January 22, 2014
Buoyant peak power demand, favorable coal prices and a resurgent Southeast Asian economy are likely to drive investments in the Asia Pacific power generation industry for 2014.
2014: Peak Power Demand Remains Buoyant due to Sustained Economic Growth
The rising electricity demand is likely to augment power generation in the Asia Pacific (APAC) region by 4.1% in 2014.
As per the IMF's outlook, Indonesia, Malaysia, The Philippines, Thailand and Vietnam are forecasted to register a combined GDP growth of 5.7% in 2014. The growth will be driven by rising domestic consumption, credit expansion and rising middle class income.
2014: Coal will be the fuel of choice in Asia, but international financing options are restricted
"Coal will remain the fuel of choice even in 2014, due to a combination of low prices and abundant availability. Furthermore, the low natural gas prices in the US have led to a rapid increase in US coal exports to Asia," noted Ravi Krishnaswamy, Vice-President for the Energy & Environment Practice, Frost & Sullivan Asia Pacific.
"Indonesia and Vietnam are expected to ride the demand wave for coal-fired power plants mainly due to the vast capacity additions they intend to achieve to bridge the power deficit," he added.
The U.S. Export-Import (Ex-Im) Bank and the European Bank for Reconstruction and Development have announced in late 2013 that they will stop financing coal power projects abroad.
2014: Asia Pacific remains unfazed by Fukushima Crisis and Remains Committed to Pursuing Nuclear Power
"In 2012 and 2013, carbon emissions in Japan increased sharply due to the country's heavy reliance on fossil fuels for power generation in the aftermath of the 2011 Fukushima Daiichi disaster. Hence to improve its current energy situation and to reduce emissions, Japan is most likely to seriously consider options to restart its nuclear power projects," noted Krishnaswamy.
Similarly, South Korea which is heavily dependent on nuclear power for almost one third of its power generation is currently facing questions on its safety of nuclear projects. In 2014, the country is likely to vigorously work on addressing the safety issues and include nuclear power in their planned installed capacity growth in the coming years. The government is likely to launch a revised nuclear policy in early 2014.
Southeast Asia's nuclear ambition is set to begin with Vietnam taking the lead. Vietnam's first nuclear power plant's construction which was scheduled to start in 2017 might commence earlier subject to the outcome of political discussions in the next few months.
2014: Solar PV (Photovoltaic) and other renewable energy installations continue to shine due to Price Stability and Government Support
Many nations in Asia Pacific region have recently introduced Feed-in-Tariff (FiT) schemes for different renewable sources of electric power in the last two years and many have brought favourable changes to their already existing tariff schemes.
Introduction of FiT for solar photovoltaics (PV) in Japan in 2012 had a great impact on the market and it led to the explosive growth of the sector in 2013. In 2014, similar market trend is likely to continue as the solar PV rates are likely to remain stable and the electricity tariffs are already very high.
In 2013, Indonesia had revised its FiT rates which are likely to encourage the start of numerous geothermal, biomass and many other renewable energy (RE) projects in the country.
"Thailand plans to add 1000 MW of solar PV by the end of 2014. The growth of RE projects has been impressive in Thailand since the introduction of the FiT policy in 2006," said Krishnaswamy.
"However, the FiT was only limited for a period of 10 years. In a radical change from the old policy, Thailand's National Energy Policy Commission (NEPC) has approved new FiT for both ground mounted and rooftop solar PV with a FiT validity of 25 years. Such a policy change is likely to stir-up the growth of RE in Thailand in 2014," he added.
The RE developers in The Philippines are not satisfied with the FiT rates implemented by The Philippines' Energy Regulatory Commission for wind, hydro, solar and biomass. However, in 2014, some biomass, small hydropower and wind projects are likely to make a headstart.
In Vietnam, UK firm Tortech and Malaysian firm CHE group are undertaking construction of 20 10MW biomass fired power plants. The firms have said that they have been encouraged by the lucrative FiT schemes in the country. In Malaysia, the SEDA (Sustainable Energy Development Authority) is likely to introduce wind power under the FiT scheme in 2014.
2014: De-regulation and Power Market Reforms Key to Retain Investors' Confidence for this Sector
Japan's electricity sector is poised to experience a turnover as government has passed the electricity bill to bring reforms in the sector which has been the first priority of the Prime Minister Abe after the nuclear accident of 2011. The establishment of a national grid and liberalisation of the power market are the key agendas of this reform. The liberalisation of utilities is expected to end the monopolistic market.
The Prime Minister has said that approximate investments of US$299 billion are required till 2020 for the transformation of the power sector. Two coal-fired thermal power plants and twelve gas-fired plants are likely to be completed by end of 2014 and their supply of electricity will replace the oil-based power by approximately 20.0% of its current generating capacity.
In Malaysia, the New Energy Plan 2011- 2015 initiated by the government focuses on the de-regulation of electricity prices and reduction of subsidies. This step will encourage higher investments in all the three sectors of power industry - generation, transmission, and distribution. Regulations will provide incentives for the use of energy efficient equipment at both individual and utility level.
"Implementation of several of the proposed power sector reforms in the Asia Pacific countries will accelerate investments and lead to harmonisation of the regional electricity markets," concluded Krishnaswamy.
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