By Dr Nuki Agya Utama, Nadhilah Shani and Aloysius Damar Pranadi
2020 is incredibly tough for ASEAN energy development as Covid-19 brings unprecedented challenges to the sector. With the five years left to run towards its regional target of 23 per cent share of renewable energy in total primary energy supply, in the pre Covid-19 era, ASEAN already needs to accelerate the effort as the share is still around 14.3 per cent in 2017. To accelerate this progress, ASEAN really needs to seek a new strategy to cope with uncertainties which the pandemic has brought in the horizon. Electricity, as the main sector that contributes to accomplishing the target needs to recover quickly to catch up with the target. ASEAN needs to install approximately 166 GW of renewable electricity by 2025 if ASEAN does not want to miss the target (ACE, 2017). In 2018, there is 67.3 GW of renewable electricity installed across the whole region with hydro, bioenergy, solar and wind being as the most installed respectively (AEDS, 2020). However, the oversupply of electricity as well as the war price on the crude oil, bring some importer oil countries a bit of relief. For countries who rely on the export of fossil fuel commodities such as coal, oil and gas will face different path if the impact of Covid-19 is continuing up to next year.
Covid-19 current impact on the electricity sector
Due to a mobility restriction, the fast-spreading Covid-19 causes severe to all the sectors including the energy sector. It also magnificently impacts on the supply and demand balance of fuels, as well as a retardation of tonnes energy projects (from oil and gas to transmission and biofuel promotions). In demand side, ASEAN experiences decline in all sector with various degree of severity. This part will depict the impacts of Covid-19 in electricity demand by snapshotting one or two grid system in the ASEAN Member States.
Reduction of electricity demand in industry and commercial
As most of its members are developing countries, ASEAN is a good fit for industry and commercial to grow. The electricity demand of industry and commercial has been increasing year by year, as it is reflected in the region’s electricity consumption from 2005-17 (AEDS, 2020). Fig. 1 shows a CAGR of 5.9 per cent and 5.5 per cent for industry and commercial. Among others, electricity consumption in the industry represented 43 per cent of total electricity consumption in ASEAN in 2017. Therefore, when corona hit ASEAN, the effort to curb in the form of quarantine and mobility restrictions which cause the operational shutdown of several power plants may significantly impact the electricity consumption in 2020.
During Covid-19 outspread, some ASEAN Member States forced operational stop for some non-fundamental goods industries to avoid the increase of human-to-human virus transmission. In red-zone cities, where the numbers are rapidly rising, many offices and buildings have also applied for work from home measure since May or April due to the quarantine actions taken by the government. Indeed, this may impact the demand profile and its amplitude. In this article, Bangkok – as one of the busiest areas in ASEAN and Java-Bali system known as one of the biggest grid systems in ASEAN was considered as an example for the analysis of the Covid-19 impact to the overall ASEAN electricity sector.
In January to March 2020, Bangkok Metropolitan Area’s power max demand started increasing normally. Due to an emergency lockdown on 26 March, the demand has fallen from 8706 MW in March to 7998 MW in April 2020. Fig. 2 shows the Bangkok Metropolitan Area’s maximum power demand in 2020 is much lower than in 2019, wherein 2019 the peak demand of this area could reach 9,526 MW
According to publicly available data for electricity demand by sector from January to March 2020 (as of May 25, 2020), the data shows that there is a normal increased of residential electricity demand, however, there is a 9 MW drop on industry electricity demand, starting by February 2020 (see Fig. 3). Industrial electricity demand shows a bigger gap 223 MW in March 2020 – and it may also be reduced more in April 2020 following the lowest point of max power demand in April 2020.
Like the hearth of a business centre, Jakarta and Banten area are the most commercial area instead of a residential base. Inevitably, the restriction of workers mobility due to Covid-19 will impact the economic activities in this capital city. However, Indonesia does not apply the sudden restriction of everyone mobility since the first case found on March 2, 2020. Three steps are concluded from government regulation. First, the normal day – where it applies until the working from home regulations are mandated for several offices and commercial buildings on March 23, 2020. Second, the work from home period, where the initiatives are coming to comply with the existing regulation, yet, there was no mandatory regulation such as lock down. Third, starting by April 10, 2020, the Large-Scale Social Distancing (PSBB) was implemented for Greater Jakarta followed by surrounding cities several days later.
To well depict the impact of Covid-19, the comparison of load in Jakarta-Banten during these three periods (March-April 2020) with last year data are proposed in this article. From PLN database (private access only), the range of demand can be 0-3 GW higher than last year data in the same date (positive change) or 1-3 GW lower than last year data in the same date (negative change). From 61 days (March 1-April 30, 2020), total days with negative change were identified starting from the working home initiatives. More negative changes are also shown during the PSBB period (April 10-31, 2020), where 15 days (out of 21) have negative change from last year demand (see Fig. 4).
Case study of electricity demand and profile
In this analysis, the ASEAN Centre for Energy compiled the demand profile information in January 2020-May 2020 from several countries whose load hugely contributes to ASEAN electricity consumption. Based on the existing database of ACE, there are three grid systems selected as the representatives namely, Jawa Bali (Indonesia), Peninsular (Malaysia) and Luzon (Philippines). These three systems are the main system in each nation, therefore this will depict the figure of ASEAN grid system as a whole due to Covid-19 pandemic.
Jawa-Bali System is the largest system in Indonesia. It may represent 50 per cent of the total installed capacity of Indonesia and 70 per cent of whole nation demand. During January-May 2020, the system was identified dropped gradually peak-to-peak. The basis peak was taken from January 31, 2020 – as a normal peak for daily maximum demand in this system. In a weekly basis, the demand was slightly increased till mid of Feb 2020. However, there is a drop in peak-to-peak basis till April 29, 2020 and normal up to March 23, 2020. Many offices and non-consumer goods industries are starting the working from home regulation as all waits for the enactment of any regulation for several areas in Jawa. The initiatives of working from home drag the total peak demand peak-to-peak down to 5 per cent from January’s peak and 8-10 per cent from Feb peak (Fig. 5). The Large-Scale Social Distancing (PSBB) was also announced on April 10, for Greater Jakarta, followed by its surrounding metropolitan area. Therefore, the peak demand in the end of April to May declined 10 per cent from January’s peak or 15 per cent from the peak at the end of February.
As the business district, Kuala Lumpur and other parts of Malaysia in Peninsular are representing more than half of Malaysia total demand. Malaysia’s first case on Covid-19 on March 11, 2020 initiated government to take an action for Malaysia Control Order (MCO). The order tends to fall in the definition of lockdown, where nobody is not allowed to go outside except for foods/medicine. The strict version of MCO was started on March 18, 2020 to March 31, 2020. However, no change on the case numbers, Malaysia extended the order. During the MCO period, the peak-to-peak load in Peninsular was dropped from 18 GW to remain at a range of 12-14 GW only (Fig. 6). Starting from May 4, the relaxation on MCO rules was undertaken by the government, therefore the load profile rises to around 15 GW and it peaks at 16 GW in mid of May. Closer to Eid holidays, the Peninsular has lower demand.
In the Philippines, Luzon grid system covers Manila and several business districts of this country. The Philippines has the first death outside China from the virus, however, the lockdown order was started more than 1 month after the first case on January 30, 2020. The economic activities in the Philippines were normal from January 1 to March 15, 2020. The Luzon grid system remains stagnant before the week of March 13, 2020. From March 15, Luzon grid system losses about nearly a fifth of its normal demand. Slow but sure, the load was increased to 9.26 GW on April 30, 2020. The Covid-19 may deeply plunge the electricity demand at first in Luzon, however, there is a normalisation trend the days after lock-down begun.
Impacts on RE Power Plant Projects
Lockdowns and quarantines surely disrupt the global chain of goods as well as limiting the workforce, causing numbers of electricity projects to be delayed or halted. The solar sector as one of the fastest-growing renewables in ASEAN is subjected to be harmed by the pandemic. Most of the on-going projects are halted due to shortages of imported materials and equipment from Chinese manufacturers since the outbreak began. This is spotted in The Philippines where the utility suffered delay to commission 135 MW solar project as the majority of PV modules within the country are from China. Not only solar, but hydropower projects are also threatened by the economic instability the country experiences due to the pandemic. Lao PDR government decided to suspend all on-going hydropower construction throughout the country while the Cambodian government already shelved two potential hydropower projects, earlier in March. Thailand also take actions to avoid oversupplying electricity during the demand plunges by signing moratorium on PPA of new power projects in neighbouring countries. However, despite the looming crisis of RE during this pandemic, Vietnam is taking a bet to resume the incentive support for solar and wind through the launch of new feed-in-tariff, hoping that this would keep the good investment on climate of RE once the pandemic passes.
Temporary actions and recommendation for ASEAN to tackle the impacts of Covid-19 in the power sector
The widespread Covid-19 impacts are inevitable for everyone, including ASEAN power utilities. Each utility may encounter several issues such as lower demand growth, the significant loss of load, lower sales, infrastructure project delays, fuel supplies or its price, demand centre change, power security issues and lower buying power from the people. Each utility may have an emergency business continuity plan to tackle all the contingency matters. This analysis will convey several ways on how each power utility can formulate the temporary actions and its emergency plan to avoid the worsened condition as well as to minimise any greater risk at their business in the future.
Reliable electricity for workers and healthcare during Covid-19
The demand is now moving from commercial and industries to residential and health care facilities. In normal condition, each utility whose responsibility to also control and dispatch the system generators has to ensure all the operating system goes well in providing reliable and high quality of electricity. Health care facilities may have some different characteristics, in comparison with commercial or industries. Utilities are now fighting to guarantee that there is no outage along the Covid-19 period since it will impact to anyone life’s today, either to the patients in health care facilities or the people who are working from home with high dependency to electricity. Each utility now takes a higher responsibility, with lower sales income to their pocket.
For some countries with low electricity access, the fast-widespread generators are also to be an option to cover the healthcare facilities or specific economic activities in that rural area. The utility will not only struggle with their current plan but also to fasten any kind of electricity access programme, therefore it will be beneficial for everyone. The students and teachers are now studying at home. If there is no internet or electricity access, on how they can get the same quality of education. Power utility shall also re-think and re-plan their programme on electricity access to support government action such as PSBB or lockdown.
Re-planning on their Power Development Plan (PDP)
Power utilities have a strong track record on developing its Power Development Plan (PDP). Some countries shall frame its PDP internally as it has high capabilities, but some developing countries require the supports of third parties. Both also updates their PDP in various intervals: annually, bi-annually, once in three years, once in five years. Updating PDP is very critical for ASEAN utilities. It is a part of re-planning their development with the new normal that we have from the Covid-19. Even, everyone is still guessing all the possibilities of the future, there is no disadvantage to having each power development plan adjusted to the current demand situation.
The update of PDP will also help each country to revisit all the firm (on-going project) and candidate (future) plan in its previous PDP. There are three reasons why utility needs to revisit the firm and candidate plan: 1) the demand situation, 2) infrastructure project delays, and 3) monetary crisis. In the demand situation, the current situation will indeed impact the demand projection.
In the short future, there is high uncertainty on the demand situation due to the Covid-19 impacts. Utilities were suggested to coordinate with the central or local government while there is any lockdown/mobilisation restriction regulation.
Some infrastructure projects are under consideration to be delayed. If the demand shows the downtrend during Covid-19, it will be a good option for the utility to postpone or take out any possible candidate plan (both transmission and generation) from their PDP. This will help the utility to avoid overstated demand projection and financial issue due to future loan on their projects.
Energy ministry and relevant bodies
Redefining goals and strategy – A new path for electricity development in the country
The pandemic brings a whole lot of new challenges to all energy stakeholder, especially regulators. Hence, it is critical for the energy ministry and all its relevant bodies to take the effect of corona pandemic into account while setting a new path of energy sector recovery. How economy bounces back is still uncertain, but the growth already slumps and there are projections of the worst economic scenario available. Energy ministry needs to evaluate again the targets and goals of the electricity sector and sort out the priorities. Some changes or projects cancellation is imminent; however, it is important for the ministry to take low-hanging fruit actions that have a minimal negative impact on the overall sector. Electricity production needs to be ensured and the emergency scenario needs to start incorporating as contingency plans in their power development plan. Maybe it is a good time to evaluate electricity demand growth and set various scenarios to accommodate different recovery pathway of the economy in the country.
Synergy for a stronger recovery
The reduced energy demand and the disruptions of supply chain and workforce impact the whole spectrum of energy, not only electricity. Inter-related problems need an inter-related solution; hence governments need to have a synergy between each other. For example, development targets in the electricity sector shall be streamlined with the environmental goals which take into account sustainability while considering how fast the economy recovers.
Power and RE market players
Optimism is needed
It is indeed a hard time for power and RE industries where the loss of profit and reduced revenue is inevitable from the dropped of demand. Independent Power Producers (IPPs) may experience significant curtailment of power production with no guarantee if there is compensation given. But as this pandemic considered a force majeure which is unpredicted by anyone, this is the hard way to learn and let the experience give a new insight of how power business risk and PPAs need to be arranged better in the future. Meanwhile, IPPs and other power market players need to keep the optimism that once the economy recovers, the business will also recover.
Adjustment to new normal
In the meantime, while the end line of the pandemic is still uncertain, market players and IPPs need to adjust with the new normal. New procedures of how the workforce shall resume working and how business is conducted need to be established. Some changes in policies from the government and utility may give the new direction to the power market players. All in all, everyone needs to carry on and survive.
Hand in hand to cope with ‘new normal’
To support the power industries and players to cope, investing and operational risk should be assessed and understood well by utilities and regulators in order to provide a win-win solution for both. Utilities need to be transparent in informing the new prediction of demand and how the priorities of dispatch may look like in the near future, hence the IPPs are aware which generation are prioritized and how this new scenario may impact them. While there will be inevitable loss or disbenefit this may cause, regulators should play its role on how to best compensate the hurt players, either the utilities as well as the IPPs. All hands are needed on the desk to minimize the damage caused by the pandemic. ASEAN Centre for Energy as an inter-governmental body can also help this effort by sharing knowledge and best experience of ASEAN countries to handle this issue in each country and to learn from each other. There is a possible delay on the effort of ASEAN Power Grid due to this pandemic, however, it is important to continue once the condition is stabilized since stronger regional connectivity could actually support faster recovery for ASEAN for the next possible crisis.
Dr Nuki Agya Utama: Executive Director at the ASEAN Centre for Energy. He holds a Doctoral degree in Life Cycle Energy Analysis from the Joint Graduate School of Energy and Environment in Thailand and a Post Doctoral in Energy Scenario and Planning from Kyoto University in Japan. Expert in energy scenario planning and green building.
Nadhilah Shani: Energy Policy Planning and Modelling Officer at the ASEAN Centre for Energy. She holds a Master of Science degree in Sustainable Energy Technology from the University of Delft in the Netherlands. Expert in renewable energy, policy analysis and ASEAN energy landscape.
Aloysius Damar Pranadi: Power, Fossil Fuel, Alternative Energy and Storage Officer at the ASEAN Centre for Energy. He holds a Master of Engineering degree in Energy & Power Management from the University of Indonesia. Expert in power and renewable energy modelling.