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ISSUE 92 | DISPLAY TO 30 JUNE 2019 | www.asian-power.com | A Charlton Media Group publication

PHILIPPINES’

NEwESt COALtECH QUEZON POWER MANAGING DIRECTOR FRANK ThIEL BRINGs sUPERCRITICAL COAL PLANT TECh TO ThE COUNTRY

vIEtNAM’S 100Gw CHALLENGE tHAI DEvELOPERS EyE OvERSEAS OPPORtUNItIES 11 ASEAN HyDRO PROjECtS UNDER PRESSURE NUCLEAR’S SLOw DEAtH IN tAIwAN AND KOREA

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In relation to primary energy there are several other factors that influence the output, they are: the height of effective fall, water quality and water discharge that can be utilized. Effective fall height is affected by the elevation of water in the siruar dam with the water elevation in the Sigura - Gura dam. This condition creates a synergy between the managers of Lake Toba, namely Jasa Tirta, the Manager of the Sigura Gura Dam, the Inalum Hydro Power Plant and the Owner of Asahan I Hydroelectric Power Plant, namely BDSN. Daily basis coordination is needed for this work. Together. Continuously encourage and educate the surrounding community not to throw garbage in the river path, activate the community waste management, and empowering residents to participate in taking care of river cleanness, like picking garbage in the river. Besides that, sediment dredging, diving for garbage cleaning and periodic trash rack checks are also carried out. However, cleaning the trash rack must be routinely done every day. To meet one of the indicators of success, the efficiency of water use is in accordance with the design of water use planning. Operation Indicator

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Net Production Average Water Debit Equivalent Available Factor (EAF)

Which is broadly influenced by several factors, including: availability of primary energy, electrical energy needs and wellness of generating equipment. As in general, the availability of primary energy is affected by rainfall. Although the rainfall or water debit that is used fluctuates annually, the production target remains the same.

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FROM THE EDITOR The second quarter issue of Asian Power looks at the slow death of nuclear power in South Korea and Taiwan, two former nuclear giants that could no longer meet the 81% global average capacity factor. South Korea has stopped 6GW of planned projects, whilst Taiwan is keen on capping nuclear capacity at 4.45GWe and eventually phasing it out.

Publisher & EDITOR-IN-CHIEF Tim Charlton ASSOCIATE PUBLISHER Rochelle Romero production editor Danielle Mae V. Isaac Graphic Artist Elizabeth Indoy

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Amidst a spell of uncertainty caused by overcapacity and stagnating growth at home, Thailand’s power developers are looking at the international market to grow. A 9GW transmission project between Thailand and Laos marks the kingdom’s increased reliance on its ASEAN neighbours. We also sat with Quezon Power managing director Frank Thiel who is bringing supercritical coal plant technology to the Philippines with the 500MW San Buenaventura Power Plant. He also talked about plans for a 70MW wind farm to be built near the site of the coal plant. Start flipping the pages and enjoy!

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ASIAN POWER 1


CONTENTs

22

24

INterview 14 CEO Quezon Power has new coal tech for the Philippines

FIRSTS 06 Are renewables at risk in Indonesia’s new plan?

Country REPORT Local hurdles push thai developers to grow overseas

sector REPORT Slow death looms over nuclear projects despite industry push for safety upgrades

SECTOR REPORT 20 Hydropower backlash and policy gaps plague Lower Mekong

07 Renewables fill investors’ war chests 08 Solar auctions take off in Asia 12 Green bonds for ASEAN power utilities

Country report

OPINION 28 Pakistan’s energy pathway under the spotlight 30 Taiwan offshore wind series part 1 – Allocation of offshore windfarms in Taiwan

16 Coal stains South Korea’s green growth policy

32 Retailer exit from Singapore’s electricity market: No need for

18 Vietnam’s future needs 100GW of power

warning bells

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

PROJECT

Japanese investors buy stake in 640MW Taiwan offshore wind project A group of Japanese investors comprising of Sojitz Corporation, JXTG Nippon Oil & Energy Corporation (JXTG Energy) and other Japanese firms have signed a share purchase agreement with German wind farm developer Wpd in the 640MW Yunlin offshore wind project off Taiwan.

REGULATION

India raises 2022 renewables target from 175GW to 227GW India has raised its 2022 renewables capacity target from 175GW to 227GW, according to vice president Venkaiah Naidu. “This target is now further raised to 227 GW of renewable energy capacity, considering that we are well on our way to exceeding the previously set target,” the official said in a speech.

4 ASIAN POWER

PROJECT

Japan’s LNG buyer JERA becomes major electricity generator Japan’s JERA became a major electricity generator following the formal takeover of power stations owned by its two shareholders. It has now assumed control of their fossil fuel power stations, giving it 68GW of mostly gas and coal-fired power generation capacity domestically as well as 9GW overseas.

Project

PTT power arm buys 69.11% of ENGIE’s Glow Energy for $2.94b Global Power Synergy (GPSC), the power generation unit of PTT, has completed the purchase of a 69.11% stake in ENGIE’s Glow Energy (Glow) at the price of $2.90 per share or $2.94b. In October 2018, Thailand’s Energy Regulation Commission blocked the bid over monopoly concerns.

project

Petronas buys 500MW portfolio of international PV projects Petronas entered into an agreement with global infrastructure investor I Squared Capital to acquire a 100% interest in Singapore-based firm Ampus Energy Solutions (M+) which owns a 500MW portfolio of PV projects. The acquisition is expected to be completed in April.

Project

ENGIE and Tokyo Gas to invest in Mexico renewables developer ENGIE and Tokyo Gas will invest in Heolios EnTG, a 50/50 joint venture company to develop renewable energy projects in Mexico. Heolios EnTG will develop six renewable energy projects in Mexico. Two of the plants are for onshore wind whilst the remaining four are for solar PV.


CO-PUBLISHED CORPORATE PROFILE

ABB’s state-of-the-art digital solutions for smarter, safer, and more efficient power plants in Asia With a suite of tried and tested digital solutions designed to unlock optimal safety and efficiency, ABB is pioneering a way of solving operational issues weighing in on prime power plant performance.

24/7 ABB Ability™ Collaborative Operations Centres around the world enable power generation companies to harness the potential of digitalisation.

D

igitalisation is changing the way power plants do business. Digital solutions provide smarter and safer answers to problems ranging from energy pricing to the regulation of carbon emissions, to distributed energy and the addition of renewable generation resources. With its global presence and years of expertise, ABB is at the forefront of providing solutions that can automate operations and optimise performance and the sustainability of a plant, whilst reducing risk and driving costs down. “There is no ‘one size fits all’ approach to implementing digital solutions. It takes significant industry expertise, a deep knowledge of the market context and understanding of the power generation process,” says Joerg Theis, Head of Energy Industries, Asia, ABB. “Our portfolio of products, systems and solutions garnered over the years extends across automation, instrumentation and electrical, delivering turbine control, excitation, condition monitoring, plant and process optimisation, and preventive maintenance.” Digitalisation presents a means to create economic value as the world’s growing energy industry faces dwindling power resources and an ever-growing depletion in knowledge, particularly in Asian countries such as Japan and Korea. Digital solutions from ABB allow power generators to better manage their process and automation know-how, gain visibility and insights into equipment performance, enhance decision making in plants and fleets based on 6 ASIAN POWER

real-time data insights and gain greater access to expertise in remote geographies through collaborative operations. Boosting operational efficiency “Digitalisation can also offer a significant range of immediate operational and financial benefits,” Theis notes. “Sensors, devices and software can enable operators to utilise a wide range of data in real time and improve decision-making; control systems enable improved performance and maintenance of vital infrastructure and equipment either on-site or remotely; advanced analytics enables predictive maintenance and simulation to optimise asset performance; and remote monitoring and external support can address key human resource and knowledge retention issues,” he explains. For instance, a shift from preventative to predictive maintenance has become increasingly important in recent years. Machine maintenance is well on the way to entering a new era. Instead of reacting when a component no longer works, technicians can act before a defect becomes apparent and causes costly downtime. Continuous data analysis gives users of smart machines a much more precise picture of their facilities, reducing cost of ownerships and maintaining reliability and availability of assets. Predictive maintenance thus moves into predictive producing — and a production unit almost becomes a veritable smart factory.

“Power utility companies that traditionally perform regular scheduled check-ups to maintain their infrastructure can now utilise AI and machine learning to review sensors, leverage data and advanced analytics to constantly assess the realtime condition of assets and identify when they might need repair or replacement well ahead of potential failure. With this information, operators can prioritise repairs and maintenance work, increasing worker safety and productivity and return on investment from assets,” Theis adds. With this in mind, predictive maintenance and asset health management are becoming a key component of operators’ strategies to optimise maintenance operations, minimise risk, improve resilience and reliability, drive energy efficiency and reduce costs. New, more agile operational and business models are possible based on connectivity, optimised decision-making and automated processes. Cloud technology and secured remote services also enable a closer relationship with partners. They allow expertise to be accessed securely from outside the plant and they free up company personnel to focus on strategic areas, such as the adoption of new business models. Driving growth through innovative technology The energy market is transforming rapidly and the companies that embrace change and search for innovative solutions for their customers


CO-PUBLISHED CORPORATE PROFILE

will emerge triumphant. ABB is driven to help customers benefit from advancing digital technologies, making it easier for them to respond to the changing energy market and contribute to a sustainable future. Through an investment in and commitment to the development of pioneering technology for digital industries, ABB is supporting customers with the development of new and evolving business models. “Collaboration is central to ABB’s customer philosophy and by working together we have delivered solutions to some of the greatest challenges in power market transformation, including virtual power plants, boiler efficiency improvement, collaborative operations and solutions that optimise processes, reduce risk, increase operator efficiency and plant availability,” Theis notes. For instance, ABB Ability™ is ABB’s unified, cross-industry digital offering, which includes more than 210 industrial internet solutions and an industrial internet technology platform to help customers develop new processes and advance existing ones, by providing insights and optimising planning and controls for real-time operations. The results can then be fed into control systems like ABB Ability™ System 800xA and ABB Ability™ Symphony® Plus to improve key performance metrics of plants and assets. In addition, ABB Ability™ Asset Performance Management (APM) helps companies to more accurately predict and prevent/reduce equipment and infrastructure failures, enabling more efficient planned maintenance practices through predictive maintenance. Optimax®, part of the ABB Ability™ Energy Management for sites suite, is ABB’s leading and globally-proven energy management system aimed at increasing plant profitability and cost efficiency through digital and scalable solutions. It enables optimum control of all energy supply system components and also provides an overview and control of all energy flows. “Customers gain better insights into energy costs and consumption by automatic measurement, monitoring and control, with access to day-ahead optimisation based on weather and load forecasts, coordinating plant energy assets and resources — in real time — to balance supply and demand using dynamic load shedding,” Theis explains. “The system can also coordinate and connect a large number of decentralised plants of different sizes. It optimises the operation of each individual unit connected with foresight and in real time, helping companies reduce their energy costs and generate additional revenue by participating in the energy markets or by optimising their decentralised energy resources.” In addition, ABB offers further digital services from its Collaborative Operations™ Centre for Power Generation and Water, which helps power generation companies harness the potential of digitalisation. A remote operations and maintenance model, ABB Collaborative Operations™ allows ABB experts to provide data insights through industrial analytics, thus making customer data actionable and a resource for driving decision-making to

optimise plant and fleet performance. Through a high-speed, cyber-secure connection to the plant’s distributed control system, the centre continuously monitors key performance indicators (KPIs) across a comprehensive suite of applications to ensure that each plant is operating within regulatory, load, environmental and cyber security requirements, automatically notifying the customer if a KPI is under-performing or a reference limit is broken. Unique Asian expertise With its comprehensive suite of digital solutions, ABB is the partner of choice for some of the region’s largest power providers. For instance, Bangkok Glass Public Company (BG) has been working with ABB to further expand its alternative energy supplies, with the opening of a 5MW solar rooftop facility at its factory in Ayutthaya province, Thailand. This will be the largest solar rooftop installation of its kind in the region and marks a significant step forward in the acceptance of selfconsumption solar energy models. Digitalisation holds great promise for the power generation industry in Asia, where increasing productivity, improving efficiency of processes and reducing cost of operations, as well as energy consumption and emissions, are critical. “Innovative companies that approach digitalisation strategically, balancing the short and longer-term objectives of the business, will gain a significant competitive advantage, improving their ability to adapt and thrive,” Theis says. Another key project is the China Light and Power (CLP) Company`s Guangxi Fangchenggang power plant. This leverages an ABB Ability™ Symphony® Plus system at the plant, controlling two 630MW thermal generating units and enabling operation at ultra-supercritical levels to improve efficiency, whilst also employing flue gas desulphurisation to minimise the environmental impact of using coal. ABB Ability™ Symphony® Plus was also at the

at the heart of a major retrofit for two Philippine geothermal power plants with a total capacity of 200MW. Energy Development Corporation (EDC), the Philippines’ largest geothermal producer, awarded ABB a multi-million dollar contract for the retrofit as well as its new Control System Integration (CSI) for the area control facilities of the two plants. Taiwan-based SunnyRich, a leading solar system integrator company in the region with a 20MW customer base, is working with the Pingtung County Government to develop a solar powered greenhouse to improve food security, produce healthy crops, and allow the land to recover following a devastating typhoon, which caused severe floods and landslides. In Singapore, international furniture store IKEA has installed a solar rooftop plant at its flagship store. Across all these high-profile projects, ABB has provided several inverter solutions, including ABB three phase outdoor string inverters for commercial and industrial applications. ABB’s inverter technology increases the system reliability and efficiency of new plants and installations over the complete lifetime of the system for more than 20 years. “With the cost of renewables, hydro, wind and solar power falling dramatically as capacity factors have soared, many countries across Asia have been quick to uptake across all markets. The growing need for uninterrupted and reliable power supplies is largely being driven by government incentives and the growing prosumer movement in energy, which is now being translated into the commercial world,” Theis notes. “ABB is writing the future of safe and smart operations by delivering integrated and secure digital solutions to automate operations and optimise performance and sustainability, with unparalleled experience in the energy and water, oil and gas, specialty chemicals and primary pharmaceutical industries,” he adds.

“ABB is writing the future of safe and smart operations by delivering integrated and secure digital solutions that enable more productive and energy efficient operations.”

Joerg Theis, Head of Energy Industries, Asia, ABB ASIAN POWER 7


FIRST still dominated by coal. “Several mega coal power projects that were supposed to be suspended or cancelled due to the depreciation of the rupiah and weakening demand in 2018 seem to have re-appeared in the 2019 RUPTL. PLTU Java-3, PLTU Java-9 and Java10, are back in the document, amidst claims made by the minister that no new coal power plants would be set up on Java island,” Brown said.

x 13gw of coal shelved SOUTHEAST ASIA india

Tata Power’s coalPokharel, plans met financial strife. Dr Bikal Kumar Wood Mackenzie

Having 13GW of coal plant projects shelved since 2010 has pushed India’s largest private integrated power company, Tata Power, to turn its back on building new plants and opt for renewables to take 70% of its new capacity additions. Institute of Energy Economics and Financial Analysis (IEEFA) energy finance analyst Simon Nicholas commented, “This represents a significant departure from the accepted wisdom of just a few years ago that a major expansion of coalfired power would be required to serve India’s growing electricity demand.” The majority of Tata Power’s thermal capacity is reportedly centred on its Mundra coal-fired power plant, which experienced $191m in losses for the first three quarters of FY2018-2019. Whilst a bailout of the Mundra plant, which is recording consistent, significant losses, is being planned to increase the tariff burden on consumers and realise a debt write-down for bank lenders, Tata Power has stated it will only halve the losses at Mundra, Nicholas revealed. Financial strife in coal Prior to the commissioning of the Mundra power plant and subsequent heavy financial losses, Tata Power had reportedly been planning other new coal-fired power plants, including some that will be fuelled by imported coal. In March 2019, a National Green Tribunal panel was set up to investigate the environmental impact of Tata Power’s proposal to convert unit 6 (500 MW) of its Trombay Thermal Power Plant from oil to imported coal. The conversion received initial environmental approval in 2014. However, with the imported coal-fired Mundra plant in deep financial strife and no apparent progress on the Trombay conversion since then, the Global Coal Plant Tracker database reportedly considers this project to have been shelved. Amongst the projects to have been cancelled or shelved are units 6 and 7 of the Mundra plant (1,660MW), whilst another proposal that was supposed to be fuelled by imported coal, the 2,400 MW Coastal Maharashtra Project, was halted in 2012 due to higher imported coal costs. Another imported coal project – the 2,000 MW Tata Begunia proposal was reported to be cancelled as recently as January 2017. Tim Buckley, IEEFA’s director of energy finance studies and co-author of the report, further noted that Tata Power’s shift mirrors the transition underway within the Indian power sector as a whole, driven by least cost renewable energy. Buckley explained. “The current Indian fiscal year has seen net coal-fired power additions come close to ceasing altogether.”

8 ASIAN POWER

Lower T&D targets could curb new renewables installations.

Are renewables at risk in Indonesia’s new plan?

I

indonesia

ndonesia’s new Electricity Supply Business Plan 2019 (RUPTL) slashed the forecast for electricity demand growth to 6.42% for 2019-2028 (from 6.86% for 2018-2027) as a response to criticisms of the reliability of past estimates. However, Institute of Energy Economics and Financial Analysis (IEEFA) energy finance consultant Melissa Brown argued that the lower forecast could only urge much bigger cutbacks in planned grid expenditures for transmission and distribution (T&D) including additions for network and distribution substations, and thus curb future renewable capacity additions. The RUPTL cut the plans for both total transmission and distribution by 10% each, network substations by 18%, and distribution substations by 33%. Brown pointed out that the projections for T&D and substations show no evidence of a correlation between investment in T&D and in renewables’ energy generation. “The decision to cut back investments in the system does not appear to reflect any system requirements to cater for more penetration of intermittent renewables in the future,” she said. Mini hydro is forecasted to grow more rapidly by 90% from a low base, whilst solar was cut back by 13%, translating into an expected increase of only 908MW in the next 10 years. The RUPTL’s generation mix is also

The RUPTL cut the plans for both total transmission and distribution by 10% each.

Unmet expectations However, according to Abhishek Dangra, senior director at S&P Global Ratings, the cut in the T&D forecast could be interpreted as a sign of the government aligning with new growth trends. He pointed out that by looking at some companies like state utility PLN, which accounts for 100% of T&D, companies’ capex almost always fall under prospective budgets for the year. “Last year, PLN said they will spend $10.62b (IDR150t) and they actually spent $6.37b (IDR90t). Now that $6.37b in itself is a big jump from their capex a few years back, but still if you look at it compared to the budget, it was still much lower,” he noted. Whilst the old RUPTL plan was based on electricity demand growth forecasts of 5-8%, Dangra noted that in the past few years, the figure was actually closer to 2-5%. “In the recent RUPTL plan, the government has taken note that some of the earlier projections on the need for electricity were based on certain assumptions on economic growth, which are not currently being realised,” he said. In the end, the RUPTL still needs to reflect the economic reality and growth prospects as they stand, Dangra said. “Overall, the demand growth is one big factor, and there could be some reform to the tariff mechanism because Indonesia is a place where subsidies are still a big part of the overall electricity tariff. Those factors would have a bigger impact on the revenues and growth for PLN rather than the RUPTL plan having the budgeted amount of investments going down.”

2019 RUPTL - changes from last year

Source: IEEFA


FIRST

Hiti Singh

78% of institutional investors eye renewables to fulfill ESG requirements.

Renewables fill investors’ war chests

A

Asia pacific

sian institutional investors’ interest in the renewable energy sector won’t be waning anytime soon, according to Octopus Investments, which found that 22% of investors are planning to increase their allocations to the sector by more than 20%. “The key investment drivers for Asian institutions are the opportunity to diversify from volatile financial markets, benefit from longterm yields and to fulfil Environmental, Social and Governance (ESG) criteria,” Hiti Singh, head of institutional funds at Octopus Investments, told Asian Power. “Institutional investors, including pension funds, have long-term liabilities that must be matched and therefore the longevity of renewable assets is particularly attractive,” she said. ESG is becoming

increasingly important for pension funds and large institutional investors when evaluating investment opportunities across the globe and across assets. “Emissions are still rising, and institutions are beginning to recognise that environmental sustainability is no longer a box-ticking exercise. This is highlighted by the 78% of Asian respondents who cited ESG as a key investment driver,” Singh said. The most attractive project types according to Asian institutional investors are grid-scale solar power projects, with 45% indicating that they have invested into the asset class. Other investments went to onshore wind power plants (22%), offshore wind power plants (22%), and waste and biomass power

plants (11%). Hydropower plants did not seem to be in the investment pie of institutional firms. Amongst Asian institutes, 6.1% are planning to invest in the sector, whilst 3.3% already have allocations to renewable energy. They are lagging investors in Europe, the Middle East and Africa (EMEA), however, which have the highest level of current and future allocations, at 5.8% and 8.4% respectively. According to Singh, institutional investors cited lack of in-house renewable skills and resources within their organisation as a key barrier. “Institutional investors in Asia are most concerned about this, with 40% of respondents listing it as a concern.” Asian institutes also cited inadequate size and scale of organisation (60%), access to investment pipeline (47%) and liquidity issues (40%) as additional challenges. Singh commented, “These challenges point to the requirement for larger specialist managers to facilitate investment into the asset class. Such managers can use their scale and existing pipelines to help provide liquidity whilst leveraging their own in-house team of experts to reduce operational risk and drive improved performance.” Despite these challenges, two-thirds (67%) of Asian respondents cited diversification as the primary driver of the interest in renewable infrastructure. “With the end of the market bull run, investors are looking to alternatives as an opportunity to diversify from short-term uncertainties of the equity markets, due to stable and predictable cash yields generated from these assets. Indeed, Asian renewable energy investors attach particular importance to long-term yields and income, with over three-quarters (78%) citing it as the most important driver,” Singh said.

the CHARTIST: THE chartist: India’s JAPAN’Swind SOLARsector INDUSTRY SLOWed IS DIMMER downWITH as tariffs JUST 20GW fall to PROJECTED as low TO as 3.5 COME cents/unit ONLINE A shift to a competitive bidding Japan’ s solar power sector will expand at robust rates through 2020energy as a large mechanism in India’to s wind sector xWeighted average tariff at auctions backlog projects supported by feedslowed of down capacity additions as in tariffs comeadjust online.to After BMI participants the2020, new guidelines, Research said that the transition to ato 3.5CRISIL Research said. Tariffs fell reverse auctions system will slow growth, as 3.8 cents/unit, from 5.8-6.5 cents/unit the Japanese government looks to regulate under the feed-in tariff (FIT) regime. capacity additions in order to reduce subsidy “Such realisations remain unviable costs andlow support grid stability. for the entire value chain at current “We expect Japan to register robust solar capital costs ofthrough $977,398-$1.03m capacity growth to 2020 as a result (INR6.8-7.2 crore) per ” CRISIL of the implementation ofMW, a substantial pipeline of projects that benefit from a Research said. Capacity additions generous feed-in scheme. are expected totariff slowsupport down further in Our forecast is that out of aand 50GW backlog 2019, despite tendering auctioning of such projects, only 20GWthrough will actually occurring intermittently the come as most will not be able to fiscalonline, year 2018. Most of the capacity is take advantage of the FiT subsidies amid Source: CRISIL Research expected to come online only between stringent government requirements and Source: BMI Research end-fiscal 2019 and”fiscal 2021. added. delays in development, BMI Research

-

OEMs x face severe decline in profitability

Source: Company filings, CRISIL Research Source: BMI Research

ASIAN POWER 9


FIRST

Solar auctions take off in Asia

Solar potential of Germany, China, India, ASEAN

Singapore

T

INDIA, asean

he sun is shining significantly brighter in India and Southeast Asia as these regions could be key segments for the global solar power additions and could reach additional capacities of 82GW and 21GW respectively by 2035, according to consultancy firm Roland Berger. Factors that enhance their strong growth potential include land accessibility and sourcing capabilities. “Southeast Asia is set to require more than 250GW of additional capacity, and India 580GW. But under existing policies, countries are struggling to meet demand. Solar power offers a solution,” said Jeffry Jacob, Roland Berger partner for energy & utilities competence centre. The International Energy Agency (IEA) estimates that about 120GW of new solar capacity and 80GW of new wind capacity will come online in India by 2040. India solar parks India’s plan to boost solar parks has so far added about 20GW of new capacity, and the pipeline is flowing with several mega-projects in the 1GW range. Such developments have seen offtake or sale prices fall as low as $0.0355/kWh at auctions in 2018 – compared to prices hovering around $1/kWh in 2015. plant WATCH

Source: Conergy, Roland Berger

Although installed solar capacity in Southeast Asia amounted to just 5GW with most projects falling below 50MW, the region still enjoys attractive sunlight conditions that strengthen the case for solar. Irradiation averaged 17.2 megajoules per square meter per day in the region, compared to 12.6 MJ/m2/day in Germany, which has 43GW of solar capacity, and 16.2 MJ/m2/day in China, which has 126GW of solar capacity. Projects backed by corporate power purchase agreements (PPAs) are also expected to become mainstream in both India and Southeast Asia, with a combined 19GW of new capacity by 2035. Solar rooftop could come off as a sizeable segment as projects below 20MW could boost capacity by 14W in 2035 as well. “The key will be to combine multiple offtakers, or buyers, for each project to ensure large and stable demand; that is, find users beyond residential customers, such as telecommunication tower companies, telecommunication operators, or commercial customers,” Jacob added.

India’s plan to boost solar parks has so far added about 20GW of new capacity, and the pipeline is flowing with several megaprojects in the 1GW range.

TEPCO removes fuel from Fukushima NPP

Taiwan’s No.3 NPP unshaken by quake

Tohoku invests in 700MW wind project

japan

Taiwan

japan

Tokyo Electric Power (TEPCO) started the removal of fuel from the Unit 3 spent fuel pool at the Fukushima Daiichi Nuclear Power Station as part of its ongoing decommissioning. The plan is to fill the container with seven fuel assemblies, seal the container with a lid and then remove the container from the pool to the ground level before placing another lid on top. The removal of the Unit 3 pool’s fuel assemblies (514 spent-fuel assemblies and 52 unused-fuel assemblies) is expected to finish in March 2021.

Taiwan’s No. 3 nuclear power plant was not affected by a magnitude 4.4 earthquake that hit southern Taiwan where the facility is located. All three nuclear power plants operating in Taiwan remained functional, and no damage was recorded in the facilities after the earthquake, Taipower said. The quake struck at a depth of only 15.5 km. The weak-motion seismometer (WMS) of the plant, which responds to ground motions such as those caused by earthquakes, was not activated by the earthquake.

Japanese electric services firm Tohoku Electric Power has participated as a new joint investor in Akita Yurihonjo Offshore Wind GK, RENOVA Inc. revealed. The Akita Yurihonjo Offshore Wind Power Generation Project is planned to have a power generating capacity of approximately 700MW, making it one of the largest offshore wind farms in Japan. RENOVA is engaging with local residents, fishermen and other local industries, and conducting environmental impact assessments.

10 ASIAN POWER

ENGIE launches asian venture capital arm

Quentin Vaquette, ENGIE Factory

French power giant ENGIE launched ENGIE Factory Asia Pacific in Singapore, its venture capital (VC) arm for the Asia Pacific, that will focus on ventures and strategic investments in renewables. Quentin Vaquette, managing director of ENGIE Factory Asia-Pacific, discussed their BUILD-SCALE-INVEST approach to startups and the types of firms they’re looking to invest in. What opportunities are there in (1) Singapore and (2) Asia Pacific that ENGIE Factory wants to tap into? We are here to accelerate the Energy Transition in Asia-Pacific. We are doing this by (i) increasing the use of energy efficiency, (ii) accelerating the adoption of green mobility, (iii) accelerating the deployment of renewable energy production and (iv) enabling universal access to clean energy in remote areas. With our BUILD-SCALE-INVEST approach, we are looking for startups and great founders across, Asia-Pacific who are passionate about making a meaningful impact. To date, over 80 startups have applied to be part of our programme and have expressed interest in collaborating with the ENGIE Factory, and we look forward to welcoming more onboard. What major energy issues do you want to focus on with ENGIE Factory and how do you build models to solve them? There are four key energy challenges faced by the Asia-Pacific region that we would like to address, which include (i) energy efficiency in building and industry, (ii) replacement of the region’s vehicle fleet by clean alternatives, (iii) increasing the share of renewable energy production and (iv) ensuring universal access to energy for all. They are limited by the number of products, solutions, startups, and companies that provide an offer that users really care about and that works for them. What is your outlook towards Asia Pacific’s renewables scene and the role of venture capital in it? Venture capital is not the right tool to finance infrastructure. Instead, it is the right tool to finance business model innovation, which in turn allows adoption. Today, neither technology nor cost is holding back the deployment of more renewables (at least for those mature ones like solar and onshore wind). Business model innovation, software, marketplaces and sharedeconomy platforms will help further accelerate the deployment of renewables and that’s where venture capital and entrepreneurship can play an important role.


FIRST

Green bonds for ASEAN power utilities asean

Jackie B. Surtani and Noel Peters, ADB

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n an attempt to open the $173b green bond market to ASEAN developers, multilateral lender Asian Development Bank (ADB) invested $20m and $155m in the maiden green bonds of AC Energy and B.Grimm Power. Jackie B. Surtani, director of Infrastructure Finance — East Asia, Southeast Asia and the Pacific, and Noel Peters, principal safeguards specialist at the Private Sector Operations Department, shared to Asian Power the process of securing the deals for these two companies. What factors do you consider before investing in companies’ green bonds? Jackie B. Surtani: When we look at a company, we first look at two things. Firstly, the project or the company is creditworthy so that we are prepared to lend money to it and it is able to pay us back. Both B.Grimm Power and AC Energy are very strong companies from a credit perspective. Our development mandate is very clear. We want to make sure that we are lending to companies that are doing renewable energy projects. How was the process of investment? Surtani: I think the key to your question is the quality of the information and the professionalism of the client. The experience was very good for both of us, because of the professionalism of both B.Grimm Power and AC Energy. We had access to senior management in

dusty hydro plans

both companies. They were able to answer all the questions we had or any other members of the ADB team, especially those from the risk department. The time it took us to process that deal internally was also relatively smooth. Noel Peters: The other thing that is important to mention is that, especially for B.Grimm Power, we actually gave them advice and supported the green part of the issuance of the bond, which is something that we’re prepared to do for anyone who’s coming to express interest in us and get involved with their green bond. What sort of advice is that? Peters: Certification is key. We actually funded the certification for B.Grimm Power. We’re doing evaluations by providing an advisor in support services to make it easy for companies to issue. Surtani: The part that ADB plays — and this is where Noel comes in — is this certification by the Climate Bonds Initiative. This is a certification that is given by a separate entity, which solidifies that this is a proper green bond. It’s very helpful. What issues have you encountered with AC Energy and B.Grimm Power? Surtani: In Noel’s case, he was kind of like wearing two hats on both deals. He was helping them with the climate bonds certification but also making sure that they have an environmental and social management system that abides by ADB safeguards. We were approached in the first week of December, but we were able to sign this deal on 30 January. It was a very short process. The timing is not an issue but a challenge. It took a lot of people to make sure that we got it done. Peters: We find that the companies who are going into the green bond space already have their mind on reputation issues, and they are quite mature in that kind of evolution.

india

400MW Kadamparai project, Tamil Nadu

Pumped hydro storage (PHS) could already have taken off in India, but enormous social costs and radio silence from policy makers have left 8.9GW of project proposals collecting dust on the drawing board. The Institute for Energy Economics & Financial Analysis (IEEFA) said that delays could be caused by social and political issues mostly related to loss of significant areas of agricultural flood plains and forest lands and forced relocation without just compensation for affected rural communities. “Interstate disputes over water rights compound environmental issues such as flood safety concerns and agricultural needs,” said IEEFA director of energy finance studies Tim Buckley. Generally, hydroelectric projects also require “very patient” capital due to seasonal water flows and mountainous, remote locations. On the upside, the Ministry of Power proposed electricity rule changes to incentivise electricity supply at times of peak demand, a key pricing signal needed to underpin financial bankability of storage projects. India also amended its “hybrid wind-solar with storage” policy to clarify that any form of storage – not just batteries – could be used in hybrid projects, including PHS, compressed air and flywheel. Buckley added that large PHS can still be done in small sites. “Refurbishing end-of-life dams and adding PHS to existing water storage dams could also inject significant value-add to India’s existing portfolio of 45GW of hydroelectricity capacity.”

Indonesia

Will a new DPT process risk the repeat of Indonesia’s renewables slump? Indonesian renewables’ momentum crashed to a halt in 2018 partly due to PLN’s delayed completion of the yearly prequalification (PQ) and procurement process for DPT, a list of developers qualified to participate in the market. HHP Law Firm partner Nadia Soraya said the sector could risk facing another slump in 2019 if processes get executed in the same way. For the 2019 DPT, PLN set the deadline of applications on 15 March, and if processes go as planned, it could announce the results in June. “It is hoped that, as this is not the first time PLN conducts the DPT PQ process, it would be completed as scheduled or at least it would not take as long as it was for the 2017 renewable DPT process. However, there remains concerns that the 2019 DPT process would still take longer than the schedule that PLN has set,” Soraya said. On a positive note, PLN eased the backlog that would have contributed to a potential delay in the June announcement. On 28 March, it released the long-awaited 2018 DPT PQ process results for large hydropower projects.

12 ASIAN POWER

However, the PQ is not the only task PLN needs to tick off. Soraya said, “If there are no renewable projects being tendered out in which the developers who have been included in the DPT can participate in, it would prevent the growth of the renewables investment in Indonesia.” On 11 March, PLN started a tender for developers in the 2017 DPT (results were announced November 2018) for a solar PV power plant project in Eastern Bali. Beating backlog Soraya noted that all of the parties in the DPT announced in November 2018 were invited to participate and had until 26-29 March to collect the Request for Proposal (RFP) documents. “I believe this is a good development and will attract new solar PV investments,” she said. Delays aside, Soyara views DPT as positive for Indonesia.“The PQ process should be seen as the regulation for Indonesian renewables heading to the right path, so long as there is transparency in the process and the results,” she concluded.

Nadia Soraya, HHP Law Firm partner

Revised power generation targets, 2018-2027

Source: IEEFA, RUPTL


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SBPL is the first supercritical coal plant in the Philippines. The plant will enjoy a higher efficiency, use less coal for the same amount of power to be delivered, and will emit less over the operating life.

Frank Thiel Managing Director Quezon Power (Philippines)


CEO INTERVIEW

Quezon Power’s new coal tech for the Philippines Coal is still in for managing director Frank Thiel as he leads the development of San Buenaventura Power, the Philippines’ first coal plant to use supercritical technology, but renewables are also welcome with a 70MW wind farm in the works.

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n an exclusive interview with Asian Power, Quezon Power Philippines managing director Frank Thiel shares the lessons he gained from running Quezon Power Philippines Ltd, its 460MW coal-fired power plant which started in 2000, and the new 500MW San Buenaventura Power Plant, which will be the first plant to use supercritical technology in the country. He also gives a glimpse of an upcoming 70MW wind farm the company plans to build close to the coal plants’ site. What are your top priorities for the company? Our Shareholder, the EGCO Group, has set several priorities for us: Health, Safety, and Environment at the top. That is on being able to operate and maintain the facility safely and in compliance with all the environmental laws and permits and ensuring thus that we are in full compliance at all times with the requirements of the Clean Air Act, DENR and all the associated environmental agencies. We also have to prioritise timely reporting of all events that may affect the plant, or our ability to deliver the power contracted with our off-taker Meralco and perform our planned maintenance outages safely, on time, and within budget to ensure that can continue to deliver on the reliability expected. Keeping our staff fully engaged in the safe operation of the plant by taking refresher training in our full simulator system is also a priority. Last, but most important: we have to continue to work closely with our host community in carrying out all the facets of our community social responsibility program. What are some of the things that you have learned from running a coal-fired power plant? A coal-fired plant can be very challenging. But for any type of plant anywhere in the world, hiring the right people, training them, making sure that they’re comfortable and they take ownership of the plant, is a key element. That’s at the top of the list for me, it’s always been there. Technologies can be learned, just like driving a car, flying an airplane. That comes over a period of time: learning the systems, understanding how they work, how they interface with one another, understanding their strengths, the strong and weak points of the plant. If you’re in a remote area like we are right now, we need to have more spare parts, more tools, and a lot more things that you would normally not consider in another station. Can you give us a rundown of the new technologies that you’ve put into place with San Buenaventura Power Plant? SBPL is the first supercritical coal plant in the Philippines. The plant will enjoy a higher efficiency, use less coal for the same amount of power to be delivered, and will emit less over the operating life. The plant will operate in supercritical mode by reaching higher operating pressures and temperatures in its cycle. It has been designed to be a flexible plant, and has more redundancy built in to allow it to operate in a load following mode as will be expected of its dispatch profile. SBPL comes equipped with a full-fledged plant simulator as well. That will allow us to train and retrain our operators, as well as to implement further efficiency refinements. You mentioned that QMSI is keen to build more coal plants in the Philippines. Which locations are still “ideal” for building power plants? Our Shareholder, the EGCO Group, is always looking for further opportunities to develop the right kind of projects. EGCO’s current portfolio includes solar, wind, hydro, gas and coal

facilities. It spans Thailand, Laos, South Korea, Australia and the Philippines at the moment. Vietnam and Indonesia are also potential markets for coal plants. Finding an “ideal” site is challenging, but not impossible. Having the community’s support and teaming up with a local partner are key elements for any project development. Bringing the right technology to suit the conditions, and securing the best EPC contractors and equipment can make for a very successful project. We focus on all these areas. What are the major issues that you’ve encountered for the past few years? There’s always the security threat, even though we have compensated and we address that by having a very strong Corporate Social Responsibility program. It’s something that we’re fully aware of, and something we have to pay a lot of attention to. Local government units can be very supportive, and our mayor has been extremely supportive, but every now and then issues do come up. When there are breakdowns along the way, as the plant does occasionally malfunction unexpectedly, so we have to deal with that. The weather is another issue. Typhoons are very, very challenging. Every now and then, we get flooded as we get a tremendous amount of rain here. We have to contend with that. Are you willing to build more coal power plants in the Philippines? Yes. We’d love to be able to do more. Our company EGCO used to own 49% of the Masinloc power station up North, but we sold that a few months ago to San Miguel Corp. But at that time, we were thinking of acquiring the other 51%. Coal is something that is of interest to us. So if there’s an opportunity to invest, we will look to do that. You mentioned that you have a plan to build a wind farm close by. Why did you choose wind power? We have seen an area that looks like it is the right site for wind. We took in data for the last four and a half years, and the data shows that it is a good wind resource and the speed of the wind is very consistent. We think that makes sense, because if the wind is consistent, we can build a wind farm and it should perform fairly okay. It’s another development for us. Our company has wind, solar, hydro, gas, and coal. Basically, we’re technology neutral. If we see an opportunity to do one technology versus another, we will definitely think about it. In your opinion, do you think there’s no threat from renewables on your coal business? Renewables have a major role to play in the power sector. I think renewables are here to stay, and I think renewables will grow over time. I don’t see renewables as a threat. I see them as a compliment. Coal, gas, and nuclear can provide baseload power. Renewables are more intermittent, but they have a role to play. And there’s room for all of us. I don’t see them as a threat, I see them as something that will help this power sector all around. What’s a day in your life like? It’s a lot of fun. I get to meet some great people, I get to do tours, I get to deal with issues of the power plant, I get to deal with commercial issues. I enjoy every single day. And I look forward to coming in and working on the power plant or being in the Manila office. ASIAN POWER 15


Country report: South Korea

South Korea has $106b of stranded asset risk in a below 2°C scenario based on the Paris Agreement.

Coal stains South Korea’s green growth policy Despite efforts to slowly reduce coal consumption, policies still tilt towards coal with 5.4GW of coal plants under construction.

T

arnishing the South Korean government’s strategy of lowcarbon and green growth are coal projects with a total capacity of 5.4GW under construction and a pipeline for plants with a total capacity of 2.1GW, in addition to various ongoing retrofits. Analysts fear that the country’s lowcarbon strategy risks being derailed by its continued focus on coal power. Whilst coal still produces 43% of total gross generation, Matt Gray, head of power and utilities at Carbon Tracker, shared in an analysis that President Moon Jae-in has shown willingness to reduce coal reliance, first by announcing plans to decommission several operating plants

A draft energy tax code by the government revealed plans to increase the fuel tax on thermal coal by 27% and lowering the tax on liquefied natural gas (LNG) by 75%.

Renewable energy – analysis of policy performance

Source: Linklaters translation of 2018 REC Weight Value Adjustment Public Hearing

16 ASIAN POWER

and then cancelling the construction plans for two units. Despite this, he argued that continued reliance on coal in the form of enduring regulatory structures puts South Korea at the top of the countries with stranded asset risk. “Our below 2°C scenario finds South Korea has $106b of stranded asset risk – the highest of the 34 countries modelled. The $106b represents the difference between the cash flow utilities may receive under the current South Korean power market and what they would receive in a below 2°C scenario, which sees capacity closed prematurely to meet the temperature goal in the Paris Agreement. This is due to regulatory structures which effectively guarantee coal generators’ high returns,” Gray said. These regulatory structures include the merit order based solely on fuel costs; large-capacity market payments; and compensation for carbon exposure and transmission restrictions. With these in place, coal generators have larger cash flows than what they would receive in other markets abroad. Moreover, a draft energy tax code by the government revealed plans to increase the fuel tax on thermal coal by 27% and lowering the tax on liquefied natural gas (LNG) by 75%. Gray said that this means the South Korean government

will have to continue subsidising coal generators either directly through higher tariffs or indirectly through out-of-market payments in order to maintain financial viability or keep tariffs artificially low to prevent higher costs. Coal conundrum “Both outcomes could prove financially and economically unsustainable, as subsidising coal generation will either anger taxpayers or energy consumers, whilst artificially low tariffs for consumers will impact fiscal resources,” said Gray. “Policymakers should be able to look at the long-run marginal cost (LRMC) of individual coal units and draw up a retirement schedule based on this.” Gray said this analysis will help policymakers close the costlier units before the cheaper units, whilst ensuring that consumers enjoy the lowest cost of electricity possible. An alternative retirement schedule based on emission intensity targets may not result in a more favourable outcome. Analysts at Carbon Tracker also found that it will be cheaper for the country to build new solar photovoltaic (PV) plants than to operate existing coal plants by 2027. They forecast that the levelised cost of electricity (LCOE) for solar will dip below $50 whilst the LCOE for coal


Country report: SOUTH KOREA Long-run marginal cost of South Korea’s coal capacity vs the levelised cost of onshore wind and solar PV, 2018-2040

Matt Gray

Jonathan Cobb

Source: Bloomber NEF (2018), Carbon Tracker analysis

will plateau. Other renewable energy options, particularly offshore wind power, are also being explored due to land, environmental, and permit constraints around solar power in South Korea. Nuclear: go or no? Next to coal, nuclear energy has also become a pillar of South Korea’s reliable and affordable electricity supply. Hana Kim, assistant professor at Sejong University, shared in a paper that nuclear power has been promoted as a zeroemission energy source that could help efficiently respond to climate change. Nuclear power plants in the country are responsible for 20.5GW or 22% of total generation capacity. Jonathan Cobb, senior communication manager at the World Nuclear Association, shared a recent survey which revealed that seven in 10 are in favour of the current level of nuclear generation, and more are in favour of increasing rather than decreasing it. Increased interest in nuclear is a result of recent emergency measures introduced to counter air pollution and shutting down fossil fuel plants, he added. However, concerns raised against the safety of nuclear reactors have led the government to slowly phase out nuclear power in the country. Cobb argued that antinuclear policies such as this are out of step with the opinions of voters. The question remains, however: is nuclear a safe and viable option for Asian countries? Daniel Brenden, senior power & renewables analyst at Fitch Solutions, said that Japan is perhaps the best example, where increasingly stringent safety requirements have hiked costs for nuclear power restarts. “There are also a number of new nuclear facilities developed in the region that use third generation reactor technology, which improves safety but also adds complexity and cost to nuclear plant development. Third generation reactors that are operational or under

construction include the APR-1400 in South Korea, CPR-1000 in China, ABWR in Japan, and HPR-1000 in China,” Brenden said. In addition, Kim said that whilst the stance on closing down old coal-fired power plants is accepted well by the public, opinions on phasing out nuclear power reactors are in a cacophony. According to her, there remains an active debate on a reliable and affordable supply of electricity in conjunction with the safety and environmental concerns about the electricity system. “The most controversial issue was whether to complete construction of the Shin-Kori #5 and #6 nuclear plants, which were planned to be completed by 2021 and 2022, respectively. To collect public opinions and decide whether to resume the construction project after suspending the project, an unprecedented deliberation process has been carried out.” Whilst the current scenario of closing old coal-fired power plants and phasing out nuclear power is a picture of economic competitiveness, according to Kim, to enable this movement, electricity demand should be decreased. Lower demand means an easier energy transition to a more ecologically friendly energy industry that is also economically feasible. “Current debates about nuclear phase out in South Korea are still biased toward supply: what energy resource will meet our demand? The energy transition needs to be discussed in terms of demand as well. Without consideration of electricity demand, it is impossible to achieve a transition to a safer and more ecologically friendly energy system,” Kim said. As the government rethinks its energy strategy, alternatives to nuclear and coal like offshore wind are emerging. Joo Hee Lee, managing partner at Linklaters Seoul, said in a January note that offshore wind energy has been given the highest weight value for renewable energy certificates (RECs) by the South Korean government. The weight value of the RECs of offshore

Daniel Brenden

Joo Hee Lee

wind ranges from 2.0x-3.5x. The focus on offshore wind power is a result of the concerns arising from large-scale solar projects constrained by land, environmental, and permit issues. Lee said that South Korea is targeting to build new offshore wind facilities with an installed capacity of 12GW between 2018 and 2030 to meet the 20% target. Exploring offshore “A key challenge for developing offshore wind projects in Korea is the lack of a track record of large-scale commercial offshore wind projects, in particular, those with international participation, as most of the offshore wind projects developed to date have been led by the South Korean Government in a ‘topdown’ format,” Lee said. Despite these concerns, Lee said that the Korean offshore wind market remains attractive given the country’s favourable topography, especially in the South and North Jeolla provinces. Other bright spots include well-developed infrastructure, the government’s initiatives and support. The current support mechanism for renewables projects, the Renewable Portfolio Standard (RPS) scheme, requires generators with 500MW or higher generating capacity to produce a minimum proportion of their power using new and renewable energy sources. They could also satisfy this requirement by buying RECs from generators. However, what could ultimately drive the renewables market in South Korea is the government’s focus on the smart grid that would drive development of technologies like smart metres, energy management systems, and energy storage systems, according to a note by law firm Jipyong. Not only that, aggressive ramp-up of renewable targets as part of countermeasures against the problem of fine dust in Seoul and neighbouring locations could also serve as a catalyst. The 3020 Implementation Plan for New and Renewable Energy first mentioned in 2017 contains certain planned policy changes that will involve the expansion of solar power generation in agricultural land areas, local communities’ participation in renewable energy projects from the initial stages and the offering of incentives that are intended to support small renewable energy projects, amongst other things. “From this plan, it can be expected that the expansion of renewable power generation in the near future will also be driven by small-scale renewable energy producers, with large-scale renewable projects such as offshore wind projects continuing to be driven by big companies, including the six power generation subsidiaries of KEPCO,” Jipyong said. ASIAN POWER 17


Country report: Vietnam

Generation capacity needs to grow 5GW annually between 2018 and 2030.

Vietnam’s future needs 100GW of power The country requires $8b to $12b of annual investments in power as electricity demand is set to grow 8% from 2018 to 2030.

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ietnam’s wind power pipeline is set to get a massive boost after UK-based developer Enterprize Energy pledged a $12b investment to develop a 3,400MW offshore wind park in Kê Gà, Bình Thuận province. Projects like this are expected to nudge the country closer to its 2030 renewable target and address a nationwide hunger for more electricity and a solution for worsening air pollution in urban areas. Investments of this scale should meet the estimated annual requirement of $8b to $12b to meet the country’s growing demand. The World Bank said demand for electricity is expected to grow at 8% from 2018 to 2030. The Vietnamese government has estimated that the generation capacity needs to go from 42GW currently to 60GW by 2020 and to 100GW by 2030, requiring 5GW every year between 2018 and 2030. The country’s Strategy for Renewable Energy Development also hopes to triple electricity output produced from renewable sources from 58 billion kWh in 2015 to 186 billion kWh by 2030, targets that have been dubbed as bold and ambitious. Recent changes in the industry, including the introduction of a new feedin tariff (FIT) scheme for solar projects, may prove these judgements otherwise. Whilst huge strides have been made 18 ASIAN POWER

The country’s Strategy for Renewable Energy Development also hopes to triple electricity output produced from renewable sources from 58 billion kWh in 2015 to 186 billion kWh by 2030.

in the renewables subsector, continual growth and increasing power shortages in Vietnam still necessitate traditional sources of thermal generation. The country’s leaders recognise that coal consumption will only increase for the next few years and push the 45% share of coal at present to around 53% in 2030. Giles T. Cooper, partner at Duane Morris Vietnam LLC, said that more coal-fired plants will be put up in the short term, whilst gas and LNG facilities will also be vital in the extended future. Fitch Solutions reported that coalpowered generation growth in the country will increase rapidly over the next decade and will dominate Vietnam’s power sector expansion. According to their forecast, coal-powered generation will grow at an average of 10.1% YoY to reach about 50% of the country’s power mix by 2028. Power producers are also expecting a gradual shift to the wholesale market mechanism in the next few years, and this move carries with it its own challenges. Frederick Burke, partner at Baker & McKenzie Vietnam, said that the current ecosystem may experience externalities and barriers to an efficient market, considering that Vietnam is only halfway to becoming a true market system. No one-size-fits-all scheme has worked

to address rather similar power issues across various countries in the region, with specific strategies working well in some and failing in others. According to Cooper, managing the risk associated with power shortages calls for various strategies and actions, such as importing from neighbouring countries like China, reducing overall energy demand and increasing prices. Seeking a silver bullet Burke argues that faster administrative processing of alternative energy and gas, particularly solar and wind, would also help bridge the gap until large-scale gas projects are fully operational. He added that an urgent re-evaluation of over 20 proposed coal-fired power plants in the pipeline could help transition to more sustainable sources. “Gas comes out of this discussion as the option that will take up the lion’s share of the country’s energy needs but with renewables playing a substantial role too,” he said. An advantage presents itself at the moment, with the favourable global pricing of liquefied natural gas (LNG). According to David Harrison, partner at Mayer Brown, Vietnam can use this to fuel gas powered projects with over 7,500MW of generating capacity, in addition to exploring greenfield LNG


Country report: vietnam Historic investment trends and forecast investment needs for the power sector (US$ billions)

Giles T. Cooper

Source: World Bank calculations based on data from RPDP7, EVN, and MOIT. (A range of future investment requirements was calculated based on low, medium, and high electricity demand forecasts in RPDP7.

to power projects. As for renewables, the government may need to be more aggressive and ambitious than it already is — especially with the demand from Ho Chi Minh City and its surrounding provinces of Dong Nai, Binh Duong, and Ba Ria-Vung Tao. Another welcome development is the launch of a draft policy for a two-year solar power FIT mechanism effective 01 July 2019 until 30 June 2021. Unlike the first FIT with a flat rate, the longawaited policy proposes varying levels of tariffs, depending on the three different irradiation regions of Vietnam and across four different solar power technologies. The new FIT mechanism varies from 6.59 to 9.85 cents per kWh. The tariffs will also gradually decline from the first year (1 July 2019 to 30 June 2020) to the second year (1 July 2020 to 30 June 2021). Harrison said that the renewable strategy must continue to focus on solar and wind, which includes consideration of the views of foreign developers and financiers. Currently, Vietnam has a large pipeline of planned build-operatetransfer (BOT) coal-fired power projects that may not be bankable due in large part to lenders’ social and environmental concerns, as well as the quality of proposed government guarantees regarding thermal power plants. “With the environmental and health costs of coal being increasingly recognised, and COP21 commitments being taken into account, gas, both domestic and imported, is increasingly being seen as the largest part of a longterm solution. Renewables are more and more seen as material parts of the energy portfolio, especially as multinational manufacturers insist on green supply chains. Energy efficiency has a role too, in so far as low prices have kept the interest in energy efficiency low till now, and that can’t last forever,” said Burke. To slowly loosen its grasp on coal, the country can tap into the power of rooftop solar generation, which has yet to be fully

Frederick Burke

unlocked in the country. The World Bank reported that there is feasible potential for 6.4GW of rooftop solar generation capacity in Ho Chi Minh City alone. Remixing the energy mix Hydropower dominates the current energy landscape of Vietnam, followed by gas and coal. The World Bank notes that the country has been extremely successful in exploring its domestic gas, coal, and hydropower reserves. But whilst the country has a high share of renewables in its overall energy mix at present, its domestic energy resources are also limited and Vietnam is projected to import more and more energy from other countries. Fitch Solutions reports that the energy mix by 2028 will comprise coal (170.316 TWh), hydropower (76.972 TWh), natural gas (75.94 TWh), nonhydropower renewables (12.679 TWh), and oil (1.286 TWh). Analysts warn that there are downside risks to this positive coal-fired power growth outlook, especially as they expect coal prices to increase due to a market deficit for coal over the next five years. In the long run, Vietnam could start exploring more of its other renewable sources, such as biomass from crops to geothermal and tidal technologies. For good reason, the government has focused on solar and wind, and with recent changes to the regulatory framework, international funds are being unlocked for utility-scale projects as well as private funds for rooftop solar projects. “We will continue to see the government developing the regime for solar and wind-powered projects. Solar has an estimated potential capacity of over 7,000MW, but land issues, the quality of the template power purchase agreement (PPA) and technical grid connection issues pose challenges. LNG will also be crucial to Vietnam’s success in meeting its energy challenges,” Harrison added. The development of an integrated greenfield LNG-to-power project also

David Harrison

needs a comprehensive legal structure, but there is no model PPA for LNG-to-power projects and stakeholders are still unclear on how critical issues such as force majeure would be addressed. Harrison added that there is also a question of whether the government may be willing to provide more robust offtake guarantees than those offered in recent years. Shifting the paradigm When the country set out on a reform plan for the energy sector in 2006, the endgame in mind was a competitive electricity retail market by 2023. With only four years left on the clock, several problems have yet to be resolved. In addition to facing issues with externalities, barriers, and pricing, the country also needs to develop its national transmission system. Harrisson said that it is not clear whether the timeline will be strictly adhered to or extended. He notes that the decision is effective through 2025, although the landscape remains unclear beyond 2025. “The national transmission system needs substantial investment. A functioning market needs to be able to rely on transmission infrastructure to ensure uniform access to power, that supply can reliably meet demand and pricing is fair and transparent,” Copper added. Vietnam’s long and thin geography has proven to be a barrier in terms of improving transmission and distribution infrastructure. There is also a conflict between keeping energy prices down to attract foreign investment and raising them to get the funds needed to grow the grid. According to Burke, there are questions also being raised around the transition from having a national monopoly buyer to smaller distributors, if this will reduce the remedies for the producer, and whether the numerous, smaller buyers will have better credit risks over a single national champion. Cooper said that, currently, renewable energy generation capacity is outside the rules of the wholesale market so that large power consumers cannot contract directly for renewable energy capacity and indirectly finance such capacity. He noted a significant demand from the private sector, especially foreign MNCs that are active in Vietnam and are also RE100 companies, to directly procure renewable energy. “Facilitating these ‘direct corporate power purchases’ by establishing an enabling legal framework would be a great spur to finance renewable energy generation in Vietnam. The government is currently looking at this closely and it is hoped that a pilot project will be in place later this year,” Cooper added. ASIAN POWER 19


SECTOR report: HydroPower

Investment potential of hydropower in Southeast Asia is at $90b.

Hydropower backlash and policy gaps plague Lower Mekong Southeast Asian nations are mulling the construction of 11 large-scale dams in the Lower Mekong, but rules, costs, and new accidents tighten scrutiny on the plans.

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he Lao government was forced to suspend the approval of new dams and require impact studies for other projects in the pipeline after the Se-Pian Se Nam Noi dam collapsed and killed dozens in 2018. Early this year, the Mekong River Commission (MRC) proposed impact mitigation and risk management measures for the Pak Lay hydropower project, the fourth of eleven projects planned in the lower Mekong river. However, experts still raised concerns over this project and the others, stating that another collapse should be avoided at all costs. Rapid economic development is placing pressure on Southeast Asian leaders to meet the burgeoning energy demand, raising investment potential in the region to $90b, according to data from the UN and DBS. However, Julian Kircherr, researcher at Copernicus Institute of Sustainable Development, said that the lack of safeguards in neighbouring countries is as worrying as the situation in Laos. If another collapse is to be avoided, Kircherr said that there must be an immediate ramp-up in safeguard monitoring and enforcement. 20 ASIAN POWER

Over 120 dams are planned for the tributaries and 11 large-scale hydropower dams are slated for the Lower Mekong mainstream, which has the potential to produce over 13,000MW of hydropower.

“Regional governments are considering the construction of 88 more dams in the Lower Mekong River basin by the year 2030. Over 120 dams are planned for the tributaries and 11 largescale hydropower dams are slated for the Lower Mekong mainstream, which has the potential to produce over 13,000MW of hydropower,” Open Development Mekong (ODM) analysts said. With climate change in the background, several questions continue to be raised as to the sustainability of renewable energy, particularly hydropower. The Hindu Kush Himalaya (HKH), which serves as the origin of 10 river basins in mainland Asia, is facing multiple threats from urbanisation and overpopulation as well as short-lived climate pollutants such as black carbon. Eklabya Sharma, analyst at the International Centre for Integrated -Mountain Development (ICIMOD), said that black carbon is being emitted by surrounding regions, where dirty energy sources are in abundance, despite per capita fossil fuel emissionS from the HKH countries being a mere one-sixth of the global average.

To mitigate the risks of climate change, experts said the HKH needs more comprehensive and integrated strategies for the long term. Yanfen Wang, professor at the University of Chinese Academy of Sciences, said that policy approaches must become more holistic, multidimensional, promote transboundary cooperation, and encourage the development of mountainspecific responses by government policymakers. The China effect Southeast Asia has become even more prolific in its energy dealings with China, 20 years since the latter embarked on a massive damming project in its own territory. To this day, China is considered the world’s leading dam builder, with Chinese banks and companies involved in 334 hydropower projects in 74 countries, according to a study from the University of Nottingham Ningbo China. The main beneficiaries in the region include Myanmar, Laos, Cambodia, and Vietnam. “Whilst Thailand and Vietnam have already developed most of their tributary sites, Cambodia, Laos, and Myanmar currently possess the greatest potential for hydropower resource development, and by the year 2030, they’re expected to reach a combined percentage of hydroelectric generation of 96%,” ODM said. However, experts warned that these projects come with huge environmental and social costs that cannot be offset by the benefits of greater access to electricity. Ethnic groups living along the


SECTOR report: hydropower Mekong Basin connectivity in Cambodia: status quo (Lower Sesan 2, Battambang 1, 6 irrigation dams)

Julian Kircherr

Eklabya Sharma

Source: Stimson Centre

Irawaddy river in Myanmar seem to have understood this. One of the biggest hydropower projects to ever land in the country, the Chinesefunded $3.6b Myitsone dam, was first suspended in 2011 but continues to be in question amidst threats to the Irawaddy river. Pressures are mounting as both countries decide on what to do with the Myitsone dam, due to protests by ethnic groups living along the river. Somehow, the local voice is having an impact on some of these projects and making China rethink its propositions. For instance, environmental concerns raised against the Batang Toru hydropower project in Indonesia led the Bank of China to re-evaluate its funding commitment. The bank said that it will make prudent decisions by duly considering the promotion of green finance, the fulfilment of social responsibility, as well as the adherence to commercial principles. Safety stress With the collapse of the Se-Pian Se Nam Noi dam, the safety of hydropower projects has also been put on the spotlight over the past months as analysts have observed improvements in China-backed projects over the years. Kircherr and his colleagues did a study on Chinese dam developers in Laos, which account for at least 50% of the global hydropower market and found out that Chinese dam developers’ adherence to safeguards has significantly improved over the years. However, 57% of their survey respondents still judged safeguard performance in Laos to be poor. In its own territory, China has recently released new guidelines in giving bigger stakes to residents affected by hydropower projects and reservoirs. The country’s National Development and Reform Commission (NDRC) said that it would “establish a long-term mechanism for sharing the benefits of hydropower development amongst migrants, locations

and enterprises.” Despite safety upgrades, bigger challenges remain as according to Brian Eyler, director, Stimson Southeast Asia, the Mekong basin’s 2.6 million tonnes of freshwater fish catch every year (way more than 450,000 tonnes of the total wild catch from North America’s lakes and rivers) is threatened by the ongoing construction of and future plans for hydropower and irrigation dams upstream in Cambodia, Laos, Vietnam, and China. Risks remain “In Cambodia alone, the connectivity of the country’s 11,000 kilometres of the Mekong/Tonlé Sap river system has already been reduced by 31% by the construction of two hydropower dams and six irrigation reservoirs. The improper siting of dams on Cambodia’s tributaries would reduce connectivity by more than 60%, and mainstream dams at Sambor and Stung Treng would cut the Tonlé Sap connection to most of the Mekong River system,” Eyler added. With rising electricity demand, hydropower projects are an inevitable part of the bigger energy mix. Eyler said that hydropower will and should play an important role in Cambodia’s future energy mix, but there is a need for system-scale planning methods that can be used to sire and operate future dams with minimal to no impacts on Tonlé Sap connectivity. Furthermore, Eyler added that authorities should also explore other sources of energy, such as solar, wind, and biomass, that would lead to a more diverse and resilient energy system. “A driving factor behind hydropower development in Cambodia is the country’s rapid electricity demand growth, which has averaged 20% since 2010. In 2011, Cambodia’s installed capacity stood at just under 800MW and was entirely supplied by hydropower. All additional demand was met by imports from Vietnam and Thailand and off-grid

Yanfen Wang

Brian Eyler

Courtney Weatherby

diesel generation which is found in ubiquity throughout Cambodia’s urban and rural areas,” Eyler added. Meanwhile, Laos can also look into approximately 8,800MW of solar potential and another 2,200MW of high-quality wind potential. Courtney Weatherby, research analyst at Stimson, said that non-hydropower renewable options are gaining traction globally, with the prices of utility-scale solar and wind dropping 85% and 65% since 2009. According to her, Laos can definitely take advantage of the dropping prices of these energy sources and reconsider the makeup of its future energy mix. “Utility-scale solar price in the United States dropped 30% from 2016 to 2017, and bids on solar and wind plants around the world regularly set new records: since 2017, we’ve seen solar lows in the United States of 2.3 c/kWh, in India of 3.6 c/ kWh, and in the UAE at 2.94 c/kWh, whilst Mexico signed a contract for wind at 1.77 c/kWh and Saudi Arabia saw bids as low as 2.1 c/kWh for its first onshore wind project,” she said. Frameworks that work Laos and Cambodia can look at their neighbour Thailand if they want to learn how to maximise non-hydropower renewables. According to Weatherby, Thailand is in a leading position for new renewables in all of Southeast Asia with more than halfway towards its 2036 solar target of 6,000MW and one-fifth of the way towards its wind target of 3,000MW. “Thailand’s Ministry of Energy has already raised the 2036 non-hydro renewable energy target from an original target of 20% to 30% and has dropped a feed-in tariff (FIT) that stimulated growth in the sector to only 7.2 c/kWh, which is close to grid parity pricing. Thailand’s adoption of clear policy has made a clear business case for investment, which is why Thai companies plan to invest $3.9b in non-hydro renewables in 2018,” Weatherby said. “Thai company Impact Energy Asia is pursuing a 600MW wind farm in southern Laos, American company Convalt Energy is moving ahead with 300MW of solar and is in talks for up to 700MW more, and many investors are expressing interest in ‘floatovoltaic’ solar plants that would sit on reservoirs in central and southern Laos,” the analyst added added. Furthermore, Weatherby said that since Thailand is out of the buying market, Laos can look to Vietnam, its only neighbour with the capacity to buy from Laos’ battery. At present, Vietnamese stakeholders are reluctant to purchase from hydropower due to the well-known impacts to agriculture and to the greater Mekong Delta region. ASIAN POWER 21


Country report: Thailand

Thai developers don’t have long-term confidence in Thailand.

Local hurdles push developers to grow overseas A 9GW transmission project between Thailand and Laos marks the kingdom’s increased reliance on its ASEAN neighbours.

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he deal between Thailand and Laos, a 340MW Xekong hydroelectric power project in Vientiane, was lauded as a groundbreaking cross-border partnership that will supply electricity in Northeast Thailand. But whilst the deal is positive for both, it reveals an increasing tendency amongst Thai power producers to seek projects overseas on the back of increasing uncertainty at home. “Most Thai developers I talk to are very keen on the international market because they don’t have long term confidence in Thailand,” said Tony Segadelli, managing director of OWL Energy. “In terms of incentives and tariffs, the investment environment is attractive. The issue is more related to the number of projects, which in turn is due to overcapacity after a long build out and a stagnating economy,” he explained. For instance, the Xekong project is a joint venture between Ratchaburi Electricity Generating Holding Public Company Limited (RATCH), a Thai listed company, together with the Lao World Engineering & Construction Co., Ltd. (LW) and B. Grimm Power Public Company Limited. The project will consist of two reservoirs located in two districts in Xekong projects, and the parties are in talks to sell power to 22 ASIAN POWER

The government is aiming to boost solar PV installations to 3GW of utility solar in 2022.

the Electricity Generating Authority of Thailand (EGAT), under a 9GW power cooperation framework between Thailand and Laos. Politics takes its toll A key factor weighing in on investor sentiment is Thailand’s general elections. Segadelli argues, “The elections will change the political landscape regardless of who wins. During 2013-2016, the Thai economy stagnated; however, the last two years have seen over 4% growth p.a. The hope is that a flood of new projects will be unleashed in the second half of 2019 however the fear is that political instability will return. If the latter happens then the economy is likely to slow again, meaning the reserve margin stays high and new projects aren’t required.” Other analysts, however, believe that the elections will have little impact on Thailand’s robust energy market. “Thailand continues to be an attractive investment destination for the power sector, driven by clear and consistent energy policies and legal framework. Elections anywhere in the world could give rise to changes in policies, including energy policies. However, with Thailand’s two- to three-decades old IPP programme pretty much coinciding with the modern era of democracy in Thailand, the

trajectory for energy development in the country has been generally consistent throughout this period despite political changes,” noted John Yeap, partner at Pinsent Masons. Yeap highlighted that initial attempts to reform the power sector along the World Bank’s model of deregulation have generally been resisted. “These will likely in the near to medium term to continue to be resisted. The fuel policy of diversification towards renewables is a global trend that is unlikely to be affected by political changes. As such, any paradigm shifts in energy policies would, therefore, seem unlikely,” he explained. Abishek Dangra, senior director at S&P Global Ratings, noted that the Thai energy sector is fairly stable regardless of political challenges. “Thailand’s Power Development Plan (PDP) runs fairly independent of any political changes in the country, and we expect the same trend to continue. PDP’s development will likely continue irrespective of any broader minor policy shifts,” he said. Dangra added that the PDP will likely be adjusted towards renewables amidst rising clamour for clean power. “In a bid to maintain grid prices, governments have explored whether there is an appetite for building fossil fuel plants. But it seems that increasing concerns for environmental,


Country report: Thailand Thailand’s renewable power generation capacity composition

Tony Segadelli

Source: Linklaters, Energy Development and Efficiency, Ministry of Energy

social, and governance (ESG) factors make this a fairly challenging proposition,” he noted. Retaining its renewables dominance Regardless of the result of the Thai elections, experts predicted that Thailand will maintain its edge when it comes to renewable energy development. Changes in the PDP will benefit specific sectors, including solar and hydroelectric power and even biomass. Whilst coal will remain dominant in the country’s power mix in the near future, experts noted that renewables will continue to gain ground in the coming years. Yeap, for instance, noted that the future will therefore likely be a mix of gas and renewables. “Whilst there are suggestions of a greater focus on coal in order to better balance the energy mix, the strong not-in-my-backyard sentiments of local communities will likely limit the ability to commission large coal plants,” he explained. “Thailand can be considered a pioneer in the region in terms of formulating a clear renewables agenda. It leads the region in terms of solar and, despite geographical and meteorological constraints, is making good progress with wind.” Segadelli agreed, stating that “Going forward combined cycle power plant (CCGT), solar and to a lesser extent, biomass will be the key growth areas. The entire bureaucracy around the power sector has been a regional leader for decades and I don’t see this changing in the foreseeable future.” As an example, Segadelli noted that Gulf Energy is in the process of constructing effectively all of the IPP CCGT projects, with EGAT being the other major constructor. Hence, it is unlikely that there will be another IPP/ SPP round for at least five years. Meanwhile, solar plants have recently been constructed on a 5MW-per-site basis, although it is unclear when this process will restart. Biomass projects are currently being developed in the SPP

sector (10-90MW range), but there have been no power purchase agreements (PPA) awarded so far this year and it is uncertain when this will resume. Hydropower is effectively all built out (although cross-border deals are still possible) and wind resources are both limited and often restricted. “Thailand has long been a promoter of renewables. However, baseload and load following will remain largely the preserve of natural gas plants. Once the current building plans by Gulf Power are completed it is likely that new CCGT plants will be built by EGAT. The demand/supply situation in the south means that additional generation is required in that region. In terms of total capacity installed, natural gas plants will remain a key driver however in terms of the actual number of projects solar will be the larger over the long term (although both are likely to be limited over the short to medium term),” Segadelli explained. “We expect the new PDP to readjust towards renewables. I think there is an acknowledgement that increasingly, probably renewables are what gets to be done in Thailand,” Dangra added. “In Thailand, the solar irradiation patterns, generally speaking, have been fairly predictable. The operating performance of solar plants have been close to P50, which means that at least in terms of resource, solar has performed well in Thailand.” Connecting ASEAN Thailand is crucial to cross-country energy partnerships in the ASEAN. Thanks to its prime location at the heart of the region, Thailand is the logical electricity transmission hub for the region as it shares land borders with Cambodia, Laos, Malaysia, and Myanmar. In terms of infrastructure, Thailand boasts a comparatively modern grid network to support cross-country deals. According to GE, Thailand’s grid, with transmission losses at around 6.11%, is

John Yeap

Abhishek Dangra

three or four times more reliable than the legacy infrastructure installed elsewhere in the greater Mekong region. For instance, when Malaysia and Laos confirmed an Energy Purchase and Wheeling Agreement wherein Laos will generate and sell 100MW of low-carbon hydroelectric power to Malaysia, both countries agreed that the electricity will be distributed from Laos to Malaysia via Thailand’s transmission system. This historic multilateral power trade deal between Laos, Malaysia, and Thailand is expected to be the first of more energy collaborations in the years ahead. Yeap believes that the country has the potential to be the conduit that brings together the tremendous hydroelectric potential of Laos and the increasing power needs in Malaysia and Indonesia. “This will avoid the environmental challenges of building new fossil plants in those countries,” he noted. “Thailand started its IPP solicitation in the early 1990s. It has been successful in ensuring a strong demand from investors, providing a robust legal framework and regulatory certainty,” Yeap added. Weak links Dangra noted that Thailand could continue to explore opportunities in neighbouring countries like Myanmar and Laos as it has done previously. “Though the PDP looks to increase domestic renewable capacity, Thailand has previously engaged in offtaker agreements with neighbouring countries and this could well continue in order to ensure grid stability.” However, Dangra warned that there might not be many companies which will follow RATCH’s footsteps in setting up cross-border hydroelectric power projects. “By nature, the construction of hydropower facilities can bring many environmental and social risks (as seen in Laos dam breakdown), as well as high capital costs.” Further, Segadelli noted that neighbouring countries also have declining power sectors. For instance, Myanmar has not signed a PPA since early 2016, whilst Cambodia has always been a slow market, and Laos is hampered by the lack of cross border opportunities with Thailand. Malaysia also suffers from overcapacity. “After many years of stagnation, the economy has started to grow at over 4% for the last couple of years and this is spurred by large infrastructure projects that will be significant power consumers. However, until the reserve margin is significantly brought down, it will be difficult to envision the build-out needed to achieve the country’s goal of 30% renewables,” Segadelli remarked. ASIAN POWER 23


sECTOR REPORT: NUCLEAR

Slow death looms over nuclear projects despite industry push for safety upgrades South Korea’s government stopped 6GW of installations whilst Taiwan firmed up on capping nuclear capacity at 4.45GWe despite opposition, preventing the countries from meeting the 81% global average capacity factor.

W

hen South Korea first unveiled its plan to build two advanced nuclear reactors in the sleepy southern village of Yeongdeok, the project was warmly welcomed by locals who believed that the plant would revitalise the county’s flagging economy. Now, barely seven years after the plan was first tabled, a dramatic shift in public sentiment has pushed the state-run Korea Hydro and Nuclear Power Corporation to scrap the ambitious project. “President Moon Jae-In has pushed for a phase-out of nuclear power and called for a stop to all plans for the construction of new nuclear reactors, a stance that was also adopted by the previous administration,” explained James Su, infrastructure analyst at Fitch Solutions. “Hence, we are unlikely to see progress for the construction of Units VII and VIII of Shin Kori Nuclear Power Plant in Busan and Units I and II of Yeongdeok Nuclear Power Plant in Gyeongsang, which would have added 6GW of capacity to the country’s energy mix.” Empty construction pipelines South Korea’s experience is not unique amongst its East Asian neighbours, such as Japan and Taiwan. Most countries are close to the global average capacity factor of 81%, according to data from the World Nuclear Association. The two exceptions are Taiwan and South Korea, where output is being constrained by energy policies in those countries. The nuclear sector’s woes are keenly felt in Taiwan, Asia’s fifth largest nuclear power market in terms of installed capacity at 4,448MWe. “There are currently no new projects in the pipeline.

Shin-Wolsong Nuclear Power Plant, which supplies 5% of South Korea’s electricity 24 ASIAN POWER

We are unlikely to see progress for the construction of Units VII and VIII of Shin Kori Nuclear Power Plant in Busan and Units I and II of Yeongdeok Nuclear Power Plant in Gyeongsang, which would have added 6GW of capacity.

Similar to South Korea, the incumbent Democratic Progressive Party has pushed for a nuclear free energy policy following their victory in the 2016 elections,” Su highlighted. Unlike South Korea, however, the government’s stance has been met with opposition, as a referendum held in November 2018 revealed strong public support for usage of nuclear power in the country. According to Jonathan Cobb, senior communication manager, World Nuclear Association, the results of the referendum show that there is serious public concern about pollution from coal. “Over 76% voted in a referendum opposing an expansion of coal capacity, against the government policy. In addition there have been problems with power cuts due to a lack of generating capacity, closing nuclear plants can only exacerbate that problem,” he noted. Su added that whilst the government has since reversed its commitment to phase-out nuclear energy by 2025, the move was likely done only to uphold the results of the referendum and to appease the electorate ahead of the 2020 General Elections. “We believe that new nuclear projects will be difficult to implement in such a political environment and we remain negative on outlook of Taiwan’s nuclear power construction sector,” Su said. There are also a number of new nuclear facilities developed in the region that use third generation reactor technology, which improves safety but also adds complexity and cost to nuclear plant development. Third generation reactors that are operational or under construction include the APR-1400 (South Korea), CPR1000 (China), ABWR (Japan), and HPR-1000 (China). In Japan, Fukushima’s long shadow will dampen the industry’s


SECTOR repor: NUCLEAR production. China is currently Asia’s leading nuclear power producer with 42.82GWe of capacity. Fitch’s Power Team forecasted that the country will add another 62GW of nuclear generating capacity between 2019 and 2028. Data further showed that China is home to the largest pipeline of nuclear projects in the region, with 10 projects under planning and 16 projects at the tender or construction phases. “We observe an uptick in project activity, with the signing of a contract between state-owned China National Nuclear Corporation (CNNC) and Atomstroyexport, the engineering division of Rosatom, in November 2018 for the construction of units 7 and 8 of the Tianwan Plant in Jiangsu,” Su explained.

Nuclear-related expenditures by Japan’s power utilities

Source: Japan Atomic Industrial Forum Nuclear Industry Survey 2017-2018

prospects for years to come. Daniel Brenden, senior power & renewables analyst at Fitch Solutions, noted that there are various structural hurdles which will prevent the sector’s recovery in the near future, including but not limited to the lack of political support and the dearth of manpower. Stifled by tragedy “First of all, the government will have to gain popular support for their plan to continue to rely on nuclear power over the coming decades, that would make the nuclear sector more attractive to people choosing their career path. As things stand, nuclear appears to face a structural decline in Japan, and with that perception, it will be hard to boost manpower,” he said. A fact-finding survey of Japan’s nuclear industry released by the Japan Atomic Industrial Forum (JAIF) revealed that only 53 people were added to Japan’s electric power utilities in FY20162017, marking the continued flat growth in hiring. About 91% of industry players also consistently cited a decline in on-the-job training opportunities in FY2014-2018. Brenden added that whilst greenfield projects will not gain much traction in Japan, Japanese utilities will continue to invest in idled reactors in order to meet safety requirements. “Nuclear power has had the firm support of the Abe government since Fukushima, seeing as they have realized how important it is to the Japanese utilities and keeping the electricity price low.” Since the closure of the plants, electricity costs have skyrocketed and carbon emissions have surged. JAIF’s report noted that nuclear-related expenditures by Japan’s power utilities ballooned by $178.9m to $17.3b in FY2017. A high ratio of industry players also pointed to reduced sales (56%) and difficulties in maintaining and continuing their technological capabilities (58%) as adverse effects of plant shutdowns. Despite the headwinds facing their industry, Japan’s nuclear energy operators remain undaunted. “We, the nuclear operators, will be strong in our resolve to carve out the future for nuclear energy, and will strengthen our nuclear-related human resources development and technology development efforts and work tirelessly in pursuing safety and economic efficiency to prepare for the future construction of new, additional units and replacements,” said a spokesperson for the Federation of Electric Power Companies (Japan). “It is very important that Japan, which has a scarce amount of energy resources and is unable to form electrical networks with neighbouring countries, realise a balanced energy mix that is not overly dependent on a particular power or fuel source,” the spokesperson urged. “At any rate, we believe it is essential that nuclear power be utilised as an important baseload energy source into the future on the principle that safety can be secured.” Whilst other countries are moving away from nuclear power, China and India are enthusiastically embracing nuclear energy

James Su

Jonathan Cobb

China unfazed “In addition, we note that China has been actively investing in the research and development of cleaner, more efficient nuclear power production, and has plans to develop the world’s first large-scale thorium-powered molten-salt reactors. Along with its long-term goal in reducing greenhouse gas emissions, as well as to reduce its dependency on coal, these factors present upside risk to China’s nuclear sector which we believe, indicate positive long-term growth prospects for the Chinese nuclear power construction sector,” he noted. CNNC is also expected to spend $12b over the next five years in the procurement of raw materials, machinery and engineering. Supply contracts and service agreements have also been signed with Rosatom and Westinghouse Electric. Cobb noted that key to China’s ambitions of becoming a significant player in the global nuclear energy technology business are the export reactors, focusing on the HPR1000 and CAP1400 reactor designs. “The first two overseas HPR1000 reactors are under construction in Pakistan. In the UK, CGN is first acting as a partner in the construction of EPR reactors at Hinkley Point and Sizewell, with plans to follow this with construction of HPR1000 reactors at a third site at Bradwell. China has also signed agreements for potential future cooperation with countries such as Kenya, Egypt, Sudan and Kazakhstan and exploring potential projects in countries such as Romania and Argentina,” Cobb said. “One development to watch out for will be the startup this year of the first of the four HP1000 reactors currently under construction in China. This will most likely be the Fuqing 5 unit in Fujian province. The successful startup of the first reactor will give potential overseas customers confidence. It is also expected that authorisation will be given this year for construction of the first CAP1400 in China, which will act as the demonstration plant of that design,” he added. Further, the Belt and Road Initiative has created opportunities

Top nuclear generation by reactor (2017)

Source: World Nuclear Association

ASIAN POWER 25


sECTOR REPORT: NUCLEAR solar and wind, experts are cautious on their ability to supply Asia’s burgeoning power demand. “Countries in Asia should be looking to increase the amount of generation from both renewables and nuclear if they want to achieve a long-term sustainable energy mix,” Cobb noted. In Japan, for instance, high costs mean that the country will have no choice but to turn to LNG and coal in the absence of nuclear power. According to Cobb, Japan has tried to boost renewables, but wind and solar capacity have proven very expensive in Japan to date, and simply cannot offset the importance of imported LNG and coal.

Top operable reactor net capacity by country

Source: World Nuclear Association

for Chinese equipment exporters, including nuclear capacity. “However, according to our proprietary key projects database, a majority of technology exports has been in the form of coal and hydropower capacity – totaling 130GW of capacity,” Brenden said. “In comparison, we only have about 2.2GW of nuclear projects mapped under the BRI initiative. Whilst there still will be appetite for nuclear capacity in BRI markets, we believe only a handful of projects will progress, due to the high cost and complexity of developing nuclear power capacity.” India poised for growth Although not on the same scale as China, Su believed that India will be another relative bright spot for nuclear energy in the region as the government pushes for higher capacity in an attempt to reduce air pollution. “With eight reactors currently being under construction, we note positive progress in the short term. India will have the second largest nuclear sector in Asia, behind China, over the coming decade,” Su said. The Indian government had initially proposed to add 63GW of nuclear power capacity by 2032, but this figure was revised down to 22GW in 2018. Although the country has scaled back on its nuclear power expansion plans, there has been positive progress for several projects in the country. Fitch’s data indicate that two projects have reached financial closure and eight others are currently under construction. In March 2018, an agreement was signed between Nuclear Power Corporation of India Ltd (NPCIL) and Electricite de France (EDF) to develop the 9.9GW Jaitapur Nuclear Power Plant Project in Maharashtra. In addition, the government granted approval to develop 12 nuclear power reactors. Additionally, India has signed an agreement with the US to build six nuclear power plants in the country. Arkapal Sil, power analyst at data analytics firm GlobalData, commented, “Collaboration with the US in building nuclear plants can be seen as India’s tactics to avoid overdependence on Russia for its nuclear industry and have a diversified technology portfolio. On the hindsight the move also indicates an indirect check on the increasing Chinese influence in the South Asian energy market, especially after the Gwadar port in Pakistan became operational in early 2018.” “Despite substantial plans, we believe high costs and difficult implementation will weigh on India’s ambitious nuclear plans, posing a downside risk to the sector. We currently forecast the country to add only 4GW of nuclear energy over a 10-year period, lending support to our positive but cautious expectations of India’s nuclear power construction sector,” Su cautioned. Whilst more countries are turning to other renewables such as 26 ASIAN POWER

Daniel Brenden

Arkapal Sil

The high cost of ditching nuclear “Nuclear remains Japan’s go-to sector to reduce fossil fuel imports, reduce electricity prices and curb carbon emissions,” Brenden noted, adding that whilst renewable energy will be the cheapest resource in Asia over the coming decade, the sector will not generate enough electricity to meet surging power demand in the region. Fitch’s forecasts showed that total non-hydropower renewables capacity in the Asian region is expected to grow by more than 140% between end-2018 and 2028, with the solar sector set to emerge as the main driver of this growth. However, despite rapid renewables growth, the sector is only expected to grow its share in the Asian power generation mix from 8% in 2018 to 14% by 2028, given the low capacity factors of wind and solar power. “We maintain that a number of key Asian power markets remaining heavily reliant on coal-fired power generation to meet rapidly rising power demand, with renewable energy set to only play a relatively marginal role as a source of power mix diversification across the region. We do expect nuclear power to hold some appeal, as a cleaner source of baseload power generation,” Brenden said. “That said, increasingly stringent safety requirements makes it an unpalatable option in a number of emerging markets, whilst we also stress that cost increases tied to safety upgrades has curbed some of the nuclear growth boom in China as well.” On the issue of safety, Cobb highlighted that nuclear reactors in Asian countries have shown very good levels of safety. “They have also shown improving operational performance, with capacity factors at least the equal of those achieved worldwide. Many plants in Asia are achieving high capacity factors because they are very well run. Nuclear companies in Asia have developed a lot of experience in both operating and constructing nuclear power plants,” he said. Keeping options open “I think nuclear power will remain important to energyhungry power markets over the coming decade, simply because it is a cleaner source of baseload power generation. Whilst wind and solar power are cheap and grow rapidly, they simply aren’t growing fast enough to meet power demand,” Brenden noted. “This is why coal remains the main reliable and cheap baseload resource across the region. However, as pollution concerns grow in propensity, I think there will be a growing understanding that nuclear power still has a role to play in meeting power demand.” “However, this would be contingent on continued cost deflation and growing acceptance of the technology. As these two challenges will remain very substantial, we maintain that coal power will continue to grow in Asia,” Brenden added. Cobb stressed that nuclear energy is a cost-effective form of power generation when considering the levelised cost of electricity. “But it is often the case that electricity markets are not supporting investment in large-scale projects such as new nuclear plants and reforms are needed to address these failings,” he said.


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OPINION

SIMON NICHOLAS

Pakistan’s energy pathway under the spotlight

P

akistan is expanding its electricity generation capability with Chinese financed and built power plants. China’s role in Pakistan’s infrastructure roll-out, known as the China-Pakistan Economic Corridor (CPEC) is a key part of its Belt and Road Initiative. Part of CPEC’s significance to China surrounds the building of transport links from China, through Pakistan to the Port of Gwadar – close to the Persian Gulf. This gives China an alternative trade route that avoids the congested sea lanes around Southeast Asia. In any potential future conflict, these sea routes could easily be cut off, halting fossil fuel imports into China – a strategic issue for the Chinese government that CPEC is intended to partially alleviate. CPEC also involves a build-out of China-backed power plants, helping to solve overcapacity in China as opportunities for such power projects dry up domestically. Pakistan, clearly, is seen as a significant growth destination within the seaborne thermal coal trade as other markets begin to dry up. The International Energy Agency’s (IEA) recently launched MediumTerm Coal Market Report highlights the role Pakistan is expected to play in propping up declining demand. However, recent events in Pakistan are casting some doubt on this role. According to the IEA’s Coal Report, seaborne exports of thermal coal will peak in 2019 and then decline as import demand increases in South and Southeast Asia will be insufficient to offset declines in China and Europe. The IEA foresees China’s thermal coal imports declining 38 million tonnes coal equivalent (Mtce) by 2023 as the nation focuses on domestic coal, gas and renewables. Imports into Europe will decline 28Mtce and Japanese imports will decline by 6Mtce according to the IEA. These declines will be partially offset by an increase in India’s thermal coal imports (up 16Mtce by 2023). This is despite the Indian government’s repeatedly stated policy of reducing thermal coal imports in the longer term. For India, reducing coal imports is as much an energy security issue as an economic one. India is amongst the nations that are most dependent on fossil fuel imports, which is as much a strategic issue for India as it is for China. Aside from the doubtful nature of the IEA’s thermal coal import forecast for India, it is Southeast Asia, Pakistan and Bangladesh where the IEA sees the biggest upside for the seaborne thermal coal market, forecasting a demand increase of 54Mtce across those countries. IEEFA has previously cast doubt on Bangladesh’s role in supporting seaborne coal demand. Bangladesh’s plans for a fleet of coal-fired power stations are badly delayed, allowing time for renewable energy to take a foothold in the nation as the technology gets ever cheaper. Concerns over fossil fuel imports Now there appears to be growing concern in Pakistan about the negative impacts of relying on imported coal. With the Pakistan rupee significantly weakened, fossil fuel imports are having an even greater negative impact on the nation’s current account balance and foreign currency reserves. In December 2018, the Energy Minister of Punjab province announced an increased commitment to renewable energy whilst also stating that the boiler at the recently built Sahiwal coal-fired power plant would be replaced to allow it to run on domestic rather than imported coal. Then in January 2019, it was confirmed that the 1,320MW Rahim Yar Khan imported coalfired power proposal had been shelved over concerns about increased fossil fuel imports and stranding power assets through over-build of capacity. With Pakistan’s economic growth stagnating, there is the possibility of slower-than-expected electricity demand growth going forward and increased chance of excess power capacity standing idle. Relying too much 28 ASIAN POWER

simon nicholas Energy Finance Analyst, IEEFA

Pakistan power generation mix

Source: Pakistan 11th Five Year Plan

on fossil fuel imports would place further economic pressure on the nation, possibly contributing to muted growth. With Pakistan apparently alert to the problems of relying too much on fuel imports, there is reportedly a focus on extending the nation’s hydropower build out. A common belief in Pakistan is that extending hydropower is doubly important as the reservoirs behind large dams can help alleviate the nation’s water problems. A recent report from the World Bank challenges this view. According to the report’s author, “new dams can help improve water security but will not address the most pressing water problems that Pakistan faces.” The huge expense and long construction times mean that hydro dams are not the best way forward for Pakistan’s power or water future. This is especially true given large hydropower projects tenancy to run significantly over-budget and over-schedule. However, a faster, cheaper and more energy-secure alternative is available. Sindh province has led Pakistan’s first forays into wind and solar power. Its leadership was confirmed by the January 2019 announcement of $100m of World Bank funding for further solar power developments. With wind and solar now the cheapest sources of new power generation in Pakistan, renewable energy should gain increased prominence in the nation’s power plans. It is reported that the government is working on a new clean energy policy which will target a significant increase in renewable energy’s share of the energy mix from 5% to 25% within six years, and reaching 30% by 2030. IEEFA would welcome such a policy as a very positive development that would have significant economic and energy security benefits for the country. In December 2018, IEEFA published an analysis of Pakistan’s electricity market, which found that reaching a 30% share of electricity generation from renewables by 2030 is highly achievable. The rise of renewable energy in Pakistan will lead to even more questions being asked about the wisdom and need for significant coal imports. Meanwhile, Pakistan’s renewables gain would be coal exporters’ loss. The seaborne thermal coal trade is relying on nations like Pakistan to limit market decline to a moderate level. The ongoing cost reductions of renewable energy combined with the technology’s economic and energy security benefits are likely to mean that the IEA’s forecast for a small decline in the seaborne thermal coal trade from 2019 is too optimistic.


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OPINION JOHN YEAP, NICK WANG, JAMES HARRIS

Taiwan offshore wind series part 1 – Allocation of offshore windfarms in Taiwan

I

n the promotion of offshore wind power, the Government has adopted a three-stage development plan of 1) Demonstration, 2) Zones of Potentials, and 3) Zonal Development, and prioritised shallow water over deep water. The initial target was an accumulated capacity is 520MW by 2020 and 3GW by 2025. In Stage 1 (Demonstration), the Ministry of Economic Affairs (MOEA) promulgated the “Demonstration Incentive Program for Offshore Wind” on 3 July 2012. The Government selected three projects, two from the private sector, namely Fuhai with 120MW and Formosa 1 with 128MW, and a project from the state-owned company Taipower with 110MW. In Stage 2 (Zone of Potentials), the MOEA promulgated “Directions of Zone Application for Planning” on 2 July 2015, along with 36 Zones of Potentials for reference of the developers. In June 2017, the “4 Years Wind Power Promotion Plan” was passed, which outlined the Government’s plan to develop wind power for the next four years, and created the single service window, so that the policy of “Nuclear-free Homeland by 2025” can be achieved. However, the referendum on 24 November 2018 repealed paragraph 1 Article 95 of the Electricity Act, hence removed the legal basis for requiring the Government to achieve a nuclear-free Taiwan by 2025. Under the promotion policy, 22 applications were received, with a total planned capacity of 10GW, of which domestic and foreign developers account for approximately half each. In January 2018, the offshore wind energy target was increased to 5.5GW by 2025. It was allocated through two different procedures. An initial 3.5GW, of which 0.5GW is to be completed by 2020 and 3GW is to be completed by 2025, was allocated through the “Selection Procedure”, and the remaining 2GW, to be commissioned by 2025, was allocated through the “Competitive Bidding Procedure”. Phase 1: Allocation by selection criteria On 30 April 2018, the MOEA allocated a total of 3,836MW of grid connection capacity to 11 offshore wind farms proposed by seven sponsors. Out of the 3,836MW, a total of 738MW is to be completed by 2020, which comprise 360MW allocated to wpd and 378MW allocated to Swancor. The remaining 3,098MW is to be completed between 2021 and 2025, with wpd being allocated 698MW; Ørsted being allocated two projects totalling 900MW; CIP being allocated two projects totalling 600MW; China Steel Corporation being allocated one project with 300MW; Taipower Wind projects allocated with capacity

Source: Pinsent Masons

30 ASIAN POWER

John Yeap Partner, Pinsent Masons

Nick Wang Associate, Pinsent Masons

James Harris Partner, Pinsent Masons

being allocated one project with 300MW; and Northland Power and YuShan Energy being allocated one project with 300MW. Local content consideration was an important factor in the selection of the winning projects for the 3,836MW allocated pursuant to the Selection Criteria. Phase 2: Allocation by competitive bidding On 22 June 2018, 1,664MW was further allocated through competitive bidding. There was no local content requirement for this round of bidding, the main considering factor was the tariff; and the bidder with the lowest offtake tariff wins. Five sponsors took part in the bidding, namely 1) Northland Power and YuShan Energy, 2) Swancor and Macquarie, 3) Ørsted, 4) Copenhagen Infrastructure Fund (CIP), and 5) Taipower. Two sponsors, namely Northland Power & YuShan Energy and Ørsted, and four windfarms were selected, with bidding price ranged from $0.072-$0.083/kWh. Together with the 3,836MW allocated earlier, 5.5GW was allocated. Ten windfarms by seven sponsors are scheduled to be completed by 2025, out of the 18 windfarms with a combined capacity of 10.5GW that passed the Environment Impact Assessments conducted at the end of 2017. In Stage 3 (Zonal Development), the undeveloped offshore windfarms in Taiwan’s territorial waters will be developed into blocks and integrated into the overall strategy. Also, the Government will be driving the development of the local supply chain, including key components of wind turbines, towers, underwater foundations, submarine cables, marine engineering shipbuilding, and so on, to improve the offshore wind power industry supply chain in Taiwan. Feed-in tariff The offshore wind feed-in-tariff (FiT) for 2018 is $0.1895/kWh, and is applicable to windfarms that have obtained the Establishment Permit and signed PPA with Taipower before the end of 2018. Six projects by Ørsted, CIP, China Steel Corporation, and Northland Power & YuShan Energy, in the Changhua area, did not obtain the consent from the local government, which is required to obtain the Establishment Permit. Thus, they were unable to sign a PPA with Taipower before the end of 2018. On 30 January 2019, after a few rounds of consultations, the MOEA announced that the applicable FiT for 2019 for offshore wind PPAs will be an average of $0.1788/kWh for 20 years, with the first 10 years being $0.2036/kWh and the remaining 10 years being $0.1343/kWh. The FiT for 2019 equates to a 5.7% reduction from the FiT for 2018. Future opportunities On 15 January 2019, the BoE held a consultation meeting with industry players and experts to discuss the plan for Stage 3. BoE currently plans to release the 4.5GW capacity across eight windfarms that has passed the EIA but has not been allocated, and incorporate certain industry-related benefits into the selection criteria. It is expected that after completing a comprehensive consultation with interested parties, the mechanism for promotion and the policies for development for the blocks will be announced in the first quarter of this year. The phase 3 allocation will utilise the same competitive bidding method as phase 2, whereby the bidder with the lowest tariff wins. In the first two phases of allocations, water depth of the windfarms was less than 50 metres, but in phase 3, windfarms with water depth of 50 metres or more will be available for bidding. The scheduled completion date for the projects from the phase 3 allocation will be after 2026.


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OPINION

gautam jindal

Retailer exit from Singapore’s electricity market: No need for warning bells

E

arlier in January, electricity retailer Red Dot Power (RDP) announced its exit from the electricity market, citing a “financial challenging period.” RDP was one of the 14 electricity retailers that participated in the pilot launch of the Open Electricity Market (OEM) in 2018. Consumers are now questioning whether it is feasible for so many retailers to survive in a small yet highly competitive market like the OEM, and whether they should even bother to switch from SP Group if their electricity providers are on naturally shaky ground. Liberalisation for many years The phrase “Open Electricity Market” (OEM) is commonly associated with the final stage of the electricity sector liberalisation in Singapore, where all consumers can choose amongst competing retailers to enjoy lower electricity prices and a wider range of plans, regardless of their electricity consumption levels. Only the residential electricity market was left to be fully liberalised, which is what happened last November with the launch of the OEM. Since the opening of Singapore’s retail electricity market in 2001, the market has been dominated by “Gentailers”, which is a term used for retailers who share a parent organisation with a generation company. RDP was one of the first “independent retailers” to enter the market when it received its retail licence in 2014. It also had the largest market share at 0.8% as of March last year, where independent retailers had a combined share of about 2% of electricity demand. It added about 120 households to its clientele in the Jurong soft launch of the OEM. RDP’s decision to exit the retail market altogether means that it is giving up its entire consumer base. Given that households have a much smaller electricity consumption as compared with commercial and industrial consumers, RDP was probably unable to develop a successful business case in the overall retail market, as opposed to speculation that the design of the OEM or the sudden competition for residential consumers led to their exit. It is possible that RDP may have banked on achieving better profitability after entry into the residential market but did not find the success that it envisaged. It is also plausible that RDP wants to focus its energy on other initiatives. The company is currently leading a consortium to install and operate one of the two large batteries being set up under the government’s energy storage test bed programme. It is also one of the major players in Singapore’s electric vehicles charging station business, with a stated aim to setup 50 such stations across the city by this year. Lessons from the East and West Whatever the case, RDP’s exit means that we need to take a deeper look at the obvious questions on everyone’s mind: Can the 13 active electricity retailers (and the 18 others with electricity retail licenses) survive for the long term in the market? Or will the electricity market go the way of the ride-hailing sector, with consumers ending up with an oligopolistic situation dominated by one or two players? Most importantly, will there be an outcome that is bad for consumers? International examples offer an instructive guide on how retail electricity markets tend to mature. Australia, New Zealand, and the state of Texas have had retail electricity competition for a number of years. All three jurisdictions, despite their differences, have stabilised at about 30-40 retailers operating in their electricity market. More importantly, in all three markets, the incumbent gentailers continue to hold on to the lion’s share of their respective markets since the markets’ inception. Only in New Zealand have independent retailers managed to claw 32 ASIAN POWER

gautam jindal Research Associate, National University of Singapore

Market share for electricity retail based on sales (%) in 2017

Source: Energy Market Authority

away 8% of the market from the incumbents. In the case of Australia and Texas, market share lost by incumbents has been grabbed by other smaller gentailers whilst independent retailers continue to maintain a combined share of about 1-2%. Yet, this is in no way a determinant for whether these markets are considered successful. In Texas, 92% of all consumers have exercised their right to choose an electricity provider at least once. Average fixed-price contract tariffs have reduced as compared to tariffs in 2001, even if these were not adjusted for inflation, making it a highly successful market. However, consumers continue to stick with trusted and financially stable retailers despite the smaller retailers offering even lower prices. Over half have never bothered to use online electricity–rate comparison tools. On the other hand, Australia’s 35 retailers now offer more than 3,000 different plans to consumers. Experts suggest that this has been done to confuse consumers and lock them into unfavourable tariff plans. As a result, the market has seen a significant decline in the levels of residential and small business consumer confidence. Gentailers vs. independent retailers The fact remains that independent retailers are at a disadvantage as compared to gentailers because they do not have access to their own generation assets through which they can hedge against price fluctuations in the wholesale market, whilst offering fixed-price contracts to their consumers. Instead, they are either dependent on hedging contracts with generators who will typically offer them worse terms than those offered to their own retail arms. Indeed, this was raised by RDP to the Energy Market Company. Alternatively, independent retailers can procure electricity futures, which make up legally binding contracts for the purchase of fixed quantities of electricity at a fixed price at a point of time in the future. Singapore launched an electricity futures market in 2015 with precisely this objective, and the growing trade volume in the market suggests that it will play a major role in facilitating the sale and purchase of electricity amongst participants at transparent prices. Whilst Red Dot Power may have decided to pack their bags in this market, there are 30 other retail license holders listed on the EMA’s website. Out of these, only 13 are currently offering plans in the OEM. One can hope that as the remaining players throw their hats in the ring, they are able to utilise the futures market and can manage to differentiate themselves by providing innovative offerings.


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