A SHORT SUMMARY OF INSIGHTS FROM POWER-GEN INTERNATIONAL 2017
Despite the Trump Administration’s decision to pull out of the Paris climate treaty, the US is continuing through a clean-energy revolution driven by economics rather than political policy; wind and solar capacity are rapidly rising while coal-fired generation is in decline.
Texas, being the US wind pioneer, have surpassed 20,000MW in wind capacity in 2017, overtaking the 19,800MW of coal capacity installed in the state with expectations that wind will produce more than coal by 2019, quite a statement considering the state of Texas has long been the biggest consumer of coal in the US. By the end of 2017 the entire US had over 85GW of wind energy installed, sufficient capacity to power 25 million homes.
Solar PV has seen a decrease in growth in comparison with the record levels of 2016, however growth is still apparent with total capacity increased to 49.3GW by the end of Q3 2017, 25% of all new generation installed by Q3 being solar – second only to Gas-fired installations.
While the opportunity for solar and wind power in the US has shown to be great, this further creates a requirement for more flexible stand-by capacity that can provide quick start power to the grid when solar or wind output drops.
Energy storage, namely the use of lithium ion batteries, is identified as one possible alternative to the use of peaking fossil fuel plants. The rapidly decreasing cost of lithium ion and the technological developments in power density and MWh storage within a footprint will see higher use of energy storage as more utilities implement the technology. The price of LI storage is expected to experience the same rapid reduction in cost that was seen in solar PV pricing. One issue that energy storage advocates are expressing is the regulatory changes that would be required to best support the growth and development of the technology, the original US legal framework was developed decades ago based on a centralised grid which isn’t relevant to the changing grid we are seeing today. The framework also does not cater to a definition that energy storage is a hybrid resource; storage is not a load but can absorb power, it’s not a generator but can provide energy and capacity, while also aiding transmission and distribution. Therefore, both federal and grid level changes would be required to appropriately support the implementation of this technology on a wider scale.
Natural gas-fired generation is still the number one source of energy in the US and continues to be the highest growing source due to the steady supply and pricing of natural gas as well as continued improvement in the efficiency of gas fired power plants.
A major issue on the demand-side of the changing grid is the era of ‘big data’. Data centres account for around 2% of the world’s electricity, and although efficiency of the data centre (DC) is improving, the amount of data and therefore energy that is consumed by DCs is on the rise. A zettabyte (ZB) is equal to 1 trillion gigabytes, in 2016/17 the total amount of data in the world was around 16ZB, this is expected to rise tenfold to 160ZB by 2025. This rise is partially attributed to growth of devices; the number of new devices is growing faster than population and internet users, i.e. one person will own several connected devices; phone, tablet, laptop, smart TV, smart fridge, smart meter etc. The other major factor is the growth in the use of data; Netflix & YouTube now account for 50% of all downstream traffic with increases in live video, online gaming and VR streaming etc. Therefore, companies such as Google, Facebook, Amazon, Netflix and YouTube require continual investment in new DC infrastructure. This provides opportunity for power providers to partner with data centres to deliver a co-operative solution; joint ventures such as the Black Hills Energy & Microsoft ‘WY Data Centre’ in Cheyenne where the back-up gas generators can used by the utility when not in use by Microsoft.
Short summary of insights gained from Asia Power Week in Bangkok last month
Indonesia’s energy plan aims to add an extra 35 GW to their energy capacity by 2019, 56% coal fired, 36% natural gas and 8% renewables (including hydro and geothermal). From the government’s perspective, coal is considered the quickest, easiest and cheapest way to provide millions of people with affordable electricity. The wealth of coal resources in the country further encourages this emphasis. There are also plans for large-scale hydro-powered energy projects, however one comment during a panel discussion made the claim (after visiting sites) that hydro projects which were scheduled to have begun construction months ago are still very much in greenfield state, flooding issues may be a factor in the delay (suggesting lack of due diligence prior to project greenlighting). In the past Indonesia has attempted to implement similar rapid-capacity plans (delays have resulted in many projects still in development to meet those old targets), the current requirement for state-owned PLN subsidiaries to own a minimum of 30% of all new IPP projects further increases likelihood of delay in the 35GW target as this may discourage foreign investment. Nevertheless, there are undoubtedly opportunities in the country for power projects in Indonesia for those able and willing to navigate the local political landscape.
The Belt & Road Initiative or yi dai yi lu (one belt, one road), China’s $150Bn/year infrastructure investment fund, is now 4 years down the line with a reported $900Bn of projects planned or underway, most projects remain on the drawing board and it is still too early to judge whether BRI will be successful. Among these projects are; the $62Bn China-Pakistan economic corridor (CPEC - a web of motorways, power plants, wind farms, factories and railways), the $1.1Bn port project in Sri Lanka, a high-speed rail link in Indonesia and an industrial park in Cambodia. Dr. Qiang Liu, the Director of Energy Division at the Chinese Academy of Social Sciences and consulting expert for the UN, was part of the panel discussion on BRI and it was his view that all delays and issues with BRI projects are caused by the decision making and policy changes of recipient governments. Other members of the panel suggested China needed to invest in providing support with the planning and management side of these substantial projects to safeguard successful implementation of BRI. This support would strengthen the concept of Chinese EPCF turnkey contractors (Engineering, Procurement, Construction and Finance).
The consensus on digitizing the energy market seems to be that large utilities are simply not ready to implement developments such as smart grid technology on a large-scale. Smart grid technology has the potential to provide vast improvements in reliability and efficiency of energy supply not just in Asia but around the world, however the level of research, development and investment required to implement the technology currently hasn’t been met. When implementation does happen, the level and method will vary by location; Singapore and Hong Kong build infrastructure upwards, whereas countries such as India and Indonesia build outwards.
In Thailand, the rising gas price due to decreasing local gas production is causing a policy shift on gas-fired power plants. The Electricity Generating Authority of Thailand (EGAT) is keen to transition towards an energy mix with increased renewable energy sources, particularly solar and wind (due to falling capex) including a percentage of imported hydro. EGAT envisions the use of currently available efficient conventional sources such as CCGTs and ultra-supercritical ‘clean coal’ to provide support in developing a secure energy mix that allows inclusion of more renewables.
In South Korea the new president, Moon Jae-in, was elected in May on a platform that promised to shut down nuclear and coal-fired plants, therefore all plans for new nuclear power projects have been cancelled. South Korea is the world’s fifth-largest nuclear power producer, with 25 operational reactors supplying around one-third of its energy mix. Therefore to replace nuclear, the government plans to boost renewable output to 20% of the energy mix by 2030 as well as supporting increased use of liquefied natural gas.
Overall it seems that Asia’s energy growth will predictably come from mostly coal-fired power plants, countries such as Vietnam, Indonesia and The Philippines who are forecasted rapid growth will rely on the affordable energy that coal can provide, even a more developed country such as Japan has greenlit 17GW of ultra-supercritical clean coal projects while hoping to re-commission their 43 nuclear reactors closed for review post-Fukushima. A positive outlook in terms of The Paris Agreement comes from countries such as Thailand and South Korea who are placing more focus on a sustainable future, even China, who are currently the largest importer and exporter of coal, are halting all new coal projects, having only 2 out of 31 mainland provinces greenlit for new projects.
CESS continually monitors worldwide energy market trends and political energy policies to ensure we have the relevant intelligence to provide support in power plant valuation, sale and sourcing for our clients.