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Electricity/Power Grid

6 December 2018

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Myanmar

Ministry of Electricity and Energy will upgrade Hlawgar power plant before the summer of 2019. Upon completion, the power plant can generate an additional 336,000 kilowatt-hours a day.

Hlawgar power plant is one of the important power plants in Yangon. The commercial operation of the power plant launched in 1995. Now it can generate about 70 megawatt on average even though it has an installed capacity of 154 mw. The power plant is in need of major repairs and maintenance.

On November 30, the ministry signed an agreement with Golden Green Energy Co., Ltd to upgrade Hlawgar power plant under Rehabilitation, Joint-Operation, Maintenance and Management (ROMM) system.

The ministry invited the tender for the upgrade and maintenance of the power plant. The ministry chose Golden Green Energy Co., Ltd as the company’s per unit cost is the lowest. The company will repair gas turbine in cooperation with US-based General Electric (GE) which produced the gas turbine.

On June 30, the ministry issued the letter of acceptance to the company in order that it can carry out repairs and maintenance of gas turbines in the Hlawgar power plant alternately.

Under the contract, the company will have to implement the first phase (59 mw) on January 19, 2019 and the second phase (84 mw) on May 19.

Energy Economy

Changes a must to meet energy goals

6 December 2018

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Vietnam

With its great potential for renewable energy development, Vietnam will be able to lure tens of billions of US dollars into such projects and ultimately meet its energy efficiency targets once it advances energy and electricity price adjustments, along with many other solutions.

A few weeks ago, the United Nations Development Programme (UNDP) released a report titled “Private funding opportunities for renewable energy and energy efficiency investments in Vietnam.”

The report stated that Vietnam will need about $23.7 billion for renewable energy (RE) under the current Power Development Plan VII, and $1.5-3.6 billion for energy efficiency (EE). This $23.7 billion will include $7.75 billion in equity and $15.95 billion in project debt (see Table).

At least $10 billion of external capital is believed to be available now to support Vietnam’s transition to cleaner energy and energy saving. The figure was obtained from interviews with 13 banks, institutions, and investors under a survey.

The survey’s input data came from Asia Climate Partners, the Asian Development Bank, Climate Fund Managers, Clean Energy Investment Accelerator, Dragon Capital Group, the Embassy of Luxembourg in Bangkok, the European Investment Bank, Export-Import Bank of Korea, FMO/SBI Ven Capital, Glennmont Partners, the International Finance Corporation, Japan International Co-operation Agency, KfW, Mitsubishi UFG Financial Group, Saigon Asset Management, Société Générale, Susi Partners, Triodos Investment Management, and the World Bank.

“This investment is possible if the current barriers constraining such investments are addressed, especially the low price of electricity that lowers the incentives for efficient use and the existing format of power purchase agreements that deter investors from investing in the country,” said the report.

“As Vietnam is strategically reforming its business sector with the establishing of a ‘super committee’ for managing capital at 19 key state-owned enterprises, with a total capital of $130 billion, the creation of a fair and transparent environment and market is within reach. The priority should be the transformation of the energy sector to a transparent and competitive energy market,” said Caitlin Weisen, UNDP country director in Vietnam.

Great potential

Vietnam is endowed with exploitable RE resources and could deploy 85,000 megawatt (MW) of solar photovoltaic (PV) generation capacity and a large portion of an estimated 21,000MW onshore and near-shore wind energy generation potential in short order, subject to requisite facilitation, and to resulting investor comfort, according to the report.

Likewise, biomass-based power plants attached to sugar mills and hydropower projects could be revitalised through appropriate price and non-price policy signals.

Vietnam has a large potential for saving on electricity of up to 7 per cent relative to the business-as-usual, through to year 2035, with the manufacturing sector offering the largest potential for such savings. The technical energy saving potential of some of the industry sectors, such as cement production, is estimated at 40 per cent of present day consumption per unit of output.

Expanding the RE capacity and enhancing EE will help improve Vietnam’s energy independence, lesser expenditures on fossil fuel purchase, and reduce environmental pollution.

The current Power Development Plan VII (PDP VII, revised 2016) targets the addition of about 24,500MW of (non-large hydro) RE capacity, broken down into solar PV (12,000MW), wind energy (6,000MW), biomass power (2,000MW), and small hydro (est. 4,500MW) through to 2030.

Removal of barriers needed

The UNDP cited the above-mentioned 13 large banks and investors as stressing that if Vietnam wants to successfully attract $10 billion into RE and EE projects, investment barriers must be eased. For example, it is recommended that the government advance energy and electricity price adjustments, among other several obstructions.

According to investors, the gradual adjustment of electricity price that would reflect the total costs of production, including environmental externalities, is essential for overcoming one of the main obstacles for investment into efficient use of energy in Vietnam.

Low energy prices do not provide financial incentives due to long payback periods.

At the very least, it would be useful to adopt a roadmap that would indicate the expected medium-term evolution of end-user energy prices in the country and provide requisite signals to institutions evaluating the returns on potential EE investments.

In 2017, the Vietnamese government issued Decree No.11/2017/QD-TTg on mechanisms for encouraging the development of solar power in the country, offering a feed-in-tariff (FiT) for utility solar power plants of 9.35 US cents per kilowatt-hour (kWh) for a period of 20 years.

The FiT will be applicable for projects beginning operations before June 30, 2019, except for ones in the south-central province of Ninh Thuan, which have a 2020 deadline. Once the commercial operation date deadline expires, new FIT rates will be finalised.

Currently, the FiT for wind power is set by the government from November 1, 2018 at 8.5 US cent for onshore projects and 9.8 US cents for offshore projects.

However, a FiT of 15 cents per kWh is proposed by the UNDP for mainland solar power plants, which should be paid over the 20-year lifetime of the investment project. An even lower initial FiT may not attract any investor and therefore the solar PV power market would not be able to develop.

Meanwhile, power plants on islands, with 25 per cent more investment cost per kWh installed capacity, would require a FiT of 19 cents per kWh for a 20-year period.

The Ministry of Industry and Trade has approved over 70 new solar power projects to be put into operation before June 2019, with the total designed capacity of over 3,000MW. This amount far exceeds the estimated solar power output of 1,000MW by 2020 in the original Power Development Plan VII.

Major investors in the solar power industry in Vietnam include German ASEAN Power, B.Grimm Power Public Co., Ltd., Trina Solar, Siemens, Schletter Group, JA Solar, Sunseap International, Nippon Sheet Glass, Ecoprogetti, Tata Power, Shapoorji Pallonji Infrastructure Capital, Gulf Energy Development, InfraCo Asia Development, and ACWA Power.

Nguy Thi Khanh, executive director of the Hanoi-based Vietnamese non-for-profit Green Innovation and Development Centre, told VIR that whereas most of the past investments in the Vietnamese energy sector have been publicly financed, future investments into renewables will attract private investors from different scales.

“Insurance companies and public equities are interested in financing large-scale wind and solar projects under sufficient legal framework conditions, whereas households might invest in small-scale generation capacity,” she said.

“Both, company and household investment, would open new financing sources and right away reduce the public investment needs. As a side effect, the competition would increase leading to lower prices for future renewable investments when managed right,” she added.

Electricity/Power Grid

Laos looks to increase electricity export

6 December 2018

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Lao PDR

Vientiane (VNA) – Lao media on November 30 quoted a report by the country’s Minister of Energy and Mines Khammani Inthilath as saying that it is looking to increase electricity export in the time to come.

The article said the minister pointed out at the ongoing session of the Lao National Assembly that currently the country is home to 61 operational power plants with a combined capacity of 7,207.24 MW, generating up to 37,300 Kwh of electricity each year. Besides advantages in thermal, solar and wind power, it boasts rich water resources that can be a strong point in hydropower.

The country can ensure supply of electricity for domestic consumption and the export of this form of energy creates a stable source of income for Laos.

The minister’s report further said currently Laos is continuing to develop 36 hydropower projects which will be completed in 2020 with a combined capacity of 4,184.10 MW, adding 20,892.99 Kwh to the national grid. The country is also cooperating with China in the study for the construction of many transmission lines stretching a total of nearly 62,000 km with 68 transforming stations, to be started next year.

Currently Laos is implementing contracts to sell electricity with Vietnam, Cambodia, Malaysia, Myanmar and Thailand, under which it will export 300 MW through Thailand to Malaysia, 200 MW to Cambodia and 100 MW to Myanmar by 2020; and 9,000 MW to Thailand and 5,000 MW to Vietnam by 2030.-VNA

Renewables

Vietnam takes full turn to renewables by 2050

6 December 2018

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Vietnam

Vietnam has significant potential to exploit its renewable energy resources, such as solar photovoltaic, wind, biomass, and hydropower, which can be harnessed to support sustainable growth in the country.

Dao Xuan Lai, UNDP assistant country director and team leader of Climate Change and Environment, shares some thoughts about the possibilities of Vietnam undergoing a transition to a low-carbon economy with more renewable energy sources and increased energy efficiency.

Vietnam has a remarkable development record over the past 30 years, with an annual average growth of over 6 per cent over the past two decades. With a strong economy performing well, GDP is estimated to have increased by 7.1 per cent (year-on-year) in the first half of 2018.

The government is pushing for productivity growth in order to achieve sustainable economic development and also meet commitments made on climate change to the global community.

In fuelling this economic growth, Vietnam has utilised substantial reserves of fossil fuels and hydro resources. The country’s power capacity, which is a combination of hydro and fossil fuel plants, has expanded significantly in recent years due to heavy government investment, with a large portion of the investment going towards hydro power. As continued economic growth requires further expansion of the energy sector, Vietnam has become a net coal importer, which may lead to long-term risks concerning energy security.

Vietnam currently lags behind many other countries in utilising renewable energy. The proportion of renewable energy used is very small, although the country has significant renewable energy potential, particularly in solar photovoltaic and wind. By increasing the use of renewable energy sources and enhancing energy efficiency, Vietnam can reap significant long-term benefits in terms of economic growth, energy security, and greenhouse gas (GHG) emission reduction.

It is estimated that Vietnam can generate up to 85,000 megawatts (MW) of solar photovoltaic power and can generate more than 21,000MW of onshore, near-shore and further offshore wind energy. Some studies even believe that a higher production of wind energy is possible. This could deliver almost as much power as the current capacity of 129,500 gigawatts by 2030.

The potential may be even greater because solar photovoltaic and wind power can be combined with other forms of land use, and the use of wind power may expand across many regions. There is also additional potential for biomass-based power, which would, for example, reduce the need for landfill waste, and other forms of clean power generation.

Furthermore, Vietnam’s energy use compared to neighbouring countries in the region is at a high level. There is the potential for saving on electricity with energy efficiency potentially contributing to 7 per cent saved year-on-year through to 2035. Energy efficiency measures can remove some 67 million tonnes of CO2 by the year 2035 and deliver additional benefits for the environment. The manufacturing sector offers the greatest potential for savings to be made. Many industries could enjoy significant savings with sectors such as cement production estimated to be able to save 40 per cent based on present day consumption and output.

Although the government may have concerns regarding capital investments for a transition towards renewable energy, the answer is that capital is readily available.

Firstly, a recent United Nations Development Programme (UNDP) study found that businesses and the private sector are ready and willing to invest, with a least $10 billion immediately available if some policy hurdles and other barriers were removed. Secondly, the falling cost of renewable energy has been a global trend over the past years and looks set to continue into the foreseeable future.

The rapid advancement of technology and the economic scale of deploying renewable energy has seen the cost of producing renewable energy driven down year after year. For solar power, the US state of Arkansas has seen the cost of energy reduced to as low as 5 US cents per kilowatt-hour (kWh).

Furthermore, the cost of producing renewable energy is already competitive when compared with the cost of fossil fuel energy, particularly if all external costs (such as costs to the environment and to health) associated with fossil fuel are included. Mobilising private sector investment in renewable energy is essential.

The private sector possesses a large amount of capital, excellent research and development capabilities, access to cutting-edge technology and is frequently a catalyst for innovations. Leveraging private sector capital will also help to use some of the state budget for other priority development areas, such as education, health, and improved productivity to sustain economic growth.

The Intergovernmental Panel on Climate Change’s special report on the impacts of global warming of 1.5 degrees C shows that the current GHG reduction ambitions would not limit global warming to the 1.5 degrees C target set by the Paris Climate Agreement.

Evidently, we must act now in order to reduce GHG emission to zero by 2050 and avoid catastrophic climate change. To achieve this target, the world needs to make a paradigm shift towards 80 per cent renewable energy and 70 per cent electric vehicles by 2050. Such targets are reminiscent of an ambitious and inspiring commitment to use only renewable energy by 2050. The targets were made by 48 countries who are members of the Climate Vulnerable Forum, declared on November 18, 2016, in Marrakech of Morocco. As a member, Vietnam can feasibly make a significant contribution to the realisation of the forum’s desired commitment by gradually shifting to more renewable energy.

Vietnam is developing a new Power Development Plan for the period 2021-2030, and will start preparing the next 10-year Socioeconomic Development Strategy. With long-term and medium-term planning for 2021-2030 underway, this is an excellent opportunity to meet the country’s renewable energy ambitions and achieve the climate change targets.

It is now time for Vietnam to consider strategic investment decisions in renewable energy that are capable of transforming the power sector and to help the country become carbon neutral by 2050. The process of accelerating towards clean and green sustainable development must leave no one behind.

Renewables

Malaysia Aims to Create 200,000 Green Jobs by 2023 in ASEAN

6 December 2018

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Malaysia

Malay government is in talks with ASEAN countries China, Japan and South Korea for the brighter future of green jobs in South-east Asia

Malaysia puts its focus on promoting green industries and jobs in the ASEAN countries. The south-east Asian country hopes to promote the identification of the potentials and prospects for green industries and jobs in the ASEAN member countries during its tenure as the chairman of ASEAN labour sector, said Tun Dr Mahathir Mohamad.

The government of Malaysia is looking at developing the corresponding regional policies to promote green industries in the three-year period, said the Prime Minister Dr Mahathir Bin Mohammad, in the 25th ASEAN Labour Ministers Meeting.

The Malay government is also in talks with ASEAN countries China, Japan and South Korea for the brighter future of green jobs in South-east Asia.

He also talked about the boom in the employment rates of green industries across ASEAN. According to the 2017 Annual report by the Developmental Bank of Singapore, over the last two years, employment has grown by 3.2 per cent compared to the overall economic growth of five to six per cent, which is almost 1.4 million new green jobs created, as reported in the Development Bank of Singapore Annual Report 2017 on Green Job Opportunities in ASEAN.

“In the same vein, we have seen strong growth, particularly in the renewable energy sector such as wind and solar power, as well as the production of equipment and installations for heating and energy saving that subsequently create jobs in the region,” said Dr Mahathir.

“Looking forward, as technology evolves, we can expect an increase in the creation of new green jobs, and stronger growth in current occupations and greening industries,” he said.

The Malaysian government is targeting revenue of RM 180 billion while creating more than 200,000 green jobs by 2030.

The Prime Minister Dr Mahathir said the Malaysian government aims to boost the growth of its green technology sector, with a targeted revenue of RM180 billion while creating more than 200,000 green jobs by 2030.

He added that the greening of the regional economy also demands that the people in the region specialise in the right skills, adapt to changes and seize the new opportunity.

The Prime Minister showed his optimism for the future prospects of the green industry sector. In the meeting, he said, now is the time for the government and workers’ and employers’ organizations to explore more into the green industries and skills across the Asia Pacific.

Electricity/Power Grid

Anticipating the future to avoid sudden shocks with ICPT implementations

6 December 2018

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Malaysia

With the ICPT mechanism, govt can manage fuel price fluctuations should situations where fuel prices go sky-high or rock bottom occur

Over the past three months, some Malaysians may have been cautiously smiling on the quiet when crude oil prices surged past the US$80 (RM336) a barrel mark. Their elation could have stemmed from their belief that higher oil prices could also mean better revenue from petro-dollars.

Therefore, more money for the government’s coffers to spur greater development in the country from 2020 and beyond.

From another standpoint, higher fuel prices also translate into higher costs for power producers, who rely mostly on fossil fuel to generate electricity, primarily coal and gas, in the case of Malaysia. And having a reliable and sustainable power supply is also part and parcel of development.

But thanks to the geopolitical manoeuvring, crude oil has temporarily fallen off the cliff to below US$70, thus providing some brief respite to power producers. That has also put liquefied natural gas prices on a bearish tone amid ample supplies and poor demand, where prices have dipped to US$9.925/mmBtu (one million British thermal units) from US$12 in October. That’s only one part of the equation.

Coal prices, on the other hand, have risen to past US$100 a tonne, especially the higher quality types with lower pollution compared to US$50 a tonne two years ago. As the demand for coal as a fuel source remains undiminished, there is no telling that the price may dip, especially with an increasing number of power producers opting for more environmentally friendly coal.

The prognosis is that demand for coal in Asia, particularly China and Japan, will remain steady. That could make coal prices stay on the high side.

Taking all these factors into consideration, power producers can rest easy in the immediate term.

But, as soon as oil producers get their act together and agree on their proposed production cuts to shore up prices after the first week of December, any upward price movement could mean higher costs again. And this is exactly where Tenaga Nasional Bhd (TNB), the country’s major power producer, is walking on a tight rope to manage costs.

Thanks to the government’s foresight in anticipating situations where fuel prices may go sky-high or even rock bottom, it had implemented the imbalance cost pass-through (ICPT) mechanism, an adaptive measure to manage fuel price fluctuations.

This mechanism, which was introduced in 2014, allows energy providers to adjust tariffs based on the changing prices of fuel required for electricity generation. Such measures provide a framework that helps the electricity supply industry remain flexible against any price volatility.

Resulting from these adaptive measures, Malaysia has been able to cushion the price impact and provide reliable energy supply. This has seen the country having a more sustainable electricity sector for greater development to benefit both commercial and residential consumers.

Its working mechanism calls for ICPT to be assessed and adjusted every six months on Jan 1 and July 1 of each year to ensure that electricity prices can adapt to changing fuel prices. It is an essential tool for TNB to ensure continued economic sustainability for the power.

It must be emphasised that the ICPT is not a ploy to boost the revenue of TNB, but it is primarily for the energy provider to adjust tariffs based on the changing prices of fuel required for electricity generation.

So far, these ICPT price adjustments have seen total rebates amounting to RM6.3 billion being enjoyed by power consumers in the last four years.

On July 1, 2018, there was an increase of 1.35 sen/kWh for business users but not residential consumers. The current ICPT adjustment, which will last until Dec 31, has not impacted residential consumers, who number about 80% of TNB’s nine million consumers.

Come January, there will be another price adjustment to reflect the current scenario in the energy and power supply industries. If we were to assess what has been happening to consumers in the neighbouring countries, we see that Singapore and the Philippines have raised electricity prices, while Vietnam and Indonesia are still grappling with challenges in the absence of price increases.

In the case of Malaysia, the anticipatory or impending picture has been factored in because of the six-month interval of the ICPT mechanism. It has put in place a scheduled and flexible way to adjust prices to contribute to a conducive, efficient and competitive environment to help in the continued development of the country. That implies no sudden increases in electricity rates to shock the business and non-business community.

Malaysian power producers mostly depend on gas and coal for 90% of their power generation needs. Adapting to price changes for these fuels is exactly what the ICPT is designed for.

In the last few months, we have seen the price of coal going up to a six-year high and by more than 32% year-on-year. Natural gas prices have also been trending up as mirrored by crude oil prices compared to last year or the year before.

In Malaysia, we have seen that the changing natural gas prices have been influenced by a steady shift towards market prices from a previously subsidised fuel cost. The liberalisation of the gas supply market is set to support a more competitive price scenario by 2019. Under such a scenario, any short-term cost rises will be balanced by offsetting with a more sustainable and competitive market.

In a landscape that is constantly shifting, certain trends are indicative of where prices are heading. It is inevitable that the rapidly growing economies in Asia will continue to drive demand for coal and natural gas against a backdrop of steady prices, if the recent international price trend is anything to go by.

In that energy supply canvas or picture, the ability to be flexible is crucial. To meet Malaysia’s growing energy needs, a fair pricing framework is therefore needed to reflect the changing costs for electricity.

This also requires consumers to pay for their part for a sustainable and reliable electricity supply industry. We have to anticipate that likely scenario emerging not too long from now.

Oil & Gas

Vitol Inks Deal with Petronas for LNG Canada Supply

6 December 2018

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Malaysia

International Swiss trading firm Vitol Group, one of the largest energy traders in the world, has stepped forward as a customer for liquefied natural gas (LNG) from the 25% share in the LNG Canada project owned by Malaysia’s state-owned Petronas.

The new export terminal, under construction on the northern Pacific coast of British Columbia, would be the primary source for a 15-year supply deal providing up to 800,000 metric tons/year (mty) of LNG, or 100 MMcf/d, the firms said Thursday.

Pricing is expected to evolve with market conditions after supplies become available from the new Kitimat terminal in 2024, with Vitol Asia Pte Ltd. picking up tanker cargos from the Petronas share of LNG production.

Vitol said the deal serves a company commitment to “long-term development of the LNG market and its evolution to become a more flexible and tradeable commodity.”

The supply agreement for gas from the LNG Canada export terminal extends until at least 2038 an LNG trading relationship with Petronas that began in 2005, Vitol said. The Malaysian firm echoed Vitol by describing the deal as “able to provide flexible solutions within a changing and evolving LNG market.”

Prices for U.S.-sourced Vitol supplies from LNG exporter Cheniere Energy Inc. are indexed to Henry Hub trading. Vitol in September Vitol Inc. inked a 15-year contract with Houston’s Cheniere for 70,000 mty of LNG.

Vitol, already the world’s largest oil trader, is “committed” to developing a long-term LNG market, Group CEO Russell Hardy said in September. “We believe that LNG has an important role to play in the future energy mix and that its evolution will require a more flexible and tradeable LNG market,” he said.

Oil & Gas

Bumi Armada falls to record low as oil outlook stays bearish

6 December 2018

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Malaysia

KUALA LUMPUR (Nov 30): Bumi Armada Bhd’s share price fell as much as three sen or 16% to 16 sen so far today amid broader market losses and after analysts said crude oil markets remained bearish.

At 12:30pm, oil and gas (O&G) support services provider Bumi Armada shares settled at 16.5 sen with some 154 million units traded. Bumi Armada was Bursa Malaysia’s most active stock.

In the broader market, the FBM KLCI fell 1.35 points or 0.08% to settle at 1,694.99 while Bursa Malaysia’s Energy Index dropped 21.76 points or 2.38% to 892.04.

Besides Bumi Armada, O&G support services providers Velesto Energy Bhd and Sapura Energy Bhd also fell among Bursa Malaysia’s most-active stocks. Velesto settled three sen lower at 20 sen while Sapura Energy fell one sen to 33 sen.

Reuters quoted Lukman Otunuga, an analyst at futures brokerage FXTM, as saying that as concerns on excessive supply and worries about falling demand become the primary themes weighing on oil markets, “the outlook for Brent Crude and WTI (West Texas Intermediate) remains bearish”.

It was reported that crude oil has lost almost a third in value since early October because of an emerging supply glut following a global surge in production, including from the US, Russia and by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC). It was reported that to rein in the glut, OPEC and its main partner Russia are moving closer to an agreement around further production cuts.

Oil prices firmed on Friday on expectations that OPEC and Russia will agree to some form of production cuts next week, although swelling US supplies kept markets in check. It was reported that international Brent crude oil futures were at US$59.81 (RM250.30) per barrel at 0347 GMT, up 30 US cents or 0.5% from their last close. US WTI crude futures were up 20 US cents, or 0.4%, at US$51.65 per barrel.

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