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

China and the US: The potential of a clean-tech partnership

Only a collaboration between the two countries will create an environment where clean-energy technologies can thrive.

AUGUST 2009 • Jonathan Woetzel
McKinsey Quarterly
Source: Climate Change Special Initiative

China and the United States, the world’s dominant producers of carbon emissions, have adopted aggressive programs to reduce oil imports, create new clean-energy industries and jobs, and generally improve the environment. But the environment that will be most critical to making or breaking the two countries’ efforts to curb the dangers of global warming could well be the market that they jointly create in pursuit of their aims. Unless the two work together to provide the scale, standards, and technology transfer necessary to make a handful of promising but expensive new clean-energy technologies successful, momentum to curb global warming could stall and neither country will maximize its gains in terms of green jobs, new companies, and energy security.

The risk is real. Electrified vehicles, carbon capture and storage (CCS), and concentrated solar power, among other emerging “green tech” sectors, will need massive investment, infrastructure, and research to get off the ground. While the Chinese and US governments, along with private investors, are pursuing all of these technologies, they cannot achieve separately what they could jointly.

For a more in-depth look at these three clean-energy technologies and how China–US cooperation could make them economically feasible, launch this Interactive Exhibit, a collaboration between McKinsey and frog design.

Published by: McKinsey Quarterly - mckinseyquarterly.com
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Opinion: Is the Power Equipment Market Bracing for a Recession?

Power equipment suppliers are yet to report a major slowdown in spending as a result of the financial crisis. However, many expect 2009 to be a tough year as customers seek to cut corners and rein in spending. David Binning reports.

Like so many industries, the power sector had been coasting along on the crest of a wave for some time before the last October's unravelling of the global economy and the resulting credit crunch. On the one hand developed economies were enjoying unprecedented growth while developing economies – namely the BRIC countries of Brazil, Russia, India and China – entered unchartered territory with regard to their economic development.

The result was exponential demand for power across the world, and with it the accompanying 'picks and shovels' to support its development. Tighter regulations being imposed by governments in Europe and elsewhere on carbon emissions helped to create new markets also, such as CCS (carbon capture and storage) biomass co-fire conversion and others. In short it was perfect storm of opportunity for suppliers of power equipment and services.

Now, some six months into a storm of an altogether different kind, the mood is understandably glum, especially with so many of the world's major economies sliding deeper into recession, leading to forecasts of a large-scale decline in energy consumption. Yet while no one in the power industry is under any illusions about the implications for business, the bad news is still yet to appear as red ink on the balance sheets for many companies.
Weathering the storm

Speaking at the International Power Summit in Rome in early March, managing director of Italian environmental engineering technologies company Magaldi, Fulvio Zubini, said that while most industry sectors are clearly down the power industry is yet to see much of the fallout. "Business is generally worse, but the crisis [for the time being at least] does not seem to have affected the power industry all that much." Zubini said.

But this did not mean he did not harbour concern for the fortunes of developing economies. "I expect, however, some delays and cancellations in projects developed by private companies in emerging areas such as India."

Magaldi is a niche provider of environmental engineering solutions including bottom ash handling systems for bottom-fired boilers. Zubini said environmental regulations were expected to provide further insulation for his area of trade along with emerging cost benefits. "2008 was the best ever for the company – we now have a very satisfying order backlog. We are still confident of achieving good results in 2009 despite the financial crisis."

Nevertheless, it would seem that buyer behaviour is changing with some in the power industry reporting that the sales process has become noticeably more difficult and protracted over the last few months as a result of the global financial crisis.

Camfil Far sales director Jose Frias said his company – a global cooling and ventilation specialist – is seeing finance executives take a deeper interest in procurement as companies work harder to tighten up their balance sheets. "Finance people are much more involved now; procurement is requiring approval at a far more senior level," Frias said.

Suppliers of power equipment and solutions hope that customers can temper their anxieties about the state of their balance sheets by considering the long-term benefits of investing in new equipment for improved efficiency and environmental performance, all ultimately leading to reduced costs.

"Naturally all of our customers want to spend as little as possible, however, utilities are wise to the benefits they get in operation and maintenance and they buy from us eventually," Zubini said.

Published by: power-technology.com - See full article here