Issue No. 81
TEPCO ONE YEAR
ISSUE 81 | DISPLAY TO 30 JUNE 2017 | www.asian-power.com | A Charlton Media Group publication
TEPCO ENERGY PARTNER’S CEO TOMOAKI KOBAYAKAWA IS DEAD SERIOUS ON WINNING BACK CUSTOMERS THE COMPANY LOST TO RIVAL UTILITIES
MALAYSIA’S “UNSUSTAINABLE” FINANCING MODELS
INDIA SMASHES BUREAUCRATIC BARRIERS FOR WIND POWER SPURT SECTOR REPORT: ASIA’S SLOW PUSH FOR NUCLEAR ENERGY USE IT’S CLOSING TIME: JAPAN’S SOLAR FIRMS QUIT
1 ASIAN POWER
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FROM THE EDITOR In this May to June issue, we delved into the Asian nuclear energy industry and its current role in the regional energy mix.
Publisher & EDITOR-IN-CHIEF Tim Charlton production editor Karen Lou Mesina Graphic Artist Elizabeth Indoy
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We also shone the spotlight on Singapore and Japan in this issue’s country reports. Both countries are gunning for greatness in the solar power industry, but each has its issues to deal with. Singapore’s solar industry can’t go all-out as financing concerns still haunt the players. Japan, on the other hand, is plagued with bankruptcies as solar firms throw in the towel amidst vague business strategies, poor sales, and insufficient capital. Will the countries weather the solar storm? In early April, Japanese utility TEPCO announced that it has appointed a new president: TEPCO Energy Partner’s CEO Tomoaki Kobayakawa. We at the Asian Power had the honour of interviewing him before he transitioned into the new position, wherein he shared that TEPCO’s retail arm is dead serious on winning its customers back and making a name in the country’s gas market by July 2017. Start flipping the pages and enjoy!
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Asian Power erred in its November-December 2016 issue by incorrectly stating in the CEO Interview on page 25 that KOMIPO’s Chung Chang-kil is the CEO of the Year at the Asian Power Awards 2017. It should have read: KOMIPO’s CEO Chung Chang-kil is the CEO of the Year at the Asian Power Awards 2016, not 2017. For the full corrected article, please visit the digital version at https://issuu.com/charlton_ media/docs/ap_novdec16_lowres
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ASIAN POWER 1
CEO INterview TEPCO Energy Partner wants its customers back
FIRST 06 Boon & bane of working with Chinese EPCs 07 Financing models are unsustainable 08 More deals for private IPPs 10 India smashes bureaucratic barriers to spur growth in its wind power sector
ANALYSIS 24 Here’s what is wrong in India’s solar success story
COUNTRY REPORT: Singapore Singapore’s savvy approach to solar growth
COUNTRY REPORT:JAPAN It’s closing time: Japan’s solar firms quit
ASIAN POWER UTILITY FORUM 26 Mission impossible: Indonesia may be setting ambitious energy targets
28 Why tiny Singapore’s solar energy sector can’t go big despite technological lead
OPINION 30 Boosting China’s clean energy sector 30 More women in hydropower companies 32 Will Singapore’s power sector bear the brunt of its carbon tax? 32 Renewable energy recipes in the development of solar PV projects
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2017 is another “year from hell” for Asia’s PV module suppliers: analysts Solar module prices are expected to continue declining in 2017 as global supply continues to exceed demand. As the largest supplier and installer of solar modules, China will continue to drive global pricing, according to Bridge to India. The country’s demand is expected to be up to 20% lower than in 2016.
3 challenges hampering Japan’s wind energy growth Japan’s wind power sector remains a tough nut to crack. The small country has 70% of its land mass covered with mountains. This would have given it an opportunity to harness wind energy. However, in 2015, it only generated 3.04GW of wind power.
Malaysia’s renewables capacity to balloon by 150% in the next decade Whilst the scale of Malaysia’s renewables sector remains limited compared to regional counterparts, the country’s supportive regulatory environment for renewables and stable economic and political environment translates into an attractive destination for renewables investment, according to BMI Research.
Indonesia’s shifting rules threaten coal-fired plants’ bankability: analyst In the fast-evolving regulatory landscape of the Indonesian power sector, it’s hard to say for sure how changes will affect developers, investors and lenders, according to Yulanda Chung, an energy finance consultant with the IEEFA.
Renewable energy jumped to 16% of India’s energy mix Renewables generation in India now accounts for ~16.10% of the country’s energy mix, according to Mercom Capital Group. The country’s total installed generation capacity is 315,369.08 MW with renewables accounting for 50,745 MW of it. Hydro power makes up 14%, with 44,189.43 MW of the total power generated.
CGN Power’s nuclear power plant utilisation to drop 2.2% Citi analysts remain downbeat on CGN Power as utilisation of its nuclear plants should drop 2.2% yoy in 2017E, mostly in Liaoning and Guangxi. Secondly, tariffs have downside risk from more power trading, and lastly, high interest rate risks still loom.
CO-PUBLISHED CORPORATE PROFILE
Providing good engineering solutions
Powering on along with Southeast Asia’s energy markets OWL Energy continuously provides quality and reliable industry advice in a changing region.
ven as power projects across Southeast Asia continue to grow and diversify, power engineering consultancy firm OWL Energy is showing how it is not just able to keep up with the changes, but is also proactive in helping clients keep abreast with industry developments “We are all about providing good engineering solutions in a service oriented manner to the client regardless of whether the project is a billion dollar project, with multilateral financing including the IFC / ADB, or if it is a small study to decide where to put the next ash pond,” says Tony Segadelli, managing director, OWL Energy. Clients constantly praise the breadth and depth of OWL Energy’s capabilities whether they be in fossil or renewable energy and the full project cycle capability, he also notes. “Whereas global companies have many layers of bureaucracy, OWL is lean and enthusiastic to the extent that even I am actively involved in project delivery.” Further, Segadelli adds, “Even our expat staff have been in Asia for decades and our strong network of engineers means we can quickly bring in outside expertise as required, covering technology experts, environmental consultants and market analysts.” Early victories OWL Energy has bagged notable wins in the first half of 2017. “Our largest success has been in taking over a distressed solar project and providing detailed design, procurement support and construction supervision from the engineering, procurement construction (EPC) contractor to get the project back on track,” shares Segadelli. “We have also diversified in terms of technology, and are now working in various capacities on hydro, battery storage, solar, biomass and waste-toenergy projects within the region.” Clients for these projects have ranged from the
large utility/global independent power producers (IPPs) to large conglomerates that have never looked at the power industry before and see it as a good market to enter, Segadelli also notes. For example, OWL Energy was engaged by a company in the Philippines that owns restaurants, mines and bookstores which has significant cashflow, and was looking at LNG facilities to invest in. In Myanmar-based projects, they are helping local companies and global entities as they seek to explore this developing market, to select the viable projects and then focus on their development. “One area that has changed in the last 12 months is that I am traveling a lot more. Singapore is a destination I often visit because there are a lot of regional investors and lenders there. However with ASEAN being 50 this year I will be celebrating by visiting all 10 countries,” he adds. Ability expansion For the remaining half of the year, OWL is looking to further increase its presence around SE Asia. In Thailand, for instance, the focus is shifting to combine intermittent and baseload supplies. In the Philippines, OWL will be expanding their abilities to provide project services to operating plants, those requiring repowering, and to the smaller hybrid systems that are becoming more economic as technologies combine to offer cost-effective alternatives to the traditional diesel generators. Myanmar requires all forms of power generation including coal and solar, while Cambodian initiatives for the company will be largely focused on solar. Short-term future plans mainly involve continuing the company’s strong engineering
Active involvement is a priority
capability, flexibility and service focus. OWL Energy will also focus strongly on investment hotspot Myanmar, where they have some strong early wins including Lenders’ Engineer on the first IPP projects to be truly project financed. “On the technology front we will be focussing on tackling technology developments, such as battery storage, as they are introduced in the region,” says Segadelli. Agile and nimble He is unfazed with observations on the strong consolidation in the engineering consulting sector at the moment. Even in the presence of global monoliths, OWL strives to aim for quality projects, client service, and undeniably strong record in seeing projects from start to finish. “OWL is all about focussing on being a local power engineering consultancy with a global outlook and reach. We are ISO9001 accredited, unlike most local firms,” says Segadelli. Further, their senior management team all come from the large consulting companies and understand the importance of having a business that is focussed on meeting clients’ needs at the right time all the time. Segadelli points to this as one of the company’s strengths and advantages over other firms.“Too often the large companies spend most of the time ‘doing business with themselves,’” notes Segadelli. “We have few layers of management and even I regularly perform project work and have a direct relationship with our clients.” For OWL, this means that when a client asks it to do a task or negotiate a contract, the company does so in a manner that facilitates getting the real work started immediately and providing a product that meets the client’s requirements. “We are the owls,” says Segadelli. “Agile and nimble.”
“We have few layers of management and even I regularly perform project work and have a direct relationship with our clients.” ASIAN POWER 5
FIRST INDONESIA’S NUKE GOAL INDONESIA
Dr Taswanda Taryo, PTKRN-BATAN
Asian Power spoke to Dr Taswanda Taryo, principal researcher of PTKRNBATAN, Serpong (Chief of Project Management Organisation for Indonesia Experimental Power Reactor 10MW), as he discusses the way forward for the Indonesian nuclear energy sector. What is the role of nuclear energy in Indonesia’s energy mix? Indonesia has made a nuclear energy outlook in 2014 and the Government of Indonesia has clearly stated that Indonesia needs 115GW in 2025. Almost a quarter of new and renewable energy (NRE) can be from solar, geothermal, micro-hydro, biomass, and nuclear power sources. One of the advantages of nuclear is that it is green, very competitive, and capable of providing larger amounts of power. What are the unique challenges for emerging countries whilst developing their nuclear power programmes? Most people agree if we talk about nuclear use for non-power (agriculture, health, industry etc.), but they oppose the promotion of nuclear for power. Fortunately, a survey done early this year shows that 77.5% of Indonesians agree that nuclear power plants (NPP) should be available in the country. The construction of NPPs depends on political decision. They are not interested in constructing NPPs since the construction time is more than 5 years. It is noted that elected officials only lead the country for 5 years. What are the main considerations in selecting nuclear technologies? Site specification, grid integration, nuclear installation safety, characteristics and technical performance, fuel performance and cycle, radiation protection, environment influence, security of installation and site, scope of owner responsibility, issue of technology owner and supplier, capability to construct NPP on time, technology transfer, as well as project efficiency and effectiveness. 6 ASIAN POWER
“Very compelling” reasons to work with Chinese EPCs
Boon & bane of working with Chinese EPCs CHINA
hen a investor engages the services of a Chinese engineering, procurement and construction (EPC) contractor for a wind project without a proper oversight strategy in place, prepare for the worst to happen. Take the case of one company that worked with a Chinese EPC contractor and made the mistake of having a passive Owner’s Engineer and Owner’s Representative– the project has become inoperable due to quality issues and is currently engulfed in a financial squabble. “These issues were discovered after the bulk of payments were made to the contractor,” says Aaron Daniels, managing director of Modern Energy Management, which is currently advising an investor of the troubled project. “Unfortunately, while contractually our client is in the right, the project bonds were drawn on a Chinese bank in China, which has been resistant to honouring our client’s demands to call on the bonds.” Chinese EPC contractors can prove irresistible to investors due to their competitive pricing, plus their strong access to certain markets and Chinese finance. “A key to understanding Chinese EPC contractors is in recognising they are State Owned Enterprises,” he says. “Within an organisation this is typically manifested
by poor internal communication about the scope of work and requirements of the project.” To prevent a disappointing project result, firms and investors that choose to work with Chinese EPC should insert control points in contract management, especially regarding prerequisites for payment. Investors must have an Owner’s Engineer with very strong project management capabilities to support the EPC contractor in managing schedules and project quality. “While the EPC contractor may have international experience, our observation is that the typical Chinese EPC contractor project management team may be newly minted engineers fresh out of school, or have limited English speaking abilities with which to communicate with local contractors,” says Daniels. Other key protocols to put in place are requiring robust defect warranties, including latent defect warranties for equipment and design coming from China; arranging for callable, draw on demand bonds from a bank in a neutral, regulated country like Singapore; and setting up a Contractor Professional Indemnity insurance cover to mitigate against investor’s pure financial losses related to design, project management and professional services provided by the EPC contractor. “To the inexperienced, there are challenges to working with Chinese EPC, but they can be managed with an experienced team. And having the ability to interact with the Chinese in Mandarin helps tremendously in building the relationship with the EPC contractor to maximize the value that they do bring to the project,” says Daniels. There can be a strong case to select Chinese EPCs because of the “very compelling” value proposition they offer to investors, that is if the relationship is managed well.they offer to investors, that is if the relationship is managed well.
Operation phase (20 years)
Source: Modern Energy Management
Syed Ahmad Syed Mustafa
Energy consumption must be well-managed
Financing models are unsustainable
hen the Malaysian government announced that it is targetting to approve RM170m (US$38.6m) in loans to technology-based companies this year, energy firms were amongst those who got excited. However, these firms are reluctant to go all-out on power projects as the country’s energy financing schemes and subsidies are still on the rocks. Syed Ahmad Syed Mustafa, chief executive officer, Greentech Catalyst, says that whilst subsidies have been helpful in energy development, they are not sustainable as they stretch the government’s expenditure capacity. Mustafa says that in order for Malaysia to remain an economic leader in
the region, the country’s energy consumption must be well-managed in order to ensure more efficient production. Green financing scheme Greentech Catalyst has been working with the Malaysian government to implement the Green Technology Financing Scheme (GTFS), which targets producers and users of green technology and provides them with 60% in government guarantee on bank loans and a rebate of 2% on interest charges. Since it was established in 2010, GTFS has financed 272 green projects amounting to RM2.96b (US$671.4m) and is expected to have generated RM5.81b in green investments. Due to
the success of GTFS, it will be continued from 2018 to 2022 with additional target of loans approval of RM5b (US$1.1b). Malaysia is not alone in revolutionising its energy financing schemes to accommodate more projects. Thailand’s Bureau of Energy Regulation and Conservation (BERC) continues to innovate its Energy Conservation Promotion Fund to spur growth in incoming energy projects. Wisaruth Maethasith, engineer, BERC, shares the Energy Efficiency Revolving Fund, or revolving fund, the ESCO revolving fund, and a direct subsidy programme as Thailand’s major schemes for energy efficiency or renewable energy projects. Maethasith shares that once accepted for the revolving fund, a project will be eligible for a low-interest loan maximum of THB50m at 3.5% flat interest rate, with a 5-year repayment period. “Six questions must be asked when designing any energy efficiency programme: What is the target market? Are there drivers for action? Is there a supply chain? What are the barriers? What solutions can address the barriers? How can change be sustained?,” says Joshua Brunert, analyst, Carbon Trust.
Total financed projects (US$m) by technology, 2017
Source: Private Participation in Renewable Energy Database, World Bank
the chartist: China’s coal-fired power generation to stagnate in the next 10 years In early March, China announced plans to shut down or stop the construction of Coal production stabilisation in the books over 50GW of coal-fired power capacity in the country. BMI Research says this announcement aligns with a series of recent policies through which the Chinese government has aimed to tackle overcapacity in the coal sector. “Whilst we do expect coal generation to grow by an annual average of 0.5% between 2017 and 2026, this entails a substantial slowdown from historic levels,” it says. This growth can also be contextualised by the fact that coal power generation has contracted since end-2013 and it expects total coal-fired generation in 2026 will trend below that of the peak in 2013. “We forecast coal-fired power’s share in the power mix to fall from 67.4% over 2017, to 53.8% in Source: BMI Research 2026,” it says.
Curbed coal power not to surpass 2013 peak
Source: BMI Research
ASIAN POWER 7
More deals for private IPPs
Projects planned for Java-Bali in 2017-2020
First Gen overcomes Slovakian EPC holdups PHILIPPINES
rivate independent power producers (IPPs) popped the champagne as soon as Indonesia’s Minister of Energy and Mineral Resources approved the 2017-2026 Electricity Supply Business Plan (RUPTL) of the national power utility, PT PLN (Persero). According to Baker McKenzie, the RUPTL in essence represents PLN’s plan to procure electricity from private IPPs. “Over the last decade, the RUPTL has evolved from a loose guideline as to which locations PLN may wish to see IPPs developed in, to a rulebook essentially requiring PLN to contract with IPPs whose projects appear on the RUPTL,” explains Luke Devine, foreign legal consultant and head of Energy, Mining & Infrastructure in Asia Pacific at HHP Law Firm (Baker & McKenzie). Resource-rich areas Further, in order for IPP projects to gain the benefits of the government guarantee program introduced under Presidential Regulation 4/2016 on Acceleration of Power Infrastructure Development, the relevant project must be listed on the RUPTL. Devine says that for areas rich in coal and natural gas resources, PLN is prioritising the development of mine plant WATCH
Source: Baker McKenzie
mouth and wellhead power projects respectively PLN intends to satisfy peak demand from gas fired power plants as well as hydro peaking plants (including pumped storage). Mobile power plants are to be deployed to deal with short-term shortages of power in various locations, particularly Sulawesi and eastern Indonesia. “For the Java-Bali system, PLN will implement 1,000MW class ultra super critical (USC) coal fired technologies, and will promote gas fired power plants as mid and peak load solutions. For the Sumatera, PLN intends to gradually implement 600MW class USC coal fired plants, depending on the readiness of the grid system,” Devine explains. The issuance of the new RUPTL now empowers PLN to continue to push out its bid documents for the development of new projects, and accordingly Devine is hopeful of seeing a great deal of activity around new greenfield IPPs over the coming few months.
Francis Giles Puno, First Gen
Francis Giles Puno, president and COO of First Gen Corporation, shares with Asian Power the difficulties they’ve had in commissioning their recent power plants located in Southern Luzon.
Thai Solar Energy’s 154.9MW solar farm
Kudankulam reactor begins operations
Sarulla geothermal plant starts running
The US$539m project will be on 332.8ha of land. Thai Solar Energy announced in a letter to the Stock Exchange of Thailand that it has acquired the rights to build and own a 154.9 megawatt (MW) solar project in Onikobe, Miyagi, Japan. The deal states that Thai Solar Energy will hold 60% share in the project, and 40% will be owned by Sino-Thai Engineering & Construction. In addition to this acquisition, both firms will acquire PurpleSol and SolarOne to complete the project.
The second unit of Kudankulam nuclear power plant (KNPP) located in Tamil Nadu, India has started commercial operations, according to Enerdata. “The KNPP will consist of up to eight nuclear reactors of 1,000 MW each. The first one started commercial operations on 31 December 2014. The units entered the construction phase in October 2016 and are expected to be commissioned in 2022 and 2023, respectively. Four additional 1,000MW reactors are also under consideration,” Enerdata said.
The plant will provide approximately 110MW. Toshiba and Ormat Technologies Inc. announced that the first unit of the Sarulla geothermal power plant, one of the world’s largest power plants, located in Indonesia’s North Sumatra, has commenced commercial operation. The approximately 110MW power plant, which combines flash and binary technologies to provide a high efficiency power plant and 100% reinjection of the exploited geothermal fluid, is operated by Sarulla Operations.
8 ASIAN POWER
Tell us more about your recently commissioned 414MW and 97MW projects. The 414MW San Gabriel power plant and 97MW Avion power plant are both located inside the First Gen Clean Energy Complex in Batangas City, Philippines. The plants are adjacent to the existing 1,000MW Santa Rita and 500MW San Lorenzo power plants. The site was determined to be the strategic location for both plants due to its accessibility and proximity to the plants’ fuel source. Natural gas utilised by the plants are supplied by the service contractors for government service contracts no. 38, which extract natural gas from the Malampaya field and then transport the gas through a 500 km pipeline to the gas plants in Batangas. San Gabriel achieved commercial operations in November 2016. On the other hand, Avion achieved commercial operations on gas in September 2016 and on liquid fuel in January 2017. San Gabriel is designed to provide mid merit supply capable of running on cyclic (daily start and stop) operation. It can also provide base load supply competitively if required especially with its close to 60% efficiency at site conditions. Avion is designed as a peaking power plant intended to displace expensive peaking oil-fired plants and sell power to the spot market mostly during peak hours, when additional electricity supply is needed by electricity users. Both plants rely on superior flexibility to cater to the unique needs of the Philippine grid. What difficulties have you had and how did you work your way around these? To develop Avion, Prime Meridian Powergen Corporation (PMPC) initially contracted IEG, a Slovakian contractor, to deliver a full turnkey power plant. Unfortunately, IEG struggled to comply with their obligations under the contract. This resulted in significant delays which led PMPC to take over and complete the project with the help of other contractors as well as the internal strength of the First Gen organisation.
We want to power not only a nation, but each and every life in it We want to light not only cities, but each and every home in it We strive to deliver a smarter, cleaner, more reliable energy for everyone That's our part in building a brighter Indonesia
PT Cirebon Electric Power | PT Cirebon Energi Prasarana www.cirebonpower.co.id Cirebon Power @CirebonPower_ofďŹ cial @CirebonPower
India smashes bureaucratic barriers to spur growth in its wind power sector
GREEN’S THE NEW BLACK PHILIPPINES
hen India’s first large-scale wind power tender resulted in an astonishing 3.46 rupees/kWh or US$0.052/kWh early this year, DV Giri, secretary-general of the Indian Wind Turbine Manufacturers Association (IWTMA), thought the record-low price is not a “magic number.” Giri says the price reflects plenty of factors that not everyone has priced in, one primary factor of which is benign conditions for bidders in Tamil Nadu.India aims to achieve a renewables target of 175GW by 2022, 60GW of which is committed for wind power. The recent tender that resulted in the record breaking price attracted intense competition from bidders, reflecting interest in the new procurement model. Giri says that the enablers for the wind target have already been put in place. Primarily, the feed-in-tariff will continue in the short term as the government pushes for auction both for interstate by the union government and intrastate by the state government. Grid corridors and grid augmentation are now established for evacuation of power. Also, utilities which are financially weak will enjoy performance-based incentives provided that they perform renewable purchase obligation, send timely payments to the generator, and employ “must run status” for wind.
India’s expanding energy sector is a distinct favorite amongst developers and bidders, and its position as a global wind leader has brought in state-of-the-art technology from Europe ranging from 250kW to 3MW with hub heights of 100 metres and above, and rotor diameter of 100 metres and above. “India can build up to 2 to 3 GW per annum in the next 24-36 months,” adds Giri.
Rolando Bacani, GBPC
Darling of the sector From a dedicated ministry, the Ministry of New and Renewable Energy, to ease of access via the Electricity Act of 2003, bureaucratic barriers are now reduced for companies looking to break into the renewable energy scene. Whilst land procurement remains a challenge, the government is already consulting agencies to help ease the process. Steve Sawyer, Secretary General of the Global Wind Energy Council (GWEC), says global wind energy has surpassed 500GW as of the end of 2016. Offshore wind remains to be in a growth path and is not yet a major concern in India, but GWEC expects that it will soon be a hot topic in the next four to five years years. “The evolution continues in two main directions: increasing sophistication of the design of turbines to take advantage of lower wind speeds, with taller towers, lower cut in speeds, longer blades, downrated generators, opening up many new geographies to commercially competitive wind power which was not available before. And then offshore, we see the growth in size. We now have a 9MW machine in commercial deployment and it won’t be long until someone makes a 10MW and puts it in the water, which improves the economics of offshore quite dramatically,” Sawyer says on the issue.
Coal-focussed Global Business Power Corporation is on a mission: to try out its luck in the renewables arena. CEO Rolando Bacani shares the group’s ambition. What is GBPC’s biggest plan to date? Our retail energy arm, Global Energy Supply Corporation, has entered into a one-year, 10MW supply agreement with Cebu-based cement manufacturer Mabuhay Filcement. We are also starting to venture out into more renewable energy projects. Our first project will most probably be located in Batangas and it’s going to be a 36MW biomass energy project. It was initially slated to be in Negros, but we didn’t make it to the feed-in-tariff (FiT) batch. It’s already running, actually, we just need to secure more permits from the Department of Energy and the Energy Regulatory Commission to get FiT. Whilst we’re working on the Batangas plant, we are also working on our other project in Negros. We’re also looking at putting up a pump storage plant and a 50MW solar plant in the Visayas region.
Is the shift in Thailand’s purchasing model boon or bane? When the power purchasing agreement (PPA) for renewables in Thailand changes to firm contracts, uncontrollable power sources such as solar, wind, and waste-to-power may face difficulties in fulfilling their obligations and tougher competition in biddings. Reports from Maybank Kim Eng show that the Energy Policy and Planning Office expects licenses for 1,000MW of power from solar, wind, biomass, biogas, and waste-to-power, This means that renewable energy companies shall have an obligation to supply power to EGAT as contracted. However, they will also not require continuous power loads like conventional power plants, but only during peak times for each power source. The average plant factor of renewable power to be used in firm PPAs is expected to be 25-30%, compared with 20-22% last year, which will ensure efficiency. The Thai government will also reward its new licenses 10 ASIAN POWER
for renewables based on bidding. This and higher requirements may cause tougher competition between industry newbies and big players. Call for transparency Cynthia Pornavalai, partner at Tilleke & Gibbins, says that Thailand needs to improve the overall structure of its renewable program from the legal/regulatory, ecological, and economic angles. “Comprehensive review and updates to the legal and regulatory framework for renewables will help avoid conflicts among state agencies. In order to attract private investors, the regulations should allow for more flexibility in divesting or restructuring investment portfolios. The licensing process should be reviewed for more transparency and streamlining, especially for smaller projects,” she says. Aggressive development and the welfare of communities must be balanced.
Renewable power capacity: current vs 2036 target
Source: Department of Alternative Energy Development and Efficiency, Maybank Kim Eng
TEPCO Energy Partner, with Nichigas, aims to sell gas to about 500,000 households for the first year of full market deregulation and to about 1 million households within the 2019 fiscal year.
Predee Daochai President Kasikornbank Tomoaki Kobayakawa CEO TEPCO Energy Partner
TEPCO Energy Partner wants its customers back It has been a year since Japan opened its energy market, and TEPCO’s retail arm only has two missions in mind: win back customers who switched providers, and etch a name in the country’s gas market by July 2017.
t has barely been months since Tokyo Electric Power Company Holdings appointed a new overall president,Tomoaki Kobayakawa. Asian Power caught up with the then president of TEPCO’s retail arm, TEPCO Energy Partner, to discuss the company’s plans of wooing customers who have switched contracts amidst the liberalisation, and venturing into the country’s US$21b gas market. The 53-year old industry veteran has been with TEPCO since 1988 and has been engaged in the electricity business ever since, mainly focussing on corporate sales. He was appointed TEPCO Energy Partner’s CEO in April 2016 when the company transitioned to a holding system and restructured into three independent businesses.
services and added value, not just by earning profits from selling more energy. The company will strive to expand nationwide and build a successful energy-saving business, not being fearful of a decrease in demand due to energy-saving or competition. Lastly is the creation of new value for customers. Facing the era of full-scale energy competition, the company will create new markets and value through collaboration that has never happened before. Collaboration with different types of business has infinite possibilities, but will require speed. The company will create new services by collaborating with different types of businesses and maximising its speedy approach as a retailer because it takes time to do this alone.
What were the previous positions you held that led you to being the president now? My previous position was corporate sales division general manager at a customer service company. For a long period of time, I was engaged in corporate sales in a deregulated and competitive environment and in solutions sales to respond to customers’ concerns over facilities in use. I was also involved in the development of a heat-pump water heater for homes, “Eco-cute,” which uses natural refrigerant — the first of its kind in the world. Through such experience, I learned to develop strategic thinking and a sales mentality in a situation where utility sales people did not need to promote their services under a monopoly market. Under the current situation where the electricity retail market — including households — is fully deregulated, my main role is to improve sales capabilities, deepen customers’ understanding, and create new value for our company, utilising my past experience. My theory is: “No sales persons are needed if you compete on price alone.”
What are the biggest challenges TEPCO Energy Partner is currently facing and what motivates you in making sure these challenges are overcome? Our mission, and our challenge, is that of “responsibility” and “competition”. Regarding the challenge, TEPCO Group exists to fulfill its responsibility of revitalising Fukushima. The company in charge of the retail business will contribute to such efforts by earning profits through its business. However, profits are earned not by one’s own efforts but by being selected by customers. Our biggest mission is to respond to the expectations from customers and society through sales and services. Our motivation, on the other hand, is to hear customers’ voices of appreciation for our additional services that solve home appliance problems under the new rate plans, as well as to see customers who switched their contracts to new power companies returning to our services.
What are your business philosophies? Being in charge of the retail division, our vision is to be a company trusted by customers that continues to strive to create new value. I believe this is a chance to develop this company from a mere electric power company to an integrated energy services company. To achieve this, it is important to have partners from different types of businesses, and we would like to create a new market and new value with collaboration that has never happened before. TEPCO Energy Partner will continue to create new value in order to respond to the various needs of society, as well as strongly support customers’ daily lives and companies’ growth. The company aims to be a partner that develops together with its customers. I believe that the company should develop new products and services from the perspective of society and customers, by aiming for “co-creation” rather than “competition,” even though it has to compete against rival companies in the deregulated electricity retail market. What are your top three priorities for TEPCO Energy Partner? TEPCO Energy Partner’s aims are the following: Putting the customer first. The company sees the full deregulation of the electricity and gas markets as a new opportunity to provide high value added and develop products and services. It will strive to be selected by customers, by providing products and services that will lead to a safe, comfortable life and support business development whilst achieving low costs. Secondly, it’s about business development through service area expansion. This includes customers buying not only electricity but also total energy, including gas and various services and appliances. The business will develop more by providing new
What is TEPCO Energy Partner’s biggest plan to date? What should the industry be excited about? Seeing the full deregulation of the electricity retail market as a chance, TEPCO Energy Partner will develop from a mere electric power company to an integrated energy services company. It will meet the challenge of this new market by not only competing but also co-creating through collaboration with different types of businesses. TEPCO will be exploring the gas market and will be working with Nichigas. How do you plan to tackle the competition? Nichigas, which will provide wholesale supply of gas from TEPCO Energy Partner for household gas sales, will begin sales from April 2017 and TEPCO Energy Partner will begin from July 2017. In tandem, we aim to sell gas to about 500,000 households for the first year of full market deregulation and to about 1 million households within the 2019 fiscal year. To earn sales from about 40,000 households for the first fiscal year, TEPCO Energy Partner first needs to prepare new rate plans and services that appeal to customers. This preparation is currently in progress. The company will create profitable package services with added value that customers will want to select, combining added services of safety and security with package sales of electricity and gas. To gain more customers for its gas sales and also activate the urban gas market — which is more difficult to enter compared with electricity — the company will also create a new platform that integrates the know-how and operational functions, such as urban gas supply, consignment operations, and security and equipment maintenance, which both TEPCO Energy Partner and Nichigas possess. The platform needs to be created as soon as possible to activate the gas market and the details are being examined with the aim of completion within the 2017 fiscal year. One of the options will be the establishment of a joint venture with Nichigas. ASIAN POWER 13
Country report: Singapore
Is Singapore’s grid stability on the line?
Singapore’s savvy approach to solar growth
Tiny Singapore has been working very hard to secure energy and has been exploring solar panel systems that are hanging, floating, and “urban,” but is the grid stable enough to handle these renewable energy innovations?
hen researchers installed a $22,000 solar panel system in a penthouse in Bukit Timah, it not only generated enough electricity to keep 400 50-watt light bulbs running for day, it also became a testament to Singapore’s increasing ingenuity in scaling up its solar photovoltaic (PV) installations despite geographical and financing constraints. Singapore has begun exploring the use of “hanging” solar panel systems like what was installed in the Bukit Timah penthouse as well as floating PV systems and energy storage to overcome the challenge of having a small land area that rules out the creation of large solar farms. The hope is that these innovations will increase the viability and attractiveness of solar PV projects as the land-scarce country tries to meet Solar installations in Singapore
Source: Energy Market Authority 14 ASIAN POWER
Solar systems in Singapore are always competing for space with other equipment such as cooling towers, water pumps and piping.
its climate change commitments and become a clean energy hub in Southeast Asia. Urban solar plants One of the promising breakthroughs on the horizon for the Singapore solar PV industry are so-called urban solar plants. The concept suspends solar panels from steel ropes and removes the need for large permanent space, which is in such low supply in the country. Moreover, urban solar plants are designed to be easy to move, so they might be deployed to an open-air carpark, then to a new vacant area when needed. “Installing such a system over an open-air carpark would not only allow it to absorb the sun’s energy, but it would also provide shade for cars. In the future, such systems could also power electric vehicles,” said Dr Thomas Reindl, deputy chief executive, Solar Energy Research Institute of Singapore at the National University of Singapore. Reindl leads four projects to find out how solar energy can be made more viable in Singapore, including a feasibility study of urban solar plants in the country. Working with collaborators from organisations such as solar energy firm Sunseap, he has received $4 million in funding from the Singapore Economic
Development Board (EDB). IE Singapore reckons that if the urban solar plant project is found to be feasible and scaled up, it could help lower the cost of solar electricity in Singapore, and lead to an increase in solar power adoption. To gauge the potential of urban solar plants, researchers installed a solar panel system at a Bukit Timah penthouse which generates roughly 20 kilowatt hours of electricity a day. Frank Phuan, founder and director of Sunseap, says such “hanging” solar panel systems are ideal for highly urbanised Singapore where there is limited space even on rooftops. “Solar systems in Singapore are always competing for space with other equipment such as cooling towers, water pumps and piping. [A hanging solar panel system] not only brings tremendous advantages for rooftop installations, but it also opens new opportunities for example in carpark covers or temporary use of land areas which are not earmarked for new developments in the near future,” he explains. Yeoh Keat Chuan, managing director of the Economic and Development Board (EDB) Singapore, reckons these new solar research projects will enable the country to tap into the fast-growing regional solar market and strengthen its position as the clean energy hub in Asia. “The research
Country report: Singapore Installed solar capacity from 2008-2016
Dr Thomas Reindl
Source: Energy Market Authority
into next-generation solar cells and systems, in close collaboration with the private sector, will also enable Singapore to accelerate its large-scale adoption of cost-competitive solar energy,” he says. Floating potential Another way that Singapore is working around its lack of land for solar farms is to turn to water surfaces instead. Late last year, the country unveiled the world’s largest floating sola panel testbed. Masagos Zulkifli, Singapore’s Minister for the Environment and Water Resources, says the pilot test of 10 floating PV systems at Tengeh Reservoir is the largest globally in terms of the number of systems being tested and the amount of it can produce, which stands at a maximum one-megawatt of energy, enough to power 250 four-room public housing flats for a year. “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,” he says. “Given our geography, solar PV systems are a key technology is Singapore’s efforts to harness renewable energy.” Zukifli adds that floating PV systems can become more efficient by using water to cool the solar panels, allowing them to yield more energy compared to solar panels that are too hot. Singapore is expected to explore a wider deployment of floating PV systems if the pilot shows them to be economically viable and environmentally sustainable. Goh Chee Kiong, executive director for Cleantech of EDB Singapore, reckons floating PV has become a global trend in the last couple of years, and that the country would do well to take advantage of the high investor interest and momentum behind this technological trend. “We are seeing developments in Japan, China, Europe, the Americas as well, Australia and even India. What this
means is that it is a highly exportable sector that we want to grow. We are seeing strong interest by various companies wanting to participate in the floating photovoltaics testbed in Singapore,” he says, citing eight companies involved in the testbed, ranging from large Japanese and Italian corporations to local small- and medium-sized enterprises. “The starting point is that we want them to establish their business hubs in Singapore,” adds Goh. “After which then they will export the knowhow from Singapore, from doing the innovation right in Singapore.” Rising investor interest Ramping up investor interest and ensuring the financial viability of solar PV projects are becoming key priorities for Singapore as interest in solar PV deployment is forecasted to continue growing, and innovations are predicted to keep coming. Installed PV capacity has surged to almost 99.4MWp as of the second quarter of 2016, up from a measly 0.4MWp in 2008, the Energy Market Authority (EMA) reveals in a recent outlook report. The regulatory agency reckons advancements in electricity generation technologies will bolster Singapore’s power sector, including the use of renewable energies such as solar PV. This is despite the apparent inadequate access to funding for solar generation companies. “The main challenge for solar financing in Singapore is the familiarity of some financial institutions to the solar PV renewable business model and that unfamiliarity tends to heighten the risk aversion and lessen competitive financing terms,” said Camillus Yang, vice president, corporate development and finance at Sunseap. As solar PV penetration soars, especially if Singapore intends to fulfill its commitments under the Paris climate change agreement, EMA has
Yeoh Keat Chuan
expressed concern on grid stability. Gautam Jindal, research associate at Energy Studies Institute of the National University of Singapore, says that other electricity markets have managed this issue by spreading the installation of these resources across large areas – a tactic that is not available to Singapore. Instead, the nation should focus its efforts on developing its energy storage systems (ESS) Unlocking energy storage “For geographically small, isolated power systems like Singapore, energy storage will play a vital role in supporting higher levels of PV deployment,” says Jindal, noting that in 2015, the country opened its electricity market for ESS by allowing them to bid for offering “regulation” service to help correct imbalances caused by load variability. From facilitating demand side management to firming up output from variable renewable energy sources, ESS can offer many solutions to generators, grid operators and consumers. This has led Singapore to develop a new policy framework to govern the application agnostic integration of energy storage solutions in its electricity market. “Energy storage has the potential to revolutionise Singapore’s electricity market in the coming years; right from enabling Virtual Power Plants to facilitating demand response, to increasing number of prosumers with PV systems on their rooftops,” says Jindal. “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.”
Solar PV installations
Source: Energy Market Authority ASIAN POWER 15
sector report: NUCLEAR
Stronger government push for nuclear
Asia’s slow push for nuclear energy use
Nuclear power programmes across Asia are once again slowly gaining steam, driven by a mix of waning public outrage and urgent necessity, but safety concerns remain a potent dampener.
ust after the Fukushima Daiichi nuclear disaster, Indonesians were asked whether nuclear power plants (NPPs) should be in the country. The votes back then were roughly split between supporters and oppositionists, but time seemed to have allayed some of the fears from the accident. In a 2016 survey, more than 75% of Indonesian respondents believed NPPs should be in the country. Other glimpses of this confidence rebound can be observed across the region, especially as nuclear power promises an economically sound solution for the growing energy needs of emerging Asian nations even as resistance remains strong, led by the likes of Taiwan and Vietnam. Indonesia has shown a resurgence of public support for nuclear power, says Dr Taswanda Taryo, principal researcher of PTKRN-BATAN, Serpong, citing a recent survey where 4,000 people were directly interviewed and 77.5% agreed that NPPs should be available in the country, up from 75.3% in 2015 and from around 49% after the Fukushima accident occurred. The results of the survey, which has been done since 2009, suggests that majority of Indonesians want NPPs and have shaken off their reservations as the years have passed. The spike in public confidence can be attributed to a stronger government push for nuclear power in recent years. In 2014, the government created a nuclear energy outlook and established the Government Decree No.79 that clearly states that Indonesia needs 115GW of power by 2025, more than double the existing electricity generation of 52GW. To fill in the gap, the government is supporting the development of new energy and renewable energy, including solar, geothermal, micro-hydro, biomass, and nuclear. “The advantages of nuclear is that it is green, very competitive, and able to provide a bigger power of electricity,” says Taryo. Despite swelling public support for NPPs, there are several 16 ASIAN POWER
The spike in public confidence can be attributed to a stronger government push for nuclear power in recent years.
major challenges related to infrastructure and policy. NPP construction, for one, takes seven to nine years, a lengthy period that exceeds the serving term of Indonesian politicians and deters leaders from taking on these big-scale projects. “The construction of NPPs depends on political decision. Politicians are not interested in constructing NPPs since the construction time is more than 5 years,” says Taryo. “They have only 5 years to lead the country. It is better for them not to take the decision once they lead the country.” He reckons more can be done in terms of financing, especially as the government looks to spend on other key infrastructure such as roads, ports, tolls, and railways. Building new NPPs also require improved expertise in selecting nuclear technologies based on factors, including safety, security, environmental impact, and capability to construct the project on time. Finally, the country needs to improve its power grid and make sure that electricity generated from NPPs are kept relatively cheap, which is made more complicated by the country’s archipelagic geography consisting of more than 3,000 islands. Taryo says it can be an uphill battle for nuclear power if electricity prices are high, or more than 10 cents/Kwh. Nuclear opposition As countries like Indonesia look to ramp up their nuclear power programmes on the back of stronger public support, the governments of Taiwan and Vietnam have ditched nuclear due to vocal opposition from their constituents. Taiwan yielded to public demand to stop nuclear power generation, which forced the country to crank up the combined share of wind and solar power to 20% in the coming decade to offset the loss of nuclear power. Thermal energy is also being eyed as an attractive energy source following Taiwan’s planned nuclear phase-out.
sector report: NUCLEAR Nuclear grid connections rates required to meet the Harmony target of 1000 GW of new build by 2050
Source: World Nuclear Organization
Strong anti-nuclear power sentiment continues to persist in Taiwan despite doubts on whether the ambitious targets for non-hydro renewables like wind and solar power can be achieved. Then, last year, Vietnam had to forego plans to build a couple of NPPs in Ninh Thuan province because of safety and project feasibility concerns. Vietnam’s National Assembly voted to abandon what would have been landmark NPP projects in cooperation with Russia and Japan, a decision that was spurred on by growing public debt and ballooning project costs. In Malaysia, rallying public support has been harder following the Fukushima disaster and is one of the biggest challenges to the country’s nuclear aspirations, says Dr Mohd Zamzam Jaafar, chief executive officer of the Malaysia Nuclear Power Corporation. “Winning public buy-in after the Fukushima accident with respect to nuclear safety and what to do with radioactive materials and used nuclear fuels” is a key hurdle to nuclear power development, he says. Because of shaky public support, the government cannot step hard on the nuclear development pedal. Critics have also called into question the competitiveness of nuclear electricity given its high upfront investment costs, especially when compared to popular renewable energy. Abort mission Despite the hurdles that Malaysia’s nuclear programmes face and the potential chilling effect after Vietnam pulled the plug on its NPPs, Zamzam reckons there is still merit for the country to leverage nuclear power to drive economic growth and lower electricity cost. “It is too early to assess the impact of Vietnam’s decision to stop its nuclear power programme in the Association of Southeast Asian Nations (ASEAN). The Nuclear Energy Cooperation-Sub-Sector Network (NEC-SSN), a programme under the ASEAN Ministers of Energy Meeting, continues with Malaysia as the current Chairman. Nuclear Power Asia 2017 is listed as an activity under ASEAN NEC-SSN and Malaysia is still pursuing the nuclear option,” he says. “Nuclear is an important base load power generation source as demonstrated in many countries with NPPs in operation. This is an important feature valued by customers and investors who rely on affordable 24/7 power supply. With expansion of sustained commercial activities, national economic development can be assured through job creation and better standard of living for people.” Zamzam notes that Japan, in restarting its nuclear programme amidst public opposition, has explicitly recognised the role of nuclear to provide reliable electricity supply and enabling a more diversified energy mix for electricity generation. Nuclear has also been shown to be a proven low carbon power source. This will likely play a major role for countries that want to meet the Paris Agreement requirements with respect to greenhouse gas emission and climate change concerns. In India, there is a similar need to push through with the
Relative unpopularity of coal/oil and nuclear plants in 2008
Nguyen Hao Quang
Mohd Zamzam Jaafar
Professor R. Rajaraman
nuclear programme even in the face of fierce criticism and public protests. The fast-developing and populated country is ploughing forward to meet its economic development goals and mitigating its recurring energy shortages. As India’s middle class continues to swell, government leaders feel increased pressure to provide electricity across the nation. The state government of Tamil Nadu, facing critical electricity shortages, proceeded with the full rollout of the Kukankulam nuclear facility to provide electricity to the surrounding poor and underpowered southern states, even as protests among concerned villagers erupted. The government’s nuclear adviser to Rajagopala Chidambaram has tried to assuage the public that the Fukushima nuclear accident has taught lessons that will help prevent a similar incident from occurring in India, and insisted that nuclear accidents must not derail the nation from pursuing a safe civil nuclear programme. India’s nuclear predicament Supporters of India’s nuclear program believe it can substantially mitigate the country’s ravenous energy needs, but the commitment to nuclear comes with caution from critics: There is a dearth of nuclear experts, which may impair the sustainability and safety of the program. “In India, [our nuclear] expertise is contained almost totally within the Department of Atomic Energy (DAE),” says Professor R. Rajaraman, emeritus professor of Theoretical Physics School of Physical Sciences. “There are no nuclear engineering schools in our universities or institutes of technology. This has been by design.” Apart from a few private companies that supply some parts for reactors, the “nuclear industry” in India consists only of that one government department, the DAE. Consequently, argues Rajaraman. when the need arose for some public debate on nuclear activities, there was little independent outside expertise available to foster a balanced debate. Nurturing more local nuclear experts will be critical to the Indian government’s plan to expand its nuclear energy capacity in the coming decades to address electricity shortfalls and lower carbon emissions. He warns that if the nuclear industry cannot develop in a unified and committed manner, there is a chance that momentum can shift to solar power, especially as the latter’s implementation costs fall and generation becomes more efficient. India’s lack of nuclear expertise is also limiting its nuclear options. The country boasts vast quantities of thorium, an alternative to uranium. However, the country lacks hands-on experience and technology yo harness thorium, preventing it from considering the element as a viable alternative. “Thorium is simply not an alternative in the short-term,” says SP Singh, former head of the Nuclear Safety Division of the Atomic Energy Regulatory Board of India. “No power reactors are using thorium on a large scale today. Developing a system for a thorium reactor will take decades. It would take a long time for ASIAN POWER 17
sector report: NUclear a thorium demonstration reactor to be established and only then can we take steps toward assessing if thorium is advantageous or not. We have plenty of thorium, but have no technology available right now to utilise it,” he adds. Playing technological catch-up Recognising the need of Asian countries, China has been stepping up to supply nuclear technology to the likes of Malaysia, Cambodia, and Thailand, although there are concerns over the safety standards from Chinese suppliers. This might prove tricky for governments that are still trying to woo critics, many of whom worry about the safety of nuclear facilities. The Chinese are making bold moves to expand their nuclear technology exports in Southeast Asia, with both Thai and Malaysian authorities revealing they are in various stages of talks with Chinese technology suppliers. The China General Nuclear Power Corporation has outlined plans for commercial expansion into Southeast Asia, singling out its relationship with Malaysia and even establishing a regional headquarters in the country. China has also been helping Cambodia ramp up its nuclear capabilities, from preparing a legal framework for the development of a peaceful use industry to offering scholarships to high-achieving Cambodian engineering students. Apart from Malaysia and Cambodia, Indonesia remains keen to drive toward nuclear power. Thailand, which had shelved plans after the Fukushima disaster, is also talking to the Chinese. Not everyone is falling in line to do nuclear business with China, however. The Vietnamese Atomic Energy Institute has expressed concern about the downstream safety-related consequences of three new plants close to, or relatively close to, the SRV’s frontier with China. The Institute is desperately trying to mitigate risk by encouraging a dialogue with Chinese operators. “With the very strong nuclear activity in China across the border, checkpoints [need to] be set up in the area to promptly detect any impacts,” says Nguyen Hao Quang, Vice Director of the Institute. The Vietnamese have traditionally sought the established experience of the Japanese and Russians in building their nuclear industry. Singh, which has spent 12 years overseeing nuclear safety, shares Vietnam’s concerns. “The major challenge now is that the Chinese eat into their cost margin by compromising safety,” he says. “Safety is reduced to export technology and this will affect not only the Chinese people but also mainly the people of importing nation.” Nations interested in importing Chinese technology and eventually plants, such as the Cambodians, Malaysians, and perhaps the Thais, are keen to take advantage of the fact that contracts may be half the cost of the French and two thirds the cost of the Russians. However, there may be risks involved in these relationships. Singh admits that all nuclear vendor or export countries have taken the failings of Fukushima into account, including the Chinese. But not everything is yet Nuclear power plants in commercial operation or operable
Source: World Nuclear Association 18 ASIAN POWER
understood, and countries might not have the safety precautions in place to justify increased nuclear risk. “Importing nations need to be careful that these [Chinese] designs still meet international standards. The Chinese have been known to overload the reactors. Any nation that considers importing Chinese units needs to make sure that such units meet Generation-3 safety standards,” says Singh. “Importing nations are very heavily populated with only small ‘safety zones’. Certain Chinese technology — particularly what they export — is obsolete. An accident will devastate the immediate area, which will naturally involve relatively densely populated neighbouring regions.”
There is an important need for institutional control and infrastructures when committing in nuclear with new reactors.
China is leading China-based American nuclear specialist Robert Barrett, a partner with PwC in Beijing, is more upbeat about Chinese technology. He says that the Chinese are generally very good at what they do and they offer export solutions in nuclear that other nations cannot. “The Chinese offer good technology and good financial solutions — the finance side plays a very important role and Chinese nuclear vendors don’t have to look toward bank financing,” he says. However, he does warn that “in terms of their internal construction, the Chinese government is somewhat challenged by the fact that safety and standard operating procedures become less pure as nuclear technology reaches the provinces and the central government has some difficulty in making provincial authorities stick to the line.” Japanese nuclear expert Professor Akira Tokuhiro, suggests that more transparency is needed before the question of safety can be answered. “Detailed information is rarely revealed to the general and the educated public. It would be unprecedented and ‘fearless’ if the Chinese designs were, on invitation, subject to safety-in-design review.” Tokuhiro reckons safety risks can be mitigated if design details can be made available to a review beyond that already exercised by the IAEA. An example is how the Koreans are undergoing the American NRC review process with their APR-1400 reactor design, and the Chinese might also follow suit — a process that provides the public and experts an opportunity to scrutinise and ask questions. “Since detailed information is hard to find on Chinese nuclear technologies and also on state of operations, there are expectations that many in the nuclear communities share,” says Tokuhiro. As a best practice moving forward to increase the confidence of the public and other stakeholders to nuclear programs, he suggests nuclear industries subject themselves to several stringent standards. These include, among others, demonstrating a world-class safety culture with international peer review, making operational data available to IAEA/INPO/ WANO, and demonstrating risk and crisis management and communications. Asian nations will need strong regulatory control to ensure safety standards are met, says Gerald Ouzounian, international director at ANDRA. Greater transparency is likewise needed to allay prevailing safety doubts and boost public support, but doing so might be difficult. “There is an important need for institutional control and infrastructures when committing in nuclear with new reactors. Among the challenges, the most important is definitely the regulation system for making sure that safety is achieved, for the public and the environment,” says Ouzounian. “The unique challenges will be to operate safely the new facilities, protecting them against any security risk, and providing all relevant information to the authorities, in charge of making it available for the public. Transparency is challenging.” Countries follow in the footsteps of France, where 58 reactors are operated by EdF, the national electric power company, under the supervision of the Nuclear Safety Authority (ASN). All information is reported on the ASN website, allowing everyone easy access to the information.
Country report: Japan
Wind and solar just can’t keep up
It’s closing time: Japan’s solar firms quit
Both solar and wind sectors are struggling as insufficient capital, poor sales, and poor cost competitiveness plague
hen the Fukushima Daiichi disaster forced Japan to shy away from nuclear power, there was hope that solar and wind would gather momentum and become the nation’s strong energy pillars. But both renewables seem to be wobbling as of late, with a record number of solar photovoltaic (PV) firms declaring bankruptcy and critics sounding the alarm on wind power’s inability to achieve grid parity anytime soon. Scarce capital, plunging sales, and high system costs also pose risks to solar and wind growth in Japan, although recent developments like market liberalisation and virtual power plant subsidies will ensure a smoother
Scarce capital, plunging sales, and high system costs also pose risks to solar and wind growth in Japan.
Japan’s power mix to remain gas-heavy
Source: BMI Research 20 ASIAN POWER
road ahead for renewables expansion, according to analysts. One of the most battered sectors in renewables is the solar PV sector. Intense financial pressure has resulted in 65 solar PV firms shuttering last year, up by 20.4% from 2015, according to Tokyo Shoko Research. This was the highest number of closures reported since the survey began. In December 2016 alone, 10 PV companies went bankrupt, marking the highest count in a single month. Bankruptcies have become more widespread among Japanese solar industry players due to vague business strategies, poor sales, and insufficient capital, the research firm explains. Japan’s wind energy development is likewise going through a rough phase, already falling behind other nations, says Masao Masuda, general manager for overseas business, transportation and energy at the Development Bank of Japan. In 2015, global wind power capacity hit 432GW, of which Japan’s contribution stood at a measly 3GW. Wind power’s cost competitiveness remains below global standards as well due to high system costs, which reached US$156 per MWh for over 20MW projects. India’s and Germany’s system costs are only around half that of Japan’s, at US$77 per MWh and US$79 per MWh, respectively, for almost the same
capacity. Unless lowered, Japan’s high systems costs will make it hard for wind power to reach grid parity. “With regards to cost competitiveness of wind power in Japan, system costs in the country is much higher than in other countries. Japan is still behind the US and European countries in terms of cost competitiveness of renewable energy, and grid parity is unlikely to be achieved in the short term,” says Masuda. Costs flying through the roof Meanwhile, Masuo Kuremura, assistant director for new and renewable energy division at the Ministry of Economy, Trade, and Industry, reckons Japan’s high costs for wind power is one of three key challenges it has to overcome. He reckons that developers keep shifting their focus to relatively cheaper solar energy projects instead of wind energy projects to produce inexpensive power. Second, Japan’s wind sector must work around the “very limited” number of areas suitable for wind projects in the country, and many of the viable ones are far-flung, making them more difficult to connect to the grid. “We need to have good connection to get the power from there to high-demand areas, and we have to increase the network gradually so as not to stress it,” says Kuremura. A third challenge for Japan is the long
Country report: Japan LNG demand to see long-term decline
Source: BMI Research
assessment time for wind power projects. Kuremura argues that some wind power projects cannot be commissioned when the assessment process drags on. “Shorten it and make it succinct so that, eventually, massive wind power can come to the grid. In three years, wind power share will increase significantly, both onshore and offshore,” he says. “But for now, Japanese wind power market is admittedly still in infancy.” Sanguine demand outlook Despite the worrisome string of closures in the solar PV industry and the robust headwinds of wind power, some analysts hold a sanguine outlook for both renewables. Atsushi Ito, president and CEO of solar IPP Next Energy & Resources Co., says cheaper PV-based electricity is coming as he expects a decline in equipment costs and an increase in operational efficiency, which could help more solar PV firms stay afloat financially. Ito adds that the solar industry will benefit when the renewable energy levy likely doubles in the coming decade from JPY2.25(US$0.0206) per kWh in 2016 to JPY4-5(US$0.0367 to US$0.0459) per kWh in 2030. Global demand for solar PV is also expected to grow at a healthy rate. Citing a GTM Research forecast, Jesse Pichel, managing director for investment banking at Roth Capital Partner, said global PV demand will grow at an 8% compounded annual growth rate from 2016-2021. But he warns that Japan must prepare the sector by ensuring stronger financing mechanisms are put in place. The government will also be pushing for more wind energy projects, but this will require significantly higher investment capital. Masuda estimates Japan will need to invest JPY2.19b (US$20.1b) to achieve its 10,000 MW wind power target in 2030, and a total of JPY19.8b (US$181m) to JPY20.7b (US$190m) investment capital to reach the 131,510 MW target for all renewables
in 2030. Given wind power’s large capital needs, the finance sector will need to step up and allocate a larger amount of available capital by inviting more long-term investors for renewables, and making the capital market open for renewable energy. Masuda warns that there is no room for complacency in the wind energy sector, especially with many operators standing on shaky financial ground. “The feed-in tariff (FiT) introduced in 2012 helped Japanese wind power operators survive financially, but the fundamentals of Japanese wind power market is still caught in a vicious cycle of high generation cost and slow growth,” he says. To help improve the operating environment, Masuda recommends reducing generation cost to grid parity and increasing wind’s share in generated electricity. Wind power operators, for their part, must become flexible enough to change business models, whenever necessary, and learn to cooperate to increase their competitiveness and bargaining power. Prospects for solar and wind remain optimistic as well considering substantial public disapproval of nuclear and coal-fired power. “We do not expect a major uptick in nuclear power or coal-ﬁred power in the country, given the strong public opposition to restarting nuclear reactors and environmental opposition facing new coal-ﬁred power projects,” says Georgina Hayden, head of power & renewables at BMI Research. “In terms of nuclear restarts, concerns over the safety of currently idled facilities that have applied to restart have already culminated in a string of court injunctions and wavering support from prefecture governors. We believe this makes the restart of these facilities in a timely manner highly uncertain and we only expect nuclear to contribute 4.7% to total power generation by 2026,” she adds. Hayden reckons the coal sector will see some growth in coal-ﬁred power
generation with annual average growth rates of 0.9% between 2017 and 2026, but there is increasing risk of project cancellations on environmental grounds. She cites international efforts to reduce emissions following the signing of the Paris Agreement in December 2015, which will cap growth in the sector. In January, KEPCO’s planned Ako coal-fired power plant has been cancelled — the first major cancellation since the new wave of projects were announced in 2016. Virtual power plants Another emerging concern for solar and wind, as their share of supply increases further in the future, is to ensure power supply stability. The government has started exploring virtual power plants (VPP), with 7 VPP construction subsidised projects adopted last year, enabled by a reported subsidy amount of JPY4b(US$36m) in FY2017. Fumiaki Ishida, general manager, advanced grid strategy group community energy division at The Kansai Electric Power, says VPP resources are operated through Internet of Things, and basically assist in controlling the supply-demand balance given increased solar and wind energy generation. “There has been a marked increase in proportion of solar and wind during light load period. During daytime, supplydemand balance is maintained by the pump-up of pumped-storage power generation. Net load sharply drops in the morning and rises sharply in the evening, making supply-demand balance difficult,” he says. “There is an expansion of opportunities to use VPP service due to progress in electric power system reform and further increase in renewable energy. We have been working on demonstration projects such as demand response and negative watts as measures to deal with various problems of the electric power system. We are also aiming to establish a system that integrates and controls various resources and establishing bulk control technology,” he adds.
Policy to focus on reversing retail price spike
Source: BMI Research ASIAN POWER 21
event coverage: WORLD SMART ENERGY WEEK now to slowly get off fossil fuel, according to Yoshiharu Ijima, executive specialist at the smart energy business unit of NEC Corporation.
Saying “no” to one type of energy source
Japan must start weaning itself off oil imports for energy With the nuclear industry in limbo, Japan has to make up its mind and get its act together to make sure that energy provision is sustained.
o maintain energy security, Japan has to make sure that there is no complete dependence on just one type of energy source. This is according to Nobuo Tanaka, chairman and former executive director of International Energy Agency (IEA) in a keynote speech at the World Smart Energy Week held on March 1 to 3 in Tokyo. “Solar is, of course, a good addition as prices have dramatically gone down, but Japan has a long way to go in this industry which is why Japan must start weaning off oil imports,” he said. “Low oil price decreases investment in high cost producer countries and increases security risk by too much dependency on Middle East oil. Diversity of oil sources and wider variety of energy sources such as gas, renewables, and nuclear is essential. After the Fukushima accident, nuclear projects in Japan need to pass several test of sustainability, namely passive safety, ease of high level radioactive waste management, and nonproliferation,” Tanaka added Toshimitsu Fujiki, director-general of energy efficiency & renewable energy department at Japan’s Ministry of Economy, Trade, and Industry, said that ultimately, Japan’s goal is to reduce levels of dependence on fossil fuels and nuclear power by focussing on comprehensive energy-saving measures and maximising opportunities to introduce renewable energy sources. The government’s 2016 22 ASIAN POWER
Firms must be sharing the responsibility of adjusting supply and demand for electric energy with stakeholders. This will urge each player to take responsibility of adjusting power supply and demand.
whitepaper on energy noted that even with these efforts, Japan projects that fossil fuels will still account for 77% of its primary energy resources, and thermal power generation 56% in FY2030. Consequently, it is essential for Japan to establish a system for procuring energy resources from other nations in a stable manner and at a low cost. More virtual power plants When Japan started testing its virtual power plants for renewable power in July 2016, experts knew that the industry is in for a breakthrough. One of the big issues in utilising solar, wind, and other renewable energy sources is that it is highly affected by weather, resulting in low production, which may consequently result to supply shortage. However, if power supply balloons and outstrips power output, the grid may be stressed, leading to a possible outage. Masayuki Kosakada, technology executive at Toshiba, said that imbalances between fluctuations of renewable power and demands are addressed regionally by a virtual storage battery. “VPPs contribute to stable power supply, improves demandsupply adjustment capability, utilises distributed energy resources, and reduces energy expenses,” he added. Japanese electricity’s self-sufficiency has become very low post-Fukushima. Reliance on fossil fuel has become high since then and it has become a challenge
Rethinking the approach Renewable energy is rapidly expanded by the feed-in tariff (FiT) programme which was introduced in July 2012, and the solar power generation sector has spread significantly since then. However, he added that due to limitation of suitable places for large-scale systems and a decline of the purchasing price, the FiT introduction amount will decrease temporarily. It is also assumed that solar for household use will grow steadily and the market of housing manufacturers’ potential will be high. “As promoting the introduction of renewable energy, maintaining supply-demand balance is becoming more difficult. Japan must therefore adopt a new approach toward power system stabilisation. The environmental change of energy market increases rapidly the difficulty of stabilising power supply and the burden of power grid operator,” Ijima added. “To solve this, there must be a shift from central control to a dispersed harmonic control. Firms must be sharing the responsibility of adjusting supply and demand for electric energy with stakeholders. This will urge each player to take responsibility of adjusting power supply and demand. If this is done continuously, then Japan will eventually depart from dependence on thermal power plant.” The World Smart Energy Week is the world’s leading comprehensive B-to-B trade show for smart and renewable energy held twice a year in Japan — March in Tokyo and September in Osaka. The show aims to provide a platform for professionals from across Japan, Asia, and the rest of the world to negotiate and network for the future of smart and renewable energy business. Since the launch of FC EXPO 13 years ago, the number of exhibitors and visitors has been increasing year after year. World Smart Energy Week consists of nine exhibitions and world-class conference sessions filling up Tokyo Big Sight . The show ranges from power generation, storage, saving, transmission, to distribution technologies. This year, 1,376 exhibitors from 38 countries came, and 62,426 visitors from 57 countries flocked into the event. Out of these, 11,354 were seminar attendees. The World Smart Energy Week 2018 will be held on February 28 to March 2, 2018 and is expected to welcome 1,850 exhibitors and 70,000 conference visitors. By Karen Lou Mesina
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Analysis: INDIA’S SOLAR SECTOR
Numbers are looking great but manufacturers’ frustrations are lurking
Here’s what is wrong in India’s solar success story
Solar installations in India reached 4GW in 2016, and are expected to surpass 9GW in 2017, but domestic manufacturers say this isn’t the real picture.
ith exponential growth in the sector, the government wants to ramp up domestic manufacturing to decrease the volume of solar module imports which, along with installations, has also increased dramatically. The challenge, like in most markets, has been cost competition from Chinese manufacturers. India also lost the World Trade Organization (WTO) ruling last year which decided that its Domestic Content Requirements (DCR) discriminated against U.S. manufacturers. Installed capacity of domestic solar cells and modules in the country is estimated to be 2,815MW and 8,008MW respectively, whilst operational capacity of solar cells and modules is 1,448MW and 5,246MW respectively as of December 2016, according to Mercom’s Manufacturing Tracker. However, manufacturers paint a different picture. Most of them are of the opinion that true working module manufacturing capacity was approximately 3GW as of the end of 2016. This huge disparity in figures is due to old and obsolete manufacturing lines that are still being counted by manufacturers as “operating capacity.” As of December 2016, an estimated 9.6 GW of solar has been installed in India. In the seven months from April to October in financial year (FY) 201617, export and import activity totaling US$1.2b (~Rs.83.2b) was registered in the sector. Out of this, India imported 24 ASIAN POWER
Competing with low-cost imports, low profit margins and lack of scale are all hurting India’s solar manufacturing sector.
solar materials worth more than a billion dollars. This is not just because India lacks manufacturing capacity, but it’s mostly because Indian modules are much more expensive compared to Chinese modules. Challenges to be faced Competing with low-cost imports, low profit margins and lack of scale are all hurting India’s solar manufacturing sector. “The major problems plaguing the sector are a lack of scale, insufficient government support and an underdeveloped supply chain,” stated an official at Waaree Energies. Access to financing is also a challenge. Manufacturers are citing lack of funding available to build manufacturing units. “Even if private banks are willing to lend, it is at exorbitant rates ranging from 16 to 17 percent,” stated Thakur of Shukra Solar, a solar manufacturer. Financing challenges struck a chord with another solar manufacturer: “You
won’t find banks financing manufacturing units because it is considered risky.” Any financing that has happened so far is because of foreign direct investment, voiced another manufacturer. Most manufacturers agree that the DCR ruling by the WTO has hurt the indigenous manufacturing sector. “The government can still make DCR a prerequisite for government tenders for projects installed on government land or buildings,” stated another manufacturer. Manufacturers would also like to see more investment in research and development to support new innovations that can bring down costs over the long run. The Ministry of New and Renewable Energy (MNRE) called a meeting with manufacturers that have a capacity of 500MW or more to discuss these issues in June last year. The MNRE asked the manufacturers to build polysilicon manufacturing facilities of about 500MW each, either in partnership with a foreign company or joining forces with Indian companies like Waaree, Vikram and Goldi Green. In return, these companies would get IPP rights to develop a 1,500 MW solar project at a fixed tariff by MNRE. “Whilst the offer was made, we have not heard back from MNRE on this topic,” said a source at Vikram Solar. Manufacturers were hoping for some kind of subsidy or incentive from the government to scale up production but were disappointed that the current budget did not provide any. Manufacturers also want more clarity around state-sponsored incentives so they can determine which states are better and more profitable for building manufacturing units. According to Mercom, Indian non-DCR modules typically cost about 10 percent more compared to Chinese modules. With highly competitive auctions like the one in Madhya Pradesh at the REWA solar park auction, tariffs have come down below Rs.4 (~US$0.059)/kWh for the first time to Rs.3.30 (~US$0.049)/kWh. From Mercom Capital Group’s “Mercom Exclusive: Can domestic manufacturers capture a larger piece of the growing Indian solar market?”
Indian solar PV imports and exports (US$m)
Source: Mercom Capital Group
ASIAN POWER UTILITY FORUM: JAKARTA
Panelists at the 2017 Asian Power Utility Forum in Jakarta, Indonesia
Mission impossible: Indonesia may be setting ambitious energy targets
Energy players are criticising the country’s loopholes in policies and regulatory framework, however it turns out that may sector-specific issues still remain such as the tedious process for land acquisition in power projects.
ndonesia pledged to reduce emission by 26% in 2020 in its Intended Nationally Determined Contribution (INDC), where the Indonesian government shifted its policy from coal to more environmental friendly gas generation. If implemented, demand for gas would increase to support the shift in the generation mix. What impacts would this have on other energy players and what regulatory changes must be done? Will this affect Indonesia’s energy targets? These are among the sectoral topics discussed in the Jakarta leg of the 2017 Asian Power Utility Forum held in Ritz-Carlton Mega Kuningan in April 6, which was attended by over 30 key representatives from the Indonesian power market. According to Stefan Robertsson, principal at The Lantau Group, sometimes official forecast are part of the problem, not the lack of policy or regulatory framework supporting the targets. Official projections and targets can often look “aspirational”, and/or are long term with no definite framework how these can be achieved. Secondly, retail pricing policies can impact fuel mix. Few Asian countries have robust “cost pass through” regimes. “Regulated retail 26 ASIAN POWER
Current requirement for RE projects are to beat PLN’s average cost of electricity, and not even enough to beat marginal cost.
tariffs with less clear cost pass-through and/or result in low/subsidized tariffs tend to creates disincentives for offtake of higher cost generation. Third is that wholesale pricing regulations can be a problem. Not every MWh of electricity is created equal. There is often only a single 24/7 base load tariff, and if the benchmark for wholesale pricing is base load power, than the outcome will favour base load power,” he said. Fourth point is that there is not enough government support for upstream, which will make downstream electricity targets hard to meet. Lastly, there is not much regulatory support for RE to begin with. Policies and regulatory framework for RE in SE Asia are lacking. In Indonesia, most recent FiT was announced in 2016, but only lasted for a few months. Current requirement for RE projects are to beat PLN’s average cost of electricity, and not even enough to beat marginal cost. Indonesia seeks to liberalise the midstream and downstream gas industry, but many sector-specific issues remain. The acquisition of land during construction and associated licensing/permitting procedures have been a recurring issue as they are time consuming and the ownership may be in dispute or may
overlap with protected forest areas or other business concession areas. In addition the process of land registration is subject to government regulation. Liberalising the gas industry “Foreign ownership restrictions are also present in certain services. The updated negative investment list issued through Presidential Decree No. 39/2014 places restrictions on certain oil and gas services including (some) construction, installation works, design and engineering support services, or technical inspections. This may make it harder for companies to find the necessary expertise to develop oil and gas projects,” Robertsson said. Restrictions on hiring foreign workers are also in place. The Decree No.31/2013 issued by MoEMR is leading to a tighter scrutiny of foreign worker permits, as the government tries to encourage the hiring of more Indonesian workers. This could lead to businesses finding it harder to find the relevant skill/expertise that require specialized knowledge, like the oil & gas industry. Agung Wiryawan, director at PwC discussed that in 2015, Indonesia had approximately 55.5GW installed capacity of power plants which generated 228TWh
ASIAN POWER UTILITY FORUM: JAKARTA of electricity. Demand for electricity in Indonesia is expected to grow by around 8.5% p.a. in the next ten years. The Government projected that demand will reach 457TWh by 2025. To meet this demand, the Government planned to develop 35GW of additional electricity generation capacity between 2015 and 2019, and a further 45GW by 2025. Updates on renewables The 35 GW programme appears to be progressing, albeit slower than hoped, so a new regulation was enacted to accelerate the development. Presidential Regulation No. 4/2016 was issued to address various issues affecting power project development in Indonesia (especially 35GW programme). In November 2016, Rinaldy Dalimi (member of National Energy Council (“DEN)) said that unless PLN could expedite the financial closure, it was unlikely that any more than 20GW would be achieved as it took around 36 months to build a power plant after the financial issues were settled. As of December 2016, only 0.5GW of the 35GW has reached the Commercial Operations Date. Under the Government’s future plan, fossil fuels are expected to continue to play a dominant role, but an increased focus on renewables. “Despite the risks in the new regulations, there are also opportunities to deploying renewables.In the past fuel subsidies, low electricity tariffs, complex regulations, legal uncertainties, logistical challenges and extensive cheap coal resources deterred potential renewables investors. Following years of underinvestment, Indonesia’s production of renewable energy remains modest. Solar insolation in Indonesia is higher than most other countries. However, the current installed capacity is only around 85MW. The MEMR plans to add 5,000MW of solar power capacity by 2019,” Wiryawan said. To support the 5,000MW target, several programs and regulatory frameworks have been introduced: Develop Renewable Energy for Villages Program (Program Energi Terbarukan Listrik Desa) with a target of electrifying 10,300 villages by 2019; A capacity quota of 500 MW of solar power to be offered in 2016; Developing regulations for hybrid PV, ongrid PV and rooftop PV, and; Developing a quality standard for solar panels and expert resources. “The estimated potential of wind energy in Indonesia has historically been regarded as relatively small, primarily due to the relatively low wind velocity. The exception is in the eastern islands, where wind velocity can reach a sufficient
level to power small-to-medium scale wind turbines. As of mid-2016, a total of 215MW geothermal capacity was added. Despite this achievement, the Government has not reached its target of installing an additional 270MW capacity,” he said. Energy balancing challenges ABB is among the market players committed to assisting the region in hitting its energy targets. Its integrated IT/ OT solutions serve 50% of electric utilities in the Platts Top 250 global ranking, 480 million electricity consumers globally, 55% of operating nuclear power plants globally, and 66% of global platinum mining production. Guillaume Ridoux, consultant in the Energy Portfolio Management (EPM) group of ABB for the Asia Pacific region and based in Singapore, discussed the challenges of balancing demand and supply given the current evolution in energy mix and how our portfolio of solutions can help. The increase of intermittent renewable and distributed energy resources requires adapted transmission and resource planning, market design and portfolio optimisation methodology and tools. With more renewables, planning requires further risk analysis related to system constraints and market see increased needs for balancing services that can be addressed by distributed technologies. “ABB Energy Portfolio Management product group recognises four solution areas to address a rapidlychanging energy business model: power market analytics, energy market intelligence, portfolio planning & operations, and distributed energy resources management,” Ridoux explained. Luke Devine, foreign legal consultant and head of energy, mining &
The 35 GW programme appears to be progressing, albeit slower than hoped, so a new regulation was enacted to accelerate the development.
infrastructure - Asia Pacific at Baker McKenzie, discussed the evolution of Indonesian power purchase agreement. First internationally debt financed PPAs started in early 1990s. Over time, different “Generations” evolved. Some changes were driven by plant type whilst other changes were just representative of a move from PLN to shift more risk to developers, for instance delaying penalties for late achievement of Commercial Operation. PLN and Sponsors/Lenders were left with discretion to find right “bankability” balance. Government left PLN alone to find right risk allocation, and eventually, only real limiters introduced around the scope of coverage of Government guarantees for those projects entitled to it. Recent PLN modifications include bonding requirements, project development cost account, and PLN is now given the option to buy a project at any time. Performance Bonds are required on signing for aggregate 10% of Project cost (typically broken up into Stage 1: 40% and Stage 2: 60%). Perry Nagle, director at PT Energy Nusantara Merah Putih, talked about the company’s upcoming captive 600MW power plant and LNG receiving terminal. The company is in partnership with Bantaeng Regency government, Sulawesi for the US$980m project. The plant will be used to suport the electricity needs of Bantaeng Industrial zone. The project will be financed on a nonrecourse project financing basis, with a total cost of approximately US$1b. “ENMP is currently finalising a development consortium with an international financial institution and one or more strategic partners to provide development stage financing to complete feasibility and to finalize key agreements,” he said.
L-R: Luke Devine, Perry Nagle, Tim Charlton ASIAN POWER 27
ASIAN POWER UTILITY FORUM: Singapore
Panelists at the 2017 Asian Power Utility Forum in Singapore
Why tiny Singapore’s solar energy sector can’t go big despite technological lead Singapore is already brimming with solar energy capacity, and the increasing levels of solar penetration is predicted to cut into peak demand despite the fact that there is no capacity needed.
ingapore, even with a modern market design, has struggled amidst a significant market failure and a lingering challenge of excess capacity and commercial non-sustainability. More broadly, reducing subsidies, and moving to cost-reflective pricing should help in due course, but there is a long, long way to go. These are among the sectoral topics discussed in the Singapore leg of the 2017 Asian Power Utility Forum held at The Shangri-La Hotel Singapore in April 25, which was attended by over 30 key representatives from the Singaporean power market. Mike Thomas, partner at The Lantau Group, said it is hard to look at Singapore’s market without some trepidation. There is slowing electricity demand growth as economy becomes less energy intensive, and GDP growth slows. There is an increasing levels of solar penetration that will cut into peak demand even though no capacity is needed. It is characterised by an idiosyncratically-designed Demand Response scheme that likely acts as an expensive “secondary price cap,” and there is collapse in wholesale prices, seen largely as a windfall benefit to consumers and an inconsistent policy / regulatory 28 ASIAN POWER
There is oversupply in generation capacity due to investments seemingly following a herd mentality.
aversion to price spikes without a clarity on what it means for the future. “Lastly, there is oversupply in generation capacity due to investments seemingly following a herd mentality and over-contracted gas, alongside high take-or-pay clauses reducing flexibility. With slower growth, Singapore’s market is a tough place to launch new policies without further risk of stranded costs,” he said. Solar in Singapore Small Singapore is a technology leader when it comes to solar power, but the sector is still yet to move forward in the country. What are the main challenges in bringing lots of PV in Singapore? According to Gautam Jindal, research associate at Energy Studies Institute, National University of Singapore, to make this happen, the country will need space. In Singapore, there’s only 45 sq km of net usable space where PV can be installed, and this is not counting the offshore installations. “We can get over 10GW of solar energy from this amount of space. Secondly, Singapore has to face the challenge of intermittency. As a tropical country, the output is very intermittent even during
bright sunny days,” he said. Singapore’s energy authorities have categorised solar as an intermittent generation source (IGS) and there’s a whole new different framework for incorporating this in the country. Before 2014 there was a hard cap that we will not go beyond 350MWp of solar. Recently, in a speech by Minister for Trade and Industry Mr S Iswaran, he said that now Singapore can incorporate 1GW of PV into the grid. “It is something that’s been said in the open, and it is going to happen,” Jindal said. One of the reasons that has made this possible is the smoothening effect of spatial diversity. Passing clouds can change radiation at single points, resulting to 60 –70% reduction of peak insolation within seconds. Between two sites far apart, impact of passing clouds becomes uncorrelated. Unique aspects of Singapore’s market Singapore’s wholesale electricity market is a pool-based market model. Procurement of energy here is co-optimised, reserve, and regulation. “We have a 30-minute trading interval, and gate closure of 65 minutes before the dispatch. We have almost 90% of excess energy generation
ASIAN POWER UTILITY FORUM: Singapore capacity, and most of our power units are fast-responding combined cycle gas turbine generators. Another important information about “operating reserves” in Singapore is that reserves are determined dynamically for every trading interval. Regulation is determined once a year, and determination method is not publicly available,” Jindal said. So what will happen if Singapore enjoys a lot of PV? What must be changed in the local market? “We need to use shorter dispatch intervals of 5 minutes. Most markets in the US and Australia, for example, go for 5-minute intervals for dispatch rather than having a an hourly or half-an-hourly dispatch,” he added. This will result to the use of energy market for low frequency variability rather than having to use regulation or reserves. Singapore can also benefit from shorter gate closures and this can lead to an improvement in forecast accuracy. Another point is the the dynamic determination of regulation requirement. The country will also need storage to participate in regulation and incentivise storages by using performance payment. Lastly, there should be more consultation on policy framework for energy storage systems. EPC vs EPC(M) Engineering, procurement and construction firms are deemed essential part of the equation when building power projects. Why is there a need for EPCs? The necessity originated in the project lenders requiring protection when providing non-recourse loans to companies. “Working with EPCs effectively passes design, construction, and performance risks to a third party rather than the borrower itself. The downside is that passing the risk costs results in a premium being paid.,” Tony Segadelli, OWL Energy’s managing director, said. EPC(M) does exactly the same role as an EPC. The difference is that the risk is being transferred on the owner, instead of the developer. Under an EPC(M) model, the owner is required to take the project risk. However equipment suppliers / contractors can be given liability for their scope if the contract boundaries are well defined. By taking on more risk the owner can remove the EPC Contractor’s contingency and thus earn a higher profit. According to Segadelli, this set up is well suited to simpler projects that can be split into limited number of discrete packages, wherein there is one contract for supply of major equipment, and there is a general contractor for installation and commissioning. This is not to say that this set up will got well for more complex projects. This is also recommendable for
new or updated technology that is still in R&D phase. It may also be suitable for a very complex project wherein the final design will be modified over the life of the project. “In an EPC contractor delegation, the owner is also the EPC Contractor it may be beneficial to the project economics to use an EPC(M) model. The EPC Contractor may have to delegate the vast majority of its tasks but want to retain financial control. This requires strong ability for the EPC and EPC(M) to collaborate,” he said. Power market evolution ABB is among the market players committed to assisting the region in hitting its energy targets. Its integrated IT/ OT solutions serve 50% of electric utilities in the Platts Top 250 global ranking, 480 million electricity consumers globally, 55% of operating nuclear power plants globally, and 66% of global platinum mining production. In conjunction with McKinsey, ABB has estimated the “level of digitalization” of various industries as a function of how long they have been pursuing it. In the 1990s, the Information & Communication Technology (ICT) companies embraced e-business and digitized most of their products (e.g. computers, routers, switches). Also the media industries are increasingly moving to digital formats away from traditional print media. Banks and investment companies increasingly operate as online companies (e.g. online brokerages) where customers rarely visit a branch but conduct most of their business on their computers or phones. Tom O’Meara senior vice president and general manager at ABB Enterprise Software, said that however, many industrial companies have been held back from embracing digital transformation
Singapore can also benefit from shorter gate closures and this can lead to an improvement in forecast accuracy.
because the digital technologies to unlock value were too expensive or unavailable. “What the consumer technology revolution has done is to make massive quantities of computing and storage available at dramatically lower cost (via the cloud). 3D printing, virtual reality (enabled by the innovations in mobile phones) are all finding applications in the industrial space. This is why we believe that many of our markets are currently primed for a dramatic acceleration in their adoption of digital technologies. Two examples of this are the energy revolution (adoption of renewables and the electrification of transportation) and industry 4.0 (the digitalisation of manufacturing),” he said. Asset performance management lets us use digital simulations of transformers and other products to optimize maintenance schedules. By combining ABB\s recent investment in Enbala with our existing power grid software systems, the company can integrate remote sources of energy generation, storage, and demand/response management into an integrated system. “We can use our maintenance workflow management systems to schedule the optimal downtime window to inspect and repair energy infrastructure. Our energy market trading system is used by many liberalized energy markets to carry out the forecasts and trading of energy in the wholesale markets. Our automated digital substation combines solid state power electronics with fiber-optic digital communications to reduce outage times,” O’Meara said. He added that ABB has a complete portfolio of wireless standard IP communications technologies that can enable use cases such as smart-metering and distribution automation. “Our microgrid solution contains all of the necessary hardware and software to act
L-R: Tony Segadelli, Gautam Jindal, Tim Charlton ASIAN POWER 29
Boosting China’s clean energy sector
hina’s Premier Li Keqiang has recently called forthepromotionofkeytechnologies for cleaner energy. Notable progress has been made in China’s utilization of this vast country’s new energy sector in recent years. Last year saw this vibrant country’s clean energy sector installing 149GW of wind power and 77GW of solar power. China’s wind power farms connected to power grids accounted for around 4%of the nation’s total electricity output. Equally impressive is that the output from solar power installations is gradually being included into the new energy sectors total contribution to China’s power generation capacity. The country’s constant efforts to transform China into a low-carbon economy will serve to help the nation in meeting the climate change pledges which were made in Paris last December. Recent clean energy reports in the Chinese media have said that the country’s de-carbonizing process is sustainable with the country’s rising demands for
clean energy resources. Carbon emissions globally that are being caused by fossil fuels have remained flat for three years in row. This flat-line in global carbon emissions is mainly due to the declining use of coal in China since 2012 says a study published in the Earth System Science Data Journal late last year. A further mark of China’s determination to clean up its energy industries is the recent announcement of China’s Shanxi province which is setting its sights upon shifting to clean energy resources said a report in the China Daily. Shanxi province is aiming to cut its reliance upon coal and is aiming at developing clean energy resources and information technology industries. Luo Huining, Party chief of Shanxi province and a deputy to the National People’s Congress is quoted as saying that the provincial government will shift its priorities towards growth developments towards new growth engines which include the coordinated development of the Beijing-TianjinHebei region plus the coordinated development of
Amy Luinstra & Kate Lazarus
More women in hydropower companies
ydropower is traditionally a maledominated field. This is not to say that female engineers, hydrologists, plant managers, or even CEOs do not exist. They do. But globally, women are grossly underrepresented in the hydropower field. Further, even when present, their talent is more often underutilised. This must change; simply because there is a business case to integrate more women into the hydropowerindustry workforce. A study prepared for the World Bank found that output per worker in East Asia and Pacific countries could actually be 7 to 18 percent higher if female entrepreneurs and workers worked in the same sectors, types of jobs, and activities as men. In Brazil, the Santo Antonio hydro-electricity plant nearly tripled the national average of women in technical jobs during its construction phase. By training locals including many women for jobs traditionally held by men instead of flying workers in and out of the remote site, the plant saved $9 for every $1 invested. The Itaipu Dam, 30 ASIAN POWER
also in Brazil, increased gender diversity and family-friendly benefits led to increased employee satisfaction. We need more There are advantages to having more women in the workforce in the hydropower sector in Asia. The International Finance Corporation–a member of the World Bank Group–launched a new gender initiative earlier this month to build that business case and demonstrate the benefits of employing more women in hydropower companies. The initiative–Powered by Women–plans to improve understanding of gender gaps in the hydropower industry in Asia by igniting research on current trends in the sector. Supported by the Australian government, Powered by Women was launched in Myanmar, where there is an urgent need to make hydropower more sustainable. Trends in the power industry globally demonstrate the scale of the challenge to improve gender diversity. Accounting firm, EY’s 2016
China’s central and western regions plus the Belt and Road initiative. Preventive measures in place In order to prevent any potential risks being caused by excessive coal mining and the low price of coal globally, the province has recently closed 25 coal mines and cut total production capacity in 2016 down to 23.25 million metric tons in 2016. The authority will not approve any new coal mine projects and is planning to cut capacity up to 100 million tons by 2020. Luo has been quoted as saying “We will expand our market share in manufacturing machinery, clean energy, industrial materials and agricultural products to both the domestic and global markets, in particular to Africa and Southeast Asia. Shanxi province has already set a target to invest up to 414.4 billion yuan (US$60.08 billion) in more than 900 projects in order to carry out the supply chain reforms. China’s Premier, Li Keqiang recently called for the promotion of the key technologies for cleaner energy together with international cooperation in order to achieve a diversified and stable energy supply that will support China’s economic development. Premier Li also said that that coal should be utilised in cleaner and more efficient way. Also renewable resources such as hydropower and solar energy should be expanded along with the secure utilisation of nuclear power. Coal accounts for more than 60% of China’s energy consumption. Women in Power and Utilities Index reports that women make up only 5 percent of workers in the power companies that participated in the study. The study indicates only meager annual increases of women workers in hydropower; around 1 percent per year. Importance of women’s roles There is abundant literature on how energy constraints in the household affect women. They are primarily responsible for collecting firewood and cooking. But, there is very little information on the importance of women’s roles as leaders in the energy sector, or hydropower specifically. According to a 2016 report by the ADB and the United Nations–Gender Equality and Women’s Rights in Myanmar: A Situation Analysis–women should be recognised as leaders in energy projects and must participate at all levels of decision-making to ensure a ‘gender-aware’ approach to promoting cleaner, more efficient energy systems. The report indicates that without understanding the demandside, supply side solutions may be inadequate. There are lessons for emerging economies such as Myanmar to help advance gender equity and ensure women do not get left behind as industries with employment opportunities, such as hydropower, take off. In Myanmar, Powered by Women aims to show companies that gender-smart workplaces make sense. By taking on gender-equity challenges, hydropower companies can stimulate business growth and efficiency and enhance sustainability.
REFRESHING LIFE WITH GREEN ENERGY
China Resources Power Holdings Co.,Ltd. (CR Power) was founded in August 2001. The Company is among the most efficient and profitable integrated energy companies in China. Its business covers thermal power, wind power, hydropower, photovoltaic power generation, distributed energy, coal mining and other areas. It also acts as a flagship company listed in Hong Kong for China Resources Holdings Co.,Ltd., which is one of the largest state-owned conglomerates in China and a Fortune 500 company. CR Power was listed on the Main Board of the Hong Kong Stock Exchange on November 12, 2003. On June 8, 2009, the Company formally became one of
the constituent stocks of the Hang Seng Index in the Hong Kong Stock Exchange. As at 30 June 2016, CR Power’s total assets amounted to HK$200.2 billion and operational installed capacity amounted to 44,379MW, covering 21 provinces, municipalities and autonomous regions in China. Since listing in 2003, CR Power has grown more than 22 times in terms of attributable operational installed capacity and its total assets, total revenue and operating profit has grown at a twelve-year CAGR of approximately 25%, 51% and 56%, respectively. Since its establishment, CR Power has been a strategy-driven enterprise and
saw a fast and solid development in the past decade due to its clear strategy and efficient execution. In the next five years, CR Power is going to focus on green energy development, greatly enhance the mix of clean energy, selectively develop highquality thermal power and actively plan to enter the power wholesale market in China. CR Power places a high degree of importance in fulfilling its CSR pursuits and committing to upholding its long-term sustainable values. CR Power will continue to work hard towards realizing its ultimate goal of positioning the Company as an excellent and sustainable, international energy company, so as to create a “Refreshing Life with Green Energy”.
arlier this year, the Singapore government announced that it will impose a tax on greenhouse gas emissions (GHG) from 2019. The tax amount, which is yet to be finalised, will lie in the range of S$10(US$7.14) to S$20 (US$14.29) per tonne of carbon dioxide equivalent (CO2e). The imposition of a price on carbon emissions is key to the overall strategy of achieving Singapore’s emission reduction target. Singapore ratified the Paris Agreement in September 2016 and committed itself to the reduction of its GHG emissions intensity; measured on a per dollar GDP basis, by 36% as compared to 2005 levels by 2030. This is on top of the pledge Singapore made at the Cancun climate conference in 2010, whereby it committed itself to reduce its emissions by 16% as compared to a business as usual scenario by 2020. For most countries that have committed to ambitious emissions reduction targets, power generation is generally the largest source of their emissions, and a key sector targeted for initial action. For example, the US’ Paris pledge is largely dependent on its “Clean Power Plan” which establishes targets at state level for emissions from power generation. Similarly, China’s 2030 target relies on substantially reducing its coal consumption along with increasing the share of natural gas and non-fossil sources in its primary energy supply. Singapore on the other hand, faces a unique conundrum. It already generates over 95% of its electricity from natural gas powered F-class
am starting a series on recipes for procedures to support Asian countries in developing Renewable Energies. Along the many years of consultancy in Asia and elsewhere in the planet developing Renewable Energy projects I have come across the symptomatic question: “no one helps us to develop renewable energy projects. What can we do?” This question has been less frequent, but even after 200GW of solar projects and 400 GW of wind projects across the world, it is still present in some countries, states and regions and I heard it a few days ago again. The recipe for PV projects has three basic ingredients: land, PPA, and Economic development. Ingredients 1 & 2: Land and PPA The land can be public or private. If it is public it should be made available for the project as a leasing for 30 years with the lowest cost possible allowed by the law in order to minimise the final cost of electricity. It should not be free however! If it is private the rent must compete with whatever usage of the land is made and provides an earning. For example eucalyptus for paper, cork, rubber, tea, cotton, etc. It can be easily seen that the final electricity tariff will reflect this cost. There is no need to share any dividends or profits with the land owner. That would be the same as renting a flat to someone and then ask for a % of the salary on top of the rent. Feasibility of the land is another issue that I will not address here, but certainly PV projects have some 32 ASIAN POWER
GAUTAM JINDAL Will Singapore’s power sector bear the brunt of its carbon tax?
combined cycle generators. The remaining share comes from “must run” waste incineration plants, embedded co-generation plants, and peaking generators. Additionally, as an alternate energy disadvantaged nation, Singapore’s only option for renewable energy is solar power, which is unfortunately limited by space constraints and concerns over its intermittent output.
Meager improvements As a result, Singapore must achieve the bulk of its reductions in emissions through the improving of its energy efficiency in the industry sector and to some extent, from the building and transport sectors. However, despite mandating businesses to develop energy efficiency improvement plans and offering financial incentives for the implementation of energy efficiency projects, overall efficiency levels improved by only 0.6% in 2015. Thus, the need of the hour is to expose the environmental costs of GHG emissions to consumers, so that this cost can be factored in to
their energy usage and investment decisions. This will make the business case for investing in energy efficient equipment and reducing energy usage, a more attractive one. The government has indicated that it intends to apply the carbon tax to businesses that emit more than 25,000 tonnes CO2e annually, which would encompass approximately 30 to 40 large emitters, some of which include power generators, refineries, and other manufacturing units. Which brings us to the question – will Singapore’s power sector bear the brunt of the carbon tax despite having invested in best of class turbines, that run on the cleanest fossil fuel available, without costing the government a dime in fuel subsidies? Singapore operates a competitive wholesale electricity market whereby generators are expected to offer generation capacity at their short run marginal costs (SRMC). In the current electricity supply & demand situation, the marginal plant is usually a natural gas combined cycle generator, and thus determines the market clearing price.
Agostinho Miguel Garcia
Renewable energy recipes in the development of solar PV projects
requirements. The Power Purchase Agreement or PPA must have as off-taker a credible institution and should be a document tested and used on power generation. “Inventing” a PPA or select any entity to sign the PPA is not adequate. The local or regional utilities should be the natural off-takers or large consumers of power as mines, industries, commercial sectors and other such users. Seasonality is discouraged on looking for off-takers as the sun shines everyday throughout the year. Ingredients 3: Development Third, the PV plant should contribute to create local jobs and economic development. Training should be devised and arranged to provide skills to local people and also associated businesses should be encouraged as hotels, restaurants, workshops, warehouses, housing, renting of equipment. The more remote a location is the more interesting are to reduce logistics costs and the local people may benefit. Mandating local content targets is
important, but WTO rules should be scrutinised to avoid legal problems later. Competitive tender process With the basic ingredients the next step is to prepare the meal: that means a competitive tender process. Such tender should inform the parties of the land, the PPA arrangement and the local economic development expected and ask for a tariff. Do not negotiate tariffs individually, do not engage into processes with a fixed developer as that will lead to infinite negotiations and unnecessary hassles and limitation on choosing the IPP. Remember that you are providing a business opportunity and there will be undoubtedly interest. This is like selling sovereign debt. There will always be interested parties. So, do not go on a ghost hunt or looking for the saviour. Prepare a tender process with the ingredients and float it to attract interested parties. You will see that you will not be disappointed and the tariffs will surprise you.
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