Asian Power

OPINIONChina’s crazy coal consumption

PAge 04

FeATUReAsia set for gas engine plant boom

PAge 06

OPINIONWill China slash its wind power installations?

PAge 08

OPINIONSafety measures in Japanese reactors

PAge 12

ISSUE 52 | DISPLAY TO 31 August 2012 | www.asian-power.com | A Charlton Media Group publication US$360P.A.

MICA(P) 248 /07/2011

ProPhecy coal’s ceo John lee talks about their newest ProJect, Mongolia’s first

ever iPP in 20 years

MONgOLIAN POWeR ReVIVeD

2 ASIAN POWERTri-Sen205x275mar12.indd 1 3/9/12 5:39 PM

ASIAN POWER 3

MOST ReAD

Japan might ration electricity this summerJapan pays the price for taking all its nuclear reac-tors offline.

The Japanese govern-ment will announce elec-tricity rationing contin-gency plans by mid-June. Since all of Japan’s nuclear reactors are non-oper-ational, the government expects power shortages in western and northern Japan.

U.S. punishes China with new tariffs on wind towersChina will reel from puni-tive U.S. tariffs of up to 26% on its leading wind tower manufacturers.

US has imposed prelimi-nary duties ranging from 13.7% to 26% against Chinese makers of wind-turbine towers who export to the USA. The move, will increase tension over trade of clean energy tech-nologies between both nations. The new tariffs could take effect this October.

energy-saving appli-ances to be subsidized by ChinaChina allots US$4.2B to pay for consumer pur-chases of energy-saving household appliances.

The subsidy for those who buy energy-saving household appliances can be as high as US$63 per unit. In addition, China is prepared to spend US$942 million cover to subsidize consumers

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MICA(P) 248/07/2011

who buy energy-efficient vehicles.

China pushes Re despite economic slowdownChina refuses to give up its global lead in many re-newable energy technolo-gies to maintain long-term economic growth.

China plans to boost the development of seven strategic emerging indus-tries including new energy in the face of a worsening economic slowdown.

Suzlon’s market share takes a beatingExtreme competition causes Suzlon Energy to lose more market share in India’s wind turbine market.

The company’s market-leading share dropped for a second straight year as

more companies entered the market for wind turbines.

China to resume nuclear power programDespite dangers from nu-clear reactors highlighted by the Fukushima disaster, China will push through with plans to build more nuclear power plants.

It has indicated that it will lift its year-long mora-torium on new nuclear power plants. China is targeting 60GW of nuclear capacity by 2020.

China is fastest growing market for natural gasChina’s switch to gas-fired power generation will sig-nificantly increase global gas demand.

The International Energy Agency says global gas demand will rise by 2.7% a

year until 2017 to hit 3.94 trillion cubic meters. China and the USA are expected to drive this growth as both nations switch from coal to gas-fired power generation.

Japan launches national energy- saving campaignhow about wearing T-shirts as an energy saving method?

Japan has launched its “Super Cool Biz” energy-saving campaign that, among other things, encourages office workers to wear casual clothes and T-shirts to limit air condi-tioner usage.

Bangladesh to get 5,000MW from nuclear by 2030To augment electricity production, Bangladesh

will produce 5,000 mega-watts of electricity from nuclear energy by 2030.

Finance Minister Abul Maal Abdul Muhith announced to the parlia-ment while presenting the budget for the fiscal year to June 2013. Bangladesh will allocate 5.0% of its to-tal expenditure for power and energy.

Kudankulam nuclear plant ready to go onlineA controversial Indian nu-clear power moves closer to becoming operational.

The Kudankulam Atomic Power Project located in Koodankulam in the Tirunelveli district of the southern Indian state of Tamil Nadu conducted a safety exercise that is one of the mandatory steps prescribed by the Atomic Energy Regulatory Board (AERB) for commissioning of the plant’s first reactor.

Japan approves feed-in tariff for renewable energyJapan’s feed-in tariff or FIT is one of the highest in the world.

Japan’s march towards renewable energy and away from nuclear energy took a giant leap when it approved new FIT rates that will boost its use of renewable energy such as solar and wind. The incentive will see Japanese utilities buy electricity from developers of renew-able energy at fixed rates lasting up to 20 years. Costs will be passed on to consumers who will pay higher electricity bills.

FIRST

4 ASIAN POWER

The country’s coal output during 2010 is reported as 3.24 billion tons which accounted for 43.4% of the world’s total output of coal.

Coal continues to play an essential role in the energy, economic and the environmental future of China’s rapidly developing economy. The nation’s economic

growth has exceeded stated targets every year since the start of the 21st century. Many industry studies have shown that the increasing demands for coal in China reflect the coun-try’s growth in economic activity and social development as the population’s living standards continue to rise.

China is the world’s fastest developing economy, largest energy user, and largest consumer of coal. In recent years, the Chinese government has made electricity accessible for mil-lions of people across the country. At the same time, the gov-ernment has continued to develop its industrialization proc-ess of encouraging its industries to move westward, increase urbanization in many regions, and modernize the nation, all of which needs vast amounts of energy to fuel this growth.

Clean coal investmentsThe central government has started to rationalize China’s coal industry and is developing many new clean coal tech-nologies. It has invested for the industry in excess of RMB 500 billion (US$79 billion) a year during its current 12th Five Year Plan (2011-2015). The level of investments into the coal industry is around the same as those for the power and oil sectors. During this 12th Five Year Plan period the coal in-dustry in China will experience many more mergers and ac-quisitions and it will become increasingly internationalized, reports from the National Energy Administration (NEA) say.

Massive coal consumptionThe country’s coal output during 2010 is reported as 3.24 billion tons which accounted for 43.4% of the world’s total output of coal. In the past few years, the consumption of coal in China has increased by around 200 million tons annu-ally. These high levels of coal consumption now account for approximately 44% of global coal consumption. In a move to reduce its carbon emissions, the government aims to cap China’s coal output to below 3.9 billion tons by the end of 2015. The government is encouraging its coal companies to seek coal resources abroad to ensure China has a sound and stable energy supply.

The new Chinese coal industryThe new look of Chinese coal industry be made up of 10 large coal companies, each capable of producing 100 million tons of coal per year. Then there will be another 10 smaller coal companies, each capable of producing 50 million tons of coal per year. These 20 coal companies will be responsi-ble for some 60% of China’s coal output. The central govern-ment will continue to promote mergers and acquisitions in the domestic coal industry with the aim of developing large coal companies and shutting down the small coal mines to eliminate outdated and inefficient coal mines.

The NEA estimates that the nation will be consuming 5.5 billion tons of standard coal by 2020 and then the con-

sumption figure rises to 7.5 billion tons by 2030. The 2030 coal consumption figure will be equal to the estimated coal usage of the 34 member countries of the Organization for Economic Cooperation and Development. As the environ-ment becomes a central issue within energy usage, China has made some significant moves to increase its energy ef-ficiency. These moves involve application of new advanced technologies, especially where coal resources are concerned as coal supplies over 70% of China’s energy needs.

Another significant development in China’s coal industry is the formation of a joint venture (JV) between China Coal Energy and one of its power generation customers, China Power International Development (CPID) in Shanxi Prov-ince. This JV is the latest in a series of investments by State-backed coal mining companies into China’s power producers which demonstrates the coal companies confidence in the future of coal fired power generation. In recent years, the na-tion’s coal fired power generators have experienced low lev-els of profitability due to tight State control on power tariffs amid rising inflation and the constant increases in the cost of thermal coal.

China, as the world’s largest energy consumer, should stick to its existing industrial upgrading, energy conservation and emission reduction targets within the government’s overall economic growth model. All of these advantageous actions are taking place as the country leads the global development of effective clean coal technologies installed in its modern coal plants. The country is embracing new clean coal tech-nologies, such as coal-to-gas, coal-to-chemicals and coal-to-liquids, to increase and enhance the nation’s energy avail-ability and security in an environmentally friendly manner. The rest of the world should learn some lessons from China’s economic achievements powered by coal.

JOHN gOSS

China to consume 5.5b tons of coal by 2020

OPINION

[email protected]

ASIAN POWER 5

VENDOR VIEW

Using transmission protection technology in distribution relaysAs the development of ‘micro-grids’ indicates a need for improved distribution system technologies, Alstom Grid provides a solution.

MiCOM P40 Agile, Alstom Grid’s recent offering in its substation automation so-lution range, lives up to its name as the

well-known MiCOM P40’s smaller, lighter ‘sibling.’ Alstom Grid recognises the mission critical status of substation automation technologies and continues to adapt leading edge transmission technologies for distribution systems and industry.

There has been increasing pressure on energy operators from governments and environmental groups to improve system efficiency while also en-suring reliable supply. As more and more operating companies worldwide embrace the concept of the Smart Grid, and offer consumers access to flexible energy supply agreements, the composition of dis-tribution systems will change. One expected change is the development of ‘micro-grids’ defined as inter-connected loads and distributed energy resources acting as integrated systems and operating in paral-lel with the main grid or in islanded mode.

Certain generic features, such as programmable scheme logic and supervision functions that have until now primarily been used in transmission sys-tems, are already being sought at medium voltages. It may seem fairly simple to use existing transmis-sion protection relays in distribution systems, but it is necessary to consider the possible limitations - alongside the benefits - of transmission protection technologies when applied to distribution systems.

Programmable scheme logicProgrammable scheme logic is a transmission pro-tection technology that enables relay users to con-figure individual protection schemes to suit their unique application. This extremely flexible system, based on programmable logic gates and delay tim-ers, allows users to create their own scheme logic design no matter how complex. The inherent flex-ibility of programmable scheme logic makes it a technology with obvious applications for distribu-tion systems and - when built into distribution relays - improves power reliability and quality.

Supervisory functionsAs distribution systems take on a more critical sta-tus, it is vital that a greater degree of supervision is built into secondary devices to enable earlier triggers for predictive maintenance. Some supervisory func-tions already in use in transmission systems such as supply supervision, condition monitoring and trip circuit supervision can be set in a distribution relay,

Programmable scheme logic can also be used ef-fectively in this context. A voltage transformer su-pervision (VTS) feature is used to detect failure of alternating current voltage inputs to the relay. VTS logic in the relay is designed to detect voltage failure

and automatically adjust the configuration of pro-tection elements whose stability would be at risk.

Communication infrastructure Distribution systems are becoming smarter and, accordingly, they need a communications infra-structure that is strong and reliable. Serial-based communications protocols such as Modbus can be augmented by more modern communication pro-tocols such as the Ethernet-based IEC61850 to en-sure protection relays can feed as much information as possible through the communications infrastruc-ture. It is essential to provide options to suit project requirements, while maintaining the same interface to staff.

Circuit breaker fail protectionProgrammable scheme logic can be used once more, in this instance, to develop simple circuit breaker. Incorporating transmission protection tech-nologies such as circuit breaker fail protection in distribution relays has several benefits including the

“Alstom Grid’s MiCOM P40 Agile has, as its name implies, the inbuilt flexibility and technological sophistication to overcome these constraints”

enabling of predictive maintenance and ‘self heal-ing’ responses to system disturbances.

Increased availability of highly integrated re-laysIt is possible to increase the availability and effective-ness of a single protection. The increased availability can be achieved by developing the self-diagnostic features within the relay.

These self-diagnostic features can include the relay detecting software-related fatal errors and subsequently performing a restart of the relevant process without having to reboot the entire device. This results in full product operational status be-ing regained within a few power system cycles; a shorter time period than the seconds it would take to reboot.

ConclusionThe incorporation of existing transmission protec-tion technologies into distribution relays can reap a myriad of benefits. There may be constraints, how-ever, such as cost, size and withdraw ability. Alstom Grid’s MiCOM P40 Agile has, as its name implies, the inbuilt flexibility and technological sophistica-tion to overcome these constraints and more, and to successfully bridge the gap between transmission and distribution relay technologies.

For more information, contact Soon-Wi Lee at +65 9231 2770 or [email protected]

MiCOM P40 Agile of Substation Automation Solutions business

6 ASIAN POWER

A first for Asia, Indonesia will install a 110MW gas engine-based power plant to provide

grid stability and peak load power. This is the first time that a gas-fired plant based on engines will be installed to meet daily power peaks in Indonesia, and it is a nascent market set to grow, according to Wärtsilä Marketing Director Kenneth Engblom.

PT Perusahaan Listrik, the state-owned utility company, will utilize the new fa-cility primarily to supply power during the evening peak load hours. It will be powered by eleven 20-cylinder Wärtsilä 34SG generator sets in V-configuration, operating on compressed natural gas and providing an output of 110 MW. Wärtsilä will also supply the necessary auxiliary equipment as well as building materials. Everything is being delivered on a fast-track basis, as the plant is scheduled to be built and fully operational before the end of 2012. Wärtsilä already has a strong presence in Indonesia, with some 2.8GW of installed power in operation. These, and all Wärtsilä installations, are sup-ported by the company’s global service network. Wärtsilä has service agreements for over 350MW of power-generating ca-

pacity in Indonesia.

The move to gas-fired enginesEngblom told Asian Power Magazine that the need to provide grid stability by be-ing able to quickly cycle up or down en-gines is important. “Gas-fired engines are much more efficient at doing this than typical steam plants which are inefficient at smaller loads, and nuclear cannot do this at all,” he says. In Europe the move to-wards installing smaller gas engine utilities is boosted by co-generated utilities which have to contend with wind and solar sources. These utilities can stop producing electricity as the weather changes. In Asia, the demand for grid stability power plants is not the same yet, but this may change as weather-dependent renewables such as solar and wind take a larger share of the generating market.

Flexible toolsIn other parts of Asia, gas engines can provide utility operators that necessary flexibility at peak times. Engblom says that Wärtsilä has the most number of engines deployed in Asia, and is in a good position to meet utilities needs for flexible power. The problem of integrating renewables to

Wärtsilä has service agreements for over350MW of power generating capacity inIndonesia.

the grid is a growing one in Europe and it will eventually affect Asia, too.

“With a lot of wind and solar power coming into the grid in Europe, it causes a lot of regulation problems. Wind is not dispatchable; the wind blows when it wants to and suddenly stops. There is a need for a lot more quickly dispatchable power generation than before. Also, it has to be flexible. It needs to run in the morn-ing at hours when everyone uses a lot of electricity. Mostly, you have less demand at day time. Then you turn it up again in the evening. Existing base load combined cycle gas turbines or stem plants are not good at this. So our idea for smart power generation means operational flexibility – you can run it, and then stop it when-ever you want. It needs to be efficient at any load as gas is expensive. Partial load efficiency is as important as full load effi-ciency,” says Engblom.

“In China and some other Asian countries, they are putting in a lot of wind and solar energy. They will need more flexible power generators in the near future. As this continues, utili-ties in Asia will soon realize they will have similar problems that are seen in Europe today. Wärtsilä is here and eager to support the Utilities and Electricity regulators in this area.”

Demand for larger utility plants Engblom says Wärtsilä is seeing more de-mand for larger combustion engine utility plants, and the largest they are building to- date is a 430MW plant for a mine site in the Dominican Republic which is based on their 22MW engine. “In Turkey, we have a lot of plants that both serve the utility and industry-sized 50 to 250MW so it is in that range.” Wärtsilä’s strength is that it has been manufacturing gas engines since 1993 and also offers dual fuel usage engines which are popular in Asia and other mar-kets transferring from liquid fuels to gas. “These can run heavy oil or diesel for now. When the gas becomes available, it can eas-ily be switched over,” adds Engblom.

“Our R&D has focused on gas and dual fuel technology for a very long time. To make an efficient engine is a sum of parts, trial and error and lots of running experi-ence. Compared with other engine manu-facturers, we are slightly more fuel-efficient and we are the forerunners in operational flexibility. For fuel flexibility, our dual fuel engine is also very popular. We are the first in the market with large gas engines and dual fuel engines. I think it’s fair to say that we have the most experience.” Engblom says Wärtsilä is unique because it can of-fer complete turn key solutions to utility operators, including full project manage-ment and EPC capabilities. The plant in Indonesia is a good demonstration of its capability in the Asian market.

Asia set for gas engine plant boom as renewables get a boostIndonesia pioneers the installation of a 110MW gas engine- -based plant powered by Wärtsilä generator sets.

FeATURe: ASIAN gAS eNgINe PLANT

ASIAN POWER 7

cO-publIsED cORpORatE pROfIlE

Yellow brick road to proficiencyInstaForex equips and educates traders with excellent online instruments for a successful Forex trading.

More and more people around the globe prefer investing in Forex. Nevertheless, only a few of them enter the market

with professional skills of investing. Forex is mostly considered as something very simple and easy to understand. In a measure it is so, because to get involved in currency trading one needs an electronic device with the access to the Internet, an uploaded trading platform and a certain de-posit. However this is enough to begin the jour-ney only, with no respect to the result achieved. To be sure of the outcome, add learning to your experience. Even those who are totally green on Forex realize it, thus driving up the demand for education related to private investments.

Absolutely all education projects are holding out promises to instantly teach a newbie how to earn on Forex, which actually is possible, though not for every education program. The “intolerable” burden can be shouldered only by the education projects, that are launched on the basis of large brokers and delivered by guru of trading and experienced analysts with reliable reputation; others are obviously availing of the “the magic words” with the mere purpose of marketing.

Providing excellent educationForex education is a series of tutoring services

and products devoted to providing basic knowl-edge sufficient to work as a professional trader. Now we will discuss market offers as exempli-fied by a large broker InstaForex, which aside from providing comfortable trading conditions, renders top-notch quality education services.

On the official website of InstaForex Company you can familiarize yourself with the general terms of Forex trading, market strategies, tech-nical and fundamental analysis as well as with step-by-step video instructions explaining the principles of working with the trading platform. It is a peculiar kind of a library with loads of ref-erence materials useful for self-education.

Every professional lecturer or tutor gives hints for individual studies at schools. Learning Forex trading one can attend workshops and trainings at companies’ offices or even online webinars.

“Forex education is a series of tutoring services andproducts devoted to providing basic knowledge sufficient to work as a professional trader.”

InstaForex offers both. One can be a part of a workshop or a consultation in a representative office of the broker. As compared to lectures at college, such studies always comprise practical part. Practical tasks are employed since the very first day of study. People, who have no time to spend at the desk, can attend webinars and on-line conferences wherever they are.

Nowadays online education is growing rap-idly, possibly, because interactive webinars that are delivered with the help of a video conference call allow using the latest methods of teaching and Internet technologies.

Practicing without losingSpeaking of practice we should mention demo accounts. InstaForex does not recommend trad-ing on a real account right after taking up an education course. Firstly, the broker offers to register a demo account with virtual deposit which allows practicing without losses. Of course, working on a real trading account to obtain more professional skills can be effective, however, like any other education class, it rarely brings satisfaction. That is why after demo ac-counts one can be sure of trying mini accounts, where a trader is working with real money, but with insignificant sums.

And yet even after a trader has started work-ing with considerable deposits, InstaForex goes on developing its customers by presenting the most important, central and timely information about events on Forex in the format of daily news releases, regular reviews made by the fa-mous analysts, newsticker etc.

To crown it all, with InstaForex a trader is cer-tain to choose not only a reliable and verified broker for comfortable trading, but also a guide in the world of professional trading, a coach, if you prefer.

8 ASIAN POWER

As the Chinese market slows, major wind turbine producers are feeling the pain from declining demand.

While China has been a world leader in developing renewable energy, it now appears that integration of renewable generation is presenting the country

with a whole new range of technicalities that threaten to slow the torrid pace of growth not only in the China, but across the world.

China’s wind power marketRecently, Chinese government officials have issued a number of new policies aimed at pushing wind developers to shift their focus from building more wind farms toward ensuring that more of the wind-generated electricity can flow safely into power grids.

As a result of these directives, the National Energy Admin-istration recently announced that it will approve about 40% less wind power capacity in 2012 than it did last year. In par-ticular, six Chinese regions that have great wind resources are forbidden from approving new installations.

As the Chinese market slows, major wind turbine produc-ers are feeling the pain from declining demand. For example, Sinovel Wind Group Co., China’s largest turbine manufac-turer, experienced slower growth last year causing a drop in nearly half of its sales revenue compared with 2010, prima-rily as a result of the slowdown in the Chinese market. Simi-larly, Xinjiang Goldwind Science & Technology Co. last year earned about one-quarter less income than a year earlier for similar reasons. Smaller local Chinese turbine manufacturers have also seen a sharp drop in their orders, and many of them have begun running out of business.

So why the slowdown?The cause of this slowdown can be attributed to several prob-lems. First, because China’s existing grid is unable to handle the unpredictable off-and-on nature of wind power, build-ing more wind farms means wasting more wind-generated electricity.

There is also an issue of grid safety. When more wind tur-bines are connected, the less stable the grid becomes.

One example occurred last year when equipment at one wind farm in western China’s Gansu province broke down and caused a chain reaction that knocked out hundreds of wind turbines across the region and threatened the electricity supply of a transmission network that covers about one-third of the nation.

The State Electricity Regulatory Commission (SERC) blamed these problems primarily on the absence of Low Voltage Ride Through (LVRT) systems, which allow wind turbines to continue operating during and after voltage dips so the grid can adjust more quickly and provide a high level of grid safety and stability.

Yet, China is not the first country to encounter such problems. Spain, Germany and other European coun-tries with high growth wind markets also have had to solve this technical challenge in order to continue to grow.

How did it go in Spain?In Spain, the Spanish grid operator, Red Eléctrica de Es-paña, turned to small innovative start-up companies to solve this problem. One such company, Wind to Power System (W2PS), a Spanish power electronics company focused on grid integration of renewable energy and power quality, has become the market leader in Europe for turbine independent LVRT retrofit solutions.

The company is now expanding into China and they are al-ready manufacturing LVRT solutions for the Chinese market locally. In addition to providing power electronics gear, they also produce testing equipment which are large containers capable of generating voltage dips for testing wind turbines in the field. They are currently selling this testing equipment to regional and provincial Electric Power Research Institutes (EPRI’s) in China.

At a recent seminar at the Spanish Embassy in Beijing, which was attended by Chinese government officials and executives from power companies, universities, EPRI’s and industry associations, Alberto Carbajo, Director General for Operations of Red Eléctrica de España, presented the Span-ish case study in how LVRT solutions solved wind integration problems in the Spanish market and allowed wind energy to surpass 20% as a percentage of total installed capacity.

Since China is now introducing a grid code similar to Spain, it can be expected that this solution will also ensure China’s improvement of grid integrity and power quality, just as it did in the Spanish market

While solving wind integration problems may seem like a minor technical challenge, it is becoming clear that it is the key to continued growth in wind development not only in China, but in the global wind market as well.

Brett A. Perlman is Board member of Wind to Power Sys-tems and former U.S. state utility regulator.

BReTT A. PeRLMAN

Wind integration key to future growth in Chinese and global wind industry

OPINION

ASIAN POWER 9

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10 ASIAN POWER

what makes chandgana power plant exceptional?The 600MW project is in central Mongolia and it does have a resource that follows Canadian Independent Standards, Coal 43-101, similar to the Australian George Standard of 1.2B. The coal is very shallow and easily extracted. We are currently in phase one of development of this 600MW thermal coal power plant that will be ramped up to 4200MW after phase two.

We received a mining and construction license in November, making it the first independent power plant project which received licensing in 20 years.

There are four existing power plants in Mongolia, but they have been there as far back as the 1970s and, in technical terms, are already very aged. There are some other projects which were licensed in 1990s but are currently inactive.

The initial 600MW capacity will be dedicated toward domestic con-sumption. Proposed output increase to 4200MW would enable Mongolia to export power directly into China via existing ultra high voltage lines.

As opposed to many other mine yards that are concentrating produc-tion on the Mongolia-Chinese border, with China being their main cus-tomers, this project is unique because it is centrally located near existing infrastructure. So, there is a road going right by it. There is a 45kb trans-mission line and the 220kb line is only about a hundred kilometers away.

It is very accessible, and the railways are just 100 kilometers away. We have all the elements, I mean, not necessarily immediately adjacent, but within reach which makes this project a lot more attractive than some of the other projects which are located farther away. Because our coal re-sources are so abundant and accessible, we can make double-digit of re-turn of investments of around 20% at a very supportable rate at 70 kWh.

what was the target funding cost of the project and where does your project financing stand now?The target cost is $1 billion. To-gether, we were able to raise over $80 million in the last two years. But when it comes to project fi-nancing, we haven’t begun the fund meeting yet because there are different elements that are needed to be in place, primarily, obtaining a mining license.

Prospective investors to the project are mostly from Asia. We have interested parties from Sin-gapore, Malaysia, Thailand, Japan, Korea, and China.

how do you address social and environmental issues in ob-taining a mining license? In terms of pollution concerns where herders living nearby would be likely affected, we have to in-form the local community of the benefits and also clearly make them

A young CEO at 38, Prophecy Coal’s John lee speaks proudly of their mine-mouth power plant project, a first of its kind for Mongolia, and one designed to augment and ultimately replace the country’s aging power supply infrastructure.

understand the disadvantage of having a power plant in the vicin-ity. We have to find a way to com-pensate them. We also have several projects in Canada in which we face very similar issues and we’ve found that through information sharing and direct engagement, we’ve been able to create good dia-logue about all aspects of current and future operations. Compared with Canada, I think Mongolia is an even easier framework. We’re planning on working with local communities. We already have a consultant living with them to deal with their concerns. Eventually, I believe that they will make good judgement over the economic investments versus the negative things that come with the projects.

There are some animals that drink from the underground water just next to the mining site but we are planning to construct wetlands to treat wastewater.

why did you choose to invest in Mongolia?Mongolia’s economy is growing and there is a severe power short-age that has been forecasted. Mon-golia was lacking foreign invest-ments until around mid of 2005. Coal is a commodity good in early 2000. Prices of coal had more than doubled, tripled or even quadru-pled in many cases and Mongolia is really one of the last frontiers in resource exploration. In the last 10 years, Mongolia has received billions of dollars in terms of coal investments which consequently boosted the mining industry and coming along with that is eco-nomic growth. Mongolia’s GDP has more than doubled in the last five years and the reason for why Prophecy got into this is because of some incidents when we were able to get hold of this coal access, and we were debating internally on what to do with the coal that we have. It’s not high-quality ranking coal but Mongolia said that they want to create a market for their own coal. Therefore, the idea of a power plant came about and just at the time when Mongolia needs a lot of power to sustain its growth.

There is virtually no large scale IPP market here today. Mongolia

John Lee, CEO of Prophecy Coal’s

CeO INTeRVIeW

Mongolia approves construction of first ever IPP in 20 years

ASIAN POWER 11

has had no power infrastructure in the last 20 years and the gov-ernment is only beginning to reg-ulate the industry. As the country’s economy grows, it is going to need power and so the prospect should be good. Currently though, there are always obstacles about the government not getting used to the idea of power from the private sector and there’s a lot of learning curve that has to be met – i.e. how does the IPP work?

what is your vision for the Mongolian power sector?Not necessarily a vision, rather a social responsibility. We are guests in this country and we are very fortunate to have inherited these huge deposits of coal. I think there is some social responsibility to return these assets to Mongolia, especially to the people. I want to stress how we differ from the oth-er Mongolian stories which you probably heard about.

Our vision is investing on Mon-golia, and creating the energy in-frastructure to make Mongolia energy eminent. We have about three site technologists today to help us achieve that vision. We are not transforming Mongolia into something different, but we want to help Mongolia sustain its growth, which at this rate would not be sustainable if they didn’t

have the matching growth driv-ers. So far, the economy has dou-bled from $4 billion to $9 billion in the last five years, but it’s a snail’s pace. If only the addition-al demand for electricity would be met without importing more from Russia, I believe we could double GDP from $9 billion to $20 billion in the next five years. It would not be such an easy so-lution. It requires a long-term development plan. We’re very fortunate to have a government that recognizes the need and is working very closely with us to the utmost possible extent.

aside from electricity, how would the society benefit from the project? We have to help the government find a way to create employment for the people in order to bring the economy into the middle in-come rank. During construction, we’ll hire 2000 people that will be a mixture of expats and Mon-golians. We’re hiring expats but the goal is to hire them and then quickly execute knowledge trans-fer to the locals. The target is to have 95% of the permanent posi-tions in the operation occupied by Mongolians. In fact, as part of this goal, we are sponsoring local scholarships, conducting training programs and eventually in due

time, we’ll hire them.Another point is a special con-

tribution to the economy. Our coal has been extensively traced to be very clean and conforms with all the international environmen-tal standards.

is there public opposition on building the mine-mouth pow-er plant project with regards to the use of coal?In Mongolia, there is a crucial need for power. There are very frequent blackouts. The public in general is supportive with all the mining activities coming out this year and to power-generating projects. Mongolia is not exactly a rich country and coal power remains to be the cheapest, most affordable, most reliable and the most accessible in the market.

And not to mention, experts are in agreement that with the latest tech-nologies available, we can develop coal-fired power plants with high efficiency and low emission.

how would you attract talent to work for the power plant considering that the site loca-tion is 300km away from the main city, ulaanbaatar?Mongolians are nomads and they’re happy to live in Gers. People have no problem living in rural areas. In fact, there are almost a billion peo-ple living in the countryside. The power plant operation requires around 450 people and I don’t think that would be hard to fill. The cultivated area of the country is only 60kms away, so there’s no issue as far as keeping people is concerned.

There are some animals that drink from the underground water just next to the mining site but we are planning to construct wetlands to treat wastewater.

12 ASIAN POWER

The Solar market is forecasted to grow from around 5gW today to 28gW by 2020

In July, the new Feed In Tariff (FIT) for renewable energy sources will come in effect. Under the new FIT, utilities are required to buy solar, wind, geothermal and hydro

power at a fixed tariff and are allowed to pass on such cost to the consumers.

FIT and the solar marketThe FIT will have most immediate impact on the Solar Pho-tovoltaic market. While the other renewable sources have also attractive rates, either lengthy environmental procedures or less favorable conditions play their part. Solar tariff is ap-plicable for installation larger then 10kW and the utilities will pay 42 yen (around 52 US cents) per kWh for 20 years, which is almost twice the current rate in Germany. German tariffs are actually lowered every year (2004 = 54 euro cents / kWh ; 2012 = 21,99 euro cents/kWh for rooftop > 100kW) to en-courage more efficient production of renewable energy.

The Solar market is forecasted to grow from around 5GW today to 28GW by 2020, majority of the growth will be re-lated to the consumer rooftop applications, still a consider-able amount of mega-solar projects (> 1MW) will come on the market.

Restarting Oi nuclear reactors?Not only the new FIT tariffs got lot of attention recently, also the Oi Nuclear reactors 3&4 restart is capturing many headlines. The country is split over the recent approval given for the restart. Majority of the Japanese believe it is too early, while the related businesses and governmental agencies are very much in favor.

While the Oi units did meet the required new safety stand-ards (by computer simulation) according to the Nuclear Safety commission, none of those measures, (such as a higher seawall, a seismically isolated emergency command center and filters to remove any radioactive substances in the case they are vented from the reactor core to the atmosphere dur-ing an emergency), have actually been implemented.

Kansai Electric Power Company (KEPCO) has committed to implement them over the next three years, but in the cur-rent climate, not many people actually believe this will hap-pen. The minister of economy, trade and industry (METI), Yukio Edano, was quoted saying “We have not necessarily gained acceptance from every member of the public, but we think we have garnered a certain level of understanding.” Ac-tually a recent poll published on 4th of June resulted in 71% of the Japanese public do not agree with the restart.

Debates hinder power generation improvementsUnfortunately the long debate over the restart and the ex-tensive lobbying effort by KEPCO, have prevented actions to further improve the power generation capacity, such as installing additional thermal generation sources and inter-connections. Also the much discussed restructuring of the Utility market did not make much progress.

While a METI committee on industry reform is examin-

ing two proposals for splitting off power generation from transmission operations, the hurdles remain tremendously high with the utility industry putting up fierce resistance.

Renewables get a boostThe expected boom in the renewable power generation can only be sustained if the utility industry is restructured. To in-tegrate all those fluctuating and remote generation sources requires additional investments in the transmission and dis-tribution grid. As currently the utilities have no direct incen-tive to integrate those renewable, it is even more unlikely they will make additional investments in the grid. It is far more easier and commercially interesting to return to the nuclear power generation era simply by arguing that the power grid is not able to integrate so much renewable energy.

Further the current business model has created a relative expensive generation and transmission as well as an inflex-ible network. Since the FIT cost is being passed on to the consumers, it is even more urgent to split the generation and transmission businesses to create more competition in the utility market, which in return will reduce the cost for the consumer.

Some are even drawing parallels between the KEPCO ac-tions, in delaying any potential solutions to reduce any power shortfall in the summer, to the slow progress being made to reform the overall Utility industry.

It will be in nobody’s interest to support this “let’s keep talk-ing and it will go away” scenario. The new FIT can be a seri-ous game changer if the environment and stakeholders can truly support it. Let’s hope common sense will prevail.

Frenk Withoos, Vice President, Power Product and Power System Division, ABB

FReNK WITHOOS

Are safety measures neglected in Japan’s Oi Nuclear reactors?

OPINION

ASIAN POWER 13

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towards a seCure energy futureThailand’s GDP is predicted to see a 5.6% growth, leading to a 6% growth in peak power demand between 2012- 2016 to 35,600 MW and 44,200 MW by 2021. With current capacity of around 28,500 MW, and despite current energy imports from neighbouring countries, Thailand will see a shortfall in capacity in the next few years.

Celebrating its 20th Anniversary in 2012, POWER-GEN Asia has established itself as the premier conference and exhibition dedicated to the power generation and transmission and distribution industries.

Attracting 7,000 delegates and attendees from over 60 countries from across South East Asia and around the world, co-located POWER-GEN Asia and Renewable Energy World Asia is the annual meeting place for senior executive and industry leaders.

The conference has become the major annual platform for the industry to discuss topics and issues of the day and is regularly contributed to with keynote speeches, in its joint keynote session, from Government Ministers and Governors of the region’s utility companies.

Joint opening Keynote SeSSion – WedneSday 3rd october – 9am- Arak Chonlatanon, Minister of Energy, Thailand- Sutat Patmasiriwat, Governor, Electricity Generating Authority of Thailand- Kenji Uenishi, President, GE Energy, Asia Pacific, Singapore

topics discussed at the conference include:• Trends, Finance & Planning• Environmental Protection, Flexibility, Fuels & Grid Technology• Power Generation & Plant Technologies• Operation, Optimization & Servicing.

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14 ASIAN POWER

In spite of current market condi-tions in India, favourable project economics are set to support coal

power as the default baseload capacity option with over $154 billion capex ex-pected between 2012 and 2020.

Since market restructuring that prin-cipally began with the Electricity Act 2003, India’s power capacity has grown at a strong CAGR of 6.8% – growing from 130GW to 220GW at year-end 2011.

During this period coal power ca-pacity has grown at a CAGR of 6.4% – from 65GW in 2003 to 107GW at year-end 2011. However, with insuf-ficient generation capacity, a history of project delays and missed government capacity additions targets, as well as severe problems with the transmis-sion and distribution networks, India’s power market faces many challenges that must be addressed to ensure that economic growth is not unduly im-peded.

As part of its broader energy secu-

rity policy, the Government of India is seeking to develop a more balanced energy mix through support for nu-clear, gas, hydro, wind and solar power – something that is designed to reduce an overreliance on coal.

However, as this article discusses, this will likely prove to be a difficult proposition; and in the medium-term, coal power project developments are expected to become increasingly wide-spread and to the detriment of invest-ment in alternative baseload options of gas, hydro and nuclear.

Favourable coal power project eco-nomics support positive outlookCoal power has long since been the dominant baseload power source and default technology choice in capacity expansion in India. But slow develop-ment of domestic coal resources, rising domestic and international coal prices, government tariff policy, supply chain capacity constraints and the bankabil-ity of PPA agreements (among other

A recent independent market study by energy business advisors John Loffman Research forecasts in excess of $154 billion to be spent on coal power projects in India between 2012 and 2020

things) are presenting significant hur-dles to timely project execution. None-theless, from the perspective of under-lying project economics, coal power continues to be India’s cheapest busload capacity option for the foreseeable fu-ture. In fact, a recent independent mar-ket study (the India Coal Power Mar-ket Analysis & Forecast 2012-2020) by energy business advisors John Loffman Research forecasts in excess of $154 bil-lion to be spent on coal power projects in India between 2012 and 2020.

Coal power remains a more cost ef-fective source of electricity relative to other technology options. Although ac-tual project economics can vary greatly from project to project depending on a range of factors. The typical values presented in the chart above help to demonstrate the difficulty facing India’s power sector, in general, and coal pow-er market, in particular. That is to say, power projects are becoming increas-ingly expensive to develop, while tariff level increases to reflect this have been less forthcoming owing to policies de-signed to protect the interests of poorer electricity consumers.

Technologies for coal projectsSupercritical 800MW coal technology currently offers the most economical option with an LCOE value of $69/MWh, which is somewhat cheaper

Coal to be India’s default baseload capacity optionThis can be possible with over $154b capex expected between 2012 and 2020. by aDrian John

FeATURe: INDIAN COAL POWeR PLANTS

ASIAN POWER 15

than 600MW supercritical coal tech-nology from China which has an LCOE value of $76/MWh. Meanwhile the commonly used domestic 500MW sub-critical technology coal projects have an LCOE of $87/MWh. However, it is worth noting that when international coal prices are utilised for these calcu-lations, the LCOEs for these three tech-nology types is $90/MWh, $98/MWh and $109/MWh respectively. For com-parison, gas power options typically have an LCOE of around $84/MWh at domestic gas prices and $102/MWh at international prices; while both nuclear and hydro are typically around $100/MWh. Although the $220/MWh LCOE for the proposed Areva EPR 1,700MW units to be built in Jaitapur (Maharash-tra) is also noteworthy as it illustrates both the potential for large variation in individual project LCOEs, as well as the willingness of the Indian authorities to support the right projects almost re-gardless of costs.

Nonetheless, it is natural that with the LCOEs of technologies such as nu-clear and hydro power converging with coal (at international coal prices), as well as the Indian Government’s desire to develop a more diversified energy mix, that such alternative power op-tions would receive greater interest. This, however, is not currently the case as these other baseload power options face their own considerable issues for project development. Nuclear and large-scale hydro projects are facing increasingly vociferous public oppo-sition, which is leading to significant project delays and cancellations; gas power projects are suffering from even worse fuel supply issues than coal – with insufficient domestic production, slow development of gas pipelines and LNG infrastructure, and high interna-tional gas prices all affecting gas power project developments. Furthermore, in-termittent non-baseload wind and so-lar power projects, that are expected to reduce over-reliance on coal, are find-ing project financing (i.e. bankability of PPAs) and insufficient government support (e.g. through tax breaks and feed-in tariffs) to be significant hurdles for project execution. Consequently, all of this, in addition to the superior LCOE calculations, supports the strong view of coal remaining India’s default option for capacity additions for the foreseeable future.

So, with access to domestic fuel sup-plies, coal power projects have con-siderably lower LCOEs than all other competing technology types, but when international coal prices are considered the economics of such projects clearly deteriorates significantly.

Coal remains India’s default option for capacity additions for the foreseeable future.

FeATURe: INDIAN COAL POWeR PLANTS

On-grid tariff ratesAlthough in most cases on-grid tariff rates will be set to ensure a rate of re-turn on investment that will support growth in the power sector (typically around 15.5%), Ultra-Mega Power Projects (UMPPs) that have been won on a competitive bid basis encounter a different and difficult problem. UMPPs are central to India’s plans to increase total installed capacity in large blocks. However, with PPAs set by the bid-ding process and no mechanisms cur-rently in place to account for interna-tional coal price rises, the economics of such projects can become greatly undermined. A good example of this is Tata Power’s Mundra UMPP which has a contracted tariff of Rs 2.26/kWh, which is now viewed as economically unviable after the Indonesian govern-ment raised the price of coal exports that Mundra UMPP intends to use. However, the CEA has supported state utilities’ resistance to Tata Power being able to increase its tariff on the basis that it would undermine the competi-tive bidding process.

In fact, the issue of insufficient tariff levels, coupled with high fuel prices, has affected the execution of a multi-tude of proposed projects, with many either being put on-hold or cancelled altogether. But recent decisions by a number of State Electricity Regulatory Commissions (SERCs) to raise tariff rates by between 12% and 37% will no

doubt help to improve the viability of many proposed coal power projects, as their required tariff levels become more attainable within such an improved tariff structure. Nonetheless, further and more structured tariff reforms will be required soon in order to ensure that a stable investment environment is in place to support large-scale pri-vate investment and project financing throughout the power industry.

Adrian has extensive experience within the energy industry, in particu-lar power and oil & gas markets. He has conducted many commercial due dili-gence studies for investment banks and private equity firms, as well as carried out commissioned bespoke research projects for clients in power and oil & gas sectors.

16 ASIAN POWER

China is expected to add generating capacity over the next fifteen years equal to the current total of the United States and build at a 6:1 ratio.

We were all required to take science courses in school and one of the ones I signed up for was basic physics. In one lecture, the professor explained temperature convec-

tion, and just in case you missed or dozed off during that one, that’s where a temperature difference in gases, liq-uids or solids will strive to equalize through convection.

Today we are witnessing convection on a previously unprecedented global scale; the shift I’m referring to isn’t what you’d think, it’s not about climate change or tem-perature, but represents one of the greatest migrations of power and capital that the world has ever seen. Although the economy has put a bit of a damper on things of late the flow is still heavily eastern in direction.

The “Power” I’m referring to is in the degree of in-creased world influence and electric generating capacity that’s lighting up whatever device you’re looking at right now.

Eastward migrationThe Anglo-Spheres dependence on imports is a power and production vacuum that has been escalating for decades and one that the East has been willingly filling, putting millions to work in jobs and at wages that west-erners “currently” refuse to accept. All this eastward mi-gration or “convection” of capital and power is happen-ing for one of two reasons; one as payments for the goods the west is importing, or two, by companies looking to get in on the boom to build infrastructure, factories and supply the goods craved by the west.

But what is missing and needed for the circle to con-tinue to expand is power in the form of electricity. And with all this inflowing cash and demand for increasing generating capacity you would think it’s a great time to be in the power business in Asia, wouldn’t you?

From a demand standpoint the potential for power plant contracts couldn’t look brighter.

China alone is expected to add generating capacity over the next fifteen years equal to the current total of the United States and build at a 6:1 ratio. India is right behind and percentage wise most other Asian nations are forecasting similar trends.

True it’s great for many industries but when it comes to developing the power plants that are needed to power Asia’s continued growth, we have a bit of a different sce-nario.

Wise considerationsSo before you decide to hang out your shingle and build a power plant or two, consider the following.

It’s a reather capital intensive industry; the field is well served by MNC’s like Doosan, GE, Siemens, Alstom and the elephant in the room, China, has its own state com-panies that are turn-key capable competitors with a dis-tinct advantage in the domestic market; and believe it or

not, it’s been said by some that Chinese bids for projects in India, Vietnam… are subsidized through currency controls and supported labor?

The Asian power market is certainly dynamic, mov-ing quickly and changing directions almost by the hour. Everyday, there are articles on a new power plant being built here, a wind farm breaking ground there, or plans for a new nuclear power station that is going to be built in one country or another.

So while the West clamors for cheap goods and wrings its collective hands, the East is doing whatever it takes to see that new generating capacity is continually being added to the grid. The US says this is all well orchestrated and monetary policy is a key part of the mix.

The theory is that if that happens it would halt or postpone “convection” before domestic Sino-Sphere economies have attained a level that would make them self-sustaining, thus breaking the virtuous circle that is driving their development and consequently power gen-erating capacity.

If and when western economies and lifestyles that are heavily based on services, not goods (76% in the US) be-come unsustainable and Asian countries reach the tip-ping point where they no longer depend on exports to support their economies, the West will certainly be fac-ing a new reality and those aforementioned unacceptable jobs might look pretty good back in Hoboken or Athens.

So for now, we’ll just have to wait and see how far the pendulum swings eastward and what happens if it doesn’t swing back toward center.

Dale Gerstenslager, General Manager, Public Relations & Communications Department, Managerial Division, Doosan Heavy Industries Vietnam Ltd, (Doosan Vina)

DALe geRSTeNSLAgeR

The vicious cycle of wealth and power convection

OPINION

ASIAN POWER 17

18 ASIAN POWER

Most electricity generated in Indonesiais sold to PLN, the state-owned utility, under 25 or 30-year power purchase agreements (PPAs).

Despite the adoption of a new electricity law in 2009 liberating the Indonesian electricity mar-ket, most electricity generated in Indonesia is

sold to PLN, the state-owned utility, under 25 or 30-year power purchase agreements (PPAs).

One of the challenging dynamics of the Indonesian electricity market is the fact that PLN sells electric-ity to consumers at less than PLN’s cost of generation and the tariff payable to independent power produc-ers (IPPs).

The Indonesian Government compensates PLN for the difference between the cost of generation and the retail tariff by way of a subsidy known as the Public Service Obligation (PSO).

The issue of PLN’s creditworthiness and the commit-ment to pay the PSO has been critical for IPPs seeking project financing. Traditionally, the essential mitigant to PLN’s credit risk has been the Indonesian sovereign guarantee.

Regulation 139In August 2011, the Indonesian Government passed Ministerial Regulation No. 139 of 2011 on Procedures for the Granting of Business Viability Guarantee of PLN for Development of Power Plants using Renewable En-ergy, Coal and Gas Conducted Through Cooperation with Independent Power Producers (Regulation 139).

Regulation 139 caused ripples of concern amongst the IPP industry because it suggested that the sovereign guarantee issued to IPPs for PLN’s payment obligations under PPAs would be reduced.

In particular, it appeared that termination payments under PPAs would no longer be covered. Without cover for termination payments, most international lenders and export credit agencies previously active in Indone-sia were unwilling to lend without sponsor support for this risk or a stable investment grade rating for Indo-nesia.

Sponsors unwilling or unable to provide support were faced with the prospect of shorter tenor, higher cost lending from regional banks. As a result there were few bids for projects tendered by PLN in late 2011 in-cluding Banten, Riau and Kalsel 1.

However, recent events bode well for Indonesian power projects. Fitch and Moody’s upgraded Indone-sia’s sovereign credit rating to investment grade in De-cember 2011 and January 2012 respectively. Once lend-ers become satisfied that Indonesia’s investment grade rating can be sustained, the issue of PLN’s creditworthi-ness becomes much less significant.

In the last few weeks Indonesia’s Ministry of Finance issued sovereign guarantees covering PLN’s payment ob-ligations under PPAs for two geothermal projects at Ra-jabasa and Muara Laboh. These are the first business vi-ability guarantees to be issued under Regulation No. 139.

A third guarantee is likely to be issued soon for a hy-dro project under the second Fast Track programme, which is seeking financial close in the near future.

Guarantee of paymentDespite initial fears, the Ministry of Finance is willing to guarantee PPA termination payments. On the nega-tive side, however, the guarantee does not provide blan-ket coverage of PLN’s obligations under the PPA.

On the contrary, only specific post - commercial op-eration date payment obligations are covered. It is likely that the guarantee will cover the tenor of the financing, but will not necessarily cover the remaining period of the PPA.

The issue of the first business viability guarantees by the Ministry of Finance and the new investment grade rating ought to provide the industry with cause for op-timism.

However, readers should note that the business viabil-ity guarantee is only available for Fast Track II projects. Several projects outside of the Fast Track II programme are being tendered without the benefit of a guarantee.

The first of these projects, Banten, a 660 MW coal-fired project, is moving into the financing phase this year. This will be an interesting test for the financing market and may establish a new model for financings in Indonesia.

Laurie Pearson, Of Counsel, Norton Rose (Asia) LLP. Laurie is a member of Norton Rose’s projects and en-ergy group based in Singapore.

LAURIe PeARSON

Indonesia issues sovereign guarantees for power projects

OPINION

ASIAN POWER 19Answers for energy.

www.siemens.com/energy

Beyond 60% – pioneering H-class efficiency with world class flexibility

Proven in 15,000 EOH and in commercial operation

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Highest customer valueSiemens plant solutions provide an optimal balance between capital costs, plant performance, and operational and maintenance considerations. Thanks to its fully air-cooled design, the SGT-8000H series gas turbine features the highest possible reliability and availability, drastically reducing life-cycle costs. The Benson HRSG achieves steam temperatures of 600 °C required to break through the 60 % efficiency barrier. As a result, single-shaft SCC-8000H series power plants offer you maximum value and long-term investment security.

Highest flexibilityThe plant’s daily start/shutdown and cycling capabilities as well as the fast start-up concept – with up to half a GW in half an hour – support intermediate load requirements and foster high efficiency and low emissions in part-load oper-ation. With a combined-cycle power output of 570 MW at 50 Hz and 410 MW at 60 Hz, the single-shaft SCC-8000H series represents a new foundation for sustainable success.

20 ASIAN POWER

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