Distributed power generation solutions-
The inadequacy of transmission and distribution (T&D) infrastructure and the topographical challenges in isolated islands such as Indonesia and the Philippines have created strong demand for distributed power generation (DPG) in Southeast Asia. During the summer of 2015, the Philippines experienced a severe power crisis characterised by rolling blackouts or “summer brownouts”. It was observed that the utility had failed to meet the country’s power demand by as much as 1,000 MW, leaving quite a significant gap between electricity demand and supply. In neighboring Indonesia, the country’s utility PLN has estimated that there could be a severe power crisis in 2016, whereby electricity margin would decline to 16 per cent (from 27-28 per cent) in the areas of Java and Bali, which is far beyond the safe limit of 30 per cent indicating a major cause for concern. These cases cannot be ignored as one-off cases for the mere fact that blackouts such as these are common in these archipelagic nations. Myanmar, marked by low electrification rates of 26 per cent and high transmission line losses of 25 per cent, will also have significant use for DPG, especially to provide electricity to smaller load centres. It would take decades for the power utilities in the aforementioned countries to strengthen the power supply through large-scale power plants. However, the sheer magnitude of the ongoing power crisis calls for an immediate short-term solution. Utilities are, therefore, driven to look beyond the scope of their traditional business models, and are increasingly willing to shift towards the concept of aiding and adopting DPG solutions through decentralised systems.
In terms of application, DPG solutions provide a strong support system to aid the development of baseload, peak and emergency power operations. Looking at the present scenario, it is quite axiomatic that countries with poor electrification rates, such as Indonesia, Myanmar and the Philippines have been the front runners of the DPG solutions market. The overall installed capacity of the DPG market was estimated to be 20,450 MW in 2015, and is forecast to reach 34,747 MW by 2020. The key types of power plants analysed are biomass and waste to power, solar photovoltaic (PV), internal combustion engine (diesel/heavy fuel oil (HFO)/gas engine/ genset)-based power plants and temporary rental power plants.
Indonesia, Myanmar and the Philippines have been facing severe rolling blackouts due to the gap in supply, their geography, and weak power sector infrastructure. Additionally, prolonged delays in completing baseload centralised power generation plants in these countries create vast opportunities for diverse DPG solutions that can be quickly deployed to meet soaring electricity demand.
Diverse technologies ranging from diesel engines, gas engines, renewable energy systems such as wind power, solar power, and small-hydro power to hybrid systems have been deployed for DPG projects in these countries. Customers and project developers are spoilt for choice with the sheer range of DPG technologies available in the market that can be selected based on fuel availability in the chosen project site, power output requirements, and government incentives, if any.
For instance, Southeast Asia has an annual global horizontal irradiance (GHI) ranging from 1,200 kWh per square metre to 1,800 kWh per square metre, making it ideal for developing solar power plants. Besides, more than 60 per cent of the land in Thailand, Myanmar and Vietnam is suitable for large-scale solar farms, with substantial irradiance levels between 1,200 kWh per square metre per year and 2,000 kWh per square metre per year. This natural advantage has given a major fillip to the DPG market in Southeast Asia.
In the Philippines, the government has formulated the Interruptible Load Programme aimed at large commercial establishments to address its severe power crunch. Through this programme, heavy electricity consumers such as commercial establishments and condominiums are expected to disconnect from the grid and turn on their generators when there is a power shortage. This utilitarian system brought in by the government has been a novice strategy that has proved quite reliable, as large government owned and controlled corporations with backup generators bearing loads of more than 1 MW have voluntarily signed up for this programme.
Even in countries like Thailand and Vietnam, where the power infrastructure is relatively good, DPG projects have seen strong developments. For instance, Thailand enjoys a strong track record of consistently meeting its RE targets aided by favorable policies and comprehensive regulations. On the contrary, Vietnam lacks a clear RE roadmap but adopts DPG solutions during the dry summer months to offset the reduction in hydropower output.
Though the opportunities are many, the prohibitive cost of batteries for solar PV panels and the inherent risks in fuel supply contracts affect the returns on investment for project developers.
In any DPG project, except those based on solar PV, 40 per cent to 60 per cent of the cost is earmarked for obtaining fuel. In some cases, project developers have to import fuel, and the returns from tariffs do not justify this expenditure. The lack of favourable policies and regulations is another hurdle to the rapid adoption of DPG.
Despite these issues, DPG is still a more viable option than conventional power solutions. A centralised power plant takes five to ten years to become fully operational due to the obstacles created by environmental laws, the protracted land acquisition process and overall construction delays. During this period, power producers will look to meet the demand for power by setting up temporary rental power plants.
Across Southeast Asia, gas-fired DPG solutions are likely to find greater uptake than diesel/HFO-fired DPG solutions due to their environmental benefits, operational flexibility and shorter implementation time. DPG solutions will also become less expensive once developers ensure the security of fuel supply through long-term partnerships with suppliers and the feedstock community.
Overall, strong policy support and a change in utilities’ business models will go a long way in unlocking the true potential of the DPG market in Southeast Asia.
Ravi Krishnaswamy heads Frost & Sullivan’s Energy & Environment Practice in the Asia-Pacific region and is based in Singapore. Krishnaswamy has spent more than 20 years in the energy and environment sector, both in engineering and business consulting functions, as a design engineer, project manager, senior industry analyst and research director. He is also Frost & Sullivan’s in-house expert on clean technologies and utilities.
Adwaith Visveswaran is Senior Research Analyst under the Energy & Environment Practice at Frost & Sullivan, Asia Pacific, and is based in Chennai, India. Since joining Frost & Sullivan in January 2015, his research experience has strongly focused on various topics on the distributed energy industry, specifically renewable energy integration, biomass and waste-to-power, and rental power sectors in the Asia-Pacific market.
