By Andrew Brandler, Chief Executive Officer, CLP Holdings
Strong economic growth has led to extraordinary energy demand in the Asia-Pacific region. The rapid pace of electricity demand growth in China and India is most commented on, but the overall level of demand growth is also being fuelled by rapid economic development in other countries across the region.
Since the Asian financial crisis, regional markets have steadily rebounded and in the power sector new Independent Power Producer (IPP) programmes are underway in several countries.
Installed generating capacity in China is expected to reach 580 GW by the end of 2006 and 650 GW by the end of 2007, a growth of 14 per cent and 12 per cent respectively year on year.
In India, where GDP growth is projected to be 7-8 per cent over the coming years, considerable additional electricity generating capacity is required. The Indian government is looking to add an extra 100 GW of electricity generation over the next seven years, in line with its vision of “Power for all by 2012”.
In Southeast Asia – Singapore, Thailand, Indonesia, The Philippines and Vietnam – as well as Taiwan, energy demand between 2005 and 2015 is forecast to grow by 6-8 per cent, which translates into a requirement for 100 GW of new generation capacity.
In Australia, new opportunities are emerging in the power sector, particularly in Queensland’s retail sector and with the demand for additional generating capacity to meet growth in peak demand in New South Wales (NSW).
The biggest factor shaping the development of Hong Kong’s power sector will be the regulatory regime that replaces the current Scheme of Control between the government and the two power companies, CLP Power and Hongkong Electric Company, at the end of 2008.
The uncertainties affecting the Hong Kong electricity business have been a factor in CLP’s diversification of its activities overseas.
In Australia, CLP has established a vertically integrated and diversified energy business, TRUenergy. TRUenergy has a well balanced portfolio of generating assets and a strong retail presence. With its balance between generation and retail, this integrated business model is ideal for supporting further growth in a highly competitive market.
CLP is expanding its generating capacity through the development of a new combined cycle gas turbine plant at Tallawarra near Wollongong in NSW. Once completed by the end of 2008, the plant will help meet growing peak demand in what is Australia’s largest power market.
In Southeast Asia and Taiwan there is demand for new power generation in Thailand, Vietnam, Indonesia and the Philippines, while Singapore is assessing the divestment of its domestic generating companies. To be better able to take advantage of opportunities in this region, CLP has entered a strategic partnership with Mitsubishi Corporation, called OneEnergy. All of CLP’s activities in this region will be conducted through OneEnergy.
In India, CLP is a significant foreign investor with 100 per cent ownership of Gujarat Paguthan Energy Corporation Limited (GPEC), which operates a 655 MW gas fired combined cycle power plant.
As a result of India’s Electricity Act 2003 there are increased opportunities for private investment in captive generation, transmission and electricity trading in addition to traditional IPPs. The government has also announced five ultramega power projects of 4000 MW to help meet its energy targets.
The diversification of fuel sources and vertical integration across the electricity supply chain will be important components for further growth in India, and CLP will pursue opportunities in coal fired plants and renewable energy and transmission projects. CLP recently entered a strategic joint venture with GMR, a leading Indian infrastructure group, to bid for the Sasan ultramega project.
CLP has a long history of involvement in China – its investments in the Mainland include the Daya Bay nuclear plant, which began commercial operations in 1994. CLP now has total investments of more than 4000 equity MW.
In China, competition between the national generating companies and other IPPs will remain intense. In this climate CLP is seeking to reinforce its credentials as a power station developer, particularly through the Fangchenggang project, which is being built at a domestically competitive cost.
This 1200 MW supercritical power station is being developed through a majority owned joint venture company, CLP Guangxi Fangchenggang Power Company Ltd. It is the first greenfield site where CLP has the majority shareholding and has led the construction and operation. The project is on schedule to bring the first 600 MW unit into commercial operation by the end of 2007.
CLP has also been focusing on developing renewables and has set a voluntary target to increase the capacity of renewable energy in its generation portfolio to five per cent by 2010. The formation of Roaring 40s draws together the technical expertise in wind and hydropower of the 50-50 Australian joint venture partner, Hydro Tasmania, and CLP’s development and financing skills, as well as its extensive experience as the largest independent power producer across the Asia-Pacific region.
CLP is also working with a UK wind farm developer, Wind Prospect, on a feasibility study for a 150 MW offshore wind project in Hong Kong waters.
Overall, renewables in the region will continue to offer strong potential. The Mainland’s Renewable Energy Law and its recognition of the critical role that government plays in encouraging renewable energy will see this sector develop rapidly.
CLP is focused on not only providing power, but doing so responsibly. In tandem with the group’s progress in renewable energy development there has been an improvement in emissions performance. Total emissions from CLP’s power plants in Hong Kong have reduced by 40-80 per cent since 1990 during a period when electricity sales have grown by 70 per cent. The introduction of ultra-low sulphur coal, called Envirocoal, and the maintenance of a balanced fuel mix of coal, natural gas and nuclear energy have all been factors in achieving this improvement.
CLP has pledged to meet the Hong Kong government’s 2010 emission reduction targets. Flue gas desulphurisation and selective catalytic reduction equipment is being retrofitted to the Castle Peak coal fired generation plant and CLP is moving ahead with plans for Hong Kong’s first LNG receiving terminal.
Clearly, there are many challenges and opportunities in the region for the power sector generally and specifically for CLP, whether in terms of the shaping of the future regulatory regime in Hong Kong, the continuing enhancement of CLP’s businesses in the region, or in responsibly meeting the expectations of societies for environmental management.