ISSUE 79 | DISPLAY TO 28 FEBRUARY 2017 | www.asian-power.com | A Charlton Media Group publication
MALAYSIA’S NUCLEAR PAUSE MALAYSIA NUCLEAR POWER CORPORATION’S CEO DR MOHD ZAMZAM JAAFAR ADMITS MALAYSIA NEEDS MORE TIME TO TWEAK ITS POLICIES
THE DAWN OF ENERGY
WILL JAPAN SUCCEED IN ITS
NUCLEAR RESTARTS? DEVELOPERS TURN TO
FLOATING SOLAR PLATFORMS
IS COAL STILL KING IN
1 ASIAN POWER
FROM THE EDITOR In 2017’s first issue, Asian Power delved into the Asian geothermal sector and why its potential is not maximised despite improved regulations across countries. Capacity growth has slowed as governments and developers face significant challenges, including high exploration costs and strong public opposition. Take Japan, for instance, whose biggest hurdle in maximising geothermal energy capacity are hot spring or “onsen” business operators.
Publisher & EDITOR-IN-CHIEF Tim Charlton production editor Karen Lou Mesina Graphic Artist Elizabeth Indoy
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We also tackled the region’s solar star India as it is starting to show signs that it may be suffering from solar challenges it has inflicted on itself. Upon channel checks with experts, we found out that the government is rushing to auction projects in solar parks even before completing land acquisition formalities. Where will this haste take India? Asian Power is amongst the first news organisations who broke the news on Vietnam saying a final “no” to nuclear energy projects. We talked to experts and asked if this decision is a leap backwards for the resource-scarce country. Find out what their answers are. In light of this, we also talked with Malaysian Nuclear Power Corporation’s CEO Dr Mohd Zamzam Jaafar to see where Malaysia stands in the sector considering the recent circumstance in Vietnam. We are also formally launching the 2017 Asian Power Utility Forum, and we will be happy to have you on board should you be interested to be a speaker or an attendee. Further details are inside the magazine. Start flipping the pages and enjoy!
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ASIAN POWER 1
SECTOR REPORT: GEOTHERMAL Asia’s geothermal energy is not gaining steam
FIRST 06 The era of Chinese EPCs 07 Developers are turning to floating solar and wind platforms 08 Japanese nuclear restarts face intensified opposition
COUNTRY REPORT: INDIA Is India hurting from selfinflicted solar burn?
COUNTRY REPORT: THAILAND IS THAILAND ENTERING ANOTHER SOLAR GOLD RUSH?
ANALYSIS 26 Vietnam’s nuclear implosion: Is the final decision a giant leap backwards?
28 India’s top solar states are still in need of regulatory support
10 Asia’s large tidal energy potential remains untapped despite high investor interest
VENDOR VIEW OPINION
24 Why are power plants the new targets of cyberattacks?
30 More natural gas usage is forecast for China 30 Is solar power really cheaper than wind power?
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The Asian Power Awards annually recognizes ground-breaking projects and trailblazing initiatives in the power sector in Asia. The PLTDG Pesanggaran Bali Power Plant is powered by twelve Wärtsilä 50DF dual-fuel engines, and the project was executed in a consortium with Wärtsilä as the lead partner. The award is a reaffirmation of Wärtsilä’s capability to deliver high quality, flexible and efficient dual-fuel power plants according to customer requirements.
News from asian-power.com Daily news from Asia most read
Thai firm EGCO acquires 20% stake in 2 Chevron-owned geothermal plants EGCO’s latest acquisition of a 20% stake in two of Chevron’s geothermal plants in Indonesia impressed analysts as it is a move in line with its intention to expand power capacity. UOB KayHian said EGCO announced the acquisition of a 20.07% stake in Cheveron’s two geothermal power plants in Indonesia.
Kyushu Electric may not lower retail prices amidst deregulation: Moody’s The company’s customer attrition rate since the retail deregulation in April 2016 has been moderate relative to some of the other nuclear-focussed utilities. As a result, the company may not lower its prices even in the face of deregulation, Moody’s said.
Malaysia’s power consumption won’t be jumping 4-5%: analyst Electricity demand for Peninsular Malaysia peaked in Apr 16 at 17,788MW as a result of extremely hot weather conditions arising from El Niño. “Thereafter, demand normalised to 2.7% yoy growth in 4Q16 (FY16: +4% yoy). A 1% change in electricity demand growth will swing TNB’s FY17 net profit by 2.3%,” UOB KayHian said.
Taipower’s 70 years of monopoly in Taiwan’s power sector just ended Prior to the law changes in Taiwan, green energy suppliers sold electricity only to Taipower. Now, other suppliers of traditional energy will also be allowed to sell electricity directly to consumers, effectively ending Taipower’s 70 years of sector monopoly.
Here are 3 reasons why China’s recent tariff cuts is good news Citi reported that NDRC issued a notice on its website about tariff cuts for on-shore wind and solar farms. It also said there’ll be no tariff cuts for off-shore wind farms and distributed solar projects. “We are positive on this notice because tariff cuts of most onshore wind farms and solar farms are less than the proposed ones,” it said.
Japan’s solar developers rush to finish approved projects Japan’s transition to an auctions-based system for procuring utility-scale solar projects will ultimately slow growth over the next decade, as the country looks to regulate growth in order to curb costs and ensure grid integration of new intermittent power supplies.
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FIRST the main benefits of integrating ESS is that it allows greater control of output from renewable power plants, albeit it will also increase the total investment cost of projects. The ESS can be used to store energy generation from solar PV plants during daytime and inject such storage energy to the distribution system when peak demand occurs during night time.
THE ERA OF CHINESE EPC CHINA
When Chinese company Xidian Holdings, together with a Singaporebased consortium, signed a deal to invest $500m to build a 232MW wind and solar project in the Philippines, the next question was whether a Chinese engineering, procurement, and construction (EPC) contract will be attached to the project. It is no secret that Chinese EPC companies are starting to swarm the renewable market in Asia with their promise of reduced costs whilst maintaining high quality. But some experts warn that the risks for a bad outcome are also higher than normal when companies partner with Chinese EPC firms without fully understanding the unique system in which the latter operate. “Without question, the potential exists to capture the opportunity of low cost, high quality projects with the potential of attractive financing,” says Simon Parker, CEO of DP CleanTech, China. Rigid system “The system is not easily flexible. Therefore, it is essential to understand how, from the outset, the Chinese EPC will be approaching the project and to be able to understand what is achievable within the established ecosystem and what is not,” he adds. Parker reckons that project managers that decide to partner with a Chinese EPC company must invest a lot of time overseeing and participating in the early stages of the project. This helps discover and reconcile the different approaches that the Chinese EPC company might take during the project duration. “Given the aggressive pricing at the outset, loss prevention can rapidly become a major overarching objective,” he says. “Such a change in emphasis can be very rapid and have adverse consequences for the project.” The thin margins of Chinese EPC contracts also leave little room for aftersales support, potentially becoming a major issue if not understood at the outset. 6 ASIAN POWER
Asia charges up energy storage demand
Asia needs better energy storage systems
s Asia builds up its renewable energy capacity, the need for installing energy storage systems (ESS) is also becoming more compelling. Countries that are scaling up their solar rooftop programmes and attempting to connect farflung regions to the power grids are starting to appreciate the boons of an integrated ESS. “Storage is becoming an increasingly important tool for integrating a rising share of variable renewable energy — including solar photovoltaic (PV) — into existing power systems,” says IRENA Research. “In the future, storage will probably play a major role in providing energy for island systems and for access in remote areas of the developing world, particularly when combined with solar PV.” In Asia Pacific, some countries — namely Japan, South Korea, China, and Australia — have started to integrate ESS with solar PV and wind power plants to better control power output fluctuations, says Natthida Jongsuwanwattana, renewable energy engineer, Mott MacDonald. Among these countries that have begun using ESS, Japan has the most experience in deployment for utility-scale generation as part of its effort to stabilise the weakly interconnected Hokkaido regional grid. Jongsuwanwattana reckons one of
ESS for rooftop solar India has also joined the bandwagon in tapping into the potential of ESS, but more to support its rooftop solar programme. AES India, for instance, recently entered a joint partnership to deliver India’s first grid-scale energy storage array to the electric grid. It will be operated by Tata Power Delhi Distribution Limited (Tata PowerDDL). “For a rooftop solar programme to be successful, it is important for the distribution network to integrate it with energy storage solutions to take care of power generation spikes and fluctuations, system stability, reactive power compensation, and grid emergencies,” says Praveer Sinha, CEO and MD, Tata Power-DDL. “Rapidly growing generation capacity will need large-scale deployment of energy storage for transmission decongestion, protecting processing plants from grid frequency, and voltage drop-triggered outages,” notes Rajendra Shrivastav, president of AES India. To ensure the optimisation of the ESS, project managers in Asian countries must seriously consider the associated costs for various battery sizes along with the curtailment loss in monetary units. “Strong collaboration among the grid utility, developers, ESS manufacturers, and all relevant parties is necessary. Developers may have to share data from operating renewable energy power plants to check the influence to grid stability,” she says.
Share of various technologies in global electricity storage system (MW)
Source: IRENA, 2015 pumped storage data from JHA, 2016
FIRST wealth of new renewable energy firms to Singapore. Eight companies are currently involved in the testbed, including large corporations from Japan and Italy.
Dr Carlos Wong
Wider deployment of floating solar PV systems are in the works
Developers are turning to floating solar and wind platforms
hen Singapore unveiled the latest experiment in renewable energy, it was a row of solar panels floating in a major reservoir. The world’s largest floating solar panel testbed located at Tengeh Reservoir will produce 1MW of energy, enough to power 250 four-room basic flats for a year. The Singapore floating testbed is the largest globally in terms of how much power it can produce and the number of systems being tested, and, in a way, represents Asia’s tenacity to try out renewable energy innovations. “Floating photovoltaic systems, those installed over our water bodies, not only help
to overcome land constraints, but also have the potential to reduce evaporative losses from our reservoirs,” says Masagos Zulkifli, Singapore’s Environment and Water Resources Minister. Installing solar panels over water can improve their efficiency due to the beneficial cooling effect and subsequent increase in energy yield as opposed to solar panels that become too hot. Should the pilot prove to be economically viable and environmentally sustainable, authorities have signalled their intent to explore a wider deployment of such floating solar photovoltaic systems. The floating photovoltaic testbed also serves as an entry point to bring in a
Floating platforms for wind “We want them to establish their business hubs in Singapore after which they will then export the know-how from Singapore — from doing the innovation right in Singapore,” says Goh Chee Kiong, executive director for cleantech at the Singapore Economic Development Board. Across Southeast Asia, there are also efforts to improve new floating platforms for wind. For instance, chairman at CBJ Ocean Platform Engineering Corp. Dr Carlos Wong is working on the introduction of a new floating platform that carries multiple wind turbines which will benefit the isolated islands of SEA countries. “The platform is recommended to be in small sizes. It costs much less than the current offshore wind farm due to its simple floating design without piling and the ability to self-orient towards the wind without the electric motor to drive the platform,” says Wong.
Solar energy potential map
Source: SOLAR GIS
the chartist: TAIWAN JOINS VIETNAM IN KICKING OUT NUCLEAR ENERGY Taiwan is the newest Asian country to be amongst those who vowed to be nuclearfree. The government has revised a law to eradicate nuclear power generation in the country come 2025. With the new law in place, the country’s reliance on thermal energy is predicted to rise as it would contribute 95% to total electricity generation by 2026, according to BMI Research. This represents growth in total thermal power output by over 60% between 2015 and 2026. The project pipelines for both coal and gas power plants have strengthened notably, and totals a combined 11GW. “The gradual commissioning of these facilities will result in Taiwan’s increased reliance on thermal imports, and coal and LNG demand will grow accordingly,” it says.
Nuclear gradually phasing out
Source: BMI Research
Thermal power projects to dominate pipeline
Source: BMI Research
ASIAN POWER 7
Coal is still king in renewablesfocussed Asia
Azure Power unveils 150MW solar project in Punjab
hen Asian countries trumpet the potential of renewables, it also comes with an implicit admission: They will still depend heavily on coal if they are to reach their economic growth aspirations in the coming decades.“Whilst Asia is also seeing a shift towards renewable energy and policies to increase renewable energy’s share of the energy mix, Asia is likely to continue to rely substantially on coal-fired plants for the near future,” says Andrew Digges, partner at Ashurst LLP. “The reason for this twin-track approach is primarily due to the very simple reasons of the need to utilise multiple generating sources in order to meet the vast energy needs of a region that includes a number of developing and industrialising countries and the abundance of efficient and cheap coal,” he adds. Even as renewable energy capacity continues to grow as a proportion of the collective, Digges argues that coal will remain an important part of Asia’s energy future. It is only in the longerterm horizon that the heavy shift to renewable generating capacity will be felt, driven by a further declining cost of renewable energy, improvements
Indian solar power producer Azure Power announced that it has commissioned the largest (150MW) solar power project in north India, in the state of Punjab. For this project, Azure Power had signed a solar power implementation agreement with Punjab Energy Development Agency (PEDA) under its Solar Policy Phase III. The 150MW solar power plant represents a portfolio of three projects of 50MW each. The weighted average tariff on these projects is US$ 8.5 cents per kWh.
Countries simply can’t turn away in a snap
in storage technology, and increased global anti-coal sentiments. Can coal be downsized? Enerdata estimates suggest that stronger climate and energy policies can help reduce the emissions from the power sector, a key rallying point for anti-coal advocates. “If aggressive energy policies are implemented, coal-based power generation will be downsized by 40% from 2015 to 2040. Growth in natural gas-based generation will also be restricted under tighter policies,” says Antonio Della Pelle, managing director at Enerdata Singapore. Enerdata also suggest solar and wind will continue to be the leading sources of renewable energy in the Asia Pacific region, with China, India, and possibly, Korea emerging as frontrunners in nuclear. Korea too, could emerge as a nuclear powerhouse as it attempts to move away from coal.
ReNew Power gets $390m loan for 709MW projects
It is only in the longer-term horizon that the heavy shift to renewable generating capacity will be felt.
Japanese nuclear restarts face intensified opposition “Not in my backyard,” say Japanese local communities, as they rally to oppose idle nuclear facilities that have applied to restart in the country due to safety concerns. This has led to a string of court injunctions and wavering support from prefecture governors, making it “highly uncertain” for these nuclear facilities to restart in a timely manner, says Daniel Brenden, renewable energy analyst at BMI Research. He reckons widespread public opposition to nuclear restarts will persist and weigh on a pronounced nuclear power rebound in Japan over the coming decade. Nuclear’s share gets smaller “Nuclear power will contribute a much smaller share of the power mix over the coming decade than it did pre-Fukushima,” says Brenden, predicting nuclear to contribute only 4.7% to total power generation by 2026, down from a previous forecast of 8%. This means coal and gas-fired generation will continue to dominate Japan’s power generation mix until 2026, and the country will rely heavily on imported fossil fuel feedstock, especially considering an anticipated slowdown in renewable energy capacity growth. 8 ASIAN POWER
With the financing from the Asian Development Bank, ReNew Power will develop PV solar power projects with combined capacity of 398MW in Jharkhand and Telangana, and wind power projects with total capacity of 311MW in Andhra Pradesh, Gujarat, Karnataka and Madhya Pradesh. The projects are expected to produce 1,400gWh of electricity.
AC Energy inks $150m wind project in Indonesia
A restart is now highly uncertain
Going online soon Daniel Brenden, BMI Research
Philippines-based AC Energy Holdings signed investment deals with UPC Renewables Indonesia to develop, build, and operate the $150m Sidrap wind project in South Sulawesi, Indonesia. The Sidrap Project is Indonesia’s first utility-scale wind farm project and is expected to generate 75MW. Completion is targetted before end-2017. This is not the first time for UPC Renewables and AC Energy Holdings to work together on a project.
Asia’s large tidal energy potential remains untapped despite high investor interest Korea
hen Korea pondered on how it could diversify its energy supply, it built a tidal power plant that could not only produce electrical energy but also improve water quality for nearby regions. The Sihwa tidal power plant — completed in 2010 and the largest of its kind globally — has since become a model project that highlights the potential of tidal energy in Asia. Tidal energy development, which includes tidal barrage and tidal current turbines, offers a huge potential for sustainable, clean, and reliable energy in other Asian countries like China, the Philippines, Indonesia, India, and Japan. “These renewable energy sources provide unique advantages compared to well-known conventional solutions, such as wind and solar power,” says Evgenia Kontoleontos, research engineer atAndritz Hydro GmbH, Austria. “In particular, the greatest advantage is the predictability of energy production and the reduction of grid instability granting a more reliable production planning for the operators.” Andritz Hydro was a subcontractor to Daewoo Engineering & Construction Co., Ltd., which was the leader of the Korean joint venture and acted as the main contractor for the installation of the Sihwa Tidal power plant. Kontoleontos reckons technological advancements have enabled tidal current turbines
to be designed in a way that can minimise their environmental impact, while eliminating any visual or audible impact above the surface. Tidal barrages, which harness the hydraulic energy from the head difference between high and low tides, are being optimised to produce more energy in a more efficient manner. At the Swansea Bay tidal power plant in the United Kingdom, for example, Andritz Hydro developed a special annual energy production optimisation software that maximises the use of available tidal energy and optimises power plant operation throughout the year. Tidal energy potential Several Asian countries are starting to step on the pedal in tidal energy development, emboldened by successful projects internationally and stronger support for renewable energy. “The industry is in very strong financial shape,” says Tim Cornelius, CEO at Atlantis Resources, a tidal energy company. “Renewable energy development is booming globally, and tidal power is where wind and solar was 15 years ago.” Cornelius says all the best sites in the world are yet to be built out, and expects billions of pounds of investment to pour into the United Kingdom’s tidal energy sector, which could then catalyse investment in large-scale projects across Asia. The Chinese market has a large untapped potential
The problem with EPC contracts in Japan
If you are a non-Japanese company attempting to enter the Japanese onshore wind market, be ready to face a bevy of challenges relating to engineering, procurement, and construction (EPC) contracts. For one, international EPC contractors are unlikely to be successful operating in Japan unless they have established strong partnership relationships with local Japanese firms, says Korawin Sriniratsai, renewable energy consultant at Mott MacDonald. This means international developers might have to procure an EPC contractor in Japan, and doing so will likely force them to adopt different business practices compared to standard international procurement practice and factor in a longer procurement time frame. Realistic EPC costs Early stages of EPC contract procurement will usually require developers to hold face-to-face meetings to establish relationships, and allow reasonable time to address questions in a cooperative manner, as is customary in Japanese culture. “For an international developer without established local contractor relationships, this is, again, likely to increase competitive procurement time frames compared to a comparable situation for projects internationally,” says Sriniratsai. To better cope with unique EPC contract procedures in Japan, international developers are advised to also budget realistic EPC costs. Costs in Japanese terms can be significantly higher than the European and international cost benchmarks due to factors like higher labour cost and increased man-hours to ensure high construction quality. 10 ASIAN POWER
Marubeni’s EPC contract records
Large potential is still untapped
with 14GW of tidal power resource identified so far, whilst South Korea has plans for tidal stream projects in Incheon, Shina, Jeaonranamdo, and Daebang. He reckons the biggest advances in this sector can be seen in Indonesia. Atlantis recently announced a 150 megawatt (MW) project with partners SBS in Indonesia. The tidal energy company also embarked on a 250MW project with GPCL in the Gulf of Kutch in India, both of which should help provide significant power in the growing Asian nations. To put this scale in perspective, Atlantis’ flagship project in Scotland — MeyGen — is the world’s largest tidal stream project at 398MW that is expected to power 175,000 homes.
CO-PUBLISHED CORPORATE PROFILE
Night view of Beijing Jingxi Gas Thermal Power Co., Ltd
Check out who is the guardian of Beijing’s clear, blue skies Find out why the Jingxi Gas-Fired Thermal Power Co., Ltd of BEH is the beacon of hope for clearer skies in China.
n recent years, smog and haze has become an issue in a number of regions in China. Beijing, the capital city of China also suffers on it. Since 2012, the government had released a numbers of actions to reduce smog. Beijing municipal government also launched “Beijing Clean Air Action Plan 2013 to 2017”. The Plan set a clear direction of establishing a cleaner and optimised energy system by using of natural gas as well as new and clean energy. To support the target, all coal fired thermal power plant in Beijing will be shut down, instead of a numbers of gas thermal power plants planed to be built. Therefore, four power and heating centers were built in Beijing, Beijing Jingxi Gas Thermal Power Co., Ltd (Jingxi Thermal Power) is part of the north west power and heating center, the biggest one among the others. With an initiated investment of US$7.6b (RMB52.52b), Jingxi Thermal Power was established in 2012 installing 3 units of Siemens Gas turbine-Steam turbine combined cycle, with one set in 2 on 1, one set in 1 on 1 configuration, and all units used 3S clutch for coupling LP turbines in order to get high efficiency for heating extraction. Moreover, with the installed capacity of 1307MW, the units can supply around 883MW of thermal energy, or around 200,000 households for Beijing district-heating distribution system. Through deep cooperation with Siemens, Jingxi Thermal Power has implemented Advanced Compressor Mass Flow Increase Upgrade to expand capacity for Siemens SGT-4000F gas turbine as the first project in China. The upgrade consists of the aerodynamic re-design of the first six rows of the compressor blades and vanes and incorporates the latest Siemens design improvements resulting in a major simple and combined cycle performance increase. Through optimising blades, wheels and sealing
surface structure, the brand new SGT 5-4000F (CMF++) gas turbine has increased power generation capacity by 42MW, which means to increase 189 million kilowatt-hour power generation annually. Under working condition of backpressure, low pressure cylinder of the turbine split by SSS clutch and the efficiency reaches up to 87.78%. To support the mass flow increase update, Jingxi modified the gas turbine air inflow system, changed it into bag-type strainer, improved filter fitness to M5. Also, the fined filters life-cycle has been extended to 12000 hours. Jingxi is also the first power plant to expand the gas turbine air inlet in China. Moreover, Jingxi Thermal Power also applies various innovative technologies, for example, APS full-automatic control, integrated pipes network geography information system, plant noise reduction, four-grid condenser, recycle water discharge system, etc. Four levels of control structure Jingxi categorized the APS control structure into four levels: Unit Stage Functional Group Stage, Sub-functional Group Stage and Driver stage. The APS system covers all main and auxiliary systems, including cold and hot state for unit, and all operation conditions for units set. The system effectively connects multiple systems of DCS, TCS, DEH and auxiliary engine control systems, and improves the control system safety. The APS control technology innovates from the following five aspects: Improvement in the selection standard of primary elements and valves; Improvement of control system security level; Automatic control for overall process (automatic control for waste heat boiler water level, auto
Siemens 4000F Gas Turbines in Jingxi Thermal Power Plant
start and auto steam return for steam turbine, coordination control for combined cycle unit, automatic control for bypass systems); Optimised energy-saving starting mode; continuous automatic control for unit starting process by optimising breakpoint intelligent judge. With all above mentioned innovative technologies, Jingxi Thermal Power obtained significant social, environmental and economic benefits since its operation, which also set a new benchmark of combined heat power plant in China. Good condition, enhanced capability Since its operation on 2014, Jingxi Thermal Power operates in good conditions and enhances the emergency capability and peak shaving capability of the grid. It replaces the original Shijingshan coalfired power plant, and reduces coal assumption by 294.1×104t/a, SO2 by 499.45t/a, smoke by 661.8t/a, NOx by 823.43t/a, ash by 95.53×104t/a annually. It makes a great contribution to improving the air quality, controlling PM 2.5 for Beijing city. And now, following the idea of Green, Innovation, Efficient, Energy-Saving, Jingxi Gas Thermal Power will keep progressing and make more contribution to the rapid growth of Beijing. With the advantages of high efficiency of power generation, high capacity of heat supply, high operational readiness and flexibility, Beijing Jingxi Gas Thermal Power Co., Ltd will play an important role to support Beijing government to achieve its aggressive target of reducing smog and haze and set an outstanding example of power plant in China. And now, following the idea of Green, Innovation, Efficient, Energy-Saving, Jingxi Gas Thermal Power will keep progressing and make more contribution to the rapid growth of Beijing.
“With all above mentioned innovative technologies, Jingxi Thermal Power obtained significant benefits.” ASIAN POWER 11
For Malaysia to go ahead, we think that we require a longer time. From signing of contract to COD, I estimate it may take about nine years or so.
Predee Daochai President Kasikornbank Dr Mohd Zamzam Jaafar CEO Malaysia Nuclear Power Corporation
CEO says Malaysia needs more time for nuke Dr Mohd Zamzam Jaafar reveals that Malaysia can only proceed with using nuclear energy post-2030, as he admits that the government is still not ready as a policy maker, regulator, and insurer in adding nuclear to the energy mix.
n January of 2011, two months before the paradigm-shifting Fukushima Daiichi nuclear accident, Malaysia — ASEAN’s then third richest nation and third largest economy — took the bold step in the “go nuclear” route to establish its statebacked nuclear energy organisation, Malaysia Nuclear Power Corporation (MNPC), which is the Nuclear Energy Programme Implementing Organisation (NEPIO) as recommended by the International Atomic Energy Agency (IAEA). Dr Mohd Zamzam Jaafar, one of the nation’s leading energy experts, who already boasted a greater than three decade career at the Tenaga Nasional Berhad, was asked to take the reigns as MNPC’s CEO. He was the obvious choice. With a PhD in nuclear engineering, Zamzam helmed the nuclear unit of the Malaysian power supplier before MNPC was conceived. Everything was ahead of the fledgling organisation, including the problems that were about to arrive, albeit vicariously, due to Fukushima. But MNPC and Zamzam have steered a steady course, and Malaysia’s nuclear energy option for electricity generation is still being explored. In his sixth year as CEO, Asian Power caught up with him as he describes the Malaysian government’s commitment to its nuclear programme as “a longhaul assignment.” What’s your 12-month vision for the Southeast Asian nuclear energy industry? I think the cooperation will continue. On our part, we have already decided to proceed with what we call the IAEA Integrated Nuclear Infrastructure Review Mission in late 2016. A team of nuclear experts came and assessed what we have done in the past five years — what we need to do, what we have done right, what we need to improve on, and so on. We are hoping IAEA will give us recommendations and suggestions on how to progress further. On our part, though we announced five years ago to have the first unit commercial operation date (COD) in 2021, I think this is no longer possible especially after the Fukushimanuclear accident, so we are targetting at least after 2030. We have about 15 years to prepare the necessary nuclear power infrastructure, one of them, of course, is to table a new atomic energy bill in the parliament, which is already documented in the 11th Malaysia Plan. Once it is passed in the Parliament, we will then proceed with the setting up of an independent and effective nuclear regulatory authority. Of course, our other main focus is to engage stakeholders, including professional groups and the general public. We even engage school children and university students, because in 2030, they will probably be in the market to get jobs and will have a role to play in the nuclear industry. What should newcomer nations like Malaysia consider to smoothly transition to utilising nuclear energy? In the Economic Transformation Programme Report, launched in October 2010, four key enablers were identified. The first one is to get public support. The second one is to sign and ratify international nuclear instruments in order for Malaysia to access nuclear technology. Without signing these instruments, I don’t think the supplier countries will be willing to supply us the technology. The third one is to make sure that we have the correct regulatory framework. That is why we want to table the bill. And once the bill is enacted, we can also ratify some of the instruments. And the fourth one is to get the site approved,
including the support of the local community. All these are still work in progress after five years. It takes longer now, especially after the Fukushima nuclear accident. Also, in 2012 and 2013, there were some public protests regarding the Lynas Advanced Materials Plant project in Kuantan. So we are pursuing the nuclear option step by step because we want to do it right for our first nuclear power plant project— which is the most important thing. The other thing is the cost of nuclear after Fukushima, because of the enhanced safety features in the new designs especially in the Generation III plant designs. We think the cost would increase and with the current low fossil fuel prices, nuclear isn’t competitive at the moment. Nuclear competes with the other fuels for the purpose of electricity generation, especially coal and gas for baseload generation. Of course, with the Paris Agreement, there is hope for nuclear, especially with respect to low-carbon electricity generation. In your opinion, what are the solutions to current challenges? The government must play an important role. For example, in the Bangladesh nuclear power plant project, it is a government-togovernment agreement. Even in Turkey, it is also a governmentto-government agreement, and I was informed that both the Parliaments of Turkey and Russia approved the project. To me, strong and consistent commitment and policy from the government is very important in going nuclear because if we change mid-stream, the project will be affected, just like what happened in Taiwan. In the case of Taiwan, the Lungmen nuclear power plant was ready to be commissioned but did not proceed as planned due to political discord. That’s what happened in the Philippines, too, with the Bataan plant in the 1980s resulting in the plant being mothballed. It’s very important that once we make a commitment to go nuclear, we have to stay the course and make it happen until the end. So that’s why we are looking at the Barakah nuclear power plant project in United Arab Emirates (UAE). What is interesting about this project is they signed a contract with a Korean group in December 2009 with an implied commercial operation date (COD) of the first unit in May 2017. This is a seven and a half years interval between the signing of the contract to the commissioning of the first unit. This shows, amongst all the projects currently under construction around the world, this is a new build project that is on schedule. Having said that, for Malaysia to go ahead, we think that we require a longer time. From signing of contract to COD, I estimate may take about nine years or so, and therefore, it is challenging for Malaysia to emulate the UAE experience. When you have a long gestation period for a project, a lot of things can happen. So that’s why it is very important that the government is strong, and consistent with policy committed to nuclear. If you change the decision midstream, the project will not be completed, bearing in mind Taiwan’s case. These are the main challenges in paving the way for the first nuclear power plant project. You want to make sure that there is support from the people and the government before we decide to proceed. In essence, the government has to assume three roles; as a policymaker to pursue the nuclear option in the energy mix, as a lawmaker to enact the nuclear law as well as related regulations, and the insurer of last resort in the event of nuclear accidents as experienced in Fukushima. ASIAN POWER 13
Country report 1: India
Projects are being rushed but infrastructure is not ready for these
Is India hurting from self-inflicted solar burn?
The sector is bright and shining, but experts are afraid that players are getting way ahead of themselves as issues on lack of access roads, clean green lands, and proper land area demarcation hamper development of solar parks.
hen you ask project developers tasked with building India’s solar parks what their most pressing challenge is, most will point outside their window to the vast tracts of undeveloped land with inadequate roads and other essential infrastructure. Execution blunders continue to hamper the country’s attempts to build solar parks and other promising solar PV projects. “Project developers are citing issues including lack of access roads, clean green lands, and clear demarcation of land areas in these solar parks,” says Priyadarshini Sanja, managing director at Mercom Capital Group.
Most policies are wellintentioned with topdown goal setting, but the problem usually is on the execution side.
Installed capacity under captive model only (MW, n=21), by year
Source: Bloomberg New Energy Finance 14 ASIAN POWER
There has been a push to build dozens of solar parks in India but this has been saddled by delays relating to poor infrastructure support, says industry insiders. These delays threaten to increase project costs and decrease profitability for solar parks. Are solar parks problematic? Solar parks — one of the pillars envisioned to usher India to a more secure energy future — accounts for 20GW of the 100GW of solar capacity that India is targetting by 2022. Currently, there are 34 solar parks planned across 21 Indian states, all of which have received in-principle approvals. In these solar parks, projects aggregating 20GW will be set up, and the Ministry of New and Renewable Energy (MNRE) is even considering increasing the capacity to be developed at solar parks to 40GW. Under the guidance of the MNRE, in some states, the Solar Energy Corporation of India (SECI) has formed joint ventures with state renewable energy agencies to construct these solar parks. State nodal agencies are also the implementing agencies in locations such as Arunachal Pradesh, Assam, Gujarat, and West Bengal, amongst others. Meanwhile, the National Thermal Power Corporation
(NTPC) is overseeing the construction of solar parks in Andaman and Nicobar Islands. However, delays relating to infrastructure and site preparation have hampered project development for some solar parks — and these are not isolated occurrences. “The issues around solar parks are typical to the Indian solar sector,” says Raj Prabhu, CEO of Mercom Capital Group. “Most policies are well-intentioned with top-down goal setting, but the problem usually is on the execution side.” One major criticism levelled against the government is its rush to auction projects in these parks even before completing land acquisition formalities. This has brought headaches to project developers who end up winning bids but then find that infrastructure is not ready for them to start construction. In the Pavagada, Charanka, and Kadapa solar parks, bidsubmission deadlines for tenders have been reportedly extended repeatedly. “The government is in a hurry to invite tenders even before they have completed land acquisition which ends in a delay of four to five months before the auctions happen. Developers, meanwhile, are paying for park infrastructure that is non-existent,” says Sanja. “Much of the infrastructure is being built parallel to project construction and will be complete
Country report 1: INDIA Annual capacity additions in India’s renewable energy sector (MW)
Source: Bloomberg New Energy Finance
when projects are close to completion, which doesn’t help the developers. After paying steep park fees, developers are having difficulties to build parts of the infrastructure.” Developers argue that delays and additional incurred expenses seriously affect project costs and profitability, especially if they end up having to clean the land, build roads, and wait for power to be evacuated after commissioning. Whilst the bidding process is transparent and the promised infrastructure is ideal for international investors, these nuisances can be quite a burden for solar park project developers. But government officials argued that development of solar parks is in its early stages and whilst the process is not perfect, state nodal agencies are working hard to resolve issues when they arise. “Solar parks are huge projects and these problems are minor when you look at the capacity that will be achieved. It has just been two years since we ventured into solar parks,” commented an SECI official. No solar parks in just a few days The MNRE has reportedly requested that the Principal Secretaries and the Chief Secretaries of State Governments take up necessary action for speedy implementation of solar power projects so that solar targets are achieved on time. MNRE is also conducting regular review meetings with state governments and solar park developers to keep projects on track. “Solar parks cannot be completed within days. A lot of planning is required — problems will come up but we are here to handle them,” commented an MNRE official. The development issues surrounding solar parks have increasingly attracted attention as India faces the triple energy challenge — meet the growing energy demand, cut down on pollution, and connect more than 300m people to the power grid. Ramping up renewable energy production has emerged as one of the
solutions to this triple energy challenge, which is why the government has set the target of building 175GW of renewable energy by 2022 — primarily solar and wind, says Shantanu Jaiswal, lead analyst for India at Bloomberg New Energy Finance. At the end of FY2016, India had 42.6GW of installed renewable energy capacity, excluding large hydro, which represents 14% of total generation capacity. “2016 is on track to become the best year for renewable installations,” says Jaiswal. “The sector is not only drawing Indian firms but also foreign utilities. Power generation companies particularly from Europe and Asia are increasing their presence through greenfield investments or acquisitions.” “PV is rapidly emerging as the king of Indian renewables,” Jaiswal adds, pointing out that the sector saw an impressive 59% CAGR in the last four fiscal years to reach 6.8GW installed capacity at the end of FY2016. Solar still represents only 2% of grid-tied generation capacity, but it is growing twice as fast as wind and coal on the back of federal and state-level auctions. King of Indian renewables Solar power is also being installed in almost all states across the country, unlike wind power which is focussed in the southwest of the country. The more distributed nature of solar has become a key advantage over other renewables, helping alleviate transmission bottlenecks and bringing generation closer to the point of consumption. Led by solar, India’s share of renewable energy in the total capacity mix has been ramping up to 14.1% in FY2016 from 12.5% in FY2013. “We believe that this percentage will keep on increasing, as India adds renewables, coal, and some hydro capacity,” says Jaiswal, given that renewables are already having a higher growth rate in the country, with a cumulative CAGR of 15%, surpassing the 12.5% for coal power plants.
Another encouraging trend is the rise in investments in utility-scale projects after the government announced the target of having 175GW of solar, wind, and biomass installed by 2022. Jaiswal reckons asset finance has grown by nearly 60% to $10.5b in FY2016 from $6.6b in FY2014, with solar obtaining the most investment in the last financial year. “Despite this strong position, the renewables sector needs to accelerate its pace even more to meet the government targets,” argues Jaiswal. If execution and financing issues are addressed, India stands to become a global force in solar energy, argue analysts. The country has one of the world’s highest solar intensities and boasts of low-cost manufacturing, and solar energy is one of its most substantial and rewarding opportunities, says McKinsey & Company. More fund is still needed The analyst estimates around $100b asset finance is needed during 2016 to 2022, including $30b in equity capital, if India is to reach its goal of 135GW of utility-scale renewable energy by 2022. The country will also need to figure out how to reduce financing costs considering it currently has the highest cost of capital in the AsiaPacific region. To raise the next $100b of asset finance, capital markets must play a bigger role. This will mean the growing prominence of green bonds, both domestic and offshore ones, and already the market is seeing their use to raise debt or refinance projects. On the equity side, infrastructure investment trusts should start to gain traction. “The idea is that investor interest is protected and developers can quickly recycle equity in large commissioned projects by selling it to long-term institutional and retail investors seeking lower, but more stable returns,” says Jaiswal. “These structures have started to attract interest and could be crucial for the estimated $30b equity that the utility-scale projects need.”
Capacity installed since FY2013 (MW, n=26), by year
Source: Bloomberg New Energy Finance ASIAN POWER 15
sector report: GEOTHERMAL
Major breakthroughs must be achieved for geothermal energy to be maximised
Asia’s geothermal energy is not gaining steam Despite Asian countries’ vast geothermal resources and increased regulatory support, it seems their hands are tightly tied in terms of developing more geothermal projects in the region.
hen industry insiders write a report card for Asia’s geothermal power development in 2016, the title should read: “Underperforming.” Geothermal capacity growth has slowed across the region and not for a lack of demand or effort. Most Asian countries have been attempting to ramp up their geothermal capacity to sate growing energy needs as well as reduce their reliance on nuclear power and fossil fuels. But governments and developers are encountering significant challenges, including high exploration costs and strong public opposition. Experts insist the region’s geothermal potential remains very promising as shown in landmark projects popping up in Malaysia and Taiwan, but it will take major breakthroughs to clear the path for large-scale projects in some countries like Japan. Sparks in Southeast Asia Capacity growth in Southeast Asia and the South Pacific regions hit a slump last year, but industry observers are excited about the rise of milestone projects and regulatory support across the region. “Although developing capacity growth has slowed in Southeast Asia and the South Pacific regions since March, it is exciting to see Malaysia entering the market with the announcement of its pilot geothermal project,” says Anthony Rocco, author of the Geothermal Energy Association’s 2016 geothermal power international market update. Tawau Green Energy is leading the development of Malaysia’s first geothermal plant at Apas Kiri-Tawau, a 30 megawatt (MW) binary plant that will use turbines from Exergy and is expected to officially operate commercially by June 2018. The plant will also benefit from the feed-in tariff (FIT) rate of US$0.10 (MYR 0.45)/ kWh announced in May 2015 for Malaysian geothermal plants up to 30MW. In Indonesia, Enel Green Power (EGP) announced it will be developing its first project, the Way Ratai plant in Lampung, which will have an expected generating capacity of 55MW. US$60m was financed from PT Geo Dipa Energy’s own equity in the form of equipment and fresh funds, whilst the remainder 16 ASIAN POWER
Although developing capacity growth has slowed in Southeast Asia and the South Pacific regions since March, it is exciting to see Malaysia entering the market with the announcement of its pilot geothermal project.
of the project is being financed by a consortium led by PT Bank Negara Indonesia Tbk. A new 45MW project, PT Jabar Rekind Geothermal, was also announced in the second half of 2016 with a target operation date in the first half of 2020. More geothermal developers will also be encouraged to pursue projects as the Indonesian government prepares a FIT mechanism and legislation to attract larger investments in the sector. “The new tariff will adopt a fixed-price system where energy suppliers do not need to negotiate with the state-owned electricity firm PLN as the primary power-off taker. This new mechanism is targetted at power plants that fall within the capacity range of 5 to 220MW,” says Rocco. The Indonesian Energy and Mineral Resources Ministry is also working on new legislation that would provide the geothermal industry with priority investment services, as well as let investors obtain necessary permits within three hours at the Investment Coordinating Board, which is already an implemented standard in other industries. Indonesia has a poor track record in promoting geothermal, and these proposed changes should at least increase the incentives available to geothermal developers and investors, who often feel neglected. “Clearly what’s missing is the renewable framework. We still don’t have solid regulatory framework for geothermal, for instance,” says Gilles Pascual, partner, infrastructure advisory at Ernst & Young. “The energy roadmap initially didn’t even include geothermal. Renewable energy is low on the government agenda,” concurs Peter Wijaya, vice president Commercial and Business Development at Star Energy. “If I were the government, I would say the tariff is attractive. If I were a developer, I would also say so. But the problem is implementation. To qualify for the tariff, you first need to prove that you have started exploration. That’s the law. The risk is entirely on the developer,” Wijaya notes. Indonesia has an ambitious target to produce 6,023MW of geothermal power by 2020. It also aims to raise the share of geothermal in the entire renewable energy share to 5.8%. But as of 2016, that share stoods at a measly 1.1%.
sector report: GEOTHERMAL Geothermal power operating and developing capacity by region
International geothermal nameplate capacity
Source: Geothermal Energy Association
Source: Geothermal Energy Association
Many experts expect the country to come up short due to ongoing regulatory challenges and high exploration costs. These issues make it especially risky for investors and developers to commit to geothermal projects, and skew the market towards the development of low-risk, established fields. A single field can cost up to US$5m, excluding other costs, says Sugeng Triyono, president director of PT Tangkuban Parahu Geothermal Power. Tough times for funding “Funding for exploration is tough — investors have to take on the full risk,” says Wijaya. “The exploration risk is very similar — though not as high — as oil and gas. However, the returns of geothermal is not as high as oil and gas.” Wijaya reckons geothermal reservoirs are much more complex than oil and gas, estimating that as much as US$7m to US$10m can be spent exploring each well. To reach the 2020 target, Indonesia will need to add roughly 300MW of geothermal energy — or drilling around 60 wells — annually. This means the sector requires a large amount of capital, but developers and investors remain concerned about risk-sharing for such capital-intensive geothermal projects. “Cost rises steeply the moment drilling and construction begins,” says Triyono. “Someone has to catch the risk, whether it is the project owner or the government.” The result is a dearth of interest to explore untapped “greenfield” projects despite the high potential for return. A positive aspect is that there has been moves to broaden the financing options for riskier geothermal projects. “Indonesian geothermal assets are extremely attractive to the private sector,” says Pascual. “There are financing solutions for this on a pure non-recourse basis. For instance, the Asian Development Bank can provide funding for exploration.” Across the South China Sea, exploratory drilling has begun for Taiwan’s new geothermal plant and is expected to finish in February 2017. The country has been supporting the development of geothermal projects and renewable energy through duty exemptions and subsidies. China National Petroleum Corporation, National Taiwan University, and the Industrial Technology Research Institute will work together to develop the binary plant in Sanxing, drilling for which began in August 2016. Under Taiwan’s Renewable Energy Development Act, the government will exempt developers who import machinery from the customs duty as well as provide developer subsidies of up to 50% of exploration costs or not exceeding US$1.5m (TW$50m) to the developer. A FIT of US$0.156 (TW$ 4.9315) per kWh is also granted for 20 years given that the installed capacity must be over 500kW. Taiwan has shown increased interest in exploring geothermal as a key energy source, and the Sanxing project should serve the country’s first geothermal demonstration plant that will help draw in more investors and suppliers. Meanwhile, in Japan, the prospect of building more geothermal projects, especially
large-scale ones, remains grim. There is strong public opposition to the development of geothermal power on economic and environmental grounds. Detractors believe geothermal projects can have a detrimental impact on booming hot springs resorts and treasured national parks, although smaller-scale projects will face less resistance.
Japan’s geothermal winter “We do not forecast an uptick in Japanese geothermal capacity growth over the next decade despite the country’s substantial geothermal energy potential,” says Daniel Brenden, renewable energy analyst, BMI Research. “This is due to popular opposition to large-scale developments, high upfront costs, and long development time frames.” Brenden reckons only 0.1% of the projects supported under Japan’s clean-energy programme use geothermal technology, and he sees little scope for geothermal to substantially increase its share in the power mix given a contraction in subsidy support. “As the country overstretched its support for new solar power capacity over the last three years, the renewables support mechanism has been reformed in order to reduce the government’s subsidy burden and improve the costcompetitiveness of solar projects in the country,” he says. Amongst renewable energy sources, solar currently has the rosiest outlook in Japan. Almost US$20b is invested annually in new solar developments, making the country one of the top solar installation markets in the world. With solar power shining so bright, geothermal is taking a backseat. Combined with strong opposition from the multi-billion-dollar hot springs resort industry and the fact that roughly 80% of geothermal resources are in national parks — where development is highly restricted — Brenden believes Japan’s geothermal power segment will post lacklustre growth over the coming decade. Large-scale geothermal projects, particularly, will find it difficult to overcome the stringent and long environmental assessment requirements. “Our muted outlook for Japan’s geothermal segment is largely attributed to the staunch popular opposition against geothermal developments in the country,” says Brenden. “Geothermal developments pose a pertinent risk to nearby spas by potentially depleting water volumes and lowering the water temperature in springs.” Geothermal power plants need hot water underground to turn their turbines, the same hot water needed by more than 21,000 spas and inns that draw around 120m customers annually for overnight visits. “A large-scale geothermal ramp-up would likely prompt heavy opposition,” says Brenden. Investor interest is also slowing on the back of long processes when it comes to environmental assessments and other pre-operational procedures of large-scale geothermal projects in Japan. This is on top of the fact that most of the country’s geothermal resources are within protected national parks. “Large-scale geothermal developments in Japan ASIAN POWER 17
sector report: GEOTHERMAL can require up to nine years of environmental assessments and survey drilling before a site can be considered workable which has reduced investor appetite,” he adds. Additionally, high upfront costs of new installations also weigh on the rationale of developing large-scale geothermal projects. It should be noted that key prefectures that had been overly reliant on nuclear power are becoming more open to large-scale geothermal projects like the Fukushima prefecture’s plan to build a 270MW geothermal power plant. The Fukushima Daiichi nuclear disaster in 2011 led the government to ramp up its renewable energy production as an alternative to nuclear energy, prompting the Ministry of Environment to lift restrictions to drill at national parks. The Wasabizawa geothermal power plant in Yuzawa city in Akita prefecture — Japan’s first large-scale geothermal project in about 20 years after the Takigami geothermal power plant went into operation — is also under construction and is expected to commence operations with a capacity of 42MW in 2019. Whilst large-scale geothermal projects face several challenges in the business and environmental fronts, small-scale geothermal projects have been gaining government support and look to expand in the coming years. “Whilst our core scenario for Japan’s geothermal sector is one of muted growth, we stress that our outlook for small-scale geothermal power is more buoyant,” says Brenden. He points out that the Japanese government has relaxed regulation for the development of small-scale geothermal projects, including the expansion of allowable zones for surface surveys and small-scale developments to S2 and S3 in addition to the S1 or ordinary zones. Smaller-scale facilities are less intrusive and undergo less regulatory scrutiny — facilities with a capacity higher than 77MW must undertake more extensive environmental assessments — which helps speed up the overall development time. Japanese geothermal energy companies have also been working closely with the community to lessen local opposition. Tokyo-based financial services company Orix plans to develop up to 152MW facilities by 2020, an initiative that has enabled Chuo Electric Power Company to develop Japan’s first facility in 15 years — the 2MW Kumamoto geothermal plant. “The development of this plant was made possible through close cooperation with the local hot spring company Waita-kai and the Oguni resort. We believe similar developments will support some growth in Japan’s geothermal segment,” says Brendan. Rocco, meanwhile, cites Sumitomo Forestry’s recent announcement to develop a small 2MW power plant in Kurikoma National Park in Japan. The developer is planning to invest around US$181m in its renewable energy portfolio. Japan offers an enticing FIT rate for geothermal at 40 Yen/kW (~$.33/ kW), which provides an advantageous policy framework for further development of similar projects. Southeast Asia Pacific Geothermal Power
Source: Geothermal Energy Association 18 ASIAN POWER
Fukushima prefecture to boost geothermal capacity growth
Source: BMI Research
“We believe this change in attitude towards small-scale geothermal energy was prompted by the Fukushima disaster in 2011, which has intensified efforts to boost power generation capacity that can be sourced domestically,” says Brenden. “This is particularly pertinent in light of Japanese nuclear reactors having been turned offline and fossil fuel imports spiking as the thermal sector have plugged power supply gaps stemming from nuclear closures.”
Smaller-scale facilities are less intrusive and undergo less regulatory scrutiny.
India embraces small-scale geothermal Governments and developers are starting to focus more on smaller-scale geothermal projects, benefitting countries like India in the form of increased life expectancy and standard of living in remote, resource-poor communities. There is no geothermal power plant yet in India, a World Energy Resources report says, but geothermal resources are present in seven provinces. One such project is a collaboration between India and Norway in the northwest part of the Himalayas. Two pilot demonstration projects investigating the utilisation of low and medium temperature geothermal resources for heating purposes, successfully improved the livelihood of the local population. The area has a very short supply of electricity of roughly three hours per day, and temperatures can drop to below 20ºC in winter. There is also a dearth of natural resources such as wood, so people mainly rely on fossil fuels like coal to heat their homes. “The researchers assessed the resource potential and heat load for heating up a hotel and restaurant, and successfully managed to install heating systems that keep the indoor temperature at about 20ºC. Due to the shortage of available electricity, solar panels have been installed to make the continuous operation of heat pumps possible,” says the World Energy Resources report. India has unveiled plans to develop 10,000MW of geothermal energy by 2030 with the cooperation of several countries that are amongst the top producers of geothermal power generation in the world, including the United States, the Philippines, Mexico, and New Zealand. The geothermal target is part of the government’s pledge to increase the share of renewable power to 175 gigawatt (GW) by 2022, and then to 350GW by 2030. India’s share of renewable energy in the total capacity mix has improved to 14.1% in FY2016 from 12.5% in FY2013, but it should be noted that the government is looking to prioritise solar and wind. Solar power holds a key advantage over geothermal and wind because it is more distributed in nature. Still, the Indian renewable sector is gathering a lot of investment interest not only from Indian firms but foreign utilities as well, particularly European and Asian power generation companies. Geothermal energy exploration has begun in several sites such as Cambay Graben in Gujarat, Puga and Chhumathang in Jammu and Kashmir, Tattapani in Chhattisgarh, Manikaran in Himachal Pradesh, Ratnagiri in Maharashtra, and Rajgir in Bihar.
Country report 2: Thailand
Experts are crossing their fingers for Thai solar
Is Thailand entering another solar gold rush?
2017 could be an exciting year to invest in Thailand’s solar energy sector as the government allows more PPAs.
ith Thailand’s government poised to allow more powerpurchase agreements in response to the country’s escalating energy needs, investors and developers might not be able to resist dipping into the solar power sector. Liberalisation in key areas such as solar rooftops, where enterprises can now obtain solar rooftop licenses with the capacity of 100 megawatt (MW), should attract larger investor interest and fast-track development. Not to mention that solar and other renewable energy sources are becoming a higher national priority as the country tries to lower its energy import bill. 2017 will usher in Thailand’s second Electricity production mix 2014
Source: Finergreen 20 ASIAN POWER
The next months will be crucial as the government may allow more power-purchase agreements under new conditions.
solar gold rush, says Dr Ulrich Eder, CEO at Pugnatorius, with several lucrative business opportunities available to those that brave the market. This bold prediction comes amidst expectation that the delayed 518MW phase 2 tranche will be realised at a feed-in-tariff (FIT) rate of US$0.161 (5.66 baht)/kWh over 25 years. He also points to half-official announcements suggesting a rollout in the first quarter of 2017, with solar projects to be connected to the grid in the second half of 2018 or earlier. The next months will be crucial as the government may allow more power-purchase agreements under new conditions and possibly without involving government agencies and agricultural cooperatives. The outlook is rosy for very small power producers (VSPPs) with total power-generating capacity of up to 9.9MW and small power producers (SPPs) with total power-generating capacity of 10-90MW. According to the Energy Policy and Planning Office in November 2016, licenses for VSPPs will be granted to private firms this year without government or quasigovernment participation. The FIT will drop from US$0.161 (5.66 baht) in 2016 to US$0.117 (4.12 baht) in 2017 and 2018. Power producing licenses to SPPs are also currently under consideration. Another potentially lucrative area
is solar rooftop — an area undergoing significant liberalisation. Business growth is expected to increase as Thailand’s energy policymakers begin to provide the private sector with better access to the state solar rooftop programme to promote solar power use. Liberalising solar rooftop The program is now allowing private companies to apply for solar rooftop development licenses, although companies will still be barred from selling power back to utilities. The Metropolitan Electricity Authority will coordinate solar projects in Bangkok, Nonthaburi, and Samut Prakan, whilst the Provincial Electricity Authority will manage other areas. “Solar power production for selfconsumption — without the need for a power production license — will most likely gain relevance and importance,” says Eder. Solar rooftop photovoltaic facilities currently account for roughly 5% of Thailand’s total solar markets, and this is expected to increase as net metering and smart grid technology become more entrenched. Solar energy development is gaining strong momentum in Thailand with 2015 registering record growth. The annual market of newly installed projects climbed more than 50% to 722MW in 2015 from 470MW in 2014 on the back of
Country report 2: Thailand Import/exports - gross consumption comparison
Dr Ulrich Eder
government initiatives to create stronger economic regions. Another 723MW have been added until the third quarter of 2016. “Solar energy is considered to play an important role in remote but strategic areas for its importance for the Thai economy, such as the group of islands that go from Koh Tao, Koh Phangan to Koh Samui with current frequent energy disruption,” says Jose Herrera, partner at Juslaws & Consult, a law firm advising Thai and foreign renewable energy companies. Renewable energy hub The anticipated solar gold rush comes as the Thai government recently put a higher priority on renewable energy. The Ministry of Energy developed the Thailand Integrated Energy Blueprint, including five energy master plans, amongst which is the Alternative Energy Development Plan (AEDP). The AEDP was first introduced in 2008 and revised in 2012 to dramatically increase the share of renewable energy consumption to 25% of total projected final energy consumption in 2021. Then, as indicated by the AEDP 2015, Thailand aims at replacing 30% of its final energy consumption with renewable energy by 2025, says a Finergreen report. More than half of the renewable electricity is expected to be generated from biomass, whilst the total capacity is set to increase by more than fourfold from about 2,100MW to 9,200MW. Installations of solar and wind are expected to jump several times from less than 100MW to 2,000 and 1,200MW, respectively. “Thailand will become a renewable energy hub in the next years,” says Herrera. “Even if the power generation cost of the renewable or alternative energies is still higher than classic sources, the commitment to make Thailand a low carbon society and the incompatibility of certain conventional energy sources with the key tourist industry offer outstanding opportunities
to renewable energy companies and foreign investors looking for long term and high returns,” he adds, citing estimates from the AEDP. “And the market will be more competitive with the arrival of new highly specialised engineering, procurement, and construction (EPC) contractors and technology suppliers from Europe, United States, and Japan,” says Herrera. In the tourist hotspot of southern Thailand, energy demand will grow 3% and at least 3 new power plants will be set up in Krabi and Thepa district. Tourism contributes to almost 10% of economic growth and it is forecast to rise to US$127m (THB 4,496.7b) by 2025. Countrywide, energy consumption is growing at an average of 2.67% annually and will grow a minimum of 75% in the next two decades, based on government estimates. Demand for energy Thailand is already one of the highest energy consumers in Asia, and a pipeline of ambitious infrastructure projects will further push up local energy demand. “Nowadays, the industrial and transportation sectors are basically the largest source of demand,” says Herrera, estimating that the two account for 36% of the total energy consumption. “The power demand from BTS, MRT, and 10 mass rapid transit infrastructure projects in the capital of Thailand and the ambitious high speed train project will contribute to the notable increase of energy consumption.” Herrera reckons that facing this rising energy consumption, the government needs to upgrade and improve the efficiency of the current power plants and renovate transmission and distribution lines. It should also implement new power plants to keep pace with population growth and economic growth forecasted by the Asian Development Bank at 3% in 2016 and 3.5% in 2017. Facing the twin pressures of higher
energy demand and unsustainably high energy bills, Thailand has been strengthening its commitment and support for renewable energy. On top of liberalisation efforts, the government has been rolling out more incentives to entice investors and developers. Rallying behind renewables Renewable energy companies, for example, are granted with tax and nontax incentives from Thailand’s Board of Investment (BOI). Renewable energy projects such as that produced from solar energy, wind power, hydropower, biomass, biogas, biofuels, and municipal solid waste, among others, are eligible for BOI support. Production of electricity or steam from renewable energy sources and projects that manufacture fuel from agricultural products, garbage or waste will receive an 8-year corporate income tax exemption. “Nowadays the dependence of energy import is a big concern for the Thai administration, therefore the government plans to rely more in renewable energies and exploration activities to look for natural gas and oil,” says Herrera. Through these efforts, the government expects that, biomass, solar photovoltaic, wind energy, and hydropower — in that order of contribution share — will cover a 25% of the energy consumption by 2021. Investors that are sceptical of the solar gold rush can consider these other promising renewable energy sources in Thailand. Wind farms are highly suitable in the southern, northern, and north eastern parts of the country, says the Finergreen report, and many new wind projects are planned with a total capacity of 2,643MW, often with private sector participation. Herrera reckons the segment covered by wind energy companies can reach a potential of 14,141MW in areas with average wind over than 6m per second. Wind projects are suitable in Surat Thani, Nakhon Si Thammarat, Songkhla, Yala, Pattani, and offshore locations.
Feed-in Tariff Thailand
Source: Finergreen ASIAN POWER 21
Analysis: INDONESIA’S ELECTRIFICATION PROGRAM requirements, and other specifications. Information from these sites, in addition to other sources, means that there is a baseline that can be established based on the implementation of these minigrids.
Is it possible to light up Indonesia’s dark and far-flung areas?
The problem with Indonesia’s new rural electrification scheme Proper electrification of a community is a complex matter involving not only the technology and business model but many localised variables.
ural electrification is a big challenge not only in Indonesia but throughout the world. Currently there is not a single technology and/or business model of rural electrification that can be called a wild success. Of course there are success stories in many regions around the world. Issues such as social behaviours, economic activities, income level and frequency, growth potential, geophysical features, all play important roles in determining how a particular community need to be electrified currently and in the future. Indonesia’s largest challenge in electrifying 100% of its population goes beyond its 17,500 islands. Of course the archipelagic nature of the country accounts for much of the difficulties. But a close second is the distribution of its population. Many of the legal boundaries of its smallest administrative government unit, villages (Desa in Indonesian), have less than 25 households. Other villages have very uneven concentrations of households within its geographical boundaries. Opportunities for the private firms Indonesia’s national electrification plan, called Programme Indonesia Terang (Bright Indonesia Program) announced in May of 2016, aims to electrify 97% of Indonesia’s population by 2019. Whilst the implementation of this program is still unclear, a clear government target provides opportunities for the private 22 ASIAN POWER
Indonesia’s largest challenge in electrifying 100% of its population goes beyond its 17,500 islands.
sector. There is a long way ahead to implement this programme the right way. Least of all, the Indonesian government will need to determine a level of service requirement to be able to call a village as electrified. Without fanfare, the Directorate General of New and Renewable Energy and Energy Conservation has been providing funds to build micro hydro and solar PV-based minigrids throughout Indonesia since 2012. Between 2012 and 2015, over 450 solar PV minigrids were tendered and installed. The total capacity of the solar panels installed is roughly 13MWp. The requirements of these minigrids are quite comprehensive. They include the distribution network and household connections including energy limiters, street lighting on utility company standard poles, medium voltage transformers when needed, sizable battery
Mobilising the private sector In 2015, the average cost of all the systems installed and commissioned that year was around US$6.50/Wp. However it needs to be understood that these systems do not require a guaranteed 15-year lifetime, or comprehensive studies. These requirements will add to the capital expenses which will have a large impact on the cost of energy production over the lifetime of the system. If the system’s initial cost was US$1,200/kWp and it’s amortised over the 17,000kWh/kWp, then it means the system’s energy will cost around US$0.07/ kWh. After adding the appropriate amount of storage to fully utilise the full amount of the usable energy, using Li-ion technologies, an additional US$0.19/kWh need to be added. This assumes a $800/ kWh capex cost, 6,000 lifetime cycles (15year), and an 80% utilisation ratio. With the right planning, implementing the correct technology and business model for Indonesia’s currently unelectrified communities can be done through the private sector. Given that some of the inherent risks of rural area electrification can be covered by the government, there are financially interesting propositions for project developers. The key is that the communities have different needs, and only by understanding them can we provide sustainable electrification technologies and business models. It just might be possible to electrify Indonesia’s dark areas and do them whilst providing financially attractive framework and regulatory conditions. It is up to both the Indonesian government and the private sector to work together and develop the right landscape for electrifying 97% of Indonesia’s population by 2019. From “Benchmarking Solar PV Microgrid Costs in Indonesia” by Andre Susanto
Indonesia’s total installed capacity
Source: “Benchmarking Solar PV Microgrid Costs in Indonesia “ by Andre Susanto
CO-PUBLISHED CORPORATE PROFILE
First solar project in the Philippines
Taking advantage of opportunities in a volatile year OWL Energy is ready to grow further and take on 2017.
or many energy engineering consultancies in Southeast Asia 2016 was described as a turbulent year. There was significant volatility in terms of workload, and those associated with the oil and gas sector saw the worst of it with significant layoffs. However as we enter 2017 the energy sector, especially power, is starting to boom again and OWL is poised to take advantage of this upturn however they intend to do so in a manner that provides sustainable, long term growth. Strategic planning “This means focusing on service and quality in each project whilst opening additional offices as the need arises,” explained Tony Segadelli, Managing Director of OWL. During 2016 we found many opportunities in the region and we are prepared to implement them in the coming year. This year saw significant growth in the solar sector however OWL is about a lot more than just consulting in solar and so Segadelli explained the growth strategy for 2017 and beyond: “This year saw OWL expand our footprint in the oil and gas sector and we plan to further cement our presence as the industry grows out of the recent price collapse and as demand increases,” says Segadelli. He notes that OWL will achieve this through utilising long term industry experts and by helping its clients’ to develop their opportunities into cash-earning entities. In relation to the volatility experienced by engineering consultancies in Southeast Asia, Segadelli says OWL was able to utilize freed up resources as it undertook its first coal bed methane project in Mongolia and an LNG study in the Philippines. “Furthermore, there are a growing number of very experienced engineers who have set up their own consulting businesses who find our flexibility and entrepreneurial spirit much easier to deal with than the larger companies that they left,” he notes.
Ban Pong CCGT Thailand
Segadelli notes that the firm’s largest projects are all solar-related: a 500 MW Feasibility Study in Vietnam, a 135 MW Owner’s Engineer role in Cambodia, and a 25 MW EPC(M) project in the Philippines. “I have been very impressed with the way that OWL’s managers have found additional resources at short notice for demanding projects,” he says.
opportunities in Myanmar and Indonesia; hydro projects in Indonesia; various coal projects across SE Asia plus waste-to-energy in Thailand. An area of strong growth in the region is hydro and OWL also aims to grow its presence in this sector, initially through smaller scale, mostly run-ofriver projects but in the longer term through large scale hydro projects, says Segadelli.
Sunny solar prospects In terms of technology and sector understanding, OWL was one of the earliest entrants into the solar sector in SE Asia. “We have therefore built up a strong understanding of rooftop and ground mounted solar,” Segadelli notes. “This has been gained through roles of varying degrees from Technical Advisor and Lenders’ Engineer right through to detailed design, procurement and construction management on a multi-contract basis, which is more varied than most of our competitors.” He shares that OWL is currently undertaking solar projects in over half of SE Asian countries and so the company’s knowledge of each country’s cultural nuisances is also well understood. “For example the Philippines has scrapped any talk of a third round of FIT, so rooftop solar is now dominating the market. Our flexibility has resulted in us quickly transitioning from ground-based to rooftop solar projects,” Segadelli says. Next year, OWL expects to further increase the number of solar projects it undertakes on an EPC(M) basis, and Segadelli says this will be particularly true in Thailand where about 100 cooperative projects (of 5 MW each) are expected to be awarded in early 2017. Some of the major projects OWL is focusing on in 2017 include CCGT
Gunning for growth In terms of geography OWL will service the whole of the booming SE Asian market but with particular interest in Cambodia and Myanmar: Myanmar is poised to be a significant growth hotspot in foreign investments and energy boom, while Cambodia is a booming market with a big room for improvement open to power firms. “OWL already has permanent representation in Yangon and we are planning to open an office there. In addition we need to establish a company in Cambodia for our OE project and intend to use this as a permanent company residing in Phnom Penh.”. In addition to solar work in Cambodia, OWL is also undertaking coal fired projects and transmission line installations in the country. Segadelli is confident about OWL Energy’s prospects in 2017 amidst the industry challenges and headwinds. He notes that staff turnover has been extremely low, and that the company continues to build a strong base to grow upon. One of OWL Energy’s strengths as well, he says, has been in hiring and retaining likeminded employees throughout the power industry disciplines and expanding into related energy sectors. “As we continue to grow we will retain our core beliefs in serving our clients and the greater community,” says Segadelli.
“I have been very impressed with the way that OWL’s managers have found additional resources at short notice for demanding projects.” ASIAN POWER 23
VENDOR VIEW: CYBERATTACKS ON PLANTS and enclosed on the outside. Yet, the integration of new applications and the development and decentralisation of networks is making the infrastructure more susceptible.
The rising number of cyberattacks alarms experts
Why are power plants the new targets of cyberattacks?
The sector has become vulnerable against cyberattacks despite energy suppliers and utilities being well protected.
hen electric utilities in Ukraine were hacked in December 2015, the industry was shaken. Two large power distribution companies were the targets of cyberattacks, cutting the power of more than 80,000 people. Even operation workstations were sabotaged by the hackers, making it harder to restore electricity to customers. It took hours to recuperate the grid, and workers even travelled to substations to manually close the breakers that the hackers remotely opened. “The energy industry has become one of the most highly targetted industries when it comes to cyberattacks,” says Dieter Klein, managing director of KEYMILE Asia. Cyberattack in the next three years According to Aon’s Global State of Information Security Survey, the number of cyber incidents reported globally in the power and utilities industries increased from 1,179 in 2013 to 7,391 in 2014. A recent survey of 625 IT executives in the US, UK, France, and Germany also revealed that 48% think it is likely that there will be a cyberattack on critical infrastructure in the next three years. “These alarming statistics highlight the urgent need to ensure our utility operations are well secured,” Klein adds. The sector has become vulnerable against cyberattacks despite energy suppliers and utilities being well protected. This is because of one simple reason: cyberattacks could cause 24 ASIAN POWER
The sector has become vulnerable against cyberattacks despite energy suppliers and utilities being well protected.
large damage. The consequences of cyberattacks in the power sector range from the disruption of public and industrial power provision to business disruptions, information loss, revenue loss, or damage to assets. “Sophisticated attackers have the skills to manipulate equipment, destroy important data, and steal sensitive information from networks, plants, and infrastructure. It can even cause the failure of plants and consecutive physical damage. The critical networks within the power sector are of national interest and attacks can have an effect on a country’s prosperity, public safety, and national defence,” Klein says. He adds that the infrastructure of energy suppliers has been secure
Hacking packet-based data New packet-based devices in the networks for remote monitoring are more vulnerable to cyberattacks because they are connected to the internet. “These IP-based applications are selectable through their IP addresses and are potentially unsecured at a point of attack. Attackers can hack the packet-based data transmission between the applications and steal and manipulate data,” Klein explains. Attacks and defenses adapt and evolve in a continuing dance. As a new technique is developed, its effectiveness increases rapidly until it is ready for deployment. Once deployed, broad exposure to real-world scenarios, feedback to the development team, and inclusion in other defenses further improves its effectiveness. The enhancement continues until it hits a level of effectiveness that prompts adversaries to respond. At this stage, attackers experiment and discover ways to evade this type of defense and develop countermeasures to reduce its value. David Allott, director of cyberdefence at Intel Security, adds that building security into the power grid is challenging, due to service availability and the amount of legacy infrastructure. There are multiple zones that must be secured, and whilst solutions have introduced greater operational efficiencies, they have also introduced a new layer of risk. “Industrial control systems and plant operations need to ensure increased availability, reliability, and safety. This requires tighter collaboration amongst manufacturers, security developers, and industrial process vendors to protect systems,” he says.
Cyber incidents in power & utilities industries
Source: Aon Global State of Information Security Survey
25 ASIAN POWER
analysis: VIETNAM JUNKS NUKE for energy. “Vietnam is heavily reliant on fossil fuels for its electricity supplies, and demand for electricity continues to grow. The decision not to add nuclear energy to its generation mix at this stage will mean Vietnam will become more dependent on fossil fuels, worsening Vietnam’s air pollution, increasing greenhouse gas emissions, and weakening its security of supply,” says Rising.
It may be too late for Vietnam in case it wants to turn back to nuke
Is Vietnam’s decision a giant leap backwards?
Southeast Asia’s most developed nuclear energy market has decided to give nuclear the flick just when players thought things were going well.
he Vietnamese parliament has just voted on a decision made by the policy-controlling government to scrap plans to construct both Russian and Japanese nuclear power plants in Ninh Thuan province. The plants were slated to be operational by 2030 and deliver 4,000MW of power to the rapidly developing and industrialising socialist republic of over 90m people. The reasons provided for this curious decision are economic. In a statement considering only the short-term effects, leader of state-run Electricity of Vietnam Group, Duong Quang Thanh, says, “Currently, power demand growth is not high, whilst domestically generated and imported sources of energy are sufficient for socio-economic development. In particular, prices of imported sources of energy are much cheaper now.” A backward step toward dirty fuel In terms of the economics of electricity generation, coal is not an attractive option, especially when the environmental pollutions and carbon emissions are taken into consideration. Coal, gas, and oil may be cheap in the short term, but fossil fuel prices are highly unpredictable and will rise in the mid to long term. As Dr Victor Nian of the Energy Studies Institute at the National University of Singapore suggests, “When the prices return to less attractive levels, it may become too late for Vietnam to turn back to nuclear power plant 26 ASIAN POWER
When the prices return to less attractive levels, it may become too late to turn back to nuclear power plant construction because of the heavy investment commitment.
construction because of the heavy investment commitment.” Conversely, nuclear energy is not subjected to the level of price fluctuations as compared to fossil fuels. Furthermore, replacing coal-fired power plants with nuclear power plants several years down the road when fossil fuel prices correct upwardly will also mean wastage in investments and assets. “So what Vietnam is actually scrapping is a long-term low-carbon base-load energy source that is competitive when measured by levelised cost of electricity,” adds Nian. Dr Agneta Rising, Director-General of the World Nuclear Association, pulls a few punches in highlighting the negative consequences of this decision on the Vietnamese people, especially considering the population’s critical stage of rapid economic industrialisation and demand Nuclear reactor projects worldwide
Source: Nikkei Asian Review
History will take its own course Other experts add that Vietnam can always reverse its decision in the future. Former secretary-general of ASEAN Ambassador Ong Keng Yong, executive deputy chairman of the S. Rajaratnam School of International Studies at Singapore’s Nanyang Technological University suggests that the decision is near-sighted, in that the policy is geared toward short-term cost savings. “Without the benefit of nuclear power for civilian use, Vietnam will rely more on traditional sources of energy, particularly oil, coal, and hydropower. It will probably buy hydropower from its neighbour Laos. Currently, the Vietnamese authorities view these sources as more competitively priced than nuclear energy. However, if there is rising demand and cost for power in the future and severe environmental concerns posed by coalfired power stations, nuclear power may be considered again by the Vietnamese government in the future,” Yong says. Is this the end of nuclear power plans for Vietnam? “Likely not,” muses Professor Olli Heinonen, of the Harvard Kennedy School of Government’s Belfer Centre for Science and International Affairs. “Vietnam cannot, in the long term, cover its growing energy needs with imports of coal and oil. We will see if construction of smaller modular reactors, enters the picture. If Vietnam continues with the plans to build a new 15MW research reactor, the government will still have a nuclear option in its future energy mix.” With reports from Simon Hyett
Analysis: INDIAN SOLAR STATES
Developers are wary curtailment might come back in some states
India’s top solar states are still in need of regulatory support
India has a total installed large-scale solar capacity of 9,018 megawatt (MW) and a solar pipeline of 14,030MW as of December 2016.
hese states including Tamil Nadu, Rajasthan, Gujarat, Andhra Pradesh, Telangana, Madhya Pradesh, Punjab, Karnataka, Maharashtra, and Uttar Pradesh hold the key to India’s solar future. Tamil Nadu leads all other Indian states with 1,577MW in-operation. In order to fulfil the state Renewable Purchase Obligation (RPO), the Tamil Nadu Generation and Distribution Company (TANGEDCO) recently auctioned 500MW in solar capacity. The state has close to 485MW of solar under various stages of development. Rajasthan’s position was recently usurped by Tamil Nadu as installation activity in the state has slowed. The state has 1,324MW of solar in-operation with a project pipeline of around 1,206MW and could reclaim the top spot. Considering Gujarat has large tracts of land ideal for large-scale grid-connected solar projects and hasn’t faced evacuation and transmission issues, the solar sector in the state has been stagnant with around 1,101MW in-operation and 300MW under development. Gujarat is a power surplus state and has met its RPO obligations and is not in a hurry to ramp up its solar installations. Andhra Pradesh is the state with the most solar parks. Activity in the solar sector has picked up in the state with the completion of Kurnool solar park. At present, Andhra Pradesh has solar projects aggregating 1,009MW in-operation and 1,494MW under 28 ASIAN POWER
Solar sector in Gujarat has been stagnant with around 1,101MW in operation and 300MW under development.
development. Its transmission network will be on-grid by February 2017. Telangana has come a long way with its solar policies and programmes since its inception as a state. Theseprogrammes have helped the state leapfrog others to claim the fifth spot with 1,006MW in-operation and 2,418MW under development. Madhya Pradesh has transformed itself from a power-deficient state to a powersurplus state. Rapid implementation of policies and programmes has led to a growing solar sector. Currently, the state has 861MW in-operation and 722MW under various stages of development. The infrastructure at the Rewa solar park is nearly complete. Once tenders are issued, solar is expected to pick up pace. The largely agricultural state of Punjab has shown progress in terms of fulfilling its power demand. Punjab is ranked seventh with projects in-operation
aggregating 569MW. The state has a project pipeline of around 453MW. Karnataka has the largest solar project pipeline of around 3,376MW. The state is facing solar park issues relating to evacuation and transmission which could delay projects. The state is ranked eighth with projects in-operation aggregating around 511MW. Maharashtra, the most industrialised state in India, is ranked ninth in terms of solar energy production. Projects aggregating around 384MW are inoperation. The state has a project pipeline of 957MW. Uttar Pradesh is a surprise addition, after power purchase agreements (PPAs) in Jharkhand for 1.1GW were not signed. The development of solar in Uttar Pradesh has been slow. The state has inoperation projects aggregating 241MW and a project pipeline of 696MW. Challenges abound Developers told Mercom that in Tamil Nadu and Rajasthan, they are wary that curtailment might come back to haunt the sector. The distribution companies (DISCOMs) can be reluctant to purchase solar power due to costs higher than conventional energy. Tamil Nadu has yet to join the Ujwal DISCOM Assurance Yojana (UDAY) programme which aims at the financial turnaround of DISCOMs. Until then, developers will be concerned due to TANGEDCO’s history of payment delays. In Andhra Pradesh, transmission losses are its gravest issue and few DISCOMs are reluctant to buy solar beyond their RPO. In Punjab, DISCOMs do not want to buy expensive solar power to provide subsidised power to farmers. Transmission losses are also an issue in Punjab, furthering developer reluctance. Telangana is mired with transmission and grid-connectivity problems. The state has a huge project pipeline, but developers are concerned about power evacuation once all projects are commissioned. The state also suffers from land availability and grid-connectivity issues. From Mercom Capital Group
Indian utility-scale cumulative solar installations and pipeline (MW)
Source: Mercom Capital Group
More natural gas usage is forecast for China
he last couple of months of 2016 saw a significant increase in the amount of positive media reports upon the planned utilisation of natural gas across many regions in mainland China. The general outlook for the natural gas industry in China seems to be remaining positive with both analysts and the natural gas companies being quoted positively in local media reports. Recent figures from the country’s custom office during mid-December report that China’s imports of liquefied natural gas (LNG) rose 46.6% from the previous year up to 2.66m metric tons. This is the highest level of imports of LNG on record, says a recent report in the China Daily newspaper. It would seem that due to the fact that China’s swiftly rising energy requirements cannot be currently satisfied by the county’s own domestic production capability; China will become progressively more reliant upon LNG and crude oil imports, according to BMI Research. The report from BMI says that the outlook for natural gas in
or those of us out there who are part of the Renewable Energy story of this century, we have seen PV dropping from more than 4 US$/W to the current 0.9 US$/W or even less. This in a span of a bit more than ten years. Wind onshore on the other hand started on a remarkable 2 US$/W and moved quite fast to 1.5 US$/W being currently on the 1.2 US$/W or a bit below. I would like to stress how remarkable the decrease in costs in RE has been, but clearly the FiT mode developed to foster wind did not help bringing down the costs as auction and reverse bidding have done for solar. Asia and namely India has been pivotal in driving down the costs in par with Africa and South Africa with very successful tariff discovery processes. Wind has also followed on the wake of the solar auctions and also power auctions, which have revealed in some cases the true costs of wind, as in Brazil and partially in South Africa and more recently in Morocco. The CAPEX of solar is now lower than wind and may continue to go lower, even if Europe and/ or the US may choose to continue blocking the Chinese imports or adopt protectionist measures that ultimately will lead to retaliations and to a loselose scenario for both parties. Nonetheless the cost of solar power as everyone should know by now is not the CAPEX cost, but the LCOE. The Levelised Cost of Electricity is an economical metric that provides the real cost of energy for a certain period of time by dividing the costs of investment, O&M, and decommissioning by the yield during the desired period taking into 30 ASIAN POWER
China looks positive. An annual growth for the 2015-25 periods in China is expected to be around 5%. Healthy growth rate In order to satisfy the country’s ever-growing energy needs, it is felt that both energy production and consumption will both experience a healthy growth rate during the next decade. It seems that China’s ever-growing energy needs cannot be satisfied by domestic production alone. So, the country will become increasingly more dependent upon imports of natural gas and crude oil. Recent media reports say all of Sinopec’s upstream gas fields are currently in full-load production. The company is currently increasing the speed of the construction of infrastructure that is currently underway. These critical energy infrastructure projects include the Chinese gas pipeline projects in Tianjin and the Sichuan to East China.
This acceleration will ensure that both projects will be in operation at year’s end. Domestic shale gas production is now a significant part of China’s energy mix China’s Sinopec has recently reported that the Fuling shale gas project, which is located in the Sichuan Basin in China’s southwest is performing well. This successful shale gas project is currently planning to increase its output of shale gas to 10b cubic metres by 2017, says a report from Sinopec in many trade and business media reports. China’s natural gas reforms Recent reports in the local business media report that China’s CNPC (China National Petroleum Corp) will split up CNPC’s natural gas and pipeline units. This significant development will assist in speeding up China’s natural gas reforms and will assist in the speeding up of reforms in the country. These developments will help promote and reform the sector into a market-based pricing system. Reports in the local media say that this new gas pipeline company will have the responsibility for all of CNPC’s natural gas pipeline operations and sales. The vice president of CNPC, Xu Wenrong has been quoted as saying that this new development will be significant in accelerating ‘much needed’ market reforms in China’s natural gas sector. Analysts are saying that the separation of natural gas sales and pipeline units will serve to speed up market reforms in the natural gas sectors.
Agostinho Miguel Garcia
Is solar power really cheaper than wind power?
consideration the yearly loss in generation due to efficiency loss. All of these costs are taken into consideration on the instance that they pertain to, so all costs are properly discounted. For those that are more into financial analysis, just drive the Net Present Value of the project to zero and extract the tariff under which that occurs. Tariffs getting low We have seen remarkable tariffs being purposed for solar power, as low as 2.91 US$ cents in Chile and 2.89 US$ cents in Abu Dhabi. As Chile leads in terms of solar resource availability in the world, we may consider 2.9 or even 3 US$ cents per kWh to be the lowest current LCOE for solar. (Let us leave the discussion on financing costs for now). The lowest for wind onshore and also looking at remarkable places for wind resource, as Morocco, show 2.5 US$ cents per kWh and also averages of 3 US$ cents per kWh. It seems that wind may still be cheaper after all! Let us look more broadly at this question. If
we compare the LCOE of solar and wind, the difference in CAPEX, which impact the upper part of the formula, is offset by the difference in resource on the lower part of the formula. (OPEX are comparable, though solar has a lower cost). Whilst we may have 20 to 25% difference on the CAPEX currently (between 0.9 and 1.2) we have a potential difference of 25 to 30% in availability of resource (between 2200 and 3000 hours per year). So they may cancel out in the end and the internal rates or return will determine the final tariffs. Of course exceptional sites for wind with around 3500 hours would be hard to beat by solar, even in Chile! What is remarkable is that both wind and solar are now cheaper than grid power in Europe and many other regions and the milestone of grid parity is an old story. Currently the issue is how to move from the current energy mix to a pure RE mix with the investments that may be necessary in the grid and also to integrate storage. Happy new year and let us continue delivering green and clean power to the world!
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A new look at portfolio investing in renewables
ike a certain iconic dessert advertisement, “Nobody doesn’t like renewables”. Yet, renewables have been difficult to invest in for a variety of reasons. From the perspective of publicly traded portfolio investors, renewables investments in emerging markets, has been especially tricky given the particular nature of renewables in terms of being narrowly associated with characteristics tied to size, location, climate, etc. With the new trends and developments in fintech though, new investment funds are revisiting emerging market renewables again, and with their new tools and approaches, may be finding promising pathways for investment. (Renewables) Romance… The litany of usual grouses can seem multi-layered whenitcomestorenewablesinemergingeconomies in Asia. It’s so narrowly balanced — more cloud cover here… less wind on that ridge… crops yields (for biomass) were less due to this weevil, etc. It’s in difficult places – laws are not ripe in country X,
n order to fulfil its commitments under the Paris climate change agreement, Singapore’s climate action plan includes a number of strategies, including reduction of emissions from its power generation sector. Already, Singapore generates more than 95% electricity using combined cycle gas generators; thus, it needs to increase the share of Solar PV to achieve further reductions. However, Singapore’s electricity regulator – the Energy Market Authority (EMA) – is rightly concerned about the impact of high PV penetration on grid stability. Experience from other electricity markets with relatively high percentage of PV and wind has shown that variability and intermittency impacts can be reduced by spreading the installation of these resources across large areas. ESS in Singapore In 2015, Singapore opened its electricity market for energy storage systems (ESS) by allowing them to bid for offering “regulation” service. Regulation is a frequency balancing service which is used to correct the generation – demand imbalances within a 30-minute trading period caused by load variability and load forecasting error. However, ESS’ are very dynamic and can offer a number of solutions to generators, grid operators, and consumers. As per the Sandia National Laboratories, ESS can provide value in seventeen different types of applications such as price arbitrage, ancillary services such as voltage regulation and load following, facilitating demand 32 ASIAN POWER
corruption is a bugbear in country Y, the financial and currency infrastructure in country Z is too rickety, etc. And the nail in the coffin to top it off in the oft-stereotyped macho world of finance – It’s too small. Without finance… As a result, what investments that have been channeled in the renewable power in emerging Asia, has often been more a series of seemingly disconnected individual initiatives or driven by public-sector policy drivers. Public equity was often restricted for all of those reasons noted above, and by additional limiting factors such as listed exchange liquidity, lack of share research, and investor mandate restrictions to global indexes such as the MSGI. For those public equity plays which may be possible with those thickets though, the investment options were also limited. Some of the larger national utilities and regional conglomerates have engaged in renewables, but such renewables had to
be subsumed within the wider corporate balance sheet rather than stand-alone as an independent investment focus. As a result, for such public equity investment fund managers, there wasn’t really a readily available supply of publicly traded shares in renewable energy plays aside from those rolled within such larger utilities or conglomerates, in which case the investment dynamic from a renewables play, was diluted to being a footnote within such larger utility. Passive investors, were then generally limited to private equity plays. In turn, companies and their private investors in renewables, could not count on exits from going public, thereby further dampening the investment positives of renewables plays. A new hope Globally though, investment options and returns are low despite how enticing putting money in a bank and getting less than 1% may swoon the hearts of investors. As a result, with new fintech tools and approaches, some public equity funds are now revisiting areas of investment alpha (variable upside returns) including for emerging market counters, renewables, and yes, even “small” micro-caps. Taking a step back – how does this landscape then look like? In recent decades, emerging markets do tend to outperform more established markets and smaller plays do have more dynamic behavior too. Aside from all of the other issues, some groundwork problems have been with the lack of company research available, the trustworthiness of public data, and liquidity in small stocks.
Singapore looking to develop policy framework for energy storage side management, and firming up output from variable renewable energy sources. Recognising this potential, Singapore is now looking to develop a holistic policy framework that will govern application agnostic integration of energy storage solutions in its electricity market. The framework will seek to answer a number of questions such as – which applications of energy storage deployment can provide the most value in Singapore? How can commercial viable business models be developed for ESS? What changes to regulatory framework are required to accommodate certain unique characteristics of storage systems – such as should ESS be considered as a generation activity, as a load, or neither, or both? An interesting question that the framework will answer is whether the current electricity market design can provide enough incentives for ESS to participate in the market. For example, studies have concluded that ESS can be much more effective in providing regulation service as compared to a combustion turbine, due to their high ramp rates
and ability to accurately follow the AGC signal. Regulation service System operators in the US thus provide fast responding regulation providers with a performance payment in addition to the usual capacity payment, making regulation markets more profitable for ESS. Singapore’s rule change on allowing ESS to participate in the regulation market notes this incentive, however its market rules continue to treat ESS at par with other generation asset that provides regulation. Energy storage has the potential to revolutionise Singapore’s electricity market in the coming years; right from enabling Virtual Power Plants to increasing number of prosumers with PV systems on their rooftops. However, this requires that Singapore develop a solid framework that provides investors with certainty and appropriate incentives to consider investing in energy storage applications that are expected to have the maximum economic value and market potential.
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