This year’s POWER-GEN Asia conference and exhibition enjoyed a record-breaking attendance and put power project financing trends under the microscope while also exploring the future role of renewables and nuclear in the ASEAN region, writes Kelvin Ross

Traditional Thai drummers on the exhibition floor at POWER-GEN Asia in Bangkok

The integration of renewables and the future role of nuclear in the ASEAN region were two of the main talking points at POWER-GEN Asia in Bangkok last month. And underpinning all debates at the show – which enjoyed a record attendance this year – was discussion of the various financing models available in Asia to get power projects off the ground.

Thailand’s renewable energy ambitions were outlined at the opening keynote session. And while there was widespread support for the promotion of renewable technologies, there were also warnings about the way in which they are deployed.

Permanent Secretary to the Ministry of Energy, Kurujit Nakornthap, stressed that “electricity is a basic requirement for a growing economy”.

He said that while Thailand had plentiful fossil fuels with price stability, it also had “abundant renewable resources” and had set itself a target of growing the number of renewables in its energy mix from the existing 8 per cent to 20 per cent by 2030. This would come, he said, by utilizing not just wind and solar, but also biomass and biogas technology.

Soonchai Kumnoonsate, governor of the Electricity Generating Authority of Thailand (EGAT), said that “if we want a sustainable tomorrow we have to take steps today”.

But he warned that a balance had to be struck to ensure a rounded energy mix that met all the conditions of the energy trilemma: security, equity and sustainability.

He said that “many people want to follow the German model, but renewables need flexible backup” and added that “in many countries subsidies for renewables are pushing fossil fuel plants out of the market”.

However, he stressed that it was EGAT’s aim to deliver 20 GW of renewables into Thailand by 2016.

Dr Piyasvasti Amranand, chairman of Thai energy company PTT, cautioned that “we have to be extremely realistic about the true potential of renewables”. In particular, he wondered if there really was enough potential for growth in Thailand for the biomass and biogas sectors. And he said that that any focus on developing Thailand’s energy sector had to first focus on energy efficiency and curbing demand.

“I am not sure I see concrete measures in energy efficiency that will curb power demand. If that is the case we could see a rapid growth in demand.”

And this surge of demand, he warned, would result in a reliance on fuel oil, “which is expensive and dirty”.

Cross-border power sector investment was the focus of POWER-GEN Asia’s plenary panel discussion. It was chaired by Edward McCartin, senior vice-president of Synova LLC, who wanted to discuss what’s going on in cross-border transactions in southeast Asia and compare the experiences of developers, financiers and advisors across the region. Before the session, McCartin told Power Engineering International that he wanted to “examine the tension and the challenges of trying to fit renewable energy projects and keep them alive. With coal being as cheap as it is, it’s very difficult to do renewable projects and get the necessary finance.”

He said that southeast Asia had seen new investors coming in who were financial players rather than “your traditional power companies, but those guys also have their own objectives and their own proclivities that don’t necessarily fit with a 25- or 30-year power development”.

“Similarly with financing, we are seeing local banks in places like Thailand and the Philippines – and certainly India – who are the ones driving the bus in terms of financing projects, but international financiers are still important in places such as Myanmar, Indonesia and also Singapore.”

McCartin said that power was “going through a change. A lot of the power companies out of the US and Europe are evaporating out of the region and we are seeing very strong activity from the Japanese and the Korean trading companies. And the Chinese are starting to move into that bit of the business and not just technology.”

But he stressed that the ASEAN region “is still a very solid place to be putting your investment dollars”.

Once the session was underway, the subject of renewables was tackled and Cyril Cabanes, senior vice-president of development at Marubeni Asian Power Singapore, said that regulatory certainty was vital for renewable investors. Cabanes said the role of governments was to “keep the train moving. The train may slow but it must keep moving. But if you leave it to the market, then the train will stop and that will be very uncomfortable for the passengers.”

Justin Wu, head of Asia-Pacific at Bloomberg New Energy Finance, said that the drivers behind renewable developments in Asia have changed, particularly in China. “Most new developers in China don’t care about carbon emissions – they are building renewables because there is a desperate need for energy.”

Cabanes (right): Regulatory certainty is vital for renewables

 

Amranand: called for energy efficiency focus

 

McCartin: ‘Local banks are driving the bus in terms of financing power projects’

Saud Siddique, executive chairman of Singapore-based Odyssey Capital, said that “investors have come to understand the risks of power projects. They have understood that the best investments are underpinned by good governance, and law and environmental issues are dealt with.”

One type of financing that is struggling in Asia is private equity. Gregory Karpinski, chief executive of MAXpower Group, said that “private equity in Asian infrastructure is a horrible mix”. He said that while some private equity firms would “take a punt”, private equity is “fundamentally incompatible with power projects in Asia”.

The panellists were asked to pick the countries that offered the best opportunities for cross-border investment. McCartin opted for the Philippines – “a very solid place” – but he warned that “competing with the local guys is hard – they are very savvy”.

Kaminsky and Cabanes also picked the Philippines while Mark Hutchinson, an energy expert with Thailand’s Advisors in Energy, singled out Thailand because it is “very stable”, with “long-term predictability and the general ease of doing business.”

Meanwhile, in a conference session dedicated to nuclear power, delegates were told that Asia will account for 80 per cent of global nuclear capacity additions by 2040.

Antonio Della Pelle, managing director of Enerdata in Singapore, said that nuclear will increase by more than 350 per cent on its current capacity by 2040, and more than half of the newbuilds will be in China.

He said China would become the nuclear energy superpower, not just in terms of capacity but also in terms of having the best technology to export. “Our children, when they talk about nuclear, will talk about China,” he added.

With one 2.4 GW new nuclear plant already going ahead in Vietnam and being built by Rosatom, he said other countries were seriously considering atomic energy, such as Indonesia and Malaysia. He said that, for Asian countries, nuclear was a serious option for their energy mix because “if we look at the levelized cost of energy, nuclear is the cheapest next to coal. And by 2040 it will be the cheapest – while solar PV will see the largest reduction in the levelized cost of energy.”

Three days of conference sessions were brought to a close with a wrap-up debate which gave the audience the chance to electronically vote on key questions affecting the Asian power market.

They were asked what is the biggest challenge to adding power generation capacity in Asia, and the resounding answer – with 75 per cent of the votes – was regulatory and policy uncertainty, while the second biggest obstacle, with 13.9 per cent, was financing.

Karpinski: ‘Private equity is incompatible with power projects in Asia’

 

Siddique: ‘Investors understand the risks of power projects’

The audience was then asked: what will be the dominant energy source in Asia in the next five years? Some 59.9 per cent said coal, 29.7 per cent voted for gas and 10.8 per cent opted for solar, while no-one saw a five-year future for nuclear or wind.

But with the question opened out to a time span of beyond five years, the answers changed to gas 44 per cent, solar 27.8 per cent, coal 22.2 per cent and nuclear 5.6 per cent – still no-one was putting any faith in wind.

Next, the audience was asked: what are the chances were of more Asian countries starting a nuclear programme? The majority (47.4 per cent) felt it was unlikely, while 28.9 per cent thought it moderately likely. Sarah Fairhurst, a partner in Hong Kong’s Lantau Group, suggested this result was because nuclear “correlates with the rise of solar. Nuclear’s big benefit has always been that it is low-carbon, but if you can find something just as low-carbon, then it diminishes.”

Winners of Asia Projects of the Year revealed

The winners of the inaugural Power Engineering International Asia Projects of the Year Awards were announced at POWER-GEN Asia in Bangkok.

At a VIP ceremony the trophies were awarded for the best gas-fired, coal-fired, distributed generation and renewable projects.

The gas-fired award was won by S-Power for its Ansan combined heat and power plant in South Korea.

The plant has an efficiency level of more than 60 per cent and utilizes Siemens’ latest H-class gas turbine technology.

In addition to generating electricity, it also provides district heating for Ansan city.

Siemens and its partner, South Korea’s Posco Engineering & Construction, completed the plant in 24 months, from groundbreaking to first commercial operation.

The award for best coal-fired plant went to the Mong Duong II power plant, Vietnam’s first and largest build-operate-transfer coal project, with 100 per cent foreign direct investment of around two billion dollars. The project owner is AES-VCM Mong Duong Power Company, which comprises the AES Corporation from the US, Posco Energy Corporation from Korea and China Investment Corporation.

Mong Duong II commenced construction in August 2010 and entered commercial operations in April this year. The plant will produce more than seven billion kilowatt hours of electricity per year, supplying more than five per cent of Vietnam’s electricity demand.

After 25 years of operations, the plant will be transferred to the government of Vietnam.

Best distributed generation project was won by Amata Power – a division of Amata B. Grimm Power Group, one of the Thailand’s leading small power producers – for two combined heat and power plants on the Amata City Industrial Estate in Bangkok.

Each combined heat and power plant is equipped with a pair of Siemens SGT-800 gas turbines, with an output of 50 MW, and one SST-400 steam turbine, which adds another 40 MW of electrical power to the output.

A major requirement from Amata B.Grimm Power was that the facilities had to be as fuel efficient as possible because in Thailand the price of natural gas continues to out-strip electricity tariffs, which puts profit margins under pressure.

The winner of the best renewables project was the Burgos wind farm, operated by EDC Burgos Wind Power.

The wind farm in the Philippines is now the biggest operational wind farm in Southeast Asia and is also the first renewable energy project to qualify for the Philippines’ new feed-in tariff regime.


Matthew Wittenstein, electricity analyst at the International Energy Agency, said that “nuclear doesn’t make sense for flexible backup to renewables”.