
software, and services to deliver
because of the infrastructure challenges
As the world moves toward a
quality, affordable, reliable, flexible,
faced or investment required, mobile
combination of centralized and
sustainable power to their consumers,
power plants provide a fast, reliable and
distributed resources, while increasing
all around the world.
scalable solution. These flexible power
environmental sustainability and
systems also help generate power
lowering the environmental footprint
during natural disaster relief, plant
of the energy systems, natural gas
shutdowns, or periods of grid instability.
generation technologies will serve
With installation and commissioning
both as a bridge to the past and the
in as few as 11 days, more than 300
foundation of the future.
Case Study: Flexible, Fast &
of GE’s TM2500 gaspowered mobile power plants are helping power
GE is continuing to lead the way
communities around the world. In
for the industry and support our
Indonesia, the TM2500 is bringing 500
customers by operationalizing
MW of power to eight different sites
our business to support the entire
scattered across six different islands. In
gas lifecycle, investing in the best
Algeria, 38 trailer-mounted TM2500
technology and servicing capability,
aeroderivative gas turbine generators
and successfully executing, with our
are providing reliable and fast power
partners, complex projects all around
to all regions, bringing much-needed
the globe.
supplemental power during the hot summer months.
18 | POWER INSIDER VOLUME 10 ISSUE 4
News Release GE and Uniper Unveil ‘GT26 HE’ Solution, the World’s First HighEfficiency Upgrade for the GT26 Gas Turbine Fleet •
By Tapping into GE’s H-Class, F-Class and Additive Manufacturing Technologies, GE Unleashes Full Performance of the GT26 Platform
•
GE’s GT26 High-Efficiency Upgrade Provides a Leap Forward in Efficiency; Significantly Decreases Fuel Costs, Increases Plant Output up to 55 Megawatts per Unit and Extends Maintenance Intervals by up to Two Years
•
Uniper’s Enfield Power Plant Will Be the First Site to Install the New GT26 HE Technology in 2020
BADEN, SWITZERLAND —March 25,
GT26 power plant operators.
with several significant benefits that GE expects to exceed. These benefits
2019—Continuing its commitment
• First upgrade that blends both GE and
to invest in its mature gas turbine
Alstom’s technology and expertise
will include increased megawatt
fleets to keep them competitive in
across all major components of a gas
output, improved plant and gas
today’s dynamic energy marketplace,
turbine solution.
turbine efficiency, and extended maintenance intervals and operating
GE (NYSE: GE) today announced the launch order for its new GT26 HE
Key performance benefits include:
hours to enable Enfield to consistently
(high efficiency) gas turbine upgrade
• H igher efficiency for combined-
elevate its position on the dispatch
with Uniper for the utility’s Enfield Power Station in greater London.
1
cycle power plants: •2 + percent base load increased efficiency, translating to as
“We’re proud to launch our new GT26
much as $4 million in fuel
HE upgrade with Uniper—it’s the most
savings annually per unit.
advanced solution we’ve ever introduced
•U p to 1 percent increased
curve in the highly competitive U.K. power market and ramp up its annual operating hours. “We’re very pleased to be working with GE on this new technology
on a GT26 gas turbine, and one of
efficiency in part load, yielding
upgrade,” said Eckhardt Rümmler,
our most efficient upgrades within the
up to $1 million in fuel savings a
chief operating officer, Uniper SE.
F-class portfolio,” said Scott Strazik,
year per unit.
“In Great Britain’s very competitive
• I ncreased plant output from 15
and challenging power generation
Power business. “Not only will this
megawatts (MW) up to 55 MWs
environment, investing to keep our
upgrade revitalize Uniper’s Enfield
per unit, improving revenue
plants competitive by lowering
power plant, it will also improve its
opportunities.
operational and maintenance costs at
president and CEO of GE’s new Gas
competitive position in the Great Britain
• E xtended inspection intervals up to
the same time as increasing efficiency
generation market, supporting its long-
32,000 hours, reducing operations
and flexibility is critical for the long-
term profitability and viability.”
and long-term maintenance costs.
term success of our fleet.”
The GT26 HE upgrade also marks other GE firsts: • First upgrade that takes the best
Helping Revitalize Uniper’s Enfield Power Station
1 I ndicative values based on: • Rating GT26 2006 configuration • 6,500 yearly operating hours
technologies and capabilities from
Uniper’s Enfield power plant in
• 4,000 full load hours yearly
GE’s industry-leading F and H class
London will be the first site to install
• $7/MMBtu fuel price
fleets to create a robust solution for
the new GT26 HE technology in 2020
• $57/MWH electricity price
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NEWS RELEASE: ‘GT26 HE’ Solution
“The opportunity to test GE’s pioneering
• A new 3D aero-profile compressor
work more efficiently, reliably, and
GT26 HE upgrade at our Enfield plant,
configuration to provide best-in-class
safely. For more than 125 years, GE
combined with our longstanding
base-load and part-load performance.
has invented the future of industry,
relationship with GE and trust in its
and today it leads new paradigms
technology and services were key reasons
To view a video about GE’s project
in additive manufacturing, materials
we chose the company for this project,”
with Uniper, please follow the link
science, and data analytics. GE people
added Mike Lockett, chief commercial
https://www.youtube.com/
are global, diverse and dedicated,
officer, power, for the Uniper Group and
watch?v=dKikDr3rYJw
operating with the highest integrity
Uniper U.K. country chairman.
and passion to fulfill GE’s mission and
About Uniper
deliver for our customers.
H-Class Technology Infusion Drives HighEfficiency Performance
Uniper is an international energy
www.ge.com
employees and operations in 40
About GE Power
The GT26 HE upgrade provides a
countries. It combines a balanced
GE Power is a world leader in power
leap forward in efficiency, output and
portfolio of technologically advanced
generation with deep domain
maintenance interval extensions. It’s
large-scale assets with outstanding
expertise to help customers deliver
powered partly through advanced
technical and commercial expertise—
electricity from a wide spectrum of
technology from GE’s flagship HA
tailoring energy solutions and managing
fuel sources. We are transforming the
gas turbine, the largest and most
complexity for its customers.
electricity industry with the digital
company with around 12,000
efficient in the industry, with additive
power plant, the world’s largest
manufactured parts and innovations
In Britain, Uniper operates a flexible
and most efficient gas turbine,
in aerodynamics, material science
and diverse generation portfolio,
full balance of plant, upgrade and
and combustion dynamics. It embeds
sufficient to power around six million
service solutions as well as our data-
technology breakthroughs across every
homes. With its seven-strong fleet of
leveraging software. Our innovative
major component of the GT26 frame—
power stations and its flexible, fast-
technologies and digital offerings help
turbine, compressor and combustor—to
cycle gas storage facility at Holford, in
make power more affordable, reliable,
take turbine performance to a new
Cheshire, it makes a solid and tangible
accessible and sustainable. For more
level, significantly decreasing fuel costs
contribution to Britain’s energy
information, visit the company’s
while increasing full-load output and
supply security. Uniper also offers a
website at www.gepower.com. Follow
extending maintenance intervals.
broad range of commercial activities
GE Power on Twitter @GE_Power and
through its Engineering Services
on LinkedIn at GE Power.
The new upgrade also features the
division, while the well-established
best of GE’s research and development
Uniper Engineering Academy
centers in both the United States
delivers high-quality technical
and Switzerland, including unique
training and government-accredited
engineering elements:
apprenticeship programmes for the
Laura Aresi
• A low-pressure turbine used in GE’s
utility, manufacturing and heavy
GE Power - Power Services
industry sectors, at its purpose-built
Global Media Relations Leader
facilities near Nottingham.
+39 02 67335622
https://www.uniper.energy/uk
laura.aresi@ge.com
About GE
Gill Dickinson
incorporating additive manufactured
GE (NYSE:GE) drives the world
Senior PR Manager –
parts to deliver high performance,
forward by tackling its biggest
Uniper in the UK
reduce cooling requirements by
challenges. By combining world-
+44 0 7976 168356
approximately 15 percent and lower
class engineering with software
gill.dickinson@uniper.energy
relative emissions.
and analytics, GE helps the world
H-class technology. • H igh-pressure turbine improvements to increase efficiency,
For more information, contact:
utilizing GE’s F-class technology. • A dvanced combustor engineering
20 | POWER INSIDER VOLUME 10 ISSUE 4
NEW: CG132B
TAKE ADVANTAGE OF DIGITAL ASSISTANCE
Caterpillar
The CG132B is the first of a new generation of gas gensets: State-of-the-art components and the TPEM (Total Plant & Energy Management) control ensure maximum reliability and availability. A secure IT infrastructure and smart data analysis enable ongoing plant optimization and cost savings. www.cat.com/catcg132b
© 2018 Caterpillar. All Rights Reserved. CAT, CATERPILLAR, BUILT FOR IT, their respective logos, “Caterpillar Yellow”, the “Power Edge” trade dress as well as corporate and product identity used herein, are trademarks of Caterpillar and may not be used without permission.
CONNECT
Energising ASEAN’s power sector with technology How ASEAN’s power industry is shaping up in the digital economy Technology is fast becoming the
complexity is the region’s ageing
The proliferation of internet-enabled
bedrock of any energy and power-
power infrastructure and varying
devices across the region, fuelled by
related goals in ASEAN. Catalysed by
priorities when it comes to sustainable
an increasingly connected and mobile
ambitious goals, such as expanding
development. All of these may prevent
population, also places additional
the region’s renewable energy
countries from keeping up with surging
pressure on the grid. With the
to 23% by 2025, the power and
appetites for data and connectivity.
impending arrival of 5G, the amount
energy industry is ripe for disruption.
of data created, processed and stored
However, as cities drive their
Although ASEAN is keeping a keen eye
will continue to grow exponentially.
manufacturing sectors towards
on renewable energy, the intermittent
As a result, computing and data
Industry 4.0 and ready themselves
nature of this energy source comes
processing is increasingly done in
for smart and sustainable urban
with its own set of infrastructural and
closer proximity to end users in order
development, it remains to be seen
business challenges. Renewables can
to decrease network congestion and
if the biggest technology trends of
cause gaps and fluctuations in energy
reduce latency, through a process
the year ahead will prove to be friend
generation and supply, an issue the
known as “edge computing”. Edge
or foe to the power industry in this
power industry is still working to
computing can help avoid delays or
critical era of disruption.
overcome. Furthermore, with the
system failures, which could have
effects of climate change, energy
a significant impact on the growing
A more complicated landscape with renewables and data
supply may become even more
number of critical services delivered
difficult to anticipate. In order to build
over 5G networks such as healthcare
balanced power grids and ensure a
or transport.
The stride towards renewable energy
steady, continuous supply of electricity,
is set against a backdrop of dual
much remains to be done to ensure
Digitising these critical services and
challenges - that of digital disruption,
that renewables continue to be seen as
delivering them over these networks,
and an unequal distribution of
a cost-efficient and reliable alternative.
in turn, makes power infrastructure
resources and expertise. Adding
22 | POWER INSIDER VOLUME 10 ISSUE 4
and facilities key targets for
cyberattacks - as seen in the series
demand, batteries have showcased huge
learning, advanced analytics and IoT
of catastrophic cyberattacks that
potential to be more than just backup
communication. Engineers can use
took down a power grid in Ukraine.
energy sources. Heavy investments are
analytics to oversee infrastructure
As ASEAN embraces digitalisation,
already made to deploy Energy Storage
remotely, safely and round-the-clock,
governments and businesses will
Systems via batteries, with Singapore’s
with minimal disruption to operations.
be faced with the unprecedented
Energy Market Authority leading the way
In due time, the process could even
challenge of ensuring that the very
through public-private partnerships with
become self-optimised, predicting
power that makes these networks
PSA and Sembcorp.
periods of peak energy demands or
possible does not buckle under these
other incidents before they happen.
attacks. Cybersecurity considerations
Taking this concept one step further,
must remain at the forefront of all
idle batteries, such as those in the
These approaches are especially
digital initiatives in the energy and
Uninterrupted Power Supply (UPS)
critical as Southeast Asia becomes a
power sectors, if the region is to
in data centres, can take on a dual
data centre hotspot, requiring even
achieve its Industry 4.0 objectives.
role of back-up power supply and
more power capacity and a stable
distributed energy resource to
supply at all times.
Harnessing technology is key
support the grid. Excess power stored in these batteries can be sold back
The sustainable development of
In the face of these emerging
to the grid when needed, changing
the ASEAN power landscape hinges
challenges, new technologies and
the way data centres and power grids
on its ability to turn challenges into
innovations are also shaping the way
interact, and thereby better advancing
opportunities. While technology may
power is managed. From IoT-enabled
the region’s clean energy goals.
appear as a panacea for a range of
power plants to generating electricity
issues and challenges, businesses
from the momentum of waves,
The very same 5G technology
and governments must tread
governments and organisations are
and edge computing that will
cautiously and avoid diving head
exploring diverse and creative ways of
place demands on existing power
first without the proper preparation
meeting the surging energy demand.
infrastructure could also hold
and understanding. If managed well,
the key to transforming power
the adoption of new technologies
A key example of an innovative
management for cities of the future.
has the potential to herald an era
approach is the adoption of battery
Additionally, the potential of remote
of unprecedented innovation for
technology to balance the frequency
and mobile power management can
the power sector, accelerating
of power grids round the clock - storing
be realised through the provision
connectivity and expanding access
energy during peak production periods,
of digital infrastructure required for
to economic opportunities and
and releasing it at other times. With
technologies
transformative services.
their ability to react instantaneously
such as
to local changes in energy supply and
machine
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CFB technology in a low carbon world How does CFB boiler technology sit in an energy landscape that is looking for renewable and low carbon solutions?
24 | POWER INSIDER VOLUME 10 ISSUE 4
boilers, these additional products and
The CFB market is still predominantly
services had unique market positions
in the small to medium size range
driven mainly by their fuel, application
serving multiple sectors like industrial,
and operational flexibility.
WTE, CHP, district heating and cooling. This is where the CFB was born and is the market segment we
acquired Amec Foster Wheeler’s
Q: What is the market potential for SFW’s CFB boiler technology?
fluidized bed businesses, creating a
A: Today, about 80-85 per cent of
and wide range of challenging fuels
new company, Sumitomo SHI FW.
the global boiler market continues
demanded by these sectors.
Last year Sumitomo Heavy Industries
still serve the most, because our CFBs are best able to reliably fire a diverse
to stay with conventional pulverized We spoke to Robert Giglio, Senior
coal (PC) technology. PC technology
But change is happening. Our first
Vice- President of Strategic Business
hasn’t changed much over the last
large 460 MW supercritical CFB went
Development for Sumitomo SHI FW,
50 years and still carries three
online at the Lagisza plant in Poland
about the acquisition, the market
fundamental disadvantages: very
eight years ago. At that time, this
potential for CFB boiler technology,
limited fuel flexibility, high air
was the world’s first supercritical and
and how it fits into an energy world
emissions and expensive emission
largest CFB unit in the world. Last
that is increasingly looking for low
control. Over the last 40 years,
year, we commissioned 2000 MW
carbon solutions.
SFW’s CFB boilers have redefined the
of our ultra-supercritical CFBs at the
meaning of fuel flexibility, reliability
Green Power Plant in Samcheok,
Q: Why was the acquisition a good fit for both companies?
and clean combustion without back-
South Korea. As of today, we have
end controls. This has been noticed
delivered 38 CFBs, each over 200
by utilities, IPPs, developers and
MW in capacity, totaling over 11 GW
A: For over 30 years, Sumitomo’s
industrial companies who have been
of electric capacity.
SHI Company had been a licensee
selecting CFB boilers more and more.
technology, supplying 67 CFBs in the
So the CFB has lots of room to grow
small to medium-size range, mostly to
into the global boiler market because
Q: What benefits does CFB boiler technology bring to the market?
their home market in Japan. Whereas,
of the higher values it offers over PC
A: Our CFBs offer value in multiple
Amec Foster Wheeler’s CFB business
technology. Even if the boiler market
dimensions. Their fuel flexibility
was truly global, delivering the full
remains flat or even declines, CFB still
provides power generators and
range of CFBs from small industrial,
has an upside growth potential of 80-
industrial plants with the ability
CHP and WTE units to very large
85 per cent.
to shop for the lowest cost coals,
of Foster Wheeler’s CFB boiler
petcokes and lignites keeping power
ultrasupercritical CFBs for utility power
prices at the lowest levels. They can
opportunity to go global and greatly
Q: Why hasn’t CFB technology already taken more of the overall boiler market share?
expand the size of their CFB boiler
A: Most of the global boiler market is in
providing a flexible carbon reduction
market and business. In addition to the
the large coal utility sector. Like most
CFB boiler technology, the acquisition
other energy markets, this capital-
included AmecFW’s BFB boilers, fluid
intensive sector is slow to accept
bed gasifiers, CFB scrubbers, fabric
change mainly because people tend
filters, specialized metallurgical waste
to stay with what they know and have
heat boilers and a broad spectrum
experience with.
plants. Sumitomo saw the acquisition as an
co-fire carbon neutral fuels up to high levels and employ highly efficient ultra-supercritical steam technology
of aftermarket services. Like the CFB
FOLLOW US ON TWITTER: @PIMAGAZINEASIA WWW.PIMAGAZINE-ASIA.COM | 25
FEATURE: CFB TECHNOLOGY
solution without turning to expensive
the logistics and cost of sourcing large
carbon capture and sequestration (CCS)
and continuous supplies of biomasses
technology. Our CFB’s can convert the
and wastes can be very challenging.
environmental liability of industrial
This is where our CFBs provides the
byproducts and waste into valuable
flexibility to co-fire carbon neutral fuels
power, steam and heat. Their clean
with more dependable fuels like coals,
burning process produces the lowest
lignites and petcokes that have well
capacity. We at SFW have always
emission without needing expensive
establish large scale supply chains.
believed in keeping all technology
air pollution control equipment saving
and fuel options in the generation
millions in plant construction and
In essence, the CFB allows each project
mix for a balanced energy portfolio.
operating cost. And finally, they provide
to set the balance point between
As with any investment, a balanced
these benefits as a highly reliable and
carbon emissions, fuel security and cost
portfolio provides the best protection
dependable base load capacity option
of energy. Since biomass supplies also
against uncertainty of the future. As
to maintain grid stability.
vary seasonally, the fossil fuels can fill
we all know too well, the energy sector
in as needed, providing energy security
has significant uncertainty related
to consumers and financial security to
to changing policy, regulation, fuel
project investors.
availability and technology. This is another area where the CFB
carbon neutral biomasses in both
Q: And how do you see the CFB technology fitting into the global trend of renewables?
small and large plants. This provides a
A: Globally we see nearly all markets
the fuel mix without having to build
near net zero carbon solution without
strongly embracing solar and wind,
another plant. And, it provides these
going to the expensive and uncertain
which offer a true zero carbon solution,
benefits as a highly reliable and
carbon capture and sequestration
and with dropping prices, renewables
dependable base load capacity option
(CCS) solution. Further, biomass is a
are growing faster than ever before. But
to maintain grid stability.
renewable energy source.
like biomass, too much wind and solar
Q: How do you see the CFB technology fitting into the global trend of carbon reduction? A: Our CFB’s can achieve a closed loop on carbon emissions by fully firing
provides value, since the same unit can burn the widest range of fuels, it provides the ability to rebalance
plants can provide dependable energy
We are seeing a growing trend of rising
on-demand which is a big advantage
energy costs and declining power
Q: Where do you see the CFB option providing the most value in today’s markets?
for a renewable energy source.
reliability in markets that have high
A: CFB can bring high value to countries
Looking beyond new build thermal
penetration levels of over 30 per cent
that have large reserves of low quality
plants, our fluid bed gasifiers can be
of wind and solar energy, like in Spain,
lignites, coals and waste coals from
retrofitted to existing PC coal plants
Germany, and Australia. Without large
mining operations, like: Colombia,
to allow them co-fire the highest
scale energy storage, grid operators
Germany, Turkey, Russia, South Africa,
levels of carbon neutral fuels and
scramble to meet load when the winds
Vietnam, Thailand, Indonesia, India,
waste, significantly reducing their
dies down or clouds cover the sky.
China and Australia. Using conventional
carbon profile. Crossing over to the
They are relying more and more on
PC technology, these low-quality fuels
transportation sector, these gasifiers
expensive fast-moving peaker-plants
drive boiler size, cost, and maintenance
can also be integrated into biomassto-
fueled by natural gas and oil to manage
and plant downtime way up.
liquid solutions to produce renewable
the growing intermittent capacity.
may not be a good thing. But unlike wind and solar, biomass
After a long difficult experience with
biofuels and green chemicals. The unwanted result of this is a direct
these fuels, many countries simply turn
But the 100 per cent biomass solutions
relationship of increasing energy
to importing high quality coals or LNG.
are not a good fit for all markets since
prices with increasing wind and solar
Today, CFB technology has been proven
26 | POWER INSIDER VOLUME 10 ISSUE 4
CFB technology in a low carbon world
at the large scale to economically,
technology dovetails perfectly with the
These fuels are much more difficult to
cleanly and reliability convert these
country’s energy goals and objectives,
burn due their higher level of corrosive
low rank fuels into power and steam,
including India’s ultimate goal for being
alkalis, chlorine and non-combustible
lowering the countries energy cost and
energy independent.
debris. Responding to this change in
improving their energy security. The
policy, we developed robust CFBs
CFB technology also keeps the door
Japan is another good example where
designs to help our clients utilize these
open for cofiring coals, petcokes and
CFB technology can make a difference.
more challenging fuels.
biomass from either import or domestic
The energy situation in Japan is critical
sources, when prices or regulations is
right now, given that the country has
The impact of this change in policy
right, so you don’t have to lock yourself
shut down all but two or three nuclear
can best be seen at the low end of the
into one fuel source.
units. The huge power gap is being filled
size scale (50-100 MW), where we are
with expensive LNG and liquid oil. Coal
seeing a growing market for multi-fuel
In broader Asia, over the last 10
is a very economically attractive base
CHP plants. As an example, we are
years, high moisture sub-bituminous
load alternative for Japan. Historically,
currently suppling a CFB to a 75 MW
Indonesia coal exports have exploded,
Japan has been firing the most premium
CHP plant that will provide power and
driven by deep price discounts in the
grade 6,000 kcal Australian coals in its
heat to the town of Zabrze in Poland.
15-40 per cent range. The same CFB
fleet of ultrasupercritical PC boilers to
The plant will be fueled by locally
boiler can fire the full range of these
achieve the highest plant efficiency to
sourced municipal waste, biomass
fuels with heating values spanning the
minimize operating cost. Here, the CFB
and coal. It is a sustainable, closed-
5000-3900 kcal/kg range, as well
option can provide high plant efficiency
loop energy solution providing energy
as, high quality Australian coals in the
with its ultra-supercritical designs, but
security, waste recycling and low carbon
5500-6000 kcal/kg range, capturing
more importantly, can tap into the
emissions at the community level.
the full arbitrage of this fuel market.
much higher cost savings of utilizing
PC plant operates are forced to trade
lower cost, lower quality Indonesian
In Korea and Japan, we are seeing a
reduced plant performance, higher
coals. Further, we are seeing a declining
number of similar multi-fuel power and
downtime and maintenance cost to
supply of premium coals globally
CHP plants using a combination of local
capture a much smaller range of these
limiting supplier competition and Japan
waste and recycled woods, as well as,
fuels. Staying with PC technology, their
negotiating position. Large utility scale
imported biomass pellets and agricultural
only other option is to build another
CFBs would break Japan out of this
byproducts. In Dangjin, Korea, we recently
PC plant designed for another narrow
procurement box.
provided a CFB to a 105 MW power plant
fuel range.
in Dangjin, Korea that fires wood pellets, recycle furniture chips and imported palm
coals, which represents their most
Q: What trends have you been seeing in the biomass energy markets?
affordable energy source. Plant
A: Over the last 10 years, we have
fuel import policy.
operators have struggled for years to
witnessed a competition for clean wood
burn these coals with conventional PC
between the energy, construction, and
At the large end of the scale (150-
technology and like Turkey has turned
furniture industries. After successful
300 MW), we are seeing some
to importing higher quality, more
lobbying by the construction and
governments supporting large scale
expensive coals. Concerned about fuel
furniture industries, governments have
utility power projects fueled by
security and raising energy costs, India’s
shifted their biomass energy program
dedicated biomass and agricultural
government has begun prioritizing the
away from clean woods toward lower
sources. In Polaniec, Poland, we
use of domestic coal over imported
quality, recycled and demolition woods,
recently built a 200 MW power plant
coal for future power projects. Some
as well as, agricultural waste streams
that fires biomass and agricultural
projects are forced to burn a mix
and byproducts like palm kernel shells
byproducts and in Teesside, UK we are
of Indonesian and domestic coals,
and bagasse.
building a 299 MW plant that will fire
India has very low quality domestic
which is a struggle for PC boilers. CFB
kernel shells. This plant originally fired coal as well, until the government changed its
imported wood pellets from the US.
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Dangjin Unit 4 in South Korea, which features our multi-fuel CFB technology, produces 105 MWe of power from palm kernel shells, wood pellets and coal.
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The role of generator Thesets role of generator in the new setsrole in the new The of generator landscape of microgrids of microgrids landscape
sets in the new landscape of microgrids
The demand for primary energy, the energy needed to meet the basic needs of the population for heating, transport and electricity consumption, has consistently grown in recent decades. Since 2010, it hasdemand increased by a factorenergy, of 1.5 and, according to the International The for primary the energy needed meet The demand for primary energy, the energy needed to meet the basicto needs of thethe Energy Agency, it is predicted to grow 32% by 2040. How can this basic needs of the population for heating, transport and electricity population for heating, transport and electricity consumption, has consistently grown growth be sustainable in the long term? The energy mix needs to be consumption, has consistently grown in recent decades. Since 2010, in recent decades. Since 2010, it has increased by a factor of 1.5 and, according to remodelled to make for cleaner forms of energy, sacrificing it has increased by away factor of 1.5 and, according to without the International International Energy Agency, it is predicted to grow 2040. How can thethe stability of supply we currently enjoy. On32% thisbylast point, thisthis is where Energy Agency, it is predicted to grow 32% by 2040. How can this growth besets sustainable long term? energy mix needs to be remodelled generator play in a the crucial role.The Generators add reliability to this new growth be sustainable in the long term? The energy mix needs to be mix, which to meet many requirements at the it has to make wayhas for cleaner forms of energy, without sacrificing the same stability time: of supply remodelled to compatible make way with for cleaner formsinfrastructure of energy, without sacrificing to we becurrently efficient, the existing everywhere, enjoy. On this last point, this is where generator sets play a crucial role. the stability of supply we currently enjoy. Onthe thisenvironmental last point, this is wher adapt to demand at any given and reduce Generators add reliability to this newtime mix, which has to meet many requirements impact generator sets play a crucial role. Generators add caused by the unstoppable increase in global energyreliability needs. to this new at the same time: it has to be efficient, compatible with the existing infrastructure
mix, which has to meet many requirements at the same time: it has adaptcompatible to demand at any given time and reduce the environmentaleverywhere, impact to everywhere, be efficient, with the existing infrastructure Massimo Brotto caused the unstoppable increase in global needs. HIMOINSAthe SALES ENGINEERING MANAGER adapt tobydemand at any given time energy and reduce environmental impac Massimo Brotto. HIMOINSA SALES ENGINEERING MANAGER caused by the unstoppable increase in global energy needs.
Distributed Energy to meet longterm Distributed Energy to meet longenergy demand term energy demand
Increased consumption in countries Increased in countries suchconsumption as India and China, global such as India and China, globaland population population growth the significant
place have an enormous effect on
demand for energy resources. But this the upswing in demand for energy growth has set course: thehas process resources. Buta this growth set has to be sustainable. The last a course: the process hasUnited to be Nations Climate ChangeThe Conference, in sustainable. last Unitedheld Nations Paris in 2015, set out the path towards demand forChange energy resources. But Climate Conference, held in this
Massimo Brotto HIMOINSA SALESwith ENGINEERING MANAGER a low-emission economy, the commitment of the 195 countries that heeded the agreement and have started signed the agreement. The majority to put solutions in place to reduce their have heeded the agreement and have dependence on coal. started to put solutions in place to Technology already offers concrete reduce their dependence on coal.
solutions these needs. “Distributed heededtothe agreement and have started a low-emission with the growth seteconomy, a course: Paris has in 2015, set out the the pathprocess towards has Generation” makes it possible to to put solutions in place to reduce their commitment of theThe 195last countries to be sustainable. Unitedthat Nations Technology offers concrete take energyalready production dependence on coal.to where the signed the agreement. The majority have an enormous effect on the upswing in Climate Change Conference, held in Increased consumption in countries such solutions these needs. “Distributed energy is,towith units that, by working Technology already offers concrete Paris in 2015, set out the path towards as India and China, global population Generation” makes possibledepending to take autonomously anditwithout on solutions to these needs. “Distributed a low-emission economy, with the growth and the significant industrial energy production where the energy the electricity grid,tocan produce Control Generation” makes it possible to continuously sustainably. commitment of the 195 countries that development that is taking place have energy is, withand units that, by working take energy production to where the Microgrids represent the most signed the agreement. The majority have autonomously and without depending an enormous effect on the upswing in energy is, with units that, by working
Distributed Energy to meet longgrowthindustrial and the significant industrial development that is taking term energy that demand development is taking place have
developed Distributed Generation on the electricity grid, can produce model autonomously and without depending on to date:continuously systems, whether connected energy and sustainably.
Control
electricity to the the grid or not, grid, whichcan canproduce combineenergy
continuously and sustainably. different conventional renewable Microgrids represent theand most Microgrids represent the most technologies. In addition to energy developed Distributed Generation developed Distributed generation, they have two Generation distinctive model model to date: systems, whether to date: systems, whether connected features: control, the most intelligent part, predicts and to which the grid or not,consumption which can combine
MICROGRID
work cycles;conventional and storage devices, the different and renewable
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heart of a microgrid, which together technologies. In addition to energy
generation, they have two distinctive features: control, the most intelligent
FEATURE: HIMOINSA GENERATORS Combining generators with a smart Hybrid Renewable Energy Systems
management system makes it possible often unpredictable natural conditions. to plan running hours to perfection and to increase the microgrid’s efficiency
In addition, generators function as a
RENEWABLE TECHNOLOGIES
CONVENTIONAL TECHNOLOGIES
• SOLAR
• GAS
• WIND • BIOMASS
+
• DIESEL
enormously. SOLAR DIESEL
very useful storage alternative that can
The combination of a conventional fossil
SOLAR GAS
respond very quickly to load variations. fuel-powered generation plant with a Combining generators withoffers a smart 100% renewable energy plant
BIOMASS COAL
=
significant advantages. management system makes it possible
• COAL WIND SOLAR
Firstly, it provides uninterrupted power to plan runningan hours to perfection and
WIND DIESEL
supply, which a renewable energy plant
to increase the microgrid’s efficiency
alone is unable to guarantee.
enormously.
SOURCE: FROST&SULLIVAN SOURCE: FROST & SULLIVAN
connected to the grid or not, which can combine different conventional and with power electronics compensate renewable In addition for the loadtechnologies. variations of renewables and are much more efficient in energy to energy generation, they have production. two distinctive features: control, the To make all this equipment work, a
most intelligent part, which predicts
monitoring system is required to collect
such the legislative framework, the and as renewable energy, and its success,
generator sets with renewable energy fossil fuel-powered generation plant
distance from theon national electricity largely depend external factors,
offers only a renewable significant fuel saving, withnot a 100% energy plant
grid, and the cost and profitability of population density and its level of
plan running hours to perfection and always be lowertoand less maintenance
sets, another third from wind energy and
Firstly, it provides uninterrupted and lubricant, filter or an injector changes enormously.
grid, and the cost and industrialisation. Even so,profitability this market is RENEWABLE TECHNOLOGIES
CONVENTIONAL TECHNOLOGIES
storage the griddevices, and fromthe thewith otherpower connected
by microgrids fromproduction. generator more efficientcomes in energy
offers significant advantages. Combining generators with a smart
maintenance costs. Running hours will management system makes it possible
distance from the national electricity
•.1% SOLARper year for • GASthe next five years, 17 its population density and=its level + • DIESEL • WIND and rural and island • BIOMASS • COALelectrification is of industrialisation. Even so, this
At present,ofone third of energy supplied variations renewables and are much
but also reduced overall running and
such as the legislative framework, the
electrifying an area, considering its Systems Hybrid Renewable Energy
of electrifying anatarea, considering expected to grow a brisk pace, around
electronics for the load sources, in compensate a smart grid environment.
costs. A typical load pattern of these
Theshows combination a conventional plants how theofcombined use of
The appeal of combining fossil fuels
consumption and work cycles; and
and communicate all data, both from
Secondly, it significantly reduces running
to increase the microgrid’s efficiency
SOLAR DIESEL
combination of a conventional fossil supply,Thewhich a renewable energy willpower be required. SOLAR GAS
fuel-powered generation plant with a
plant alone is100% unable to guarantee. renewable energy plant offers
BIOMASS COAL
WIND SOLAR
expected to lead the process as a whole,
market is expected to grow at a brisk
with year-on-year growth of 23%.
pace, around 17.1% per year for the
significant advantages. Suitable conditions for the Firstly, it provides an uninterrupted power installation ofsupply, a hybrid plant energy plant which a renewable WIND DIESEL
Secondly, it significantly reduces alone is unable to guarantee.
Hybrid solutions are especially Secondly, it significantly reduces running running costs. A typical loadattractive pattern of SOURCE: FROST&SULLIVAN
costs. A typical these for industrial markets, suchloadaspattern the ofmining
aHowever, monitoring is required to the system global trend is certainly
these plants plants shows how the combined next five years, rural and island shows how the combined use of Advantages of and incorporating telecommunications sectors, as backgenerator sets with renewable energy such as the legislativeor framework, the with power electronics compensate use of generator sets with renewable electrification is expected to lead the generator sets in hybrid distance from the national offers not only a significant fuel saving, electricity for the load variations of renewables up energy in rural areas and islands, as but also reduced overall running and grid, and the cost and profitability of and are much efficient in with energy year-on-year generation energy offers not only a significant process asmore aplants whole, well as a single source of continuous
collect and communicate all data,to to combine different technologies
always be lower and less maintenance population density and itsfuel level of saving, but also reduced overall growth To make allof this23%. equipment work, asets into power for shops, farms or households. Incorporating generator
eliminate they both fromthe thenegative grid andaspects from the other
these applications share a number these hybrid systems guarantees thatto grow at aAll be required. expected brisk pace, around running and will maintenance costs. of and communicate all data, both from
the rest from microturbines, solar panels
To make all this equipment work, or fuel cells.
each have when used connected sources, in individually, a smart gridand to reduce dependency on fossil fuels. The
environment. At present, one third of
falling price of solar panels is making the
energy supplied by microgrids comes
transition much smoother and countries
from sets, another thirdSaudi such generator as the United Arab Emirates, from wind energy and the from Arabia, Qatar, Germany andrest Chile have started to encourage renewable energy microturbines, solar panels or fuel cells. projects with this goal. The appeal of combining fossil fuels
However, the global trend is certainly
production.
monitoring system is required to collect
electrifying an area, considering its
industrialisation. Even so, this market is
maintenance costs. Running hours will and lubricant, filter or injector changes
17.1% per year for the next five years, the system grid and from other connected common features: the isthe reliable: Advantages of it ensures that Running hours will always be lower and sources, in a smart grid environment.
and rural and island electrification is
Suitable conditions for the
are places thatofare not plant energy is always available. Theyexpected are the to lead the • processThey as a whole, installation a hybrid At present, one third of energy supplied
incorporating generator less maintenance and lubricant, filter with year-on-year growth of 23%. by microgrids in comes generator solutions connected Hybrid to the grid are or especially have attractive ingredient thefrom mix that provides a very sets, another from wind energy and for industrialwill markets, as the mining sets inthird hybrid or injector changes be such required. Advantages of incorporating excessively high electricity costs. sound solution to the intrinsic instability the rest from microturbines, solar panels or telecommunications sectors, as backgenerator sets in hybrid generation plants orrenewable fuel cells. up energy in rural areas and islands, as Their demand is up to 5MW, of energy, because, generation unlike plants • However, the global trend is certainly well as a single source of continuous Incorporating generator setsare into Suitable conditions with 4,000 running renewable energy, generators not generator sets to combine different technologies to power for shops, farms orhours households. Incorporating into around eliminate the negative aspects they All share a number these hybrid systems guarantees that perthe year.installation The these idealapplications situation for dependent upon often unpredictable for of aa of these hybrid systems guarantees that each have when used individually, and to common features: the system is reliable: it ensures that hybrid most of the natural conditions. reduce dependency fossil fuels.it The • isThey are places thatdemand are not energythat is always available. They are theplant hybrid plant the system is on reliable: ensures price of solar panels is making the connected to the when grid or have ingredient a very during occurring the day, solar Infalling addition, generators function as a in the mix that provides
Hybrid solutionsexcessively are especially attractive energy is always transition much smoother available. and countries They high electricity costs. soundare solution to the intrinsic instability
and renewable energy, and its success,
sources are• available. very storage alternative that can energy, because, such useful as the United Arab Emirates, Saudi Their demand is up to 5MW, of renewable unlike
largely depend on external factors,
Arabia, Qatar, Germany and Chile have with around 4,000 running hours renewable energy, generators are not • They have a high level of exposure respond very quickly to load variations.
to combine different technologies to eliminate the negative aspects they
the ingredient in the mix that provides started to encourage renewable energy
for industrial markets, such as the mining per year. The ideal situation for a or telecommunications sectors, as hybrid plant is most of the demand
dependent upon often unpredictable
aprojects very with sound solution to the natural intrinsic this goal. conditions.
each have when used individually,
The appeal of combining fossil fuels energy, occurring during the day, when solar In addition, generators function as a energy in backup rural areas and islands, instability of renewable
and to reduce dependency on
largely dependunlike on external factors, • They have a high of exposure respond very quickly to load as variations. well as a single source of level continuous because, renewable energy,
fossil fuels. The falling price of solar
GRID generatorsSMART are not dependent upon
panels is making the transition
and renewable energy, and its success,
very useful storage alternative that can
BALANCE OF SYSTEM
sources are available.
power for shops, farms or households.
BALANCE OF SYSTEM SMART GRID
much smoother and countries such as the United Arab Emirates, Saudi Arabia, Qatar, Germany and Chile have started to encourage renewable energy projects with this goal.
30 | POWER INSIDER VOLUME 10 ISSUE 4
Balance of System Smart Grid
generator set actually works
In this specific case, it would mean
an annual saving of 1,600,000 litres of Let’s suppose that a hybrid plant is FEATURE: GENERATOR SETS IN NEW MICROGRIDS diesel per year, more than one third of installed in Chile, in a region where solar
grid, make it possible to plan running hours and to increase the efficiency of the whole system.
PV 36%
POWER [kW]
DIESEL 64%
HOURS [h]
Conclusions
connected to the grid or have
Case study: how integrating renewable energy with a generator set actually works
excessively high electricity costs.
Let’s suppose that a hybrid plant is
unquestionably have a role to play in the
Their demand is up to 5MW, with
installed in Chile, in a region where solar
coming years. Their capacity to ensure
around 4,000 running hours
irradiance is 2,312kWh/m² and annual
availability of energy to meet increasing
per year. The ideal situation for a
electricity consumption is approximately
demand that is more challenging from
hybrid plant is most of the demand
17,520MWh/year. For constant daily
an environmental point of view makes
occurring during the day, when solar
consumption of 4MW for 12 hours, let’s
them a sound solution to the intrinsic
sources are available.
estimate that 4,800,000 litres of diesel
instability of renewables, and a useful
They have a high level of exposure
would be required. Massimo Brotto
storage alternative. Generators respond
All these applications share a number of common features: •
•
•
They are places that are not
to sunlight or wind. To guarantee
energy production to more renewable forms of production, generator sets
more 15 yearsoccur of experience, he quicklyWith when loadthan variations and,
leads a team of professionals providing technical
a return on investment, solar
HIMOINSA SALES If threeENGINEERING HIMOINSA MANAGER HTW-2030 T5
irradiance should be more than
generator sets, which supply a total of
of a smart makeand it possible tosystems. In terms withgrid, batteries renewable
1,300kWh/kWp or, as applicable,
4.85MW are installed, how many hours
plan running hours and to increase the costs. profitability and minimising running
wind exposure should be at least 4
would it take to recoup an investment
efficiency of the whole system.
m/s. Countries such as Chile, Peru
like this? How much fuel could be saved?
www.himoinsa.com
and India, or regions such as the
The monitoring systems are responsible
Caribbean, Asia Pacific, Middle East
for detecting which energy source is the
and North Africa are geographical
best at any given time. So, during the
areas that meet all these optimal
hours of greatest solar irradiance, the
natural conditions for installation.
generators work at a minimum level. In
They have enough space for the
this way, the service life of the engine
With more than 15 years of experience,
installation of solar panels. Where
is increased and therefore the running
he leads a team of professionals
this is under a roof, the ratio should
and maintenance costs of the unit are
providing technical support to the
be around 10 square metres per
reduced. And of course, fuel consumption
sales department and working on
kW generated. Where this is on the
is considerably reduced. In this specific
the development of generator set
ground, 20 square kilometres would
case, it would mean an annual saving of
applications with batteries and
be required per MW.
1,600,000 litres of diesel per year, more
renewable systems. In terms of
than one third of current consumption.
new product design, he focuses on
Based on these figures and depending
optimising profitability and minimising
on the price of diesel and solar irradiance,
running costs.
www.himoinsa.com | 2017
•
In the transition from conventional
support to the sales department and working on when integrated in the management the development of generator set applications
of new product design, he focuses on optimising
Massimo Brotto HIMOINSA SALES ENGINEERING MANAGER
the investment in a plant that combines generator sets with solar panels could be recouped within three to five years.
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POWERING THE FUTURE: Malaysia’s energy policy challenges
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PARTS
|
SERVICES
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REPAIRS
Policy Ideas № 55 November 2018
Powering
the future: Malaysia’s energy policy challenges Renato Lima de Oliveira
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FEATURE: POWERING THE FUTURE
Executive summary »»
The energy industry is changing fast and in multiple directions, with important consequences for energy-rich countries. Malaysia is also experiencing unprecedented political changes with the election of the Pakatan Harapan (PH) coalition on May 9 of 2018, the first alternation of power since the country’s independence. Some of the key promises made by the PH’s manifesto are related to the energy sector, including a fast growth of renewable generation and the promotion of green technologies. This paper discusses the global energy scenario, Malaysia’s energy policy challenges, and explains why it is important to put energy innovation at the forefront of the national development strategy.
»»
In the last decade, the energy industry has been affected by two important factors: the growth of unconventional oil and gas (O&G) production and renewable sources of energy. The former brought abundance of fossil fuels, starting from the United States but with potential to spread to other countries. The latter represents alternatives to fossil fuels, which can be key to diversifying the energy sources and upholding commitments to limit greenhouse gas emissions as called for by governments that signed the Paris Agreement (2015), which includes Malaysia.
»»
In terms of total contribution to the world energy supply, unconventional O&G far exceeds the growth of modern renewables such as wind and solar. In 2017, unconventional O&G (from shale and tight oil), in the United States alone, added 12.8 million barrels of oil equivalent per day (MMBOE/d). In contrast, solar and wind energy provided equvalent to 2.1 MMBOE/d, globally, in 2016. However, renewables have shown impressive gains in competitiveness in recent years and, in some cases, are the cheapest sources for electricity generation. In addition to these dramatic cost reductions, renewable sources are poised to gain from the electrification of energy demand (e.g., electric vehicles), climate changerelated policy activism that discourages fossil fuels, and consumers’ pressure in favor of low carbon alternatives.
»»
Both the abundance of fossil fuels unlocked by new technologies and the increasingly competitive alternative energy sources will disrupt business models of firms that rely on the extraction of conventional O&G, as well as the public finances of oil-rich countries like Malaysia.
»»
Unlike the rest of the world, Malaysia’s energy matrix is becoming more carbon-heavy: in terms of primary energy share, coal has increased from 5%
Dr Renato
in 1996 to 20% in 2016. In electricity production, coal has replaced natural
Lima de Oliveira
gas as the main source of energy and now accounts for 46% of electrical
is an Assistant
energy generation. Meanwhile, modern renewable sources (solar and wind)
Professor of
make up less than 1%.
Management at the Asia School of Business
»»
Malaysian policymakers will need to devise policies to expand the supply
(ASB). His main expertise lies
and generation of natural gas (to replace coal) and drastically incentivize
in the political economy of
low-carbon sources of energy such as solar in order to de-carbonize the
development and state-business
energy matrix and reach the target of 20% of renewable energy by 2025 as
relations, particularly in the areas of
promised by the PH manifesto.
industrial and innovation policies and government accountability.
»»
Both objectives can be facilitated by a national innovation system that
Dr Renato received his PhD in
prioritizes the research and development (R&D) of the energy sector.
Political Science from MIT and
Malaysia’s high-cost and complex O&G resources need to continuously
his PhD thesis was on the politics
innovate to remain competitive in a world of fossil fuel abundance and
of unconventional oil: industrial
to unlock new gas fields that can replace the growing coal consumption.
and technology policy in Brazil,
Incentives for local R&D and collaboration between lead firms, suppliers and
Malaysia, and Mexico. He can be
universities are also key to building capabilities in renewables.
reached at renato.lima@asb.edu.my
* The views and opinions expressed in this paper are those of the author and do not necessarily represent IDEAS
34 | POWER INSIDER VOLUME 10 ISSUE 4
POWERING THE FUTURE: Malaysia’s energy policy challenges
1. Introduction The energy industry is changing fast
made by PH in its manifesto presents
to new entrants and business models.
and in multiple directions: the United
examples of political demands with
It follows with an analysis of Malaysia’s
States overtook Saudi Arabia in 2014 as
fiscal costs and impact on the energy
energy sector, with particular attention
the world biggest oil producer, thanks
sector, such as: increasing royalties to
to the O&G industry. It then argues for
to unconventional oil production;
oil-producing states to 20%; subsidizing
an energy innovation system in Malaysia:
electric cars and e-bikes are now mass
and “stabilizing” petrol prices; enabling
a series of interconnected institutions
market products and not gadgets
the purchase of a first car with reduced
and market players from the public and
for early-adopters, threatening the
prices to low income families; and
private sectors working in collaboration
internal combustion engine and the
abolishing highway tolls. Furthermore,
to develop and deploy technologies and
demand for liquid fuels; and the price
the replacement of the GST with the
to foster the creation of new companies.
of solar photovoltaics generation is
reintroduction of the SST will result in a
Such an innovation system will be
rapidly decreasing and becoming
predicted tax revenue shortfall of RM21
key to maintaining the strength of the
market competitive, pushing solar
billion to be partially compensated with
current O&G industry by extending the
adoption regardless of subsidies. Recent
oil revenues.1 At the same time, PH
life of current fields and supporting new
technological gains have unlocked
promised to increase renewable energy
discoveries; by promoting knowledge
more oil and gas (O&G) reserves as
supply from 2% to 20% by 2025 and to
spillovers from energy-based research
well as alternative energy sources.
“focus on green technology development
(such as material sciences, biotechnology,
Amidst increasing concerns with the
and renewable energy” (Pakatan Harapan
data analytics, etc.) to non-energy sectors,
environmental impact of fossil fuels and
2018, p. 86). This is a challenging
helping to further diversify Malaysia’s
a change in the demand profile towards
governing agenda that involves a series of
economy and tax base; and by preparing
electrification, there is a possibility that
tradeoffs and compromises.
the nation for an economy where fossil
oil reserves will be left on the ground,
fuels play a diminishing role and it
resulting in a loss to resource-rich
This paper discusses the challenges
becomes increasingly unfeasible to base
countries, including Malaysia.
ahead for Malaysia’s energy sector and
a large share of the national budget on
makes policy suggestions to the method
O&G revenues.
In addition to global developments,
by which the country can position
Malaysia’s landscape is also changing. The
itself to build a strong, innovative and
This study concludes that with the
election of the Pakatan Harapan (PH)
financially sustainable energy industry
right policy mix, Malaysia can be well
coalition on May 9, 2018 represented
amidst the emerging domestic and global
positioned in the future energy scenario.
the first change of government since
environment. It starts by presenting key
The task for policymakers is to provide
the country’s independence. Elections
trends in the global energy industry that
a clear vision of direction followed
in Malaysia were already increasingly
are disrupting the status quo and leading
by calibrated policy instruments that
competitive, and going forward,
promote the long-term objectives of
politicians will be increasingly pressured
developing the country’s innovation
to accede to distributive demands that
and institutional capacity, which will
may be key to winning and retaining
foster a competitive and sustainable
government. Some of the key promises
energy sector. 1 T he Sun Daily, “SST to be set at 6% for services, 10% for sales,” July 16, 2018
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POWERING THE FUTURE: Malaysia’s energy policy challenges
2. From scarcity to abundance: the role of technology in powering the future The spectacular global economic
residues (traditional biomass), oil
peacefully alternate, power. In fact,
growth witnessed since the industrial
helped to create modern life and
few resource rich countries have
revolution – when global GDP
global trade that most of us may take
managed to utilize their endowment
per capita jumped from less than
for granted. Figure 1 highlights these
blessing as a developmental
$1000, where it had been stagnant
energy transitions and also shows
advantage, which is what led to a
for centuries, to over $10,000 as
how modern renewables (wind and
large literature in social science on
registered most recently – has been
solar) are still negligible in terms of
the “resource curse.” About 70% of
fueled by hydrocarbons. First, it was
total world energy consumption.
total oil reserves and 43% of oil
led by coal, and in the 20th century,
Albeit, renewables are growing fast, as
production (BP, 2018) come from the
by oil. Oil has several advantages:
elaborated later in the paper.
Organization of Petroleum Exporting
2
it can “pack” lots of energy in a
Countries (OPEC), an association
comparatively small volume (high
The omnipresence of oil use is
which features some of the most
energy density), it is cheap, easy
contrasted with its uneven global
autocratic regimes. 3 For the most
to store and transport, and is a
distribution. Few countries have large
part, the oil found in OPEC countries
versatile raw material for a number
oil reserves and are net exporters. To
tend to be plentiful and technically
of fuels and petrochemicals. Given
complicate things further, proliferous
easy to extract, which makes them
its technical qualities, oil allowed the
giant oil fields tend to be in politically
the lowest cost of production in the
expansion of the internal combustion
unstable and undemocratic countries
world and the most able to collect
engine, as well as everyday plastics
– a relationship that is unlikely
high revenues per barrel sold. Through
and synthetic fibers that are now
random but rather a consequence
a variety of channels, the abundance
embedded in contemporary society.
of the easy access to oil riches and
of an easy-to-extract resource also
By replacing less efficient forms
the politico-economic incentives
made these countries less likely to
of energy, such as wood and crop
it creates to retain, rather than
diversify their economies.
Figure 1: Primary energy consumption by main sources (1800-2015) Source: Smill (2017)
2 For historical statistics see Maddison (2001) and for most recent data The World Bank (2018). 3 The following countries are present members of OPEC: Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.6
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FEATURE: POWERING THE FUTURE
Figure 2: U.S. crude oil and dry natural production *Noted: Shale gas production includes associated natural gas from tight oil plays Source: U.S energy Information Administration, Annual Energy Outlook 2018 Reference case
For many years, the combination
doubled its total oil production and
Figure 2, from the U.S. Energy
of both the high inelasticity of
contributed to the world oil market
Information Agency, shows the
demand for oil along with its
supply the equivalent to nine times of
dramatic gains in production from
production concentration in a
Malaysia’s total crude oil production
tight oil and shale gas (EIA, 2018). In
handful of large exporters had led to
in 2017 (0.7 mb/d)?
2017 alone, these unconventional
profound geopolitical and economic
sources added 12.8 million barrels of
consequences, notably the U.S.
The answer lies in the combination
oil equivalent per day (MMBOE/d).
interest in the Middle East to secure a
of resource availability (i.e., geology);
The figure also shows EIA’s growth
source of energy to its economy.
technological advancements,
projection - most likely under baseline
particularly the combination of
scenarios - up to 2050, with the U.S.
The U.S. is a large, resource-rich
horizontal drilling with hydraulic
featuring as a net energy exporter.
nation, which was an oil pioneer.
fracturing; and institutional
However, production peaked in
differences, including private property
While the U.S. had all the
1970 at 11.3 million barrels per day
rights for the subsoil and a strong
necessary factors to be a pioneer in
(mb/d) and reached a bottom of
capital market that financed oil
unconventional O&G, it is far from
6.7 mb/d in 2008. From that year
entrepreneurs. It has been known
being the only country with these
onward, production started to grow
for years that large parts of the
types of resources. In 2015, an
consistently and reached a record-
U.S. territory had O&G trapped in
assessment made by EIA on the global
high of 13 mb/d of crude oil in 2017.
formations that were too costly
potential of technically recoverable
Since 2009, the U.S. has surpassed
to extract because conventional
shale resources shows 418 billion
Russia as the world’s top producer of
production techniques yielded very
barrels of crude oil and 7,576 trillion
natural gas, and since 2014 displaced
low recovery volumes. The high oil
cubic feet of natural gas in a multitude
Saudi Arabia as the world’s leading
prices that prevailed in the 2000s
of countries – including Australia,
crude oil producer (BP, 2018).
created incentives for entrepreneurs
Argentina, France, Indonesia, Poland,
to experiment solutions to tap these
etc. (see Figure 3). To give a sense of
unconventional resources.
proportion, the total world reserve
How was it possible that in a period of less than a decade, the U.S. almost
38 | POWER INSIDER VOLUME 10 ISSUE 4
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FEATURE: POWERING THE FUTURE
Figure 3: Assessed basins based on EIA (2015) with a crude oil consumption of 92.6
bundle of technologies that enabled
the result of decades of investment in
million barrels per day, or 33.3 billion
the shale revolution spreads to the
R&D to discover and develop challenging
barrels per year, which leads to over
rest of the world and new ones are
resources, with the participation of
50 years of available reserves given
developed, more oil can be extracted
state-owned and private companies as
the current level of consumption (BP,
from today’s conventional fields.
well as local and international research
2018). The technically recoverable
institutions (see Box 1).
tight oil from shale, as mentioned, can
The growth of O&G production from
add another 12 years to that already
shale is not the only remarkable
Box 1: Brazil’s leadership in deep
sizable length of time. In addition,
technological advancement in the
offshore oil
when the technologies used for shale
industry lately. Another source of
Since Brazil opened its oil sector for
begin to be deployed in conventional
production growth has been from
private investment in the mid-1990s
fields, available resources will also
deepwater offshore wells. Thanks
with the first bidding round in 1999,
grow by enabling higher recovery rates
to advancements in 3-D and 4-D
production has increased from 1.132
from current producing fields (Aguilera
seismic analysis, subsea systems,
mb/d in 1999 to 2.734 mb/d in 2017
and Radetzki, 2016). It is surprising for
and drilling under challenging high
(BP, 2018). Brazil’s Petrobras is a
those outside the O&G sector to know
pressure conditions, oil companies
global leader in deepwater offshore
that in most oil fields in the world,
have been increasingly able to master
oil production, a feat made possible
only 20% to 40% is actually extracted
the challenges of extracting O&G from
with a mission-driven R&D investment
(Muggeridge et al., 2013). While in
water depths that go even beyond 2km.
program called Procap, which started
most cases it is technically possible to
In 2007, for example, Petrobras and
in the 1980s and was designed to
extract more oil from a mature field
the Brazilian government announced
master deepwater and ultra-deepwater
with “enhanced oil recovery” techniques,
the discovery of a new oil play with
offshore oil production. Lawmakers
production will stop when it does not
initial estimates of 70 billion barrels of
and regulators introduced specific rules
make economic sense to do so, i.e.,
resources below a thick layer of salt and
during the opening of the country’s
when the marginal cost of extraction
in water depths of over 2km located
oil sector to channel oil revenues to
per barrel from a given field is higher
200km away from the coast. This pre-
local R&D by public universities and
than the price it can be sold. As the
salt area, as it came to be known, was
private companies. Up to 1% of the
40 | POWER INSIDER VOLUME 10 ISSUE 4
POWERING THE FUTURE: Malaysia’s energy policy challenges
gross value of the oil production
The high oil prices that prevailed
installed capacity of solar and wind
from highly productive fields had to
during the latest commodity super-
increased from a slim 18,163 MW
be spent on local R&D investment
cycle (from 2004 to 2014) provided
in 2000 to 903,119 MW in 2017
in the areas of oil, natural gas and
a clear incentive to the development
(IRENA, 2018a). Installed capacity
biofuels. The amount was to be used
of energy-related technologies such
is a tricky indicator for renewable
in universities and research centers,
as those that allowed the expansion
energies because the sun is not always
and up to 50% in internal R&D centers
of unconventional oil production.
shining nor the wind always blowing.
of oil companies and suppliers with
Another incentive was the lack of low-
Nevertheless, when taking into
local R&D operations. More recently,
cost reserves available to international
account total energy generation, the
contracts from 2013 reserved 10% of
oil companies (IOC). National oil
growth has been from 32,294 GWh
the earmarked resources to supplier
companies (NOC) own about 90%
to 1,286,648 GWh from 2000 to
development programs. The opening
of the world’s reserves (Victor et al.,
2016. To put this into perspective, in
of the oil sector allowed Petrobras to
2012). Oil operators that are left with
2016, solar and wind energy provided
partner with private firms and raise the
less-than-good acreage had to invest
the same as 2.1 MMBOE/d of energy
capital necessary to invest in deepwater
to overcome technical challenges
for a year – about Norway’s crude oil
offshore fields, which carried high price
and cost barriers to bring to market
production and about one-sixth of
tags and geological risks. Petrobras is
the barrels that come from high-cost
U.S. unconventional O&G in 2017
the only national oil company (NOC) to
assets. These resources, however, have
(EIA, 2018).
have received three OTC Distinguished
high breakeven price and are the first
Achievement Awards (1992, 2001,
investments to be halted when prices
Renewable energies are still a green
2015), which is a prize that recognizes
decline, such as in 2014.
drop in a black ocean, since fossil fuels
technological innovations in the segment (Lima-de-Oliveira, 2017).
currently account for about 80% of Figure 4 shows GDP growth and oil
total primary energy consumption in
prices (real and nominal) per year. In
the world. However, there are good
Unfortunately, the Brazilian oil
real prices, the commodities super-
reasons to believe that a combination
company was also in the spotlight
cycle observed in the 2000s was
of factors is poised to favor renewable
recently due to a major corruption
marked by higher oil prices than in
energy production in the coming years:
scandal revealed in 2014 that led to
previous periods of oil shocks, such
the arrest of former directors, senior
as in the 1970s. Therefore, oil prices
executives from supply companies
between $40 to $60, as observed
1. Dramatic cost reductions
and high-level politicians, including
recently, are not low prices, but
In addition to
a former speaker of the house,
rather historically high. Secondly,
incremental
a finance minister and a former
GDP growth is decoupling from oil
innovation, wind and solar energy
president. The scandal involved
prices as the economy becomes more
projects have benefited tremendously
the payment of kickbacks from
knowledge-intensive and service-
from scale economies and learning-
suppliers to fund political campaigns
sector-based rather than energy-
by-doing in manufacturing. This
and was a major blow to the image
intensive and manufacture-driven.
has been particularly true with solar photovoltaic (PV). Scientists involved
of the company. Thankfully, the independence of public prosecutors
The share of renewables
with the MIT Energy Initiative have
and Brazilian courts revealed the full
High oil prices and a growing concern
noticed that “the cost of solar power
extent of the corruption scheme and
over the environmental impact
tends to be lower than expected, and
held the participants accountable
of fossil fuels also stimulated the
the deployment of solar power tends
by imposing fines and criminal
search for substitutes. The current
to be higher than expected” (Brown et
convictions. Petrobras also received
commercially available wind and
al. 2017). For instance, in 2011, the
back part of the losses in judicial
solar energy generators are updated
U.S. Department of Energy launched
agreements with suppliers.
versions of technologies that have
the SunShot initiative with the aim
been around for decades. Yet, the
of accelerating cost reduction in solar
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FEATURE: POWERING THE FUTURE
Figure 4: GDP growth and oil prices (1960-2017) Source: BP 2018 and World Bank Development Indicators
deployment so it could be competitive with conventional sources of electricity generation (i.e., coal and natural gas) without subsidies, which required slashing costs by 75%. The target set for 2020 was achieved in 2017 for utility scale solar (a levelized cost of electricity of $0.06 per kWh4) and a new initiative, for 2030, was launched with a target to further reduce costs by 50% ($0.03 per kWh)(U.S. DOE ,2017). Recent energy auctions in different markets showed renewables on cost parity or even cheaper than natural gas and coal (IRENA, 2018b). However, this does not necessarily mean that we can now quickly reduce the share of
Figure 5: Trends in Renewable Energy (Electricity Generation in GWh)
fossil fuels in the energy matrix. Due
Source: IRENA 2018a
to the intermittent nature of the most deployed modern renewable energies,
coal. Utility-scale energy storage would
is to achieve comparably low costs
wind and solar PV, system stability
solve this issue, but cost reductions and
in concentrated solar thermal power
requires backup generators that can
technological improvements in this
(CSP), a solar technology that, unlike
be dispatched to the system – most
area are still limited. One of the focus
solar PV, can store energy and dispatch
of the time fueled by natural gas and
areas of the SunShot 2030 initiative
it to the grid when needed.
4 M easured as the levelized cost of electricity (LCOE) for an area of average climate in the U.S. LCOE is a convenient measure to compare costs among different sources of energy by incorporating the net present value of capital and operational costs over the lifetime of a given project. It can be interpreted as the break even price of the project or “the price of electricity required for a project where revenues would equal costs, including making a return on the capital invested equal to the discount rate” (IRENA 2012, p. 3).
42 | POWER INSIDER VOLUME 10 ISSUE 4
POWERING THE FUTURE: Malaysia’s energy policy challenges
2. Electrification of energy demand
the internal combustion engine to
of 2°C above pre-industrial levels, the
electric vehicles. On this front, the
world needs to drastically move away
penetration of electric vehicles is
from carbon-based sources of energy.
The digital economy
gaining momentum: sales of electric
This is reflected in the objectives of the
has the potential to shift energy
vehicles reached 1 million units in
Paris Agreement (2015), the latest in a
demand in multiple fronts, including:
2017 (IEA, 2018a).
series of summits and meetings that
growing usage of equipment powered
seek to coordinate a unified response
by electricity; decentralization of
Since 2016, investments in electricity
energy production, with consumers
generation surpassed oil and gas
also playing the role of generators;
– US$750 billion versus US$715
The Paris Agreement is based on
and a shift in the consumer base
billion, respectively, for 2017 (IEA
voluntary cooperation. It has no
from passive to active through smart
2018b). Electricity can be generated
enforcement mechanism and already
meters and internet-of-things that
from multiple sources and coal
suffered a major blow with the election
manage load and add flexibility to
has traditionally been dominant
of Donald J. Trump in the United
the energy grid. Some of the impacts
in many countries due to it being
States, who announced the withdrawal
are more speculative, such as gradual
cheap and widely available, despite
of the US from the agreement. Despite
reduction of global physical trade
its environmental, and largely
the fragility of a global agreement to
through decentralized manufacturing
unpriced, cost from high emissions of
limit carbon emissions, at the country
via 3D-printing or widespread
nitrogen oxides (NOx), sulfur oxides
and state level, policies can accelerate
deployment of more efficient logistics
(SOx) and greenhouse gases. Coal
energy transition.
through driverless cars and trucks, both
is gradually being displaced due to
of which have the potential to reduce
the stricter environmental laws and
In the U.S., although the Trump
liquid fuel consumption (Helm 2017).
cost competition from renewables
administration is reversing regulations
and natural gas (particularly in the
set by the Environmental Protection
From energy-hungry data centers
U.S., thanks to the shale revolution).
Agency (EPA) to benefit the coal and
that serve as cloud storage to mobile
It is now commonplace to see
oil industries, activists turned to state
phones at the hands of hundreds of
natural gas as a “bridge fuel” for
level politics to enforce their green
millions of users, the digital economy
a greener future because it can
agenda. States like California and
is powered by electricity. The backbone
generate electricity with 50% less
Massachusetts have their own clean
of the contemporary economy runs
CO2 emissions than coal and can also
energy and pollution reduction targets.
on electricity, even for intensive and
provide dispatchable thermoelectric
perhaps spurious usage, such as purely
generation when needed,
When politics fail, citizens concerned
bitcoin mining.
compensating the intermittency of
with environmental impact can
wind and solar PV generation.
also influence the energy demand
5
Presently, oil is rarely used to generate electricity; instead, it is dominant (94%) in transportation (BP, 2018). If demand for transportation goes down, either by increased efficiency
to the challenge of global warming.
through their purchasing power. To
3. Policy activism and consumer’s preference
differentiate products and promote
Most scientists and
offsetting schemes, signaling to
sustainable consumption, some companies are investing in carbon
with driverless cars or 3D-printing
politicians agree that the rate of CO2
consumers that they are doing their
reducing the intercontinental flow of
emissions and other greenhouse gases
part in mitigating climate change.
goods, oil stands to lose. It also stands
are linked to a warming of the planet
to lose if transportation switches from
and if we are to keep it below a rise
5 A recent paper that assessed the feasibility of cryptocurrencies serving as dominant mean of exchange pointed to the energy consumption as one of the barriers for large scale adoption. The study estimated that the total electricity use of bitcoin mining amounted to the consumption of a country like Switzerland, resulting in an environmental disaster, so the authors claimed (BIS 2018).12
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FEATURE: POWERING THE FUTURE
It is hard to predict the exact impact
nation’s underground wealth.
that the stick of local regulations or
forms of transportation. In this likely scenario, oil prices would stay lower
the carrot of consumers favoring
A new energy scenario challenges
in the medium- to long-term – with
environmentally sustainable suppliers
this conventional approach and poses
occasional short-term fluctuations to
will have on business practices.
serious threats to oil-rich countries such
adjust supply and demand and react to
Nonetheless, the combination of policy
as Malaysia. The increasingly lower cost
geopolitical shocks.
activism and consumers’ preference
of renewables is bringing competitive
towards sustainable products are
alternatives to energy generation.
The gradual decline of oil in the energy
forces that energy firms based on fossil
The electrification of the economy,
matrix will have deep repercussions
fuel will have to reckon with as it can
including the transportation sector,
and it is a challenge to oil companies,
increase their cost of doing business.
can reduce the demand for liquid fuels.
particularly NOCs. It puts pressure in
Technological advances in horizontal
countries that base a large share of their
Energy transition and its political effects
drilling, fracking and deepwater
fiscal revenues on oil sales and have
offshore production have unlocked vast
not diversified their economy. It will
For most of the 20th century,
new reserves outside OPEC countries
be particularly hard for countries and
policymakers from oil-rich countries
and challenged the idea of peak oil and
regions that base their economy on the
were able to reasonably expect that
increasingly higher oil prices. Finally,
sole extraction of natural resources and
the combination of high oil demand,
policy and consumer pressures can
have not invested in human capital and
lack of a real substitute and limited
accelerate the shift towards a lower
innovation capabilities.
reserve availability secured an intrinsic
carbon footprint in the economy.
value to their subsoil wealth. They did
Because of these factors, oil
The good news to oil-rich countries is
not need to hurry to take oil out of
consumption may reach a peak in the
that energy transitions take time and
their ground – oil produced tomorrow
coming decades, whereby natural gas
the current production from renewables
would be worth more than oil
and renewables gradually displace
is still miniscule. Policy decisions
produced today, since reserves would
oil products, even if total energy
taken today can have a deep impact in
get increasingly scarce, and prices
consumption goes up. To keep their
shaping the future. In the next section,
would be driven up over time. Output
market share in the world energy matrix
the paper addresses Malaysia’s energy
could be managed according to the
and slow down the energy transition,
system and provides policy suggestions
fiscal needs of the producing countries,
oil-rich countries may react by
that allow the country to seize the
the time horizon of the rulers, and
increasing their production capacity and
opportunities brought by the incoming
the quotas set by OPEC. NOCs could
try to undercut, by lowering prices, the
global energy changes.
then play the role of custodians of the
expansion of renewables and electric
44 | POWER INSIDER VOLUME 10 ISSUE 4
POWERING THE FUTURE: Malaysia’s energy policy challenges
3. Malaysia energy outlook
This section starts by describing the
In the late 1960s, Shell and Esso
national capabilities in human
main players in Malaysia’s energy
started offshore oil exploration in
resources and in the supply chain
system, particularly PETRONAS in
Malaysian waters but production was
through regulations built into the
O&G and Tenaga Nasional Berhad
miniscule, amounting to less than 10k
Production Sharing Contracts (PSCs)
in electric energy. It follows with an
bpd in the 1960s. Yet, it had potential
that foreign oil companies signed.
analysis of Malaysia’s energy matrix
and the Malaysian government
By requiring companies to transfer
and energy transition challenges.
decided to revamp the legal framework
knowledge from foreign workers to
by centralizing regulatory and
locals and by sponsoring scholarships,
PETRONAS and the O&G sector
ownership rights from states, and
PETRONAS developed, over the
negotiating new contracts with oil
years, a pool of qualified human
The big wave of contract renegotiations
companies that would increase the
capital apt to operate in all activities
and later oil nationalizations between
taxes from oil production. PETRONAS,
of the O&G value chain. It also created
the 1950s and 1970s shifted most of
created in 1974 through the Petroleum
incentives for the localization of
the economic rent from international oil
Development Act (PDA), reflected
goods and services in Malaysia by
companies to host countries (Mommer,
the spirit of the time. Globally, oil
requiring oil companies to buy from
2002; Maugeri, 2006). With traditional
scarcity drove companies to find
local licensed companies. Starting
markets closed or severely taxed, oil
new markets and host governments
in 1978, PETRONAS took the risk of
companies sought to explore resources
expected high returns. Nationally,
operating a field by itself by setting up
outside OPEC countries. This led to the
PETRONAS would serve as a vehicle to
a subsidiary (Carigali) that undertook
economically counterintuitive move
promote a Bumiputera business class,
the development of an area
of developing more costly sources
in accordance with the principles of
relinquished by Conoco (the Duyong
of oil before exhausting the cheap
the New Economic Policy (NEP), which
field). With time, PETRONAS became
ones, which are predominantly found
was enacted in 1971 following the 1969
a fully integrated O&G company
in OPEC countries. New areas for oil
ethnic riots.
with a strong international footprint
exploration and production included
(Hashim, 2004; Lima-de-Oliveira,
the North Sea, Alaska, and offshore
More than just a rent-collector,
Brazil and Malaysia.
PETRONAS sought to develop
2017; Lopez, 2012).
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FEATURE: POWERING THE FUTURE
Domestically, PETRONAS still takes the role of a regulator (through the Malaysian Petroleum Man¬agement (MPM) division) and operator (Carigali) in the upstream. Natural gas represents about two-thirds of Malaysia’s upstream production with 1.372 mboe/d in 2017. Since the mid-1990s, crude oil production has stabilized around 700 kbp/d (See Figure 6). Several companies are involved in upstream exploration and production
Figure 6: Crude oil and gas production of Malaysia (1970-2017) Source: BP 2018
in Malaysia, such as Shell, Exxon, Murphy Oil, ConocoPhillips, Sapura
deepwater PSC, R/C PSC). In 2011,
small fields, it will be necessary to
Energy, Hibiscus, etc. As the custodian
PETRONAS awarded six Risk Service
invest in cost-reduction technologies
of the nation’s O&G resources with
Contracts (RSC) to develop clusters
and devise even more attractive
full regulatory powers, PETRONAS
of marginal fields. Despite an initial
fiscal regimes. Malaysia’s high fiscal
dominates the country’s sector and
interest, most of them had been
dependence on oil revenues –
determines the conditions of entry
returned following the decline of oil
frequently over 20% of the federal
through closed biddings, select¬ing
prices after 2014 as they have an
budget – and dwindling reserves
which areas are put for exploration
estimated breakeven costs of $60 per
represent a critical challenge to the PH
and under what fiscal terms. It also
barrel (BMI, 2018).
government. To boost future capacity,
holds a minimum 15% equity stake in
the O&G industry in Malaysia will According to IEA (2017), about half of
need to: (a) increase exploration in
the country’s recoverable resources
deepwater offshore areas; (b) maximize
The rate of growth of domestic O&G
are in fields smaller than 100 million
the recovery factor of existing oil fields
production has been below the
barrels. Unless prices go (and stay)
(through the deployment of enhanced
country’s economic progress and
up, in order to profitably exploit these
oil recovery techniques); and, (c)
upstream PSCs.
Malaysia has struggled to add to reserve capacity. The fall of oil prices in 2014 hit Malaysia particularly hard as the country’s geological endowment is of high-cost offshore O&G with fields of limited size. Figure 7 shows full cycle production costs (capital and operational expenditures per boe6) and total O&G output for a group of 45 countries.7 With US$18/boe of cost, Malaysia is situated among the countries with high cost of production. Accordingly, since the contracts have been signed in 1976, subsequent contracts have offered more attractive fiscal terms to partners (1985 PSC,
Figure 7: Full cycle production costs and total output in selected countries * Author’s calculation based on GlobalData Upstream Analytics
6 T hese estimates do not include exploration and appraisal costs. Sedimentary basins with higher geological risk, most of which are outside of OPEC countries, will have higher expected costs. 7 A ll countries that hold more than 2 billion boe of reserves.
46 | POWER INSIDER VOLUME 10 ISSUE 4
POWERING THE FUTURE: Malaysia’s energy policy challenges
monetize small, marginal fields. All
Electricity, which is majority-owned by
in 2010 to coordinate the initiative
three routes represent cost challenges
TNB with minority participation by the
and the creation of incentives that
and likely require lower government
state of Sabah, and Sarawak Energy.
include targeted subsidies in the form
take per barrel to attract investments.
About 60% of the country’s generating
of feed-in tariffs and loan guarantees,
capacity comes from TNB with
as well as other incentives such as
In sum, while O&G production in
Malakoff (23%), Powertek (8%) and
technology grants, etc. Furthermore,
Malaysia while O&G gas production
YTL Power (6%) playing sizable roles.
the PH manifesto pledged to increase
in Malaysia has been stable or slightly
renewable energy supply to 20% by
growing since the mid-2000s, the
Malaysia adopts a single buyer
current institutional framework has
model with independent power
not been successful in meeting the
producers (IPPs). Policy is set by the
In light of these state policy priorities
country’s economic growth rate and
Energy Commission, established in
and the fact that Malaysia is a gas-rich
the need to add reserves to match
2001, and the Ministry of Energy,
country, it is surprising to note that
the demand. It should be noted that
Technology, Science, Climate Change
Malaysia is becoming a more, and
PETRONAS has been investing heavily
and Environment (MESTECC) – which,
not less, carbon-intensive economy.
in the downstream sector with the
as the long name signals, is a ministry
Coal may be dying in the rest of the
Pengerang Integrated Complex (PIC),
with no shortage of issues to deal with.
world, but not in Malaysia: in terms
a US$27 billion project in partnership
2025.
of primary energy share, coal has
with Saudi Aramco that will process
Malaysia has signed and ratified
increased from 5% in 1996 to 20%
Saudi crude. However, the economics
the COP21 Paris Agreement and
in 2016. Most of coal consumed in
of downstream are significantly
committed to cut its greenhouse
Malaysia is imported and used to
different: it is a highly competitive
gas emissions. In the government-
generate electricity. Beginning in the
segment with low margins. The growth
issued Green Technology Master
late 1990s (see Figure 8), Malaysia has
in the downstream segment is unlikely
Plan (2017-2030), it aspired to
made a strong bet on coal by raising
to compensate, in fiscal contributions,
reduce 45% of emission intensity
consumption more than 17-fold – from
the upstream sector – which makes the
by 2030 (KeTTHA, 2017). Increasing
964 ktoe in 1998 to 17,101 ktoe in 2016
strengthening of the latter critical.
the mix of renewable energy in the
(Energy Commission 2017). As a share
country is a necessary condition and
of electrical energy generation, coal
The electrical energy market
different policy instruments have
supplied 46% of the total 150,442
been deployed to promote renewable
GWh in 2016, with a negligible
If in O&G, PETRONAS is the crown jewel
energies in Malaysia. This includes the
participation of modern renewables
of the country, in electrical generation
establishment of Greentech Malaysia
like solar and wind.
Tenaga Nasional Berhad (TNB) is the dominant player. However, the electrical energy market is more diverse and has been subject to recent changes towards opening and competition. With a near monopoly in Peninsular Malaysia, TNB is the biggest electricity provider in the country. TNB is publicly-listed and the government controls it through Government Linked Investment Companies (GLICs) like Khazanah and Permodalan Nasional Berhad (PNB). In Borneo, the electrical utility role is performed by Sabah
Figure 8: Electricity generation mix (in GWh) of Malaysia (1990-2016)
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FEATURE: POWERING THE FUTURE
The combination of fast national
as Liquefied Natural Gas (LNG)
2014, the PH government signaled
economic growth, slow progress
follows market prices, while the
that it plans to keep consumer energy
in domestic hydrocarbon output
gas consumed domestically has a
prices low through this politically
(particularly gas fields in offshore
lower rate that is regulated by the
friendly, but environmentally and
Peninsular Malaysia) and political
government. The difference between
fiscally costly, policy.
pressure to keep domestic energy
the LNG price and the domestic
prices low under subsidized rates
one is a subsidy which is borne by
As shown in Figure 8, Malaysia’s
has resulted in an explosion of coal
PETRONAS. Since the adoption of
energy balance is carbon-heavy,
consumption. The availability of
this policy, in 1997, PETRONAS has
and decarbonization – as called for
natural gas would make it a perfect
forgone RM241.4 billion of revenues
by the Green Technology Master
fuel for domestic electric energy
(Malaysian Gas Association, 2017).
Plan and the PH manifesto – will
generation, as has been happening
Malaysia’s premier oil company is
require greater investments in
in the United States with the shale
required to commercially sell its
technologies and new public policies
revolution. However, Malaysia’s
production in order to generate
to unlock more natural gas and
natural gas can be more profitably
much needed revenues for the public
support the expansion of renewable
sold elsewhere than domestically
budget, which, in part, ends up paying
sources. Malaysia has been gradually
consumed, mainly due to subsidized
for energy subsidies. In 2010, energy
implementing policies to promote
energy prices and long-term contracts.
subsidies for electricity and transport
renewables but they have yet to
8
fuel accounted for 4.1% of the GDP
move the needle in the direction of
In Malaysia, 60% of the total
(ERIA, 2016). Although Malaysia had
less carbon.
gas production that is exported
been phasing out subsidies since
Box 2: The TN50 Oil and the energy long-term aspirations In 2017, the Malaysian government launched the “Transformasi Nasional 2050” (TN50) initiative which had the aim of making Malaysia a top-20 nation in socio-economic development and innovation by 2050. The initiative involved several stakeholders from diverse sectors of the society – including IDEAS – in meetings that debated both the long-term aspirations for the country as well as the policies necessary to make them a reality. PETRONAS led the initiative of the TN50 for the oil, gas and energy (OGEE) sector. Malaysia is no stranger to such long-term planning exercises and the TN50 built upon a rather surprisingly successful national tradition of aspiring to hard-to-reach goals that includes the New Economic Policy (NEP) (1971-1990) and Vision 2020 (1991-2020), which were planning efforts that achieved a fair share of success, albeit not without controversy. Planning so far ahead in the future (2050) is doomed to result in mistakes or unrealistic targets because technology is constantly disrupting business models. However, the initiative was able to capture the thinking of major stakeholders of the industry and how they wanted or saw the sector evolving in the future. In July 19, 2018 the TN50 OGEE secretariat shared with stakeholders their conclusions, which had been formulated in a white paper delivered to the new PH government. It called for a fully liberalized market in the energy sector (but not in O&G), increase of renewables in the energy matrix, and more investments in energy innovation (to reach 3% of GDP by 2050 from less than 1% currently).
8 The growing domestic demand with limited natural gas supply can generate systemic risks and extra costs. For instance, a curtailment of natural gas from offshore Peninsular Malaysia due to platform maintenance resulted in an energy crisis in 2011 and 2012, which led to a spike in the use of fuel oil and diesel (see Figure 8). Since May 2013, with the completion of a regasification terminal in Melaka, Peninsular Malaysia gained more energy security. However, in 2016, only 20 cargoes of LNG were imported through this terminal while 420 cargoes were exported from Bintulu, Sarawak (Malaysian Gas Association 2017).
48 | POWER INSIDER VOLUME 10 ISSUE 4
POWERING THE FUTURE: Malaysia’s energy policy challenges
Figure 9: Sankey diagram of Malaysia’s energy balance (2016). Source: IEA (https://www.iea.org/Sankey/#?c=Malaysia&s=Balance)
4. Energy innovation: a framework for Malaysia’s future
Technological innovations are
also gaining ground in total energy
particularly OPEC members, will have
reshaping the energy sector with
consumption with the digital economy
to cope with the double challenge of
profound economic and geopolitical
and electric transportation options.
increased supply from shale and more
implications. After a decade of more
In O&G, the US shale revolution has
cost-competitive alternative energy
hype than reality, renewable energies
unlocked vast amounts of new sources
sources. Given their fiscal dependency
are catching up and becoming cost-
of fuel with the potential to keep
on oil revenues, and domestic political
competitive, without subsidies, in
hydrocarbon prices low in the medium
challenges, oil-rich countries may well
generating electricity. Electricity is
to long term. Oil-dependent countries,
react by pumping more O&G out of
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POWERING THE FUTURE: Malaysia’s energy policy challenges
ground before it is too late – before
in the country, with an average of
this activity. In both O&G as well as
their reserves get stranded. This
RM13,310 (Department of Statistics
renewables, the numbers do not fare
can further depress oil prices in the
Malaysia, 2017).
well internationally.
It is vital, therefore, to sustain the
Table 1 presents the number of
This likely scenario will be particularly
national O&G industry and invest
international patents registered by a
challenging to Malaysia. Given its high
in building capabilities to smoothly
list of 15 NOCs. The company selection
cost of production (see Figure 7) and
transition to renewables and seize
was based on the list of firms studied
relatively small fields, lower oil prices
the green jobs of the future. The path
by Victor et al. (2012). In addition
can seriously affect the domestic oil
forward passes through increasing
to the total number of patents, I
industry, which has already struggled
Malaysia’s innovative capacity, using
followed Cavalheiro et al. (2014) and
to maintain production levels. Higher
revenues from O&G to invest in cost
also provide information on patents
royalties, such as those demanded
reduction innovations in order to
that match the E21B technical area of
by oil-producing states, can equally
maintain the current industry and help
the International Patent Classification
depress new investments. The
to unlock more natural gas that can
(IPC) scheme which encompasses
combination of economic growth,
replace coal, and also in renewable
upstream technologies.
political pressures to keep energy
technologies. In this regard, there is
prices low and limited natural gas
much to achieve, as detailed in the
PETRONAS occupies the median
output has already impacted the
following sections.
position – behind seven other NOCs,
medium- to long-term.
national energy matrix by increasing
but ahead of most Middle Eastern, African and Indian competitors, which
accounts for 46% of the electrical
Energy innovation in Malaysia
energy produced in Malaysia (Energy
How is Malaysia ranking in terms of
addition, of its 287 patents, only
Commission, 2017). This contrasts
energy innovation? Patents are an
10 are directly related to upstream
with the commitments made by
imperfect but widely used metric for
technologies (E21B category). This is in
Malaysia under the Paris Agreement
innovation output and can provide
stark contrast to the leading NOCs like
to limit carbon emissions and make
a snapshot of the country’s effort in
CNPC, Statoil/Equinor and Petrobras.
the usage of coal, which now
the PH manifesto promise to increase
basically do not engage in R&D. In
Company
Origin
patents (total)
patents (upstream)
even more challenging.
CNPC
China
10034
5274
Statoil
Norway
2818
1182
Despite a diversified economy, the
Petrobras
Brazil
2744
716
O&G industry is still a key pillar of
Gazprom
Russia
1263
458
Malaysia’s economy. The country has
PDVSA
Venezuela
1210
158
a heavy reliance on O&G revenues
Saudi Aramco
Saudi Arabia
1061
272
to fund its public budget – it was
Pemex
Mexico
859
63
renewable energy utilization to 20%
15% in 2017 from a peak of 49% in
PETRONAS
Malaysia
287
10
2009 (EPU, 2017). Furthermore, the
ONGC
India
12
4
dependence is expected to increase
ADNOC
Abu Dhabi
2
1
again in 2018 to cover the revenue
NIOC
Iran
2
2
shortfall from the replacement of
Sonatrach
Algeria
1
0
GST to SST tax system. The sector’s
KPC
Kuwait
0
0
economic contribution has been
NNPC
Nigeria
0
0
estimated as RM203 billion for
Sonangol
Angola
0
0
a total national GDP of RM 1,353 billion, or 14.7% of the GDP (EPU, 2017), and it pays the highest salaries
Table 1: International patents by selected NOCs (from 1970 to 2017) Source: Author’s calculation based on the European Patent Office search
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THE FUTUREpatent applications, from 2000 to 2015, for renewable technologies for a TableFEATURE: 2 showsPOWERING data on cumulative selected group of countries.9 Measured by patents per population, Malaysia shows room for improvement.
Table 2: Cumulative number of patents filled for renewable technologies (2000-2015) Table 2 shows data on cumulative
Company
patent applications, from 2000 to Country Patents 2015, for renewable technologies1809 for a Singapore
selected group of countries.9 Measured
United States 102680 Spain shows room for improvement. 9682 China 169181 TheSouth energyAfrica sector is one of the 2238 pillars of Malaysia’s economy but it Mexico 4488 is not innovating enough to face the Brazil 6752 technical and political challenges. ThisMalaysia study suggests to Malaysian 562 policymakers Turkey to put energy innovation 516 by patents per population, Malaysia
at the forefront of their sectoral
Source: IRENA and UN
Population 1809 5,535,262 United States 102680 319,929,162 46,397,664 9682 Spain 1,397,028,553 China 55,291,225 169181 South125,890,949 Africa 2238 205,962,108 Mexico 4488 30,723,155 Brazil 78,271,472 6752
Singapore
Malaysia
policy. Following Lester and Hart’s
Patents
562
Population
Patent per million population
Patent per million population 5,535,262 326.81 326.81 319,929,162 320.95 320.95 208.68 208.68 46,397,664 121.10 1,397,028,553 121.10 40.48 35.65 55,291,225 40.48 32.78 125,890,949 35.65 18.29 205,962,108 32.78 6.59 30,723,155
18.29
The(2012) energy sector is one of the pillars of Malaysia’s economy but it is not innovating enough to face the energy innovation framework Turkey 516 78,271,472 6.59 technical and10), political (see Figure Malaysiachallenges. needs to This study suggests to Malaysian policymakers to put energy innovation at the forefront of their sectoral policy. Following Lester and Hart’s (2012) energy innovation framework strengthen its national innovation Table 2: Cumulative number patents filled for (seesystem Figure 10), needs to strengthen its national innovation system from the of stage of creating from theMalaysia stage of creating renewable technologies (2000-2015) options to incrementally greater stages of innovation. options to incrementally greater stages of innovation. Figure 10: Stages of energy innovation (Lester and Hart 2012)
Creating options Creating options “Ideation” “Ideation” Laboratory research Laboratory research Development andand proof Development of concept proof of concept
Demonstating Demonstrating viability viability Market testing Market testing Debugging Debugging
Early adoption Early adoption Market/regulatory Market/regulatory development development Manufacturing Manufacturing
System intergration intergration System
Prototyping Prototyping
Riskreduction reduction Risk
Pilot-scale Pilot-scale
Demonstration at Demonstration at commercial scale commercial scale Scale Scale: $10M-1B $10M-1B
Complementary Complementary infrainfrastructure structure deployment deployment Limited competition Limited competition
Seed Seed stage stage Scale: Scale: $100k-100M $100k-100M
Learning-by-doing/ using Learning-by-doing/ using Economies of scale Economies of scale Scale: Scale:Up Uptoto$10s $10sof ofbillions billions
Source: IRENA and UN
Improvement- in-use Improvement-in-use Continued cost Continued cost reductions reductions Unrestricted Unrestricted competition competition Learning-by-doing /using Learning-by-doing / using Carbon pricing Carbon pricing Evolutionary Evolutionary advances advances Scale: Up to Scale: Up to $100s of billions $100s of billions
Figure of energy innovation and Hart 2012). The list includes patents for ocean energy, heat pumps, geothermal energy, fuel 10: from Stages waste, biofuels, bioenergy, hydropower, (Lester wind energy, wind power, PV thermal hybrid, solar photovoltaics, solar thermal, cross-cutting.
9
9 T he list includes patents for ocean energy, heat pumps, geothermal energy, fuel from waste, biofuels, bioenergy, hydropower, wind energy, wind power, PV - thermal hybrid, solar
Powering the future: Malaysia’s energy policy challenges photovoltaics, solar thermal, cross-cutting.
52 | POWER INSIDER VOLUME 10 ISSUE 4
23
POWERING THE FUTURE: Malaysia’s energy policy challenges
The national O&G sector can play
Malaysia has a very centralized energy
which would reduce the national
a much stronger role in promoting
innovation model, with PETRONAS
dependency on O&G.
innovation given its magnitude in
at the top. The national oil company
the share of the economy and the
has its own internal R&D and also
The energy world is in transition:
technical challenges that it faces.
partners with universities - its own
energy companies are re-evaluating
Lima-de-Oliveira and Sturgeon (2017)
Universiti Teknologi PETRONAS as
their business strategies and countries
show that the O&G industry has its
a case in point. PETRONAS has also
are rethinking their policy frameworks.
own innovation system, characterized
been experimenting with innovation
As a country rich in natural gas,
by intense collaboration between the
challenges through crowdsourcing for
Malaysia would be well equipped
main actors. Oil operators tend to
specific solutions. Such centralized
to make a transition towards a less
conduct in-house R&D for subsurface
mode, however, is not ideal in
carbon intensive energy system,
research and more asset-specific
promoting collaboration between
given the role of natural gas as a
questions. These lead firms influence
the diverse range of actors of the
bridge fuel. However, because of the
the development of technologies,
O&G value chain or attracting global
slow growth rate of domestic O&G,
which are more applied in nature,
in-house R&D from other companies.
particularly in Peninsular Malaysia,
by working with their Tier 1 suppliers
International oil companies, like Shell
natural gas output is being prioritized
like the oilfield service companies
and Exxon, participate in the extraction
to external markets, while coal is
Schlumberger and Halliburton.
of resources in Malaysia, but not in the
being used to generate electricity to
Operators also keep close links
production of new knowledge. Along
Malaysian citizens – carrying with it all
with universities and research and
with other national players like Sapura
the negative externalities from coal
technology organizations (RTOs)
Energy, they could be incentivised to
generation including disease-causing
for recruitment, the development
produce and share such knowledge
particulate matter. At the same time,
of technologies that are less asset
given a framework that created
there is recent political pressure to
specific and have broad applicability,
incentives towards R&D application in
redistribute more revenues from O&G
and in answering questions that are
Malaysia. Public policies to promote
production to oil producing states,
outside their core expertise. In O&G,
innovation and collaboration can
to compensate revenue losses in
no single technology determines
include matching funds, research
switching from GST to SST, and to
the competitive advantage of an
consortiums, high-technology
provide subsidized petrol. Considering
oil company. Instead, firms gain
government procurement, innovation
Malaysia’s high cost of production and
their competitive edge by building
calls and supplier development
a future global scenario of fossil fuel
capabilities to bundle and deploy an
programs.10 They could be structured
energy abundance that would keep
integrated set of technologies. Another
towards particular challenges in
prices down in the medium- to long-
key finding from Lima-de-Oliveira and
increasing the domestic O&G
run, the sustainability of the energy
Sturgeon (2017) is that public policies
production (e.g., maximizing resource
sector is under threat. This paper calls
can influence the scale of local R&D,
recovery, dealing with contaminants)
for policies that put innovation at
attract global research labs to where
as well as involve the development
the forefront with instruments that
international oil companies have a
and integration of renewables. In short,
promote wide collaboration between
sizable presence (co-location), and
an innovation policy is needed to
the multiple stakeholders.
promote knowledge linkages between
strengthen the O&G industry, as well
foreign and domestic oil companies,
as help develop the local talent and
local suppliers and universities.
capabilities in renewables energies,
10 Both PETRONAS and the Malaysia Petroleum Resource Corporation (MPRC) have supplier development programs. This task is critical to upgrade local players into higher value-added activities
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FEATURE: POWERING THE FUTURE
5. Conclusion
“More important than the riches from natural resources are the artificial riches of education and technology”. Roberto Campos (1917-2001), former Brazilian Ambassador
The history of
with increasing costs of production
in crude oil. Gas has historically been
modern Malaysia
can seriously limit the competitiveness
a less noble by-product of the search
has been shaped by
of the local O&G sector in an era of
for oil but currently is the only fuel
its natural resource
global fossil fuel abundance. Equally
predicted to grow in share of the world
endowments, such as rubber, palm
important, Malaysia’s politics is passing
energy matrix. Natural gas is considered
oil, and particularly, O&G. Malaysia’s
through unprecedented changes, with
to be a bridge fuel: it has lower carbon
fossil fuel endowment has provided
the election for the first time of a
content per unit of energy generated
the country with a tax source to pay
governing coalition (Pakatan Harapan)
and can be stored and dispatched upon
for investments; affordable energy
not led by UMNO and Barisan
demand – characteristics not currently
that has benefitted consumers; and
Nasional. With increased political
available to most renewables, such as
an important manufacturing and
competition and party fragmentation,
solar and wind, which are intermittent
service sector led by PETRONAS and
distributive demands like petrol
sources of energy. However, domestic
other O&G extracting companies.
subsidies, low energy prices and lower
resources have not grown to the
Furthermore, PETRONAS became
taxation can be intensified, bringing
rhythm of the country and Malaysia
an icon of the country – beyond a
additional challenges to the fiscal
has deployed more and more coal in its
touristic hotspot and a F-1 sponsor –
stability of the country.
energy matrix.
due to its leadership in business ranks and example of an NOC that built capabilities to internationalize and
In summary, both the
For the energy sector
compete shoulder-to-shoulder with
global energy industry
to continue as one
major players.
and Malaysia are in
of the pillars of the
flux, which calls for a
Malaysian economy
reflection of the prevailing institutional
it is necessary to invest more in
These are true
arrangement and how to best seize
the future, to which innovation is
accomplishments
the opportunities brought by a shifting
key. Incentives for local R&D and
but one should not
energy business environment.
collaboration between lead firms,
rest on their laurels.
suppliers, and universities can
The energy sector is passing through
be targeted to reduce domestic
profound challenges – coming
This study suggests
production costs of O&G, unlock
from environmental pressures,
that Malaysia can be
more natural gas that can replace
technological disruptions, and changes
well placed to face
coal consumption, and build
the coming energy
capabilities in renewables.
in consumption patterns. All of these can put at risk the arrangement that
challenges, but doing so may require
so far has been beneficial to Malaysia.
new institutions and public policies.
In the domestic front, ageing fields
Malaysia is richer in natural gas than
54 | POWER INSIDER VOLUME 10 ISSUE 4
POWERING THE FUTURE: Malaysia’s energy policy challenges
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IDEAS is inspired by the vision of Tunku Abdul Rahman Putra al-Haj, the first Prime Minister of Malaysia. As a cross-partisan think tank, we work across the political spectrum to improve the level of understanding and acceptance of public policies based on the principles of rule of law, limited government, free markets and free individuals. On 2 September 2016, IDEAS was ranked as the 17th think tank to watch globally in a survey of more than 6,800 think tanks in 143 countries by the University of Pennsylvania’s 2015 Global Go To Think Tank Index Report. Please support us by making a donation. You can make a contribution by cheque payable to “IDEAS Policy Research Berhad” or by transfer to our account CIMB 8008852042. We can only survive with your support. © 2018 IDEAS. All rights reserved. IDEAS Policy Research Berhad, The Lower Penthouse, Wisma Hang Sam, 1, Jalan Hang Lekir 50000 Kuala Lumpur www.ideas.org.my Reg No: 1219187-V
56 | POWER INSIDER VOLUME 10 ISSUE 4
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www.smartusys.com
HYDROGEN
Hydrogen is more than just energy storage, renewable hydrogen is the solution towards an energy transition Energy systems across the globe
renewable technology has decreased
the world leader in creating hydrogen
are undergoing a fundamental
much faster than expected, integrating
using electrolysis and implementing
transformation to increase the
these intermittent energy sources into
hydrogen fuel cell solutions.
quality of air and to decrease their
the power grid is highly challenging
dependency on oil, coal and gas as a
due to the increasing need for grid
primary energy source.Driven mainly
flexibility and energy storage solutions.
Electrolysers offer a multimegawatt solution
by a political vision to decrease the
This is where Hydrogenics, a global
Water electrolysers use electrical
negative impacts of climate change
hydrogen technology company,
power to split water (H2O) into
and decarbonize the power sector,
is leading the way in delivering a
hydrogen (H2) and oxygen (O2).
wind and solar technologies have
clean and everlasting solution to the
Thanks to Hydrogenics’ focus
emerged as key renewable
renewable energy equation. With over
on continuous innovation, our
technologies. While the cost of
60 years of experience, Hydrogenics is
electrolysers are capable of
58 | POWER INSIDER VOLUME 10 ISSUE 4
modulating their electrical energy
capacity in the TWh range for seasonal
input very rapidly (less than 1
storage capability. It can charge energy
second) over the total power range,
for several days, or even consecutive
When produced from renewable
making them a very attractive
weeks, without needing to discharge
power, hydrogen offers the capability
solution for grid balancing services
the stored energy.
to significantly decarbonize the power,
to the power sector in the MW-scale
for a range of applications as noted.
gas, transport and industrial sectors, by
range. Hydrogenics’ electrolysers
Unlike other energy storage
substituting oil, coal and natural gas.
are ‘plug and play’ units, safely
technologies, Power-to-Gas provides
In this case, hydrogen acts a 100%
and reliably producing very pure
the means to both store and transport
renewable energy vector, connecting
hydrogen in continuous or dynamic
energy. By storing hydrogen or
these sectors to renewable power. Per
operation modes.
substituting natural gas in the existing
Daryl Wilson, Hydrogenics President
natural gas pipeline network and
& CEO, “With over 20 megawatts of
Hydrogen is used in a wide range of applications
associated underground storage
energy storage plants commissioned
facilities, the stored energy can be
or being built around the globe,
Hydrogen is often seen as the glue in
discharged where and when it is
Hydrogenics is clearly leading the
maximizing renewable energy with the
needed most. This results in higher
Power-to-Gas market.”
industrial and transportation sectors.
overall integrated system efficiency.
Hydrogenics has delivered hundreds of
A fast-growing market with game changing potential
glass, semi-conductors), power
Renewable hydrogen as a Solution for Transportation, Storage, Power and Blending of Gases
plants (generator cooling) and for
Hydrogenics is leading the industry
it’s for transportation, fuel production
the hydrogenation of oils in the food
in renewable hydrogen projects
or energy storage, major companies
industry. In addition, Hydrogenics has
where electrolysers are used to store
around the world are strategically
supplied electrolysis technology to
renewable wind and solar electricity
transitioning to renewable hydrogen
over 60 hydrogen refuelling stations
into hydrogen. Once the renewable
to help reduce their carbon footprint.
worldwide where hydrogen is used as a
hydrogen is produced, there are
Hydrogenics technology is being used
fuel for fuel cell electric vehicles.
several ways to commercialize it in
in over 100 countries, with varied
the energy system. Hydrogen can
solutions in power, transport, industrial
Integrating Renewables for grid flexibility
be re-electrified via a fuel cell to
and gas blending applications.
Power-to-Gas is a highly effective
to-power). Hydrogen can be directly
way of integrating renewables. It can
injected into gas grids (power-to-gas)
provide a rapid, dynamic response to
or combined with carbon dioxide (CO2)
Hydrogenics: the leading provider of renewable hydrogen solutions
the Independent Grid Operator’s signal
to produce synthetic methane (CH4).
Hydrogenics is the global innovation
to adjust to the variations in renewable
Hydrogen can also be used in industrial
leader with over 60 years of
generation output. The siting of a
applications (power-to-industry), in
experience in designing, manufacturing
Power-to-Gas facility is not restricted
fuel production (powerto- fuels) for
and installing industrial and
to any geologic formation; it can be
fuel cell vehicles like buses and cars,
commercial hydrogen systems around
deployed wherever the power and gas
and at refineries or in the production of
the world. Hydrogenics’ electrolysers
grids intersect.
methanol. Hydrogenics has done over
deliver pure hydrogen solutions
30 projects using these technologies
for industrial processes, renewable
Power-to-Gas is a scalable technology.
and applications by converting mostly
hydrogen projects and hydrogen
It provides unparalleled energy storage
excess renewable energy to Hydrogen,
refuelling stations. Hydrogenics
electrolyser systems for every industry, including ammonia production plants (fertilizers), oil refineries, industrial manufacturing plants (steel, float
It is clear that hydrogen technologies will be at the core of our new decarbonized energy system. Whether
deliver power when needed (power-
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FEATURE: HYDROGENICS
also designs hydrogen fuel cells
soon expanding those initiatives in the
hydrogen annually within the smallest
for light and heavy fuel cell electric
Asia Pacific region. Hydrogenics has
carbon footprint and highest power
vehicles including urban transit buses,
developed and installed more than
density in the industry.
commercial fleets, utility vehicles
500 electrolyzers globally, including
and trains, as well as for stationary
the first-to-market scalable PEM
Hydrogenics has production sites in
applications such as critical power and
electrolysis electrolyzer. This past
Canada, Belgium and Germany and
hydrogen power plants.
February, the company was awarded
sales offices in select locations around
a contract by Air Liquide Canada Inc.
the world. Hydrogenics is publicly listed
Hydrogenics currently has lead the
to design, build and install a 20 MW
on the NASDAQ (HYGS) and TSX (HYG)
global market in Hydrogen energy
PEM electrolyzer system, considered
and is the only global company to
storage with the vast majority of large
the world’s largest, at Bécancour,
produce both water electrolysers and
projects completed or under contract
Québec. Hydrogenics says the plant
PEM fuel cells, making it the leading
in Europe and North America, while
will produce about 3,000 tons of
company in clean hydrogen technology.
Powering Change in the Transportation Sector
60 | POWER INSIDER VOLUME 10 ISSUE 4
HYDROGEN: THE SOLUTION TOWARDS AN ENERGY TRANSISTION
One of the key market drivers for
A hydrogen Fuel Cell Electric Vehicle
Canada is considered a global leader
hydrogen as fuel source is the need
(FCEV) is an electric vehicle in which a
in the hydrogen sector and has one
for deep decarbonization of our
fuel cell is used to keep a small battery
of the largest concentrations of
economies. The tipping point was in
at an optimal rate of charge. The
hydrogen product and services in
2015 with the Paris Agreement on
drivetrain of a FCEV is the same as a
the world. Hydrogenics Corp. is one
Climate Change. Governments, experts
battery electric vehicle. A FCEV provides
of the pioneers in developing fuel
and industries have acknowledged
zero emission transport with the same
cell technology for transportation.
the need to move towards a net zero
performance in terms of range, payload
Hydrogenics has over 2,000 fuel cell
carbon by 2050 which is extremely
and refueling time as a conventional
installations around the world, and
challenging. There is a clear trend towards direct electrification of transport, heating and industry using more renewables. With the transportation sector being among the highest contributors to GHG emissions and pollution worldwide, one of the only ways to achieve deep decarbonization is to opt for hydrogen fuel produced from renewable power using water electrolysis technologies. Hydrogen fuel cells are very well
is one of the few companies in the
One of the only ways to achieve deep decarbonization is to opt for hydrogen fuel produced from renewable power using water electrolysis technologies
suited to play a large role in the de-
industry with expertise and technology on both the generation and use of hydrogen within fuel cells. When looking at the business case and emission reduction targets, hydrogen is well positioned to have the biggest impact in transportation industry as a fuel source. Hydrogenics says the hydrogen fuel cell is the answer to scaling down emissions from vehicles and the company is now considered a major supplier of fuel cells for medium
carbonization of the transportation
vehicle. Since fuel cells can deploy
and heavy-duty trucks and buses, as
sector. When powered by renewable
energy in very dense packages, they
well as commercial passenger trains.
energy sources electrolyzers can
are also quite suited to moving heavy
produce green hydrogen that is
duty vehicles. This is why momentum is
Hydrogenics supplied the core power
renewable and emission free at the
building for Hydrogen fuel cell powered
for the French train manufacturer,
point of generation and the point of use
transport over the last decade with
Alstom’s “Coradia iLkint“, the world’s
within fuel cells, providing a clean well-
successful implementations in cars,
first passenger hydrogen fuel cell trains
to-wheel solution.
rail, trucks, bus, and other medium and
in Germany and now have orders to
heavy-duty applications.
supply the largest hydrogen powered
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FEATURE: HYDROGENICS
train fleet in the world. Hydrogenics fuel cells are also powering the world’s largest hydrogen powered bus fleet in China, and have freight, delivery, and public sanitation vehicles throughout Europe and North America. In December of 2018, Hydrogenics announced it has been selected to design and supply fuel cell power modules for a new lightweight vertical take-off and lift (VTOL) aircraft to be used for daily commuting and other applications, revolutionizing the way people travel between cities and around the country. Hydrogenics has been integrating
significantly smaller size and weight
The technology is market proven
hydrogen fuel cells into vehicles
as well as faster refueling time in
and continues to advance. The
for decades, with their HyPM-HD®
comparison to battery applications.
Hydrogen Council projected that fuel
power modules, and most recently
Their compact design allows for easier
cell efficiency will likely reduce fuel
launching a new HD50 power module
integration and provides a robust and
consumption by 20 to 35% as the
for heavy-duty trucks and buses at the
flexible platform with no compromise
technology is further refined over the
Fuel Cell Expo in Japan earlier this year.
in vehicle performance.
next 10 years. It is also expected that
HyPM-HD® power modules produce
the fuel costs per kg hydrogen will fall
DC power in standard outputs ranging
as distribution and retail infrastructure
from 30-180 kW per module. They
scale up. This seems quite reasonable
offer longer runtimes and life at a
given the significant cost reductions already achieved in the last decade with electrolysers, refueling stations, and fuel cell costs cut significantly.
62 | POWER INSIDER VOLUME 10 ISSUE 4
Edra Power Holdings
Power Barges and Powerships: A Power Project Developer’s Tutorial Recent international press coverage
are over 80 power barges installed
speed engines in either simple and
concerning large power barge projects
and operating around the world with a
combined cycle mode and can range
in Lebanon, Ghana, Pakistan, United
utilization rate of over 96% primarily
in output from 30 MW to 300 MW
States and beyond, have increased
deployed on mid to long-term power
per power barge. Larger output on
project developers’ awareness of these
purchased agreements.
individual power barges is possible
unique power plant siting options.
depending on the power project
While power barges are fairly low
Power barges utilize state-of-
profile in the developers radar, there
the-art gas turbines and medium
64 | POWER INSIDER VOLUME 10 ISSUE 4
development requirement.
Multiple power barges may be
years for mid-term and 10 to 25 years
25-year contract becomes less of an
combined in large power barge
for long-term contracts. Most power
economic advantage and becomes a
complexes, such as the existing 650
barges in the world are permanently
disadvantage. Powerships can be more
MW power barge complex in New York
installed on long-term contracts.
challenging to service and perform major
City, USA and 290 MW power barge complex in Lagos, Nigeria.
overhauls on without shipyard support. Power barge designers take into
Some larger powerships may also not
consideration these mid to long-term
be World Bank compliant on heavy
What is a Power Barge?
operations by increasing steel plate
fuel oil exhaust emissions or compliant
A power barge utilizes conventional
scantlings, installing active and passive
with seawater discharge temperature
land-based power plant generation
cathodic protection, and specifying
regulations, making long-term financing
technology installed on either new or
special coating systems, thus avoiding
and permitting more difficult.
recently fabricated deck barges. They
the need for frequent dry docking.
operate with the same efficiencies,
Many power barges are still in operation
The residual value of power barges is
the same fuels, and with the same
long after 25 years.
much higher than land-based plants
operation and maintenance teams as their land-based technical equivalent.
as they do not require dismantling, Currently, there are a few power barges
component shipping or reassembly.
operating in emergency or temporary
Power barges employed on mid
Capital costs and construction
(short-term 6 months to 5 years)
to long-term contracts can be
schedules for power barges can be
contracts, but this format is usually
redeployed by disconnecting from the
comparable and, in many cases, will be
served by containerized high speed
existing site and reconnecting at the
less expensive with faster deliveries than
engines, mobile gas turbines, and
new operating site.
equivalent land-based power plants.
powerships. Powerships are similar to power barges but are less competitive
Basing Considerations
This is due to the construction of
in mid to long-term contracts as their
Many power plants are built around
power barges in shipyards (like building
advantage is based on self-propulsion
coastal port cities where land cost
a power plant in a shop environment)
needed for frequent shifts from
can be expensive for building of
and that construction can commence
contract to contract. The need for
conventional power plants. Power
prior to permitting. Shipyards employ
self-contained propulsion in a 5 to
barges can either operate on a pier/
skilled labor at much lower costs with duty free import/export zones and offer year-round construction in favorable weather. Land-based construction often experiences equipment import delays and costs, unfavorable weather and expensive skilled labor costs or the lack of local skilled labor. Many power barges are built in Southeast Asian shipyards then delivered around the world. Operation and maintenance costs for power barges are comparable to equivalent land-based power plants. Power barges are ideal in mid and long-
Image: Estrella Del Mar II 106 MW Combined Cycle Wartsila 18V50 DF Medium Speed Engine 60 Hz power barge (currently available)
term contracts with durations of 5 to 10
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FEATURE: POWER BARGES
dock or can operate remotely on a
combined with power barges in a
conventional power plant. These are all
mooring, thus requiring a minimal
complex. FSRUs with onboard power
suitable for power barge applications.
amount of land or no land at all.
may be suited for the long-term
Most waterside sites under
Land-based power plants incur costs
contracts, but separate FSRUs and
consideration for brown-field or
associated with land acquisition and
power barges are better solutions
green-field land-based power projects
site civil works, including extensive
for short or mid-term contracts. The
can also be suitable sites for power
pilings and foundations that can be
difference is that at the end of the
barge projects.
very costly and take considerable time
short or mid-term contract, the next
to construct.
suitable contract will need to have the
Project developers should consider
same FSRU performance and power
the power barge option for many
Power barges only require enough
generation requirements. Whereas
reasons, including land availability/
water depth to float (usually around
FSRUs with separate power barges
cost, local labor availability/cost, project
2 to 3 meters) and shelter from the
can be deployed independently on
commissioning schedules, seismic
open seas. Power barge installation
contracts that do not match up with
or geophysical conditions, weather,
can also accommodate most
the integrated capabilities.
tsunami or tidal surges, or climate
hurricane/typhoon winds and surge conditions as well as tsunami surge.
Power barges and FSRUs As power barges utilize the same power generation technology as landbased plants, and they have the same fuel supply and operating economics. However, there is a new role that power barges can play in the recent
change effects.
Operation and maintenance costs for power barges are comparable to equivalent landbased power plants.
About the Author Dave Nickerson is founder and president of Power Barge Corporation. He has over 30 years of experience in power barges and powerships with an additional 14
strong shift to LNG fuels. A new generation of power barges is
years as a merchant marine officer,
With dwindling numbers of new
now underway with Energy Storage
shipyard superintendent, and senior
large-scale LNG receiving projects,
Systems such as large scale NMC
engineering specialist for space launch
the attention has turned to the mid-
and LFP battery power barges. Power
vehicles, advanced cruise missiles and
scale markets. The challenges for
Barge Corporation is developing new
nuclear submarine programs.
new mid-scale LNG fueled projects
designs that range from 50 MW 4 Hr to
are the lack of mid-scale LNG carriers
100 MW 4 Hr energy capacities. These
Power Barge Corporation is a Houston
(vessels), regasification capacity, and
are ideal for major port cities that
based EPC and project/engineering
the non-linear economies of scaling
have substantial hydro, wind or solar
services group that specializes
these vessels and facilities. Mid-scale
power facilities or are in need of other
in design and/or construction of
floating storage and regasification
ancillary services that large scale ESS
medium-speed engine, gas turbine
units (FSRUs) are just coming into
can provide.
and battery power barges.
LNG vessels. Mid-scale LNG carriers
Conclusion
www.powerbargecorp.com
and FSRUs store and process
Most power plants around the world are
approximately 15,000 to 45,000 CM
sited near cities located on navigable
Disclaimer: PBC has been under
of LNG like the Saga LNT carriers.
rivers or in seaports. These cities have
contract to most companies in the
high electricity demands. The rivers
power barge and powership business
Some companies are evaluating
or seaports provide an ease of access
and also owns and markets existing
the combination of FSRU with
to transport heavy power generation
power barges.
onboard power generation or FSRUs
to the site and cooling water for the
the market, along with mid-scale
66 | POWER INSIDER VOLUME 10 ISSUE 4
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