While Europe’s power sector stagnates, plagued by mothballing of plants and policy uncertainty, Asia’s thirst for more electricity is driving a boom for domestic and international energy firms alike.
At POWER-GEN Asia in Kuala Lumpur last month the question of how Asia would meet its energy needs was addressed, with one word summing up the answer: coal.
At the opening keynote ceremony, Zainudin bin Ibrahim, vice-president of generation at Tenaga Nasional Berhad (TNB), Malaysia’s biggest power company, forecast that Malaysia is set to use 40 million tonnes of coal a year by 2020 to meet its energy demands.
He said that the “forward momentum” of the country’s economy was pushing up energy demand, which last year rose by 3.8 per cent. Some 44.5 per cent of the Malaysian peninsula’s energy supply comes from coal and he said this is only going to increase, as natural gas resources are disappearing.
And he added that these statistics should be enough to drive home the need for a shift in energy strategy in the country. “If ever there was a need for the industry to collaborate on the way forward, it is now. There is a common interest to develop a modern power system that is smart and sustainable.”
Indeed, smart and sustainable are the key words driving what he called a “transformation” of TNB’s business, with the focus now on delivering only the most high-efficiency power plants, and he added that this transformation would enable the company – and the country – to make “a quantum leap” into a modern power mix.
Next on stage was the Asian Development Bank’s head of energy, who urged Asia not to tackle its rocketing electricity demand by adopting the attitude that “coal is cheap – let’s pollute”. Anthony Jude said that while coal is readily available and low-cost, it would always be the easy option for those countries struggling to meet spiralling energy demand.
Jude, who is head of the ADB’s Energy Committee, said that $12.2 trillion of energy infrastructure investment would be needed to meet the region’s power needs, but stressed that this must be spent on the right type of plants. He said that if Asia was “going to go down this trajectory” of coal, it was vital that new power plants must burn coal in the cleanest way possible.
He also called for a drive on energy efficiency and regional trading as a way to alleviate the electricity demands of ASEAN nations. Otherwise, he warned, “Asia is going to have serious problems with security of supply and climate change”.
Speaking to PEi on the exhibition floor, Sean Purdie, managing partner for power in the Asia Pacific with Environmental Resources Management, said: “In my experience of 15 years in the power sector in Asia, the highest growth area in terms of risk profile is environmental, social, health and other types of risk – if you like, stakeholder risk: people are aware of what is going on in the environment and what can be done to alleviate the issues and improve their life.” But the issue of environmental impact, while being acknowledged, looks set to come second to the need to provide fast, reliable power.
|Seats of power: plenary panel speakers
Mark Hutchinson, managing director of IHS Energy, said on the sidelines of the conference sessions: “Price is the main driver. Economics trumps environment – sadly to many people. In the current situation, that is the case. Coal wins, sustainability loses.”
The issue of what exactly sustainability means was tackled at the Plenary Panel discussion. I had asked the group of panellists whether it was realistic to expect power-hungry Asian nations to balance energy demand with sustainability.
In reply, the boss of a Malaysian power firm said that “sustainability is about more than CO2 – it’s about economic growth”.
Torstein Dale Sjotveit, chief executive of Sarawak Energy Berhad, said that “people have a very narrow mindset in terms of sustainability”.
“For me, sustainability means a balanced mix between economic growth, technology and environment. It’s not just about making a better environment, so to speak.”
He said the average emissions per capita in ASEAN nations was six tonnes. “In Norway it’s about 13, in Australia it’s 26, and the US is 22. So the western world really has to take a big chunk of the challenge of solving the CO2 issue.”
On whether solar was a solution to electricity demand, he said that to replace one of his hydro plants which generates 20 TWh per year with solar, “it will take 500 square km for the solar panels, it will cost more than 100 billion Ringits [$31bn], and then after five years you have to spend 20,30, 40 million to replace all the batteries.
“So sustainability is about more than CO2. It’s about economic growth in Asia.”
Charanjit Singh Gill of Tenaga Nasional Berhad added that solar “is not the magic pill” for large-scale power generation. “It plays it role but it’s a supplementary role.”
It was suggested that if a storage solution could be found for solar, it would take away the intermittency issues of renewables.But Ahmad Fauzi Bin Hasan, chief executive of Malaysia’s Energy Commission, said: “If you really want to go for energy storage, there are options, but they are not economically feasible at the moment.”
He said that “coal is the way forward”, with the proviso that they employ CCS and IGCC.
Wouter van Wersch of Alstom said that storage “will be a key game-changer – the new technology is going to come”. He added that the so-called prosumer market – consumers who produce their own electricity – would also be a similar game-changer .
“As soon as the consumers themselves play an active role in the managing of the energy, this is going to be a drastic change for our industry. Of course we are not there yet, it will take some time, but in the medium term and the longer term it will have an effect.”
Voting offers snapshot of opinions
POWER-GEN Asia’s final conference session gave the audience the chance to vote on several questions designed to offer a snapshot of the delegates’ opinions.
The questions and the results were as follows:
What do you think are the biggest challenges in adding generation capacity in Asia?
Financing: 29 per cent;
Regulatory uncertainty: 33 per cent;
Fuel price uncertainty: 5 per cent;
Overcoming public objections: 33 per cent.
What do you see as the dominant energy source for capacity additions in Asia in the next five years?
Coal: 91 per cent;
Gas/LNG: 0 per cent;
Nuclear: 5 per cent;
Solar: 5 per cent;
Wind: 0 per cent.
And beyond the next five years?
Coal: 57 per cent;
Gas/LNG: 9 per cent;
Nuclear: 26 per cent;
Solar: 9 per cent;
Wind: 0 per cent.
Considering the decreasing price of PV panels, what is the likelihood of Asia following Europe in starting to invest in such panels on a large scale?
Very likely: 35 per cent;
Quite likely: 43 per cent;
Somewhat unlikely: 22 per cent;
Very unlikely: 0 per cent.
What is the chance of nuclear making a comeback in Asia in the wake of Fukushima?
Quite high: 26 per cent;
Moderately likely: 52 per cent;
Somewhat unlikely: 9 per cent;
Very pessimistic: 13 per cent.
In response to this question, Mike Thomas, partner in Hong Kong-based Lantau Group, said that nuclear was “picking up in China and it hasn’t gone away in Korea – I see no other alternative from a carbon perspective in China”.
What are the prospects for more integrated transmission grids across Asia?
Little chance: 32 per cent;
Some progress: 41 per cent;
Significant development: 27 per cent.
What is the most effective way to support the development of renewables?
Obligations on generators/suppliers: 18 per cent;
Feed-in tariffs: 45 per cent;
Direct government subsidy: 18 per cent;
None – renewables must develop unaided: 18 per cent.
What is the best approach for Asia’s power supply system?
Large central power stations with extensive transmission systems: 9 per cent;
Local renewable generation with flexible local back-up generators: 4 per cent;
A mix of both: 87 per cent.
What evolution of market share do you see for traditional Western and Japanese OEMs vs those from China and South Korea?
Shrink to boiler, turbine and generators business only: 33 per cent;
As above and then disappear altogether: 14 per cent;
Remain significant for some plants only (e.g. CCGT): 29 per cent;
Stay unchanged: 9 per cent;
Regain momentum: 5 per cent.
POWER-GEN Asia’s closing reception saw the Best Paper Awards. The winners were:
Track 1: Trends and Planning: Sarah Fairhurst, Lantau Group, for ‘Is gas the right fuel for power in the Philippines?’;
Track 2: Clean and Flexible Operation: Akihiro Komaki, IHI Corp, for ‘Operation experiences of oxyfuel boiler in Callide oxyfuel project’;
Track 3: Power Plant Technologies: John Marion, Alstom Power, for ‘Advanced ultra-supercritical steam power plants’;
Track 4: Operation, Optimization & Servicing: Joel Wagner, STEAG Energy Services, for ‘Online Fatigue Monitoring and Predictive Analysis for Improved Flexibility of Plant Operation’.
Precergy managing director Adrian John said: “When we talk of sustainable power growth and the strategic and technology challenges that Asian countries are facing, we are really talking about how countries can balance the interests of all stakeholders while ensuring timely investment in power infrastructure that underpins continued economic growth and social development.”
He said that from a strategic perspective “the greatest challenge is for policymakers to create stable and attractive investment environments that appeal to a balanced cross-section of domestic and international investors. Without this, we see ambitious annual and long-term capacity targets missed time and again as projects struggle to get financed and reach final investment decision. In light of this, major issues of fuel subsidies and tariff cross-subsidization that often deter investment and impact market efficiency must be addressed.”
|Above and top: a packed audience heard the opening keynote session
On choosing technology, John stated that “the challenge is for countries to provide reliable and secure electricity supplies to growing populations and economies while not contributing unduly to climate change or other localized environmental issues such as air pollution or flooding. In this context countries face the difficult decisions of whether to simply focus on maximizing their domestic fossil fuel or hydro resource endowments or to invest in currently more expensive but less environmentally damaging technologies such as wind and solar.”
Earlier, Malaysia’s deputy energy minister had stressed to delegates that the country had already made that ‘difficult decision’ and was pushing ahead with a renewable energy blueprint. YB Dato’ Seri Diraja Mahdzir Khalid said that renewables had “the potential to change the industry” in the ASEAN nations and in particular in Malaysia.
“As a nation that is still in its development stage, Malaysia is faced with an increasing demand for electricity which is needed to drive economic growth while maintaining adequate supply and efficient utilization of resources with minimal impact to the environment,” he said as he delivered the event’s keynote speech.
|VIP delegates try the latest technology on the exhibition floor
He explained that the government has set an ambitious target of delivering 985 MW of electricity from renewables by next year.
The minister added that feed-in tariffs had been introduced in 2011 for solar PV, small hydro (under 30 MW), biomass, biogas and geothermal, and so far 5300 applcations had been received – worth 1079 MW – of which 4500 (805 MW) had been approved.
He added that a Green Technology Financing Scheme had also been set up and to date had approved funding for 131 projects. And he stressed that as well as a drive for renewables, the government was backing the use of clean coal technology in all new coal plants.
On the exhibition floor, established companies were joined by new players, and none were newer than Ethos Energy, just 120 days old on the first day of the show.
Ethos is a coming together of two companies – Siemens’ TurboCare business and the former Wood Group gas turbine services. It offers lifecycle solutions for energy assets such as gas and steam turbines, generators, compressors and transformers.
Meanwhile, Ramesh Singaram, president of GE Power Generation APAC, explained that “the biggest thing happening in Asia is the discussion of market reforms and removal of subsidies”.
He said: “With the gas price at around $16-$18, when you subsidize that, then you’re never going to get the most efficient machines onto the grid. So markets are facing challenges with regard to how you make sure you get the most competitive levelized tariff in the market.”
Whatever the issues ASEAN countries face in bringing new power generation online, Alstom’s Wouter van Wersch summed up the energy future for the region: “The 21st century is clearly going to be the Asian century – the market is here and the resources are here.”
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