Clean technologies to feature strongly in SE Asia power markets

Southeast Asia's power systems will require around 90,000MW of new capacity, and investment of US$124 billion to 2020. The region has seen a paradigm shift over the last decade as it moves from a self-contained and self-sufficient market to now being increasingly reliant on imported fuel supply--whether thermal coal or liquefied natural gas.

In contrast to many Asian and global power markets, Southeast Asia is very gas-centric in terms of primary fuel supply. As the main gas producing basins have reached maturity, a lack of reserve replacement and increasing demand has seen the shift to imported fuels. With the global gas market setting prices at a benchmark to fuel oil in Asia Pacific, gas is increasingly being seen as a more costly means to generate electricity. To this end, we are now seeing coal being the fuel of choice in most markets and this fuel now dominates new-build capacity that is being planned or under construction.

To date, renewable power, with the exception of hydro-electricity, has been small-scale in Southeast Asia, as the region has focused on exploiting its large reserves of coal and gas.

Thailand remains the most advanced country in Southeast Asia in terms of exploiting its biomass renewable resources and more recently wind and solar, via its Small Power Producers programme, and cost pass-through mechanism to end users through "adders" and feed-in tariffs.

Indonesia and Malaysia have yet to fully exploit their geothermal and biomass potential respectively. The Small Renewable Energy Power (SREP) Programme in Malaysia has not yet achieved its target in bringing renewable power to the grid. The absence of a feed-in tariff is likely the main reason for this. In Indonesia, the focus has almost entirely been on geothermal energy with 4,000MW capacity assigned to geothermal in their second Crash Build programme. But the disagreements in power purchase agreement (PPA) prices and lack of government guarantees have pushed back several projects.

Vietnam has a well-established hydropower capability, and has had a Renewable Energy Action Plan (REAP) since 1999. However, the adoption of renewable technology has yet to take off. Last year, the incentive to support wind generation was issued to exploit the estimated wind potential of over 500GW.

Singapore has endorsed numerous financial schemes and test-bedding projects to promote the renewable energy development. Realistically, Singapore's options for renewable power are photovoltaic solar and biofuels. However, this will be limited due to the total land and municipal waste available, and the extensive cloud cover that reduces solar efficiency.

These reasons contribute to the certainty that coal and gas-fired generation will continue to dominate the region's power generation to 2020, even as renewable energy growth provides opportunities for new investment. Wood Mackenzie estimates capital expenditure through to 2020 on renewable power, excluding hydro, of around US$12 billion, or about 10 percent of the total required. Development of new technologies in renewables is expected to continue thereby driving the costs down and making them more cost competitive.

Simultaneously, there have been technological shifts in thermal power generation, with the region moving from sub-critical pulverised fluidised bed (PFB) technology to a cleaner and more efficient supercritical PFB as seen from the coal plants under construction in Malaysia and Indonesia.

Similarly, in the recent bidding round in Malaysia, H-Class combined cycle gas turbines (CCGTs) was the technology choice from a majority of bidders. The project was eventually awarded to TNB for building H-Class CCGT by 2016. We expect this trend to continue across the region, in line with more efficient power generation focused on fossil fuels to meet strong electricity demand growth in the region.

BY : Dr Bikal Pokharel, Wood Mackenzie