ISSUE 78 | DISPLAY TO 31 DECEMBER 2016 | www.asian-power.com | A Charlton Media Group publication
CEO OF THE YEAR
HOW KOMIPOâ€™S CEO CHUNG CHANG-KIL TOOK CRISIS-STRICKEN FIRM TO CHURN OUT $25.4M IN POWER PLANT PROFITS
ARE DRONES TAKING OVER WIND AND SOLAR O&M?
ASIA IS GETTING SICK OF USING SUBCRITICAL PLANTS
HYBRID POWER SYSTEM NIGHTMARES CHINESE PV MAKERS ARE OVERSTOCKING
FROM THE EDITOR Publisher & EDITOR-IN-CHIEF production editor graphic artist
ADMINISTRATION Advertising Editorial
The Asian Power Awards hit its 12th year of recognising the top achievers and best players of the industry. Over a hundred key executives from outstanding companies flocked to the “Oscars” of the power industry and witnessed the awarding ceremony. Flip through the pages and check out the awarding night which transpired in Seoul, South Korea for the first time.
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The Asian Power team sought KOMIPO’s CEO Chung Chang-kil, who was awarded the CEO of the Year, for this issue’s cover feature as he discusses his biggest challenge yet. Two years after a crisis brought by the government’s continuous undervaluation of KOMIPO, he believes the firm is now on the right path to fully reversing the difficulty with hefty plant profits. Read on and see how his plans will play out for the rest of his term as the CEO. Malaysia and Vietnam are also in the limelight as this issue’s country reports. Our team sought industry experts’ insights on Malaysia’s ambitious renewable energy goals and Vietnam’s shaky energy policy framework. Start flipping the pages and enjoy!
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ASIAN POWER 1
SECTOR REPORT: COAL & GAS
28 Will Coal & Gas Burn Bright or Burn Out? FIRST 16 China turns to smart power generation
COUNTRY REPORT: MALAYSIA Doubts are cast over Malaysia’s ambitious renewables targets
COUNTRY REPORT: VIETNAM Vietnam’s power players cry out for stronger government support and policy framework
ANALYSIS 32 Yes, China will succeed in cutting use of coal-based power in just a decade
16 Drones are taking over wind and solar O&M 17 Asia is getting sick of using subcritical power plants 18 Hybrid power systems can be a nightmare
OPINION 46 Chinese energy companies are seeing natural gas as the future 46 How does Southeast Asia’s coal plans fit with Paris commitments?
Published Bi-monthly on the Second week of the Month by Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building Singapore 069533
34 Why ASEAN countries are not yet ready for variable renewable power
44 Blockchain – an opportunity for energy producers and consumers?
EVENT COVERAGE 36 POWER-GEN ASIA 2016: Playing catch up with Asia’s fast integrating power system
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ADB loans $48m to Assam, India for power distribution system upgrades The Asian Development Bank (ADB) and the Government of India signed a $48m loan to help Assam state continue its drive to improve access to efficient and reliable power. This is the second tranche loan of the $300m multi tranche-financing facility for the Assam Power Sector Investment Program.
Vietnam junks plans for 4000MW nuclear power plants The Vietnamese government surprised the nuclear industry as it announced the abandonment of plans to build the 4000MW nuclear power plants, saying that there are cheaper energy alternatives and citing sluggish power demand.
Solar PV market predicted to grow 286% to $345.59b by 2020 The photovoltaics market is expected to grow from $89.52b in 2013 to $345.59b by 2020, at a CAGR of 18.3% between 2014 and 2020, according to a recent report by Markets and Markets. In terms of geography, APAC is expected to hold the major market share at 53.25% in 2013, followed by Europe at 23.52%.
Philippines gives go signal for 2000MW power projects The Philippines energy arm, the Department of Energy (DOE), has given the green light to 11 power projects for grid impact studies (GIS) in October. The projects are capable of generating a total of 1,877.9MW of power.
Kansai Electric to be the costliest power utility in a nuclear-free Japan Without nuclear, Kansai Electric will become the most expensive power utility. According to Dr. Bikal Kumar Pokharel, principal power analyst, Wood Mackenzie Singapore, for Kansai Electric, cost competitiveness will depend significantly on the return of nuclear plants. Nuclear formed 25% of its capacity mix pre-Fukushima.
Chinaâ€™s power sector overcapacity to stretch beyond 2020 Chinaâ€™s power sector faces significant uncertainty as overcapacity reaches unprecedented levels, and will likely worsen for two more years before gradually stabilising after 2017, according to new analysis from IHS Markit.
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co-published Corporate profile
KOMIPO breaks ground for cleaner and greener energy in Korea and Southeast Asia The state-run company hooked deals in Indonesia, Thailand, and Malaysia.
Boryung #3 6,000 days trouble free ceremony
he evolving environmental landscape has pushed the global energy sector towards more ecologically sound strategies and goals that contribute to sustainable development. Plenty of companies are running ahead of the pack as they prioritise innovation and greater collaboration with its neighbors. Korea Midland Power Co. (KOMIPO), one of Korea’s six power subsidiaries of the staterun Korea Electric Power Corp. (KEPCO), has come up with interesting initiatives to reduce greenhouse gas (GHG) emissions through GHG reduction methods such as waste utilization, by-product recycling, and CCS technology development. One of KOMIPO’s biggest investments until 2017 is a US$6.9m (KRW8.2b) deal to accomplish a pan-ministerial national policy cooperation research task to utilize hot waste water from thermal power plants in farming. Through the use of thermal waste water, farmers will be able to save up to 80% of heating costs based on traditional energy sources. Hot waste water utilisation According to KOMIPO CEO Chung Chang-kil, this project is designed to utilise hot waste water for greenhouse heating, capture & inject CO2 and accelerate photosynthesis, utilise coal ash as bed soil in farming and create optimum crop growth environments while verifying profitability. “In addition, KOMIPO 6 ASIAN POWER
is carrying out projects to utilise the hot waste water in the fishery field, investing KRW6.7b and constructing a new hot waste waterutilized ‘Fishery Seed Hatchery’ in August 2015. Utilising the hot waste water, the hatchery is consuming less energy to heat seawater and cutting expenses, while nurturing and sending 700,000 baby fish in nearby seas for contribution to the income of fishermen,” Chang-kil adds. Going green Known for its strict system of preventive maintenance for all facilities and its feat of running the world’s longest long-term troublefree operation, KOMIPO is also now on the lookout for stronger and more ecologically viable partnerships with the private sector. In Korea, it is implementing eco-friendly collaboration businesses with companies by supplying hot waste water to adjacent LNG terminals and enabling its use for LNG vaporisation to increase vaporisation efficiency, while minimising the discharge volume of hot waste water.
KOMIPO is now on the lookout for stronger and more ecologically viable partnerships with the private sector.
In 2015, KOMIPO and Hankook Special Gases Co., Ltd. entered into a Memorandum of Understanding (MOU) that helped secure a distribution network for reuse of KOMIPO’s produced high-purity carbon dioxide (CO2) in a wide variety of fields. KOMIPO expects the effect of creating new energy industry markets as well as contributing to the nation’s GHG reduction efforts. The increasing share of renewables in the world’s energy mix has also driven KOMIPO to invest in more renewable projects alongside its waste recycling and conversion initiatives. The company built a small hydro power plant utilising the head drop that occurs when the hot waste water is discharged, harvesting about US$2.1m (KRW2.5b) of electric power revenue annually. From the very beginning that the company was founded, Chang-kil says that his team at KOMIPO has always recognised the importance of large-scale GHG reduction technology development. In May 2013, the company successfully completed construction of a 10MW-class carbon capture facility as its Boryeong TPP in May 2013, a result of its decade-long efforts on technology development. “Since then, with investment of about KRW7b more, KOMIPO completed installation of facilities for refining, compressed liquefaction and storage of CO2 in August this year and expects to produce high-purity CO2 starting in September for utilisation in
co-published Corporate profile
participated together in KOMIPO’s ultra-large power plant construction projects after the mandatory organization of consortiums, so large enterprises are substantially supporting SMEs, and SMEs and equipment & materials companies can take part more actively in the construction of Shin-Boryeong TPP #1 & #2 and Shin-Seocheon TPP #1.
KOMIPO plant in Cirebon, Indonesia
Cooperation with SMEs “As a result, SMEs’ receipt of orders increased from an annual average of US$48.5m (KRW57b) (‘13~’14) to US$499m (KRW87.1b) in 2015. The practice of mandatory participation of SMEs in the power plant construction, routine maintenance, and service fields thus far monopolised by large enterprises is the first in Korea and unique among power companies,” Chang-kil says. KOMIPO’s efforts have borne fruit in the recognition it has received over recent years. Owing to such efforts, the Federation of Korean Industries (FKI) selected KOMIPO as a ‘Koreantype Shared Growth Model.’ The company also won the Most Excellent Award at the ‘2014 Shared Growth Grand Contest’ sponsored by the Korean Ministry of Trade, Industry & Energy. In 2015, KOMIPO received ‘Excellent Grade,’ the highest grade among 25 public enterprises, in the 2015 Shared Growth Assessment of Public Organizations supervised by the Ministry of Trade, Industry & Energy. This award means that KOMIPO’s SME support programmes are receiving external recognition and are being recognised as good examples for other energy companies to emulate.
diverse fields,” says Chang-kil. Over the years, KOMIPO has been recognised for its excellent plant operation capability. This reputation allows KOMIPO to bring its competencies outside of the Korean market and into greater diversification of its products in the regional energy scene. One of the company’s first forays overseas is the construction and operation of the Cirebon Power Plant in Indonesia, the company’s first time to export its homegrown ultra super-critical pulverized coal thermal power plant.
to KOMIPO’s overseas work sites of US$1m, and exports of KOMIPO’s cooperating SMEs US$25.5m (KRW30b). KOMIPO is operating the ‘Shared Growth 1+2 System’, a system that requires a large enterprise to enter bids jointly with two cooperating SMEs when participating in KOMIPO tenders. KOMIPO has expanded the scope of SMEs annual participation to power plant construction, design service and routine maintenance fields. Under the system, large enterprises and SMEs have
Going global Chang-kil adds that at present, KOMIPO is pursuing the ‘K-Jang Bogo Project,’ which has combined the demand from SMEs intending to advance into overseas markets with the government’s SME support policy. This project is comprised of four export support platforms -overseas competitiveness reinforcement (Youth Jang Bogo), establishment of overseas outposts (Cheonghaejin Jang Bogo), accompanied advance activation (King of Marine Jang Bogo) and creation of new opportunities for overseas growth (Trade King Jang Bogo). “Under this program, 34 SMEs set up an ‘Accompanied Overseas Advancement Committee’ named PT. SSH (Sung San Hitech), a local corporation in Indonesia, and achieved exports of US$1.5m in 2013, US$3.6m in 2014 and US$4.02m in 2015. This year, KOMIPO dispatched SMEs and a trade promotion mission to Indonesia, Thailand and Malaysia July 10~21, where the SMEs successfully concluded contacts worth US$1.32m with power plants being operated by KOMIPO,” Chang-kil says. KOMIPO has been increasing its efforts in making sure that win-win outcomes will result from the K-Jang Bogo Project. It has already established several targets for 2016 -- achievement of large enterpriseSME cumulative (‘10~’16) total exports of US$212m (KRW250b), direct exports of SMEs
“The practice of mandatory participation of SMEs in the power plant construction, routine maintenance, and service fields thus far monopolised by large enterprises is the first in Korea and unique among power companies.”
Social responsiblity activity fot Thanksgiving Day ASIAN POWER 7
Thought Leadership Article
PT Indonesia’s award winning plant demonstrates the benefits of smart power generation
Wärtsilä is honoured to be associated with the success of PT Indonesia Power who received the Best Dual-Fuel Power Plant of the Year award for the 200MW PLTDG Pesanggaran project.
Recipients of the Best Dual-Fuel Power Plant of the Year award
T Indonesia Power’s PLTDG Pesanggaran project was executed in consortium by Wärtsilä and PT Pembangunan Perumahan (Persero) Tbk (PT PP), one of Indonesia’s largest construction contractors. At the heart of this power plant, the prime movers are twelve Wärtsilä 18V50DF tri fuel units. As Tim Charlton, Editor-in-Chief of Asian Power, rightly said, “This power plant ensures greater reliability in the supply of electricity to both domestic and industrial consumers on the island of Bali. The fuel versatility of this plant provides valuable flexibility of operation and reliability to PT Indonesia Power’s customers.” Display of SPG’s prowess As a matter of fact, this project is another perfect illustration of the benefits of Wärtsilä’s Smart Power Generation solutions. Modern Power Systems need to provide Affordable, Reliable and Sustainable electricity to their customers. That can only be achieved if the electricity is generated by Smart Power Generation solutions that offer a combination of Operational Flexibility, Energy Efficiency and Fuel Flexibility. PT Indonesia Power’s power plant clearly demonstrates these Smart Power Generation attributes. Fuel flexibility enables this plant to run on liquid fuel in the initial period and be able to run on Natural Gas when it is available. This plant can run on high efficiency in open cycle mode. Considering that this plant is equipped with multiple generating sets, the operational efficiency remains high at a wide range of operating loads. The multiple gensets combined with quick start 8 ASIAN POWER
and ramp up capability also makes the plant highly flexible on operation. High quality in a short time “This plant delivery demonstrates Wärtsilä’s capability to deliver high quality state of the art power plant in a rather short time schedule,” says Jan-Erik Möuts. The plant is powered by twelve Wärtsilä 50DF dual-fuel engines. When the plant first started its operations in May 2015, it ran on HFO while the Tanjung Benoa LNG storage and regasification terminal was being built. Since July 2016, LNG has been readily available and the power plant has moved to running on natural gas.
Ensuring greater reliability in the supply of electricity to both domestic and industrial consumers
“This plant delivery demonstrates Wärtsilä’s capability to deliver high quality state of the art power plant in a rather short time schedule.”
The Asian Power Awards annually recognizes ground-breaking projects and trailblazing initiatives in the power sector in Asia. The PLTDG Pesanggaran Bali Power Plant is powered by twelve Wärtsilä 50DF dual-fuel engines, and the project was executed in a consortium with Wärtsilä as the lead partner. The award is a reaffirmation of Wärtsilä’s capability to deliver high quality, flexible and efficient dual-fuel power plants according to customer requirements.
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”.
COMMITTED TO EFFICIENT & CLEAN COAL TECHNOLOGY
Hindustan Powerprojects with a vision of commissioning 6000 MW by 2020 in the thermal, solar and hydro is a leading player in the Indian energy sector M B Power ( Madhya Pradesh) Limited, Jaithari, Anuppur, Madhya Pradesh
CO-PUBLISHED CORPORATE PROFILE
Faster, cheaper and cleaner energy to balance economic development and sustainability PT Cirebon Electric Power (“CEP”) recognises its environmental and social responsibility and to maximise plant performance towards a sustainable future.
factory leaving its ash pond empty without ashes. To prevent dust from the power plant to harm surrounding areas, PT Cirebon Electric Power installs a 13-meter high Wind Breaker around its coal storage. The company also planted three layers of trees to maximise the function of the wind breaker.
Heru Dewanto - President Director Cirebon Power
co-friendly growth is a challenge worldwide. Innovations and technologies continue to offer solutions. Thanks to technological advances, clean coal is now possible. Coal power plants no longer use “subcritical” technology and have moved on to a more advanced “supercritical” technology. This guarantees a more efficient power plant. Less coal, less emission, less waste. For a country like Indonesia who needs to balance between economic development and sustainability, clean coal technology is the solution. The world’s power plant technology advancement today move towards a more and more “clean coal” technology. OECD countries recently reaffirm their continuing support on coal based power as long as operators are using clean coal technology. Among 5,000 less efficient “subcritical” power plants, Indonesia has only two “clean coal” units, one of them is the Cirebon Power Plant. Bringing in industry and technical expertise Established in April 2007, PT Cirebon Electric Power (CEP) is an international consortium-led power generation project involving leading international players in the energy and infrastructure sectors in Asia. Each shareholder brings their relevant industry and technical expertise, financial strength, local knowledge and market leadership. CEP owns a 660 MW coal fired power plant located in Cirebon District approximately 250 km east of Jakarta, the capital of Indonesia. The plant utilises supercritical technology which improve the cycle efficiency, resulting in lower coal consumption and reduced emissions to the atmosphere even though using low caloric coal. The boiler is 14 ASIAN POWER
tangentially fired and utilizes LO-NOx Burners which ensure that the production of nitrous oxides (NOx) is significantly lower than the thresholds set out by the government of Indonesia. The 4-year-old 660MW power plant have powered more than 600,000 homes. CEP consumes nearly 2.3 million metric ton of Indonesian 0.1% low Sulphur and maximum 4% low ash environmental friendly Indonesian sub-bituminous coal. The low sulphur coal allows CEP to operate its power plant more efficiently, and therefore emits less harmful emission The low ash content contributes to the life extension of power plant ash disposal facility and reduces the cost associated with ash disposal treatment and area. All ash produced are transported on a daily basis to a local cement
Use of cooling towers Sea water cooling towers are installed so that sea water discharged from the condenser are brought back to the sea with 0oC temperature rise. The government regulates a maximum of 2 oC rise. This is the first time that this technology has been applied in Indonesia for a power plant of this nature and size. Cirebon Power Plant operates on a 107-ha land in Kanci Kulon Village, 250 KM east of Jakarta. The success of this power plant, paves the way for Cirebon Power to expand to the next project of 1,000MW ultra supercrtical (USC) power plant in Cirebon. The expansion project is a part of the government’s 35GW Mega Project, and will be built on 204 ha of state-owned property. Financial closing is expected by the end of the year. This will be one of Indonesia’s first USC power plants , that will hopefully commence its operations in 2020 following a 51-month construction. CEP recognizes its environmental and social responsibility and commitment to maximize its Plant performance towards a sustainable future through the continual improvement of key performance metrics by implementing clean technology. It has, throughout the construction and now operation of the USC plant, developed and engaged in sound operational practices that are financial and environmentally sustainable. A sustainable development of clean coal technology is a commitment of PT Cirebon Electric Power as its contribution to build a stronger, better Indonesia.
Clean coal technology is the solution
Source: ASEAN Renewable Energy Policies
“A sustainable development of clean coal technology is a commitment of PT Cirebon Electric Power.”
FIRST exposed to the elements and suffering wear and tear. Drones are playing a larger role in helping inspect turbine blades and ensure they are in tip-top condition. “Each individual wind turbine blade needs to be inspected at minimum once a year during a turbine’s average 20-year lifespan because blade deterioration can reduce a turbine’s ability to produce power at best and cause total system failure at worst,” says Jesse Broehl, senior research analyst with Navigant Research. He says drones provide quicker and less risky blade inspection than rope-based techniques, and can provide highresolution images that are essential for operations and maintenance.
CHINA TURNS TO SMART POWER GENERATION
With China curtailing around 15% of its potential wind energy in 2015, a shiny solution is gaining fervent support: smart power generation (SPG). SPG installations in Southern China could help the efficient absorption of variable wind energy transmitted from the north, argues Xiaoping Chen, GM, energy solutions and vice president at Wartsila, China. Chen explains that the technology behind SPG is modular power based on internal combustions engines, allowing it to balance variable renewable energy by starting in less than one minute and reaching full load in less than five minutes. He argues that plants will operate at high efficiency at any load and allow unlimited number of starts and stops with no impact on maintenance. Managing curtailment rate How will this help China manage its curtailment rate? Whilst variable renewable energy currently accounts for around 6% of total generation in China, experts reckon wind curtailment has become a significant issue. Total curtailed wind volume more than doubled to 33.9TWh in 2015 from 12.6TWh the previous year, notes Liutong Zhang, senior manager at The Lantau Group, Hong Kong. Total curtailment amount in 2015 for wind and solar is equivalent to Singapore’s power consumption. “The causes of curtailment are manifold,” says Michael Davidson, a PhD candidate at the Massachusetts Institute of Technology, “High penetrations of wind in provinces far from load centres, inflexibility of the coal-heavy generation mix, and institutional barriers owing to incomplete power deregulation.” “China’s transition to a truly reliable and sustainable power system requires a new approach to incentive investment in flexible generation,” Chen says, insisting that SPG will bring increased flexibility in the system and enable integration of larger shares of wind and solar energy. 16 ASIAN POWER
Drones provide quicker inspection techniques
Drones are taking over wind and solar O&M
hen Singaporean startup SwarmX unveiled a collaboration with DNV GL to deploy drone docking stations to monitor wind and solar farms, it was a move meant to capture the growing market of renewable energy operators in Southeast Asia that are using drones to inspect their assets. Drone sales and services for wind turbine inspection is a booming business, with annual revenue expected to reach $1.6b by 2024, according to Navigant Research. Drone inspection is expected to increasingly complement current wind turbine blade operations and maintenance practices. Drones are taking over For example, SwarmX’s fully automated drone docking station, branded as The Hive, enables companies to monitor production and performance of a wind or solar asset, prevent problems form occurring, and help respond if problems arise. “It is increasingly important for renewable energy providers to look beyond capacity to improve energy efficiency and asset optimisation,” says Mathias Steck, executive vice president Asia Pacific at DNV GL – Energy. At the start of 2015, there were nearly 270,000 individual wind turbines operating globally, and each of these possesses a set of blades constantly
Drone is the future of O&M Can drones then be the survey and O&M instrument of the future? “It is a very useful tool, it adds many additional information to be used in initial stages (videos, aerial pictures, etc). But for high accurate digital elevation models, this technology has to be used in combination with conventional ground survey, and is seen as a useful technology helping to increase efficiency and reduce the time and costs, but not as a complete replacement of conventional surveying. However, the simplicity, ability, and robustness of UAV are considered to be worth having,” says Talay Jiamjaratrangsee, GIS engineer at Poyry Energy in Thailand. Operators must take into account the drop in drone performance in extreme conditions such as days that are hot and with strong winds, Jiamjaratrangsee adds. The drone’s battery temperature increases dramatically when operating in direct sunlight, and will affect total flight time. The same goes for flying against strong winds, which drains battery life and slows down the drone.
Cumulative revenue for UAV units and services for wind turbine inspection by region
Source: Navigant Research
FIRST new capacity additions are supercritical or USC. Over the period to 2040, supercritical and USC technologies represent most new coal-fired gross capacity additions at 35% and 21%, respectively. Marc Clemson
Ultra-supercritical plants’ efficiencies are at 40-45%
Asia is getting sick of using subcritical power plants
fter Malaysia completed the construction of its first ultrasupercritical (USC) plant in 2015, it was yet another sign that Southeast Asia was starting to tire of subcritical power plants and were keen to shift towards more efficient coal-fired generation. There is also expectation that USC plants will dominate China’s coal power project pipeline in the coming decade, notwithstanding concerns that the country will be ramping up its renewable energy quotas. Subcritical coal-fired power plants in Southeast Asia operate at low average efficiencies of 33% in 2014, projected to increase to 35% by 2040, compared
with supercritical and USC units that are projected to reach efficiencies as high as 40% and 45%, respectively, according to Marc Clemson, senior project manager at Mott MacDonald in Singapore. Subcritical coal-fired power plants also have higher operating costs since their lower efficiency levels imply larger volumes of fuel input. “For countries such as Malaysia and Thailand, which rely on the international market to procure the bulk of their coal needs and therefore face greater risk of price fluctuations, there is additional incentive to build more efficient power plants,” says Clemson. The IEA notes that a growing share of
Subcritical coal-fired power plants in Southeast Asia operate at low average efficiencies of 33%.
Let’s get “critical” The move towards supercritical and USC plants come after decades of determined industry effort and investment to reduce emissions and simultaneously improve the performance of existing coal-fired power plants, says Wolfgang Moll, portfolio manager, thermal generation projects at RWE Technology International in Germany. “These parameters could only be realised by introducing new materials. As a direct consequence investments and operation rise in costs.” In China, the commercial operation of the first 2x1000MW double-reheat USC power plant and rising operational experience could mean that large-scale double-reheat units with high efficiency and low emission will become the mainstream for new coal power projects in the next decade, says Youwang Shen, engineering manager at Parsons Brinckerhoff in Singapore.
Gradual shift towards more efficient coal-fired generation
the chartist: Three culprits behind Japan’s stunted renewables expansion In the aftermath of the 2011 Fukushima disaster, the government offered attractive financial incentives to renewables developers in an attempt to bridge the generation gap left from the lack of nuclear output despite a permanent decline in power demand. According to Wood Mackenzie, Japan encouraged households and businesses to conserve electricity in response to expected power shortages. “These energy efficiency measures combined with continued awareness of energy usage in the residential and industrial sectors, meant that power demand will never recover,” it says. However, BMI notes that several dynamics have shifted in the sector since then, such as weakening government support, cheaper fuel alternatives, and electricity sector reform - which all contributed to the slowdown in growth in the renewables sector.
Japan slipping in the regional renewables rankings
Renewable growth since 2010
Source: EIA, IRENA, BMI
Source: Wood Mackenzie
ASIAN POWER 17
Hybrid power systems can be a nightmare
Malaysia’s Sesco to supply power to Indonesia
hen Singapore became home to Southeast Asia’s first large-scale offshore renewable energy system based on hybrid power systems, experts had mixed reactions. For its proponents, hybrid power systems are the dream of the future, integrating traditional power sources with renewable power sources, but experts warn that it can turn into a technical nightmare. “Challenges must be overcome to ensure that present levels of reliability are not significantly affected when operating a hybrid power system,” says Amit Gupta, chief of electrical capability group-Asia at Rolls-Royce Singapore. Big shoes to fill One key task is to design new market models that allow competitive participation of intermittent energy sources, and provide appropriate incentives for investment. There is also a need to design appropriate demandside management schemes to allow customers to react to the grid needs. Asian countries like the Philippines also face an uphill battle when it comes to funding and site availability. Malin Östman manager, project development at Wärtsilä Finland Oy
Hybrid systems can be too complicated to deal with
Malaysian power firm Sarawak Electricity Supply Company Limited (Sesco) will start providing power to West Kalimantan, Indonesia in 2017. According to Ricky Cahya Andrian, PT PLN West Kalimantan’s Area, distribution manager at Sesco will be supplying 230MW of power. “Based on the partnership that was built in the beginning of 2016, Sesco Malaysia has been supplying 90 MW of electricity. Starting next year, the supply will be increased,” he adds.
Singapore reckons there is excellent potential for PV-engine hybrids in the Philippines due to a good level of irradiation and widespread diesel use as a generating fuel. But cost and availability of land remain as major challenges to implement solar PV and PV-engine hybrids across the islands. Increasing complexities The rising complexity of hybrid systems should also keep operators on their toes. “The development of more energy sources or storage technologies will increase the complexity on hybrid systems,” says Fernando Niggli, technical manager at DEIF Korea, South Korea. He reckons that individual sources cannot operate if the integration to the other sources is incomplete. This only causes more problems, especially in the microgrid level of applications, and puts pressure on the industry to roll out better systems.
Challenges must be overcome to ensure that present levels of reliability are not significantly affected when operating a hybrid power system.
Wind turbine tower market to topple over to just $5.5b Although the APAC region is set to maintain its status as the global leader of the wind turbine tower market through to 2020, GlobalData predicts its value will decrease from $9.62b in 2015 to $5.5b by the end of the forecast period, representing a negative compound annual growth rate of 10.5%. The decline can primarily be attributed to the decrease in wind capacity addition and falling tower costs. Annual capacity addition in China is expected to decline during the 2016–2020 period, as its target to install 250GW of wind capacity by 2020 can be achieved with only 22GW a year. Rahul Khatri, GlobalData’s Analyst covering Power, explains, “The decline in the tower market in the APAC region is in line with global trends, as the overall wind tower market is expected to drop from $17.2b in 2015 to $14.5b by 2020, mainly due to declining prices and increased tower heights in larger turbines. Indeed, tower prices are expected to fall by 7% by 2020.” The market will also be heavily restricted by a lack of sufficient grid infrastructure, as the industry struggles to upgrade existing infrastructure and construct new facilities to meet demand. 18 ASIAN POWER
“Dirtiest” power plant in Oz to shut down
French energy giant Engie made it to the headlines as it decided to shut down Australia’s “dirtiest” power station come March 2017. Hazelwood currently provides almost 22% of the state’s energy requirements.
AboitizPower injects $1.2b in 2 Bataan plants
No thanks to declining prices and higher towers
Going online soon Grid infrastructure is still insufficient
Philippines-based AboitizPower has sealed a deal acquiring stakes held by funds managed by Blackstone Group in a coalfired power plant along with another power project under construction. The stake buy is signed through subsidiary Therma Power and is worth about $1.2b.
CO-PUBLISHED CORPORATE PROFILE
Powering ASEAN into the future with smarter, cleaner steam power from GE
Both established and emerging nations alike have bold energy ambitions, and GE’s smarter, cleaner steam power can help them get ahead in the game.
Tanjung Bin Ultra-supercritical Power Plant
he ASEAN bloc has a total population of nearly 60m, making it the world’s third largest market after China and India. The region is projected to record future growth of 4 to 6%, and its energy demand will rise in tandem by as much as 80% by 2040. ASEAN’s primary energy mix is predicted to rise on average 4.7% each year to reach 1.685m tons of oil equivalent (mtoe) by 2035, according to the ASEAN Centre for Energy. From established to emerging nations, many ASEAN countries have bold energy ambitions for the future. Indonesia for example, plans to produce an additional 35GW of power by 2019 to lift the national electrification rate to close to 100% from 88% today. In Vietnam, the government targets to raise $148 billion for energy development from 2014 to 2030, to meet demand that is anticipated to grow 10.5% per annually from 2016 to 2020, and 8% annually throughout the next decade.1 Two billion people in the world do not have enough power to support social and economic development while more than a billion people don’t have access to any electricity at all. The International Energy Agency, or IEA, projects global energy demand to increase by as much as one third by 2040. Enter USC technologies Coal, which accounts for nearly 40% of global electricity production, can help ASEAN meet its burgeoning power needs. Coal-fired power plants are set to account for 25% of the world’s additional energy supply over the next decade. A staggering 85% of the facilities will be implemented in ASEAN which is home to
Indonesia, the world’s third largest coal producer and Southeast Asia’s biggest economy. Coal-fired thermal plants traditionally lag behind their gas-fired counterparts in terms of efficiency but the case no longer holds true. GE’s ultra-supercritical, or USC, and advanced steam turbine technologies enable the facilities to deliver efficiency of up to 49%, nearly at the output of any gas-fired turbine and way above the global coal-fired average of 33%. Each percentage point of efficiency reduces carbon dioxide emissions by 2%. Global carbon dioxide emissions can be cut by 2 gigatonnes annually if the average efficiency of coal-fired power plants is increased to just 40%; that’s more than the emissions of Southeast Asia for a full year. Lower emissions, low NOx burners Malaysia currently has two 1,000MW USC plants, the first of their kind in Southeast Asia, operating at Manjung and Tanjung Bin. The facilities bend the laws of physics by taking steam to over 600 degrees Celsius and 4,000 psi of pressure to spin turbines that generate electricity. Both plants can burn 15 different types of coals sourced from various countries such as Australia and South Africa. Emissions from coal power plants are reduced by GE’s environmental control solutions, or ECS, with pollutant removal rates well in excess of 90% across technologies. At Tanjung Bin, plant emissions are significantly lowered through the use of low NOx burners, a highly efficient
seawater flue gas desulphurization facility, along with fabric filters to reduce nitrous oxide, sulphur oxide and dust emissions. With the use of GE’s Air Quality Controls Solutions, plants can reduce outputs of nitrous oxide by 95%, sulphur oxide by more than 98% and almost eliminate particulates completely. We live in a digital world where technology is integrated with our devices and lifestyles. GE has done the same for power plants with the Digital Power Plant, or DPP, powered by the Predix operating system where sensors generate data to increase a facility’s efficiency up to 1.5% over its lifespan. This generates additional power for more than 200,000 homes in China and reduces coal consumption by 105,000 tons annually. A DPP reduces unplanned downtime by 5% which can add $50 million in net present value over a power plant’s lifetime, and helps to reduce carbon dioxide emissions which are equal to taking more than 200,000 cars off the road. Smarter, Cleaner Steam Power can help Southeast Asian countries power ahead and reach the ranks of developed nations, while reducing carbon dioxide and pollutant emissions. http://asia.nikkei.com/Politics-Economy/International-Relations/ Vietnam-trying-to-juice-up-power-sector-with-foreign-investment
Plant emissions are significantly lowered
“With the use of GE’s Air Quality Controls Solutions, plants can reduce outputs of nitrous oxide by 95%.” ASIAN POWER 19
Chinese PV makers are overstocking CHINA
hen solar power prices dipped by almost a quarter in the past five months, fingers pointed to Chinese manufacturers overstocking and raw material price reductions as the biggest drivers to the price declines. From China to Abu Dhabi, construction bids for solar projects have reflected the significant reduction in solar power prices. In August, a bid of $0.46 per watt was submitted to build 500MW of solar power in China. Then in September, a record low bid of $0.023 per kWh was submitted for 1.2GW of solar power in Abu Dhabi. The recent sharp slide in solar power prices can be attributed to overstocking by manufacturers in China, the largest producer of solar photovoltaic cells and modules in the world, says Shubhaang Gupta, director, Solar Universe India, a solar photovoltaic (PV) systems manufacturer. No thanks to overstocking “Prices of raw materials, such as aluminum and glass used in panels, have also sank, further pulling down solar power prices even amidst the devaluation of the Chinese yuan. Prices should fall even more in the coming months before hitting rock bottom next year, triggering further market consolidation and wider consumer adoption.” Gupta expects prices to hit rock bottom by early next year, around March 2017, and then
stabilising in the subsequent next 12 months. This is a hopeful prediction since it will not be healthy for prices to continue falling like they have been in the past year. “The coal industry is falling apart not just because of raw material supply problems and of course the range of ill effects they have on the environment but also because of constant reduction in price of coal extraction,” says Gupta. “We do not want a situation like this for solar and I believe the aim should be for solar to reach grid parity and hold onto those levels.” No need for external subsidies “We expect that the prices in the future will continue to reflect the true value of the technology without being subject, like in the past, to the need of external subsidies, or the need for investors to capture unreasonably high level of returns, typical of non-mature technologies,” says Andrea Lovato, executive director - business development at ACWA Power International. He reckons that the trend of highly competitive solar PV tariff is gaining steam as seen in flurry of new records, and this has enabled solar PV to establish footholds in Middle East markets. Governments have also expressed enthusiasm for renewables and declared ambitious targets for renewable capacity installation. Meanwhile, in China and America, corporate casualties increased as the
Japan’s liberalisation aftermath JAPAN
Kansai Electric’s shifting energy mix
Two months after Japan liberalised its retail electricity market in April, more than a million residential consumers jumped to another provider, drawn to hundreds of new power producers offering cool packages and lower prices. Some of the savvier newcomers are bundling electricity with cell phone plans and internet services, letting consumers select their contract to suit their lifestyle. Analysts reckon the influx of competition and innovative business models are already compelling the regional monopolies to evolve their offerings as well. The incumbents are shaken up “Market reform along with declining demand, increasing capacity, and a rapid change in fuel mix are forcing the incumbent utilities to remap their business strategies,” says Dr. Bikal Kumar Pokharel, principal power analyst at Wood Mackenzie, Singapore. Japan has unleashed the flood gates of market liberalisation for two key reasons, says Toyokazu Misono, managing executive officer at Kansai Electric Power (KEPCO). First to secure stable supply and second to bring down the country’s electricity prices, which are the highest in Asia. “Electricity suppliers are not the issue per se, we have enough players in the industry. However, the issue is the transmission of the energy supply along the way. A lot of demand comes from Japan’s central area, but our big suppliers are in the far coasts,” explains Misono. “Costs in Japan are already heavy on the wallet as it is, and the government wants to make sure that electrification won’t be an issue in the long term,” he adds. 20 ASIAN POWER
Source: Wood Mackenzie
Dr Bikal Kumar Pokharel
need for industry consolidation strengthened amidst plummeting prices. More smaller companies are expected to follow suit as prices dip further. “Certainly some further consolidations in the suppliers’ markets, especially for the main equipment as in the PV modules, will be happening in the future,” says Lovato. “But this will be in parallel with an increase of the supply volume on the account of the continuously expanding markets for renewables either in the utility scale or in the distributed market spaces.”
Thought Leadership Article
Siemens high efficient combined cycle power plant technology at Ansan power plant in South Korea
Siemens fires up Flex Power with higher efficiency plants
The company is snagging deals to provide more sustainable energy in the Asian power market.
iemens has been a leader in providing high-capacity turbines for industrial coalfired power plants, but local demands in Asia have added another focus–small-scale projects for communities without power. Recent changes in the energy market have driven Siemens to ride the renewables wave and increase innovation in its leadership and products. “When I took office one and a half years ago, we clearly saw in our business that we need to go through a profound transition and that transition included really being flexible enough to respond to these local demands. So nowadays, we have a team in the division which is really spotting the markets. They go in early and they develop these opportunities and drive the organisation from the countries backwards. We have also moved our sales office into Singapore and the decisions are made locally. This is where we see that our customers are responding positively to those changes,” says Willi Meixner, chief executive officer, Power and Gas Division at Siemens. With the rise in renewables, Meixner said that companies must no longer think traditionally by placing countries in geographical divisions to identify the right energy solution. According to him, companies nowadays need to find the right mix between renewable power generation and fossil power generation for every country. “The challenge for us as an OEM is to understand early on which way a country wants to go. There are countries like Vietnam which are currently heavily investing in coal and into gas-fired power plants, but we’re also looking at how we can bring renewables into the country. There are other countries like Korea which has declared that they are shutting 10 coal-fired power plants. There is no left or right. There is
an individual solution needed,” says Meixner. Individualised solutions The big question remains for countries with areas that remain unlighted—how do you bring power to the people who don’t have it? Meixner said that beyond sustainable power, what these countries need are economic solutions. In Indonesia, Siemens signed an MoU with PLN (Perusahaan Listrik Negara) to deploy 500MW of small 10-15MW of distributed generation units which will be powered with the fuel available on the islands. “The MoU we have signed there is going to roll out these units together with local manufacturers, so we do the packaging incountry, we supply the equipment out of the UK, adding local values to our factories. Once it is established, there will be local jobs, there is a market developing itself. People will demand local products made in Indonesia,” Meixner says. Meixner adds that Siemens maintains its focus on providing efficient solutions for large cities, and revealed that they are also participating in the large IPP projects to achieve Indonesia’s plan for an added 35,000MW of capacity. Siemens has also partnered with Korean EPCs and Meixner said that Korea has proven to be very beneficial if it comes to building large combined cycle power plants and steam plants. With more renewables in the energy mix, customers want to be ensured that power generation will remain stable and reliable throughout the changes. Siemens boosted investments in Flex Power so it can run up
Willi Meixner, CEO, Power and Gas Division, Siemens
combined cycle power plants in less than 30 minutes from 0 to 600MW. It has also made a distinct decision to invest greatly into gas turbines that can rup up in minutes rather than the usual unit of hours. Better technology “A combination of these really quick starters with high efficient combined cycle power plants is what is needed as a backup as we are transitioning into a more renewable based power generation. There is a whole product portfolio that customers can choose from,” Meixner says. The increased share of renewables could also impact battery storage on the grid level, and Siemens is utilising its test plants in Germany to experiment with hydrogen storage. Meixner says that they are investing a lot into turning power to gas, and with the success of hydrogen storage, the northern part of the continent that experiences two to three days without sun can experience uninterrupted power. “All we have so far is minutes rather than hours. The clear target on our research departments is how can you turn power into long-term storage? And the sizes we are experimenting with are going up to tens of megawatts. There is still a question of efficiency, to be answered in the matter of longevity, what is the lifetime of these components?” Meixner adds.
“The challenge for us as an OEM is to understand early on which way a country wants to go.” ASIAN POWER 21
Country report 1: Malaysia
Malaysia is not the technology owner for RE innovations
Doubts are cast over Malaysia’s ambitious renewables targets Not everyone is convinced with the government’s target of 1,000MW renewable grid-connected capacity by 2020.
hen the 10th Malaysia Plan was first implemented in 2011, it aimed to allocate the national budget to all of the major economic sectors of the country until 2015. As a result of effective planning, Malaysia has shown marked improvement in practically all sectors, particularly in the effective sourcing and delivery of energy – for instance, electricity generation has increased by over 5,000MW and electricity coverage in the rural areas has grown to roughly 98% from 93% in 2010.
Challenges include the mismatch between the location of the grid and green energy resources such as biomass, biogas, and hydro.
Components of electricity tariff revision
Source: Tenaga Nasional Berhad 22 ASIAN POWER
The focus on energy development was mainly placed on diversifying energy sources and investment in new technology and infrastructure in order to meet Malaysia’s growing demand in a sustainable manner. At the same time, the country undertook to ensure efficient utilisation of their resources, which included taking measures to improve productivity in the process. Supply efficiency issues The increase in generation capacity was brought about by commissioning 10 power plants, with various energy sources including hydropower and gas. In remote rural areas, alternative smaller systems such as solar hybrid and biomass were also utilised apart from connection to the country’s main grid. The efficiency of electricity supply services has increased significantly and the number of power interruption occurrences are also lower. However, with Malaysia targetting more sustainable energy use in the long term, they must reduce their dependence on fossil fuels as a main source of power by exploring alternative environmentally-friendly power sources. “The mainstay of the generation fuel
mix will continue to be conventional fossil fuels like coal and gas. Gas is now even being imported as LNG for use in power plants. Clean energy sources will, for a long time, only be seen to complement fossil fuels and hydro, and not become a significant component of the fuel mix,” says Ir. Andrew Amaladoss, general manager of Tawau Green Energy of the struggle to increase energy productivity with clean energy sources. “Challenges include the mismatch between the location of the grid and green energy resources such as biomass, biogas, and hydro,” he adds. In the total generation fuel mix, coal is expected to increase in terms of its current ratio to natural gas, leading to a significant increase in coal consumption for Malaysia in the near future. Unfortunately, in the near term, the country looks set for even more coal, in an effort to maintain electricity prices as the gas fuel subsidy is gradually reduced,” says Dr Ali Askar Sher Mohamad, managing director at Sher Engineering & Consultancy and former chief operating officer of Sustainable Energy Development Authority (SEDA) Malaysia. A secure energy supply is one of the
Country report 1: malaysia
KL Sentral at night
primary underpinnings of economic growth – in Malaysia, it would enable the country not only to move forward as an economy, but to raise their citizens’ standard of living. For this reason, the energy sector is one of the main components for development in the 11th Malaysia Plan to be implemented this 2016-2020, which includes comprehensive governance and a communication plan to improve good governance and public awareness on energy developments. Part of this plan also entails a continuation of the earlier developments on improvement of productivity by ensuring that there is a secure and reliable supply of natural gas, as well as further research on its safe and efficient distribution, particularly in the rural areas. In order to reduce distortion of market energy prices, sustained efforts will be carried out to decrease and gradually remove energy subsidies. By removing these subsidies, growth in the oil and gas subsector is also imminent – a means of ensuring fair competition in the gas supply market will be implemented to encourage new entrants to contend with Petronas, which is currently Malaysia’s sole gas supplier. This is in conjunction with plans to develop technology that will greatly increase the country’s oil refining capacity, to which third-party gas suppliers will have access. Identifying the best RE source One of the most heavily-debated strategies in place for the future is the assessment and application of the clean and green alternative to Malaysia’s fossil fuel concerns: renewable energy (RE). This was first introduced in the form of the Renewable Energy Act in 2011, and with it, the Feed-in Tariff (FiT), as part of the country’s movement to explore new sources of clean energy. Under the FiT, SEDA expects to achieve at least 1,000MW of installed renewable gridconnected capacity by 2020 as part of several initiatives to be applied by the government that are currently under
development, one of which is net energy metering. Not everyone is convinced by the argument for RE, however – there are challenges to be faced in introducing new sources of energy to the country, as it poses several difficulties in terms of environmental sustainability. It also involves enormous investment, not only in terms of finances and infrastructure, but also the extensive amount of time involved in researching and developing the required technology. “The government needs to identify the correct renewable energy resource that suits Malaysia and encourage the industry players to develop the necessary technologies locally where possible,” says Piarapakaran S., president of the Association of Water and Energy Research Malaysia (AWER). “Currently, Malaysia is not the technology owner for many RE technologies. We mainly ‘buy and use’ these technologies which will increase the cost of developing RE in Malaysia. Eventually, the consumers have to bear this additional cost via the electricity tariff. Besides this, the Malaysian government needs also to protect our rainforests to ensure the long-term sustainability of our mini hydro and largescale hydroelectric projects.” A sizeable number of residents and authorities alike are also wary of the introduction of nuclear energy as one of the renewable energy options being explored, despite the strong enthusiasm for its implementation in 2011. An independent atomic energy regulatory commission will be established in preparation for the project. Educating the public One of the foremost challenges includes educating public sentiment: the majority of Malaysian citizens are not confident in the idea of building a local nuclear power plant, and especially not if it is within their residential zone, based on the National Energy Security Survey (NESS) conducted by AWER. Whilst plans to explore nuclear power as a
Pi Dato’ Ir. Dr. Ali Askar Sher Mohamad ara
potential energy source are still in place, Malaysia still has several more years to go before their research is completed, not to mention applied – perhaps by then the results will be more reassuring. “I personally believe that nuclear is the way forward for Malaysia to cut its dependency on imported fuels, and that more effort needs to be put into public awareness and the conceptualising of nuclear in the generation mix,” says Amaladoss, emphasising that whilst confidence in the project is currently very low, the current public mind-set may be changed if the public is properly informed and provided with adequate data on its development. The exploration into renewable energy sources will allow Malaysia to strike the optimum balance in fuel mix, which aims to gradually decrease the ratio of fossil fuels and to substantially increase clean energy sources. To reduce their country’s carbon footprint, top-of-the-line emission control technologies will also be used to ensure that future power plants are not negatively affecting the environment. This is particularly relevant in light of the fact that coal constitutes a considerable percentage of their current fuel mix, and will only increase further in the shortterm future. Incentivising efficiency gains Continuing the Incentive Based Regulation (IBR) is also part of Malaysia’s plans for the next few years, this time by restructuring the current model to further incentivise efficiency gains by the utility. Greater transparency yields greater efficiency in the new model, as well as being more financially stable, in turn benefitting Malaysian consumers and enabling overall economic growth. In the past few years, the 10th Malaysia Plan focussed on expanding their infrastructure network in all economic sectors to improve accessibility and overall quality of life. In the 11th Malaysia Plan, further investment in the developing infrastructure will be made to increase productivity and efficiency.
Malaysian power mix evolution
Source: Global Energy and CO2 Data ASIAN POWER 23
I intend to realise the most excellent grade in the 2016 government management assessment through the accident-free innovation movement, fuel cost saving, etc., and lead the company to another takeoff.
Predee Daochai President Kasikornbank
Chung Chang-kil CEO KOMIPO 24 ASIAN POWER
KOMIPO’s Chung Chang-kil is the CEO of the Year at the Asian Power Awards 2016 Two years after a crisis brought by the government’s continuous undervaluation of KOMIPO, its CEO believes the firm is now on the right path to fully reversing the crisis with hefty plant profits.
hen KOMIPO CEO Chung Chang-kil found that employee morale in the field had fallen far more than he expected due to the relocation of KOMIPO head office and the constant undervaluation of the company by the government, he knew that he had to make conscious efforts to increase kinship with field employees. “As a result, KOMIPO achieved ‘B’ grade in the government’s management assessment - a three-grade jump from last year,” he says. Asian Power caught up with CEO Chung Chang-kil as he discusses the company’s current challenges and expected wins. He was also named the CEO of the Year in the Asian Power Awards 2016. It has been five months since you took over the role, what do you think makes your leadership unique? There are many things that I have felt as CEO whilst directly visiting field sites, conversing with employees and listening to the difficulties of various business units over the past five months with an emphasis on communication as the top priority of my management style. I found that in the field, employee morale had fallen far more than I expected due to the relocation of KOMIPO’s head office and the government’s continuous undervaluation of the company. To find solutions to the company’s development direction, I have made a conscious effort to increase frank dialogue and kinship with field employees. As a result, KOMIPO achieved ‘B’ grade in the government’s management assessment — a three-grade jump from last year. When I heard that the morale of KOMIPO executives and employees has improved considerably owing to the achievement, I felt rewarded. With this as momentum, I intend to realise the most excellent grade in the 2016 government management assessment through the accident-free innovation movement, fuel cost saving, etc., and lead the company to another takeoff. What are your future management concepts, plans, and resolutions for KOMIPO? I plan to carry out the company’s mission to supply stable and economical electric power, proactively respond to environmental changes, expand sustainable growth engines, and take the lead in the future energy industry, based on true communications with executives and employees as well as with customers. To accomplish this, with ‘Faithful to the Basics,’ ‘Open Management,’ and ‘Sustainable Growth’ as my management guidelines, I will sharpen the company’s capabilities with a focus on results. According to the results of the government’s management assessment for public organisations announced recently by the Ministry of Strategy & Finance, KOMIPO rose three grades compared with 2015. What led the firm to the achievement? KOMIPO faced a de-facto management crisis with the announcement of the government’s 2014 management assessment results. However, the company, with the implementation of field-centric management, including a company-wide accident-free innovation campaign, development of a data-based fault prediction system, and intensive management of subpar facilities, achieved the highest facility reliability level to earn a significantly enhanced grade in the most recent management assessment. Also, the company purchased a generation fuel, LNG, from abroad at cheaper prices for the first time amongst domestic power companies and reduced the
people’s burden. The fact that KOMIPO created about US$16m (KRW20b) in net profit from construction and operation of power plants in Indonesia also was a factor in the company scoring higher points, I think. The result was the fruit of all employees having agonised and endeavoured together in every field with one mindset to prepare a second takeoff of the company. Going forward, KOMIPO will solidify its position as a leading organisation, fulfilling its responsibilities such as supplying stable power to the people. In the case of coal-fired thermal power plants, two rabbits should be caught at the same time, namely, eco-friendly and high-efficiency power plants. Please introduce the measures that you are taking in this area. Recently, new coal-fired thermal power plant technologies have been developed steadily. Joining this trend, KOMIPO is doing its best in constructing Shin-Boryeong TPP #1 & #2 at present. Owing to these technologies, the efficiency of Shin-Boryeong TPP will be about 1.3% greater compared to the existing Boryeong TPP #7 & #8 and produce electric power consuming less coal, so this power plant is expected to reduce GHG emissions by about 530,000 tons. KOMIPO plans to build not only the Shin-Boryeong TPP but also Seoul CCPP, Jeju LNG PP, and Shin-Seocheon TPP as eco-friendly and high-efficiency power plants with the world’s top technologies. With regard to fine dust, KOMIPO is exerting utmost efforts to prevent environmental pollution, operating the latest environmental pollution prevention facilities and discharging effluents at a much lower level than required. What is the status of your overseas projects and what are your future plans in this area? With the construction and operation of Cirebon coal-fired TPP (660MW) in Indonesia as the start, KOMIPO is carrying out diverse overseas power generation businesses, including O&M of Tanjung Jati TPP (1,320MW) in Indonesia and Navanakorn CCPP (110MW) in Thailand. Amongst the projects, the construction and operation of the Cirebon TPP, a representative success case in the overseas advance of Korean power generation businesses, began a 30-year long-term project with its dedication in July 2012 as the start. This project consists of constructing and operating a 660MW thermal power plant after KOMIPO’s organisation of a consortium with Japan’s Marubeni Corp. and Indonesia’s Indika. From the perspective of being the first overseas coal-fired power plant project won by a domestic public power company, it enables us to evaluate KOMIPO’s global position. KOMIPO is already operating two units of a 660MW-class power plant at Tanjung Jati in Indonesia, and through operating of two power plants in the country, the company has taken a firm position as a core organisation supplying 7% of the total electric power for Java Island, which has suffered from chronic electric power shortages. In 2015, KOMIPO created US$14m (KRW16.5b) in revenue from the Cirebon TPP construction and operation business and cumulative net profit reached US$42.4m (KRW50b). Also, with overseas business achievements being realised in multiple sectors, KOMIPO realised about US$14m (KRW16.5b) of profit in 2015 alone, and expects to earn US$25.4m (KRW30b) in power plant operating profits annually over the next 30 years. ASIAN POWER 25
Country report 2: VIETnam
Will EVN’s reduced grip on the power sector help the industry?
Vietnam’s power players cry out for stronger government support and policy framework Stringent rules disallowing smaller plants from selling to the spot market need to be resolved immediately.
hen Vietnam revealed that it had junked future plans of constructing two nuclear power plants, the energy industry was shaken. Where will small Vietnam get sustainable power supply and support its growing economy? The emergence of Vietnam’s economy has been one of the fastest in Asia, with GDP growing by almost 7% per annum over the last 20 years. With this increase in economic activity comes a commensurately large increase in the demand for power to support it, with demand for electricity estimated to have been increasing annually by about 13-15%. However, lack of government support and a poor policy framework have impeded the development of generation capacity in the country. According to Abhishek Kumar, a principal consultant for energy and development at Frost & Sullivan Asia Pacific, Vietnam scores very poorly on all indices of the World Energy Council’s “Energy Trilemma”, which measures the security, equity, and sustainability of a country’s energy situation. At the moment, 60% of Vietnam’s capacity is generated by fossil fuels and only 7% of capacity is generated by renewables. Coal-fired plants are the most common in Vietnam, with 35% of total capacity using this feedstock, 26 ASIAN POWER
Other renewable sources are still quite small, but can become viable alternatives in the future.
according to US Energy Information Administration Statistics. Much of the capacity coming online will also be coalfired and according to Kumar, the ratio of coal-fired plant capacity to total capacity will increase to 50% by 2030. These plants mainly source coal locally, but domestic supply may not be enough in the near future given the rapidly increasing demand and large requirements from new capacity. Nuclear or RE or both? Oil product-powered plants represent about 25% of the country’s energy mix. The country is a net importer of petroleum products and is heavily dependent on its oil-powered plants. This presents a significant risk to the country’s generation capacity from price exposure to the swings in the global oil market, along with climate change actions worldwide putting pressure on the use of these plants. Renewables still make up the minority of all generation capacity, with about 38% of energy being produced by these technologies. Kumar says that renewables are highly viable for Vietnam, as evidenced by studies by the German international development think tank Gesellschaft für Internationale Zusammenarbeit (GIZ). He notes that feedstock from agricultural products and residues of about 10b cubic
metres can replace almost 10m tons of oil per annum, which presents a big opportunity to reduce oil dependence and the carbon footprint of Vietnam’s generation capacity. Other renewable sources are still quite small, but can become viable alternatives in the future. Hydropower is at about 4GW spread over a large number of plants which are smaller than 30MW in size, whilst solar and wind are still somewhat insignificant compared with the total capacity. Dependence on fossil fuels Kumar explains that there are economic, policy, and technical barriers to the development of Vietnam’s power sector. From an economic standpoint, Vietnam is highly dependent on importation of fossil fuels and this exposes them to both price risk and currency risk. Given that about 61% of the country’s generation capacity is reliant on this feedstock, Vietnam is forced to be a price-taker and the economic viability of generation companies can be gravely affected by market price swings. Locally, the entire coal supply is held by state-owned Vinacomin under a natural monopoly which could artificially buoy prices of the input. “Under its mining licences, Vinacomin has exclusive rights to explore and operate licensed coal mines in Vietnam,” according to Brian Grieser,
Country report 2: vietnam Vietnam’s electricity demand versus power shortage
Source: International Atomic Energy Agency
VP-senior analyst at Moody’s. With no competition from other local producers, input costs are likely to stay artificially elevated, which may hurt the attractiveness of fossil-fuel plants for foreign investors. The large amounts of imports must be financed with dollars, and the Vietnamese dong has been steadily depreciating against the greenback for the past five years, which has been hitting Vietnam Electricity (EVN), Vietnam’s largest power company, with forex losses that have impaired its ability to expand transmission lines critical to the sector. Development challenges The structural situation in Vietnam’s power sector also presents challenges to its development. The distribution capacity is largely held by EVN, which currently operates under a natural monopoly. “Over the years EVN has been claiming losses in its business and recovering the same from tariff hikes from the consumers,” says Kumar. There is also a lack of opportunity for small power plants, as units which are smaller than 30MW are currently not allowed to sell to the wholesale market. Alternative sources of energy such as wind, solar, and geothermal are usually less than 30MW in size, and this policy increases the risk of operating these plants and reducing incentive to build them. There is also a stark lack of technology to build more advanced power generation facilities, especially in renewables. This is more likely to be brought in through foreign investment, which is unlikely to gain significant traction given the numerous hurdles mentioned previously. A number of policy changes are in place that may help unlock the sector’s potential. The monopoly of EVN on distribution is set to end this year. Introduction of competition may lower tariff rates and improve returns to power generators, making the country’s power sector a more attractive investment
destination. The country has also introduced a wholesale spot market in order to further reduce EVN’s grip on power purchasing and allow market forces to impact rates and allow for more fair prices for power consumers. At the moment however, only plants with capacity over 30MW are allowed to sell to this spot market. Kumar notes that there are still a number of policy actions that need to take place. First of all, the issue of smaller plants not being able to sell to the spot market needs to be resolved to incentivise investments into renewables. This would also improve the technology available to the Vietnamese power sector, given that it would make the industry attractive to foreign firms that possess this expertise. The generation companies owned by EVN must also be re-evaluated in order to become more cost-competitive after operating under a monopoly for the longest time. The expiration of EVN’s natural monopoly should serve as an impetus for its genco’s to adapt to market forces. Additionally, the country still needs to set up its policy to support the development of off-grid and microgrid power generation and distribution. For emerging markets such as Vietnam, this becomes crucial, given the infrastructure deficit that continues to hamper the energising of far-flung areas. Adaption of PPP model The PPP model can be adapted by Vietnam to rapidly develop the sector through broad-based investment from both foreign and domestic firms. The Vietnamese power market does not yet have independent private entities handling the various parts of the power supply chain, making it very different from the market of developed nations. Thus, Kumar notes that it would be best for Vietnam to adapt a Build-OperateTransfer (BOT) or Build-Operate model for independent power product or
Generation companies owned by EVN must also be re-evaluated in order to be more costcompetitive.
distribution projects that would retail to consumers. The generation will likely still require more government support given the current state of the downstream market. This will enable new players to enter the power market, improve the technology currently available, and spread the project risks more evenly across entities that are better equipped with the expertise to undertake it. Additionally, it would create a multiplier effect for the economy as these projects would also spur job creation in the power sector. The reform of policy will be key to the success of the PPP model in Vietnam. The legal framework, government budget, and protection of the sanctity of contracts will be key to encouraging foreigners to invest in Vietnam power PPPs, given that these have been poorly executed in other emerging markets. The framework for purchasing of power will also have to be put into place and the government will have to manage any attempts at interference from EVN to ensure that competitiveness is maintained in the downstream market, as is the intention of these new pro-competition laws. If executed properly, there are large returns to be made bridging the supplydemand gap and servicing the country’s growing demands.
Historical and expected electric generating capacity
Source: International Atomic Energy Agency
Electricity versus power shortage
Source: International Atomic Energy Agency ASIAN POWER 27
sector report: coal & gas
Coal will no longer be king in the long run
Will coal & gas burn bright or burn out?
Asia is hungry for energy, which coal & gas-fired generation seem ready to address, but their dominance over cleaner alternatives is becoming less certain as renewable sources are becoming cheaper.
hen Malaysia and Indonesia reached respective milestones earlier this year – the former building a landmark 1,000MW coal power plant and the latter a gas-fired power plant in the undersupplied Gorontalo province – it showed the potential of coal and gas-fired power plants to meet Asia’s enormous energy needs. But analysts reckon that even with the advantages coal & gas-fired power plants offer, especially amidst technological leaps that boost efficiency and lower harmful emissions, clean generation alternatives continue to gain ground. Factors such as mounting air pollution and cheaper renewable energy costs are presenting convincing arguments for Asian governments to shrink the role of coal & gas in the region’s long-term energy mix. Proponents of coal & gas-fired power plants expect them to remain popular in Asia. Thousands of such plants are indeed in the pipeline, although critics warn of falling utilisation amongst Asian coal power plants and rising concerns on long-term gas supply, which could strengthen the case for renewables and nuclear power. Key role in Asia’s fuel mix “In looking at the overall energy needs of Asia for the next 25 years, it is clear that coal and natural gas will both play a key role in the region’s fuel mix,” says Dr. Ivan Marten, global leader energy practice, senior partner and managing director at The Boston Consulting Group. He enumerates three focal reasons for this positive assessment: Abundance, affordability, and availability. “Both gas and coal are abundant, and gas is becoming even more so thanks to new technologies such as hydraulic fracturing – and more recently high pressure fracturing and re-fracturing – which has significantly increased natural gas production in the United States,” says Marten. “Gas prices have fallen drastically in the recent years because of increased supply, and coal prices have fallen, too, because more gas is replacing coal for electricity generation in the United States. And they are both available, meaning that their supplies are easily accessible in response to 28 ASIAN POWER
In looking at the overall energy needs of Asia for the next 25 years, it is clear that coal and natural gas will both play a key role in the region’s fuel mix.
demand and largely secure,” he adds. For the International Energy Agency, coal and natural gas are the two most important fuels for electricity generation globally, with a share of some 40% and 22% respectively in 2012. Each offers compelling advantages for a region that is looking to generate more energy to sustain their growing economies. Coal is more widely available and lower cost fuel than natural gas. Natural gas-fired power plants are not only generally cheaper and quicker to build than coal-fired power plants, but also tend to have higher cycle efficiencies and greater operational flexibility. Southeast Asia warms up to coal Currently, Malaysia and other Southeast Asian countries like Thailand and Vietnam have shown increased emphasis for coal-fired capacity due to domestic gas supply shortages and gas price increases resulting in expensive liquefied natural gas (LNG) imports, according to IEA. In March 2016, Malakoff Corporation Berhad’s (Malakoff) 1,000MW Tanjung Bin Energy (TBE) power plant entered commercial operations, a major milestone as it is Malaysia’s first independent power producer (IPP) project that was awarded by the Energy Commission via a competitive bidding process. “During its development, we challenged ourselves to deliver an affordable electricity tariff to the off-taker, Tenaga Nasional Berhad (TNB), and ultimately to the consumers at large,” says Encik Habib Husin, executive vice president of Malakoff. TBE makes its generating capacity available to TNB under a 25-year power purchase agreement whilst a supply and transportation agreement between TNE and TNB Fuel Services Sdn Bhd ensures a steady and quality coal supply for the power plant. A major concern for coal-fired power plants is their environmental impact, but the Malaysian project deploys GE modern steam turbine and generator technology, ultrasupercritical boiler, and proprietary environmental control systems. According to Malakoff, the plant to generates affordable
sector report: coal & gas Relative affordability of natural gas and coal for Japan and the United States
Source: Coal, Gas, or Nuclear: Asia’s Inconvenient Energy Choice
Load factors of coal and lignite power plants by percentage during 1986-2015
Source: Ministry of Power, India
electricity at reduced environmental impact. Emission of nitrous oxide, sulphur oxide, and dust at the plant will be lessened through the use of low NOx burners, a highly efficient seawater Flue Gas Desulphurisation facility, and fabric filters. This technology increases the plant’s net efficiency and enables it to utilise 100% sub-bituminous coal. “TBE is another demonstration of GE’s commitment to the region’s development and the need for energy mix diversification especially on coal generation,” says Andreas Lusch, CEO of GE Steam Power Systems. “The highly efficient ultra-supercritical power plant delivered by GE Steam Power Systems will provide an additional capacity of 1,000MW for Peninsular Malaysia, providing energy equivalent to almost 2m people.” Malaysia’s TBE project has also contributed to developing the economy of local communities with more than 5,200 direct jobs created during the project peak and 100% utilisation of local skilled workers. The project also created additional jobs related to equipment supply, manufacturing, engineering, transportation, and other services. The implementation of rigorous training programmes also ensured that teams had proficiency operating state-of-the-art ultra-supercritical technology. Reduction in gas subsidies in Malaysia and recent disruptions in the gas supply in Thailand will push up coal demand in those countries by about 4.8% per annum through 2040, says Marten.
infrastructure, and a failure to foresee expansion in and falling costs of renewable generation. “In China, the biggest brake comes from rapidly slowing economic growth combined with ambitious targets for energy efficiency and clean generation. Clean energy may be sufficient to meet all of the country’s projected electricity demand growth, thus consigning any new coal power plants to an increasingly idle surplus,” says ECIU. For India, the similarly defined load factor, or the proportion of nameplate capacity used, has fallen from a peak in 2008 of above 78%, to below 65% last year. The problem can be attributed to a failure of infrastructure investment, coal shortages, and cash-strapped grid operators. This trend in falling utilisation rates is likely to continue for China and India, says ECIU, as both countries ramp up their renewable and nuclear generation, which hold the advantage of having near-zero operating costs once built. “Given that real-time electricity despatch is usually on the basis of least marginal cost, these will displace fossil fuel power when available. The result may be falling and unpredictable utilisation rates, and thus greater investment risks in fossil fuel-fired power, as seen in Germany,” says ECIU. China has notably been investing heavily in technologies that will enable its electricity system increasingly to use variable renewables.
Coal’s utilisation conundrum Four countries in Asia – China, India, Indonesia, and Vietnam – have pipelines of 1,824 coal power plants either planned or under construction, accounting for 74% of the estimated global pipeline, but the Energy & Climate Intelligence Unit (ECIU) says a number of factors suggest that these nations will eventually build far fewer than this pipeline number. Looking at the historical trend worldwide in the past halfdecade, from 2010-2015, shelved or cancelled coal power proposals outnumbered completed power plants by two to one worldwide. ECIU notes that for the four Asian countries with a large pipeline for coal power plants, the relevant rate is 1.5 to one, or 635GW cancelled or shelved, compared with 411GW completed. For India, the ratio is four to one, with 390GW cancelled since 2010 compared with 98GW completed. “In both India and China, coal plants are being used for less and less of the time,” says ECIU. “Depending on trends in power prices, this may make new plants progressively less profitable, and less attractive to investors.” In China, the average utilisation rate, or the proportion of time that power plants run, has fallen, for coal, from 60% in 2011 to below 50% last year. This means Chinese utilities have been left with over-built capacity owing to many reasons. ECIU cites a credit-fuelled industrial investment binge, slowing economic growth, over-optimistic expectations for electricity demand, lagging grid and other supporting
Severe air pollution calls Cleaner alternatives to coal are also gaining traction due to the severe air pollution in the four Asian nations, especially China and India. Not only is there rising public opposition to new mines, but governments are beginning to enact regulatons, including India’s carbon tax on coal, which will make it weigh heavily on investment decisions for new coal power plants. ECIU adds that the successful conclusion of the Paris climate summit will accelerate existing investments in energy efficiency and low-carbon generation, with the IEA estimating national pledges agreed under the Paris Agreement requiring around US$14t investment over the next decade and a half. “Taken together, these factors indicate that the four Asian nations are likely to complete far less than half of their collective, current coal power plant pipeline,” says ECIU. “In our estimation, the global figure for new build will fall far short of 1,000 power plants in the next five years, and is likely to lie in the region of around 500,” or less than half of the 1,082 coal power plants completed worldwide from 2010 to 2015. The actual completion number might rise or fall depending on key trends such as construction and operating costs, delivery, and investment, as well as the rate of economic growth for each country. With this move towards coal-based power generation in Asia, IEA says there is a need to encourage several countries to follow the example of China and focus on building highefficiency low-emissions coal plants to avoid unnecessary carbon
Dr Ivan Marten
Encik Habib Husin
Mark C. Thurber
ASIAN POWER 29
sector report: COAL & GAS emissions. Looking forward, supply security is less of an issue for coal than gas, although there are concerns on a shortage of technological investments to help ensure long-term sustainability. “The relative abundance of coal will help to protect the supplies for Asian countries, although it underscores the need to maintain safe and efficient infrastructures,” says Marten. “Technology has always been a disruptive force in the energy industry, but the lack of current investment and progress in carbon capture and storage currently limits the role of coal going forward.” “Sustainability challenges are likely to drive regulation revision and change relative merits of coal versus gas versus other energy sources. Political and social momentum seems to favour further constraints on coal, as suggested by recent government declarations. Coal will nevertheless likely remain a more economical fuel for power generation, even with more significant carbon pricing, which will support growing demand in Asia,” he adds. Growing Asian gas demand Whilst coal is generally more affordable than gas based on average power generation costs for power plants, gas is more advantageous in countries such as Indonesia. At the northern tip of the island of Sulawesi, Indonesia, on the Minahassa peninsula, the Gorontalo province faced a problem of faltering power supply that was remedied by a gas-fired power plant project. Gorontalo is famous for its beautiful mountainous panoramic view and beautiful diving sites, and is home to the highest marine biodiversity on the planet, but its electrification ratio was only at 77.58% in October 2015, meaning that nearly 60 households did not have access to electricity. This led the Indonesian government to design a 35GW power project as part of the National Medium Term Development Program 20152019. The gas-fired Gorontalo power plant has become one of the first-to-run 35GW projects. The power plant developed by PT PP was completed in six months, and has been operating since March 2016. GE was selected as the technology partner and provided its mobile power plant technology. Specifically, GE’s TM2500 generator set, which is trailer-mounted and can be installed faster than traditional power plants, can produce more than 25MW of power output in the hot Indonesian climate—enough power for approximately 25,000 homes. Altogether, the four units for the Gorontalo province will provide 100MW of power to ensure grid stability and help the province meet expected power demand increases. Outside of Indonesia, other Asian governments seeking to reduce carbon emissions will be drawn to gas-fired power plants. “Quite simply, gas is greener than coal,” says Marten. “Asian gas demand is forecast to grow at a compounded annual growth rate
Utilisation rates of thermal power, %, 2009-2015
of 3.2%, driven by its flexibility and government policy objectives such as climate change. As a consequence Asia will become the largest gas import market, surpassing Europe.” He expects to see more rapid growth in gas demand from China, India, Southeast Asia and the Middle East. China is forecast to grow by 5.1% per annum through 2040 reaching 603b cubic meters (bcm); India by 4.6%, reaching 202bcm; Southeast Asia by 2.4%, and the Middle East by 2%, reaching 706bcm.
The current gas environment looks favourable for buyers in the short term, but the long-term outlook is less certain.
Annual growth in capacity of power generating technologies, 2012-15
Source: NBSC 30 ASIAN POWER
Limited gas demand growth On the other hand, gas demand growth will be limited in Japan due to a rebound in nuclear market share and a renewed focus on energy efficiency programs. With gas demand set to balloon in the coming decades, there is a need for consuming nations in Asia to develop long-term gas supply security strategies. “The current gas environment looks favourable for buyers in the short term, but the long-term outlook is less certain,” says Marten. “Buyers, having multiple supply options and hence the ability to influence strongly contract terms, will probably push to move from oil indexations to Henry Hub to regional indices such as JKT or FOB Singapore and include price caps.” The danger in this scenario is that limited appetite for new long-term contracts may result in projects being postponed, which will then limit liquidity after 2020. “This risk is probably one all parties should keep in mind as they define their strategies,” says Marten. Asia is also looking at nuclear power, and its growth in the region will depend on government policies on carbon pricing, natural gas pricing, and nuclear support, says Mark C. Thurber, associate director, energy and sustainable development at Stanford University. In highlighting some policy implications, he reckons that in much of Asia, nuclear power is already economically competitive with alternatives in theory. However, in practice, costs can escalate drastically due to regulatory delays. “Only states with existing nuclear energy capability and mostly supportive public opinion, such as China and perhaps South Korea, have much prospect of significant growth in nuclear energy over the next two decades,” says Thurber. Policies that encourage price liberalisation, allowing gas prices to be determined by supply and demand rather than set administratively, should boost additional gas supply in countries with significant gas resources. Meanwhile, the imposition of a carbon price will help make natural gas and nuclear more competitive in Asia, and encourage the development of an energy system that Thurber believes will be more resilient against future climate policy shocks. “There is a strong logic for collaboration between nuclear startups in the United States, where the regulatory climate for deploying new nuclear technologies is difficult, and pro-nuclear power countries in Asia,” says Thurber. “That said, excessively loose regulation would pose risks for the entire global nuclear sector, which would be badly damaged by another accident.”
ANALYSIS: CHINA’S COAL USE
Coal-curbing policies will be successful in China
Yes, China will succeed in cutting use of coalbased power in just a decade
The government’s centralised coal reduction efforts, coupled with the increased adoption of renewable energy — and also ‘cleaner’ fuels such as nuclear power — will lessen coal’s dominance of the power mix over the coming decade.
he successful implementation of coal capacity restrictions by the National Energy Administration (NEA) will help to address the thermal overcapacity in the market and reduce coal consumption — paving the way for alternative fuels to gain share in the power mix, including renewable energy. Provincial-level opposition to coal curbing policies will remain a pertinent issue, but we expect the Chinese government to register success in reducing coal’s share in the power mix over our 10-year forecast period,
The reduction of coalfired power generation will pave the way for alternative fuels to gain share in the power mix,
Coal curbing efforts to continue in China
Source: “Industry Trend Analysis - Government Coal-Curbing Policies To Source: BMI EIA,Research, BMI Register Success” 32 ASIAN POWER
accounting for 55% in 2025. The announcement by the NEA in October to limit the construction of coal-fired power facilities across China is underpinned by the government’s efforts to reduce pollution and to also tackle overcapacity — amidst stalling power demand and continued growth in renewables capacity. Stop building more Amongst the announcements by the NEA is the postponement of the construction of some coal-fired plants that have already secured approval and to cap the capacity of some large coal projects under construction in some of the coal-heavy provinces in the country. As such, if the NEA is successful in its implementation of the policies, this will help to address the thermal overcapacity in the market and reduce coal consumption. By extension, the reduction of coal-fired power generation will pave the way for alternative fuels to gain share in the power mix, including renewable energy — which has previously faced problems of idling, due to integration limitations in the grid system, but also due to coal being prioritised for power generation over new renewables capacity. Despite the strong rhetoric from the
NEA, we highlight that there is still an ongoing disconnect between the government’s national energy policy and coal capacity additions at the provincial level. This has the potential to undermine the NEA’s coal curbing efforts. For example, centralised government policy is focussed on reducing coal consumption, whilst at the same time boosting the clean energy sector. Pushing forward with policies That said, we expect the Chinese government to push on with its coal reduction policies and apply more pressure on provincial leaders, despite the strong provincial-level resistance. The government’s centralised coal reduction efforts, coupled with the increased adoption of renewable energy — and also ‘cleaner’ fuels such as nuclear power — will lessen coal’s dominance of the power mix over the coming decade. We expect coal-fired power generation to contract over 2016 and 2017, with coal contributing around 55% to the total electricity mix by 2025 — from a contribution level of about 70% in 2015. From BMI Research, “Industry Trend Analysis - Government Coal-Curbing Policies To Register Success”
Powering ASEAN’s Energy Sector In 2013, Thailand produced 459,000 barrels of oil per day, but it consumed 1.2 million barrels per day. It is the second largest importer of oil in Southeast Asia. Thailand is a major producer of natural gas, with reserves of at least 10 trillion cubic feet. Although it is the second largest coal producer in Southeast Asia, it imports additional coal to meet domestic demand. 90% of Thailand’s electrical generating capacity is conventional thermal. Oil-fired plants have been replaced by natural gas, which in 2014 powered 75% of electrical generation. Coal-fired plants produced 20%, with the remainder from biomass, hydro and biogas. Thailand has no nuclear power plants, and plans to produce 5 GW of electricity by 2025 have been reduced to 2 GW following the Fukushima nuclear accident. Looking beyond Thailand, Asia-Pacific’s share of global energy consumption is projected to increase to 47% by 2035. The strongest growth will come from renewable energy (502%).
459,000 of oil per day in 2013. barrels
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Investing in Asian power: Where are the hot spots?
his commentary covers cross border investment action in Asia and / or overseas (DFI) funding directed into Asian markets, ranging from the “safe and secure” to the cowboy chao of emerging markets and “frontier” economies. This is pretty much what the IPPF is all about, at least originally when we launched in December of 2000. The IPPF was initially created by a group of major power entities deeply embroiled in China after the big “Goldrush” of the eighties and nineties. They saw a need for a “neutral” platform, an NGO, that would serve their needs and by extension the industry. Our original members were all IPP’s: AES, Meiya Power, Mirant, El Paso, Siemens Power, Shell Power, BP Global, Corvanta, Sithe, Dynegy, InterGen. My firm, Laykin Communications, had already established an energy / power track record in Asia. We had assisted Calcutta Electric, AKA – “CESC Ltd”, with their first IPO (actually the first Indian power IPO) in Hong Kong, Singapore and Tokyo in the late eighties. In the early nineties, AES retained Laykin Communications for various public relations / corporate communications assignments. This led to AES assigning L/C with the responsibility of hosting and running the IPPF in 1998. At that time AES kept their Asian Headquarters in HK with a couple of floors in the “Entertainment Building” on Queen’s Road with a large staff. After almost two years of feasibility studies, countless meetings, conferences and serious one –on-ones with European (mainly British) and American energy and power decision makers, the IPPF was officially launched on December 10th, 2000 with four founding member firms (AES, MPC, InterGen and Mirant). Defining Asia and where best to invest Before we get into priorities, commandments and wish-lists, this paper is mainly focused on “metropolitan” Asia – ASEAN, North Asia, Greater China. However, with the phenomena of “frontier” focused funds rapidly changing certain investment paradigms, what constitutes valid investment opportunities is a rapidly changing canvas. What follows is what happens when you ask 17 blind men to describe an elephant. We asked about three dozen energy, power , financial, legal and allied infrastructure decision-makers what were the three most important things to consider when investing and / or developing power in Asia, we filtered the results down to the five best (listed below). Then, we add in our own two cents worth with a few key items that were missing from the top five. In 1882 Edison built two functioning power plants. One in London with partners who helped arrange institutional customers such as post and telegraph facilities. In the same year Edison created the “Pearl Street” station in NYC, mainly to supply electricity lighting in nearby residential and commercial buildings. By the turn of the century, the building of power plants had become a serious heavy industry sector. A century later when the IPPF was launched investors were mainly major banks and government entities that had the resources to come up with tens or hundreds of million of US dollars to carry a power project from Green and Brown fields through to commissioning. Today small investors can become IPP’s with a few wind turbines or a quarter acre of solar panels. The balkanization of the industry along with technology driven cost reductions have drawn thousands of investment players into the energy arena. 34 ASIAN POWER
Joel Laykin President-CEO , Laykin Communications Secretary General, Independent Power Producers Forum
Phenomena of “frontier” focused funds
From 1882 onwards electric power resources and distribution spread across America and Europe. Paris was nick-named “the City of Lights” by 1905. The Gold Rush In America the stranglehold of cartels (termed as “trusts”) and allied monopolies was causing great concern in Washington. President Theodore Roosevelt was a “progressive reformer” bent on dragging his Republican Party to more “liberal” positions. He broke 44 separate “trusts” opening up more marketplace competition which laid the foundation for the economic boom enjoyed by the U.S. from WWI through the roaring twenties. What does this have to do with power?- plenty. While Roosevelt managed to force Standard Oil and the coal trusts to break up, the actual power industry remained untouched by his administration. The main reason for this was that it was still in its infancy compared to rail, steel, oil, coal, beef, etc. Corruption and chicanery in the American Power industry was endemic but below the radar. By 1928, twenty two interwined power companies controlled 90% of America’s electricity production and three of the largest owned or controlled over half of America’s power. Theodore’s nephew Franklin, elected at the height of the great depression in 1932 was too busy with his “New Deal” to do something about the power industry. It wasn’t until 1935 that “Tommy the Cork” ( FDR’s slickest whiz kid) managed to help drive through “PUHCA” the “Public Utility Holding Corporation Act” of 1935. Handcuffs were slapped on the power industry, no more “cross state lines” investments. What drove U.S. power companies overseas was “PUHCA”. They couldn’t expand very much domestically. Turmoil before and through WWII also kept the lid on international expansion. As post-war affluence gradually spread around the globe in the fifties and sixties, America power companies were still stymied by unfavorable investment environments. India was still dominated by Fabian socialist dreams. The ASEAN countries were either unstable, run by dictators or just recovering from the indo-China conflicts when all of a sudden the
OPINION PRC does an about face on direct foreign investment. US firms, along with British, French, Belgian, etc. rush in to help China begin the long slog from a total installed capacity in 1978 of 230,000 MW to over 1,650,000MW today. “Bring your technology, your money, your equipment, etc. China welcomes you”. The Honeymoon is over! Unfortunately things started to go sour around the mid-nineties. Between 1990 and 2002 there was an increasing degree of unethical (if not illegal) behavior by provincial governments in China. This coupled with turmoil in certain US power markets (remember California’s “rolling blackouts” orchestrated by Kenneth Lay?) and to top it all off, the Enron debacle, a black hole that sucked all the oxygen out the industry, destroying careers and companies in its wake. Mirant, AES, Dynegy and many others went Chapter II or found themselves greatly reduced in size and resources. A great gloom settled over the industry. At industry gatherings from 2003 to about 2010 executives in traditional “Big” power (renewables were amazingly exempt from this miasma) would never dare mention overseas energy investment opportunities. Their stocks would tank, their bonds would become junque, etc. The repeal of PUHCA This comprehensive Legislation of 1935 had long since out lived its usefulness. Multiple layers of constraining statutes and regulatory mandates had created such substantial safety nets that the power industry could never return to the bad old days of the teens and roaring twenties. In fact, it really should been repealed by 1985. We had to wait another 20 years for it to finally happen in 2005. Great - the handcuffs were off. Companies could cross state lines, merge, acquire, expand. Terrible – Just when the traditional “big” power decisionmakers were beginning to reconsider major overseas investments. They had a rethink. Why have the aggravation of confronting strange cultures, possibility of coups, tolerating incomprehensible laws enforced by people with unpronounceable names who don’t even have the courtesy to speak English when you can relax in the state next door in the executive club room of your latest acquisition? The big guys never came back. The good news is that there great opportunities for the smaller “light on their feet” start-ups, the entrepreneurs from all over the world. The Renaissance Led by exciting new technologies, the acceptance of renewables into the body politic of the global power industry, globalization, rising incomes, expectations and ambitions have all come together to create tidal waves of civic, corporate and individual interests into all things that relate to energy and power. Argentinian firms investing in small run-of-river hydro in Thailand, Thai firms investing in geothermal in Indonesia. Indonesian firms investing in bio-fuel in Malaysia, etc. – the Asian investor hasn’t just arrived , he / she are in leadership positions across the full spectrum. However, they face the same land-mines that Europeans, Americans, Japanese and Chinese must deal with – much of this is illustrated below as we go into our favourite five “top three
Why have the aggravation of confronting strange cultures?
lists”. Five “expert” responses to what investors should consider first and foremost. I. Former senior advisor to EON, major academic credentials, experience in energy / power circles in Germany, Pakistan, India, Co-Chair / the IPPF Europe Committee, German National 1. Is the investment actually relevant to the market? Have you considered the direction of the political will? 2. Have you done your due diligence on “Risk”? 3. Is there regulatory flexibility? II. Wind farm power grid supplier based in Taiwan, the company is considering branching into Indonesia. American with scientific credentials and government background, American. 1. What is the going tariff rate? 2. How is the history of buyer off take? “Do they pay”? 3. What are the PPA limitations and / or restrictions? Will the grid be able to take all that you can feed in to it? III. Major big power player, chaired / CEOed three large IPPs, built plants all over China, ran the 2nd largest power investor in the PRC (after CLP) strong technical / engineering background. His company also owned plants in Indonesia, Pakistan, Philippines and Vietnam, Chinese American. 1. Do you really understand the regulatory environment? 2. Have you matched planned supply with potential demand? What are the chances for long term sustainable relationship with the market? What are the opportunities for expansion? 3. Will your project meet minimum ROI requirements? IV. In-depth knowledge of key ASEAN power markets. Ran important market entry investment actions for a number of inter-national firms. Major trouble-shooter in conflicts between international developers and certain Asian governments, legal background-American. 1. Is your projected tariff truly attractive? Is this really a market where power can be sold at appropriate prices? 2. Legal certainties? How enforceable are contracts in your target market? Is your market signed on to the New York Convention. How’s the Arbitration clause look? 3. Location specific as an issue. Are foreigners allowed to own land? Due diligence is an imperative on land issues. If your in coal you need to be near a coast. If you are into geothermal, better be near funeroles. V. Top drawer finance guru in power. Former EVP at major multinational (British / U.S.). Also country (China) EVP for major developer, Ran big coal, hydro and wind projects. PRC - Chinese 1. How is the political stability? Have you considered all aspects of political risk, change of party / administration. 2. Rule of Law. How is the court system? Would “home town justice” be a legitimate concern? 3. Who are your partners? How much do you really know about them? Wrap up The energy and power sectors have evolved so much especially in the past two decades. We think that above so called “top three lists” should be considered a (maybe) top 15 things to consider when making the move overseas. My additions are: Corruption: US firms are bound by the anti-corruption act that was the result of the Lockheed payola scandal of the 1960’s. The UK, Australia, etc. have similar restraints. It’s very possible to succeed and close a deal without engaging in corrupt actions. You just have to work harder and possibly longer. I know it can be done because I have done it – in china of all places. A number of ASEAN countries have taken steps to mandate more protection for farmers and persons who could be ejected from family property via eminent domain by corrupt officials. China is the worst offender. The innocent American or European who has partnered with a firm whose main contribution is the land on which a wind farm is to be built has to be very sure that they have not made a deal with the devil. My contribution goes beyond coups and the like. In advanced or emerging social democracies (Australia, New Zealand, Japan, Taiwan, Korea, a change of administration could pose a possible risk. Recent “change of party in power” in Australia caused a bit of havoc in the renewable sectors. ASIAN POWER 35
event coverage: POWER-GEN ASIA 2016
Asia as an arena of energy competition
Playing catch up with Asia’s fast integrating power system More than 8,000 power industry delegates and key figures from 75 countries flocked to Seoul, South Korea to attend the POWER-GEN Asia.
overing every aspect of the power generation industry, POWERGEN Asia, Renewable Energy World Asia, and the POWER-GEN Asia Financial Forum converged once more in 2016 to form Asia Power Week. At the KINTEX Convention Centre, Asia Power Week embraced the entire spectrum of power generation sources from a strategic, financial, and technical viewpoint. Renewable energy and distributed generation are fast becoming part of the mainstream power industry and were an intrinsic element of what was presented both within the conference programme and on the exhibition floor. The conference programme offered seven main themes, allowing delegates the opportunity to examine the industry’s distinct elements both individually and in the context of a fast integrating power system. According to the IEA, for the recent 20 years, 80% of coals, 75% of oil, and 60% of gas produced in the world have been exported to countries in Asia. This shows that Asia is at the centre of the global energy trade. Global energy trade centre Along with that, the demand for energy is in a steady rise in China, India, as well as in Southeast Asia and the Middle East. For that reason, Asia has become an arena of competition where global energy companies present their new technologies, 36 ASIAN POWER
The power industry structure is highly segmented/ fragmented. There are numerous areas of specialisation, for all items of equipment, design, installation, commissioning, etc.
and many companies are looking at opportunities to enter Asian markets. In the Asia Power Week 2016, a range of sessions were organised so that opinions on the problems facing Asia can be shared and development directions for the future can be explored. The well-timed topics, along with prominent figures in panels, quenched the intellectual thirst of visitors. In particular, sessions were prepared for the introduction of the electricity markets of major countries and related companies, reflecting the fact that China and countries in Southeast Asia, where the demand for energy is increasing, are interested in the energy industry and its current state. EPC troubles Amongst the hot topics discussed in the conference were the benefits, misapprehensions, and realities of working with Chinese Engineering, Procurement, and Construction firms (EPCs). Simon Parker, DP CleanTech China’s CEO, extensively discussed that based on their experience, with Chinese EPC Contracting and the environment for smaller scale distributed power, there are some key issues and subsequent implications which they have frequently observed, and which need to be understood by potential partners of Chinese EPCs. “The power industry structure is highly segmented/
fragmented. There are numerous areas of specialisation, for all items of equipment, design, installation, commissioning, etc. This produces highly competitive bidding; low pricing,” he says. Generally, Parker says there is a very keen focus on the competitive landscape and goal orientedness, hence companies are heavily incentivised to win. This results to a volume-based approach to bidding: the more bids in the market, the greater the chance. Parker adds that the cultural norm is that contracts are not the basis from which to manage the project, rather the reference to be used only if and when things go wrong. “China contracts tend to be extensively in favour of the customer; frequently to an extent that is unreasonable and unworkable. This is generally understood within the China environment and therefore not enforced in reality,” he says. Low carbon green growth The forum’s main theme was the discussion on a new paradigm of the electric power industry called ‘low carbon green growth.’ For instance, Korea has a high dependence on imported energy, importing 96.4% of its energy consumed in the country. It has a vulnerable energy security structure with over 80% of total oil consumption from imports from the Mideast. Oil accounts for 38% of total energy consumption of the country. Korea has structural weaknesses regarding energy security. Korea’s energy imports amounted to US$172.5b in 2011 which accounted for 32.9% of total amount of imports. It was even higher than the country’s total exports of semiconductors, automobiles, and ships (US$152b). The Korean government announced a plan for ‘New Market Creation for Energy Demand Management Based on ICT’ and said that it will revise the supply centredenergy policy to focus more on demand management. The country will especially focus on electricity demand management business, integrated services for energy management, independent microgrid business, PV system rental business, electric vehicle and paid charging services, and businesses that leverage the heat from hot waste water of thermal power generation. Korea has announced that it will cut greenhouse gas emissions by 37% from its business-as-usual emissions by 2030. The government has been committed to supplying new and renewable energy and nurturing related industries as a means to achieve its GHG reduction goal. Currently, new and renewable energy accounts for 4.5% of the total energy supply in Korea.
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Meet the biggest game changers of the industry at the Asian Power Awards 2016
It’s another record year for the Asian Power Awards
ver a hundred senior executives and prime industry figures flocked to the Conrad Seoul on September 21 for the awards night in South Korea. The awards featured 23 categories this year as nominations jumped to 118. The awards were expertly judged by John Yeap, partner, head of energy – Asia at Pinsent Masons, and Mark Hutchinson, managing director at AWR Lloyd. John Goss, managing director of Ceejay AOD, also gave a speech at the awards ceremony on behalf of the judges. Asian Power publisher Tim Charlton deeply congratulated the awardees and said, “On behalf of the Asian Power team, we are humbled and again grateful for spending your time with us tonight. This is the first time we are holding the awards in South Korea, and we are proud to have you on board with us.” GE was amongst the awardees as it received the EPC of the Year-Gold Award for its pivotal role as the main contractor and leader of the consortium for the engineering, procurement, construction, and commissioning (EPC) of Malakoff Corporation’s (Malakoff) Tanjung Bin Energy Power Plant. The Tanjung Bin Energy Power Plant, located in the southern part of the Malaysian Peninsula near the city of Johor Bahru, also won the Coal Project of the Year – Gold Award. “GE’s high efficiency ultra-supercritical steam technology used in Tanjung Bin 4 will allow Malakoff to offer affordable electricity with a low environmental footprint and provide enough energy to power 2m people,” said Andreas Lusch, CEO, GE’s Steam Power Systems. “We are honoured to receive the EPC of the Year – Gold Award from Asian Power.” Maibarara Geothermal Inc (MGI), who was handed the Geothermal Power Project of the Year award, said the title acknowledges Maibarara-1’s innovative development, effective operations, and dynamism in the field of geothermal energy. “This award shows that Filipino expertise and ingenuity in geothermal energy operations are second to none. Such international recognition of MGI’s facility in just two years of commercial operations owes to the vision and wisdom of our Board, the dedication and professionalism of our team, and the engagement and cooperation of our stakeholders in regulatory agencies, private industry, and host communities,” MGI president F.G. Delfin Jr. said in a statement. The Asian Power Awards 2016 was held in conjunction with the annual POWER-GEN Asia conference which was held for the first time in South Korea. 38 ASIAN POWER
Attendees at the registration
Asian Power copies
Solar Power Project of the Year
Standby Power Plant of the Year
• Gold - Agriculture Integrated Solar Photovoltaic Powered by Cypark Resources Berhad • Silver - Shuaa Energy 1 PSC Powered by ACWA Power • Bronze - Negros Island Solar Power Inc. (Islasol) Powered by Monte Solar Energy Inc.
• Gold - Black Start Power for Aditya Aluminium in India Powered by Aggreko (Singapore) Pte Ltd
Hydro Power Project of the Year • Gold - 102 MW Gulpur Hydropower Project, Pakistan Powered by Mira Power Limited (subsidiary of Korea SouthEast Power Co. Ltd (KOEN)) • Silver - Korea Muju pumped-storage Power Plant, Korea Hydro & Nuclear Power Co. Ltd. Powered by Emerson • Bronze - Rehabilitation Project of Chingshan Branch Plant of TaChia Hydro Power Plant Powered by Taiwan Power Company Wind Power Project of the Year • Gold - Application of Reversing Engineering to Repair the Large Wind Turbine FRP Blades and Accident Analysis Powered by Taiwan Power Company • Silver - West Timor 21 MW Wind Farm Powered by Indo Wind Power Holdings Pte Ltd • Bronze - Guam Power Authority Wind Turbine Grant Project Powered by Guam Power Authority Geothermal Power Project of the Year • Gold - 20 MW Maibarara Geothermal Power Project Powered by Maibarara Geothermal Inc. Coal Power Project of the Year • Gold - Tanjung Bin Energy Power Plant Powered by Malakoff Corporation Berhad • Silver - Cirebon CFSPP 1x660 MW Clean Coal Technology Powered by PT Cirebon Electric Power • Bronze - Nabha Power Limited Gas Power Project of the Year • Gold - Gorontalo 100 MW Gas Power Plant Powered by GE • Silver - Korea Sejong Natural Gas Power Plant, Korea Midland Power Co. Ltd. Powered by Emerson • Bronze - China Beijing Jingneng Gaoantun Thermal Power Co., Ltd Powered by Emerson Fast-Track Power Plant of the Year • Gold - Tasmania – Supplementary Generation Powered by APR Energy • Silver - China Chiping Xinyuan Aluminum Co., Ltd. 6x700MW Project Powered by Emerson • Bronze - Interim Power Station in Myingyan, Myanmar Powered by Aggreko (Singapore) Pte Ltd
Environmental Upgrade of the Year • Gold - UNIDO Best Available Techniques (BAT) and Best Environmental Practices (BEP) Powered by AES Philippines – Masinloc Power Partners Co. Ltd • Silver - Agriculture Integrated Solar Photovoltaic Powered by Cypark Resources Berhad • Bronze - 102 MW Gulpur Hydropower Project, Pakistan Powered by Mira Power Limited (subsidiary of Korea SouthEast Power Co. Ltd (KOEN)) Transmission & Distribution Project of the Year • Gold - Changi East 230kV Substation Powered by SP PowerGrid Ltd • Silver - Greener and Smarter: Powering new Hong Kong Arts Hub Powered by CLP Power Hong Kong Limited • Bronze - Banqiao Primary (161kV) Substation Reconstruction Project Powered by Taiwan Power Company Power Plant Upgrade of the Year
Distribution Ltd. (TPDDL) • Silver - Mobile Phone- based ‘On Spot’ Revenue Management Powered by ApplicationReliance Infrastructure Limited • Bronze - System for monitoring De-hooking drive using AMR Load reading data of the Distribution Transformers Powered by CESC Limited Dual Fuel Power Plant of the Year • Gold - PLTDG PESANGGARAN BALI 200MW, PT INDONESIA POWER Powered WÄRTSILÄ and PT. PP (Persero) Tbk EPC of the Year • Gold – Tanjung Bin Energy Power Plant Powered by GE’s Steam Power Systems Renewable Power Producer of the Year – Malaysia • Agriculture Integrated Solar Photovoltaic Powered by Cypark Resources Berhad Power Utility of the Year – CHINA • China Resources Power Holdings Co., Ltd. Power Utility of the Year – INDIA • J.K. Nagar 220/33 kV Substation Powered by India Power Corporation Limited
• Gold - Pressure Reducing and DeSuperheating System (PRDS) Powered by AES India Pvt. Ltd. - Odisha Power Generation Corporation • Silver - Countermeasures of Stress Corrosion Cracking on Steam Turbine Rotor Grooves at Hsinta Power Station Unit 1 Powered by Taiwan Power Company • Bronze - China Zhejiang Guohua ZheNeng Power Company 4x600MW Units DEH/MEH Improvement Project Powered by Emerson
Power Utility of the Year – Philippines
Innovative Power Technology of the Year
• Yugadanavi 300 MW Combined Cycle Power Plant Powered by Lakdhanavi Limited
• Gold - BEIJING JINGXI GAS-FIRED THERMAL POWER CO., LTD OF BEH Powered by Siemens • Silver - Gorontalo 100 MW Gas Power Plant Powered by GE • Bronze - China Resources Power Holdings Co., Ltd.
Power Utility of the Year- UAE
Smart Grid Project of the Year • Gold - J.K. Nagar 220/33 kV Substation Powered by India Power Corporation Limited • Silver - CESC and Silver Spring Networks Collaborate to Deploy MultiApplication IoT Network in Kolkata, India Powered by CESC Limited • Bronze - Real-Time Alarm and Emergency Processing System for Underground Cables Powered by Taiwan Power Company Information Technology Project of the Year • Gold - BW on HANA Implementation Powered by Tata Power Delhi
• Masinloc Power Plant Performance Enhancement Program (MPPEP) Powered by AES Philippines - Masinloc Power Partners Co. Ltd Power Utility of the Year - Saudi Arabia • ACWA Power Power Utility of the Year- Sri Lanka
• Generation Scheduling & Despatch Enhancement Project Powered by Abu Dhabi Transmission & Despatch Company – TRANSCO Power Utility of the Year- Vietnam • AES – VCM 1,240 MW Mong Duong II Power Plant Powered by AES – VCM 1,240 MW Mong Duong II Power Plant Independent Power Producer of the Year • Gold - 1,000 MW of solar and wind energy capacity Powered by ReNew Power Ventures Pvt. Ltd. • Silver - ACWA Power • Bronze - Nabha Power Limited CEO of the Year • CHUNG CHANG-KIL of Korea Midland Power Co. Ltd
ASIAN POWER 39
Anthony Wai Leung Ip and Yiu Hung Choi from CLP Power Hong Kong
ACWA Power Representatives
Lakdhanavi Limited Representatives
CEO of the Year, Chung Chang-kil from KOMIPO
KOMIPO Team 40 ASIAN POWER
Abu Dhabi Transmission & Despatch Company – TRANSCO Team
Easa Ahmed Alzarooni of Abu Dhabi Transmission & Despatch Company – TRANSCO
Francisco Delfin, Jr. of Maibarara Geothermal Inc.
Asian Power Team
Representatives from PT Cirebon Electric
Heru Dewanto of PT Cirebon Electric Power
Kavita Sinha from CESC Limited
Wang Xiao Bin of China Resources Power Holdings Co., Ltd
Guillame Turc representing on behalf of Malakoff Corporation Berhad
Representatives from Wartsila and PT Indonesia Power Bali
Kithsiri Egodawatta of Lakdhanavi Limited
PT Cirebon Electric Power Executives ASIAN POWER 41
Yiu Hung Choi of CLP Power Hong Kong Limited
Representatives from POSCO Energy and AES VCM
Kavita Sinha of CESC Limited
Yung-Chin Chiang of Taiwan Power Company 42 ASIAN POWER
Young Chul of ACWA Power
Chung Chang-kil of KOMIPO
Executives from AES
Achmat Ibrahim, Doreen Tan, and Mohd Hilmy Zawawi of Cypark Resources Berhad
The AES Team
Guillaume Turc of GE’s Steam Power Systems
Mira Power Executives
The Mira Power Limited Team
Executives from Cypark Resources Berhad and China Resources
WÄRTSILÄ and PT. PP (Persero) Tbk Representatives ASIAN POWER 43
Analysis: BL0CKcHAIN IN ENERGY
Peer-to-peer transactions in the energy sector
Blockchain – an opportunity for energy producers and consumers?
Whilst blockchain-based data transmission and data storage as such can currently be provided at minimal cost, the verification process leads to very high hardware and energy costs-
he technical potential of blockchain applications is clearly apparent even today: particularly decentralised energy supply relationships as well as the execution and recording of transactions are realistic prospects, so the potential for blockchain technology in the energy sector is promising. Blockchain is a technology that enables so-called “peer-to-peer” transactions. With this type of transaction, every participant in a network can transact directly with every other network participant without involving a third-party intermediary. The blockchain innovation is that transactions are no longer stored in a central database, but distributed to all participating computers, which store the data locally. The first relevant blockchain application was Bitcoin, a so-called “cryptocurrency”. Over recent years, Bitcoin has become the basis for other blockchain applications, most of which are currently being developed in finance. A number of businesses and initiatives have recently been launched that apply the blockchain principle to other industries, amongst them the energy sector. Blockchain applications are generally considered to be a very promising technology but they are still at an early stage of development. Decentralised structure Its decentralised structure for the execution of transactions and the storage of data is seen by experts to be the key benefit of blockchain technology. With data being stored in several locations at once the information becomes more difficult to tamper with, whilst being available everywhere. However, the majority of experts also believe that there are alternative solutions capable of ensuring the functioning of a decentralised supply system. The trend to revert to more decentralised forms of supply, e.g. customer self-generation or distributed generation from renewable energy sources, is already being 44 ASIAN POWER
Blockchain is a technology that enables so-called “peer-to-peer” transactions.
promoted in Germany as it is, with the country managing its transition towards a sustainable energy system (the socalled “energy transition”). Blockchain technology is not a necessary requirement for the operation of such a decentralised model and its associated data flows and transactions. Both transactions and data flows could just as well be recorded in conventional databases: this is a belief shared by most experts we have interviewed. At least judging from the current state of developments, these would be faster and less costly to operate, with the added benefit of being largely already available. While blockchainbased data transmission and data storage as such can currently be provided at minimal cost, the verification process leads to very high hardware and energy costs. The cumulative energy costs of some public blockchains have been driven to immense levels due to the many decentralised transaction verification processes that are carried out simultaneously. It must be mentioned, though, that new applications have been able to achieve great progress in this area. Is it a more suitable tool? The answer to the question of whether blockchain technology will be a more suitable tool for the energy sector than conventional databases and solutions will also depend on technological progress. The state of the technical infrastructure, data security, and the scalability of the technology are key aspects here. Implementation of a decentralised energy-transaction and supply system will require technical infrastructure that includes, for example, smart meters for all consumers. Data security must be guaranteed by ensuring that the software is proof against tampering and attacks. The technology must be capable of being deployed on a large scale, with computing processes fast enough to ensure that energy can be supplied and transactions
Analysis: BL0CKcHAIN IN ENERGY executed in real time and without any delay. Considering the present state of the technology and the progress that has been made since the first blockchain application was launched, it appears safe to assume that solutions will be found to resolve currently open issues. Experts believe that one particular requirement is that people’s awareness of the opportunities provided by blockchain applications must grow in step with the technology’s development. Critics assume that the technology is developing faster than the public’s understanding of how to use it responsibly. Whether users’ awareness of the technology will grow will also be dependent on the availability of concrete suitable applications for consumers. At present, blockchain is a purely technology-driven development. There are no suitable applications available for customers who wish to actively control and manage their energy supply, nor are there automated software solutions for customers who do not want active control of their energy supply. The first group of end customers require suitable applications they can use without difficulty. These apps must be user-friendly, easy to use, and effective. No such applications have emerged as yet, although individual companies and start-ups are working to develop solutions. Customers who do not wish to actively manage their energy supply, for example because they do not own a smartphone or do not want to spend any time on doing this, require automated software solutions. Blockchain technology will not succeed in the energy sector unless such applications are developed and used on a large scale. Regulatory challenges posed If a decentralised transaction model were to be implemented on the basis of blockchain technology, this would probably transform current market roles, with the changes to be reflected in the regulatory regime. All energy consumers would have to manage their own energy balances. Meter operators would no longer be required to collect data themselves, as all transaction data would be recorded automatically on the blockchain. The current regulatory unbundling provisions require energy companies to separate their network activities (regulated business) from the supply of energy to customers (competitive activity). Customers have the right to freely choose their electricity supplier (or gas supplier) in a liberalised electricity market. In order to ensure that customers can smoothly transfer between suppliers, so-called “balancing groups” were introduced. This made it possible for each customer to be assigned to a supplier in a simple way. Another significant area of regulation Peer-to-peer transactions
Transformation of market structures on introduction of decentralised transaction model
is the so-called “clearing process”, which is run to reconcile planned consumption against customers’ actual consumption as recorded by their meters. The difference between these is referred to as balancing energy and the costs incurred in relation to this are charged to each electricity supplier according to causation.
All energy consumers would have to manage their own energy balances.
Transmission system operator A key prerequisite for the regulatory regime to function properly is that each customer is accounted for as part of a balancing group – by clearly assigning customers to balancing groups and their suppliers to the responsible balancing group managers (which may or may not be the same entity). The meter operators obtain readings of the verified meter data relevant for billing and transportation charging purposes and pass them on to the other players involved: to the relevant electricity supplier for billing purposes and to the relevant transmission system operator (TSO) for clearing and settlement purposes. The TSO collects all data for each balancing group and aggregates it in order to determine the balancing energy costs to be allocated to the balancing group: to the relevant distribution system operator (DSO); to the relevant balancing group manager, who in turn charges the balancing energy (cost-generating) it has been allocated to the suppliers using its balancing group. The above shows clearly that a simple delivery of electricity entails complex settlement processes across the entire electricity market and that the corresponding meter readings are required for various purposes. In order for the market model to function properly, each customer must be clearly assigned to a balancing group. Balancing group managers are required to provide security in order to ensure that the costs incurred in relation to balancing energy can be recovered. One major benefit of a blockchain-based transaction model is that all electricity delivered to the networks can be clearly attributed to individual customers in small time units (down to time windows of only a few minutes). This means that all electricity produced and consumed can be settled very precisely at variable prices. The physical electricity as such would continue to flow to the end user directly from the closest generator. A significantly improved database would allow for network operations to be finetuned better at both distribution and transmission levels. A simplified clearing process would lead to less balancing energy being charged to market participants. Blockchain technology allows for direct contractual relationships to be established between energy consumers and energy producers. From PwC’s “Blockchain – an opportunity for energy producers and consumers?” ASIAN POWER 45
JOHN GOSS email@example.com
Chinese energy companies are seeing natural gas as the future
sia’s largest oil and gas producer China National Petroleum Corp. has reported that it will be increasing the company’s investments into the exploration and production for natural gas deposits, together with the necessary infrastructure. These investments will include; exploration and production, gas pipelines construction and storage plus the vital gas marketing/sales activities over the next decade. The State-owned CNPC currently allocates 70% of its total budget to the production of natural gas and around 10% to gas pipeline construction. The head of CNPC’s planning department, Hou Qijun was recently quoted by the China Daily newspaper as saying that these figures are expected to increase as the Chinese energy company focusses more of its efforts into the natural gas business. It was recently reported that China National Offshore Oil Corp (CNOOC) had started building two more storage tanks in a strategic move that will assist in the development of offshore gas
ust under a year on from COP 21, three of the main players – the US, China, and India – have now ratified the Paris treaty on climate change initiatives. What does this mean for South East Asia and its energy policies? To date the region has yet to show any major shift from favouring coal as the fuel of choice. Although gas generates around a third of the power mix in Southeast Asia, coal-fired power generation has been dominating the power development market since 2010. Across the region developers are still favouring coal, particularly for baseload power operation, with 26 GW of new coal planned to be built by 2020 versus 17 GW of gas. In addition, there is another 43 GW of coal plant likely to be sanctioned by 2020 and 33 GW more waiting in the wings. Coal’s three assasins? However, how sustainable is “king coal’s” reign in the long term? My economics lecturer once told the class that an economist is someone surrounded by assassins. There are three potential assassins for coal-fired power generation in South East Asia – these are the same “assassins” that have hit coal in Europe and the United States: 1) Gas competitiveness; 2) Clean energy; 3) Government policy. Whilst coal dominated new build when gas prices were US$13-15per mmbtu, the economics becomes more interesting in the current climate of low gas prices. Any sustainable long-term price for gas in the US$6-8 per mmbtu range could see 46 ASIAN POWER
transportation and the pipeline network and utilization. In a recent statement, CNOOC said that the two tanks, which can each hold 160,000 cubic meters of liquid natural gas (LNG), will be added to the existing LNG station in Putian, Fujian Province. Who got the lion’s share? The Chinese energy firm China National Offshore Oil Corp., CNOOC giant reports that it is viewing LNG as another mainstay industry for the Chinese energy company after oil. The company says that LNG currently accounts for 18% of the company’s total with oil accounting for 82%. CNOOC has become the country’s largest trader in the LNG market. The company’s natural gas supply sector covers some 78 cities across the country. The company’s sales of LNG reached 12.66b cubic meters in the first half of this year. This impressive figure represents a year-onyear of 11.%. The company’s CNOOC’s imports
of LNG soared up to 7.million metric tons. This figure represents an increase of 24.4% year-onyear. The Chinese energy company has recently reported that the LNG currently being imported by CNOOC now represents 60% of the country’s total. The consumption of gas in China during 2015 expanded to 191b cubic meters, according to an annual report from the China National Petroleum Corporation’s Research Institute of Economics and Technology Research. A $10b natural gas deal The UK’s oil and energy giant, BP Plc, has signed a sale-and-purchase agreement last year in which BP will sell 1m metric tonnes of LNG to annually to China Huadian Corp, which is currently China’s largest gas-fired power generator. A recent statement from BP said that this deal means that China will become the world’s largest energy importer by 2035 with its energy production growing by 4%. The Chairman of Huadian, Li Qiunkui, was quoted by China Daily as saying that this agreement was in-line with the common objectives of both energy companies. He continued by saying that this agreement was in-line with the common objectives of both energy companies. Li also said that he expected further co-operations with BP in the future. Experts have said that though there are always risks involved in exploring shale gas fields existing, BP has a rich experience in the fields of shale gas exploration and production overseas.
How does Southeast Asia’s coal plans fit with Paris commitments? gas compete for new-build baseload plant. Spot gas prices will remain subdued for some time, and are unlikely to recover this decade. The bad news for gas suppliers is that by 2020 almost another 100 mtpa of committed LNG supply capacity is due. Whilst gas demand is likely to grow at a much more subdued rate, leaving an over-capacity of around 30%. This does not even include pre-FID projects in East Africa, Canada, and the US that represent at least another 50-100 mtpa waiting in the wings. Clean energy Wind and solar costs have respectively fallen 30% and 50% in the last five years. In many markets, globally, they are already cost-competitive (or are near to competing) with fossil fuel generation on grid-scale economics. The advantage that these technologies have in Southeast Asia is that they are less capital-intensive, and quicker to market. Technology advances are likely to see further cost reduction. Some commentators suggest that renewable power plus battery technology costs
could be cost-competitive by the end of the decade – if not sooner. If this happens then this would be a “game-changer”. Government policy It is hard to square that Southeast Asia countries are signatories to the Paris Agreement with the current coal plans. Although Indonesia and Vietnam have hinted that there is more room for gas in their mixes, given that these two countries have the largest planned coal-build. Whilst the Philippines’ new government has stated that they are necessarily not bound by the treaty. It is still too early to ascertain any concrete changes in the energy policies in Southeast Asia and reconciling them with the Paris Agreement. Given that new-build coal plant tends to attract strong local opposition in many markets, and with alternative power options from gas and renewables becoming cheaper, then governments may be more inclined to meet carbon reduction plans by limiting coal’s role in favour of gas or renewables.
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Strategically changing Myanmar’s approach to hydropower
ptimising project siting and configuration are the most effective environmental and social risk avoidance measures in hydropower development. Siting is often decided very early on in project development, primarily on a project-by project basis. What the hydropower sector needs is to move away from a project-byproject to a landscape-level approach that will assess and manage cumulative impacts of multiple projects across a watershed. Myanmar’s Ministry of Natural Resources and Environmental Conservation and Ministry of Electricity and Energy are leading a country-wide Strategic Environmental Assessment (SEA) for the hydropower sector to achieve this. The SEA is looking at environmental and social values from a broad river-basin perspective to understand the entire river system upstream and downstream. If we understand these values within an entire basin, we can determine potential impacts and better mitigate risks. The SEA focusses on the main river basins
lmost all in this sector have already read many texts and technical reports on the hidden costs of intermittent sources or Variable Renewable Energy (VRE) as solar PV and wind. Are all of the arguments really true? Let us look at some of the most common ones. For each installed MW of VRP there is the need for 1MW of conventional power that must be ready to generate whenever the sun is not shining or wind is not blowing. Now, the conventional units are installed already in the grid. Thus the flexibility of those units is the sole issue. Technically speaking, only some of the conventional units are able to be used in a flexible way, namely gas and new coal turbines plus hydro, which are the most flexible units of them all, by the way. The water availability may be a limitation, more for wind than solar as when it rains the sun does not shine. Additionally, for each MW of VRP generated at least one unit of conventional-based power is not generated and costs are higher due to fixed capacity costs. Coal and gas units will be generating less indeed, but almost all PPAs for conventional power have the price of electricity defined as fixed capacity plus a variable cost. Myth busted Whilst in Europe, for example, wind and solar are more expensive than the conventional, the same is not true in many countries in Asia, as India for example, when new built is compared or when LCOE analysis is made. The real problem is the 48 ASIAN POWER
in Myanmar that have hydropower potential, including the Ayeyarwady-Chindwin, Thalnwin, Sittaung, Tanintharyi and Rakhine coastal basins, Mekong, Kaladan, and Myit Mo Hka/Bago. Still in infancy stage The SEA is currently in the early part of Stage 1 of three stages and the team is consulting diverse stakeholders in each river basin to gain an understanding of the environmental and social hotspots that need to be protected during hydropower planning. This information will then be layered with technical data to help project planners better understand, at the earliest possible stages of planning, how to avoid major environmental and social impacts. Project proposals pursued by the Myanmar government following the SEA process will be based on a stronger understanding of potential environmental and social impacts as the SEA will indicate levels of sensitivities. Information on sustainability with project feasibility data, and
determination of bankability of projects will then enable a better understanding of a project’s overall potential. Till now, the sustainability element was not considered in project choices. Once completed, the SEA will contribute to better understanding of the balance between economic development needs and the sustainable use and protection of Myanmar’s natural resources and social diversity. Limited policies, procedures, and plans To put the SEA in context, Myanmar is in its earliest phases of policy and guideline development for the hydropower sector. There are limited policies, procedures, and plans in Myanmar to drive sustainability linking water, food, and energy objectives, while there is strong opposition to large hydropower projects in the country. The SEA could be a milestone for the hydropower sector, leading to the development of integrated policy and plans to guide the sustainability of the hydropower sector. Scaling out to a country-wide perspective through the SEA process will give a broad understanding of the baseline environmental and social situation of the country. However, deeper knowledge is needed at the basin scale to address the cumulative impacts from multiple hydropower projects. Many of these impacts go beyond what a single developer can resolve. The outcomes of the SEA will hopefully enable an approach that considers the importance of basin-wide cumulative impact assessment and management for future hydropower development in Myanmar.
Agostinho Miguel Garcia
The hidden costs of Variable Renewable Energy – or are these just urban myths?
number of hours of the business models of the conventional generation that get impacted by VRP, and that is upsetting investors and lenders involved in those projects. Transmission costs never paid? Thirdly, transmission costs are never paid by VRP. This is true, but is also true for any generation project. A coal power plant next to a coal mine does not pay for the transmission. That is added on the cost of the electricity for the consumers based on the generation, transmission, and the distribution costs and also the overhead of the companies involved. Optimising the transmission costs for decentralised generation as solar on-grid PV and wind is required, and programmes like the Renewable Energy zones in California, the “Renewable Energy Development Zones” in South Africa, and solar parks in India are exactly doing that and in the latter the IPPs are paying for the connecting infrastructure to the grid. The transmission infrastructure laid exclusively
for VRP is indeed less used than for conventional power, but the objective is to integrate a mix of generation, where initiatives as wind-solar parks will fill the extra capacity. Moreover, once storage becomes more costcompetitive those lines will be fully used, so it is just a matter of time. VRP is more expensive than the prices of the PPAs. I guess that this extreme view questions export banks, credits to manufacturers, development banks, and other initiatives national or international targetting reducing the cost of VRP. Again, nothing is hidden, the same initiatives and programmes exist for conventional fuels as well as equipment for conventional power generation, so “subsidies” are part of the business of power generation and not exclusive to VRP. VRP cannot supply 100% of the power needs. It is true for the time being, but there is nothing hidden. The vision is to have a mixed generation of clean sources (it does not include nuclear) from VRP, hydro, and storage.
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