Asian power firms look to international markets for growth opportunities

Nov 30 - Datamonitor
Energy security concerns and business expansion plans are driving Asian power generation companies to venture into international markets. However, various technical, commercial and political risks pose significant challenges to these companies' plans to establish an international footprint.
Indian utility major National Thermal Power Corporation (NTPC) is working towards a proposal of building a 4,000-5,000MW gas-fired power plant in Iran at a cost of around $5 billion. In another development, NTPC is looking to develop a 500MW coal-fired power plant in Sri Lanka. Bharat Heavy Electricals Limited, India's leading power equipment manufacturer, won a contract for setting up a $100m, 120MW co-generation power plant in Indonesia. In addition, the company has formed a joint venture with National Hydroelectric Power Corporation, which is also looking to develop hydro plants in Bhutan and Myanmar, in order to venture into the central Asian markets.
Having gained confidence from watching Indian exploration and production firms successfully carry out international ventures, power sector firms in other Asian markets have started to follow suit. These strategies not only include providing engineering, procurement and construction services or supplying equipment, but also setting up power plants in non-domestic markets.
Chinese firm Huadian Group Power Operations Limited recently signed a contract with the Sri Lankan government through which it will set-up a coal-fired power plant. Also following this trend, Sri Lankan company Hydropower International Limited is helping East African countries like Tanzania, Rwanda and Burundi to set up small hydro power plants.

Revenue incentives, coupled with domestic energy security concerns, have prompted state-run players to take such initiatives. Along with earning supply or service revenues, power generation players are also mulling the option of importing a share of the power generated into their domestic market. As a part of NTPC's Iran power project, a share of the power generated will be brought to India through a 1,500km long, high-voltage transmission line. Domestic power generation firms are also deliberating the barter option, whereby they can import fuel in return for developing power generation facilities in international markets. One example of such an approach is NTPC's move to build gas and coal-fired power stations in Nigeria in return for three million tons per annum of reasonably priced natural gas.

As this international trade makes commercial sense, individual countries must look to mitigate the political risks involved, which are seen as the major threat to these expansion strategies. If the parties involved do not guard against such risks, projects are likely to suffer a fate similar to that of the proposed gas pipeline between India-Pakistan-Iran, which has been derailed due to unstable political relations between the countries involved. The current row between Russia and Ukraine over a gas pipeline is further proof that energy balances rely heavily on political stances between the countries involved.

Apart from political risks, power generation companies also face challenges at the execution level. The high cost of laying undersea transmission lines between Sri Lanka and India, or of laying overhead transmission lines on difficult terrain between Iran and India, highlights the technical and commercial difficulties in international energy commerce, especially in a geographically diverse Asia Pacific region. There has been very little private participation in such projects due to the high risks and costs involved. The execution of such projects is also impacted by the continued threat of terrorist activities across the region. Thus, although such projects have been successful in more stable regions such as Europe, companies must be pragmatic about their potential elsewhere, especially in Asia Pacific.
However, advances in technology may help to diminish such logistic hurdles for electricity transfers. Electricity storage and transfer technology, which is currently being developed by technology majors like General Electric (GE), would enable companies from energy deficient countries to import electricity in return for power generation services in fuel rich countries. GE has invested more than $150m in developing advanced battery technologies, including high energy-density sodium-based batteries that will provide energy storage for a variety of applications. GE envisages initially rolling out approximately 10 million cells, which translates into 900MW-hours of energy storage or transferring capacity. The successful implementation of high-voltage power links in Europe, like the 450kV, 580km-long NorNed link between the Netherlands and Norway (the longest undersea power link in the world), or the 450kV, 250km-long high-voltage direct current link between Germany and Sweden, further substantiate the role technology could play in overcoming international trade challenges.
Thus, backed by liberal power policies and technological advancements, Asia Pacific countries must overcome the political constraints and logistic challenges involved in international expansion and endeavor towards the expansion of mutual energy commerce between countries, thereby establishing the much needed energy balance across the region.

Published by: Energycentral.com