[PPT] - Power Grids in Asia Power Grids in Asia Mode of operation and PowerPoint Presentation

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ECONOMIC C ECONOMIC CONSULTING NSULTING ASSOC SSOCIATES LIMI ES LIMITED TED 41 Lonsdale Road London NW6 6RA UK tel +44 20 7604 4545 / fax +44 20 7604 4547 www.eca-uk.com

Power Grids in Asia Power Grids in Asia

Mode of operation and dynamics Mode of operation and dynamics

Stephen Wilson Stephen Wilson Presentation at a workshop on Presentation at a workshop on Power Grids and CDM Methodologies Power Grids and CDM Methodologies Buenos Aires, Buenos Aires, 8 December 2004 8 December 2004

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Outline Outline

Key issues and questions

Four example countries

Implications for CDM projects

Implications for CDM projects seeking to avoid electricity seeking to avoid electricity generation emissions in Asia generation emissions in Asia

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Key Key issues issues

Drawing on the Drawing on the Baseline Recommendations Baseline Recommendations paper of paper of Kartha, Laza Kartha, Lazarus and Bosi, Energy rus and Bosi, Energy Policy Policy 32, 2004: 32, 2004:

Build, operating or combined margin:

Build, operating or combined margin: defining the marginal plant defining the marginal plant

now in the future

Baseline dynamics and crediting lifetimes

will new construction change the marginal plant? will this occur within the next 7 or 10 years?

Geographic aggregation, are plants dispatched

by individual state/provinc

state/province only (sub-national)?

by multi-state/province regions

regions (wider sub-national)?

across a national

national grid?

with international

international imports and exports?

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Key Key questions questions

Supply-demand balance

Is there adequate generation or a shortage? If a shortage, is this met by off-grid generation?

Wh

What is at is the current generation plant mix? the current generation plant mix?

% of coal, gas-fired, hydro, nuclear, other

What is the current generation fuel mix?

% of coal, gas-fired, hydro, nuclear, other

What is the current dispatch method?

bid-based, economic least-cost or other

Dy

Dynam namics cs

What is the rate of growth and additions? Will the additional plant change dispatch?

How sensititive are future emissions to:

additional plant? the dispatch method?

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India Thailand China Vietnam

Example Asian countries Example Asian countries

Country Installed capacity GW Growth Doubling % pa China 2nd largest ~ 380 7y 10% India =6th (with Germany) ~ 112 11y 6% Thailand Mid-sized ~ 25 10y 7% Vietnam Small ~10 8y 9%

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China China

53 53 63 63 35 35 47 47 25 41 41

12

2 4 <1 20 10

Year 2002 values in GW

Huge system 300+ GW in

Huge system 300+ GW in 2002, ~380 GW in 2004 2002, ~380 GW in 2004

2nd largest

2nd largest in t in the world he world

High developing country

High developing country growth rates growth rates especially in t especially in the coastal sout coastal south and east h and east

Large income and

Large income and development development d dispa sparities ities between coastal and interior between coastal and interior provinces provinces

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China China

Huge system 300+ GW in

Huge system 300+ GW in 2002, ~380 GW in 2004 2002, ~380 GW in 2004

2nd largest

2nd largest in t in the world he world

High developing country

High developing country growth rates growth rates especially in t especially in the coastal sout coastal south and east h and east

Large income and

Large income and development development d dispa sparities ities between coastal and interior between coastal and interior provinces provinces

Re

Regi gional

nal gri

grids, s, wit with weak interconnect weak interconnections

ns

bet between provinces and een provinces and largely non-existent largely non-existent int interconnections between rconnections between grids grids

Hainan Xinjiang Tibet Shandong Fuijian

South South East East North- North- east east North North North- west Central Central

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China China

North North channel channel Central Central channel channel South South channel channel

West-to-East powe

West-to-East power transmission project transmission project in 10 in 10th

th Five-year Plan

Five-year Plan

3 major po

3 major power wer transmission transmission ‘ch ‘chann nnels’ els’

Majo

Major 500kV AC an r 500kV AC and some DC in some DC investments vestments

The 3 ‘channels’ plus north-south interconnections will eventually form the national grid

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China China

Sti

Still predominantly state- ll predominantly state-owned,

wned, but

but t trend is end is towards privat wards privatisat isation ion

State-power generation as

State-power generation asset sets divest divested int ed into 5 5 gencos gencos

two large grid companies formed

regional grids being t

regional grids being tied t ed toget gether er

western resources (gas and hydro) being

western resources (gas and hydro) being developed and ‘forced’ developed and ‘forced’ i in t to east eastern provinces ern provinces

di

dispat spatch stil ch still i l involv volves ‘shari es ‘sharing’ ng’

generation shortage

generation shortage in some areas (eg: in some areas (eg: Guangdong) angdong)

CD

CDM unli M unlikely to change hydro dispatc ely to change hydro dispatch, gas gas will be must-run, so th will be must-run, so the ‘marginal’ plant is e ‘marginal’ plant is likely to be coal for the foreseeable future likely to be coal for the foreseeable future

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Context: generation ownership Context: generation ownership in China’s electricity sector in China’s electricity sector

0% 25% 50% 75% 100%

Ownership

SPC Non-SPC SOE Non-SOE Chinese Foreign Private

Capacity

~ 300 GW ~ 150 GW SPC wholly-owned SPC controlled SPC minority-owned non-SPC, State-owned Chinese privately controlled Foreign privately controlled SPC Involvement 0 GW

Privatisation trend

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China: national grid China: national grid

Guangdong and south China initially separate from ‘national grid’

Generation already

separated from transmission Southern Power Grid Company

State Power Grid Corporation

State Power’s generation

assets allocated to five companies, transmission assets to two companies

State Power to be

a transco and system operator

The 18 200 MW Three Gorges

project will play a major role at the heart of the China’s future national grid

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China: special case of Guangdong China: special case of Guangdong

1 3 9 1 2 3 12

A large proportion of on-grid capacity in Guangdong is not centrally dispatched

0% 25% 50% 75% 100%

Dispatch

Hydro Thermal Nuclear

Plant Type

50% 75% 25% 100%

Centrally dispatched Non-centrally dispatched utility plants captive plants

GW

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India India

Very large system 112 GW

Very large system 112 GW

Thermal d

Thermal dominated minated

High developin

High developing co coun untry try growth rates growth rates

5 r

5 regi gional gri al grids, s, impro proved an ed and im d impro provin ing interconnections a interconnections and dispa dispatch ch co-ord co-ordination within and ination within and bet between een regio regions

17 17 31 31 32 32 29 29

Year 2002 values in GW

2 2

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India India

Mix of central and state-level ownership

Capacit

Capacity is still predominant y is still predominantly (90%) government- y (90%) government-

wned, but
wned, but there is a trend to privatisation, some

there is a trend to privatisation, some states further down the path than others states further down the path than others

5 regional grids, 4 regional dispatch centres

dispat

dispatch previously stat h previously state-by-state by telephone e-by-state by telephone negotiation, lit negotiation, little disc le discipli ipline, poor frequency control ne, poor frequency control

now much more co-ordinated, new availability-

now much more co-ordinated, new availability- based generat based generation tariff, Power Trading Corporation

n tariff, Power Trading Corporation

managing trades between excess and shortage managing trades between excess and shortage states and catalysing new projects states and catalysing new projects

still generation shortages in some areas

interconnections being improved, moving towards

interconnections being improved, moving towards integrated national power market integrated national power market

gas

gas MAY play an increasingly large role play an increasingly large role

marginal plant will be thermal, but gas or coal?

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Thailand Thailand

Mid-size system ~25 GW

Mid-size system ~25 GW

Thermal d

Thermal dominated minated, with with a majorit a majority of gas

f gas
High developin

High developing co coun untry try growth rates growth rates

Na

Nati tiona

nal g

grid, wi , with som th some constraints constraints

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Thailand Thailand

Mix of state-ownership (

Mix of state-ownership (EGAT st T still ill has 6 has 60%) and privat and private

One large base-

One large base-load c

ad coal

al plant (~1 plant (~10%), ), but but cap capacity (70%) a city (70%) and energy (~60%) is energy (~60%) is dominated by gas- dominated by gas-fi fired combined cycl red combined cycle pl e plant ant

In dispatch EGAT de

In dispatch EGAT decrements its plants to crements its plants to meet IPP contractual commitments meet IPP contractual commitments

Base load coal and hydro will always be

Base load coal and hydro will always be di dispat spatched ched

It is safe to say that

It is safe to say that any CDM project would be any CDM project would be avoidi avoiding gas- ng gas-fired CC fired CCGT emissions emissions

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Vietnam Vietnam

Majorit

Majority st stat ate- e-owned (

wned (EVN

VN) but private IPPs ) but private IPPs coming in (eg: Phu My gas-fired CCGT) coming in (eg: Phu My gas-fired CCGT)

Hydro-thermal system, wi

Hydro-thermal system, with gas-fired CCGT to th gas-fired CCGT to dominate the thermal side dominate the thermal side

EVN

EVN are also planning a nuc are also planning a nuclear plant lear plant

Assuming that gas-fired

Assuming that gas-fired IPPs will be must-run, IPPs will be must-run, coal could be the marginal plant, coal could be the marginal plant, but but l likely to kely to need simulation to det need simulation to determine role of hydro ermine role of hydro

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Economics: China Economics: China

Cost of capital 10% over 10y (ie: 15% RoE if 70% debt @8%) 85% plant load factor Coal @$65/tce, coal -> elec sent out 35% Gas @$5.50/mmBtu, gas -> elec sent out 50%

Coal Gas CapEx 500 600 US$/kW Annualised 83 100 US$/kW/y Unitised 1.12 1.33 USc/kWh Fuel cost 2.28 4.17 USc/kWh Total 3.40 5.50 USc/kWh +O&M +O&M

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Economics: India Economics: India

Cost of capital 10% over 10y (ie: 15% RoE if 70% debt @8%) 85% plant load factor Coal @$60/tce (~$2/GJ), coal -> elec sent out 35% Gas @$3/mmBtu (subsidised), gas -> elec sent out 50%

Coal Gas CapEx 850 600 US$/kW Annualised 142 100 US$/kW/y Unitised 1.90 1.34 USc/kWh Fuel cost 2.10 2.31 USc/kWh Total 4.00 3.65 USc/kWh +O&M +O&M

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Economics: India (2) Economics: India (2)

Cost of capital 10% over 10y (ie: 15% RoE if 70% debt @8%) 85% plant load factor Coal @$60/tce (~$2/GJ), coal -> elec sent out 35% Gas @$3/mmBtu (subsidised), gas -> elec sent out 50%

Coal Gas CapEx 850 600 US$/kW Annualised 142 100 US$/kW/y Unitised 1.90 1.34 USc/kWh Fuel cost 2.10 3.80 USc/kWh Total 4.00 5.14 USc/kWh +O&M +O&M

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Carbon economics Carbon economics

China India India Gas 5.50 3.65 5.14 Coal 3.40 4.00 4.00 Cost Δ 2.10

0.35

1.14 USc/kWh Emission Δ 0.45 0.45 0.45 kg/kWh Unit cost ~47

8

25 US$/t CO2

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Dynamics Dynamics

Transmission projects can significantly change

Transmission projects can significantly change plant dispatch where they inter-connect plant dispatch where they inter-connect

states or provinces to sub-national regional grids

(examples: China, India)

sub-national grids to a national grid

(examples: China, India)

countries into international regional grids

(examples: India with Nepal and Bhutan, Thailand and Vietnam with Laos)

Power trading between previously connected but

Power trading between previously connected but poorly co-oprdinated grids can significantly poorly co-oprdinated grids can significantly change plant dispatch change plant dispatch

example: India

A move from traditional to market-based models

A move from traditional to market-based models has the potential to change plant dispatch has the potential to change plant dispatch significantly significantly

partial example: power trading in India

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Dynamics Dynamics

Changes in: Geographic aggregation Dispatch method Plant mix Marginal plant Country China Yes Tentatively Somewhat Probably not India Rapidly Yes Yes Quite likely Thailand [Imports] Maybe Yes No Vietnam [Imports] Not likely Somewhat Possibly

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Conclusion Conclusion China:

China:

Huge potential market and CDM projects could

avoid coal emissions, but geographic aggregation and market developments may affect this

India:

Theoretically large potential market but with

several dynamic changes, CDM projects are likely to be avoiding gas-fired CCGT emissions

Thailand:

CDM projects will be avoiding gas-fired CCGT

emissions, therefore will need to be relatively low incremental c/kWh projects

Vietnam:

A relatively small market, but rapidly growing.

Stable plant mix and non-imminent market reforms suggest minimal dynamic changes

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Key Key questions questions

What price does the CDM project need

What price does the CDM project need to sell the electricity at to get to sell the electricity at to get dispatched? dispatched?

What does this imply about the plant being

What does this imply about the plant being displaced in the dispatch schedule? displaced in the dispatch schedule?

What does this imply about the plant being

What does this imply about the plant being deferred as a result of the CDM project? deferred as a result of the CDM project?

Will market reforms change this picture within

Will market reforms change this picture within the crediting life of CDM projects? the crediting life of CDM projects?

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stephen.wilson@eca-uk.com stephen.wilson@eca-uk.com

Power Grids in Asia Power Grids in Asia

Mode of operation and dynamics Mode of operation and dynamics

Outline Outline

Key issues and questions

Four example countries

Implications for CDM projects seeking to avoid electricity seeking to avoid electricity generation emissions in Asia generation emissions in Asia

Key Key issues issues

Key Key questions questions

Example Asian countries Example Asian countries

Country Installed capacity GW Growth Doubling % pa China 2nd largest ~ 380 7y 10% India =6th (with Germany) ~ 112 11y 6% Thailand Mid-sized ~ 25 10y 7% Vietnam Small ~10 8y 9%

China China

China China

South South East East North- North- east east North North North- west Central Central

China China

China China

Context: generation ownership Context: generation ownership in China’s electricity sector in China’s electricity sector

Privatisation trend

China: national grid China: national grid

China: special case of Guangdong China: special case of Guangdong

1 3 9 1 2 3 12

India India

India India

Thailand Thailand

Thailand Thailand

Vietnam Vietnam

Economics: China Economics: China

Coal Gas CapEx 500 600 US$/kW Annualised 83 100 US$/kW/y Unitised 1.12 1.33 USc/kWh Fuel cost 2.28 4.17 USc/kWh Total 3.40 5.50 USc/kWh +O&M +O&M

Economics: India Economics: India

Coal Gas CapEx 850 600 US$/kW Annualised 142 100 US$/kW/y Unitised 1.90 1.34 USc/kWh Fuel cost 2.10 2.31 USc/kWh Total 4.00 3.65 USc/kWh +O&M +O&M

Economics: India (2) Economics: India (2)

Coal Gas CapEx 850 600 US$/kW Annualised 142 100 US$/kW/y Unitised 1.90 1.34 USc/kWh Fuel cost 2.10 3.80 USc/kWh Total 4.00 5.14 USc/kWh +O&M +O&M

Carbon economics Carbon economics

China India India Gas 5.50 3.65 5.14 Coal 3.40 4.00 4.00 Cost Δ 2.10

1.14 USc/kWh Emission Δ 0.45 0.45 0.45 kg/kWh Unit cost ~47

25 US$/t CO2

Dynamics Dynamics

Dynamics Dynamics

Conclusion Conclusion China:

China:

India:

Thailand:

Vietnam:

Key Key questions questions

What price does the CDM project need to sell the electricity at to get to sell the electricity at to get dispatched? dispatched?

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