Capacity augmentation and distribution grid automation in Asia Pacific

In 2014, the transmission and distribution (T&D) sector in the Asia-Pacific region will be driven by the transformation in the key areas of capacity augmentation and distribution grid automation. Asia Pacific’s growing demand for electricity is likely to increase power generation by 4.1 per cent in 2014. This needs to be actively supplemented by T&D grid expansion to ensure reliable power supply. The majority of the T&D investments are likely to be concentrated in Southeast Asia in 2014.

Growing economies such as Vietnam, Indonesia, and Myanmar will be focusing on transmission grid expansion and reliability, with rural electrification and increasing the overall electrification ratio being their top priority. Vietnam’s power T&D sector offers several opportunities for private investors in 2014 thanks to the institution of favourable regulations. During this period, capital will be spent mostly on building and enhancing the 220 kV and 500 kV networks. Investments are also expected in the 110 kV network to strengthen the links between the T&D systems.

Upswing in electricity tariffs

As Singapore moves towards the cheaper and diversified liquefied natural gas (LNG) sources of fuel for power generation, it is expected that its wholesale market electricity prices will fall by end-2014. However, Singapore’s current electricity prices are already one of the highest in the region, due to its market-based pricing model.

For the rest of the countries in the Asia-Pacific region such as Thailand, Vietnam, and South Korea, electricity tariffs are expected to rise due to diverse reasons such as variations in fuel adjustment rates, the rise in crude oil prices, and currency depreciation in certain economies.

One exception will be Japan, where electricity prices are expected to decrease in 2014. At present, electricity tariffs in Japan are very high due to the shortfall of electricity after the closure of nuclear power plants. However, prices look set to decline by the end of 2014, when new coal- and LNG-based power plants are likely to be commissioned.

Utility finances likely to improve

The T&D electrical equipment market has been on the decline in Japan, as the utility companies have reduced their capital and operational expenditures drastically to buy expensive fossil fuels for thermal power generation in order to cater to the power demand. This situation should improve, as the country is likely to start operating two new coal–fired power plants and 12 LNG–fired power plants by end-2014.

Utility companies and regulators in Australia have been grappling with the trade-off between reliability and high capital expenditure over the last couple of years. The average age of T&D system assets in Australia is reported to be 30–35 years. Hence, assets need to be replaced on a continuous basis in order to maintain the health of the grid. However, the market experienced a drastic fall in capital expenditure from utility companies in 2013, as they were not allowed to pass on the bills to the consumers by the regulatory authority.

In 2014, the capital expenditure in the T&D sector in Australia is likely to improve marginally by 3.7 per cent to reach AUD 9.98 billion, as a result of the shift in focus to replacement of assets with a slow decrease in augmentation expenditure. However, this spending will still be far lower than the capital expenditure in 2012.

Smart meters and automation to dominate smart grid investments

Several smart grid test-beds were developed across the Asia-Pacific region in 2013. Projects in Japan, Taiwan, South Korea, Singapore, and Malaysia are at various stages of testing. For 2014, key investments in the sector would be focused on installation of smart meters by regional electricity utilities and the implementation of tested and approved smart technologies in selected smart cities. Key highlights are presented below.

  • In Southeast Asia, total electricity meter installation will reach 160 million units and the total smart meter penetration rate will be around 2.5 per cent by end-2014.
  • Widespread smart meter installations by the Provincial Electricity Authority (PEA) are expected to be launched in Thailand in 2014. The country’s smart grid development project for 2013–17 will focus on substation automation, renewable energy integration, and battery storage.
  • In Vietnam, the Danang Power Company will initiate smart distribution automation in 2014.
  • Thailand has opportunities in smart metering in the next year with pilot and trial projects in the PEA regions.

Slow progress on ASEAN grid

The ambitious ASEAN grid was chartered based on the concept of continentalisation to integrate supply and demand sources in the region. However, not much progress on this major initiative is expected to be made during 2014. The countries involved in developing the ASEAN grid will first need to address technical challenges and business regulations. n

Ravi Krishnaswamy heads Frost & Sullivan’s Energy & Power Practice in the Asia Pacific region and is based in Singapore. Ravi has spent more than 15 years in the energy and power sector as a design engineer, project manager, senior industry analyst and research director. His current management responsibilities in Frost & Sullivan include business unit profitand loss, Energy group’s geographic expansion, research planning, quality control, industry thought leadership, strategic review of consulting delivery and managing client relationships. Ravi is also managing Frost & Sullivan’s Growth Innovation and Leadership Forum on ‘Global Green Revolution’ and ‘Clean Technologies’ which brings together organizations from diverse industries on green platform, thus identifying cross-vertical opportunities

Avanthika Satheesh is the Senior Research Analyst under the Energy & Environment Practice at Frost & Sullivan, Asia Pacific. She has a specialisation in the areas of design engineering of extra high voltage substations in power transmission and distribution and renewable energy integration to power grid.