Pimagazine Asia Volume 10 Issue 4

MALAYSIA’S RENEWABLE FUTURE

CFB Technology Gas Generation

Cyber Security

VOLUME 10 ISSUE 4

Power Barges & Power Ships

100 years of control technology innovation

#1 ranked DCS in the power generation sector ABB Ability™ Symphony® Plus

ABB

— Creating value from digital takes ability.

ABB Ability™.

Access to dependable power is one of the defining attributes of modern society. In today’s digital age, we have the technology to manage the vast amounts of data being produced by power plants - offering insights that lead to valuable customer actions. By making plants more intelligent, and blurring the lines between the physical and digital worlds, ABB is helping generate more reliable power. Creating value from digital insight takes ability. ABB Ability. abb.com/power-generation, abb.com/symphonyplus

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CONTENTS Editors Note �������������������������������������������������������������������������������������������������������������������������� 3 Pay Attention: LockerGoga and Trisis/Triton demand an improved cyber security strategy ������������������������������������������������������������������������������������� 5 Retrofit RRB V47/ PS600 for Coca Cola wind site, India ������������������������������������������ 11 The Importance of Gas-fired Generation in a .

Transformed Energy Landscape ������������������������������������������������������������������������������������� 14 News Release: GE and Uniper Unveil ‘GT26 HE’ Solution �����������������������������������������19 Energising ASEAN’s power sector with technology ���������������������������������������������������� 22 CFB technology in a low carbon world ��������������������������������������������������������������������������24 The role of Generator Sets in the new landscape of Microgrids ������������������������������29 Powering the future: ���������������������������������������������������������������������������������������������������������33 Hydrogen �����������������������������������������������������������������������������������������������������������������������������58 Power Barges and Powerships: ���������������������������������������������������������������������������������������64

Advertisers Index ABB �������������������������������������������������������������������������������������������������������������������������������� 2, 10 Karpowership �������������������������������������������������������������������������������������������������������������������� 13 Caterpillar ��������������������������������������������������������������������������������������������������������������������21, 67 Sumitomo Shi FW ����������������������������������������������������������������������������������������������������������� 28 MD&A ���������������������������������������������������������������������������������������������������������������������������������32 Enexio �������������������������������������������������������������������������������������������������������������������������������� 36 Ansaldo Energia ���������������������������������������������������������������������������������������������������������39, 68 Powergen Asia 2019 �������������������������������������������������������������������������������������������������������50 Smart Utility Systems (SUS) ������������������������������������������������������������������������������������������57 Edra Power Holdings ������������������������������������������������������������������������������������������������������ 63

4 | POWER INSIDER VOLUME 10 ISSUE 4

Pay attention: LockerGoga and Trisis/Triton demand an improved cyber security strategy The need for a solid cyber security strategy has been discussed and debated for almost half a century now and yet the basic worm-type attacks first documented back in 1972 are still with us today. Why? Because even the most basic measures

ticket” item t hat would be expensive

thinking, for some reason, often is not

to protect control systems from

to replace — you protect that asset with

applied. Cyber experts are still struggling

these types of attacks are still not

insurance. And even though you can’t

to convince senior management they

systematically employed.

see it or feel it, you know, instinctively,

need to spend money to protect their

that it’s worth the money. You sleep

control system assets.

It’s hard to believe that there are still

better at night knowing you have it and it

thousands of systems in operation

would be a high-priority item to reacquire

But major security events starting in

today without any basic security

if you lost it — especially if it contributed

2017 set off alarm bells in board rooms

controls in place. If you own a car, a

to your livelihood. But, when it comes

across the industrial world. Two viruses,

house or a boat — just about any “big-

to control system cyber security, this

WannaCry and NotPetya, wreaked

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FEATURE: CYBER SECURITY

havoc on companies that were running older Microsoft Windows operating systems but failed an entry-level cyber security test: keep your systems patched and up to date. More recently, newer ransomware such as LockerGoga and malware like Trisis/Triton have taken down entire company networks.

All of these viruses were destructive.

WannaCry and LockerGoga were standard ransomware, but NotPetya was a wiper bug that masqueraded as ransomware. Its purpose: cause maximum damage to the systems it

was disrupted and the total financial

infected. It forced thousands of large

impact is still unknown

on an event that may not happen.

A major international package

Of course, everyone knows that

to halt production by scrambling data

delivery company announced the

cyber security is important and that it

and offered no way out to its victims,

loss of US$300 million

falls into the general category of risk

complex operations in many industries

5.

management. But, as an event such as

such as paying for decryption keys.

Similarly, Trisis is malware that targets

That is a lot of money — money that

the massive oil spill in Alaska’s Prince

industrial control systems, specifically

could have refreshed legacy systems,

William Sound in 1989 proves, the cost

the safety systems that allow industrial

acquired new assets, invested in R&D,

of doing nothing is far greater than the

facilities to shut down safely in

paid employee bonuses, delivered

cost of being proactive (super tankers

emergency situations. Reports show that

stockholder dividends, etc. Certainly,

are now made with double hulls to

the group behind Trisis/Triton continued

some of it should have been spent

prevent a repeat of that ecological

to attack distributed control systems

hardening these organization’s systems

disaster). It isn’t that control system

(DCS) throughout 2018 and 2019.

against such events. So why wasn’t it?

owners don’t deploy cyber and security solutions; they do. They are aware of

Companies that were impacted disclosed the financial impact of these attacks. It’s not pretty: 1.

One of the world’s largest producer of light-weight metal suffered losses worth US$52 million in the first quarter of 2019

2.

One of the world’s largest

It’s hard to convince companies to spend money on something that has no measurable return on investment.

the problem and take actions to avoid risks. But many in the industrial world are still too focused on the big attack or hack — the nation state that blacks out an entire region or shuts down the water supply to a city — when the bigger risk is common malware that impacts a control system because it is running older, unprotected and unpatched operating systems.

container shipping companies, with substantial oil and gas assets wiped

This risk exists even if the system is “air-

its books in the third quarter of 2017

Why companies don’t invest in cyber security

A French building materials

Part of the answer is pretty simple:

People going about their daily routines

manufacturer lost about €250

it’s hard to convince companies to

often introduce data and software using

million in sales

spend money on something that has

removable media such as USB drives

The worldwide pharmaceutical

no measurable return on investment.

to make changes to their systems,

production of a major drug producer

Basically, it’s hard to put a dollar value

introducing the potential for viruses

out as much as US$300 million off 3.

4.

6 | POWER INSIDER VOLUME 10 ISSUE 4

gapped” from the business’s network.

PAY ATTENTION: CYBER SECURITY

along the way. And, as these air-gapped systems become more interconnected to enable integration with business applications, they become increasingly exposed to the internet. This is why it is far more likely that common malware is the threat that will cause the most damage in the long run — just as we’ve seen with the string of cyber-attacks over the last several years.

This is because there is a fundamental disconnect in securing operational technology (OT) vs. information technology (IT). But, as OT becomes more exposed to the internet, it faces the same cyber security threats as any other networked system. This is because operators have adopted the

data when there is a threat. That makes

same hardware, software, networking

sense if it’s a credit card database, but

employees on cyber security

protocols and operating systems that

it doesn’t work out so well if a firewall

best practices?

run and connect everyday business

blocks PLCs from opening and closing

technologies, such as servers, PCs and

valves in an oil refinery or pulp mill.

networking gear.

1.

2.

Do you regularly train your

Do you have a comprehensive list of cyber assets?

3.

Luck is not a strategy

Have you performed an operational risk assessment?

At the same time, many machines

And then there is just human nature.

and legacy systems are so old and so

Many operators simply rely on wishful

proprietary, no self-respecting cyber-

thinking that goes something like this:

criminal would ever write malware to

“We haven’t had an incident; therefore, we

attack them. Why? There just aren’t

must be doing the right things.” Well, not

enough of these systems around to

really. If you assume not having been

malware prevention and do you

make it profitable (typically the main

attacked or hacked means you are doing

update the signatures on a daily basis?

motive of hackers everywhere today)

enough, think again. You could just

or notorious (if they have more harmful

be lucky. Being lucky is great, but you

motives).

should not rely on luck as a strategy.

Talk to a professional gambler and they

That leaves control system operators in

will tell you the same thing: eventually

a tough position. If they try to deploy

your luck runs out.

the same security measures as IT then

4.

Have you performed a cyber security assessment?

5.

Have you implemented proper network segmentation?

6.

7.

Have you implemented end-point

Do you patch your systems on a regular basis (minimum quarterly, ideally monthly)?

8. Are you monitoring your system logs and network traffic?

9.

Do you have a backup of all your assets such as switches, routers,

a) they may not work or b) IT security

So, how do you know the difference

firewalls, programmable logic

measures, when effective, may actually

between luck and “doing the right

controllers (PLCs), remote terminal

shut down a running production

things?” Ask yourselves the following

units (RTUs), intelligent electronic

process. This could be more harmful for

questions. If you answer “no” or “don’t

devices (IEDs) and every other digital

the business than the cyber-attack.

know”, then perhaps you should

control asset with a configuration file?

consider yourselves “lucky” and start

10. If your system were compromised

The problem is that IT cyber security

taking a hard look at your cyber security

today, do you have a recovery and

solutions tend to focus on locking down

posture and policies:

response plan ready?

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FEATURE: CYBER SECURITY

If you answered “no” to one or more of these questions, you are not alone.

Most control system owners do not employ this level of cyber security readiness. But, at a base level, if you do not have proper network segmentation, updated system software, end-point protection and hardened systems, then you are probably lucky that your system hasn’t been compromised.

Cyber security best practices frameworks can all be distilled into these basic steps: identify, protect, detect, respond and recover.

Getting up to cyber speed When thinking about how to get started, don’t just look for some new technology that claims to mitigate all your risks — it doesn’t exist. Doing the basics well before investing in advanced cyber technologies is the key. In order to minimize your risks and get the most protection in the least amount of time, you first need to plan and develop a cyber security program that: 1.

Identifies what assets you are trying to protect

2.

Determines how you are going to protect those assets

3.

Enables intrusion detection and monitoring

4.

Defines incident response process and procedures

5.

Verifies mechanisms to restore and recover assets

8 | POWER INSIDER VOLUME 10 ISSUE 4

PAY ATTENTION: CYBER SECURITY

These five steps follow well-trodden

Conclusion

are safe from attack, it is only a matter

ground. All of the cyber security best

The list of things you should do to

of time before you won’t be pretending.

practices frameworks can all be distilled

protect your operational technology

Eventually, your luck will run out, and

into these basic steps: identify, protect,

is long and beyond the scope of

maybe it will be your systems that go

detect, respond and recover.

this article, but if you continue to do

down this time, and your company that

For example, putting in a firewall to

nothing, pretending that your systems

ends up in the headlines.

separate your control system from the corporate/business network is a great idea. But, if you don’t have an inventory

AUTHOR

of critical assets and applications, you may still be vulnerable to risks from employees and contractors who use laptops and removable media.

Developing strong security policies and

John Brajkovich

practices and mapping out a 3-to-

Operations Manager –

5-year journey that leads to security

Advanced Services group, ABB

maturity is also highly recommended.

John Brajkovich is the Operations

Security and he has joined the

Some effective technology tactics to

Manager of the US Advanced

extensive reach of ABB’s global

consider are hardened perimeters,

Services group at ABB. He has

team in developing cyber solutions

adopting a defense-in-depth approach,

over a decade of experience in

for their customers. Outside of

whitelisting, investing in network intrusion

Operational Technology.

supporting solutions,

system and security awareness training

John oversees a team of highly

John is also involved in consultative

for all employees. Also, make sure to

skilled engineers that deliver a wide

efforts in corporate Security Control

include specific contractual language about

range of services including: process

Frameworks and Emergency

cybersecurity in your OT/control system

optimization, system performance

Procedures for OT cyber security

requests for proposals (RFPs). To execute

optimization, and cyber security.

breaches. His background in

prevention (IPS), air-gapping control

your plan, leverage your IT and OT teams,

industrial control systems is an

but also look for OT suppliers who can offer

Over the last several years, a large

asset for cyber security working

comprehensive cyber security services.

focus has been put into OT Cyber

alongside IT.

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100 years of control technology innovation

#1 ranked DCS in the power generation sector ABB Ability™ Symphony® Plus

ABB

— Creating value from digital takes ability.

ABB Ability™.

Access to dependable power is one of the defining attributes of modern society. In today’s digital age, we have the technology to manage the vast amounts of data being produced by power plants - offering insights that lead to valuable customer actions. By making plants more intelligent, and blurring the lines between the physical and digital worlds, ABB is helping generate more reliable power. Creating value from digital insight takes ability. ABB Ability. abb.com/power-generation, abb.com/symphonyplus

Retrofit RRB V47/ PS600 for Coca Cola wind site, India Retrofit for Coca Cola turbines increases green energy production by 10% Green power for Coca Cola’s factory

this season requires proactive service

performance in a tough environment

and maintenance in the off-season to

the turbines are worn out. Turbine spare

Since 2007, DEIF Wind Power

prepare the turbine to perform in the

parts and service costs have increased

Technology has collaborated with the

windy season.

and some spare parts are no longer in

Vestas licenced manufacturer of the

production. This is a normal challenge

PS-600 turbine, which runs without

The Indian Coca Cola manufacturer,

for IPP’s and owners of older turbines.

VRCC and therefore limited to 600

Brindvadan Beverage, is an

Furthermore, the turbines showed high

kW. The PS-600 kW is the Indian

Independent Power Producer (IPP),

variation in the AEP as well as the CoE

version of the Vestas V47 and builds

who owns their own wind site of RRB

was extremely high.

on Vestas’ platform and technology.

PS-600 kW turbines in South India.

Adapted to the Indian conditions and

The wind turbines are producing green

approved as wind class 2, the PS-600

power for the Coca Cola bottle factory’s

Midlife upgrade for extended turbine life-time

kW is designed to produce energy in

energy consumption.

The optimal solution for the customer was to perform a midlife upgrade based

the Monsoon season, where the wind can blow up to 10-15m per second. The

The turbines at the wind site have

on a control solution upgrade to extend

intensive performance of a turbine in

been running 15 years. Combined with

the turbine operational lifetime. A

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FEATURE: TURBINES INCREASE GREEN ENERGY

new control solution including control

PS-600 kW turbine with the advantage

now perform reports, read data and

strategy has been designed to replace

of being an approved supplier to RRB

follow the turbine availability. This way,

the COTAS controller of the PS-600

turbines the last 10 years. With a

the IPP can secure optimal energy

kW turbine. DEIF’s control strategy is

professional service team in India, DEIF

production, lower service costs and

approved according to GL2010 from

provide support and offer spare parts by

thereby lower the COE. With a new

the German company Aerodyn. With a

day-to-day delivery.

control solution the PS-600 kW the

controller retrofit solution DEIF secure

performance lifetime is extended with

the IPP’s investment with a pay-back

Benefits

an increased AEP by 10 %. With these

period of maximum 2 years. DEIF Wind

With the optimal retrofit solution,

benefits, Coca Cola can continue to

Power Technology was selected as the

the IPP has received improved data

produce green energy.

retrofit partner to upgrade the V47/

access with new technology and can

12 | POWER INSIDER VOLUME 10 ISSUE 4

Karpowership

www.karpowership.com

power for asia

THE IMPORTANCE OF Gas-fired Generation in a Transformed Energy Landscape The world’s electricity system is rapidly changing.

Amid the shifts, gas-fired generation will be an important part of the overall energy mix. In fact, according to the International Energy Agency’s (IEA) most recent World Energy Outlook (WEO), published in November 2018, the contribution of gas to powering the world through 2040 is vital by almost any measure, across markets and sectors. Considering this demand, GE

pushing us towards a more efficient and

binary, with stark choices required

stands behind the significant role of gas

autonomous grid, in which generation

between fossil fuel sources of power

because of its sustainability, generation

and transmission and distribution (T&D)

generation and renewable ones.

flexibility, low capital costs, natural

are optimized in real time. Finally, as the

Instead, it is a tapestry of generation

resource efficiency and “right-sized”

world races to confront climate change

combinations reflecting market realities

and rapid deployment capabilities. All of

caused by CO2 and other emissions,

and the marriage of old and new

these factors will help gas power meet

the system is adapting to incorporate

technologies. Only with a hybrid system

the world’s demand for electricity over

zero- and low-carbon power sources

made possible by gas can we build the

the coming decades.

and innovations that make traditional

power grid of the future while at the

thermal sources more efficient and

same time diligently working toward

The Grand Transformation

sustainable.

decarbonization.

The overall structure of the power

With these profound changes, the

industry is transitioning from one based

emerging and future electric grid will

Demand for Gas-fired Generation

primarily on a hub-and-spoke central

be one powered by a mix of generation

Given the size, complexity, and

generation model with one-way energy

sources—from gas, wind and solar

lifetime of electricity systems, the

flows, to a hybrid system comprised

tohydropower and nuclear—that will

grand transformation of the energy

of both distributed and centralized

work in tandem, across many different

landscape will not happen overnight.

resources with two-way flows. At the

energy markets in the developed and

In fact, according to the International

same time, new digital innovations are

developing worlds. This world is not

Energy Agency (IEA), traditional thermal

14 | POWER INSIDER VOLUME 10 ISSUE 4

sources—including fossil fuels and nuclear power—still account for 75% of total electricity generation; and even aggressive scenarios don’t envision the global generation share of thermal sources falling below 50% until 2030.1 It is worth digging into the IEA’s most recent forecasts—part of the organization’s annual World Energy Outlook (WEO) published in November 2018—to highlight the essential role gas power will play. The IEA’s base case scenario, the New Policies Scenario (NPS), looks to the future. It considers the effects of all existing climate policies and policy intentions of countries around the world, including those widely agreed on in the 2015 Paris Agreement.

Gas overtakes coal by ~2025 as the #1 technology in terms of installed capacity globally in the IEA’s New Policies Scenario (their reference case), and holds the #1

Under the NPS scenario, the IEA

position through at least 2040, the end of the IEA’s forecast period.

explores different markets and sectors.

Source: IEA WEO 2018

For electricity generation, it predicts that natural gas, wind and solar

roughly 2,750 GW, edging out solar PV

NPS, natural gas demand for the power

photovoltaic (PV) will supply 70 percent

at around 2,500 GW. Coal hangs on at

sector quadruples between now and

of the additional electricity generated

2,250 GW, followed by hydro power

2040, increasing from 50.3 bcm to

between now and 2040 in nearly

at 1,800 GW. Finally, wind comes in at

194.4 bcm.4

equal shares. By 2040, a total of 1,510

1,750 GW, and battery storage kicks in

gigawatts (GW) of new capacity for gas-

at 250 GW.3

2

The IEA has also considered the outcomes if electricity demand grows

fired power plants will be needed, when factoring in the retirements of many

Probing deeper into the IEA’s regional

even faster than in the NPS. This “Future

existing plants.

forecasts reveals an important shift

is Electric” (FIE) scenario reflects the

underway in investment in gasfired

trends of electrification in transport

According to the IEA: “gas-fired power

power plants: while advanced

and heating, an increasingly digital

plants are the only fossil fuel technology set

economies—led by the U.S. and

economy that requires more electric

to grow in almost all regions, thanks to the

EU—accounted for about 60 percent

power, and expanded electricity access

low upfront investment cost for new plants,

of cumulative investment in gas

for the nearly one billion people still

the increasing availability of gas, and the

from 2000 to 2017, developing

without it today. Here, renewables will

role of gas in [power] system flexibility.”

economies—led by China, India, and

meet a projected 45% of the additional

Southeast Asia—make up 60 percent

demand for electricity that is imagined,

The NPS also envisions natural gas

of future investment. To take China as

but if supply is to keep up, gas will still

overtaking coal in providing the most

an example, while growing electricity

have a key role to play, making up 30

capacity by the mid-2020s, with

demand will “primarily be met by

percent of the extra demand.5

renewables rising rapidly as well.

renewables and nuclear,” there is “scope

Specifically, in 2040, the IEA projects

for gas to contribute.” The numbers

that gas-powered capacity will be

belie this cautious language. Under the

1–5 IEA WEO 2018.

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FEATURE: GAS-FIRED GENERATION

Key Features

Gas Takes the Capacity Lead in IEA’s New Policies Scenario

Amidst the grand transformation, existing and new gas-fired plants will play an increasingly important role in maintaining reliable, low cost, and sustainable electric power around the globe. The fact is that natural gas-fired plants have key

1,690

460

1,510

2,740

Today

Expected Retirements

Expected Additions

Gas Capacity in 2040

GW

GW

GW

features and capabilities that make both

GW

Source: IEA WEO 2018

centralized and distributed gas power the centerpiece of transformed electric power networks around the world.

Case Study: The World’s First Hybrid Battery-Gas Turbine Power Plant In 2017, Southern California Edison (SCE)—which provides 15 million residents with

There are several key features of

energy in the greater Los Angeles area—launched the world’s first hybrid battery-gas

gaspowered generation that make it

turbine power plant. The technology pairs GE’s 10 MW/4.3 MWh battery system

uniquely positioned to usher in our short-

with its LM6000 “peaker” gas turbine, which can ramp up to 50 MW in under five

and intermediate-term energy future.

minutes. This flexible solution allows the battery to supply the grid with electricity for up to 30 minutes when solar and wind energy from the two sources ebbs. With

Sustainability

the additional help of sophisticated software that matches demand and supply,

The carbon-led economic growth

the hybrid plant not only enables more use of renewables but also obviates the

that powered the 20th century is

previous need to keep the gas turbine operating in spinning reserve mode, burning

unsustainable in the 21st. GE agrees with

fuel and producing CO2 and other emissions.

the global scientific consensus, stated in reports by the Intergovernmental Panel on Climate Change (IPCC), that ever-greater emissions of greenhouses gases like CO2 will continue to lead to global climate change. To confront this challenge, the power system must decarbonize. Natural gas-fired generators have the lowest CO2 emissions of all fossil power generation fuels—a natural

Generation Flexibility

are an ideal complement to variable

gas-fired combined cycle plant has

The global system is evolving toward

renewable resources because they

roughly 50% of the CO2 emissions of

an integrated and hybridized network

can change power levels quickly, turn

a similarly sized coal plant, and lower

containing elements of old and new

down to low levels when demand is

emissions levels for other pollutants such

technologies working synergistically

less, and start up very rapidly. All of

as mercury, NOx, SOx and particulate

to provide reliable, affordable, and

these attributes enable gas turbines

matter. Meanwhile, coal-to-gas switching

sustainable electric power to factories,

to work in concert with renewables to

was responsible for two thirds of the 27%

businesses, and communities around

maintain reliability in a power system.

6

reduction in CO2 in the U.S. across all

the world. Increasing levels of variable

As an example, a 570 megawatt (MW)

sectors (power, transportation, industry,

renewable energy like wind and

7HA.02 combined cycle power plant,

agriculture) since 2005.

solar will challenge power markets

which is capable of powering more than

and operators, requiring them to

half a million U.S. homes, can start in

7

more rapidly respond to changes in

less than 30 minutes, can ramp up or

Renee Gomez and Nathan Westbrook, Chemistry

supply and demand. Natural gas-fired

down at 60 MW per minute, and can

Department, Texas A&M University (see link).

generators are ideally suited to provide

turn down to less than 200 MW while

7 GE Power Strategic Marketing Analysis.

increasing power market flexibility over

maintaining emissions limits.8

8 GPS Product Catalog, 2018.

time. For starters, gas-fired generators

6 “ Coal vs. Natural Gas Energy Production,” Daniel Frazier,

16 | POWER INSIDER VOLUME 10 ISSUE 4

THE IMPORTANCE OF Gas-fired Generation in a Transformed Energy Landscape

Low Capital Costs9

storage system. As urbanization and

technologies provide developers with

In a capital constrained world, a key

electrification accelerate around the

the flexibility to install both small and

feature of gas-fired generators is their

world, it will become more difficult

large increments of power very quickly.

relatively low up-front capital costs

to satisfy electricity demand with

Gas-fired generation options range

as well as the ability to upgrade older

dispersed renewables that are often

in size from hundreds of kilowatts to

assets. Simple cycle and combined

located far from the demand. As

hundreds of megawatts. A 30 MW

cycle natural gas-fired power plants

an example, to meet NYC’s goal of

simple cycle power plant can be

have the lowest upfront capital costs on

electrifying its bus fleet by 2040 would

transported by land, sea or air to remote

a $/kW installed basis. As an example,

require covering 15% of Manhattan

locations and can be generating power

in the U.S., a combined cycle plant

with solar panels. Fuel can account

in a matter of weeks. A large combined

costs approximately $1,000/kW, while

for up to 50% of the total lifecycle

cycle power plant can be commissioned

simple cycle is $825/kW. Onshore

cost of a natural gas power plant.11 The

in 2-3 years, 1-2 years faster than a

wind is approximately $1,350/kW and

most efficient combined cycle power

comparably sized coal power plant and

utility scale solar is $1,100/kW. New

plants are capable of achieving 64%

3-4 years faster than a comparably

nuclear is $9,500/kW and offshore

efficiency.

sized nuclear plant.15

in the capacity factor of a combined

In combined heat and power

9 L azard’s Levelized Cost of Energy (LCOE) Analysis,

cycle plant (~70%) and a utility scale

applications, greater than 80% fuel

solar field (~19%), roughly seven times

efficiency can be achieved. This

10 G E Power Strategic Marketing Analysis.

the upfront capital is needed to provide

fuel efficiency results in real cost

11 L azard’s LCOE Analysis, November 2018.

the equivalent power capacity from the

savings and lower emissions per MWh

12 G E Gas Power Systems Product Catalog, 2018.

solar field.

generated. Additionally, according to

13 https://www.epa.gov/chp/chp-benefits

Climate Central, current natural gas

14 http://www.climatecentral.org/news/water-

10

12

wind is $3,025/ kW. When factoring

13

Natural Resource Efficiency

power plants use four times less water

Gas-fired generators are resource

fired counterparts.

per MWh generated than their coal14

Version 12.0, November 2018.

usedeclines- as-natural-gas-grows-19162 15 These are the estimates GE Power uses in its forecast model, based on experience.

efficient, conserving fuel, water and is the most land efficient power

Right-Sized and Rapid Deployment

generation source. It requires 50–100

In a power plant landscape with a

times less space per MWh generated

large degree of uncertainty around

compared to a renewables and battery

future supply and demand, gas-fired

land relative to alternatives. Gas

Case Study: Two World-Records for Efficiency GE’s HA gas turbines helped achieve world records for combined-cycle efficiency in both the 50Hz and 60Hz segments. EDF’s Bouchain plant in France reached a net combined-cycle efficiency of 62.22% in 2016 using the 50Hz 9HA gas turbine; and Chubu’s Nishi-Nagoya plant, which features the 60Hz 7HA, reached a gross combined-cycle efficiency of 63.08% in Japan in 2018. GE’s HA is the world’s largest, most efficient, and most flexible gas turbine available today. Each point of efficiency can generate up to $50 million in fuel savings over 10 years for a 1 GW plant. The high power density of the HA can help bring power online for millions of households in just a few years, making it a cost-effective and efficient solution for utilities and power producers around the world.

FOLLOW US ON TWITTER: @PIMAGAZINEASIA WWW.PIMAGAZINE-ASIA.COM | 17

FEATURE: GAS-FIRED GENERATION

Case Study: Gas Closes a Power Gap in Pakistan High population growth, rapid urbanization and increased manufacturing placed a giant strain on Pakistan’s electricity grid. In 2014, GE embarked on its largest infrastructure development project in a decade to help plug this gap, building three combined cycle gas power plants in record time that together are expected to add 3.6 GW to the national grid, the equivalent power needed to supply up to 7.3 million Pakistani homes. The plants are equipped with GE’s HA technology, the world’s most efficient heavy duty gas turbines. The rapid startup times

renewable sources, the share of which is growing in

of HA turbines offer a flexible component to intermittent

Pakistan’s overall energy mix.

Conclusion

Visit ge.com/power to learn more

The importance of natural gas-

about how we’re helping customers

Mobile Power In places where

fired generators in the transformed

navigate the changing energy

extending grid connections the “last

energy landscape emerging today

landscape with our equipment,

mile” can be cost- and time-prohibitive,

and tomorrow cannot be overstated.

software, and services to deliver

because of the infrastructure challenges

As the world moves toward a

quality, affordable, reliable, flexible,

faced or investment required, mobile

combination of centralized and

sustainable power to their consumers,

power plants provide a fast, reliable and

distributed resources, while increasing

all around the world.

scalable solution. These flexible power

environmental sustainability and

systems also help generate power

lowering the environmental footprint

during natural disaster relief, plant

of the energy systems, natural gas

shutdowns, or periods of grid instability.

generation technologies will serve

With installation and commissioning

both as a bridge to the past and the

in as few as 11 days, more than 300

foundation of the future.

Case Study: Flexible, Fast &

of GE’s TM2500 gaspowered mobile power plants are helping power

GE is continuing to lead the way

communities around the world. In

for the industry and support our

Indonesia, the TM2500 is bringing 500

customers by operationalizing

MW of power to eight different sites

our business to support the entire

scattered across six different islands. In

gas lifecycle, investing in the best

Algeria, 38 trailer-mounted TM2500

technology and servicing capability,

aeroderivative gas turbine generators

and successfully executing, with our

are providing reliable and fast power

partners, complex projects all around

to all regions, bringing much-needed

the globe.

supplemental power during the hot summer months.

18 | POWER INSIDER VOLUME 10 ISSUE 4

News Release GE and Uniper Unveil ‘GT26 HE’ Solution, the World’s First HighEfficiency Upgrade for the GT26 Gas Turbine Fleet •

By Tapping into GE’s H-Class, F-Class and Additive Manufacturing Technologies, GE Unleashes Full Performance of the GT26 Platform

•

GE’s GT26 High-Efficiency Upgrade Provides a Leap Forward in Efficiency; Significantly Decreases Fuel Costs, Increases Plant Output up to 55 Megawatts per Unit and Extends Maintenance Intervals by up to Two Years

•

Uniper’s Enfield Power Plant Will Be the First Site to Install the New GT26 HE Technology in 2020

BADEN, SWITZERLAND —March 25,

GT26 power plant operators.

with several significant benefits that GE expects to exceed. These benefits

2019—Continuing its commitment

• First upgrade that blends both GE and

to invest in its mature gas turbine

Alstom’s technology and expertise

will include increased megawatt

fleets to keep them competitive in

across all major components of a gas

output, improved plant and gas

today’s dynamic energy marketplace,

turbine solution.

turbine efficiency, and extended maintenance intervals and operating

GE (NYSE: GE) today announced the launch order for its new GT26 HE

Key performance benefits include:

hours to enable Enfield to consistently

(high efficiency) gas turbine upgrade

• H igher efficiency for combined-

elevate its position on the dispatch

with Uniper for the utility’s Enfield Power Station in greater London.

1

cycle power plants: •2 + percent base load increased efficiency, translating to as

“We’re proud to launch our new GT26

much as $4 million in fuel

HE upgrade with Uniper—it’s the most

savings annually per unit.

advanced solution we’ve ever introduced

•U p to 1 percent increased

curve in the highly competitive U.K. power market and ramp up its annual operating hours.

“We’re very pleased to be working with GE on this new technology

on a GT26 gas turbine, and one of

efficiency in part load, yielding

upgrade,” said Eckhardt Rümmler,

our most efficient upgrades within the

up to $1 million in fuel savings a

chief operating officer, Uniper SE.

F-class portfolio,” said Scott Strazik,

year per unit.

“In Great Britain’s very competitive

• I ncreased plant output from 15

and challenging power generation

Power business. “Not only will this

megawatts (MW) up to 55 MWs

environment, investing to keep our

upgrade revitalize Uniper’s Enfield

per unit, improving revenue

plants competitive by lowering

power plant, it will also improve its

opportunities.

operational and maintenance costs at

president and CEO of GE’s new Gas

competitive position in the Great Britain

• E xtended inspection intervals up to

the same time as increasing efficiency

generation market, supporting its long-

32,000 hours, reducing operations

and flexibility is critical for the long-

term profitability and viability.”

and long-term maintenance costs.

term success of our fleet.”

The GT26 HE upgrade also marks other GE firsts: • First upgrade that takes the best

Helping Revitalize Uniper’s Enfield Power Station

1 I ndicative values based on: • Rating GT26 2006 configuration • 6,500 yearly operating hours

technologies and capabilities from

Uniper’s Enfield power plant in

• 4,000 full load hours yearly

GE’s industry-leading F and H class

London will be the first site to install

• $7/MMBtu fuel price

fleets to create a robust solution for

the new GT26 HE technology in 2020

• $57/MWH electricity price

FOLLOW US ON TWITTER: @PIMAGAZINEASIA WWW.PIMAGAZINE-ASIA.COM | 19

NEWS RELEASE: ‘GT26 HE’ Solution

“The opportunity to test GE’s pioneering

• A new 3D aero-profile compressor

work more efficiently, reliably, and

GT26 HE upgrade at our Enfield plant,

configuration to provide best-in-class

safely. For more than 125 years, GE

combined with our longstanding

base-load and part-load performance.

has invented the future of industry,

relationship with GE and trust in its

and today it leads new paradigms

technology and services were key reasons

To view a video about GE’s project

in additive manufacturing, materials

we chose the company for this project,”

with Uniper, please follow the link

science, and data analytics. GE people

added Mike Lockett, chief commercial

https://www.youtube.com/

are global, diverse and dedicated,

officer, power, for the Uniper Group and

watch?v=dKikDr3rYJw

operating with the highest integrity

Uniper U.K. country chairman.

and passion to fulfill GE’s mission and

About Uniper

deliver for our customers.

H-Class Technology Infusion Drives HighEfficiency Performance

Uniper is an international energy

www.ge.com

employees and operations in 40

About GE Power

The GT26 HE upgrade provides a

countries. It combines a balanced

GE Power is a world leader in power

leap forward in efficiency, output and

portfolio of technologically advanced

generation with deep domain

maintenance interval extensions. It’s

large-scale assets with outstanding

expertise to help customers deliver

powered partly through advanced

technical and commercial expertise—

electricity from a wide spectrum of

technology from GE’s flagship HA

tailoring energy solutions and managing

fuel sources. We are transforming the

gas turbine, the largest and most

complexity for its customers.

electricity industry with the digital

company with around 12,000

efficient in the industry, with additive

power plant, the world’s largest

manufactured parts and innovations

In Britain, Uniper operates a flexible

and most efficient gas turbine,

in aerodynamics, material science

and diverse generation portfolio,

full balance of plant, upgrade and

and combustion dynamics. It embeds

sufficient to power around six million

service solutions as well as our data-

technology breakthroughs across every

homes. With its seven-strong fleet of

leveraging software. Our innovative

major component of the GT26 frame—

power stations and its flexible, fast-

technologies and digital offerings help

turbine, compressor and combustor—to

cycle gas storage facility at Holford, in

make power more affordable, reliable,

take turbine performance to a new

Cheshire, it makes a solid and tangible

accessible and sustainable. For more

level, significantly decreasing fuel costs

contribution to Britain’s energy

information, visit the company’s

while increasing full-load output and

supply security. Uniper also offers a

website at www.gepower.com. Follow

extending maintenance intervals.

broad range of commercial activities

GE Power on Twitter @GE_Power and

through its Engineering Services

on LinkedIn at GE Power.

The new upgrade also features the

division, while the well-established

best of GE’s research and development

Uniper Engineering Academy

centers in both the United States

delivers high-quality technical

and Switzerland, including unique

training and government-accredited

engineering elements:

apprenticeship programmes for the

Laura Aresi

• A low-pressure turbine used in GE’s

utility, manufacturing and heavy

GE Power - Power Services

industry sectors, at its purpose-built

Global Media Relations Leader

facilities near Nottingham.

+39 02 67335622

https://www.uniper.energy/uk

laura.aresi@ge.com

About GE

Gill Dickinson

incorporating additive manufactured

GE (NYSE:GE) drives the world

Senior PR Manager –

parts to deliver high performance,

forward by tackling its biggest

Uniper in the UK

reduce cooling requirements by

challenges. By combining world-

+44 0 7976 168356

approximately 15 percent and lower

class engineering with software

gill.dickinson@uniper.energy

relative emissions.

and analytics, GE helps the world

H-class technology.

• H igh-pressure turbine improvements to increase efficiency,

For more information, contact:

utilizing GE’s F-class technology.

• A dvanced combustor engineering

20 | POWER INSIDER VOLUME 10 ISSUE 4

NEW: CG132B

TAKE ADVANTAGE OF DIGITAL ASSISTANCE

Caterpillar

The CG132B is the first of a new generation of gas gensets: State-of-the-art components and the TPEM (Total Plant & Energy Management) control ensure maximum reliability and availability. A secure IT infrastructure and smart data analysis enable ongoing plant optimization and cost savings. www.cat.com/catcg132b

© 2018 Caterpillar. All Rights Reserved. CAT, CATERPILLAR, BUILT FOR IT, their respective logos, “Caterpillar Yellow”, the “Power Edge” trade dress as well as corporate and product identity used herein, are trademarks of Caterpillar and may not be used without permission.

CONNECT

Energising ASEAN’s power sector with technology How ASEAN’s power industry is shaping up in the digital economy Technology is fast becoming the

complexity is the region’s ageing

The proliferation of internet-enabled

bedrock of any energy and power-

power infrastructure and varying

devices across the region, fuelled by

related goals in ASEAN. Catalysed by

priorities when it comes to sustainable

an increasingly connected and mobile

ambitious goals, such as expanding

development. All of these may prevent

population, also places additional

the region’s renewable energy

countries from keeping up with surging

pressure on the grid. With the

to 23% by 2025, the power and

appetites for data and connectivity.

impending arrival of 5G, the amount

energy industry is ripe for disruption.

of data created, processed and stored

However, as cities drive their

Although ASEAN is keeping a keen eye

will continue to grow exponentially.

manufacturing sectors towards

on renewable energy, the intermittent

As a result, computing and data

Industry 4.0 and ready themselves

nature of this energy source comes

processing is increasingly done in

for smart and sustainable urban

with its own set of infrastructural and

closer proximity to end users in order

development, it remains to be seen

business challenges. Renewables can

to decrease network congestion and

if the biggest technology trends of

cause gaps and fluctuations in energy

reduce latency, through a process

the year ahead will prove to be friend

generation and supply, an issue the

known as “edge computing”. Edge

or foe to the power industry in this

power industry is still working to

computing can help avoid delays or

critical era of disruption.

overcome. Furthermore, with the

system failures, which could have

effects of climate change, energy

a significant impact on the growing

A more complicated landscape with renewables and data

supply may become even more

number of critical services delivered

difficult to anticipate. In order to build

over 5G networks such as healthcare

balanced power grids and ensure a

or transport.

The stride towards renewable energy

steady, continuous supply of electricity,

is set against a backdrop of dual

much remains to be done to ensure

Digitising these critical services and

challenges - that of digital disruption,

that renewables continue to be seen as

delivering them over these networks,

and an unequal distribution of

a cost-efficient and reliable alternative.

in turn, makes power infrastructure

resources and expertise. Adding

22 | POWER INSIDER VOLUME 10 ISSUE 4

and facilities key targets for

cyberattacks - as seen in the series

demand, batteries have showcased huge

learning, advanced analytics and IoT

of catastrophic cyberattacks that

potential to be more than just backup

communication. Engineers can use

took down a power grid in Ukraine.

energy sources. Heavy investments are

analytics to oversee infrastructure

As ASEAN embraces digitalisation,

already made to deploy Energy Storage

remotely, safely and round-the-clock,

governments and businesses will

Systems via batteries, with Singapore’s

with minimal disruption to operations.

be faced with the unprecedented

Energy Market Authority leading the way

In due time, the process could even

challenge of ensuring that the very

through public-private partnerships with

become self-optimised, predicting

power that makes these networks

PSA and Sembcorp.

periods of peak energy demands or

possible does not buckle under these

other incidents before they happen.

attacks. Cybersecurity considerations

Taking this concept one step further,

must remain at the forefront of all

idle batteries, such as those in the

These approaches are especially

digital initiatives in the energy and

Uninterrupted Power Supply (UPS)

critical as Southeast Asia becomes a

power sectors, if the region is to

in data centres, can take on a dual

data centre hotspot, requiring even

achieve its Industry 4.0 objectives.

role of back-up power supply and

more power capacity and a stable

distributed energy resource to

supply at all times.

Harnessing technology is key

support the grid. Excess power stored in these batteries can be sold back

The sustainable development of

In the face of these emerging

to the grid when needed, changing

the ASEAN power landscape hinges

challenges, new technologies and

the way data centres and power grids

on its ability to turn challenges into

innovations are also shaping the way

interact, and thereby better advancing

opportunities. While technology may

power is managed. From IoT-enabled

the region’s clean energy goals.

appear as a panacea for a range of

power plants to generating electricity

issues and challenges, businesses

from the momentum of waves,

The very same 5G technology

and governments must tread

governments and organisations are

and edge computing that will

cautiously and avoid diving head

exploring diverse and creative ways of

place demands on existing power

first without the proper preparation

meeting the surging energy demand.

infrastructure could also hold

and understanding. If managed well,

the key to transforming power

the adoption of new technologies

A key example of an innovative

management for cities of the future.

has the potential to herald an era

approach is the adoption of battery

Additionally, the potential of remote

of unprecedented innovation for

technology to balance the frequency

and mobile power management can

the power sector, accelerating

of power grids round the clock - storing

be realised through the provision

connectivity and expanding access

energy during peak production periods,

of digital infrastructure required for

to economic opportunities and

and releasing it at other times. With

technologies

transformative services.

their ability to react instantaneously

such as

to local changes in energy supply and

machine

FOLLOW US ON TWITTER: @PIMAGAZINEASIA WWW.PIMAGAZINE-ASIA.COM | 23

CFB technology in a low carbon world How does CFB boiler technology sit in an energy landscape that is looking for renewable and low carbon solutions?

24 | POWER INSIDER VOLUME 10 ISSUE 4

boilers, these additional products and

The CFB market is still predominantly

services had unique market positions

in the small to medium size range

driven mainly by their fuel, application

serving multiple sectors like industrial,

and operational flexibility.

WTE, CHP, district heating and cooling. This is where the CFB was born and is the market segment we

acquired Amec Foster Wheeler’s

Q: What is the market potential for SFW’s CFB boiler technology?

fluidized bed businesses, creating a

A: Today, about 80-85 per cent of

and wide range of challenging fuels

new company, Sumitomo SHI FW.

the global boiler market continues

demanded by these sectors.

Last year Sumitomo Heavy Industries

still serve the most, because our CFBs are best able to reliably fire a diverse

to stay with conventional pulverized We spoke to Robert Giglio, Senior

coal (PC) technology. PC technology

But change is happening. Our first

Vice- President of Strategic Business

hasn’t changed much over the last

large 460 MW supercritical CFB went

Development for Sumitomo SHI FW,

50 years and still carries three

online at the Lagisza plant in Poland

about the acquisition, the market

fundamental disadvantages: very

eight years ago. At that time, this

potential for CFB boiler technology,

limited fuel flexibility, high air

was the world’s first supercritical and

and how it fits into an energy world

emissions and expensive emission

largest CFB unit in the world. Last

that is increasingly looking for low

control. Over the last 40 years,

year, we commissioned 2000 MW

carbon solutions.

SFW’s CFB boilers have redefined the

of our ultra-supercritical CFBs at the

meaning of fuel flexibility, reliability

Green Power Plant in Samcheok,

Q: Why was the acquisition a good fit for both companies?

and clean combustion without back-

South Korea. As of today, we have

end controls. This has been noticed

delivered 38 CFBs, each over 200

by utilities, IPPs, developers and

MW in capacity, totaling over 11 GW

A: For over 30 years, Sumitomo’s

industrial companies who have been

of electric capacity.

SHI Company had been a licensee

selecting CFB boilers more and more.

technology, supplying 67 CFBs in the

So the CFB has lots of room to grow

small to medium-size range, mostly to

into the global boiler market because

Q: What benefits does CFB boiler technology bring to the market?

their home market in Japan. Whereas,

of the higher values it offers over PC

A: Our CFBs offer value in multiple

Amec Foster Wheeler’s CFB business

technology. Even if the boiler market

dimensions. Their fuel flexibility

was truly global, delivering the full

remains flat or even declines, CFB still

provides power generators and

range of CFBs from small industrial,

has an upside growth potential of 80-

industrial plants with the ability

CHP and WTE units to very large

85 per cent.

to shop for the lowest cost coals,

of Foster Wheeler’s CFB boiler

petcokes and lignites keeping power

ultrasupercritical CFBs for utility power

prices at the lowest levels. They can

opportunity to go global and greatly

Q: Why hasn’t CFB technology already taken more of the overall boiler market share?

expand the size of their CFB boiler

A: Most of the global boiler market is in

providing a flexible carbon reduction

market and business. In addition to the

the large coal utility sector. Like most

CFB boiler technology, the acquisition

other energy markets, this capital-

included AmecFW’s BFB boilers, fluid

intensive sector is slow to accept

bed gasifiers, CFB scrubbers, fabric

change mainly because people tend

filters, specialized metallurgical waste

to stay with what they know and have

heat boilers and a broad spectrum

experience with.

plants.

Sumitomo saw the acquisition as an

co-fire carbon neutral fuels up to high levels and employ highly efficient ultra-supercritical steam technology

of aftermarket services. Like the CFB

FOLLOW US ON TWITTER: @PIMAGAZINEASIA WWW.PIMAGAZINE-ASIA.COM | 25

FEATURE: CFB TECHNOLOGY

solution without turning to expensive

the logistics and cost of sourcing large

carbon capture and sequestration (CCS)

and continuous supplies of biomasses

technology. Our CFB’s can convert the

and wastes can be very challenging.

environmental liability of industrial

This is where our CFBs provides the

byproducts and waste into valuable

flexibility to co-fire carbon neutral fuels

power, steam and heat. Their clean

with more dependable fuels like coals,

burning process produces the lowest

lignites and petcokes that have well

capacity. We at SFW have always

emission without needing expensive

establish large scale supply chains.

believed in keeping all technology

air pollution control equipment saving

and fuel options in the generation

millions in plant construction and

In essence, the CFB allows each project

mix for a balanced energy portfolio.

operating cost. And finally, they provide

to set the balance point between

As with any investment, a balanced

these benefits as a highly reliable and

carbon emissions, fuel security and cost

portfolio provides the best protection

dependable base load capacity option

of energy. Since biomass supplies also

against uncertainty of the future. As

to maintain grid stability.

vary seasonally, the fossil fuels can fill

we all know too well, the energy sector

in as needed, providing energy security

has significant uncertainty related

to consumers and financial security to

to changing policy, regulation, fuel

project investors.

availability and technology.

This is another area where the CFB

carbon neutral biomasses in both

Q: And how do you see the CFB technology fitting into the global trend of renewables?

small and large plants. This provides a

A: Globally we see nearly all markets

the fuel mix without having to build

near net zero carbon solution without

strongly embracing solar and wind,

another plant. And, it provides these

going to the expensive and uncertain

which offer a true zero carbon solution,

benefits as a highly reliable and

carbon capture and sequestration

and with dropping prices, renewables

dependable base load capacity option

(CCS) solution. Further, biomass is a

are growing faster than ever before. But

to maintain grid stability.

renewable energy source.

like biomass, too much wind and solar

Q: How do you see the CFB technology fitting into the global trend of carbon reduction?

A: Our CFB’s can achieve a closed loop on carbon emissions by fully firing

provides value, since the same unit can burn the widest range of fuels, it provides the ability to rebalance

plants can provide dependable energy

We are seeing a growing trend of rising

on-demand which is a big advantage

energy costs and declining power

Q: Where do you see the CFB option providing the most value in today’s markets?

for a renewable energy source.

reliability in markets that have high

A: CFB can bring high value to countries

Looking beyond new build thermal

penetration levels of over 30 per cent

that have large reserves of low quality

plants, our fluid bed gasifiers can be

of wind and solar energy, like in Spain,

lignites, coals and waste coals from

retrofitted to existing PC coal plants

Germany, and Australia. Without large

mining operations, like: Colombia,

to allow them co-fire the highest

scale energy storage, grid operators

Germany, Turkey, Russia, South Africa,

levels of carbon neutral fuels and

scramble to meet load when the winds

Vietnam, Thailand, Indonesia, India,

waste, significantly reducing their

dies down or clouds cover the sky.

China and Australia. Using conventional

carbon profile. Crossing over to the

They are relying more and more on

PC technology, these low-quality fuels

transportation sector, these gasifiers

expensive fast-moving peaker-plants

drive boiler size, cost, and maintenance

can also be integrated into biomassto-

fueled by natural gas and oil to manage

and plant downtime way up.

liquid solutions to produce renewable

the growing intermittent capacity.

may not be a good thing.

But unlike wind and solar, biomass

After a long difficult experience with

biofuels and green chemicals.

The unwanted result of this is a direct

these fuels, many countries simply turn

But the 100 per cent biomass solutions

relationship of increasing energy

to importing high quality coals or LNG.

are not a good fit for all markets since

prices with increasing wind and solar

Today, CFB technology has been proven

26 | POWER INSIDER VOLUME 10 ISSUE 4

CFB technology in a low carbon world

at the large scale to economically,

technology dovetails perfectly with the

These fuels are much more difficult to

cleanly and reliability convert these

country’s energy goals and objectives,

burn due their higher level of corrosive

low rank fuels into power and steam,

including India’s ultimate goal for being

alkalis, chlorine and non-combustible

lowering the countries energy cost and

energy independent.

debris. Responding to this change in

improving their energy security. The

policy, we developed robust CFBs

CFB technology also keeps the door

Japan is another good example where

designs to help our clients utilize these

open for cofiring coals, petcokes and

CFB technology can make a difference.

more challenging fuels.

biomass from either import or domestic

The energy situation in Japan is critical

sources, when prices or regulations is

right now, given that the country has

The impact of this change in policy

right, so you don’t have to lock yourself

shut down all but two or three nuclear

can best be seen at the low end of the

into one fuel source.

units. The huge power gap is being filled

size scale (50-100 MW), where we are

with expensive LNG and liquid oil. Coal

seeing a growing market for multi-fuel

In broader Asia, over the last 10

is a very economically attractive base

CHP plants. As an example, we are

years, high moisture sub-bituminous

load alternative for Japan. Historically,

currently suppling a CFB to a 75 MW

Indonesia coal exports have exploded,

Japan has been firing the most premium

CHP plant that will provide power and

driven by deep price discounts in the

grade 6,000 kcal Australian coals in its

heat to the town of Zabrze in Poland.

15-40 per cent range. The same CFB

fleet of ultrasupercritical PC boilers to

The plant will be fueled by locally

boiler can fire the full range of these

achieve the highest plant efficiency to

sourced municipal waste, biomass

fuels with heating values spanning the

minimize operating cost. Here, the CFB

and coal. It is a sustainable, closed-

5000-3900 kcal/kg range, as well

option can provide high plant efficiency

loop energy solution providing energy

as, high quality Australian coals in the

with its ultra-supercritical designs, but

security, waste recycling and low carbon

5500-6000 kcal/kg range, capturing

more importantly, can tap into the

emissions at the community level.

the full arbitrage of this fuel market.

much higher cost savings of utilizing

PC plant operates are forced to trade

lower cost, lower quality Indonesian

In Korea and Japan, we are seeing a

reduced plant performance, higher

coals. Further, we are seeing a declining

number of similar multi-fuel power and

downtime and maintenance cost to

supply of premium coals globally

CHP plants using a combination of local

capture a much smaller range of these

limiting supplier competition and Japan

waste and recycled woods, as well as,

fuels. Staying with PC technology, their

negotiating position. Large utility scale

imported biomass pellets and agricultural

only other option is to build another

CFBs would break Japan out of this

byproducts. In Dangjin, Korea, we recently

PC plant designed for another narrow

procurement box.

provided a CFB to a 105 MW power plant

fuel range.

in Dangjin, Korea that fires wood pellets, recycle furniture chips and imported palm

coals, which represents their most

Q: What trends have you been seeing in the biomass energy markets?

affordable energy source. Plant

A: Over the last 10 years, we have

fuel import policy.

operators have struggled for years to

witnessed a competition for clean wood

burn these coals with conventional PC

between the energy, construction, and

At the large end of the scale (150-

technology and like Turkey has turned

furniture industries. After successful

300 MW), we are seeing some

to importing higher quality, more

lobbying by the construction and

governments supporting large scale

expensive coals. Concerned about fuel

furniture industries, governments have

utility power projects fueled by

security and raising energy costs, India’s

shifted their biomass energy program

dedicated biomass and agricultural

government has begun prioritizing the

away from clean woods toward lower

sources. In Polaniec, Poland, we

use of domestic coal over imported

quality, recycled and demolition woods,

recently built a 200 MW power plant

coal for future power projects. Some

as well as, agricultural waste streams

that fires biomass and agricultural

projects are forced to burn a mix

and byproducts like palm kernel shells

byproducts and in Teesside, UK we are

of Indonesian and domestic coals,

and bagasse.

building a 299 MW plant that will fire

India has very low quality domestic

which is a struggle for PC boilers. CFB

kernel shells. This plant originally fired coal as well, until the government changed its

imported wood pellets from the US.

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Dangjin Unit 4 in South Korea, which features our multi-fuel CFB technology, produces 105 MWe of power from palm kernel shells, wood pellets and coal.

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Industries Served ► Power ► Industrial ► Combined heat and power ► Waste-to-energy

White Paper

White Paper

®

The role of generator Thesets role of generator in the new setsrole in the new The of generator landscape of microgrids of microgrids landscape

sets in the new landscape of microgrids

The demand for primary energy, the energy needed to meet the basic needs of the population for heating, transport and electricity consumption, has consistently grown in recent decades. Since 2010, it hasdemand increased by a factorenergy, of 1.5 and, according to the International The for primary the energy needed meet The demand for primary energy, the energy needed to meet the basicto needs of thethe Energy Agency, it is predicted to grow 32% by 2040.

How can this basic needs of the population for heating, transport and electricity population for heating, transport and electricity consumption, has consistently grown growth be sustainable in the long term?

The energy mix needs to be consumption, has consistently grown in recent decades.

Since 2010, in recent decades.

Since 2010, it has increased by a factor of 1.5 and, according to remodelled to make for cleaner forms of energy, sacrificing it has increased by away factor of 1.5 and, according to without the International International Energy Agency, it is predicted to grow 2040.

How can thethe stability of supply we currently enjoy.

On32% thisbylast point, thisthis is where Energy Agency, it is predicted to grow 32% by 2040. How can this growth besets sustainable long term? energy mix needs to be remodelled generator play in a the crucial role.The Generators add reliability to this new growth be sustainable in the long term? The energy mix needs to be mix, which to meet many requirements at the it has to make wayhas for cleaner forms of energy, without sacrificing the same stability time: of supply remodelled to compatible make way with for cleaner formsinfrastructure of energy, without sacrificing to we becurrently efficient, the existing everywhere, enjoy. On this last point, this is where generator sets play a crucial role. the stability of supply we currently enjoy.

Onthe thisenvironmental last point, this is wher adapt to demand at any given and reduce Generators add reliability to this newtime mix, which has to meet many requirements impact generator sets play a crucial role.

Generators add caused by the unstoppable increase in global energyreliability needs. to this new at the same time: it has to be efficient, compatible with the existing infrastructure

mix, which has to meet many requirements at the same time: it has adaptcompatible to demand at any given time and reduce the environmentaleverywhere, impact to everywhere, be efficient, with the existing infrastructure Massimo Brotto caused the unstoppable increase in global needs.

HIMOINSAthe SALES ENGINEERING MANAGER adapt tobydemand at any given time energy and reduce environmental impac Massimo Brotto.

HIMOINSA SALES ENGINEERING MANAGER caused by the unstoppable increase in global energy needs.

Distributed Energy to meet longterm Distributed Energy to meet longenergy demand term energy demand

Increased consumption in countries Increased in countries suchconsumption as India and China, global such as India and China, globaland population population growth the significant

place have an enormous effect on

demand for energy resources.

But this the upswing in demand for energy growth has set course: thehas process resources.

Buta this growth set has to be sustainable.

The last a course: the process hasUnited to be Nations Climate ChangeThe Conference, in sustainable. last Unitedheld Nations Paris in 2015, set out the path towards demand forChange energy resources.

But Climate Conference, held in this

Massimo Brotto HIMOINSA SALESwith ENGINEERING MANAGER a low-emission economy, the commitment of the 195 countries that heeded the agreement and have started signed the agreement. The majority to put solutions in place to reduce their have heeded the agreement and have dependence on coal. started to put solutions in place to Technology already offers concrete reduce their dependence on coal.

solutions these needs. “Distributed heededtothe agreement and have started a low-emission with the growth seteconomy, a course: Paris has in 2015, set out the the pathprocess towards has Generation” makes it possible to to put solutions in place to reduce their commitment of theThe 195last countries to be sustainable.

Unitedthat Nations Technology offers concrete take energyalready production dependence on coal.to where the signed the agreement. The majority have an enormous effect on the upswing in Climate Change Conference, held in Increased consumption in countries such solutions these needs.

“Distributed energy is,towith units that, by working Technology already offers concrete Paris in 2015, set out the path towards as India and China, global population Generation” makes possibledepending to take autonomously anditwithout on solutions to these needs. “Distributed a low-emission economy, with the growth and the significant industrial energy production where the energy the electricity grid,tocan produce Control Generation” makes it possible to continuously sustainably. commitment of the 195 countries that development that is taking place have energy is, withand units that, by working take energy production to where the Microgrids represent the most signed the agreement. The majority have autonomously and without depending an enormous effect on the upswing in energy is, with units that, by working

Distributed Energy to meet longgrowthindustrial and the significant industrial development that is taking term energy that demand development is taking place have

developed Distributed Generation on the electricity grid, can produce model autonomously and without depending on to date:continuously systems, whether connected energy and sustainably.

Control

electricity to the the grid or not, grid, whichcan canproduce combineenergy

continuously and sustainably. different conventional renewable Microgrids represent theand most Microgrids represent the most technologies. In addition to energy developed Distributed Generation developed Distributed generation, they have two Generation distinctive model model to date: systems, whether to date: systems, whether connected features: control, the most intelligent part, predicts and to which the grid or not,consumption which can combine

MICROGRID

work cycles;conventional and storage devices, the different and renewable

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heart of a microgrid, which together technologies.

In addition to energy

generation, they have two distinctive features: control, the most intelligent

FEATURE: HIMOINSA GENERATORS Combining generators with a smart Hybrid Renewable Energy Systems

management system makes it possible often unpredictable natural conditions. to plan running hours to perfection and to increase the microgrid’s efficiency

In addition, generators function as a

RENEWABLE TECHNOLOGIES

CONVENTIONAL TECHNOLOGIES

• SOLAR

• GAS

• WIND • BIOMASS

+

• DIESEL

enormously.

SOLAR DIESEL

very useful storage alternative that can

The combination of a conventional fossil

SOLAR GAS

respond very quickly to load variations. fuel-powered generation plant with a Combining generators withoffers a smart 100% renewable energy plant

BIOMASS COAL

=

significant advantages. management system makes it possible

• COAL WIND SOLAR

Firstly, it provides uninterrupted power to plan runningan hours to perfection and

WIND DIESEL

supply, which a renewable energy plant

to increase the microgrid’s efficiency

alone is unable to guarantee.

enormously.

SOURCE: FROST&SULLIVAN SOURCE: FROST & SULLIVAN

connected to the grid or not, which can combine different conventional and with power electronics compensate renewable In addition for the loadtechnologies. variations of renewables and are much more efficient in energy to energy generation, they have production. two distinctive features: control, the To make all this equipment work, a

most intelligent part, which predicts

monitoring system is required to collect

such the legislative framework, the and as renewable energy, and its success,

generator sets with renewable energy fossil fuel-powered generation plant

distance from theon national electricity largely depend external factors,

offers only a renewable significant fuel saving, withnot a 100% energy plant

grid, and the cost and profitability of population density and its level of

plan running hours to perfection and always be lowertoand less maintenance

sets, another third from wind energy and

Firstly, it provides uninterrupted and lubricant, filter or an injector changes enormously.

grid, and the cost and industrialisation.

Even so,profitability this market is RENEWABLE TECHNOLOGIES

CONVENTIONAL TECHNOLOGIES

storage the griddevices, and fromthe thewith otherpower connected

by microgrids fromproduction. generator more efficientcomes in energy

offers significant advantages.

Combining generators with a smart

maintenance costs.

Running hours will management system makes it possible

distance from the national electricity

•.1% SOLARper year for • GASthe next five years, 17 its population density and=its level + • DIESEL • WIND and rural and island • BIOMASS • COALelectrification is of industrialisation.

Even so, this

At present,ofone third of energy supplied variations renewables and are much

but also reduced overall running and

such as the legislative framework, the

electrifying an area, considering its Systems Hybrid Renewable Energy

of electrifying anatarea, considering expected to grow a brisk pace, around

electronics for the load sources, in compensate a smart grid environment.

costs. A typical load pattern of these

Theshows combination a conventional plants how theofcombined use of

The appeal of combining fossil fuels

consumption and work cycles; and

and communicate all data, both from

Secondly, it significantly reduces running

to increase the microgrid’s efficiency

SOLAR DIESEL

combination of a conventional fossil supply,Thewhich a renewable energy willpower be required.

SOLAR GAS

fuel-powered generation plant with a

plant alone is100% unable to guarantee. renewable energy plant offers

BIOMASS COAL

WIND SOLAR

expected to lead the process as a whole,

market is expected to grow at a brisk

with year-on-year growth of 23%.

pace, around 17.1% per year for the

significant advantages.

Suitable conditions for the Firstly, it provides an uninterrupted power installation ofsupply, a hybrid plant energy plant which a renewable WIND DIESEL

Secondly, it significantly reduces alone is unable to guarantee.

Hybrid solutions are especially Secondly, it significantly reduces running running costs.

A typical loadattractive pattern of SOURCE: FROST&SULLIVAN

costs. A typical these for industrial markets, suchloadaspattern the ofmining

aHowever, monitoring is required to the system global trend is certainly

these plants plants shows how the combined next five years, rural and island shows how the combined use of Advantages of and incorporating telecommunications sectors, as backgenerator sets with renewable energy such as the legislativeor framework, the with power electronics compensate use of generator sets with renewable electrification is expected to lead the generator sets in hybrid distance from the national offers not only a significant fuel saving, electricity for the load variations of renewables up energy in rural areas and islands, as but also reduced overall running and grid, and the cost and profitability of and are much efficient in with energy year-on-year generation energy offers not only a significant process asmore aplants whole, well as a single source of continuous

collect and communicate all data,to to combine different technologies

always be lower and less maintenance population density and itsfuel level of saving, but also reduced overall growth To make allof this23%. equipment work, asets into power for shops, farms or households.

Incorporating generator

eliminate they both fromthe thenegative grid andaspects from the other

these applications share a number these hybrid systems guarantees thatto grow at aAll be required. expected brisk pace, around running and will maintenance costs. of and communicate all data, both from

the rest from microturbines, solar panels

To make all this equipment work, or fuel cells.

each have when used connected sources, in individually, a smart gridand to reduce dependency on fossil fuels. The

environment. At present, one third of

falling price of solar panels is making the

energy supplied by microgrids comes

transition much smoother and countries

from sets, another thirdSaudi such generator as the United Arab Emirates, from wind energy and the from Arabia, Qatar, Germany andrest Chile have started to encourage renewable energy microturbines, solar panels or fuel cells. projects with this goal.

The appeal of combining fossil fuels

However, the global trend is certainly

production.

monitoring system is required to collect

electrifying an area, considering its

industrialisation. Even so, this market is

maintenance costs. Running hours will and lubricant, filter or injector changes

17.1% per year for the next five years, the system grid and from other connected common features: the isthe reliable: Advantages of it ensures that Running hours will always be lower and sources, in a smart grid environment.

and rural and island electrification is

Suitable conditions for the

are places thatofare not plant energy is always available. Theyexpected are the to lead the • processThey as a whole, installation a hybrid At present, one third of energy supplied

incorporating generator less maintenance and lubricant, filter with year-on-year growth of 23%. by microgrids in comes generator solutions connected Hybrid to the grid are or especially have attractive ingredient thefrom mix that provides a very sets, another from wind energy and for industrialwill markets, as the mining sets inthird hybrid or injector changes be such required.

Advantages of incorporating excessively high electricity costs. sound solution to the intrinsic instability the rest from microturbines, solar panels or telecommunications sectors, as backgenerator sets in hybrid generation plants orrenewable fuel cells. up energy in rural areas and islands, as Their demand is up to 5MW, of energy, because, generation unlike plants • However, the global trend is certainly well as a single source of continuous Incorporating generator setsare into Suitable conditions with 4,000 running renewable energy, generators not generator sets to combine different technologies to power for shops, farms orhours households.

Incorporating into around eliminate the negative aspects they All share a number these hybrid systems guarantees that perthe year.installation The these idealapplications situation for dependent upon often unpredictable for of aa of these hybrid systems guarantees that each have when used individually, and to common features: the system is reliable: it ensures that hybrid most of the natural conditions. reduce dependency fossil fuels.it The • isThey are places thatdemand are not energythat is always available.

They are theplant hybrid plant the system is on reliable: ensures price of solar panels is making the connected to the when grid or have ingredient a very during occurring the day, solar Infalling addition, generators function as a in the mix that provides

Hybrid solutionsexcessively are especially attractive energy is always transition much smoother available. and countries They high electricity costs. soundare solution to the intrinsic instability

and renewable energy, and its success,

sources are• available. very storage alternative that can energy, because, such useful as the United Arab Emirates, Saudi Their demand is up to 5MW, of renewable unlike

largely depend on external factors,

Arabia, Qatar, Germany and Chile have with around 4,000 running hours renewable energy, generators are not • They have a high level of exposure respond very quickly to load variations.

to combine different technologies to eliminate the negative aspects they

the ingredient in the mix that provides started to encourage renewable energy

for industrial markets, such as the mining per year. The ideal situation for a or telecommunications sectors, as hybrid plant is most of the demand

dependent upon often unpredictable

aprojects very with sound solution to the natural intrinsic this goal. conditions.

each have when used individually,

The appeal of combining fossil fuels energy, occurring during the day, when solar In addition, generators function as a energy in backup rural areas and islands, instability of renewable

and to reduce dependency on

largely dependunlike on external factors, • They have a high of exposure respond very quickly to load as variations. well as a single source of level continuous because, renewable energy,

fossil fuels. The falling price of solar

GRID generatorsSMART are not dependent upon

panels is making the transition

and renewable energy, and its success,

very useful storage alternative that can

BALANCE OF SYSTEM

sources are available.

power for shops, farms or households.

BALANCE OF SYSTEM SMART GRID

much smoother and countries such as the United Arab Emirates, Saudi Arabia, Qatar, Germany and Chile have started to encourage renewable energy projects with this goal.

30 | POWER INSIDER VOLUME 10 ISSUE 4

Balance of System Smart Grid

generator set actually works

In this specific case, it would mean

an annual saving of 1,600,000 litres of Let’s suppose that a hybrid plant is FEATURE: GENERATOR SETS IN NEW MICROGRIDS diesel per year, more than one third of installed in Chile, in a region where solar

grid, make it possible to plan running hours and to increase the efficiency of the whole system.

PV 36%

POWER [kW]

DIESEL 64%

HOURS [h]

Conclusions

connected to the grid or have

Case study: how integrating renewable energy with a generator set actually works

excessively high electricity costs.

Let’s suppose that a hybrid plant is

unquestionably have a role to play in the

Their demand is up to 5MW, with

installed in Chile, in a region where solar

coming years. Their capacity to ensure

around 4,000 running hours

irradiance is 2,312kWh/m² and annual

availability of energy to meet increasing

per year. The ideal situation for a

electricity consumption is approximately

demand that is more challenging from

hybrid plant is most of the demand

17,520MWh/year. For constant daily

an environmental point of view makes

occurring during the day, when solar

consumption of 4MW for 12 hours, let’s

them a sound solution to the intrinsic

sources are available.

estimate that 4,800,000 litres of diesel

instability of renewables, and a useful

They have a high level of exposure

would be required.

Massimo Brotto

storage alternative. Generators respond

All these applications share a number of common features: •

•

•

They are places that are not

to sunlight or wind. To guarantee

energy production to more renewable forms of production, generator sets

more 15 yearsoccur of experience, he quicklyWith when loadthan variations and,

leads a team of professionals providing technical

a return on investment, solar

HIMOINSA SALES If threeENGINEERING HIMOINSA MANAGER HTW-2030 T5

irradiance should be more than

generator sets, which supply a total of

of a smart makeand it possible tosystems. In terms withgrid, batteries renewable

1,300kWh/kWp or, as applicable,

4.85MW are installed, how many hours

plan running hours and to increase the costs. profitability and minimising running

wind exposure should be at least 4

would it take to recoup an investment

efficiency of the whole system.

m/s. Countries such as Chile, Peru

like this? How much fuel could be saved?

www.himoinsa.com

and India, or regions such as the

The monitoring systems are responsible

Caribbean, Asia Pacific, Middle East

for detecting which energy source is the

and North Africa are geographical

best at any given time. So, during the

areas that meet all these optimal

hours of greatest solar irradiance, the

natural conditions for installation.

generators work at a minimum level. In

They have enough space for the

this way, the service life of the engine

With more than 15 years of experience,

installation of solar panels. Where

is increased and therefore the running

he leads a team of professionals

this is under a roof, the ratio should

and maintenance costs of the unit are

providing technical support to the

be around 10 square metres per

reduced. And of course, fuel consumption

sales department and working on

kW generated. Where this is on the

is considerably reduced. In this specific

the development of generator set

ground, 20 square kilometres would

case, it would mean an annual saving of

applications with batteries and

be required per MW.

1,600,000 litres of diesel per year, more

renewable systems. In terms of

than one third of current consumption.

new product design, he focuses on

Based on these figures and depending

optimising profitability and minimising

on the price of diesel and solar irradiance,

running costs.

www.himoinsa.com | 2017

•

In the transition from conventional

support to the sales department and working on when integrated in the management the development of generator set applications

of new product design, he focuses on optimising

Massimo Brotto HIMOINSA SALES ENGINEERING MANAGER

the investment in a plant that combines generator sets with solar panels could be recouped within three to five years.

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POWERING THE FUTURE: Malaysia’s energy policy challenges

MD&A GLOBAL CAPABILITIES

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PARTS

|

SERVICES

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REPAIRS

Policy Ideas № 55 November 2018

Powering

the future: Malaysia’s energy policy challenges Renato Lima de Oliveira

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FEATURE: POWERING THE FUTURE

Executive summary »»

The energy industry is changing fast and in multiple directions, with important consequences for energy-rich countries.

Malaysia is also experiencing unprecedented political changes with the election of the Pakatan Harapan (PH) coalition on May 9 of 2018, the first alternation of power since the country’s independence. Some of the key promises made by the PH’s manifesto are related to the energy sector, including a fast growth of renewable generation and the promotion of green technologies. This paper discusses the global energy scenario, Malaysia’s energy policy challenges, and explains why it is important to put energy innovation at the forefront of the national development strategy.

»»

In the last decade, the energy industry has been affected by two important factors: the growth of unconventional oil and gas (O&G) production and renewable sources of energy. The former brought abundance of fossil fuels, starting from the United States but with potential to spread to other countries. The latter represents alternatives to fossil fuels, which can be key to diversifying the energy sources and upholding commitments to limit greenhouse gas emissions as called for by governments that signed the Paris Agreement (2015), which includes Malaysia.

»»

In terms of total contribution to the world energy supply, unconventional O&G far exceeds the growth of modern renewables such as wind and solar. In 2017, unconventional O&G (from shale and tight oil), in the United States alone, added 12.8 million barrels of oil equivalent per day (MMBOE/d). In contrast, solar and wind energy provided equvalent to 2.1 MMBOE/d, globally, in 2016. However, renewables have shown impressive gains in competitiveness in recent years and, in some cases, are the cheapest sources for electricity generation. In addition to these dramatic cost reductions, renewable sources are poised to gain from the electrification of energy demand (e.g., electric vehicles), climate changerelated policy activism that discourages fossil fuels, and consumers’ pressure in favor of low carbon alternatives.

»»

Both the abundance of fossil fuels unlocked by new technologies and the increasingly competitive alternative energy sources will disrupt business models of firms that rely on the extraction of conventional O&G, as well as the public finances of oil-rich countries like Malaysia.

»»

Unlike the rest of the world, Malaysia’s energy matrix is becoming more carbon-heavy: in terms of primary energy share, coal has increased from 5%

Dr Renato

in 1996 to 20% in 2016. In electricity production, coal has replaced natural

Lima de Oliveira

gas as the main source of energy and now accounts for 46% of electrical

is an Assistant

energy generation. Meanwhile, modern renewable sources (solar and wind)

Professor of

make up less than 1%.

Management at the Asia School of Business

»»

Malaysian policymakers will need to devise policies to expand the supply

(ASB). His main expertise lies

and generation of natural gas (to replace coal) and drastically incentivize

in the political economy of

low-carbon sources of energy such as solar in order to de-carbonize the

development and state-business

energy matrix and reach the target of 20% of renewable energy by 2025 as

relations, particularly in the areas of

promised by the PH manifesto.

industrial and innovation policies and government accountability.

»»

Both objectives can be facilitated by a national innovation system that

Dr Renato received his PhD in

prioritizes the research and development (R&D) of the energy sector.

Political Science from MIT and

Malaysia’s high-cost and complex O&G resources need to continuously

his PhD thesis was on the politics

innovate to remain competitive in a world of fossil fuel abundance and

of unconventional oil: industrial

to unlock new gas fields that can replace the growing coal consumption.

and technology policy in Brazil,

Incentives for local R&D and collaboration between lead firms, suppliers and

Malaysia, and Mexico. He can be

universities are also key to building capabilities in renewables.

reached at renato.lima@asb.edu.my

* The views and opinions expressed in this paper are those of the author and do not necessarily represent IDEAS

34 | POWER INSIDER VOLUME 10 ISSUE 4

POWERING THE FUTURE: Malaysia’s energy policy challenges

1. Introduction The energy industry is changing fast

made by PH in its manifesto presents

to new entrants and business models.

and in multiple directions: the United

examples of political demands with

It follows with an analysis of Malaysia’s

States overtook Saudi Arabia in 2014 as

fiscal costs and impact on the energy

energy sector, with particular attention

the world biggest oil producer, thanks

sector, such as: increasing royalties to

to the O&G industry. It then argues for

to unconventional oil production;

oil-producing states to 20%; subsidizing

an energy innovation system in Malaysia:

electric cars and e-bikes are now mass

and “stabilizing” petrol prices; enabling

a series of interconnected institutions

market products and not gadgets

the purchase of a first car with reduced

and market players from the public and

for early-adopters, threatening the

prices to low income families; and

private sectors working in collaboration

internal combustion engine and the

abolishing highway tolls. Furthermore,

to develop and deploy technologies and

demand for liquid fuels; and the price

the replacement of the GST with the

to foster the creation of new companies.

of solar photovoltaics generation is

reintroduction of the SST will result in a

Such an innovation system will be

rapidly decreasing and becoming

predicted tax revenue shortfall of RM21

key to maintaining the strength of the

market competitive, pushing solar

billion to be partially compensated with

current O&G industry by extending the

adoption regardless of subsidies. Recent

oil revenues.1 At the same time, PH

life of current fields and supporting new

technological gains have unlocked

promised to increase renewable energy

discoveries; by promoting knowledge

more oil and gas (O&G) reserves as

supply from 2% to 20% by 2025 and to

spillovers from energy-based research

well as alternative energy sources.

“focus on green technology development

(such as material sciences, biotechnology,

Amidst increasing concerns with the

and renewable energy” (Pakatan Harapan

data analytics, etc.) to non-energy sectors,

environmental impact of fossil fuels and

2018, p. 86). This is a challenging

helping to further diversify Malaysia’s

a change in the demand profile towards

governing agenda that involves a series of

economy and tax base; and by preparing

electrification, there is a possibility that

tradeoffs and compromises.

the nation for an economy where fossil

oil reserves will be left on the ground,

fuels play a diminishing role and it

resulting in a loss to resource-rich

This paper discusses the challenges

becomes increasingly unfeasible to base

countries, including Malaysia.

ahead for Malaysia’s energy sector and

a large share of the national budget on

makes policy suggestions to the method

O&G revenues.

In addition to global developments,

by which the country can position

Malaysia’s landscape is also changing. The

itself to build a strong, innovative and

This study concludes that with the

election of the Pakatan Harapan (PH)

financially sustainable energy industry

right policy mix, Malaysia can be well

coalition on May 9, 2018 represented

amidst the emerging domestic and global

positioned in the future energy scenario.

the first change of government since

environment. It starts by presenting key

The task for policymakers is to provide

the country’s independence. Elections

trends in the global energy industry that

a clear vision of direction followed

in Malaysia were already increasingly

are disrupting the status quo and leading

by calibrated policy instruments that

competitive, and going forward,

promote the long-term objectives of

politicians will be increasingly pressured

developing the country’s innovation

to accede to distributive demands that

and institutional capacity, which will

may be key to winning and retaining

foster a competitive and sustainable

government. Some of the key promises

energy sector.

1 T he Sun Daily, “SST to be set at 6% for services, 10% for sales,” July 16, 2018

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POWERING THE FUTURE: Malaysia’s energy policy challenges

2. From scarcity to abundance: the role of technology in powering the future The spectacular global economic

residues (traditional biomass), oil

peacefully alternate, power. In fact,

growth witnessed since the industrial

helped to create modern life and

few resource rich countries have

revolution – when global GDP

global trade that most of us may take

managed to utilize their endowment

per capita jumped from less than

for granted. Figure 1 highlights these

blessing as a developmental

$1000, where it had been stagnant

energy transitions and also shows

advantage, which is what led to a

for centuries, to over $10,000 as

how modern renewables (wind and

large literature in social science on

registered most recently – has been

solar) are still negligible in terms of

the “resource curse.” About 70% of

fueled by hydrocarbons. First, it was

total world energy consumption.

total oil reserves and 43% of oil

led by coal, and in the 20th century,

Albeit, renewables are growing fast, as

production (BP, 2018) come from the

by oil. Oil has several advantages:

elaborated later in the paper.

Organization of Petroleum Exporting

2

it can “pack” lots of energy in a

Countries (OPEC), an association

comparatively small volume (high

The omnipresence of oil use is

which features some of the most

energy density), it is cheap, easy

contrasted with its uneven global

autocratic regimes. 3 For the most

to store and transport, and is a

distribution. Few countries have large

part, the oil found in OPEC countries

versatile raw material for a number

oil reserves and are net exporters. To

tend to be plentiful and technically

of fuels and petrochemicals. Given

complicate things further, proliferous

easy to extract, which makes them

its technical qualities, oil allowed the

giant oil fields tend to be in politically

the lowest cost of production in the

expansion of the internal combustion

unstable and undemocratic countries

world and the most able to collect

engine, as well as everyday plastics

– a relationship that is unlikely

high revenues per barrel sold. Through

and synthetic fibers that are now

random but rather a consequence

a variety of channels, the abundance

embedded in contemporary society.

of the easy access to oil riches and

of an easy-to-extract resource also

By replacing less efficient forms

the politico-economic incentives

made these countries less likely to

of energy, such as wood and crop

it creates to retain, rather than

diversify their economies.

Figure 1: Primary energy consumption by main sources (1800-2015) Source: Smill (2017)

2 For historical statistics see Maddison (2001) and for most recent data The World Bank (2018).

3 The following countries are present members of OPEC: Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.6

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FEATURE: POWERING THE FUTURE

Figure 2: U.S. crude oil and dry natural production *Noted: Shale gas production includes associated natural gas from tight oil plays Source: U.S energy Information Administration, Annual Energy Outlook 2018 Reference case

For many years, the combination

doubled its total oil production and

Figure 2, from the U.S. Energy

of both the high inelasticity of

contributed to the world oil market

Information Agency, shows the

demand for oil along with its

supply the equivalent to nine times of

dramatic gains in production from

production concentration in a

Malaysia’s total crude oil production

tight oil and shale gas (EIA, 2018). In

handful of large exporters had led to

in 2017 (0.7 mb/d)?

2017 alone, these unconventional

profound geopolitical and economic

sources added 12.8 million barrels of

consequences, notably the U.S.

The answer lies in the combination

oil equivalent per day (MMBOE/d).

interest in the Middle East to secure a

of resource availability (i.e., geology);

The figure also shows EIA’s growth

source of energy to its economy.

technological advancements,

projection - most likely under baseline

particularly the combination of

scenarios - up to 2050, with the U.S.

The U.S. is a large, resource-rich

horizontal drilling with hydraulic

featuring as a net energy exporter.

nation, which was an oil pioneer.

fracturing; and institutional

However, production peaked in

differences, including private property

While the U.S. had all the

1970 at 11.3 million barrels per day

rights for the subsoil and a strong

necessary factors to be a pioneer in

(mb/d) and reached a bottom of

capital market that financed oil

unconventional O&G, it is far from

6.7 mb/d in 2008. From that year

entrepreneurs. It has been known

being the only country with these

onward, production started to grow

for years that large parts of the

types of resources. In 2015, an

consistently and reached a record-

U.S. territory had O&G trapped in

assessment made by EIA on the global

high of 13 mb/d of crude oil in 2017.

formations that were too costly

potential of technically recoverable

Since 2009, the U.S. has surpassed

to extract because conventional

shale resources shows 418 billion

Russia as the world’s top producer of

production techniques yielded very

barrels of crude oil and 7,576 trillion

natural gas, and since 2014 displaced

low recovery volumes. The high oil

cubic feet of natural gas in a multitude

Saudi Arabia as the world’s leading

prices that prevailed in the 2000s

of countries – including Australia,

crude oil producer (BP, 2018).

created incentives for entrepreneurs

Argentina, France, Indonesia, Poland,

to experiment solutions to tap these

etc. (see Figure 3). To give a sense of

unconventional resources.

proportion, the total world reserve

How was it possible that in a period of less than a decade, the U.S. almost

38 | POWER INSIDER VOLUME 10 ISSUE 4

as of 2017 was1,696.6 billion barrels,

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FEATURE: POWERING THE FUTURE

Figure 3: Assessed basins based on EIA (2015) with a crude oil consumption of 92.6

bundle of technologies that enabled

the result of decades of investment in

million barrels per day, or 33.3 billion

the shale revolution spreads to the

R&D to discover and develop challenging

barrels per year, which leads to over

rest of the world and new ones are

resources, with the participation of

50 years of available reserves given

developed, more oil can be extracted

state-owned and private companies as

the current level of consumption (BP,

from today’s conventional fields.

well as local and international research

2018). The technically recoverable

institutions (see Box 1).

tight oil from shale, as mentioned, can

The growth of O&G production from

add another 12 years to that already

shale is not the only remarkable

Box 1: Brazil’s leadership in deep

sizable length of time. In addition,

technological advancement in the

offshore oil

when the technologies used for shale

industry lately. Another source of

Since Brazil opened its oil sector for

begin to be deployed in conventional

production growth has been from

private investment in the mid-1990s

fields, available resources will also

deepwater offshore wells. Thanks

with the first bidding round in 1999,

grow by enabling higher recovery rates

to advancements in 3-D and 4-D

production has increased from 1.132

from current producing fields (Aguilera

seismic analysis, subsea systems,

mb/d in 1999 to 2.734 mb/d in 2017

and Radetzki, 2016). It is surprising for

and drilling under challenging high

(BP, 2018). Brazil’s Petrobras is a

those outside the O&G sector to know

pressure conditions, oil companies

global leader in deepwater offshore

that in most oil fields in the world,

have been increasingly able to master

oil production, a feat made possible

only 20% to 40% is actually extracted

the challenges of extracting O&G from

with a mission-driven R&D investment

(Muggeridge et al., 2013). While in

water depths that go even beyond 2km.

program called Procap, which started

most cases it is technically possible to

In 2007, for example, Petrobras and

in the 1980s and was designed to

extract more oil from a mature field

the Brazilian government announced

master deepwater and ultra-deepwater

with “enhanced oil recovery” techniques,

the discovery of a new oil play with

offshore oil production. Lawmakers

production will stop when it does not

initial estimates of 70 billion barrels of

and regulators introduced specific rules

make economic sense to do so, i.e.,

resources below a thick layer of salt and

during the opening of the country’s

when the marginal cost of extraction

in water depths of over 2km located

oil sector to channel oil revenues to

per barrel from a given field is higher

200km away from the coast. This pre-

local R&D by public universities and

than the price it can be sold. As the

salt area, as it came to be known, was

private companies. Up to 1% of the

40 | POWER INSIDER VOLUME 10 ISSUE 4

POWERING THE FUTURE: Malaysia’s energy policy challenges

gross value of the oil production

The high oil prices that prevailed

installed capacity of solar and wind

from highly productive fields had to

during the latest commodity super-

increased from a slim 18,163 MW

be spent on local R&D investment

cycle (from 2004 to 2014) provided

in 2000 to 903,119 MW in 2017

in the areas of oil, natural gas and

a clear incentive to the development

(IRENA, 2018a). Installed capacity

biofuels. The amount was to be used

of energy-related technologies such

is a tricky indicator for renewable

in universities and research centers,

as those that allowed the expansion

energies because the sun is not always

and up to 50% in internal R&D centers

of unconventional oil production.

shining nor the wind always blowing.

of oil companies and suppliers with

Another incentive was the lack of low-

Nevertheless, when taking into

local R&D operations. More recently,

cost reserves available to international

account total energy generation, the

contracts from 2013 reserved 10% of

oil companies (IOC). National oil

growth has been from 32,294 GWh

the earmarked resources to supplier

companies (NOC) own about 90%

to 1,286,648 GWh from 2000 to

development programs. The opening

of the world’s reserves (Victor et al.,

2016. To put this into perspective, in

of the oil sector allowed Petrobras to

2012). Oil operators that are left with

2016, solar and wind energy provided

partner with private firms and raise the

less-than-good acreage had to invest

the same as 2.1 MMBOE/d of energy

capital necessary to invest in deepwater

to overcome technical challenges

for a year – about Norway’s crude oil

offshore fields, which carried high price

and cost barriers to bring to market

production and about one-sixth of

tags and geological risks. Petrobras is

the barrels that come from high-cost

U.S. unconventional O&G in 2017

the only national oil company (NOC) to

assets. These resources, however, have

(EIA, 2018).

have received three OTC Distinguished

high breakeven price and are the first

Achievement Awards (1992, 2001,

investments to be halted when prices

Renewable energies are still a green

2015), which is a prize that recognizes

decline, such as in 2014.

drop in a black ocean, since fossil fuels

technological innovations in the segment (Lima-de-Oliveira, 2017).

currently account for about 80% of Figure 4 shows GDP growth and oil

total primary energy consumption in

prices (real and nominal) per year. In

the world. However, there are good

Unfortunately, the Brazilian oil

real prices, the commodities super-

reasons to believe that a combination

company was also in the spotlight

cycle observed in the 2000s was

of factors is poised to favor renewable

recently due to a major corruption

marked by higher oil prices than in

energy production in the coming years:

scandal revealed in 2014 that led to

previous periods of oil shocks, such

the arrest of former directors, senior

as in the 1970s. Therefore, oil prices

executives from supply companies

between $40 to $60, as observed

1. Dramatic cost reductions

and high-level politicians, including

recently, are not low prices, but

In addition to

a former speaker of the house,

rather historically high. Secondly,

incremental

a finance minister and a former

GDP growth is decoupling from oil

innovation, wind and solar energy

president. The scandal involved

prices as the economy becomes more

projects have benefited tremendously

the payment of kickbacks from

knowledge-intensive and service-

from scale economies and learning-

suppliers to fund political campaigns

sector-based rather than energy-

by-doing in manufacturing. This

and was a major blow to the image

intensive and manufacture-driven.

has been particularly true with solar photovoltaic (PV). Scientists involved

of the company. Thankfully, the independence of public prosecutors

The share of renewables

with the MIT Energy Initiative have

and Brazilian courts revealed the full

High oil prices and a growing concern

noticed that “the cost of solar power

extent of the corruption scheme and

over the environmental impact

tends to be lower than expected, and

held the participants accountable

of fossil fuels also stimulated the

the deployment of solar power tends

by imposing fines and criminal

search for substitutes. The current

to be higher than expected” (Brown et

convictions. Petrobras also received

commercially available wind and

al. 2017). For instance, in 2011, the

back part of the losses in judicial

solar energy generators are updated

U.S. Department of Energy launched

agreements with suppliers.

versions of technologies that have

the SunShot initiative with the aim

been around for decades. Yet, the

of accelerating cost reduction in solar

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FEATURE: POWERING THE FUTURE

Figure 4: GDP growth and oil prices (1960-2017) Source: BP 2018 and World Bank Development Indicators

deployment so it could be competitive with conventional sources of electricity generation (i.e., coal and natural gas) without subsidies, which required slashing costs by 75%. The target set for 2020 was achieved in 2017 for utility scale solar (a levelized cost of electricity of $0.06 per kWh4) and a new initiative, for 2030, was launched with a target to further reduce costs by 50% ($0.03 per kWh)(U.S. DOE ,2017).

Recent energy auctions in different markets showed renewables on cost parity or even cheaper than natural gas and coal (IRENA, 2018b). However, this does not necessarily mean that we can now quickly reduce the share of

Figure 5: Trends in Renewable Energy (Electricity Generation in GWh)

fossil fuels in the energy matrix. Due

Source: IRENA 2018a

to the intermittent nature of the most deployed modern renewable energies,

coal. Utility-scale energy storage would

is to achieve comparably low costs

wind and solar PV, system stability

solve this issue, but cost reductions and

in concentrated solar thermal power

requires backup generators that can

technological improvements in this

(CSP), a solar technology that, unlike

be dispatched to the system – most

area are still limited. One of the focus

solar PV, can store energy and dispatch

of the time fueled by natural gas and

areas of the SunShot 2030 initiative

it to the grid when needed.

4 M easured as the levelized cost of electricity (LCOE) for an area of average climate in the U.S. LCOE is a convenient measure to compare costs among different sources of energy by incorporating the net present value of capital and operational costs over the lifetime of a given project. It can be interpreted as the break even price of the project or “the price of electricity required for a project where revenues would equal costs, including making a return on the capital invested equal to the discount rate” (IRENA 2012, p. 3).

42 | POWER INSIDER VOLUME 10 ISSUE 4

POWERING THE FUTURE: Malaysia’s energy policy challenges

2. Electrification of energy demand

the internal combustion engine to

of 2°C above pre-industrial levels, the

electric vehicles. On this front, the

world needs to drastically move away

penetration of electric vehicles is

from carbon-based sources of energy.

The digital economy

gaining momentum: sales of electric

This is reflected in the objectives of the

has the potential to shift energy

vehicles reached 1 million units in

Paris Agreement (2015), the latest in a

demand in multiple fronts, including:

2017 (IEA, 2018a).

series of summits and meetings that

growing usage of equipment powered

seek to coordinate a unified response

by electricity; decentralization of

Since 2016, investments in electricity

energy production, with consumers

generation surpassed oil and gas

also playing the role of generators;

– US$750 billion versus US$715

The Paris Agreement is based on

and a shift in the consumer base

billion, respectively, for 2017 (IEA

voluntary cooperation. It has no

from passive to active through smart

2018b). Electricity can be generated

enforcement mechanism and already

meters and internet-of-things that

from multiple sources and coal

suffered a major blow with the election

manage load and add flexibility to

has traditionally been dominant

of Donald J. Trump in the United

the energy grid. Some of the impacts

in many countries due to it being

States, who announced the withdrawal

are more speculative, such as gradual

cheap and widely available, despite

of the US from the agreement. Despite

reduction of global physical trade

its environmental, and largely

the fragility of a global agreement to

through decentralized manufacturing

unpriced, cost from high emissions of

limit carbon emissions, at the country

via 3D-printing or widespread

nitrogen oxides (NOx), sulfur oxides

and state level, policies can accelerate

deployment of more efficient logistics

(SOx) and greenhouse gases. Coal

energy transition.

through driverless cars and trucks, both

is gradually being displaced due to

of which have the potential to reduce

the stricter environmental laws and

In the U.S., although the Trump

liquid fuel consumption (Helm 2017).

cost competition from renewables

administration is reversing regulations

and natural gas (particularly in the

set by the Environmental Protection

From energy-hungry data centers

U.S., thanks to the shale revolution).

Agency (EPA) to benefit the coal and

that serve as cloud storage to mobile

It is now commonplace to see

oil industries, activists turned to state

phones at the hands of hundreds of

natural gas as a “bridge fuel” for

level politics to enforce their green

millions of users, the digital economy

a greener future because it can

agenda. States like California and

is powered by electricity. The backbone

generate electricity with 50% less

Massachusetts have their own clean

of the contemporary economy runs

CO2 emissions than coal and can also

energy and pollution reduction targets.

on electricity, even for intensive and

provide dispatchable thermoelectric

perhaps spurious usage, such as purely

generation when needed,

When politics fail, citizens concerned

bitcoin mining.

compensating the intermittency of

with environmental impact can

wind and solar PV generation.

also influence the energy demand

5

Presently, oil is rarely used to generate electricity; instead, it is dominant (94%) in transportation (BP, 2018).

If demand for transportation goes down, either by increased efficiency

to the challenge of global warming.

through their purchasing power. To

3. Policy activism and consumer’s preference

differentiate products and promote

Most scientists and

offsetting schemes, signaling to

sustainable consumption, some companies are investing in carbon

with driverless cars or 3D-printing

politicians agree that the rate of CO2

consumers that they are doing their

reducing the intercontinental flow of

emissions and other greenhouse gases

part in mitigating climate change.

goods, oil stands to lose. It also stands

are linked to a warming of the planet

to lose if transportation switches from

and if we are to keep it below a rise

5 A recent paper that assessed the feasibility of cryptocurrencies serving as dominant mean of exchange pointed to the energy consumption as one of the barriers for large scale adoption. The study estimated that the total electricity use of bitcoin mining amounted to the consumption of a country like Switzerland, resulting in an environmental disaster, so the authors claimed (BIS 2018).12

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FEATURE: POWERING THE FUTURE

It is hard to predict the exact impact

nation’s underground wealth.

that the stick of local regulations or

forms of transportation. In this likely scenario, oil prices would stay lower

the carrot of consumers favoring

A new energy scenario challenges

in the medium- to long-term – with

environmentally sustainable suppliers

this conventional approach and poses

occasional short-term fluctuations to

will have on business practices.

serious threats to oil-rich countries such

adjust supply and demand and react to

Nonetheless, the combination of policy

as Malaysia. The increasingly lower cost

geopolitical shocks.

activism and consumers’ preference

of renewables is bringing competitive

towards sustainable products are

alternatives to energy generation.

The gradual decline of oil in the energy

forces that energy firms based on fossil

The electrification of the economy,

matrix will have deep repercussions

fuel will have to reckon with as it can

including the transportation sector,

and it is a challenge to oil companies,

increase their cost of doing business.

can reduce the demand for liquid fuels.

particularly NOCs. It puts pressure in

Technological advances in horizontal

countries that base a large share of their

Energy transition and its political effects

drilling, fracking and deepwater

fiscal revenues on oil sales and have

offshore production have unlocked vast

not diversified their economy. It will

For most of the 20th century,

new reserves outside OPEC countries

be particularly hard for countries and

policymakers from oil-rich countries

and challenged the idea of peak oil and

regions that base their economy on the

were able to reasonably expect that

increasingly higher oil prices. Finally,

sole extraction of natural resources and

the combination of high oil demand,

policy and consumer pressures can

have not invested in human capital and

lack of a real substitute and limited

accelerate the shift towards a lower

innovation capabilities.

reserve availability secured an intrinsic

carbon footprint in the economy.

value to their subsoil wealth. They did

Because of these factors, oil

The good news to oil-rich countries is

not need to hurry to take oil out of

consumption may reach a peak in the

that energy transitions take time and

their ground – oil produced tomorrow

coming decades, whereby natural gas

the current production from renewables

would be worth more than oil

and renewables gradually displace

is still miniscule. Policy decisions

produced today, since reserves would

oil products, even if total energy

taken today can have a deep impact in

get increasingly scarce, and prices

consumption goes up. To keep their

shaping the future. In the next section,

would be driven up over time. Output

market share in the world energy matrix

the paper addresses Malaysia’s energy

could be managed according to the

and slow down the energy transition,

system and provides policy suggestions

fiscal needs of the producing countries,

oil-rich countries may react by

that allow the country to seize the

the time horizon of the rulers, and

increasing their production capacity and

opportunities brought by the incoming

the quotas set by OPEC. NOCs could

try to undercut, by lowering prices, the

global energy changes.

then play the role of custodians of the

expansion of renewables and electric

44 | POWER INSIDER VOLUME 10 ISSUE 4

POWERING THE FUTURE: Malaysia’s energy policy challenges

3. Malaysia energy outlook

This section starts by describing the

In the late 1960s, Shell and Esso

national capabilities in human

main players in Malaysia’s energy

started offshore oil exploration in

resources and in the supply chain

system, particularly PETRONAS in

Malaysian waters but production was

through regulations built into the

O&G and Tenaga Nasional Berhad

miniscule, amounting to less than 10k

Production Sharing Contracts (PSCs)

in electric energy. It follows with an

bpd in the 1960s. Yet, it had potential

that foreign oil companies signed.

analysis of Malaysia’s energy matrix

and the Malaysian government

By requiring companies to transfer

and energy transition challenges.

decided to revamp the legal framework

knowledge from foreign workers to

by centralizing regulatory and

locals and by sponsoring scholarships,

PETRONAS and the O&G sector

ownership rights from states, and

PETRONAS developed, over the

negotiating new contracts with oil

years, a pool of qualified human

The big wave of contract renegotiations

companies that would increase the

capital apt to operate in all activities

and later oil nationalizations between

taxes from oil production. PETRONAS,

of the O&G value chain. It also created

the 1950s and 1970s shifted most of

created in 1974 through the Petroleum

incentives for the localization of

the economic rent from international oil

Development Act (PDA), reflected

goods and services in Malaysia by

companies to host countries (Mommer,

the spirit of the time. Globally, oil

requiring oil companies to buy from

2002; Maugeri, 2006). With traditional

scarcity drove companies to find

local licensed companies. Starting

markets closed or severely taxed, oil

new markets and host governments

in 1978, PETRONAS took the risk of

companies sought to explore resources

expected high returns. Nationally,

operating a field by itself by setting up

outside OPEC countries. This led to the

PETRONAS would serve as a vehicle to

a subsidiary (Carigali) that undertook

economically counterintuitive move

promote a Bumiputera business class,

the development of an area

of developing more costly sources

in accordance with the principles of

relinquished by Conoco (the Duyong

of oil before exhausting the cheap

the New Economic Policy (NEP), which

field). With time, PETRONAS became

ones, which are predominantly found

was enacted in 1971 following the 1969

a fully integrated O&G company

in OPEC countries. New areas for oil

ethnic riots.

with a strong international footprint

exploration and production included

(Hashim, 2004; Lima-de-Oliveira,

the North Sea, Alaska, and offshore

More than just a rent-collector,

Brazil and Malaysia.

PETRONAS sought to develop

2017; Lopez, 2012).

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FEATURE: POWERING THE FUTURE

Domestically, PETRONAS still takes the role of a regulator (through the Malaysian Petroleum Man¬agement (MPM) division) and operator (Carigali) in the upstream. Natural gas represents about two-thirds of Malaysia’s upstream production with 1.372 mboe/d in 2017. Since the mid-1990s, crude oil production has stabilized around 700 kbp/d (See Figure 6).

Several companies are involved in upstream exploration and production

Figure 6: Crude oil and gas production of Malaysia (1970-2017) Source: BP 2018

in Malaysia, such as Shell, Exxon, Murphy Oil, ConocoPhillips, Sapura

deepwater PSC, R/C PSC). In 2011,

small fields, it will be necessary to

Energy, Hibiscus, etc. As the custodian

PETRONAS awarded six Risk Service

invest in cost-reduction technologies

of the nation’s O&G resources with

Contracts (RSC) to develop clusters

and devise even more attractive

full regulatory powers, PETRONAS

of marginal fields. Despite an initial

fiscal regimes. Malaysia’s high fiscal

dominates the country’s sector and

interest, most of them had been

dependence on oil revenues –

determines the conditions of entry

returned following the decline of oil

frequently over 20% of the federal

through closed biddings, select¬ing

prices after 2014 as they have an

budget – and dwindling reserves

which areas are put for exploration

estimated breakeven costs of $60 per

represent a critical challenge to the PH

and under what fiscal terms. It also

barrel (BMI, 2018).

government. To boost future capacity,

holds a minimum 15% equity stake in

the O&G industry in Malaysia will According to IEA (2017), about half of

need to: (a) increase exploration in

the country’s recoverable resources

deepwater offshore areas; (b) maximize

The rate of growth of domestic O&G

are in fields smaller than 100 million

the recovery factor of existing oil fields

production has been below the

barrels. Unless prices go (and stay)

(through the deployment of enhanced

country’s economic progress and

up, in order to profitably exploit these

oil recovery techniques); and, (c)

upstream PSCs.

Malaysia has struggled to add to reserve capacity. The fall of oil prices in 2014 hit Malaysia particularly hard as the country’s geological endowment is of high-cost offshore O&G with fields of limited size. Figure 7 shows full cycle production costs (capital and operational expenditures per boe6) and total O&G output for a group of 45 countries.7 With US$18/boe of cost, Malaysia is situated among the countries with high cost of production.

Accordingly, since the contracts have been signed in 1976, subsequent contracts have offered more attractive fiscal terms to partners (1985 PSC,

Figure 7: Full cycle production costs and total output in selected countries * Author’s calculation based on GlobalData Upstream Analytics

6 T hese estimates do not include exploration and appraisal costs. Sedimentary basins with higher geological risk, most of which are outside of OPEC countries, will have higher expected costs.

7 A ll countries that hold more than 2 billion boe of reserves.

46 | POWER INSIDER VOLUME 10 ISSUE 4

POWERING THE FUTURE: Malaysia’s energy policy challenges

monetize small, marginal fields. All

Electricity, which is majority-owned by

in 2010 to coordinate the initiative

three routes represent cost challenges

TNB with minority participation by the

and the creation of incentives that

and likely require lower government

state of Sabah, and Sarawak Energy.

include targeted subsidies in the form

take per barrel to attract investments.

About 60% of the country’s generating

of feed-in tariffs and loan guarantees,

capacity comes from TNB with

as well as other incentives such as

In sum, while O&G production in

Malakoff (23%), Powertek (8%) and

technology grants, etc. Furthermore,

Malaysia while O&G gas production

YTL Power (6%) playing sizable roles.

the PH manifesto pledged to increase

in Malaysia has been stable or slightly

renewable energy supply to 20% by

growing since the mid-2000s, the

Malaysia adopts a single buyer

current institutional framework has

model with independent power

not been successful in meeting the

producers (IPPs). Policy is set by the

In light of these state policy priorities

country’s economic growth rate and

Energy Commission, established in

and the fact that Malaysia is a gas-rich

the need to add reserves to match

2001, and the Ministry of Energy,

country, it is surprising to note that

the demand. It should be noted that

Technology, Science, Climate Change

Malaysia is becoming a more, and

PETRONAS has been investing heavily

and Environment (MESTECC) – which,

not less, carbon-intensive economy.

in the downstream sector with the

as the long name signals, is a ministry

Coal may be dying in the rest of the

Pengerang Integrated Complex (PIC),

with no shortage of issues to deal with.

world, but not in Malaysia: in terms

a US$27 billion project in partnership

2025.

of primary energy share, coal has

with Saudi Aramco that will process

Malaysia has signed and ratified

increased from 5% in 1996 to 20%

Saudi crude. However, the economics

the COP21 Paris Agreement and

in 2016. Most of coal consumed in

of downstream are significantly

committed to cut its greenhouse

Malaysia is imported and used to

different: it is a highly competitive

gas emissions. In the government-

generate electricity. Beginning in the

segment with low margins. The growth

issued Green Technology Master

late 1990s (see Figure 8), Malaysia has

in the downstream segment is unlikely

Plan (2017-2030), it aspired to

made a strong bet on coal by raising

to compensate, in fiscal contributions,

reduce 45% of emission intensity

consumption more than 17-fold – from

the upstream sector – which makes the

by 2030 (KeTTHA, 2017). Increasing

964 ktoe in 1998 to 17,101 ktoe in 2016

strengthening of the latter critical.

the mix of renewable energy in the

(Energy Commission 2017). As a share

country is a necessary condition and

of electrical energy generation, coal

The electrical energy market

different policy instruments have

supplied 46% of the total 150,442

been deployed to promote renewable

GWh in 2016, with a negligible

If in O&G, PETRONAS is the crown jewel

energies in Malaysia. This includes the

participation of modern renewables

of the country, in electrical generation

establishment of Greentech Malaysia

like solar and wind.

Tenaga Nasional Berhad (TNB) is the dominant player. However, the electrical energy market is more diverse and has been subject to recent changes towards opening and competition.

With a near monopoly in Peninsular Malaysia, TNB is the biggest electricity provider in the country. TNB is publicly-listed and the government controls it through Government Linked Investment Companies (GLICs) like Khazanah and Permodalan Nasional Berhad (PNB). In Borneo, the electrical utility role is performed by Sabah

Figure 8: Electricity generation mix (in GWh) of Malaysia (1990-2016)

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FEATURE: POWERING THE FUTURE

The combination of fast national

as Liquefied Natural Gas (LNG)

2014, the PH government signaled

economic growth, slow progress

follows market prices, while the

that it plans to keep consumer energy

in domestic hydrocarbon output

gas consumed domestically has a

prices low through this politically

(particularly gas fields in offshore

lower rate that is regulated by the

friendly, but environmentally and

Peninsular Malaysia) and political

government. The difference between

fiscally costly, policy.

pressure to keep domestic energy

the LNG price and the domestic

prices low under subsidized rates

one is a subsidy which is borne by

As shown in Figure 8, Malaysia’s

has resulted in an explosion of coal

PETRONAS. Since the adoption of

energy balance is carbon-heavy,

consumption. The availability of

this policy, in 1997, PETRONAS has

and decarbonization – as called for

natural gas would make it a perfect

forgone RM241.4 billion of revenues

by the Green Technology Master

fuel for domestic electric energy

(Malaysian Gas Association, 2017).

Plan and the PH manifesto – will

generation, as has been happening

Malaysia’s premier oil company is

require greater investments in

in the United States with the shale

required to commercially sell its

technologies and new public policies

revolution. However, Malaysia’s

production in order to generate

to unlock more natural gas and

natural gas can be more profitably

much needed revenues for the public

support the expansion of renewable

sold elsewhere than domestically

budget, which, in part, ends up paying

sources. Malaysia has been gradually

consumed, mainly due to subsidized

for energy subsidies. In 2010, energy

implementing policies to promote

energy prices and long-term contracts.

subsidies for electricity and transport

renewables but they have yet to

8

fuel accounted for 4.1% of the GDP

move the needle in the direction of

In Malaysia, 60% of the total

(ERIA, 2016). Although Malaysia had

less carbon.

gas production that is exported

been phasing out subsidies since

Box 2: The TN50 Oil and the energy long-term aspirations In 2017, the Malaysian government launched the “Transformasi Nasional 2050” (TN50) initiative which had the aim of making Malaysia a top-20 nation in socio-economic development and innovation by 2050. The initiative involved several stakeholders from diverse sectors of the society – including IDEAS – in meetings that debated both the long-term aspirations for the country as well as the policies necessary to make them a reality. PETRONAS led the initiative of the TN50 for the oil, gas and energy (OGEE) sector.

Malaysia is no stranger to such long-term planning exercises and the TN50 built upon a rather surprisingly successful national tradition of aspiring to hard-to-reach goals that includes the New Economic Policy (NEP) (1971-1990) and Vision 2020 (1991-2020), which were planning efforts that achieved a fair share of success, albeit not without controversy. Planning so far ahead in the future (2050) is doomed to result in mistakes or unrealistic targets because technology is constantly disrupting business models. However, the initiative was able to capture the thinking of major stakeholders of the industry and how they wanted or saw the sector evolving in the future.

In July 19, 2018 the TN50 OGEE secretariat shared with stakeholders their conclusions, which had been formulated in a white paper delivered to the new PH government. It called for a fully liberalized market in the energy sector (but not in O&G), increase of renewables in the energy matrix, and more investments in energy innovation (to reach 3% of GDP by 2050 from less than 1% currently).

8 The growing domestic demand with limited natural gas supply can generate systemic risks and extra costs. For instance, a curtailment of natural gas from offshore Peninsular Malaysia due to platform maintenance resulted in an energy crisis in 2011 and 2012, which led to a spike in the use of fuel oil and diesel (see Figure 8). Since May 2013, with the completion of a regasification terminal in Melaka, Peninsular Malaysia gained more energy security. However, in 2016, only 20 cargoes of LNG were imported through this terminal while 420 cargoes were exported from Bintulu, Sarawak (Malaysian Gas Association 2017).

48 | POWER INSIDER VOLUME 10 ISSUE 4

POWERING THE FUTURE: Malaysia’s energy policy challenges

Figure 9: Sankey diagram of Malaysia’s energy balance (2016).

Source: IEA (https://www.iea.org/Sankey/#?c=Malaysia&s=Balance)

4. Energy innovation: a framework for Malaysia’s future

Technological innovations are

also gaining ground in total energy

particularly OPEC members, will have

reshaping the energy sector with

consumption with the digital economy

to cope with the double challenge of

profound economic and geopolitical

and electric transportation options.

increased supply from shale and more

implications. After a decade of more

In O&G, the US shale revolution has

cost-competitive alternative energy

hype than reality, renewable energies

unlocked vast amounts of new sources

sources. Given their fiscal dependency

are catching up and becoming cost-

of fuel with the potential to keep

on oil revenues, and domestic political

competitive, without subsidies, in

hydrocarbon prices low in the medium

challenges, oil-rich countries may well

generating electricity. Electricity is

to long term. Oil-dependent countries,

react by pumping more O&G out of

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POWERING THE FUTURE: Malaysia’s energy policy challenges

ground before it is too late – before

in the country, with an average of

this activity. In both O&G as well as

their reserves get stranded. This

RM13,310 (Department of Statistics

renewables, the numbers do not fare

can further depress oil prices in the

Malaysia, 2017).

well internationally.

It is vital, therefore, to sustain the

Table 1 presents the number of

This likely scenario will be particularly

national O&G industry and invest

international patents registered by a

challenging to Malaysia. Given its high

in building capabilities to smoothly

list of 15 NOCs. The company selection

cost of production (see Figure 7) and

transition to renewables and seize

was based on the list of firms studied

relatively small fields, lower oil prices

the green jobs of the future. The path

by Victor et al. (2012). In addition

can seriously affect the domestic oil

forward passes through increasing

to the total number of patents, I

industry, which has already struggled

Malaysia’s innovative capacity, using

followed Cavalheiro et al. (2014) and

to maintain production levels. Higher

revenues from O&G to invest in cost

also provide information on patents

royalties, such as those demanded

reduction innovations in order to

that match the E21B technical area of

by oil-producing states, can equally

maintain the current industry and help

the International Patent Classification

depress new investments. The

to unlock more natural gas that can

(IPC) scheme which encompasses

combination of economic growth,

replace coal, and also in renewable

upstream technologies.

political pressures to keep energy

technologies. In this regard, there is

prices low and limited natural gas

much to achieve, as detailed in the

PETRONAS occupies the median

output has already impacted the

following sections.

position – behind seven other NOCs,

medium- to long-term.

national energy matrix by increasing

but ahead of most Middle Eastern, African and Indian competitors, which

accounts for 46% of the electrical

Energy innovation in Malaysia

energy produced in Malaysia (Energy

How is Malaysia ranking in terms of

addition, of its 287 patents, only

Commission, 2017). This contrasts

energy innovation? Patents are an

10 are directly related to upstream

with the commitments made by

imperfect but widely used metric for

technologies (E21B category). This is in

Malaysia under the Paris Agreement

innovation output and can provide

stark contrast to the leading NOCs like

to limit carbon emissions and make

a snapshot of the country’s effort in

CNPC, Statoil/Equinor and Petrobras.

the usage of coal, which now

the PH manifesto promise to increase

basically do not engage in R&D. In

Company

Origin

patents (total)

patents (upstream)

even more challenging.

CNPC

China

10034

5274

Statoil

Norway

2818

1182

Despite a diversified economy, the

Petrobras

Brazil

2744

716

O&G industry is still a key pillar of

Gazprom

Russia

1263

458

Malaysia’s economy. The country has

PDVSA

Venezuela

1210

158

a heavy reliance on O&G revenues

Saudi Aramco

Saudi Arabia

1061

272

to fund its public budget – it was

Pemex

Mexico

859

63

renewable energy utilization to 20%

15% in 2017 from a peak of 49% in

PETRONAS

Malaysia

287

10

2009 (EPU, 2017). Furthermore, the

ONGC

India

12

4

dependence is expected to increase

ADNOC

Abu Dhabi

2

1

again in 2018 to cover the revenue

NIOC

Iran

2

2

shortfall from the replacement of

Sonatrach

Algeria

1

0

GST to SST tax system. The sector’s

KPC

Kuwait

0

0

economic contribution has been

NNPC

Nigeria

0

0

estimated as RM203 billion for

Sonangol

Angola

0

0

a total national GDP of RM 1,353 billion, or 14.7% of the GDP (EPU, 2017), and it pays the highest salaries

Table 1: International patents by selected NOCs (from 1970 to 2017) Source: Author’s calculation based on the European Patent Office search

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THE FUTUREpatent applications, from 2000 to 2015, for renewable technologies for a TableFEATURE: 2 showsPOWERING data on cumulative selected group of countries.9 Measured by patents per population, Malaysia shows room for improvement.

Table 2: Cumulative number of patents filled for renewable technologies (2000-2015) Table 2 shows data on cumulative

Company

patent applications, from 2000 to Country Patents 2015, for renewable technologies1809 for a Singapore

selected group of countries.9 Measured

United States 102680 Spain shows room for improvement. 9682 China 169181 TheSouth energyAfrica sector is one of the 2238 pillars of Malaysia’s economy but it Mexico 4488 is not innovating enough to face the Brazil 6752 technical and political challenges.

ThisMalaysia study suggests to Malaysian 562 policymakers Turkey to put energy innovation 516 by patents per population, Malaysia

at the forefront of their sectoral

Source: IRENA and UN

Population 1809 5,535,262 United States 102680 319,929,162 46,397,664 9682 Spain 1,397,028,553 China 55,291,225 169181 South125,890,949 Africa 2238 205,962,108 Mexico 4488 30,723,155 Brazil 78,271,472 6752

Singapore

Malaysia

policy. Following Lester and Hart’s

Patents

562

Population

Patent per million population

Patent per million population 5,535,262 326.81 326.81 319,929,162 320.95 320.95 208.68 208.68 46,397,664 121.10 1,397,028,553 121.10 40.48 35.65 55,291,225 40.48 32.78 125,890,949 35.65 18.29 205,962,108 32.78 6.59 30,723,155

18.29

The(2012) energy sector is one of the pillars of Malaysia’s economy but it is not innovating enough to face the energy innovation framework Turkey 516 78,271,472 6.59 technical and10), political (see Figure Malaysiachallenges. needs to This study suggests to Malaysian policymakers to put energy innovation at the forefront of their sectoral policy. Following Lester and Hart’s (2012) energy innovation framework strengthen its national innovation Table 2: Cumulative number patents filled for (seesystem Figure 10), needs to strengthen its national innovation system from the of stage of creating from theMalaysia stage of creating renewable technologies (2000-2015) options to incrementally greater stages of innovation. options to incrementally greater stages of innovation.

Figure 10: Stages of energy innovation (Lester and Hart 2012)

Creating options Creating options “Ideation” “Ideation” Laboratory research Laboratory research Development andand proof Development of concept proof of concept

Demonstating Demonstrating viability viability Market testing Market testing Debugging Debugging

Early adoption Early adoption Market/regulatory Market/regulatory development development Manufacturing Manufacturing

System intergration intergration System

Prototyping Prototyping

Riskreduction reduction Risk

Pilot-scale Pilot-scale

Demonstration at Demonstration at commercial scale commercial scale Scale Scale: $10M-1B $10M-1B

Complementary Complementary infrainfrastructure structure deployment deployment Limited competition Limited competition

Seed Seed stage stage Scale: Scale: $100k-100M $100k-100M

Learning-by-doing/ using Learning-by-doing/ using Economies of scale Economies of scale Scale: Scale:Up Uptoto$10s $10sof ofbillions billions

Source: IRENA and UN

Improvement- in-use Improvement-in-use Continued cost Continued cost reductions reductions Unrestricted Unrestricted competition competition Learning-by-doing /using Learning-by-doing / using Carbon pricing Carbon pricing Evolutionary Evolutionary advances advances Scale: Up to Scale: Up to $100s of billions $100s of billions

Figure of energy innovation and Hart 2012).

The list includes patents for ocean energy, heat pumps, geothermal energy, fuel 10: from Stages waste, biofuels, bioenergy, hydropower, (Lester wind energy, wind power, PV thermal hybrid, solar photovoltaics, solar thermal, cross-cutting.

9

9 T he list includes patents for ocean energy, heat pumps, geothermal energy, fuel from waste, biofuels, bioenergy, hydropower, wind energy, wind power, PV - thermal hybrid, solar

Powering the future: Malaysia’s energy policy challenges photovoltaics, solar thermal, cross-cutting.

52 | POWER INSIDER VOLUME 10 ISSUE 4

23

POWERING THE FUTURE: Malaysia’s energy policy challenges

The national O&G sector can play

Malaysia has a very centralized energy

which would reduce the national

a much stronger role in promoting

innovation model, with PETRONAS

dependency on O&G.

innovation given its magnitude in

at the top. The national oil company

the share of the economy and the

has its own internal R&D and also

The energy world is in transition:

technical challenges that it faces.

partners with universities - its own

energy companies are re-evaluating

Lima-de-Oliveira and Sturgeon (2017)

Universiti Teknologi PETRONAS as

their business strategies and countries

show that the O&G industry has its

a case in point. PETRONAS has also

are rethinking their policy frameworks.

own innovation system, characterized

been experimenting with innovation

As a country rich in natural gas,

by intense collaboration between the

challenges through crowdsourcing for

Malaysia would be well equipped

main actors. Oil operators tend to

specific solutions. Such centralized

to make a transition towards a less

conduct in-house R&D for subsurface

mode, however, is not ideal in

carbon intensive energy system,

research and more asset-specific

promoting collaboration between

given the role of natural gas as a

questions. These lead firms influence

the diverse range of actors of the

bridge fuel. However, because of the

the development of technologies,

O&G value chain or attracting global

slow growth rate of domestic O&G,

which are more applied in nature,

in-house R&D from other companies.

particularly in Peninsular Malaysia,

by working with their Tier 1 suppliers

International oil companies, like Shell

natural gas output is being prioritized

like the oilfield service companies

and Exxon, participate in the extraction

to external markets, while coal is

Schlumberger and Halliburton.

of resources in Malaysia, but not in the

being used to generate electricity to

Operators also keep close links

production of new knowledge. Along

Malaysian citizens – carrying with it all

with universities and research and

with other national players like Sapura

the negative externalities from coal

technology organizations (RTOs)

Energy, they could be incentivised to

generation including disease-causing

for recruitment, the development

produce and share such knowledge

particulate matter. At the same time,

of technologies that are less asset

given a framework that created

there is recent political pressure to

specific and have broad applicability,

incentives towards R&D application in

redistribute more revenues from O&G

and in answering questions that are

Malaysia. Public policies to promote

production to oil producing states,

outside their core expertise. In O&G,

innovation and collaboration can

to compensate revenue losses in

no single technology determines

include matching funds, research

switching from GST to SST, and to

the competitive advantage of an

consortiums, high-technology

provide subsidized petrol. Considering

oil company. Instead, firms gain

government procurement, innovation

Malaysia’s high cost of production and

their competitive edge by building

calls and supplier development

a future global scenario of fossil fuel

capabilities to bundle and deploy an

programs.10 They could be structured

energy abundance that would keep

integrated set of technologies. Another

towards particular challenges in

prices down in the medium- to long-

key finding from Lima-de-Oliveira and

increasing the domestic O&G

run, the sustainability of the energy

Sturgeon (2017) is that public policies

production (e.g., maximizing resource

sector is under threat. This paper calls

can influence the scale of local R&D,

recovery, dealing with contaminants)

for policies that put innovation at

attract global research labs to where

as well as involve the development

the forefront with instruments that

international oil companies have a

and integration of renewables. In short,

promote wide collaboration between

sizable presence (co-location), and

an innovation policy is needed to

the multiple stakeholders.

promote knowledge linkages between

strengthen the O&G industry, as well

foreign and domestic oil companies,

as help develop the local talent and

local suppliers and universities.

capabilities in renewables energies,

10 Both PETRONAS and the Malaysia Petroleum Resource Corporation (MPRC) have supplier development programs. This task is critical to upgrade local players into higher value-added activities

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FEATURE: POWERING THE FUTURE

5. Conclusion

“More important than the riches from natural resources are the artificial riches of education and technology”.

Roberto Campos (1917-2001), former Brazilian Ambassador

The history of

with increasing costs of production

in crude oil. Gas has historically been

modern Malaysia

can seriously limit the competitiveness

a less noble by-product of the search

has been shaped by

of the local O&G sector in an era of

for oil but currently is the only fuel

its natural resource

global fossil fuel abundance. Equally

predicted to grow in share of the world

endowments, such as rubber, palm

important, Malaysia’s politics is passing

energy matrix. Natural gas is considered

oil, and particularly, O&G. Malaysia’s

through unprecedented changes, with

to be a bridge fuel: it has lower carbon

fossil fuel endowment has provided

the election for the first time of a

content per unit of energy generated

the country with a tax source to pay

governing coalition (Pakatan Harapan)

and can be stored and dispatched upon

for investments; affordable energy

not led by UMNO and Barisan

demand – characteristics not currently

that has benefitted consumers; and

Nasional. With increased political

available to most renewables, such as

an important manufacturing and

competition and party fragmentation,

solar and wind, which are intermittent

service sector led by PETRONAS and

distributive demands like petrol

sources of energy. However, domestic

other O&G extracting companies.

subsidies, low energy prices and lower

resources have not grown to the

Furthermore, PETRONAS became

taxation can be intensified, bringing

rhythm of the country and Malaysia

an icon of the country – beyond a

additional challenges to the fiscal

has deployed more and more coal in its

touristic hotspot and a F-1 sponsor –

stability of the country.

energy matrix.

due to its leadership in business ranks and example of an NOC that built capabilities to internationalize and

In summary, both the

For the energy sector

compete shoulder-to-shoulder with

global energy industry

to continue as one

major players.

and Malaysia are in

of the pillars of the

flux, which calls for a

Malaysian economy

reflection of the prevailing institutional

it is necessary to invest more in

These are true

arrangement and how to best seize

the future, to which innovation is

accomplishments

the opportunities brought by a shifting

key. Incentives for local R&D and

but one should not

energy business environment.

collaboration between lead firms,

rest on their laurels.

suppliers, and universities can

The energy sector is passing through

be targeted to reduce domestic

profound challenges – coming

This study suggests

production costs of O&G, unlock

from environmental pressures,

that Malaysia can be

more natural gas that can replace

technological disruptions, and changes

well placed to face

coal consumption, and build

the coming energy

capabilities in renewables.

in consumption patterns. All of these can put at risk the arrangement that

challenges, but doing so may require

so far has been beneficial to Malaysia.

new institutions and public policies.

In the domestic front, ageing fields

Malaysia is richer in natural gas than

54 | POWER INSIDER VOLUME 10 ISSUE 4

POWERING THE FUTURE: Malaysia’s energy policy challenges

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Industry Recorded the Highest Monthly Average Salaries & Wages of RM13,310.”

Release Date: Monday 10, July 2017.

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IDEAS is inspired by the vision of Tunku Abdul Rahman Putra al-Haj, the first Prime Minister of Malaysia. As a cross-partisan think tank, we work across the political spectrum to improve the level of understanding and acceptance of public policies based on the principles of rule of law, limited government, free markets and free individuals. On 2 September 2016, IDEAS was ranked as the 17th think tank to watch globally in a survey of more than 6,800 think tanks in 143 countries by the University of Pennsylvania’s 2015 Global Go To Think Tank Index Report.

Please support us by making a donation. You can make a contribution by cheque payable to “IDEAS Policy Research Berhad” or by transfer to our account CIMB 8008852042. We can only survive with your support. © 2018 IDEAS. All rights reserved.

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56 | POWER INSIDER VOLUME 10 ISSUE 4

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www.smartusys.com

HYDROGEN

Hydrogen is more than just energy storage, renewable hydrogen is the solution towards an energy transition Energy systems across the globe

renewable technology has decreased

the world leader in creating hydrogen

are undergoing a fundamental

much faster than expected, integrating

using electrolysis and implementing

transformation to increase the

these intermittent energy sources into

hydrogen fuel cell solutions.

quality of air and to decrease their

the power grid is highly challenging

dependency on oil, coal and gas as a

due to the increasing need for grid

primary energy source.Driven mainly

flexibility and energy storage solutions.

Electrolysers offer a multimegawatt solution

by a political vision to decrease the

This is where Hydrogenics, a global

Water electrolysers use electrical

negative impacts of climate change

hydrogen technology company,

power to split water (H2O) into

and decarbonize the power sector,

is leading the way in delivering a

hydrogen (H2) and oxygen (O2).

wind and solar technologies have

clean and everlasting solution to the

Thanks to Hydrogenics’ focus

emerged as key renewable

renewable energy equation. With over

on continuous innovation, our

technologies. While the cost of

60 years of experience, Hydrogenics is

electrolysers are capable of

58 | POWER INSIDER VOLUME 10 ISSUE 4

modulating their electrical energy

capacity in the TWh range for seasonal

input very rapidly (less than 1

storage capability. It can charge energy

second) over the total power range,

for several days, or even consecutive

When produced from renewable

making them a very attractive

weeks, without needing to discharge

power, hydrogen offers the capability

solution for grid balancing services

the stored energy.

to significantly decarbonize the power,

to the power sector in the MW-scale

for a range of applications as noted.

gas, transport and industrial sectors, by

range. Hydrogenics’ electrolysers

Unlike other energy storage

substituting oil, coal and natural gas.

are ‘plug and play’ units, safely

technologies, Power-to-Gas provides

In this case, hydrogen acts a 100%

and reliably producing very pure

the means to both store and transport

renewable energy vector, connecting

hydrogen in continuous or dynamic

energy. By storing hydrogen or

these sectors to renewable power. Per

operation modes.

substituting natural gas in the existing

Daryl Wilson, Hydrogenics President

natural gas pipeline network and

& CEO, “With over 20 megawatts of

Hydrogen is used in a wide range of applications

associated underground storage

energy storage plants commissioned

facilities, the stored energy can be

or being built around the globe,

Hydrogen is often seen as the glue in

discharged where and when it is

Hydrogenics is clearly leading the

maximizing renewable energy with the

needed most. This results in higher

Power-to-Gas market.”

industrial and transportation sectors.

overall integrated system efficiency.

Hydrogenics has delivered hundreds of

A fast-growing market with game changing potential

glass, semi-conductors), power

Renewable hydrogen as a Solution for Transportation, Storage, Power and Blending of Gases

plants (generator cooling) and for

Hydrogenics is leading the industry

it’s for transportation, fuel production

the hydrogenation of oils in the food

in renewable hydrogen projects

or energy storage, major companies

industry. In addition, Hydrogenics has

where electrolysers are used to store

around the world are strategically

supplied electrolysis technology to

renewable wind and solar electricity

transitioning to renewable hydrogen

over 60 hydrogen refuelling stations

into hydrogen. Once the renewable

to help reduce their carbon footprint.

worldwide where hydrogen is used as a

hydrogen is produced, there are

Hydrogenics technology is being used

fuel for fuel cell electric vehicles.

several ways to commercialize it in

in over 100 countries, with varied

the energy system. Hydrogen can

solutions in power, transport, industrial

Integrating Renewables for grid flexibility

be re-electrified via a fuel cell to

and gas blending applications.

Power-to-Gas is a highly effective

to-power). Hydrogen can be directly

way of integrating renewables. It can

injected into gas grids (power-to-gas)

provide a rapid, dynamic response to

or combined with carbon dioxide (CO2)

Hydrogenics: the leading provider of renewable hydrogen solutions

the Independent Grid Operator’s signal

to produce synthetic methane (CH4).

Hydrogenics is the global innovation

to adjust to the variations in renewable

Hydrogen can also be used in industrial

leader with over 60 years of

generation output. The siting of a

applications (power-to-industry), in

experience in designing, manufacturing

Power-to-Gas facility is not restricted

fuel production (powerto- fuels) for

and installing industrial and

to any geologic formation; it can be

fuel cell vehicles like buses and cars,

commercial hydrogen systems around

deployed wherever the power and gas

and at refineries or in the production of

the world. Hydrogenics’ electrolysers

grids intersect.

methanol. Hydrogenics has done over

deliver pure hydrogen solutions

30 projects using these technologies

for industrial processes, renewable

Power-to-Gas is a scalable technology.

and applications by converting mostly

hydrogen projects and hydrogen

It provides unparalleled energy storage

excess renewable energy to Hydrogen,

refuelling stations. Hydrogenics

electrolyser systems for every industry, including ammonia production plants (fertilizers), oil refineries, industrial manufacturing plants (steel, float

It is clear that hydrogen technologies will be at the core of our new decarbonized energy system. Whether

deliver power when needed (power-

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FEATURE: HYDROGENICS

also designs hydrogen fuel cells

soon expanding those initiatives in the

hydrogen annually within the smallest

for light and heavy fuel cell electric

Asia Pacific region. Hydrogenics has

carbon footprint and highest power

vehicles including urban transit buses,

developed and installed more than

density in the industry.

commercial fleets, utility vehicles

500 electrolyzers globally, including

and trains, as well as for stationary

the first-to-market scalable PEM

Hydrogenics has production sites in

applications such as critical power and

electrolysis electrolyzer. This past

Canada, Belgium and Germany and

hydrogen power plants.

February, the company was awarded

sales offices in select locations around

a contract by Air Liquide Canada Inc.

the world. Hydrogenics is publicly listed

Hydrogenics currently has lead the

to design, build and install a 20 MW

on the NASDAQ (HYGS) and TSX (HYG)

global market in Hydrogen energy

PEM electrolyzer system, considered

and is the only global company to

storage with the vast majority of large

the world’s largest, at Bécancour,

produce both water electrolysers and

projects completed or under contract

Québec. Hydrogenics says the plant

PEM fuel cells, making it the leading

in Europe and North America, while

will produce about 3,000 tons of

company in clean hydrogen technology.

Powering Change in the Transportation Sector

60 | POWER INSIDER VOLUME 10 ISSUE 4

HYDROGEN: THE SOLUTION TOWARDS AN ENERGY TRANSISTION

One of the key market drivers for

A hydrogen Fuel Cell Electric Vehicle

Canada is considered a global leader

hydrogen as fuel source is the need

(FCEV) is an electric vehicle in which a

in the hydrogen sector and has one

for deep decarbonization of our

fuel cell is used to keep a small battery

of the largest concentrations of

economies. The tipping point was in

at an optimal rate of charge. The

hydrogen product and services in

2015 with the Paris Agreement on

drivetrain of a FCEV is the same as a

the world. Hydrogenics Corp. is one

Climate Change. Governments, experts

battery electric vehicle. A FCEV provides

of the pioneers in developing fuel

and industries have acknowledged

zero emission transport with the same

cell technology for transportation.

the need to move towards a net zero

performance in terms of range, payload

Hydrogenics has over 2,000 fuel cell

carbon by 2050 which is extremely

and refueling time as a conventional

installations around the world, and

challenging. There is a clear trend towards direct electrification of transport, heating and industry using more renewables. With the transportation sector being among the highest contributors to GHG emissions and pollution worldwide, one of the only ways to achieve deep decarbonization is to opt for hydrogen fuel produced from renewable power using water electrolysis technologies.

Hydrogen fuel cells are very well

is one of the few companies in the

One of the only ways to achieve deep decarbonization is to opt for hydrogen fuel produced from renewable power using water electrolysis technologies

suited to play a large role in the de-

industry with expertise and technology on both the generation and use of hydrogen within fuel cells.

When looking at the business case and emission reduction targets, hydrogen is well positioned to have the biggest impact in transportation industry as a fuel source. Hydrogenics says the hydrogen fuel cell is the answer to scaling down emissions from vehicles and the company is now considered a major supplier of fuel cells for medium

carbonization of the transportation

vehicle. Since fuel cells can deploy

and heavy-duty trucks and buses, as

sector. When powered by renewable

energy in very dense packages, they

well as commercial passenger trains.

energy sources electrolyzers can

are also quite suited to moving heavy

produce green hydrogen that is

duty vehicles. This is why momentum is

Hydrogenics supplied the core power

renewable and emission free at the

building for Hydrogen fuel cell powered

for the French train manufacturer,

point of generation and the point of use

transport over the last decade with

Alstom’s “Coradia iLkint“, the world’s

within fuel cells, providing a clean well-

successful implementations in cars,

first passenger hydrogen fuel cell trains

to-wheel solution.

rail, trucks, bus, and other medium and

in Germany and now have orders to

heavy-duty applications.

supply the largest hydrogen powered

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FEATURE: HYDROGENICS

train fleet in the world. Hydrogenics fuel cells are also powering the world’s largest hydrogen powered bus fleet in China, and have freight, delivery, and public sanitation vehicles throughout Europe and North America.

In December of 2018, Hydrogenics announced it has been selected to design and supply fuel cell power modules for a new lightweight vertical take-off and lift (VTOL) aircraft to be used for daily commuting and other applications, revolutionizing the way people travel between cities and around the country.

Hydrogenics has been integrating

significantly smaller size and weight

The technology is market proven

hydrogen fuel cells into vehicles

as well as faster refueling time in

and continues to advance. The

for decades, with their HyPM-HD®

comparison to battery applications.

Hydrogen Council projected that fuel

power modules, and most recently

Their compact design allows for easier

cell efficiency will likely reduce fuel

launching a new HD50 power module

integration and provides a robust and

consumption by 20 to 35% as the

for heavy-duty trucks and buses at the

flexible platform with no compromise

technology is further refined over the

Fuel Cell Expo in Japan earlier this year.

in vehicle performance.

next 10 years. It is also expected that

HyPM-HD® power modules produce

the fuel costs per kg hydrogen will fall

DC power in standard outputs ranging

as distribution and retail infrastructure

from 30-180 kW per module. They

scale up. This seems quite reasonable

offer longer runtimes and life at a

given the significant cost reductions already achieved in the last decade with electrolysers, refueling stations, and fuel cell costs cut significantly.

62 | POWER INSIDER VOLUME 10 ISSUE 4

Edra Power Holdings

Power Barges and Powerships: A Power Project Developer’s Tutorial Recent international press coverage

are over 80 power barges installed

speed engines in either simple and

concerning large power barge projects

and operating around the world with a

combined cycle mode and can range

in Lebanon, Ghana, Pakistan, United

utilization rate of over 96% primarily

in output from 30 MW to 300 MW

States and beyond, have increased

deployed on mid to long-term power

per power barge. Larger output on

project developers’ awareness of these

purchased agreements.

individual power barges is possible

unique power plant siting options.

depending on the power project

While power barges are fairly low

Power barges utilize state-of-

profile in the developers radar, there

the-art gas turbines and medium

64 | POWER INSIDER VOLUME 10 ISSUE 4

development requirement.

Multiple power barges may be

years for mid-term and 10 to 25 years

25-year contract becomes less of an

combined in large power barge

for long-term contracts. Most power

economic advantage and becomes a

complexes, such as the existing 650

barges in the world are permanently

disadvantage. Powerships can be more

MW power barge complex in New York

installed on long-term contracts.

challenging to service and perform major

City, USA and 290 MW power barge complex in Lagos, Nigeria.

overhauls on without shipyard support.

Power barge designers take into

Some larger powerships may also not

consideration these mid to long-term

be World Bank compliant on heavy

What is a Power Barge?

operations by increasing steel plate

fuel oil exhaust emissions or compliant

A power barge utilizes conventional

scantlings, installing active and passive

with seawater discharge temperature

land-based power plant generation

cathodic protection, and specifying

regulations, making long-term financing

technology installed on either new or

special coating systems, thus avoiding

and permitting more difficult.

recently fabricated deck barges. They

the need for frequent dry docking.

operate with the same efficiencies,

Many power barges are still in operation

The residual value of power barges is

the same fuels, and with the same

long after 25 years.

much higher than land-based plants

operation and maintenance teams as their land-based technical equivalent.

as they do not require dismantling, Currently, there are a few power barges

component shipping or reassembly.

operating in emergency or temporary

Power barges employed on mid

Capital costs and construction

(short-term 6 months to 5 years)

to long-term contracts can be

schedules for power barges can be

contracts, but this format is usually

redeployed by disconnecting from the

comparable and, in many cases, will be

served by containerized high speed

existing site and reconnecting at the

less expensive with faster deliveries than

engines, mobile gas turbines, and

new operating site.

equivalent land-based power plants.

powerships. Powerships are similar to power barges but are less competitive

Basing Considerations

This is due to the construction of

in mid to long-term contracts as their

Many power plants are built around

power barges in shipyards (like building

advantage is based on self-propulsion

coastal port cities where land cost

a power plant in a shop environment)

needed for frequent shifts from

can be expensive for building of

and that construction can commence

contract to contract. The need for

conventional power plants. Power

prior to permitting. Shipyards employ

self-contained propulsion in a 5 to

barges can either operate on a pier/

skilled labor at much lower costs with duty free import/export zones and offer year-round construction in favorable weather. Land-based construction often experiences equipment import delays and costs, unfavorable weather and expensive skilled labor costs or the lack of local skilled labor. Many power barges are built in Southeast Asian shipyards then delivered around the world.

Operation and maintenance costs for power barges are comparable to equivalent land-based power plants.

Power barges are ideal in mid and long-

Image: Estrella Del Mar II 106 MW Combined Cycle Wartsila 18V50 DF Medium Speed Engine 60 Hz power barge (currently available)

term contracts with durations of 5 to 10

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FEATURE: POWER BARGES

dock or can operate remotely on a

combined with power barges in a

conventional power plant. These are all

mooring, thus requiring a minimal

complex. FSRUs with onboard power

suitable for power barge applications.

amount of land or no land at all.

may be suited for the long-term

Most waterside sites under

Land-based power plants incur costs

contracts, but separate FSRUs and

consideration for brown-field or

associated with land acquisition and

power barges are better solutions

green-field land-based power projects

site civil works, including extensive

for short or mid-term contracts. The

can also be suitable sites for power

pilings and foundations that can be

difference is that at the end of the

barge projects.

very costly and take considerable time

short or mid-term contract, the next

to construct.

suitable contract will need to have the

Project developers should consider

same FSRU performance and power

the power barge option for many

Power barges only require enough

generation requirements. Whereas

reasons, including land availability/

water depth to float (usually around

FSRUs with separate power barges

cost, local labor availability/cost, project

2 to 3 meters) and shelter from the

can be deployed independently on

commissioning schedules, seismic

open seas. Power barge installation

contracts that do not match up with

or geophysical conditions, weather,

can also accommodate most

the integrated capabilities.

tsunami or tidal surges, or climate

hurricane/typhoon winds and surge conditions as well as tsunami surge.

Power barges and FSRUs As power barges utilize the same power generation technology as landbased plants, and they have the same fuel supply and operating economics.

However, there is a new role that power barges can play in the recent

change effects.

Operation and maintenance costs for power barges are comparable to equivalent landbased power plants.

About the Author Dave Nickerson is founder and president of Power Barge Corporation. He has over 30 years of experience in power barges and powerships with an additional 14

strong shift to LNG fuels.

A new generation of power barges is

years as a merchant marine officer,

With dwindling numbers of new

now underway with Energy Storage

shipyard superintendent, and senior

large-scale LNG receiving projects,

Systems such as large scale NMC

engineering specialist for space launch

the attention has turned to the mid-

and LFP battery power barges. Power

vehicles, advanced cruise missiles and

scale markets. The challenges for

Barge Corporation is developing new

nuclear submarine programs.

new mid-scale LNG fueled projects

designs that range from 50 MW 4 Hr to

are the lack of mid-scale LNG carriers

100 MW 4 Hr energy capacities. These

Power Barge Corporation is a Houston

(vessels), regasification capacity, and

are ideal for major port cities that

based EPC and project/engineering

the non-linear economies of scaling

have substantial hydro, wind or solar

services group that specializes

these vessels and facilities. Mid-scale

power facilities or are in need of other

in design and/or construction of

floating storage and regasification

ancillary services that large scale ESS

medium-speed engine, gas turbine

units (FSRUs) are just coming into

can provide.

and battery power barges.

LNG vessels. Mid-scale LNG carriers

Conclusion

www.powerbargecorp.com

and FSRUs store and process

Most power plants around the world are

approximately 15,000 to 45,000 CM

sited near cities located on navigable

Disclaimer: PBC has been under

of LNG like the Saga LNT carriers.

rivers or in seaports. These cities have

contract to most companies in the

high electricity demands. The rivers

power barge and powership business

Some companies are evaluating

or seaports provide an ease of access

and also owns and markets existing

the combination of FSRU with

to transport heavy power generation

power barges.

onboard power generation or FSRUs

to the site and cooling water for the

the market, along with mid-scale

66 | POWER INSIDER VOLUME 10 ISSUE 4

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