Across Asia, federal and municipal governments are promoting decentralized energy through policies and initiatives designed to encourage the uptake of multiple technologies, but there is still more work to be done, write Jens Kastner and Julian Ryall
|Japan’s Fujisawa Sustainable Smart Town, where each home is fitted with solar panels and battery energy storage systems Credit: Panasonic Corporation|
The energy market in Asia is one of the most dynamic sectors in the region, and so government policy and regulation are having to be nimble and flexible, trying to coax production in a sustainable direction.
Take the deregulation of Japan’s household electricity market, which went into effect on 1 April. It enables consumers to choose their energy provider through a unified grid instead of having to rely on the nation’s 10 regional utilities who have had local supply monopolies.
Smaller power providers are expected to gain more market access as a result. Indeed, in the run-up to deregulation, no fewer than 266 companies had registered as providers of electricity, giving consumers choice on price and other incentives, such as choosing energy that is not from a nuclear power plant.
Liberalization of the gas market is scheduled to follow suit in 2017, with the full opening of the power industry to be completed when, in April 2020, a revised Electricity Business Act will separate power transmission and distribution from the major power firms, and open up new opportunities for distributed energy systems.
Prior to March 2011, Japan’s energy mix was dominated by nuclear power, natural gas, oil and coal, with renewables accounting for a fraction of the total that was being consumed. The earthquake and tsunami that struck the coast of northeast Japan on 11 March of that year, crippling three of the six reactors at the Fukushima nuclear plant, triggered not only the second-worst nuclear accident in history, but a backlash against Japan’s dependence on atomic energy. As recently as 28 June, shareholders attending nine power companies’ annual meetings called on them to move away from nuclear energy and invest in alternative energy sources.
And while the motions were all voted down, and the Japanese government remains committed to nuclear energy, there has been a recognition that the nation needs to move away from its monolithic reliance on the grid. It has also set a target of renewables accounting for 24% of the total energy mix by 2030. Stand-alone, on-site power will be a key part of that change.
‘In Japan, distributed energy systems are lagging behind other major economies because the centralized system and the efficient transmission system were always considered to be reliable,’ said Yoshiaki Shibata, a senior economist and manager of the new and renewable energy group at the Tokyo-based Institute of Energy Economics, Japan.
‘People thought that depending on the centralized system was the cheapest and most secure way of providing energy – but since the earthquake, things have been changing.’
Solar PV panels on a bridge in Taipei, Taiwan
Credit: Wei-te Wong
A feed-in tariff (FiT) system, which was planned before the earthquake to promote renewable energy, went into effect in July 2012, and since 2009, more than 150,000 residential fuel cells have been installed. Storage batteries have also become more widespread.
‘Unfortunately, Japan has very little experience of distributed energy systems [DES], so the government has set up a study group to promote the effective use of DES in a way that also fits in with the existing centralized system,’ Shibata said. The sector is covered by the Electric Utility Industry Law, which dates back to 1964, backed by a Grid Code (industry guidelines) implemented in 1986 to ensure grid stability for distributed energy systems.
The events of 2011 demonstrated that such systems could provide solutions in the event of a natural disaster, so the Japanese ministry of economy, trade and industry has convened a panel, ‘The Study on Energy Resource Aggregation Business’, to recommend on promoting the system.
Meanwhile, a Council for a Strategy for Hydrogen and Fuel Cells released an updated strategic roadmap in March, including new goals. Those targets include future price targets for household fuel cells, such as solid oxide fuel cells costing ¥1 million ($9750) by 2021. The panel also called for the construction of 160 hydrogen stations by 2020, rising to 320 within five years.
The Chinese government will doubtless assess the effectiveness of these Japanese policies.
China leads the world in installed renewables capacity today, driven by the country’s twin needs to achieve energy security and eliminate extreme urban air pollution. However, the country still has relatively little distributed generation, with the economic case for rooftop installations continuing to be challenging. National guaranteed payments equivalent to $0.06/kWh for on-grid distributed solar power has typically not been sufficient to overcome concern about costs.
Growth in distributed solar photovoltaics (PV) is also hindered by limited roof space in densely populated coastal areas where most people live in high-rise blocks, as well as by rural homes, which usually have poor structures that cannot support the weight of installations. Another problem is assessing the ownership of China’s roofs, given that private property is a relatively new concept in this nominally communist country.
‘Still, China is looking to boost its share of distributed installations, and many new subsidies are available at the municipal level, including additional FiTs and capital cost subsidies,’ said Katrina Westerhof, an analyst who leads distributed generation research at US-based research firm Lux Research. ‘And although there is still much more distributed solar than distributed wind in China, small wind turbines can be quite economical for remote and rural residential customers who lack a grid connection, and FiTs are also available for both on- and off-grid systems.’
The latest data by the Germany-based World Wind Energy Association reflects just this: China continues clearly to be the market leader in terms of installed small wind units, with 689,000 units installed by the end of 2014.
Meanwhile, the International Energy Advisory Council (IEAC) has observed that Chinese government anti-pollution and pro-renewable policies probably mean China’s coal consumption peaked in 2013.
According to the IEAC, China currently generates more than 28 GWe through cogeneration/trigeneration and more than 60% of urban central heating comes from decentralized energy networks servicing more than 330 cities.
China’s new five year plan (2016-2020) includes plans to expand annual power production from co- and trigeneration to 50 GWe by 2020, including 30 GWe of gas-fired cogeneration/trigeneration to replace coal.
‘Most Chinese cities have some form of district heating primarily fuelled by coal, and a handful of cities have district cooling; these decentralized energy networks are ideal candidates to switch to natural gas or renewable fuels to significantly reduce emissions and local pollution,’ explained Allan Jones MBE, president and chair of the IEAC.
He added that under its Transit Synergized Development programme, the Chinese government is seeking to modernize its energy infrastructure through the deployment of natural gas-fired combined cooling, heating and power (CCHP) technology and, where available, renewable-fuelled decentralized energy to power mass transport systems.
In a 2009 study, the McKinsey Global Institute predicted that up to 170 mass transit systems could be built in China by 2025.
A similar move away from promoting large-scale power production to encouraging decentralized power is in evidence in Taiwan. The island’s government has long promoted fossil fuels and centralized nuclear energy, with its isolated grid relying on imported energy resources for 98% of its needs. However, a regulatory framework supportive of distributed generation (DG) was put in place in 2012, before Tsai Ing-wen of the Democratic Progressive Party (DPP) was elected Taiwanese President earlier this year on an ambitious post-Fukushima vow to phase out nuclear power by 2025. Nuclear currently accounts for around 20% of the island’s electricity mix.
‘Taiwan has some big initiatives under way that push DG and particularly rooftop PV systems,’ said Westerhof. ‘At the core of the rooftop PV drive stands a recently increased FiT.’ She elaborated that the FiT depends on scale, a smaller rooftop PV system to get the equivalent of approximately $0.23 to $0.25 per kWh in 2016, meaning more than double the retail power rate.
The attractive FiT goes hand in hand with the ‘Million Rooftop PVs’ project launched in 2012 by Taiwan’s Bureau of Energy. Under the project, solar energy has been promoted through providing financing to system integrators, among other measures. Obviously also helpful are the facts that Taiwan has abundant sunshine and is a global powerhouse in manufacturing PV equipment. Through a surge in private sector interest in PV installations since 2010, accumulated installed capacity of PV systems grew from 9.5 MW at the end of 2009 to 728.5 MW by October 2015, according to Taiwan’s energy bureau.
Westerhof added that distributed energy is also attractive for reasons beyond energy security and pollution reduction.
‘The north of Taiwan uses more power than it generates, whereas the south generates more than it uses, a situation that can threaten the grid with congestion,’ Westerhof said. ‘And one of the best solutions to that is bringing capacity closer where it is used, including through the promotion of DG. Taiwan’s solar FiT reflects this: installations in the northern part are eligible for a higher FiT to help mitigate congestion.’
To facilitate the intelligent linking of DG systems, Taiwan’s National Energy Programme – Phase II (2014-18) provides for smart grid demonstration sites, of which there currently are 18 around the island and a virtual power plant demonstration project. The programme is also developing power systems to harvest the high energy potential of the Kuroshio ocean current that runs along Taiwan’s east coast, and wave energy resources in the shallow and windy Taiwan Straits.
The new government announced on 26 June that it will develop a renewable energy development programme further developing solar energy and wind power. According to an International Energy Advisory Council note, ‘the new Taiwan energy policy is on the right path to achieve energy independence and deliver significant greenhouse gas emission reductions.’
National government institutions are not the only players that matter in the Asian decentralized power regulatory scene, of course. In South Korea, the Seoul Metropolitan Government (SMG) has been pushing its One Less Nuclear Power Plant (OLNPP), an aggressive programme of energy efficiency and decentralized energy launched in 2012. The OLNPP was initiated following the Fukushima nuclear disaster in 2011 and has so far displaced 23 TWh of centralized energy generation through a combination of achieving energy efficiencies and new decentralized energy output, according to the IEAC. Currently under way is the OLNPP phase 2, which includes establishing 320 MW of solar PV, 230 MW of fuel cells, 12,000 building energy efficiency retrofits, 8 million LED lights and 150,000 drivers joining Seoul’s car sharing scheme.
‘The OLNPP energy efficiency and decentralized energy programme is based on the laws of physics – Kirchhoff’s Law – which dictates that electricity will always flow to the nearest energy demand so remote centralized energy electrons will always be displaced by local and much reduced decentralized energy electrons,’ said the IEAC’s Jones, whose organization played an important role in helping create the OLNPP. He added, ‘Therefore, energy efficiency and decentralized energy policies such as SMG’s will always trump national government energy policy by default, and with Seoul’s population representing more than 20% of [South] Korea’s population, such a programme of works will have a big impact in displacing centralized energy with decentralized energy.’
The policy taps existing trends in the South Korean energy scene. Whereas installed PV capacity is relatively low in South Korea, the country has a large-scale installed fuel cell capacity of around 300 MW, says the US National Fuel Cell Research Centre. The central government has aided this by counting fuel cells as renewables in its renewable portfolio standard (RPS) policy that insists utilities supply a set amount of renewable energy. Utilities can buy green energy credits paid to fuel cell operators to make up their green energy quotas, and this applies even when they are operating natural gas, not on renewable fuel.
‘South Korea not only leads the world in installed fuel cell capacity but has also become a hotspot for fuel cell developers,’ said Lux Research’s Westerhof. ‘Stationary fuel cells in the country are often multi-MW systems deployed at office parks, hospitals and other facilities, where power can be used on-site or fed back into the grid. Most of these deployments are combined heat and power (CHP) systems, which can provide heat to district heating systems or nearby users.’
The Global Smart Grid Federation (GSGF) has noted that South Korea has pushed the introduction of distributed generation since the early 2000s through programmes such as the government’s New and Renewable Energy plan. A smart grid development road map has targeted the implementation of a nationwide smart grid by 2030. To that end, Korea Electric Power Corporation (KEPCO), South Korea’s largest utility, operates a smart grid test-bed complex on Jeju Island.
Jens Kastner is a journalist based in Taipei, and Julian Ryall is a Tokyo-based journalist This article is available on-line. Please visit www.decentralized-energy.com