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2009 GLOBAL POWER REVIEW POWER GLOBAL

A snapshot of the world’s top electricity markets

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2009

A snapshot of the world’s top electricity markets Contents 2 Introduction 6 Guest editorial Lars G. Josefsson, president of Eurelectric, the association representing the European power sector, and CEO of Vattenfall Country Focus

Senior Editor Heather Johnstone americas12 Argentina Deputy Editor Tim Probert 16 Brazil Associate Editor 18 Canada Nigel Blackaby

20 Chile Advertisement Sales Manager 22 Peru Anthony Orfeo, [email protected] 24 USA Advertisement Sales Manager Asif Yusuf, [email protected]

Digital Sales Manager Leo Wolfert, [email protected] asia-pacific30 Australia Studio/Production Manager 34 China Karl Weber 36 Sub-editor India David Grove 38 Indonesia Design 40 Malaysia Jem Soar 42 Pakistan Production 45 Philippines Becky Crews 48 Thailand Group Publisher 50 David McConnell Vietnam Corporate Headquarters PennWell Corporation, 1421 S. Sheridan Road, Tulsa, OK 74112, USA europe54 Czech Republic Tel: +1 918 835 3161 57 Fax: +1 918 831 9834 France Circulation Director 60 Germany Gloria Adams 62 Italy Circulation Manager Janet Orton 64 Poland Chairman 66 Russia Frank T. Lauinger

70 Spain President/CEO 72 Sweden Robert F. Biolchini 74 Turkey PennWell International Power and Environment Group 76 UK Warlies Park House, Horseshoe Hill, Upshire, Essex EN9 3SR, UK Tel: +44 1992 656 600 Fax: +44 1992 656 700 middle80 Angola east-africa Circulation and subscriber enquiries Janet Orton 82 Egypt PennWell Corporation, 1421 S. Sheridan Road, 84 Kuwait Tulsa, OK 74112, USA 86 Saudi Arabia 88 South Africa © Copyright 2009 by PennWell Corporation. All rights reserved. ® “Global Power Review” is a 90 United Arab Emirates registered trademark of PennWell Corporation.

PennWell Global Power Review 2009 1

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Introduction

Welcome to the 2009 edition of the PennWell in 2030 is lower than projected in last year’s World Corporation’s Global Power Review, an essential Energy Outlook, primarily because of the expectation information source on the world’s major electricity of slower economic growth. markets, providing readers with the most up-to- The majority of the forecast growth in demand is date market data. anticipated to come from non-OECD countries. Growth In this year’s publication, which is the seventh edition, is projected to increase by 146 per cent between 2006 we focus on 31 electricity sectors across the Americas and 2030, with demand growing fastest in Asia. (both North and South America), the Asia-Pacific region, China’s electricity demand has been growing at an Europe and the Middle East and Africa region. One annual double-digit rate since 2000 (representing an country that makes its debut this year is Angola. average rate of 14 per cent). This rate is expected to Heather Johnstone Senior Editor Located on the western coast of southern Africa, slow over time, dropping to 7.6 per cent a year up to Angola has the third largest GDP (on a purchasing power parity basis) in sub-Saharan Africa, after South “Although the world demand for electricity is Africa and Nigeria. The country’s economic growth over the last ten years has been fuelled by oil, and it projected to double between 2006 and 2030, the is now the third biggest producer in Africa. However, with the recent fall in the value of oil its economic level in 2030 is forecast to be lower because of the growth is likely to slow. Angola’s electricity sector is at the beginning of a expectation of slower economic growth” lengthy process of reconstruction and modernization after 27 years of civil war that devastated the country’s 2015, mirroring what is happening with its economic infrastructure. Last year, MINEA (the Ministry of Energy growth, averaging 4.6 per cent a year between 2006- and Water), with financial support from the US Trade 2030. and Development Agency, requested tenders from The election of President Barack Obama at the US companies to conduct a study looking at the end of last year looks set to have a profound effect rehabilitation of its electricity distribution network on the energy landscape of the fossil fuel dependent (currently it is only a minority of citizens that have access USA – some would argue a revolution. The new to electricity) and the development of hydropower administration clearly sees energy as playing a key role projects – currently hydropower accounts for 63 per in helping to get the US economy out of recession. cent of Angola’s total installed capacity. As part of his ‘economic stimulus’ package, Although it cannot be described as a ‘key electricity $150 billion has been earmarked for a raft of clean market’ as it is only beginning the reconstruction and energy technologies, ranging from next generation development of its electricity system, Angola may well biofuels and commercial plug-in vehicles to become a major power player in the African continent commercial-sized renewables and deployment of clean in the future. coal technologies, with the expectation of creating In the latest edition of the International Energy thousands of new jobs. Tim Probert Agency’s (IEA’s) World Energy Outlook 2008, global The new administration is likely to have an impact Deputy Editor electricity demand is forecast to grow at an annual rate on the global energy sector too, especially with the of 3.2 per cent between 2006 and 2015, falling to an promise to cut US greenhouse gas emissions to 80 average of 2 per cent between 2015 and 2030. per cent of 1990 levels 2050. Further, in the run up According to the IEA, this projected slowdown in to last year’s elections Obama made it clear that he demand reflects a shift in economies of non-OECD was keen for the United States to re-engage with the countries away from heavy manufacturing, which is international community in the fight against climate highly energy intensive, towards less energy-intensive change – a complete reversal from his predecessor. industries and services, as well efficiency improvements The timing of this change in attitude could not be and saturation effects in OECD countries and some better with the United Nations Climate Change meeting emerging economies. being held this year, where world leaders will be tasked Although the world demand for electricity is with framing the successor to the Kyoto Protocol. The projected to almost double between 2006 and 2030, absence of the USA, as well as other energy giants such Nigel Blackaby increasing from 15 665 TWh to 28 140 TWh. The level as China and India, would be unthinkable. Associate Editor

2 PennWell Global Power Review 20082009

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We creaea

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ate the energy that makes us grow Building a new future on our great past

www.ansaldoenergia.it

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Functioning markets and political leadership needed for a sustainable energy future

Lars G. Josefsson is CEO of Vattenfall and President of EURELECTRIC, the association representing the European power sector

As the European electricity industry enters a new investment cycle - almost goals and mechanisms will work together. The challenge will be to implement a the entire power-generation fleet will need to be replaced by 2030 - we consistent, market-based framework which ensures that the GHG and RES targets have a unique opportunity to get on the path to a secure, carbon-neutral can be met at affordable cost to the economy. electricity system. Available synergies with key sectors such as transport and First, the policymakers must work out the practicalities of the third phase of the buildings offer further opportunities to move Europe towards a more ener- emissions trading system (ETS). EURELECTRIC accepts the logic that allowances to gy-efficient, carbon-neutral economy by mid-century and brake the accelera- emit GHGs should be auctioned, not free of charge, provided all sectors are treated tion of climate change. EURELECTRIC believes a market-approach is the right equally under ETS rules. We regret this level playing-field could not be achieved way to deliver on these goals but political leadership is required to create when the legislators finalised the new Directive - free allowances will continue in the right structure and incentives for companies and their customers. special cases - but we welcome the intention to make auctioning the rule for all The way energy supply and use are organised will be a key factor in the effort to soon. The way it is handled will be crucial. To be consistent with the integration of stay below the crucial 2°C threshold for global warming. A secure, carbon-neutral electricity markets, a common auctioning platform should be set up for the whole electricity supply, delivered through a competitive market, will be a major part of the of Europe. solution to the energy-climate challenge. This will require clear thinking, determined The flexibility mechanisms in the new RES Directive, which allow member states action and close cooperation among the various actors. to develop joint projects and support schemes in pursuit of their national targets, In the European Union, Parliament and Council of Ministers are still trying to will promote European integration. However, we would have liked to see real oppor- agree a third “package” of energy market legislation. EURELECTRIC believes the tunities for companies to trade RES-power, as they are better suited to commerce main requirement is to drive forward regional integration as a step on the way to than governments. Our estimates show free trade in RES-power could bring annual a single European electricity market. It will be crucial to encourage and incentivise savings to the European economy of $21bn by 2020. If this valuable flexibility is transmission operators to integrate their activities at regional level. The system of to be harnessed, policymakers must quickly clarify the practicalities of setting up governance must also take a regional perspective, which means the new Agency joint RES projects and ensure companies are involved. The Directive should also be under whose umbrella national regulators will cooperate must be given adequate implemented in a way that will assist member states wishing to establish common powers. Moreover, if the regional model is to drive market development, market RES-certificate systems as joint support schemes. stakeholders must be closely associated in the process of drawing up codes and rules In addition, the provisions facilitating RES-access to the grid must be imple- that will govern the regional markets. The legislative bodies will need wisdom and mented in a way which, while promoting energy security and low-carbon supply, a spirit of compromise if they are to overcome their differences and forge a good does not work counter to the competitive market. agreement before the upcoming European elections bring a halt to parliamentary Of course Europe cannot go it alone on climate change. The global challenge activity. It is in no-one’s interests to delay the legislation until the next Parliament requires a global approach. Part of the framework should be a robust carbon price convenes. based on an international emissions trading system. As a basis we urge the parties Meanwhile, it is important not to lose sight of the single most important task of meeting in Copenhagen in December to forge a solid international climate action electricity companies - ensuring secure supply to customers. This can only happen accord to succeed the Kyoto Protocol. if market prices are allowed to fully reflect underlying cost, if all power generation Meanwhile, some thirty electricity CEOs from the EU, USA, Canada, Japan and options are available to investors and if we diversify external raw energy supply Australia meeting in Atlanta, USA last October set up an International Electricity sources and routes. The recent Russia-Ukraine gas dispute highlighted the dangers Partnership, which will seek to work with policymakers and stakeholders worldwide of undiversified supply and reminded us that energy security cannot be taken for on a roadmap designed to drive forward development and deployment of commer- granted. We welcome the ideas set out by the European Commission in the Second cial technologies that will reduce carbon emissions. Strategic Energy Review, especially suggestions for developing the networks. Grid There are also major opportunities in other sectors to replace less energy-effi- infrastructure is a vital area for attention if we are to create a functioning integrated cient or more carbon-intensive processes by carbon-neutral power. Energy-efficient European energy market. lighting, heat pumps for spatial heating/cooling and electric or plug-in hybrid cars all One important way of protecting energy security is to maintain a diverse mix of provide a means to reduce GHG emissions. The EURELECTRIC task force on electric fuels and technologies. The EURELECTRIC Role of Electricity project shows how the vehicles is liaising with power companies and car manufacturers to ensure a widely triple challenge of ensuring secure supply while reducing greenhouse gas (GHG) accepted standard for re-charging infrastructure. emissions and promoting economic competitiveness can be met through a broad Europe’s electricity companies are working with customers, legislators and regu- mix deploying all zero- or low-carbon technology options - carbon capture and stor- lators towards a competitive, secure and low-carbon energy supply. But policymak- age (CCS) and a continuing role for nuclear power alongside renewable energies ers must set the right framework. Decisions regarding the ETS, RES-deployment, (RES) – plus energy-efficient electro-technologies in key sectors. CCS-financing, new nuclear and coal power plants, infrastructure authorisation and The recently-finalised package of energy-climate legislation, with its targets to regional market integration will be crucial. Informing the public on energy issues and reduce GHG emissions and its provisions on RES and CCS, will provide some clarity incentivising consumers to choose energy-efficient and low-carbon options is also a for companies to invest in low-carbon power technology. However some important vital government task. Leadership and cooperation are both needed, and we must details have been left to later decisions and it remains to be seen how the various all work together to get it right.

6 PennWell Global Power Review 2009

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS AMERICAS Argentina Despite recent economic growth and increasing demand for energy, Argentina’s economic crisis of 2001 is still undermining confidence in the country, which continues to struggle to attract investment.

Argentina is the second largest country in Latin The Argentine energy sector is Hydrocarbon market share, 2007 Source: Secretary of Energy America by landmass, and it has the third largest among the most open in Latin America economy. The country is divided into 23 provinces to private investment, and it has the third and an autonomous city, Buenos Aires, which is largest reserves of natural gas on the 2.50% also its national capital. Vast indigenous resources continent, behind Bolivia and Venezuela. 19.70% and a diverse industrial sector support the The country is rich in indigenous natural Argentine economy, but these resources are not resources, as highlighted by Pan always exploited efficiently. American Energy’s discovery in 2008 After a crisis in 2001, Argentina’s economy of 100 million barrels of oil-equivalent appeared to be performing reasonably well, at least reserves located in the southern part of on the macro-economic surface. However, economic the country. Argentina is also the third indicators have been deteriorating recently to a point largest oil producer in Latin America Oil where inflation, for example, has reached 25 per after Venezuela and Brazil. Natural gas cent, while the economy has shown worrying signs of Although Chevron and Petrobras are Coal 77.80% sluggishness. active in oil production and Total is In this economic climate, President Cristina involved in the natural gas field, both Fernandez de Kirchner has exacerbated the situation markets are dominated by Repsol-YPF. Formerly state- by giving mixed signals to the international community, owned, Repsol-YPF was privatized in 1991 to raise funds most of whom still do not trust Argentina’s ability for the government as the economic crisis gripped the to meet its debts on time. In September 2008, the country. Public opposition to the privatization centred on president promised to repay $6.7 billion to the Paris the company’s status as a national symbol and because Club creditors, who have been waiting for such a some claimed the whole process lacked transparency. As response since Argentina defaulted on payments in the economy began to recover, the government created 2001. This was a crucial first step towards rebuilding a new state-owned oil and gas company, Enarsa, confidence and attracting new foreign investment, which was supposed to reassert control over some of but soon after the president nationalized the private Argentina’s natural resources. But, in practice, it has pension system. The international community quickly done little more than initiate some exploration projects concluded that Argentina was again short of cash to with other market participants. meet its obligations, and confidence in the economy vanished once more. Electricity Market The past six years have been a challenging period for Energy Overview the electricity sector in Argentina. Economic growth Argentina has been avoiding an energy crisis for after the 2001 collapse resumed at levels higher than several years, but some analysts seem to believe it will 8 per cent per year and energy demand followed, with happen sooner rather than later. The country’s energy growth at around 5.5 per cent. But higher demand and problems began in the 2001 economic meltdown, economic growth failed to encourage new investment which forced the government to freeze energy tariffs. in the sector, so supply increases were limited and Since then, investment in the energy sector has been the government was forced to implement measures nonexistent. On top of this, Bolivia, the largest holder geared towards energy conservation and efficiency. of natural gas in Latin America, was also experiencing Despite this, during 2007 the government approved a a crisis of confidence, after the government took project to construct two new combined cycle natural control of the hydrocarbon industry. Investment in gas fired power plants in a co-operative effort with Bolivia’s hydrocarbon industry fell considerably, which the private sector. Both power plants have a capacity affected its ability to meet growing demand for natural of 800 MW. gas supplies to Argentina, which in turn reduced its By the end of 2007, total installed capacity in natural gas exports to Chile. Since 2008, the Argentine Argentina was 26 GW. This was a 1 per cent increase government has been negotiating with its main energy compared with 2006, a year in which total installed trading partners, Brazil and Bolivia, to secure natural capacity decreased by 2 per cent. Thermo plants are gas supplies. the country’s largest source of power, providing more

12 PennWell Global Power Review 2009

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than half its total capacity at 13.7 GW, followed by of total installed capacity or 25 072 Total electrical capacity growth Source: INDEC hydroelectricity with 11.2 GW and nuclear with around MW in 2007, and MEMSP, which 1 GW. None of these sources have suffered significant had 818 MW of installed capacity variations in their installed capacity since 2001. The in 2007. 8000 only significant peak growth was in thermo generation, Both the MEM and MEMSP 7000 when it reached almost 14 GW in 2005. markets come under the 6000 Electricity generated during 2007 increased by administration of Cammesa, which 5000 4 per cent compared with the previous year, reaching reports to the ministry of energy 4000 108 467 GWh. Hydrogenation reversed an upward but is owned by the companies MW trend in its market share by decreasing 12 per connected to the power grid. 3000 cent during the year compared with 2006. In 2005, 2000 hydropower increased its share of the market by 13 per Infrastructure Investment 1000 cent compared with a year earlier. Investment in the energy sector 0 Meanwhile, thermo generation increased by 14 is urgently needed in Argentina.

per cent, accounting for 64 per cent of all the energy Economic growth has increased 2001 2002 2003 2004 2005 generated during 2007. Despite that, its mid-year energy demand in the past few share was only 50 per cent. Natural gas remained the years, while investment in the sector dominant fuel powering thermo plants, accounting for has stalled. Total electricity generation Source: INDEC 78 per cent of total fuel used to power electricity power The government recently plants in 2007. Although natural gas use increased by approved the construction of two 9 per cent year-on-year, its overall share in the market new thermo plants that will be built 60000 was reduced from 2006, when it accounted for 83 per by two private companies: Isolux 50000 cent of total fuels used to power thermo plants. from Spain and Iecsa from Argentina. Other fuel sources, such as coal and oil, increased The two plants are scheduled to 40000 their share, due to increased demand for natural gas in begin commercial operations in two 30000 residential areas, as a result of a cold winter, reducing years and require investment of $880 MW the gas available for power generation in industrial million. Construction will begin in 20000 markets. April 2009. Both plants will add a Nuclear energy production decreased, due to combined capacity of 840 MW to the 10000 scheduled maintenance of Central Embalse, which Argentine electricity system. 0 shut the station down for almost two and a half During 2009, construction is

months during the first half of the year. scheduled to begin on a 478 MW 2001 2002 2003 2004 2005 Electricity imports increased by 208 per cent hydroelectric power plant, Chihuido compared with the previous year, going from 1125 I, on the Neuquén river. The investment required GWh to 3458 GWh. At the same time, electricity for the project is estimated at $1 billion. A second exports decreased by 73 per cent, shrinking from 2671 hydroelectric power plant, Chihuido II, may also be GWh in 2006 to 712 GWh in 2007. built in the future. Inflation affecting the economy also had an impact Local authorities in Mendoza are calling on the electricity sector. Prices in real terms increased for companies to bid for the construction of two by 11 per cent during 2007, while nominally the hydroelectric power plants, Blanco and Blanco II, with increase was 18 per cent. a total installed capacity of 324 MW and 117 MW Argentine economic growth of 8.7 per cent meant respectively. energy demand increased by 6.6 per cent in 2007. Consumption stood at 99 074 GWh and was met by Future Trends supply at 107 190 GWh. Investment in the energy sector will not happen The electricity sector was privatized in the 1990s without the collaboration of the international private and reorganized in the three main business areas: sector. But economic and political conditions have been generation, transmission and distribution. Each private a consistent obstacle to attracting private companies company is permitted to operate in no more than one and financing. However, Argentina has shown that it of these areas. Although there are several government is prepared to use fiscal incentives to attract players to institutions in charge of supervising the sector, it is the its energy sector to at least sustain the energy needs energy agency, Enre, that acts as the regulator. of the country. There are two major markets where energy is Energy interconnection with Mercosur, and traded in Argentina, based on a free-market model: especially with Brazil, is a top priority for the current MEM, the largest in the country with over 90 per cent government.

14 PennWell Global Power Review 2009

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS AMERICAS Brazil Brazil has turned to hydrocarbons to fill potential shortfalls in generation, after poor rainfall provoked an energy crisis in 2001 and exposed the dangers of relying on hydropower for the majority of the country’s power needs.

Brazil is the largest country in Latin America by of electricity generation. Hydrocarbon reserves Source: Ministério de Minas e Energia, Ben 2008 all measures: land, population and gross domestic The Brazilian government has product (GDP). The country is a federation of 26 recently made oil production a top states and a federal district where the nations priority to avoid high international 2500000 Oil (thousands of m3) capital, Brasilia, is located. prices. Estimates suggest that Natural gas (millions of m3) The Brazilian economy is very diverse, with activities Brazil holds the second largest oil 2000000 ranging from labour-intensive ones such as agriculture reserves in Latin America behind to manufacturing and financial services. Venezuela. Most importantly, 1500000 As with all its regional counterparts, Brazil is Brazil discovered a large offshore 1000000 manoeuvring to reduce the impact of the international oil field in 2007 that could turn economic crisis on its interests. The effects have already the country from a net oil importer 500000 been felt on its international trade balance, currency, to a net exporter. Oil reserves stocks and overall economy, although inflation is no were estimated to be 12.2 billion 0 longer an issue, for once. barrels at the beginning of 2008.

Brazil is concerned with the uncertainty over the Petrobras, a state-owned 2000 2001 2002 2003 2004 2005 2006 2007 long-term effects on its economy. With the USA being company, dominates the oil and hit hard and its government in transition, Brazil has a natural gas sectors in Brazil. Although both markets unique opportunity to take advantage of international are open to foreign investment, few companies can turmoil to become a leading force in the region. With compete with Petrobras, which controls over 90 per the steep decline in the price of oil, the Venezuelan cent of these markets. president, Hugo Chavez, stands to see his influence Brazil is also developing the ethanol industry, using inside and outside his country decline, leaving no sugarcane as its feedstock, to increase its energy strong rival to Brazilian regional hegemony. matrix. Brazil is the second largest ethanol producer in the world, behind the USA. Energy Overview Brazil is an energy hungry country, and forecasts Electricity Market predict that this trend will continue to increase as its Total installed capacity in Brazil increased by 4.1 GW industries expand and more regions of the country in 2007, according to the national electricity regulator, are electrified. Recent economic prosperity has fuelled Aneel. This includes 2.9 GW from new hydroelectric energy consumption during the past decade, turning power plants, 0.4 GW from thermo plants, 0.3 GW Brazil into the third largest energy consumer on the from small hydroelectric facilities and 0.1 GW of wind American continents, behind the USA and Canada. power. Total installed domestic capacity was 101 GW, Although Brazil has many natural resources, a lot while electricity imports added another 8 GW. of them are currently unexploited, due to a lack of Electricity supply increased by Coal reserves Source: Ministério de Minas e Energia, Ben 2008 infrastructure. This means it currently imports natural 5 per cent in 2007 compared gas from Bolivia, the largest natural gas holder in Latin with the previous year to reach America, despite having domestic reserves of its own 483 TWh. Hydroelectricity 35000 estimated at 348 billion m3. accounts for 77.4 per cent of 30000 Brazil could be self-sufficient with its estimated total electricity generated during natural gas reserves if it was capable of developing 2007, an increase of 7.2 per 25000 the transport infrastructure to transport natural gas cent, according to the latest 20000 to major industrial areas. Recent pricing conflicts figures released by the Brazilian 15000 with the Bolivian government have encouraged Brazil government. to reconsider its natural gas strategy, perhaps by However, the largest rise in 10000 Thousand tonnes importing natural gas from Argentina instead in the 2007 was in biomass generation, 5000 short term. which increased its share of 0 A strong rainy season is also helping Brazil to total production by 21 per cent

reduce its reliance on natural gas imports. Its hydro- to 3.7 per cent at the end of 2000 2001 2002 2003 2004 2005 2006 2007 electricity plants are now becoming a dominant source 2007, becoming the second

16 PennWell Global Power Review 2009

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PennWell Global Power Review 2009

Installed capacity by source Source: Ministério de Minas e Energia, Ben 2008 largest energy provider by source. justifiably proud of its hydroelectricity infrastructure, Meanwhile, coal, nuclear and since it provides cheap electricity to its citizens without natural gas power generation depending on fuel imports. However, after poor 2007 247 decreased their share of electricity rainfall sparked an energy crisis in 2001, thermal production in 2007 by 6 per cent, projects became a preferred option to compensate for 21324 10.1 per cent and 15.2 per cent Brazil’s over-dependence on hydro resources. As soon respectively. as the rain resumed and dammed reservoirs refilled, Although nuclear energy hydroelectricity once again became the country’s most decreased in its share of total important source of power. electricity production in 2007, it In 2008, Aneel approved five new hydroelectric could increase its share of the power plants totalling 793 MW of installed capacity. Thermo production matrix significantly in These are currently waiting to receive environmental Hydro the future. impact approval. Aneel is also examining 26 possible Nuclear 76821 Brazil has two nuclear facilities new hydroelectric projects with a total of 5382 MW Wind run by Electronuclear, a subsidiary of installed capacity. An additional 47 projects, with a of Eletrobras, with a combined combined installed capacity of 7011 MW, have already total installed capacity of 1980 MW. A third unit started viability studies, which should be submitted to has been under construction for years, but in 2007, Aneel during 2009. Electronuclear finally received permission to complete Some local industry associations are demanding an it. This will add 1350 MW of additional nuclear increase in the use of coal for electricity generation. capacity to the Brazilian national grid. A fourth unit is There are three coal plants being built in Brazil that, also planned by Electronuclear. once finished, will have a combined installed capacity Although Brazilian wind generation is still in its of 1400 MW, doubling current coal capacity. There infancy, its production capacity more than doubled, are 14 other coal power plants being studied with a from 236 GWh in 2006 to 559 GWh, in 2007. combined installed capacity of 6959 MW. There are large coal reserves and coal-powered Brazil is also studying the number of plants that plants in the south of Brazil. The plants have a total need upgrading or refurbishment and those that need installed capacity of 1415 MW. to be decommissioned. Industry used the most energy of any sector in In terms of renewables, Proinfa, the government 2007, consuming 46.7 per cent of the total used. programme to foster non-conventional renewable The commercial sector is second, with 22.4 per cent, sources, is also following an expansion plan. For 2009, followed by residential users, who consumed 22.1 per 1208 MW of new installed capacity is scheduled to cent of the total. start operations, 771 MW of which will come from The Brazilian electricity market is open to private wind energy, while 427 MW will be provided by small investment, although it is largely dominated by the hydro plants and 10 MW from biomass. Proinfa is public sector. Eletrobras, controlled by the federal predicted to reach is target of having 3000 MW of government, is the largest industry player, with a non-conventional renewable sources in the country 40 per cent market share of generation capacity. by 2010. Meanwhile, the largest private company in terms of generation capacity is Tractebel Energia, controlled by Future Trends GDF Suez, with 7 per cent of market share. Brazil will continue to depend on hydroelectric Several public bodies contribute to the electricity resources and new fuel sources, such as ethanol from market functions. The highest authority in the sugar cane. Other renewable sources are also on the country is the Ministry of Energy and Mines. Under agenda, along with an increase in coal use and nuclear the umbrella of the ministry, Aneel is the electricity power generation. regulator, ensuring that generation, transmission and Natural gas is losing favour in Brazil, which remains distribution comply with current laws and regulations. sceptical about the chances of a satisfactory political Under Aneel’s supervision, the operator of the national agreement with its main source of gas, Bolivia, electricity system (ONS) co-ordinates generation and especially when it expects a year of favourable rainfall transmission. to power its hydro plants. The Brazilian government has also been expanding Infrastructure Investment a programme of rural electrification, begun in 2004. Hydroelectricity has traditionally dominated the Brazilian The programme, a joint effort from the Ministry of electricity market, although much of its potential has Mines and Energy and Eletrobras, has already installed yet to be exploited. The Brazilian government is electricity in 1211 homes in four different states.

PennWell Global Power Review 2009 17

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS AMERICAS Canada The global economic crisis could upset Canada’s well-laid plans to safeguard its valuable energy export business by leading the way in environmentally sound power generation and further investing in renewable energy.

Canada is the second largest country by of natural gas, fuelling Domestic energy production by a energy source (TWh) Source: National Energy Board geographical area in the world. The only land quarter of all its energy border it shares is to the south, with its main consumption, the country trading partner, the USA. Canada is a federation also provides the US with Petroleum divided into ten provinces and three territories. 17 per cent of its natural Natural gas It is a democracy with a constitutional monarchy, gas imports. Exports from where both French and English are official Canada to the US were Hydro languages. The economy has been strong for estimated to be running at more than a decade, and the country’s standard 294.5 million m3 per day Nuclear of living is considered among the highest in in 2007. Coal the world. The country’s coal Canada expects a rough 2009 in economic terms. reserves are also extensive, Renewable Total: 5100 The economy is projected to contract, unemployment estimated to be 7251 mil- 0 to expand and the fiscal deficit to grow. As in many lion short tonnes. Coal plays 5000 1000 1500 2000 2500 other countries, the impact of the crisis is still being an important role in the TWh debated. Analysts do not yet agree on the extent to energy sector, especially which the country will be damaged. in electricity generation. What seems clear is that its fate is closely tied to Although coal’s contribution is expected to decrease the fate of its main trading partner, the USA, where over time, it will still play an important role for years the short-term prospects are anything but promising. to come. The Canadian government can be expected to emulate Despite its high use of hydrocarbon fuels, Canada is the US by easing taxes on corporations and consumers. striving to develop more renewable sources of energy, However, many analysts consider these measures to be such as hydro electricity and wind power. insufficient to stimulate the economy. Electricity Market Energy Overview The Canadian electricity sector has one main objective: Canada is a net energy producer, with its energy the environment. The government is pursuing clean surplus dedicated to supplying the USA with oil, energy programmes to reduce greenhouse gas natural gas and electricity. Because of the energy ties emissions, but it also wants to make sure that energy between the Canada and the USA, both countries is provided in an efficient manner. In 2007, the are members of the North American Energy Working government announced the investment of C$230 Group, which is responsible for ensuring that energy million ($179 million) for research and development trade between the two countries runs as smoothly as into new technologies, such as clean-coal and carbon possible. sequestration, and also for measures to reduce the Canadian oil reserves are the second largest in the environmental impact of oil sand extraction. The world after Saudi Arabia. However, they are located in electricity sector is specifically promoting the use of oil sands in Alberta, and the oil is consequently more cleaner ways of producing electricity, with a strong expensive to extract. emphasis on wind power. Even so, Canada’s oil production is the third highest Total installed capacity in the country was 124 GW in the American continent after the USA and Mexico. at the end of 2007, according to the latest figures The country is heavily reliant on oil, but it is still able to provided by Canada’s National Energy Board (NEB). supply around 18 per cent of US oil imports. Although During 2007, new capacity came from new natural several pipelines already connect the two countries, gas-fired power plants and wind farms. further ones are planned to allow Canadian oil exports Wind generation increased in capacity to reach to the US to increase. 2246 MW during 2008. There is currently enough The latest Canadian government projections wind power to supply electricity to 671 000 homes, indicate that the country has 1.64 trillion m3 of natural according to the Canadian Wind Energy Association. gas reserves, with the Alberta region being one of the By province, Ontario provides the highest amount of largest sources. Even though Canada is a heavy consumer wind energy in the country with an installed capacity

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Crude oil and equivalent production by province Source: National Energy Board of 781 MW, followed by Infrastructure Investment Quebec with 531 MW, The Canadian government’s main agenda is the Alberta with 524 MW, provision of assured electricity supplies at reasonable Alberta Saskatchewan with 171 prices, while being friendly to the environment. Northwest territories MW, Manitoba with 103 This is evident in energy conservation and efficiency MW, Prince Edward Island initiatives implemented by the provinces over the past Nova Scotia with 72 MW, and Nova few years, which have had a positive impact on future Manitoba Scotia with 61 MW. The energy trends. Newfoundland Canadian Wind Energy Investment in new large hydroelectric plants is Ontario Association expects all accelerating. Construction of a C$5 billion ($3.9 Saskatchewan provinces to have at least billion) 900 MW hydroelectric project in Quebec began one wind farm by the end in January 2007 and is due for completion in 2009. A British Columbia of 2009. new 200 MW hydroelectric power plant in Manitoba is 0 1020304050607080 Hydroelectricity domi- due to be completed by 2012. % nates Canadian electricity Despite reduced production in 2007, Canada will generation. Production dur- see new nuclear power plants come online in the

Electricity production by type (TWh) Source: National Enegery Board (NEB) ing 2007 was able to meet next few years. Energy Alberta is planning to finalize demand, even though a 2200 MW nuclear facility by 2017, and Bruce Power there were unexpected is also preparing to construct a 4000 MW nuclear 19% extreme weather events plant. Other provinces are also evaluating their nuclear and some outages. Total programmes, which could see the expansion of existing potential capacity reached power plants or the construction of new ones. 38% 599.7 TWh, the highest Renewable sources of electricity, especially wind in the past five years. power, are still on course to play a key role in Canada’s Hydroelectricity was able electricity matrix. Several projects are due to start 18% to increase its share of commercial operations in the near future. In the Conventional production, due to favour- Gaspé region, eight wind farms with a total capacity Synthetic crude oil Heavy crude oil able weather conditions, of 990 MW are scheduled to enter operation by Bitumen and its total production 2012. Two are already functioning, the most recent 25% for 2007 was 361.8 Twh, of which, L’Anse-à-Valleau facility, became operational 10.7 TWh higher than the in November 2007 with a total installed capacity of previous year. 100.5 MW. Hydro-Quebec also received 66 bids from Nuclear energy experienced an unexpected increase 30 different companies in 2005 for the construction of in its energy production share in 2006, but returned to wind farms generating 7724 MW. 2005 levels in 2007, with 87.9 TWh produced. Canada could become a dominant force in wind This loss was compensated for by an increase in energy in the future if all its development plans are thermo generation of 8.5 TWh in 2007 compared with completed by 2020 as scheduled. By the end of 2008, the previous year to take total thermo production to Canada was the 12th country in the world to have 150.1 TWh. installed 2000 MW of wind power capacity. While Canada is committed to environmentalism, it is still pursuing coal power, especially using cleaner Future Trends technologies that reduce pollution. Despite this, Canada has enough energy supplies to satisfy demand SaskPower has scrapped plans to construct a 300 MW in the short term, but energy prices are uncertain, coal-fired plant, which the company will replace with according to the NEB. Price volatility has remained conventional natural gas plants and wind energy. outside Canadian control and continues to fluctuate in The over-supply of generation allows Canada to the world economic crisis. be a net electricity exporter. All of which goes to The country faces two key events in future: the west its southern neighbour, the USA. In 2007, exports of Canada will have a tighter generation mix, due to increased by 40.8 per cent, or 50.1 TWh. Export an increase in demand over the past few years, while revenues increase 28 per cent, while both imports of production in the east will reduce as a consequence to electricity and the revenue paid for them shrank in the economic slowdown. 2007 compared with a year earlier. In the coming years, wind energy will keep growing Canada needs to improve its transmission lines, as Canada prepares to become a leading force behind and a new upgrade plan was prepared in 2007. renewable energy sources. But there has been renewed However, the plan faces delays as it comes under interest in nuclear energy, and new facilities are on public scrutiny. the agenda.

PennWell Global Power Review 2009 19

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS AMERICAS Chile Chile is trying to reshape its energy structure after years of problems caused by Argentinean natural gas export restrictions. The country’s ability to promote new investment in the energy sector is helping with the transition.

Chile is mostly recognized for the shape of its started reducing its exports to Chile. Projected coal consumption by existing electricity generators Source: CNE territory: long and narrow. It borders Peru to the Since then restrictions have only north, Bolivia to the north-east, Argentina to increased. 5000000 the east and the Drake Passage at the country’s Chile has been compensating for southernmost tip. The Pacific forms the country’s the natural gas shortage by using 4000000 entire western border, with a coastline that alternative fuels, such as diesel. stretches for more than 6435 km. The country’s This has led to financial losses, 3000000 length is responsible for its variety of climates, due to the cost of infrastructure with deserts in the north, mild weather in the to accommodate these fuels, such 2000000

middle – where most of the population resides as diesel storage facilities. Enap, Short tonnes – and glaciers in the southern areas. Although the state oil company, may have 1000000 it is not the most powerful country in Latin suffered losses of $500 million in America, its still provides the best quality of life 2008 from buying oil derivatives to 0 for its population, which produces the highest replace natural gas. Higher prices 2009 2010 2011 2012 2013 2014 2015 gross domestic product (GDP) per capita in for oil in the first half of 2008 the region. exacerbated Enap’s financial troubles. In recent times, its main economic issue has been The Chilean government knows it can no longer to sustain energy demand and supply in equilibrium, a rely on its neighbours for fuel supplies, and it seeks difficult task considering Chile has scarce indigenous to diversify its energy generation by exploiting its natural resources. domestic hydropower resources and, potentially, by Although Chile is the most stable and prosperous introducing nuclear plants. Renewable sources of economy in the Latin America region, it has not energy, completely ignored in past debates about been immune to the international financial crisis. In the future of Chile’s energy sector, are now centre November 2008, the economy only grew 0.1 per cent, stage, with large projects being studied along with the according to figures released by the government. leading countries in the field, such as Germany, Spain Chile’s Central Bank forecasts growth of between or Canada. 2 per cent and 3 per cent in 2009, while in 2008 the Although Chile is trying to avoid relying on Argentine economy grew by 5.1 per cent. Unemployment is also natural gas imports, it is seeking new suppliers from forecasted to increase in the coming months. Despite around the world, following the construction of the decrease in business loans and the contraction regasification terminals for liquefied natural gas (LNG). in copper exports, one of Chile’s primary economic A new LNG plant is scheduled to begin operations in engines, the country could sustain growth and avoid the second half of 2009, supplying 10 million m3 per entering an economic recession, but this will not be day of natural gas. This will considerably reduce Chile’s easy if economic metrics worsen in the near future. exposure to the vagaries of Argentine gas supply. Industrial activity fell during the last quarter of 2008, The financial crisis is also providing Projected coal consumption by existing electricity generators Source: CNE and Chile’s currency lost value, as the international respite for the energy sector, with community predicted that Latin American commodities the government predicting that 5000000 in general would suffer from a demand shortage due energy demand will contract for the to the global economic crisis. first time in 26 years in 2009. 4000000

Energy Overview Electricity Market 3000000 Chile depends on foreign imports to meet its energy Chile’s electricity market was privatized demands, because it lacks indigenous natural in the 1980s. Today generation, 2000000

resources. Natural gas consumption increased in 1996, transmission and distribution are Short tonnes due to the construction of several new thermoelectric in the hands of the private sector. 1000000 power plants, and for a while the construction of The market operates under the several pipelines between Chile and Argentina helped supervision of the National Energy 0 sustain Chile’s demand for natural gas. However, Commission (CNE) and the Ministry 2009 2010 2011 2012 2013 2014 2015 supply became restricted in 2004, when Argentina of the Economy and Energy (MEE).

20 PennWell Global Power Review 2009

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PennWell Global Power Review 2009

Monthly gas consumption, 2008 Source: CNE Chile is divided in four electricity shortage of natural gas. Coal is now the largest systems, the largest of which is the contributor to energy production, with 38 per cent central grid (SIC) with 9.1 GW of of the total. A year earlier, its contribution was even 300000 total installed capacity, serving mostly higher at 43 per cent. 250000 residential costumers. The Norte Grande The SIG market is dominated by six companies, system (SING) provides 3.6 GW, mostly which produce all the energy in the system. The largest 200000 to industries, while the remaining generator, Electroandina, accounts for 30 per cent of 150000 Magallanes and Aysen systems provide the energy produced, followed by Gasatacama with 80 MW and 48 MW respectively. Total 26 per cent, Edelnor with 19 per cent, Norgener with 100000 installed capacity in the country was 14 per cent, AES Gener with 8 per cent and Celta with 50000 14.9 GW at the end of 2007. 3 per cent, although this can vary on a monthly basis. Thousand cubic meters Electricity generation in 2008 0 decreased by 0.31 per cent, or 41 845 Infrastructure Investment GWh, compared with 2007, according The restriction on imports of natural gas from Argentina Jan Feb Apr July Aug Mar May June to industry sources. The government is having a profound impact on the Chilean electricity had not released its official figures when sector, which in turn affects the short-term additions Global Power Review went to press. to the generation matrix. During 2009, 19 projects Total hydroelectricity generation from December are scheduled to start commercial operation and none 2007 to November 2008 in the SIC system was of these is scheduled to burn natural gas. Instead, 13 23 433 GWh, a 3 per cent increased compared with the will use diesel and one coal, two will be hydroelectric previous 12 months. Thermo electricity on this system power plants and three wind farms. These projects will dropped by 4.3 per cent year-on-year to 18 359 GWh add a total of 1426 MW of capacity to the Chilean from 19 177 GWh a year earlier. As in 2007, diesel electricity matrix. remained the largest source for electricity generation, Coal-powered plants will increase their market with 52 per cent of total production compared with 43 share in the near future. Between 2010 and 2011,four per cent between 2006 and 2007. Diesel generation new coal power plants will start operations in the stood at 9476 GWh in the SIC. SING. These plants will add a combined installed Meanwhile, natural gas went from producing capacity of 765 MW to the national system. 18 per cent of the total power generated in the 12 Chile is also promoting renewable energy sources, months ending in November 2007 to producing only and several wind projects are being studied. One of 7 per cent during the same period a year later. Natural these will be connected to the SING system and will gas production went from 3494 GWh to 1224 GWh. ease its dependence on thermo electricity derived from Coal production’s contribution to the SIC did not fuel. A wind farm is projected to have a total installed change significantly during that period. Production capacity of 140 MW. It will require an investment of stood at 6291 GWh for the 12 months ending in $316 million. November 2008. Electricity production in the SIC system increased by Future Trends 3.5 per cent in the 12 months from December 2007 Chile is pursuing electricity generation diversification to to November 2008, rising from not only exploit its few indigenous resources, but also Electricity generation by system, 2007 Source: CNE 12 751 GWh to 13 193 GWh. to guarantee supplies of fuels, such as liquefied natural The SIC system is dominated gas, coal or diesel, from multiple international suppliers. by five private generators that In future, if nuclear power is finally used in the country, SING account for 92 per cent of total then this list will also include uranium. energy produced. Endesa was the The country’s most abundant natural indigenous SIC largest producer, accounting for resource is hydropower potential. Although there 37 per cent of total electricity is great scope for exploiting this source of energy Aysen produced. Then came Colbun with in Chile, development faces tight opposition from Magallanes 24 per cent, Gener with 16 per environmentalists. The HidroAysen project, if built, will cent, Pehuenche with 9 per cent add a projected 2750 MW of hydroelectric capacity Self producers and Guacolda with 6 per cent. to the SIC system, becoming the largest hydroelectric Total: 60138 Other smaller generators produce complex ever built in the country. The project would

0 the remaining 8 per cent. produce 18 430 GWh a year, equalling the capacity of The SING system is dominated all current hydro power plants in the SIC. However, it 10000 20000 30000 40000 50000 GWh entirely by thermo generation and will have to overcome the strong opposition from local has been the most hurt by the and international environmentalists first.

PennWell Global Power Review 2009 21

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS AMERICAS Peru Peru is blessed with one of the largest natural gas reservoirs in Latin America. While the country is still adapting to the impact of its discovery, the country has become one of the fastest growing economies in Latin America.

Peru is located in the Andean Region, bordering country. Part of Petroperu, a state- Natural gas production share by contractor, 2007 Source: Perupetro Ecuador, Bolivia, Chile, Brazil and Colombia. It has owned oil company, was privatized in a long coastline in the Pacific Ocean. The country 1993, when the hydrocarbon market is divided into 25 regions, and it has a variety of opened to private participation. The 0.79% 1.53% 3.90% climates in its territory. Peru has a population of largest oil producer in the country 0.47% 5.43% 28 million people, most of whom live in Lima, the is currently the Argentinean oil country’s capital. company Pluspetrol, although Peru is a presidential representative democratic Petroperu remains an important 14.83% republic with a multi-party system. Under the current market player. Other market players constitution, the president is the head of state and include Petrobras Energía Peru and GMP government. He or she is elected for five years Petro-Tech Peruana. Sapet and cannot seek immediate re-election, but must Proven natural gas reserves Petrobras stand down for at least one full constitutional term are estimated at 334.1 billion m3, Olympic before re-election. The president designates the prime according to statistics provided by 73.03% Petro Tech minister and, with his advice, the rest of the Council Perupetro. Peru has become the Aguaytia Pluspetrol of Ministers. There is a unicameral Congress with 120 fifth-largest country with proven members elected for a five-year term. natural gas reserves in Latin For the past few years, Peru’s economy has been America. Natural gas production in the country has performing extremely well, and it was expected to been increasing considerably in the past five years. keep growing strongly in the next few years. Before the Production stood at 453 million m3 in 2003, while it international financial crisis, its economy was forecasted reached a peak of 2.6 billion m3 in 2007. This increase to grow by 9 per cent during 2009. However, as the is fostering a change in energy use in the country. global economy worsens, the Peruvian government has Natural gas production and consumption is expected to said that growth could be negatively affected in 2009. keep increasing in the coming years, as Peru prepares At the end of 2008, the government downgraded its infrastructure to become a net exporter, mostly to its forecast to 7 per cent, while independent analysts Mexico and the US, but also possibly to Chile. predicted 5 per cent growth. A liquefied natural gas (LNG) terminal is being built To revive the economy, the government announced in the southern part of the country, which is expected a stimulus package of $12.3 billion to be injected to start exporting natural gas from 2010. Its production into the economy. The hope is that the stimulus will capacity it is estimated at 4.2 million tonnes per year. be enough to sustain the forecasted growth. Despite The LNG project requires an investment of $3.8 billion, the announcement, doubts remain over whether the the largest direct foreign investment in Peru. Several government can effectively implement it. It is also major global energy companies have a stake in the uncertain whether Peru can keep growing when its project, including Hunt Oil Company from the US (50 core industry, mining, is experiencing a steep reduction per cent), SK Energy from Korea (20 per cent), Repsol in its exports. YPF from Spain (20 per cent) and Marubeni of Japan (10 per cent). Energy Overview Peru has traditionally relied on oil for its energy Electricity Market production and consumption. However, the discovery Peru’s total installed effective capacity reached 6.4 GW and tapping of a large reserve of natural gas in during 2008, according to the latest figures released by Camisea, which began producing natural gas in the Ministry of Mines and Energy. The national electricity 2004, and further exploration are changing its energy matrix was evenly split between hydroelectric power and consumption habits. Natural gas has been increasing thermo plants at 3 GW each until 2007, when thermo its share in Peru’s energy sources, and in the near generation installed capacity surpassed hydroelectric by future it will become a net exporter of natural gas. an additional 400 MW. The only renewable source is 0.7 According to Perupetro, the country had 416 million GW of wind generation capacity. Of the total capacity barrels of proven oil reserves at the beginning of 2007, in the country, 5.5 GW are available for the electricity most of which are located in the northern part of the market, while self-suppliers use the remaining 0.9 GW.

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PennWell Global Power Review 2009

Total electricity generation by source Source: Ministry of Energy and Mines Investment in the electricity market private sector facilities. Despite this, the single largest has been growing constantly since recov- generation company is state-controlled, Electroperu. ering from a steep decline between 2001 The largest distributor is Endesa’s subsidiary, and 2003, although the rate is still below Edelnor, which supplies Peru’s capital, Lima, and the Hydro that of 1999. In 2008, $373.8 million was surrounding area. invested in the generation sector, while in Thermo 2003 the investment was $92 million, the Infrastructure Investment lowest in the past 13 years. There are several new power plants under construction Wind Hydroelectricity still supplies the largest or being considered by different market players. During proportion of energy to the market, 2008, the Peruvian government awarded 13 new although there is a reverting trend in contracts for the construction of hydroelectric projects Total favour of thermo generation. During 2008, with an installed capacity of 1371 MW. In addition, hydroelectric power plants produced 19 five new plants are scheduled to begin commercial 0 333 GWh (59 per cent) of the year’s 32 operations in 2009. The largest is the hydroelectric 1000 2000 3000 4000 5000 6000 7000 8000 626 GWh total output. Hydroelectricity plant El Platanal, which will add 220 MW of new MW production decreased its rate of growth by capacity. A small 10 MW hydroelectric plant, Poechos 1 per cent in 2008 compared with 2007, II, is also due to enter service. while thermo increased its electricity production by 28 Thermo plants, however, will contribute the greatest per cent year-on-year. Wind capacity did not produce boost to capacity, taking advantage of the increased electricity during the year. natural gas production in the country. Three plants are Overall electricity production has been increasing schedule for 2009: TG2 Kallpa and TG3 Chilca, with consistently in the past decade. Production increased 176 MW each, and Oquendo, with 50 MW. In total, by 9 per cent from 2007, following a period of strong 632 MW of new capacity is due to enter the Peruvian economic growth. Since 1995, electricity production market in 2009. has grown by 95 per cent. Brazilian state-controlled Eletrobras is also planning Total electricity consumption stood at 28 967 a large hydroelectricity investment in Peru. It is exploring GWh in 2008, growing 9 per cent compared with the the potential for constructing five hydroelectric facilities previous year and 113 per cent compared with 1995. with a combined installed capacity of 4.95 GW, enough The industrial sector has traditionally been the largest to supply energy to 11.5 million homes. electricity user. It increased its yearly consumption by The Ministry of Mines and Energy is forecasting a 13 per cent in 2008 to reach 15 597 GWh. Second is total investment in the electricity sector for 2009 of residential consumption, which accounted for 6403 $643 million. The government does not expect that GWh in 2008, a year-on-year increase of 8.9 per figure to decrease, due to the international economic cent. The services sector increased its consumption by crisis. Total private investment in the country is 2.6 per cent to reach 4504 GWh in 2008. Per capita estimated at $13.9 billion, although the executive said electricity consumption stood at 1010 kWh in 2008, it would still be happy if it only expected $10 billion. while per capita production was 1138 kWh. The Peruvian government is also planning to Investment in transmission lines reached its highest increase its budget for rural electrification, one of its level in 1999. Investment has fallen sharply since then top priorities. and has remained at a low rate of growth. Transmission line growth Source: Ministry of Energy and Mines During 2008, transmission lines received Future Trends $46 million in investment, down from $70 The Peruvian market has become one of the most 20000 million the previous year and 171 million attractive in Latin America. Its economy is growing dollars in 1999. Interconexión Eléctrica ISA, fast, its regulatory environment is fairly stable and it from Colombia, is the largest transmission welcomes private investment with open arms. Despite 15000 provider in Peru among the seven private this, Peru needs to increase its generation capabilities companies with a stake on the country’s to sustain economic growth and the associated energy

km 10000 transmission grid. demand. The Peruvian electricity market was Although Peru has an abundance of natural gas, the 5000 privatized and opened to competition in government seems to prefer to develop hydroelectric 1992 to promote new investment and plants and renewable sources of energy, using natural a more efficient electricity system. Since gas to plug gaps in capacity and exporting the rest of 0 then, the private sector has taken over the it. In this way, the government aims to protect Peru‘s generation market, and around 80 per cent energy security, while using exports of natural gas as a 2000 2001 2002 2003 2004 2005 2006 2007 2008 of electricity generation comes from the new revenue source.

PennWell Global Power Review 2009 23

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS AMERICAS USA The US government is planning to embrace the latest technologies and invest in renewable energy to help cure the country’s economic ills and reverse its declining influence.

The USA is a federal republic comprising 50 states in 2008, due to the fact Total capacity, 2007 Source: Energy Information Administration and one federal district, Washington DC, where that its demand is more its city capital is located. Its main trading partners correlated to weather are China, Canada, Mexico, Japan and Germany. It conditions in the country 400 is the largest importer of goods in the world and than oil. The USA is the 350 the third-largest exporter. However, the services largest consumer of natural 300 sector is the true engine of its economy. gas in the world and the 250

In the past two years, the US economy has been second largest producer. GW 200 showing negative signs. It was hit by one of the worse Meanwhile, coal 150 economic crises it has ever faced during 2008, which is production increased by now being compared to the Great Depression of 1929. 2.8 per cent in 2008, due 100 Newly elected president, Barack Obama, has stated that to higher export levels. 50 the economy is “very sick”, and the situation can only However, the government 0 get worse in 2009 before it show signs of improving. expects a new turn of Coal Wind Solar

Not without reason, the US economy has been at events and is forecasting Other Hydro Nuclear the epicentre of the international financial turmoil. a fall in coal production Biomass Petroleum Natural gas Geothermal The government is launching unprecedented anti- of 2.9 per cent in 2009. Other gases crisis packages to save financial institutions, car The USA holds the worlds manufacturers and consumers, while the Federal largest coal reserves, used heavily in its electricity Reserve has reduced the interest rate to almost zero generation matrix. to stimulate the economy. The long-term implications Many analysts believe that the USA is losing its of these measures are unclear, and it is impossible to position as the world leader in energy trends because predict whether they will have the expected effect. The it is not embracing green energies as quickly as other only certainty is that 2009 will be a year to remember countries. Although President Obama hopes that the for the current US generation. economic crisis and concurrent changes in consumer behaviour towards energy consumption will provide Energy Overview enough incentives for a green revolution in the The USA is the largest energy producer and consumer in country. the western hemisphere. It accounts for large reserves of oil, natural gas, coal, uranium and various sources Electricity Market of renewable energy. The USA produces energy from Total installed capacity in the USA reached 998.8 all sources imaginable, although its economy is heavily GW at the end of 2007, according to the Energy dependant on oil and coal for generating electricity. Information Administration (EIA). The installed capacity The world financial crisis has put downward increased year-on-year by 1.2 per cent, mostly from pressure on oil prices and natural gas, despite the wind power, which increased its Projected generating capacity between 2007 and 2030 fact that the Organisation for Petroleum Exporting total base by 7.5 GW during Source: Energy Information Administration Countries (OPEC) has tried to keep prices stable by the year, according to figures reducing production, a measure that has not yet released by the American Wind 46 GW worked. Demand for oil has decreased considerably Energy Association (AWEA). 57 GW in the USA as consumers alter their driving habits and The total installed capacity in favour energy efficient vehicles. wind energy reached 24 GW at The US government expects oil consumption to the end of 2008. Wind energy decrease in 2008 by 5.8 per cent compared with 2007, is experiencing extraordinary 3 GW and domestic oil production is also estimated to fall by growth, which is bringing benefits 130 000 barrels per day (bpd). The downward trend to the economy. According Coal in US oil production was accelerated by Hurricane to AWEA, during 2007, 50 Natural gas Katrina, which reduced oil production in Gulf of manufacturing facilities were Nuclear Mexico facilities. open in the USA, generating 139 GW Renewables Natural gas consumption was expected to increase employment for 14 000 people.

24 PennWell Global Power Review 2009

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 — One Power Plant at a Time

                     
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However, the recent boom in wind energy could be Infrastructure Investment slowed down considerably in 2009 if the government The USA is facing a tough economic environment that does not offer tax incentives for renewable sources of is damaging the energy sector, particularly in terms of energy, according to AWEA. the of financing new projects. The government expects Solar energy also experienced significant growth energy consumption to decline by 0.5 per cent in in 2007, with total installed capacity rising by 25 per 2009, but growth is expected to recover in 2010 with cent from 400 MW to 500 MW compared with 2006, a 1.5 per cent increase, due to an overall improvement according to EIA figures. The Solar Energy Industries in the economic climate. Association (SEIA) estimates that, with tax incentives, President Obama has a clear green agenda for the solar industry could create 440 000 jobs and attract the energy sector, which could further propel the $325 billion by 2016. growth of generation capacity in nuclear, wind and However, the USA still heavily relies on thermo solar power. generation from various fuels, with natural gas having The future of coal power does not look very prom- the highest installed capacity and coal producing ising over the short term. Plans to build around 50 more electricity. Total thermo power capacity in all its GW of new capacity between 2008 and 2016 were

forms (coal, natural gas, petroleum and other gases) cancelled or post- Natural gas reserves, 2007 Source: Energy Information Administration accounts for 77 per cent of total capacity with 769 poned during GW, while hydroelectricity accounts for 10 per cent of 2008. Planned total installed capacity with 100 GW. investment in Dry NG There was mild growth in the nuclear sector, clean coal tech- with capacity rising by 1 per cent to 101 GW, which nologies is also NG Non-associated, Wet After Lease Separation accounts for another 10 per cent of the total capacity fading, as the NG Non-associated, in the country. But this will soon change as the USA cost of these tech- Wet After Lease Separation prepares to build 17 new nuclear power plants in the nologies makes NG Associated-Dissolved, near future. Nuclear generation accounted for 19 per them uncompeti- Wet After Lease Separation cent of total electricity generated in 2007 with 806.5 tive. This decline NG liquids TWh, its highest historical yearly production. in coal-powered In 2007, natural gas power plants had a total plants for the next installed capacity of 395 GW, a moderate increase eight years will be 1000 2000 3000 4000 5000 6000 7000 8000 compared with the 388 GW of 2006. Although no compensated for new natural gas plants have been built in the USA for by the construction of natural gas power plants, which the past three years, the electricity sector still increased make up the largest proportion of new additions to the its natural gas consumption by 6.5 per cent to reach US electricity matrix. 652.8 million m3. In 2009, wind capacity is expected to maintain Coal use has remained relatively steady and capacity its growth trend. Some 26 per cent of new capacity has not increased in four years, while in 2003 it is predicted to come from this source during 2009, a decreased compared with the previous year. Total coal level only surpassed by new natural gas capacity. capacity at the end of 2007 was 330.6 GW compared with 330 GW a year earlier. Coal consumption by the Future Trends electricity sector remained almost unchanged during The EIA forecasts that electricity demand in the USA that time. Coal consumption was 1128.8 million short will increase by 25 per cent by 2030, requiring about tons in 2007, while in 2006 consumption amounted to 260 GW of new capacity. The new government is 1112.3 million short tons. clearly going to need an aggressive agenda to promote As with coal and natural gas, the petroleum clean technologies. installed generation base also remained flat for 2007 Wind power is becoming a dominant source of energy, compared with the previous year, with an installed as illustrated by the 40 GW of new wind capacity that capacity of 58.3 GW, which is only 0.2 GW higher than will be built between 2008 and 2016. Solar power in 2006. Petroleum consumption for power generation has also been growing in the past couple of years, increased by 1.7 per cent from 289 000 bpd in 2006 to especially in states such as California, where the state’s 294 000 bpd in 2007. solar initiative aims to have 3 GW of installed capacity Residential consumption was the largest consumer by 2016 and has allocated $3.3 billion to this end. of retail electricity in 2007 with 1392 TWh, an increase Nuclear energy will also play an important role in of 3 per cent over the previous year. Commercial con- the future expansion of the electricity matrix, while sumption increased by 1.1 per cent in 2007 to reach coal will suffer the steepest decline, due to the eco- 1343 TWh. Meanwhile, industrial sector consumption nomic crisis and the postponement of new clean coal decreased slightly from 1011 TWh to 1006 TWh. technology projects.

26 PennWell Global Power Review 2009

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asia-pacificASIA-PACIFIC

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC Australia Australia has embarked upon an ambitious climate change policy encompassing a cap-and-trade emissions system, but coal remains king of its energy policy.

Australia, the world’s sixth largest country by of electricity transmission Coal production by year Source: size, is a democratic federal state within the and distribution circuit, Commonwealth of Nations. The legislature consists and it has more than of a federal parliament comprising a 76-member 9.5 million electricity 30000 Senate (upper house) and a 150-member House of connections. 25000 Representatives (lower house). Principal electricity In December 2007, the Labor Party’s Kevin Rudd generation in 2006-2007 20000 became Australia’s 26th Prime Minister, beating the was 226 600 GWh, Liberal party’s John Howard, who was standing for comprising 56.7 per cent 15000 GWh office for a fifth time after an incumbency of 11 years. from black coal, 24.5 Australia is blessed with enviable natural resources per cent from brown 10000 and a small population of 21 million. It has a gross coal, 12.2 per cent from 5000 domestic product (GDP) per capita of $36 226, the natural gas, 6.1 per cent 17th highest in the world according to the International from hydro and 0.6 per 0 Monetary Fund. Annual GDP growth is expected to cent from oil and other average 2.4 per cent from 2009-2013, down from an fuels.

average of 3.3 per cent in 2003-2007. Australia’s vast size 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 and the distance between Coke Coal by-products Brown coal briquettes Energy Overview its most populous regions Australia is rich in natural resources with significant oil, rules out coast-to-coast interconnectivity. Therefore, natural gas, coal and uranium oxide reserves. It is one the National Electricity Market (NEM) of eastern and of the few countries belonging to the Organization for southern Australia is separate to the remote areas of Economic Co-operation and Development (OECD) that Western Australia and the Northern Territory. is a significant net energy exporter – consuming only a Western Australia has a stand-alone arrangement, third of its annual energy production. known as the Wholesale Electricity Market (WEM), The country exports approximately 60 per cent of operating in the South-West Interconnected System its annual coal production, which makes it the largest (SWIS). The Northern Territory, because of its relatively net exporter of coal in the world, comprising 29 per low population and isolation, operates with independent cent of global exports. Australia dominates the coking power producers (IPPs) and remote generators. coal market, where it is responsible for over half of all The NEM is a wholesale market through which world exports, and it leads the world in thermal coal generators and retailers trade. Six participating exports, accounting for 21 per cent of that market. jurisdictions are linked by transmission network Japan receives over 60 per cent of Australian coal interconnectors. The network has around 260 registered exports, while other important markets include the rest generators, six state-based transmission networks of Asia and Europe. (linked by cross border interconnectors) and 13 major As of 2008, Australia has 850 billion cubic metres distribution networks that collectively supply electricity of proven natural gas reserves. Total natural gas to customers. In geographical span, the NEM is the production in Australia in 2007/08 was 44 billion cubic largest interconnected power system in the world, metres. The country is also the fifth largest exporter of covering 4500 km. liquefied natural gas (LNG). Australia’s prospects for The market has five regions divided along the expanding energy exports in the future are promising boundaries of Queensland, Victoria, South Australia, as Asian demand for coal and LNG rises. New South Wales and Tasmania. Uranium exports represent a third of Australia’s The NEM is a compulsory wholesale pool into which energy exports in energy equivalent terms. generators sell their electricity. The main customers are retailers, which buy electricity for resale to business and Electricity Market household customers. The installed capacity of Australia’s electricity generators The market is a virtual pool in which supply bids is 44 900 MW in grid-connected capacity and 5200 MW are aggregated and dispatched to meet demand. The in embedded and non-grid capacity. There is 865 200 km Australian Energy Regulator monitors the market to

30 PennWell Global Power Review 2009

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ensure participants comply with the National Electricity Total consumption of electricity by state Source: Law and the National Electricity Rules. The National Electricity Market Management Company (Nemmco) 100000 manages this pooled central dispatch system. Wholesale trading in electricity is conducted as a spot 80000 market where supply and demand are instantaneously 60000 matched in real-time through a centrally co-ordinated dispatch process. Generators offer to supply the 40000 market with specific amounts of electricity at particular prices. Offers are submitted every five minutes of 20000 every day. From all offers submitted, Nemmco’s systems determine the generators required to produce 0 2000-1 2001-2 2002-3 2003-4 2004-5 2005-6 2006-7 electricity based on the principle of meeting prevailing demand in the most cost-efficient way. Nemmco then New South Wales Victoria Queensland Western Australia Southern Australia dispatches these generators into production. A dispatch price is determined every five minutes, the Queensland state government, IHI, J-Power, Mitsui, and six dispatch prices are averaged every half-hour to Schlumberger and Xstrata. determine the spot price for each trading interval for Renewables are taking off in a major way. Conergy, each of the regions of the NEM. Nemmco uses the spot Germany’s largest solar energy company, has teamed price to settle financial transactions for all energy traded up with Australia’s Macquarie Bank to build an A$2.5 in the NEM. billion ($2.2 billion) 1 GW wind farm on the eastern The rules set a maximum spot price of A$10 000 coast of Australia. ($6577) per MWh, which is the maximum price at Spanish energy company Union Fenosa SA will which generators can bid into the market. A minimum invest A$1.9 billion ($1.2 billion) to double Australia’s spot price is also set at the rate of -$1000 per MWh. wind farm power generation by 2013, by adding 850 MW to the current capacity of 824 MW. Infrastructure Investment Coal is still king in Australia, but the country is striving Future Trends to adopt clean coal technology. The first carbon capture In December 2008, Australia pledged to cut its 2000 and storage (CCS) project in the southern hemisphere greenhouse emissions by 5 to 15 per cent by 2020 was launched in the Otway Basin near Nirranda South and unveiled a carbon trading scheme. Around 1000 in Victoria. The facility will capture, compress and inject of Australia’s biggest companies and 75 per cent carbon dioxide into a depleted natural gas reservoir. The of greenhouse gas emissions will be covered by the project is being developed by the Cooperative Research scheme from July 2010. Centre for Greenhouse Gas Technologies. In early 2010, the government will set an overall GE Energy is expected to sign a deal to build an cap on total carbon emissions for the first five years. It integrated gasification combined cycle (IGCC) coal- will then issue permits to cover every tonne of carbon, fired power plant with carbon capture and storage which can be bought and sold. in the Australian states of New South Wales or Companies are free to emit at whatever level they Queensland by 2014. GE is looking at a 700-800 MW choose, but they must surrender one permit for every IGCC power station that would cost about $3 billion. tonne of carbon Another CCS project is the Callide Oxyfuel they produce. Energy consumption by fuel, 2006/07 Source: demonstration project in Biloela, Queensland, which The market will will retrofit an existing power station with technology set the price of Black coal that burns pulverized coal in a mixture of oxygen and carbon permits, Brown coal recirculated waste gases, creating a high concentration but the govern- Coke Coal by-products of carbon dioxide in the gases exiting the power ment will cap Brown coal briquettes station’s boiler. The carbon dioxide can then be the price at a Wood, woodwaste captured, purified and liquefied, ready for transport to maximum A$40 Bagasse Refinery input an underground storage site, rather than released into ($27) a tonne, Petroleum products the atmosphere. rising five per Natural gas Six partners are collaborating on the A$206 million cent a year above Town gas Electricity/hydro ($135 million) project, which is based at CS Energy’s inflation for four Solar energy Callide A Power Station in central Queensland. The years, to ensure 0 100000 200000 300000 400000 500000 600000 project’s partners are: CS Energy, which is owned by price stability.

32 PennWell Global Power Review 2008

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC China Demand continued to put pressure on China’s electricity system through most of 2008. However, the global recession may give the country a breathing space as it seeks to complete the integration of its grid systems.

China is Asia’s largest country and the third largest Natural gas production in Installed generating capacity in the world, occupying an area of 9.6 million km2. 2007 was 69.3 billion m3, a rise of China State Power Information Network, State Grid Corp of China, China Electricity Council It shares land borders with Kazakhstan, Mongolia, 23 per cent over 2006. Production 800 Russia, North Korea and a variety of countries in is expected to more than double southeast, south and western Asia. To its east lie over the next decade, according 700 the South and East China Seas. The population of to PetroChina, to reach 150-200 600 China was 1.3 billion in 2008, making it the most billion m3. Reserves in 2006 were populous country in the world, and it continues to estimated to be 2450 billion m3. 500 China has enormous grow, currently at a rate of 0.63 per cent a year. 400 China is a centralised communist state in which power hydropower reserves. Its gross lies with the central cadre of the Chinese Communist theoretical capacity is 6083 300 Party. Elections within the National People’s Congress in TWh/year, of which 1753 TWh/ Capacity (GW) 200 2007 confirmed Hu Jintao as president and Xi Jinping as year is considered economically vice president. The country has been moving towards a exploitable today, according to 100 market-based economy since 1979, but the government the World Energy Council. Total 0 still maintains tight control over policy. However, major potential generating capacity could

economic changes have taken place, leading to rapid be 400 GW or more, of which less 1999 2000 2001 2002 2003 2004 2005 2006 2007 growth and a burgeoning private sector. than half has been exploited, plus GDP was $3251 billion in 2007, making China the a further 125 GW of small hydro potential. fourth largest economy in the world. GDP growth was The country also has a vast wind resource. 11.9 per cent, following growth of 11.1 per cent in Government figures suggest there could be between 2006. However, this slowed rapidly towards the end of 700 GW and 1300 GW of potential onshore and a 2008, and predictions have been revised downwards further 250 GW offshore. Other renewable resources for 2009, due to lower exports and slowing national include solar, biomass and tidal energy. demand as global economic conditions deteriorate. Electricity Market Energy Overview The Chinese electricity sector is moving slowly towards Coal is the main source of energy in China, accounting a more competitive structure following the break- for around 69 per cent of total consumption. It has up of the State Power Corp of China in 2002 and reserves estimated at 114.5 billion tonnes and produced the creation of separate generation, transmission and 2.29 billion tonnes of coal in 2007, up from 2.11 billion distribution companies. Transmission is dominated by tonnes in 2006. Production was continuing to rise at the two companies: the China State Grid Corp, which beginning of 2008, and production capacity is expected has five regional subsidiaries, and the China Southern to reach 3.00 billion tonnes by 2010. The country is now Power Grid Corp. Meanwhile, the generation assets of both the largest producer and the largest consumer the State Power Corp of China was devolved to seven of coal globally, consuming 2.34 billion tonnes in companies: Huaneng Group, Datang Corp, Huadian 2007, meaning demand exceeds the pace of domestic Corp, Guodian Corp, China Power Investment Corp production. Of this, 1.19 billion tonnes (around 51 per and two nuclear power companies, which together cent) was used by the electricity industry. Consumption control around 50 per cent of generation. Another 40 in 2008 is expected to reach 2.49 billion tonnes. This is per cent is under the control of local government power 4 per cent higher than in 2007, but represents a drop in companies, while private and foreign independent demand growth of 5 per cent. power producers control the remaining 10 per cent. China had 12.8 billion barrels of proven oil reserves The State Electricity Regulatory Commission, created in 2007. At the time, it produced 3.73 million barrels in 2003, is responsible for regulation and setting per day (bpd) but consumed 6.93 million bpd, a net tariffs within the sector. Moves towards liberalisation shortage of 3.2 million bpd. The country is conse- continue, and pilot projects on establishing a wholesale quently one of the world’s largest oil importers. Its power market have begun in northeastern and eastern major suppliers include Saudi Arabia, Angola, Iran, regions. Full liberalisation of the power sector is Russia and Oman. planned for sometime after 2010.

34 PennWell Global Power Review 2009

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PennWell Global Power Review 2009

Production by source, 2007 Source: Xinhua Meanwhile, generating capacity in to centres of demand. As a consequence, some China has increased dramatically during key infrastructure projects in the country involve 2 the beginning of the 21st century. Capacity interconnecting the six regional grid systems (excluding 15 had risen to 713 GW by the end of 2007, the Tibet grid), so that power can be moved from west an increase of 91 GW over the previous to east and north to south. This will include increasing year. Though large, this is less than 2005, the capacity of the two main west to east transmission when capacity increased by more than 100 interconnection routes from around 7000 MW in 2005 GW. Production in 2007 was 3260 GWh, a to 40 GW each by 2020. rise of 18 per cent over the level in 2006. Meanwhile, investment in new generating capacity Government figures suggested consump- is continuing, but with a shift in emphasis, as strategies tion in 2007 was 3250 GWh, which implies to combat global warming become increasingly Thermal either implausibly low losses of 0.3 per important. This means that growth of renewable and Hydropower cent or much increased levels of electricity carbon-neutral technologies such as hydropower and Nuclear 83 and others imports. However, growth was slowing by nuclear power will be accelerated at the expense of the end of 2008, with demand falling by coal-fired generation. 4 per cent in October and 7 per cent in November, the Nuclear plans include increasing capacity from largest reductions since 2001. Overall consumption 9 GW to 40 GW by 2020. This will involve the could fall by as much as 5 per cent in 2009, according construction of 30 or more new nuclear units over the to some predictions. next 11 years. The most important source of electricity in China A massive hydropower programme is already under is coal, which accounted for 83 per cent of total way, with major projects along the Yangtze and Yellow electricity production in 2007. However, this is a small rivers (among others) due to enter service between fall compared with 2006, when coal was responsible 2012 and 2016. According to the Chinese Academy for 84 per cent. The government has begun replacing of Engineering, the country is planning 110 projects small coal-fired plants with larger, more efficient and with generating capacities of over 1000 MW, of which cleaner units. In 2007, 553 small 14 GW plants were 20 are already in operation. The remainder, provision- closed and a further 13 GW of capacity was due to be ally due to be completed between 2010 and 2015, shut down in 2008. will add around 200 GW of extra capacity. With this, These closures reflect growing environmental hydropower will account for 28 per cent of installed concern in China, which is evident in the policy capacity by 2015, up from 20 per cent in 2007. of closing small coal-fired plants while expanding Installed wind capacity in China is expected to renewable energy, particularly hydro and wind power, reach 10 GW by 2010 and 70 GW by 2020. Even so, and nuclear capacity. the major additions to generating capacity will still Hydropower is the most important renewable come from coal-fired plants, which will account for resource in China and its second most important at least 300 GW of new capacity by 2020 if current source of power, accounting for 20 per cent of growth predictions are borne out. installed capacity in 2007 and 15 per cent of produc- Predicted growth tion, up from 14 per cent in 2006. Future Trends Source: Chinese Academy of Science, State Grid Corp of China, Merill Lynch, IEA The third main source of electricity is The global recession may provide China with a breath- nuclear power, which accounted for ing space as it tries to keep pace with electricity 10000 Installed capacity (MW) 2 per cent of production in 2007. demand. Demand was falling by the end of 2008, as Production (TWh) Wind power capacity, though still a energy-intensive industries responded to the changing 8000 small proportion of the total, grew economic climate. Even so, medium-term growth is from 2.67 GW in 2006 to 6.05 GW likely to remain buoyant. Predictions before the reces- by the end of 2007, a rise of 227 per sion began suggested that installed capacity would 6000 cent. Output in 2007 was 5.6 GWh, have to grow to 1200 GW by 2020 and 1312 GW up 95 per cent on a year earlier. by 2030 as demand rose to 6000 GWh (2020) and 4000 8500 GWh (2030). Tight financial conditions will Infrastructure Investment restrict foreign investment over the short term, but 2000 China has faced frequent power large, labour-intensive projects such as hydropower shortages in recent years as schemes could prove attractive to the government as it has struggled with a shortage a means of boosting the Chinese economy. Investment 0 of generating capacity and the in the transmission network will also continue, as it is difficult task of moving power from vital that China eases the problem of frequent power 2007 2007 2007 2007 2007 2007 regions rich in generation resources shortages.

PennWell Global Power Review 2009 35

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC India Although India’s economy is showing signs of slowing, the government must continue its ambitious power infrastructure investment as demand for electricity continues to grow.

The Republic of India is bounded to the southwest In the public domain, electricity generation Total installed thermal power capacity (January 2009) by the Persian Sea, to the southeast by the Bay of falls under the responsibility of the central Source: CEA Bengal and the Indian Ocean to the south. Along government and state governments. According 100000 its northeastern frontier are the Himalayas, which to the Central Electricity Authority (CEA), more form India’s geographic boundary with the People’s than 76 GW of this installed capacity is owned 80000 Republic of China, Bhutan and Nepal. by the State Electricity Boards (SEBs). The SEBs It is home to close to 1.2 billion people, making it are also responsible for buying electricity from 60000 the world’s second most populous country. It comprises other companies and selling it, accounting for MW 28 states and seven union territories and covers an area 95 per cent of retail sales. 40000 of 3 287 590 km2. India has a democratically-elected Approximately 49 GW of the generation government, which has been led by the prime minister, capacity is owned by the central government 20000 Dr. Manmohan Singh since May 2004. National elections via a number of government-owned are scheduled in April this year. companies, the largest being the Nuclear 0 Oil

India currently has the fourth largest economy Power Corporation of India Limited, NTPC Gas Coal Total in the world on a purchasing power parity basis, and the National Hydro Power Corporation. with an estimated gross domestic product (GDP) of NTPC is the single largest company with an installed $3.32 trillion in 2008. Since 2000, the country’s economy capacity of close to 28 GW comprising 22 fully owned has grown exponentially, averaging around 7 per cent a thermal plants and four part-owned coal and gas plants. year. However, the central bank has revised its estimate of The remainder of India’s installed capacity, i.e. over economic growth this year downwards to 7.5-8 per cent. 22 GW, is controlled by the private sector. This comprises In 2010, the rate could fall to 5.5 per cent or less, the independent power producers (IPP) and captive power lowest since 2002. plants. The capacity of captive power plants has grown at a higher rate than IPP capacity, prompted by irregular Energy Overview and insufficient public electricity supply and by high tariffs, According to the International Energy Agency (IEA), India’s and was facilitated by certain provisions of the Electricity proven reserves of oil were 5.6 billion barrels at the end Act 2003. As a result many industries now use their own of 2007. Oil production is around 800 000 barrels per power plants for in-house consumption. day (bpd), however this is insufficient to meet domestic Of the total installed capacity in India, over two-thirds demand, which is 2.9 million bpd, so India currently is thermal generation (coal, oil and gas). Thermal capacity imports over two million bpd, primarily from the Middle is dominated by coal, which represents over 53 per cent East, with Saudi Arabia the biggest supplier. of the total, close to 77 400 MW, with gas and oil trailing India’s proven natural gas reserves were reported by the at 14 700 MW and 1200 MW, respectively. Energy Information Administration to be 1.2 trillion m3 in India’s has a significant installed hydropower base of 2006, while production amounted to around 28 billion m3. 36 700 MW, which represents close to a quarter of the However, consumption of natural gas is expected to rise at country’s total installed capacity. India ranks fifth in the an average annual growth rate of 4.8 per cent to 2030, world in term of exploitable hydropower resources. according to the IEA, so in the longer-term production is India has a largely indigenous nuclear power not expected to meet the growing demand. Thus, natural development programme. According to the CEA’s latest gas imports will increase, with liquefied natural gas playing figures, the nuclear installed capacity is 4120 MW as of an ever more important role. January 2009. Its nuclear fleet currently comprises of 15 small India’s total coal reserves, which amounted to (90-200 MW) reactors and two mid-sized (500 MW) 287 billion tonnes in 2007, are ranked fifth largest after reactors. It also has six reactors under construction, four of the USA, Russia, China and Australia. Its proven reserves which are due to enter commercial operation this year. total some 115 billion tonnes. State-owned Coal India is In 2004, the government set an ambitious target of responsible for 85 per cent of coal production in India. having 20 GW of nuclear capacity online by 2020, and for this generation source to supply 25 per cent of electricity Electricity Market by 2050. India has the fifth largest installed generation capacity in In recent years nuclear development has been the world, with over 147 GW as of January 2009. hampered by chronic shortages in domestic uranium

36 PennWell Global Power Review 2009

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Ownership breakdown of installed capacity Source: CEA supplies. However, following a deal crores ($180 billion), including associated transmission with the US, signed in 2008, India will and distribution improvements. get access to US nuclear fuel, reactors 1199.75 MW and technology, paving the way for Infrastructure Investment 14734.01 MW the entry of the private sector into the India is now halfway through its 11th Five-Year Plan, and 77398.88 MW country’s nuclear power sector. in the 12 months from January 2008 to January 2009, India’s renewable energy capacity more than 5.5 GW of capacity has been added. is 13 200 MW, and comprises In 2007, the Ministry of Power set tentative targets for small hydro, biomass gasifiers, the central sector to add of 46 500 MW by 2012, while at biomass power plants, urban and state level and private sector a combined 41 800 MW tar- industrial water power and wind get was set. The targets include 6400 MW of new nuclear Coal power. In the latter, India continues generation and 10 700 MW through non-conventional Gas to make steady progress, and in resources, most notably wind. Oil Total: 93332.64 2007 its installed wind capacity was In 2006, the Ministry of Power launched an initiative 7845 MW. In 2007, India was ranked to develop large coal based plants. Known as ultra-mega as the fourth largest wind market in the world on the power projects (UMPPs), these are a series of ambitious basis of cumulative MW however, according to the latest supercritical power projects, with each project having figures from the Global Wind Energy Council, it slipped a minimum capacity of 4000 MW, and are aimed at to fifth position in total wind power installed capacity bridging the capacity gap. The selection of the projects is last year. In 2008, India added 1800 MW rather than based on competitive bidding. the expected 2000 MW, increasing its total capacity to As of August 2008, a total of 12 UMPPs have been 9645 MW. However, BTM Consult forecasts that the planned. To-date, four UMPPs have been awarded. India’s demand for electricity from wind power will double largest private power producer, Tata Power, won the by 2012 and that India will have a total installed wind UMPP in Mundra, Gujarat Province in 2007, while Reliance capacity of 22 845 MW. Power, part of Reliance Energy Limited, has bagged On the transmission side, Power Grid Corporation three UMPP to-date – Sasan, Madhya Pradesh Province, of India Limited integrates India’s five regional grids into Krishnapatnam, Andhra Pradesh Province, and in January a national grid, although inter-regional capacity is still this year, Tilaiya UMPP in the province of Jharkhand. limited. Currently, 1700 km of 800 kV lines, 70 000 km With the transmission constraint problem severe in of 400 kV lines and 110 000 km of 220 kV lines make up the eastern region, a plan has been developed to build the bulk of the high voltage transmission network. 30 000 MW of inter-regional transmission capacity by Chronic underinvestment in the country’s power 2012 and the formation of a national grid. Indian authori- sector has been a major constraint to the country’s ties have launched an international competitive tender development, with close to 40 per cent of the population for two transmission schemes, which together have an not having access to electricity. According to the Ministry estimated cost of more than $1 billion. The projects, of Power, in the period 2007-2008 peak demand the 1980 MW North Karanpura project and the Talcher was 108 866 MW, while peak generation was only augmentation system, due for completion between 2009 90 793 MW, representing a deficit of over 16 per cent and 2012 are the first of 14 planned. of peak demand. According to the International Energy Agency, India Future Trends will need to invest $1.25 trillion in energy Coal will continue to be India’s main fuel source for new Wind power growth forcast (2008-2012) Source: C EA infrastructure between 2006-2030, with power generation. All of the country’s operating coal fired more than three-quarters of this invest- power stations use subcritical technology, and although 4000 ment in power infrastructure (generation, six supercritical plants were included in the 10th Five-Year 3500 transmission and distribution). Plan, none were built. The plan for 12 UMPPs in the 11th 3000 As part of the country’s 11th Five-Year Five-Year plan is an important development, and four at 2500 Plan, which runs between 2007-2012, least look likely to reach construction. 2000 the Ministry of Power has set the goal of With the meeting to decide on the successor to the 1500 ‘Power for All’ by 2012, representing a Kyoto Protocol taking place later this year, rapidly developing total installed generation base of 200 GW. economies like India will come under greater pressure to 1000 To achieve this goal, 78 GW of additional cut their carbon emissions. Thus, the country will continue

Capacity additions (MW) 500 capacity will need to be created between to diversify its fuel generation mix to bolster low-carbon 0 2007-2012, which represents more than energy sources such as wind power and nuclear, as the capacity added in the last 20 years. well the greater exploitation of its hydropower resource 2008 2009 2010 2011 2012 This will cost in the region of Rs.800 000 estimated to be 250 000 MW.

PennWell Global Power Review 2009 37

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC Indonesia The Indonesian government urgently needs to expand the country’s generating capacity and attract massive transmission and distribution system investment if it is to rid itself of a damaging system of oil subsidies.

The Indonesian archipelago in Southeast Asia However, Indonesia plans a large Installed capacity by grid, 2007 Source: PLN stretches almost 500km from the west of the programme of new coal-fired Malaysian peninsula to Australia. The archipelago power plants, which is likely officially contains 13 677 islands; the five largest to lead to a significant rise in are Sumatra, Java, Kalimantan, Sulawesi and Irian domestic consumption. Jamali Jaya. The country occupies a land area of just under Gross hydropower potential Sumatra 2 million km2. With a population of 237.5 million in Indonesia is 2147 TWh/year in 2008, Indonesia is the fourth most populous according to the World Energy Sulawesi country in the world and the most populous Islamic Council, of which 40 TWh/year nation. More than half of the population lives on is considered economically fea- Kalimantan the island of Java. sible. This translates into around Nusa Tenggara After years of military dictatorship, Indonesia has 76 000 MW of potential capac- been moving towards full democracy. Elections in ity, of which only 6 per cent has Maluku 2004 led to the appointment of its first democratically currently been exploited, possibly Papua elected head of state, Susilo Bambang Yudhoyono. because many of the best sites are Since 2004, there have been significant economic distant from the main population 0 reforms. The improved economic climate helped the centres. There is also around 500 5000 Indonesian stock market become one of the three best MW of small hydropower poten- 10000 15000 20000 25000 performing in the world in 2006 and 2007. GDP in 2007 tial, which is mostly unexploited. Installed capacity by grid, 2007 was $432.9 billion and GDP growth 6.3 per cent. Fuel The country has a geothermal and electricity are subsidized, so the high price of oil in potential of around 27 GW, of which less than 3 per 2007 and 2008 has cost the government. cent has been utilized. There is biomass potential, esti- mated to be around 50GW, and significant wind and Energy Overview solar opportunities. Indonesia’s oil reserves were estimated to be 4.3 billion barrels in 2007, slightly higher than during the Electricity Market previous year. Oil production in 2007 varied between The Indonesian electricity system is spread unevenly 950 000 barrels per day (bpd) and 985 000 bpd, across the huge archipelago that makes up the country. significantly lower than the 1.15 million bpd in 2006. Today there are seven independent interconnected Oil consumption in 2006 was 1.1 million bpd, making systems and more than 600 isolated systems. The the country a net importer of oil. This, coupled with fuel largest of the interconnected systems is the Java- subsidies, has been damaging the Indonesian economy, Madura-Bali (Jamali) grid, with a total installed capacity but the drop in the price of oil at the end of 2008 should of 22 302 MW in 2007. Sumatra had a total capacity relieve some pressure. of 4634 MW, Sulawesi 1130 MW and Kalimantan 1000 Natural gas reserves were 2630 billion m3 at MW, while the three remaining grids of Musa Tenggara, the beginning of 2007. Production in 2007 was 92 Maluku and Papua have 237 MW, 197 MW and 170 billion m3 (252 million m3/day) and consumption was MW respectively. Total installed capacity was put at 34 billion m3 (37 per cent), while 63 per cent was 29 705 MW in 2007, including isolated systems, but exported. Domestic gas consumption is rising and was it is not clear if this figure includes independent power expected to account for 50 per cent of production producers (IPPs). in 2008. The most important electricity company in Indonesia Coal reserves are estimated to be around 5 billion is PLN, a vertically integrated company that controlled tonnes. Production was expected to rise by 15 per 25 222 MW, 85 per cent of the total national capacity, cent from the 165 million tonnes of 2006 to exceed in December 2007. The company is wholly owned by 215 million tonnes in 2007, with 77 per cent of the Indonesian government. Efforts to privatize PLN the total exported. The additional production was earlier this decade were overturned by the constitutional to help feed the rising demand for coal in China court in 2004 and its monopoly position has since been during 2007 and early 2008, but demand has since strengthened. PLN is mandated as the sole supplier dropped significantly as the global economy slows. of electricity through its monopoly of transmission

38 PennWell Global Power Review 2009

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Generation by source (%) Source: PLN and distribution. The company is regulated by the residential sector with 39 per cent. Commercial by the Ministry of Energy and Mineral sector consumption is just under 16 per cent. Resources (MEMR) and is also monitored 50 Java - Bali by the Ministry of Finance. At the end of Infrastructure Investment Outside Java - Bali 2007, the company served 37.4 million With the power sector in Indonesia in an almost 40 customers through its transmission and continual state of crisis, there is an urgent need for distribution systems. Most are domestic investment to expand generating capacity. According 30 customers and represent only a small part to PLN predictions, the capacity needs to grow from 20 of the population, although the country is around 25 000 MW in 2008 to 82 000 MW by the end considered 60 per cent electrified. of 2018, an increase of 57 GW. Of this, around 35 GW 10 There is a small IPP industry in Indonesia is to be built by PLN and 22 GW by private sector IPPs. with a total generating capacity of 5080 PLN has been mandated to build 10 000 MW of 0 MW, mainly through four coal-fired plants new coal fired capacity by 2009 as part of a fast-track in Java with a combined capacity of 4370 programme designed to improve the balance of supply. Hydro Diesal MW. The remainder is made up of small This forms part of a government strategy to become diesel, geothermal and gas-fired facilities. independent of imported fuel by moving away from oil Gas turbine

Coal - steam The government has attempted to attract fired generation to coal and gas. The bulk of the new

Fuel Oil - steam new private sector investment to the mar- capacity will be in Java, where 10 large plants will be ket, but with little success. constructed. A further 25 projects with an aggregate Natural gas - steam In recent years, there has been significant capacity of 3100 MW are planned for outside Java.

Fuel Oil - combined cycle under-investment in the power sector, and In a second accelerated phase of power plant

Natural gas - combined cycle the margin of supply over demand in the construction, a further 11 000 MW are planned between main Jamali grid is only around 5 per cent. 2010 and 2014 with private sector participation. PLN’s In some areas outside this region demand exceeds share of this second phase is expected to be 7300 MW, supply. Meanwhile, the government, which controls including 5300 MW of coal-fired capacity, 1100 MW of tariffs, has not increased them since 2003. The rapid rise gas-fired combined cycle capacity, 300 MW of hydro in fuel prices during 2007 and early 2008 meant that capacity and close to 700 MW of new geothermal subsidies had to rise alarmingly. capacity. IPP projects slated for this phase include 2300 Electricity production was 143 682 MWh and MW of coal-fired capacity and 1500 MW of geothermal consumption was 121 522 GWh in 2007, according capacity. There will also have to be massive investment to the MEMR. Fossil fuels provide the main source in the transmission and distribution system, and an of electricity. On the Jamali grid, coal and natural extension of its range to rural communities without gas each provide 27 per cent of electricity, while access to power today. fuel oil and diesel make up 24 per cent. Hydropower contributes 16 per cent and open cycle gas turbines 4 Future Trends per cent. A significant geothermal capacity provides 2 Constrained by supply, electricity sales in Indonesia per cent of production. grew at an average rate of 6.8 per cent a year between PLN predicted growth in generating capacity Source: PLN Diesel is the major source 2002 and 2007. This has put a great strain on a of electricity beyond the Jamali system where supply can barely match demand and grid, accounting for 44 per cent electricity remains subsidized. The government needs 100000 of total production. Natural to attract private sector investment in order to meet gas provides a further 16 per this demand, but to achieve this it will need to remove 80000 cent, coal 10 per cent and subsidies and provide a clear legal framework for open cycle gas turbines 11 per IPP contracts. cent, while hydro contributes Most Western companies appear shy of investing. 60000 13 per cent. These figures, While there has been Chinese interest, this has centred and particularly the high diesel on supplying equipment and constructing plants, not 40000 use, reflect the large number operating them. The initial 10 000 MW fast-track of isolated systems across the programme has been estimated to require $10 billion 20000 archipelago. of investment, but much more will be required if Industry is the major the economy is not to be constrained by electricity

Predicted installed capacity (MW) consumer of electricity shortages. Consequently, the government’s priority 0 in Indonesia, accounting must be to create the confidence necessary to attract for around 40 per cent of investment in the power sector. In the current economic 2008 2008 2010 2011 2012 2013 2014 2015 2016 2017 2018 consumption, closely followed climate, that is likely to prove more difficult than ever.

PennWell Global Power Review 2009 39

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC Malaysia Malaysia is working hard to broaden its energy portfolio, amid concern that its increasing reliance on imported fossil fuels in recent years undermines the country’s energy security.

The Federation of Malaysia comprises peninsular the Economic Planning Unit in the prime minister’s Energy indicators: Malaysia Malaysia and the states of Sabah and Sarawak on department had appointed a consultant to review the the island of Borneo. Separating the peninsular position. Energy indicator Value from the island is the South China Sea. To the Energy production (Mtoe) 97.94 north of the peninsular is Thailand and to the Electricity Market south is Singapore. Malaysia covers an area of The Malaysian electricity system comprises three Net imports (Mtoe) -29.13 329 758 km2 and has a population approaching 28 geographically separated grids in peninsular Malaysia, Electricity consumption (TWh) 88.46 million. The country is governed by a parliamentary Sabah and Sarawak and is dominated by three utilities: democracy with a constitutional monarch as the Tenaga Nasional Berhad (TNB) serving peninsular Electricity consumption (kWh/capita) 3388 head of state. Malaysia, Sabah Electricity Sdn Bhd (SESB) and Syarikat Source: (Key World Energy Statistics 2008, IEA) Following a strong start to 2008, when real gross Sesco Bhd (formerly known as the Sarawak Electricity domestic product (GPD) grew by 7.1 per cent in Supply Corporation). the first quarter and 6.7 per cent in the second, the The bulk of Malaysia’s electricity is consumed on the country’s economic development has been damaged peninsular and is generated from three sources: gas, coal by the global financial downturn and unemployment is and hydropower. Gas accounts for approximately 60 per rising. Its GDP in the third quarter was 4.7 per cent and cent of current generation capacity, but this is projected this downward trend looks set to continue. That said, to decline to 30 per cent by 2030. Coal has increased its the country is less exposed to US sub-prime mortgage share from around 11 per cent in 2002 to over 30 per problems than many other nations and the Malaysian cent today. Hydropower is predicted to increase its share Institute of Economic Research (MIER) predicts growth from 5 per cent today to 35 per cent by 2030. of 3.4 per cent for 2009. TNB is the largest electricity utility in Malaysia, with more than Ringgit69.8 billion ($20 billion) in assets. Energy Overview TNB’s generation division operates and maintains six More than 30 years ago, Malaysia met its electricity thermal power stations and three major hydro-electric needs largely through burning imported oil. The oil power generating schemes in peninsular Malaysia. shocks in the 1970s prompted the development of The division also supports three independent power Malaysia’s gas sector, led by state-owned Petronas. In producers (IPPs) and manages the national transmission 2007, Malaysia exported 32 039 million m3 of natural grid running throughout the peninsular. TNB’s total gas, ninth largest worldwide, and in January 2008 it installed capacity is 8416 MW, which includes 6505 was estimated to have 2.35 trillion m3 of natural gas MW thermal and 1911 MW hydro power plants. TNB’s reserves, or 1.3 per cent of the world’s total. market share is 42.7 per cent, with the grid’s installed Despite increasing production, the country’s capacity being just below 20 000 MW. demand for gas has outstripped its supply. As a Like many in TNB installed capacity including IPPs (national grid) Source: TNB result, Malaysia is turning increasingly toward fuel the power sector, imports. In December 2008, Iran and Malaysia signed TNB is facing a 9.7% three co-operation agreements in their oil and gas financial squeeze. 45.1% (1910.5MW) sectors. Furthermore, new coal-fired power plants are Its 2007/08 (8887.4 MW) being developed that are strongly reliant on imports. financial year According to Tan Sri Leo Moggie, the chairman of showed profits 18.6% Tenaga Nasional Berhad, the country is at risk of of Ringgit2600 (3670 MW) shifting from nearly 80 per cent dependence on gas to million ($719 Hydro nearly 45 per cent dependence on coal. million), which, Conventional With supply security becoming an increasingly though substan- thermal (coal) important issue, concerns have been voiced about the tial, represent a 4.2% Conventional structural balance of the country’s electricity market. significant drop (840 MW) thermal (oil and gas) In October 2008, the government sought to calm from Ringgit4067 Combinrd cycle such fears, stating that the country had sufficient million ($1125 14% Gas turbine (2762 MW) IPPs reserves of electricity, and that it was “keeping tabs” million) the year 8.4% (1653 MW) on developments in the power supply sector and that before.

40 PennWell Global Power Review 2009

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Maximum electricity demand (MW) Source: TNB There are two main reasons for this one of the first projects in creating the ASEAN grid. A downturn: greater payments to IPPs and link between Sarawak and the peninsular should enable an increase in the price of coal. At the the integration of the Philippines into the grid. 100 International Operations same time, TNB’s customers are feeling the Export effects of higher energy costs, while the Infrastructure Investment 80 Domestic manufacturing sector recently asked for a Exemplifying Malaysia’s investment in hydropower is reduction in the electricity tariff. TNB rejected the 2400 MW Bakun dam in Sarawak. Due to be com- 60 such calls in November 2008, stating that pleted in 2010, the dam has reached a height of 207 while the price of oil has come down, the m and claims to be the second tallest concrete-faced 40 electricity generated in peninsular Malaysia rock-fill dam in the world. Preliminary work has also does not use oil but mostly gas and coal. begun on Sarawak’s Murum dam – a 944 MW project 20 Having recognized a need to reduce its that is expected to cost approximately Ringgit3 billion

Revenue (Ringgit billions) dependence on fossil fuels, the Malaysian ($850 million). 0 government is working to broaden its Turning to Sabah, domestic power generation energy portfolio and has set a target of capacity increased in 2008, following completion of the generating 350 MW of renewable power latest phase of the 100 MW combined cycle Sepanggar

FY2004 FY2005 FY2006 FY2007 FY2008 by 2010. TNB commissioned the first wind- Bay Power Corporation project (an IPP). By late 2008 the solar hybrid renewable energy plant at Pulau 190 MW combined cycle Ranhill Powertron project had Perhentian, Terengganu, in late 2007. And, in December been largely completed, with an agreement in place for 2008, TNB announced that it had signed an agreement a second phase. And Petronas signed an agreement in to develop a 10 MW biomass power project in Pahang. November 2008 with the state government’s strategic Since 2001, when the Malaysian government launched development vehicle, Yayasan Sabah, to embark on a the small renewable energy power programme (SREPP), 300 MW power plant project in Kimanis, Papar. TNB has signed 11 renewable energy power purchase Such construction is welcome news for power agreements (REPPAs) in peninsular Malaysia, with a consumers in Sabah after a decision was taken in the combined capacity of 54 MW. first half of 2008 not to proceed with a new 300 MW In 2007, the government announced its intention coal-fired power station – the Lahad Datu project. In to rely on hydropower to produce 30 per cent of the response to this decision, TNB posted a statement on country’s electricity needs over the next decade. While the SESB website, highlighting its concerns for future related investment is occurring in the peninsular – with power supply in the region, that read: “Sabah faces an TNB stating that approximately 600 MW of the total acute power shortage problem… We foresee 2010 to 1700 MW hydropower potential is being earmarked be a critical year for Sabah.” for development – Sarawak offers particularly large Returning to the peninsular, during the past year hydropower potential. The Sarawak Corridor of TNB’s generation division undertook “repowering” of Renewable Energy (SCORE) was launched in February the second phase of the 750 MW combined-cycle gas 2008 and, relying heavily on hydropower, has the turbine plant at the Tuanku Jaafar Power Station in potential to deliver 28 000 MW once it is fully developed. Port Dickson. The Sarawak government website reports that about Ringgit500 billion ($138 billion) has already been Future Trends committed since the project’s launch. This investment In 2008 the Malaysian government announced its extends beyond hydropower and renewable energy, intention to prepare a new national energy policy, with the broad goals of improving the state’s economic including plans for renewable energy and nuclear position and the quality of life of its residents. energy. “Dependence on gas is expected to reduced One issue central to tapping the power generating to 55.9 per cent in 2010,” said the energy, water and potential of Sarawak is having a suitable transmission communications deputy minister, Datuk Joseph Salang network in place, not least because Sarawak cannot use Gandum. “While the contribution from renewable all of the power that it could generate. Taking a regional energy, including hydro, is expected to increase to 7.4 perspective, energy ministers of the Association of South per cent by 2010.” East Asian Nations (ASEAN) signed a memorandum of The country is developing a renewable energy understanding in August 2007 covering the formation action plan that will detail how renewable energy will of the ASEAN power grid. The grid aims to interconnect increase its market share of Malaysia’s generation mix. the association’s ten member nations and thereby Coming years may see the construction of the coun- promote power trading and exchange across Southeast try’s first nuclear power plant, highlighting the impetus Asia. Malaysia has already established an interconnection that is pushing the market away from coal and gas with Thailand and a link to Sumatra is expected to be towards exploiting other resources.

PennWell Global Power Review 2009 41

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC Pakistan Pakistan is tackling the challenge of generating sufficient power to meet growing demand through short-term contracts with independent power providers and long-term hydropower, coal and gas power projects.

Pakistan is located in the north-western corner of there are low-ash, low-sulphur reserves Installed generating capacity the Indian subcontinent. It stretches around 1600 in Tharparkar. Coal represents the largest Census of electricity establishments 2005-2006, IAEA, Hydrocarbon Development Institute of Pakistan km from north to south and 800 km from east to fossil fuel reserve in the country. However, west. To the west lie Iran and Afghanistan, to the the coal industry in Pakistan remains 25000 north China and to the east is India. The country small. covers an area of 803 940 km2. The population Hydropower potential in Pakistan is 20000 was 172.8 million in 2008, while annual population 480 TWh/year according to the World growth was around 2 per cent. Energy Council, with 219 TWh/year tech- 15000 Since the formation of Pakistan in 1947, there has nically exploitable. This is equivalent to been constant friction between India and Pakistan, around 46 000 MW of potential generat- leading to three wars. The country also faces a major ing capacity, of which only 14 per cent 10000 internal threat from Islamic militants. Though ostensibly has been exploited. There is at least 41 5000 a democracy, Pakistan has suffered several periods of 000 MW of potential wind capacity, and Installed capacity (MW) military dictatorship. the solar potential is considered much After decades of under-investment, the Pakistan larger still. Biomass will be significant, 0 economy began to improve in 2001 and grew by particularly using sugar cane bagasse. between 6 per cent and 8 per cent between 2004 and 1996-7 1997-8 1998-9 2000-1 2001-2 2002-3 2003-4 2004-5 2005-6 2006-7 2007. GDP in 2007 was $143.8 billion and GDP growth Electricity Market 1999-2000 5.3 per cent. Inflation rose to 11 per cent during the first The electricity sector in Pakistan has been months of 2008 on top of rising commodity prices. dominated historically by two state-owned companies: the Karachi Electricity Supply Corp (KESC), which serves Energy Overview Karachi and adjacent areas, and the Water and Power Pakistan has significant reserves of oil, natural gas, coal Development Authority (WAPDA), which covers the rest and hydropower. However, these are insufficient to meet of the country. The electricity sector is overseen by the domestic demand, and the country imports oil, coal and Ministry of Water and Power. There is also a National electricity. Imports account for around one third of total Electric Power Regulatory Authority (NEPRA), which energy supply. The total commercial supply in 2007 was licences electricity sector companies and sets tariffs for 60.38 million tonnes of oil equivalent (Mtoe). Of this generation, transmission and distribution. natural gas supplied 48.6 per cent, oil 30.5 per cent, KESC was privatised in 2005 with control passing to coal 7.3 per cent, hydropower 12.6 per cent and nuclear private sector companies. WAPDA was also restructured power 0.9 per cent. to form separate generation, transmission and Oil reserves were estimated to be 376.8 million distribution companies, but remained controlled by the barrels at the beginning of 2007. Production in 2007 government. WAPDA was divided into Maximum electricity demand (MW) Source: TNB was 67 400 barrels per day (bpd), while consumption in two entities in 2007: WAPDA, which is 2006 was 350 000 bpd. Consequently, there is a major now responsible solely for hydropower 100 shortfall made up with imports from the Middle East, and water development, and the Pakistan International Operations accounting for 81 per cent of oil consumption in 2007. Electric Power Company (PEPCO), a Export 80 While oil accounts for around 30 per cent of total WAPDA subsidiary responsible for Domestic energy consumption in Pakistan, natural gas accounts thermal power generation, transmission 60 for close to 50 per cent. Reserves in June 2007 were and distribution. The latter now controls put at 917 billion m3. Production in 2006-2007 four generation companies, the National was 40.8 billion m3, all of which was consumed Transmission Dispatch Company (NTDC) 40 domestically. Indigenous reserves are not expected to and nine distribution companies. meet the growth in demand for natural gas, and there The country also has a number of 20 Revenue (Ringgit billions) are plans to import both pipeline gas and liquefied independent power provider (IPP) natural gas (LNG). Without them, gas shortages are projects. Licenses for the first wave of 0 expected after 2010. these were granted in 1994, following Proven coal reserves were estimated to be 3.3 billion a severe power shortage. By 2007 there FY2004 FY2005 FY2006 FY2007 FY2008 tonnes in 2007. Much of this is high-sulphur coal, but was a total IPP capacity of 6397 MW.

42 PennWell Global Power Review 2009

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Breakdown of generation by type, 2007 Source: Pakistan Energy Yearbook, 2007 Power shortages became severe consumption in 2006-2007 was 72 712 GWh. Domestic again that year, and a new wave of consumers use the largest proportion of power, 33 0.2% licenses had to be issued. In total, 335 GWh, or just under 46 per cent, while industry 0.1% 2.3% NEPRA granted ten new licenses in consumed a further 21 066 GWh (29 per cent) and 2007-2008, for power plants with agriculture 8176 GWh (11 per cent) in 2006-2007. capacities totalling 1536 MW. Pakistan’s main transmission grid has a backbone 32.5% The total installed capacity in running the length of the country, which operates at 36.4% Pakistan in June 2007 was 19 414 500 kV. This is supplemented with additional regional MW, according to figures from the lines at 220 kV. It is owned and operated by the NTDC, Hydrocarbon Development Institute a wholly owned subsidiary of WAPDA. Natural gas of Pakistan. This comprised 6479 Oil MW of hydropower, 12 478 MW Infrastructure Investment Hydro based on thermal power plants and According to the most recent predictions, total energy Nuclear 462 MW from nuclear units. consumption in Pakistan is projected to rise from 60.38 Imported The electricity available to the Mtoe in 2007 to 79.4 Mtoe in 2010, 177.34 Mtoe 28.5% Coal grid in 2006-2007 was 98 213 in 2020 and 361.82 Mtoe in 2030, or more than six GWh. Of this, 36.4 per cent was generated from times the consumption in 2007. Natural gas will provide natural gas, 28.5 per cent from oil and 32.5 per cent most of this energy, rising from 29.31 Mtoe in 2007 from hydropower plants. The country’s nuclear plants to 162.58 Mtoe by 2030. Oil consumption will rise provided 2.3 per cent of the total and coal plants only more slowly, and coal use will increase from 4.4 Mtoe 0.1 per cent. A further 0.2 per cent of the power to 68.58 Mtoe by 2030. Hydropower, nuclear power available to the grid was imported. and renewable energy consumption are all expected to The large contribution of oil to the generation mix increase rapidly too. has resulted in a sharp increase in generation costs The demand for electricity is expected to rise equally in 2007-2008. As a consequence, there have been dramatically, with the installed capacity predicted to significant tariff rises, and time-of-use metering has reach 47 000 MW in 2010, 71 000 MW in 2020 and been introduced to curtail peak load requirements. Total 182 000 MW by 2030. As with overall energy use, the

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greater part of the additional capacity will be based on Projected capacity increases Source: Pakistan Planning Commission natural gas-fired power plants, which will account for 78 000 MW of the projected new capacity between 2007 and 2030. Coal capacity will grow strongly too, 35000 Nuclear increasing by up to 20 000 MW, and nuclear capacity is 30000 Hydro expected to increase by 8400 MW. Coal There will be considerable additional investment in 25000 Renewable renewable power sources. Large hydropower projects Oil 20000 Gas are likely to be the main focus of investment, with an additional 26 200 MW of generating capacity expected 15000 to enter service by 2030. Small-scale hydropower 10000 is being targeted, with 1228 MW of capacity from Capacity increases (GW) plants smaller than 50 MW available for development, 5000 and wind development is being encouraged too. 0 Under current plans, renewable sources, excluding large 2010 2015 2020 2025 2030 hydropower, will provide 5-10 per cent of the country’s power, with a total of around 800 MW by 2010, 3000 moderated by the 2008-2009 global recession. MW by 2020 and 9700 MW by 2030. Estimates suggest that $50-60 billion will be needed by 2030 to improve the situation. This will be provided Future Trends by both the government and the private sector, but The immediate problem for the Pakistan electricity until 2012 most new capacity is expected to be built by sector is to provide sufficient power to meet demand IPPs, from whom an additional 10 000 MW of capacity without resorting to load shedding, rationing and is scheduled. power cuts. Demand exceeded capacity by 2546 MW in New publicly funded hydropower projects could start June 2007, and demand growth is expected to be over entering service by 2011, but the larger projects being 8 per cent annually between 2009 and 1015, further planned will not be completed before 2015, when new exacerbating the situation. However, growth may be nuclear capacity could also become available.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC Philippines Deregulation remains an ongoing issue in the Philippines, while increased self-sufficiency and the development of renewable energy technology are becoming increasingly important.

The Republic of the Philippines comprises more 2.7 per cent, and the import volume of finished than 7000 islands with a total land area of almost petroleum products rose by 11.4 per cent 300 000 km2. The terrain is mostly mountainous, (41 046 million barrels in 2006 compared with with narrow or sometimes extensive coastal 45 712 million barrels in 2007). lowlands. In July 2008, the population was Coal reserves in 2006 were estimated at 236 million estimated to be in excess of 96 million and the tonnes. Production in that year was an estimated 2.36 growth rate was put at approximately 2 per cent. million tonnes and consumption was an estimated The Philippines has a presidential, unitary form of 10.15 million tonnes. government (with some modification: there is one The government has voiced plans to increase the autonomous region largely free from the national country’s level of self-sufficiency by increasing its use government), where the president functions as both of its oil, gas and coal reserves. The development head of state, head of government and commander- of renewable energy, particularly geothermal, which in-chief of the armed forces. The president is elected currently makes up about 17 per cent of the country’s by popular vote to a single six-year term, during power generation by source, is also helping reduce the which time she or he appoints and presides over country’s dependency on imported fuels. the cabinet. There are three power grids in the Philippines: The political climate can be tempestuous, with Luzon, Visayas and Mindanao. Of these, Luzon is President Gloria Macapagal Arroyo weathering several the largest, catering for about three quarters of the attempts to unseat her since she took office in January country’s needs. Within each grid, there are three types 2001, including a rebellion by 300 soldiers, who of distribution utility: electric co-operative (EC), private seized a hotel in Manila in 2003 and demanded that investor-owned utility (PIOU) and local government she withdrew from office. However, the event ended unit-owned utility (LGUOU). peacefully. The country’s economy was, according to 2008 Q3 Electricity Market reports, considered relatively resilient in light of the The privatisation of the country’s National Power onset of the current global financial crisis. The gross Corporation (NPC) continues in accordance with domestic product (GDP) growth rate for the first three Republic Act 9136 of 2001 (also known as the quarters of 2008 averaged 4.6 per cent. The service Electric Power Industry Reform Act [EPIRA]), albeit sector accounts for about half of the Philippine GDP. not as smoothly as the Philippine government wants, according to some reports. Energy Overview Designed to reduce electricity rates and improve the The Philippines has natural gas reserves of 98.58 million delivery of power supply to end-users, EPIRA encourages m3, according to 2008 estimates, most of which is in its greater competition (and hopefully efficiency) in the Malampaya offshore gas field. It is estimated that these electricity industry. The Energy Regulatory Commission Power generation by source, 2007 Source: Philippine Department of Energy reserves could contribute as much (ERC) was created, as a result of EPIRA, to act as the as 3000 MW of energy over 20 governing body for a restructured power industry, and years. No gas is exported, and the oversee its separation into generation, transmission, 0.10% 14.36% country’s natural gas production distribution and supply sectors. and consumption was put at 2.1 All of the NPC’s electrical transmission functions 31.52% million m3 in 2006. were transferred to what was then a new company, 8.63% Proven crude oil reserves are called the National Transmission Corporation (TransCo), estimated to be 139 million barrels which has since been acquired by a consortium called Natural gas (December 2006). The country’s the National Grid Corporation, according to reports in Coal crude oil imports fell from 78 January 2009. Geothermal 261 million barrels in 2006 to Meanwhile, the government’s Power Sector Assets 17.14% Oil-based 74 380 million barrels in 2007, and Liabilities Management (PSALM) corporation, also Hydro a reduction of some 5 per cent. created from EPIRA, has begun auctioning power Other 28.25% As a result, the volume of crude plants and had, at the time of producing this review, processed locally decreased by set an auction date of 20 February 2009 for the

PennWell Global Power Review 2009 45

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7 - 9 October 2009 IMPACT Exhibition & Convention Centre Bangkok, Thailand www.powergenasia.com Co-located with Renewable Energy World Asia –ASIA– Strengthening energy security for sustained economic growth

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Gross power generation by utility (2007) coal-fired Sual (1000 MW) and Pagbilao (700 MW) an estimated 12 105 MW (of which the Luzon grid will plants. Under EPIRA, PSALM will select independent see predicted demand of 8884 MW). Annual demand UTILITY Generation (MWh) % share power producer administrators (IPPAs) through by 2016 is predicted to be almost 69 000 GWh, NPC 15 151 018 25.42 bidding. EPIRA also resulted in the creation of the compared with the 47 337 GWh of 2007. Philippine Electricity Market Corporation (PEMC), the Renewable energies will play a critical role in NPC-SPUG 437 373 0.73 governing body for the Wholesale Electricity Spot meeting this demand. The Philippine Renewable NPC IPP 26 155 929 43.88 Market (WESM). Energy Bill was passed in 2008, after more than 18 Gross power generation saw an increase of some years of deliberation. It is hoped that the bill will boost MERALCO IPP 14 413 361 24.18 five per cent, from 56 784 GWh in 2006 to 59 612 the country’s energy self-sufficiency to a target level of Non-IPC 3 454 109 5.79 GWh 2007. Of this total power in 2007, natural gas- 60 per cent by 2010. fired power plants made the greatest contribution at Based on DOE projections, if renewable energy Total Generation 59 611 790 100.00 31.52 per cent (18 789 GWh), followed by coal fired sources could supply an additional 2500 MW of Source: Philippine Department of Energy at 28.25 per cent. total power supply in the next ten years, the country Generation from oil-based power plants increased could achieve $1.2 billion in energy savings over the Growth in peak demand by grid, by 10.36 per cent, from 4665 GWh in 2006 to 5148 same period. GWh in 2007, to represent 8.63 per cent of the total between 2006 and 2007 mix. A significant factor here was the full operation of Infrastructure Investment GRID 2006 (MW) 2007 (MW) % CHANGE oil-based power plants in the Luzon grid during July According to the latest DOE figures, to meet the 2007, a month during which the Pagbilao and Sual projected increase in energy requirements, the LUZON 6466 6643 2.74 coal-fired power plants were on outages, due to fuel distribution utilities are planning for 23 414 circuit km VISAYAS 1066 1102 3.38 constraints. of lines to be rehabilitated and/or upgraded and for a Hydroelectric power generation fell by 13.84 per further 14 249 km to be constructed. Also, some 6478 MINDANAO 1228 1241 1.06 cent, from 9939 GWh in 2006 to 8563 GWh in 2007, MVA of substation capacity will be required, of which PHILIPPINES 8760 8986 2.58 to represent 14.36 per cent of the power mix. This fall the Luzon grid will need an estimated 4415 MVA. was attributed to low rainfall during the summer. These projects are predicted to require an investment Source: Philippine Department of Energy Generation from geothermal power plants of $2.3 billion. decreased from 10 465 GWh in 2006 to 10 215 Planned power plant developments, which will GWh in 2007, a fall of 2.39 per cent, due to require approximately $600 million, include a 200 outages experienced by the Macban, Bacman and MW coal-fired plant in Naga City, Cebu, and a 29 MW Tiwi geothermal plants in Luzon. Most outages were thermal plant and 15 MW diesel plant in Masbate due to deactivated shutdowns as a result of steam province. However, following the long-awaited passing deficiency or isolation resulting from transmission/ of the Renewable Energy Bill, most interest seems to network problems. Geothermal’s share in the power be in renewable energy technology. For example, at mix in 2007 was 17.14 per cent, down compared with least six new wind power projects are expected to its 18.43 per cent share in 2006. start in 2009. These could account for almost 200 MW Other renewable energy contributed only 0.10 per of generation (from an investment of around $500 cent of gross generation in 2007, but this was up on million), but the total potential wind power capacity its contribution in 2006, and the Department of Energy for the Philippines has been put at 7404 MW across (DOE) is predicting that biomass, solar, wind and ocean 1038 sites surveyed nationwide. energy will play increasingly important roles in coming Electricity sales, 2007 Source: Philippine Department of Energy years. Some figures suggest these Future Trends sources may be contributing as The Philippines is working hard towards self-sufficiency – much as 104.1 million barrels of with heavy emphasis on renewable energy. Fortunately, 3.42% fuel oil equivalent by 2012. the country’s geography works heavily in its favour. It Growth in electricity sales is currently the world’s second largest generator of accelerated between the 45 672 power from thermal energy after the US, but its plan 34.41% 28.06% GWh of 2006 and the 48 009 to almost double thermal power generation during GWh of 2007, an increase of some the next ten years could see the country take the 5 per cent, with some 60 per cent lead. Wind and hydro (including tidal) power will play of 2007 sales made by PIOUs. important roles. Industrial The DOE, working with the Another offshoot of EPIRA, the Countrywide Residential distribution utilities, is predicting Electrification and Missionary Service Company Commercial peak demand will grow annually (CEMSCO) is promoting indigenous and renewable 34.11% Other at an average of 4.43 per cent up energy as a way of electrifying those areas that do not until 2016, by which time it will be yet have access to electricity.

PennWell Global Power Review 2009 47

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC Thailand Electricity generation in Thailand is highly reliant on natural gas. As demand for electricity grows, the Thai economy could be badly damaged by disruption to its gas supply.

Thailand, in Southeast Asia, has a population of 65 a facility capable of producing Power generation by fuel type, October 2008 (Source: EGAT) million people. Inflation in the country is around 5 million tonnes per year at Map Ta 4.6 per cent and real gross domestic product (GDP) Phut in Rayong. While some have 1% 3% 5% growth approximately 5 per cent. questioned the need for an LNG In September 2006, a military coup overthrew the import terminal, it is generally felt government of Prime Minister Thaksin Shinawatra, that it would add an additional layer although the change in leadership did not immediately of supply security by diversifying the 21% affect oil or natural gas production. During 2006, country’s import sources. Thailand’s real GDP grew by an estimated 5 per cent, right on trend with average five-year growth Electricity Market Natural gas levels. Political stability was restored when democratic The Electricity Generating Authority Lignite/Coal Hydro elections were held in December 2007. of Thailand (EGAT) is primarily Oil Thailand’s energy intensity and carbon emissions responsible for power generation and 70% Import & others have increased with the introduction of energy- transmission, while the Metropolitan intensive industries. Electricity Authority (MEA) and the Provincial Electricity Authority (PEA) share responsibility for distributing Energy Overview electricity to Bangkok an d the provinces respectively. Thailand has limited domestic oil and imports a significant EGAT reports to the Office of the Prime Minister, while portion of its needs. The country has large natural gas MEA and PEA report to the Ministry of the Interior. reserves, and production has increased substantially in EGAT’s long-term plan is to increase the minimum recent years. However, the country remains dependent power reserve from 15 per cent to 25 per cent to raise on imports of natural gas to meet growing energy energy supply security. EGAT plans to increase net demand. installed capacity to 43 918 MW by 2011. Thailand’s oil industry is dominated by PTT, formerly There have been repeated attempts to privatise the Petroleum Authority of Thailand. The company EGAT, with the intention of using the funds raised to underwent a partial privatization in 2001, during which invest in building new power plants. In early 2004, 32 per cent of its equity was sold. Thailand’s oil sector is massive employee protests forced the EGAT governor to open to foreign investment, although foreign companies resign, thus delaying the planned privatization. The new usually work in joint ventures with PTT Exploration and governor, Kraisri Karnasuta, worked with employees to Production (PTTEP), PTT’s upstream subsidiary. address their concerns and, by December 2004, 80 per According to the Oil & Gas Journal, Thailand had cent of the employees supported privatization, and the 419 billion m3 of proven natural gas reserves as of process was restarted. The agency was transformed into January 2007. Natural gas production has risen steadily a public limited company in June 2005. However, EGAT’s in recent years, although not enough to keep up with privatization was again halted when a petition was filed the growth in domestic consumption. with the SAC a few days before the scheduled listing. PTTEP has a stake in many of Thailand’s natural gas In March 2006, the court ruled against EGAT’s producing fields. Foreign companies, however, supply privatization, citing conflicts of interest, public Installed generating capacity, October 2008 (Source: EGAT) the bulk of Thailand’s natural gas output. Chevron is hearing irregularities and the continued right of the largest foreign operator, accounting for 70 per expropriating public land. The court also ruled cent of the country’s natural gas production. that insufficient opportunities were given for EGAT Several ongoing projects will increase Thailand’s EGAT employees to make themselves heard, as natural gas supplies in the next few years, particularly there was only one public hearing for employees. IPP in the Malaysia-Thailand joint development area (JDA) The court nullified two decrees: one ordering located in the lower part of the Gulf of Thailand. It has the dissolution of the status of EGAT as a state SPP been estimated that the JDA holds between 266 billion enterprise and the other serving as a new charter Import & m3 and 679 billion m3 of natural gas reserves. for EGAT plc. exchange PTT has established a subsidiary to study the feasibility The Thai government has declared its objective 0 5000 10000 15000 20000 of building a liquefied natural gas (LNG) import and of increasing the level of renewable energy MW storage terminal in Thailand. PTTLNG is considering use from the current level of 0.5 per cent to 8

48 PennWell Global Power Review 2009

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Electricity production and consumption (Source: EGAT) per cent by 2011. Biomass-based energy is invest $6 billion in building a 4000 MW nuclear power expected to provide over 60 per cent of this, plant, due to start commercial operation in 2020. A reflecting Thailand’s high dependence on consortium, which includes Siemens and Marubeni, 2004 the agricultural sector and its access to large is building a 700 MW combined cycle power plant, amounts of waste agricultural material. designated Bang Pakong 5, scheduled for completion 2005 To achieve the 8 per cent goal, the in March 2009. It will run on natural gas, with oil as a 2006 government is encouraging the power back-up fuel. Amata and Sumitomo are building a 280 generation sector to produce around 1900 MW cogeneration plant in Rayong, due for commercial 2007 MW from renewable sources. Independent operation in 2012. SGC Wind Energy is developing power providers (IPPs) are required to adhere Thailand’s first private wind-power plant, with a capacity 2008 to the renewable portfolio standard, under of 30 MW. It will be located in Nakhon Si Thammarat on which power producers that wish to sell the Hua Sai coastline. Demco is developing a 100 MW 0 30000 60000 90000 120000 150000 power to EGAT must produce 5 per cent wind plant in Petchaboon. Production (GWh) Consumption (GWh) of their installed capacity from renewable Finally, in June 2007, Thailand’s National Energy sources. Policy Committee called for bids for up to 1000 MW of Agricultural residues, such as bagasse and palm SPP plants, ranging in size from 10-100 MW. Around fibre, have been used as energy sources in cogenera- half of this capacity will be from cogeneration plants, tion plants. Expected improvements in the operating while the other half will be from renewable energy. efficiency of these plants will ensure greater heat rate and improved electricity levels. Future Trends EGAT also plans to encourage very small power Between 2007 and 2021, electricity demand in Thailand producers (VSPP) to use solar cells. A solar cell power is expected to increase at an average of around 5.7 per plant with a capacity of 500 kW, the largest plant in cent per year. The domestic gas reserve is limited, and Southeast Asia, was opened in a remote area in the the country is likely to face increased dependency on north of Thailand in July 2006. Solar energy plants gas imports. are expected to increase in remote areas that do Although domestic lignite reserves are quite not have access to the power grid. Unfortunately, abundant, they have a low heat content and are the adoption of solar power is hindered by its cost, environmentally damaging. Any expansion of coal-fired which is approximately four or five times higher than power plants is unlikely, due to public opposition to conventional biomass power generation. environmental emissions. Therefore, any new coal-fired power plants would have to rely on imported coal, Infrastructure Investment which raises the issue of supply security. The Thai Board of Investment (BOI) is intensifying The current high dependence on gas in power its efforts to lure capital investment to the kingdom generation makes Thailand vulnerable to fluctuations in by launching an eight-point plan to hone Thailand’s the international market. Spikes in the price of oil also competitive edge as a destination for direct investment. raise the price of gas, which in turn affects the electricity The board aims to attract smart investment into projects tariff. Meanwhile, this dependence makes the electricity from knowledge-based industry sectors, life science and generation system more vulnerable to disruption. value creation industries, as well as renewable energy This vulnerability could be mitigated in a number investments, to foster sustainable development. of ways. Reducing the cost of natural gas for power The World Bank ranks Thailand 15th in the world generation would be a complicated task, as it would in ease of doing business, according to its “Doing affect the whole gas supply chain and the whole Business in 2008” study, well ahead of Malaysia, national energy policy. Diversifying the fuel mix for Korea, the Philippines, China and other Southeast power generation would reduce vulnerability, but the Asian markets. environmental impact of coal-fired power makes it Underlining the pace of development is a series unlikely to be adopted in a major way. Nuclear energy of power infrastructure investments over the past two could mitigate vulnerability, and the country already has years. A project to establish interconnections in the plans to install four 1000 MW nuclear power plants southern province Kari will involve installation of 33 by 2021. But nuclear power is not going to play a kV subsea cables, which will link the islands of Koh Pu, significant role in the near- to medium-term future. Koh Phi Phi Don and Koh Siboya with each other and Renewable energy will increase, but it is start- the mainland, as well as the island of Koh Lanta with ing from a tiny base, and will not be able to meet the mainland. In addition, a 24 km, 115 kV, 100 MW the country’s fast-growing demand for electricity. connection will link Khanom on the mainland with Ko However, it could reduce dependence on gas, as well Samui island in the Gulf of Siam. EGAT is planning to as fuel imports.

PennWell Global Power Review 2009 49

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS ASIA-PACIFIC Vietnam Vietnam’s plans for an additional 2.7 GW of new capacity by 2010 have been dealt a blow by the global downturn in demand for the Southeast Asian nation’s exports.

The Socialist Republic of Vietnam is located an estimated 332,000 bpd. Although it is a Electricity production in Vietnam/GWh, 2006 Source: International Energy Agency on the Southeast Asian peninsula and has a significant net oil exporter, Vietnam relies population of 85.3 million. Much of Vietnam’s on imports of petroleum products, due to a 9691 history has been a battle to stave off domination lack of refining capacity. According to OGJ, 23599 by foreign powers, but the country’s war of Vietnam has around 192.6 billion m3 of independence finally ended in 1975 with victory proven natural gas reserves. 2289 for the communist north. Vietnam has recoverable coal reserves The Cambodian-Vietnemese war resulted in a of around 165 million short tons (MMst), period of isolation from the West. But the Cambodian the majority of which is anthracite. settlement of October 1991 allowed Vietnam, still Production has increased considerably over Coal a communist state, to implement a programme of the past decade. Vietnam exports most of Oil Gas economic renovation (known as Doi Moi). its coal to Japan and China. The country 20915 Hydro The Vietnamese government still holds a tight has started to promote the construction Total: 56494 rein over major sectors of the economy through large of new coal-fired power plants to diversify state-owned enterprises and the banking system. The energy sources and utilize domestic supplies. government plans to reform key sectors and partially Vietnam’s total generation capacity is approximately privatize state-owned enterprises, but implementation 11.36 GW, of which state utility group Electricity of has been gradual and the state sector still accounts for Vietnam’s (EVN’s) facilities accounted for about 81 per approximately 40 per cent of GDP. cent. The remainder was under the control of other Vietnam’s major export sectors are crude oil, local and foreign independent power producers (IPPs). textiles, footwear and fisheries. The country’s total The current power generation system relies mainly GDP is $71.1 billion, with a GDP per capita of $830. on thermal gas power (39 per cent) and hydropower Vietnam’s rate of real GDP growth was an estimated (37 per cent), while thermal coal power, which currently 6.9 per cent in 2008, down from an anticipated accounts for 13 per cent, will play an increasingly 7.3 per cent, owing to lower credit expansion and important role in the medium and long term. dampened consumption growth. The government faces a number of challenging Electricity Market policy issues in 2009, most notably the need to control For years, Vietnam had suffered from chronic power inflation, which is expected to be 12 per cent, and to shortages, but in January 2009 it announced, for reduce downward pressure on the currency. the first time, that it has more electricity than it needs, due to slowing demand. The global economic Energy Overview downturn, especially in Japan, the USA and Europe, Over the course of two decades, Vietnam has emerged Vietnam’s key trading partners, has hurt Vietnam’s as an important regional producer of oil and natural export manufacturers. gas in Southeast Asia. The country has boosted In 2008, demand for power was led by industry. exploration activities, allowed greater foreign company It jumped around 16 per Electricity production by sector (GWh), 2006 Source: International Energy Agency involvement in the oil and natural gas sectors and cent, while supply only introduced market reforms aimed at strengthening rose 12 per cent, forcing 6203 Vietnam’s energy industry. the government to import 1547 22975 According to Oil & Gas Journal (OGJ), Vietnam electricity from China and 607 Industry holds approximately 600 million barrels of proven oil rotate power outages in 4159 Transport reserves, all of which are located offshore. Ongoing both Hanoi and Ho Chi Minh Residential exploration activities are likely to increase this figure City. Government officials Commercial & in the future, as Vietnam’s waters remain relatively now expect that Vietnam Public Services under-explored. will have redundant capacity, Agriculture/Forestry Energy Sector’s Vietnam’s oil production has increased steadily over as demand is expected to 20569 the past two decades. The country’s oil production was grow by 6-7 per cent, while own use around 400,000 barrels per day (bpd) in 2008, based on generation capacity is set to 434 Distribution losses Total: 56494 new production projects. In 2008, the country consumed rise by 14-15 per cent.

50 PennWell Global Power Review 2009

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Vietnam energy overview Soaring demand had also led EVN to plan to invest Quang Ninh. AES Corp would invest up to 90 per cent $3bn a year to build 33.2 GW of new generation of the estimated cost while Incoming will contribute Oil production 350 700 bbl/day (2007 est) capacity by 2015. So far there have been no delays in the remaining 10 per cent. Oil consumption 271 100 bbl/day (2007 est) EVN power projects. Vietnam plans to undertake three nuclear power In 2004, the Vietnamese National Assembly passed projects (one at 2 GW and two generating 4 GW), Oil exports 394 400 bbl/day (2005) the new electricity law that outlines how a competitive with a potential total capacity of 10 GW. In November Oil imports 271 100 bbl/day (2007) electricity market will be developed in three phases: 2008, the Ministry of Industry and Trade announced the first focuses on creating competition in power plans to build two 2000 MW nuclear power plants Oil proved reserves 600M bbl (1 January 2008 est.) generation; the second introduces competition for in the central province of Ninh Thuan, which will be Natural gas production 6.86bn m3 (2007 est.) bulk supply of electricity, including supplying directly to operational from 2020 to 2022. major industrial customers; and the final phase involves The Ninh Thuan nuclear power plant No 1 would Natural gas consumption 6.86bn m3 (2007 est.) competition at the retail level. The Ministry of Industry be in Phuoc Dinh commune, Ninh Phuoc district. Its Natural gas proved reserves 192.5bn m3 ( 1 Jan 2008 est.) anticipates that this market restructuring process may two reactors will be put into commercial operation by take as long as 20 years. 2020 and 2021. Source: CIA Factbook One of the many important transitional steps towards The Ninh Thuan plant No 2 will be built in Vinh Hai a competitive electricity market is the restructuring of commune, Ninh Hai district. Its two reactors will be put EVN, a state owned monopoly with many wholly into commercial operation by 2021 and 2022. owned subsidiaries, into shareholding companies with Vietnam has yet to choose the technologies it will different types of shareholders, including local and use for its new nuclear power plants. foreign private investors. This restructuring aims to In October 2008, OneEnergy (a joint venture create a more market-oriented business model, which between CLP Group and Mitsubishi) and EVN signed a does not have as many close ties to the government, memorandum of understanding for the development by splitting various subsidiary entities away from EVN and ownership of the 2000 MW coal fired Vinh Tan to form new shareholding companies. In 2008, Hanoi power complex in the Binh Thuan province of Vietnam. approved the establishment of the National Electricity Construction on the first phase of the project is Transmission Corporation, which will be 100 per cent expected to begin in late 2010. It is scheduled to enter owned by Electricity of Vietnam. operation by 2014. As a result of the government’s broader rural Alstom Hydro is providing EVN with all the electro- electrification programme, nearly 12 million out of mechanical equipment for the largest hydro power around 13 million rural households in Vietnam now plant in Southeast Asia, with a planned capacity of have electricity. In 1996, only 50.7 per cent of rural 2400 MW, located in Son La, in a deal worth €190m households had electricity, but by 2005 the reach had ($270m). The first unit is scheduled for commissioning grown to 90.7 per cent. As of October 2006, the rural in 2010 and the last in 2012. electrification rate in Vietnam was 91.53 per cent and is expected to reach nearly 100 per cent by 2020. Future Trends In May 2008, Vietnam’s trade and industry ministry Infrastructure Investment submitted plans to build a competitive electricity market According to Hanoi’s Sixth Power Development Master in Vietnam. The ministry put forward a three-stage Plan, it is estimated that an additional yearly capacity scenario for restructuring the electricity industry that of 2700 MW will be required between 2006 and 2010 was supported by international consultants, the World to meet the rapidly growing demand for power. Bank and the Asian Development Bank (ADB). In January 2009, Malaysian firm Janakuasa won Following a study of Vietnam’s industry, targets approval from the Vietnamese government to develop and capacity to develop its market, the Vietnamese and construct Duyen Hai 2, a 1200 MW coal-fired government has decided that the model for its power plant in the southern province of Tra Vinh. competitive electricity market is a cost-based pool (CBP). Duyen Hai 2 is among the projects listed in the Sixth Under these plans, all electricity plants with capacity of Power Facility Development Master Plan to boost 30 MW or higher (except BOT electricity plants with power capacity in Vietnam. long-term service and consumption contracts) must offer In December 2008, the Vietnamese government prices directly to the market and electricity generating said it would grant an investment license to US utility plants sign trading contracts with each buyer. AES to build a 1200 MW coal-fired power plant in The unit price that each generating plant can offer northern Vietnam at an estimated cost of $1.4 billion. is based on specific principles, and ceiling and floor AES will form a joint venture with state-owned coal prices, in an attempt to avoid unexpected price hikes producer Incoming to operate the plant, which will be in the market. The trade and industry ministry would located in Mong Duong in the coal hub province of regulate this new market.

PennWell Global Power Review 2009 51

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Czech Republic A steady growth in electricity demand since earlier in the decade means that the Czech Republic will turn from a net exporter to a net importer of power by 2015 unless new capacity is built.

The Czech Republic is a landlocked state within Gross theoretical Installed capacity by type, 2006 Source: Czech Statistical Office central Europe. The country shares borders with hydropower poten- Germany to the north and west, Poland to the tial in the Czech 44 MW Steam and combined north and east, Slovakia in the south-east and Republic is 23 TWh/ 2175 MW heat and power plants Austria in the south. Its land area is 78 866 km2, year, according to 51 MW Nuclear power plants and the population in 2008 was 10.2 million, the World Energy Combustion plants slightly lower than in 2007, reflecting a small Council, of which Hydropower plants negative population growth rate. 4 TWh/year is con- Wind power From the end of the Second World War until sidered technically 3760 MW the fall of the Soviet Union, the country formed exploitable. The part of the eastern European state of Czechoslovakia. country has a tra- Independence was achieved in 1989, and in 1993 the dition of exploiting 11478 MW two states that comprised Czechoslovakia, the Czech small hydropower, and the Slovak republics, separated. In 1999, the Czech which declined dur- Republic joined NATO, and in 2004 it became a member ing the Soviet era of the European Union (EU). The country hopes to but is now increasing again, with 1188 sites in use. become a member of the euro-zone in 2012. Hydropower accounted for 76 per cent of the Czech The country is a democratic republic with an Republic’s renewable output in 2005, with biomass elected president and parliament. The economy is now making up a further 18 per cent and biogas 5 per cent. market based, with a strong industrial tradition. It was Wind potential could amount to 11 667 MW of capac- booming until the middle of 2008, when the financial ity, but the economically exploitable capacity may only crisis began to affect growth in all Eastern European be 3000 MW. There is also a technically exploitable countries. GDP in 2007 was $175.3 billion and GDP geothermal potential of 300 MW. growth 6.6 per cent. Electricity Market Energy Overview The Czech Republic electricity market was fully liberalized Coal is the principal energy resource in the Czech on 1 January 2006, when domestic customers were Republic, accounting for 42.5 per cent of total energy allowed to choose their supplier. The market is operated consumption in 2005. Reserves are estimated to be by the Czech electricity market operator, OTE, a joint 63.9 million tonnes, comprising both bituminous stock company established by the government, which coal and lignite. Bituminous coal production in 2006 must legally retain shares worth 67 per cent of its capital was 13.4 million tonnes, while lignite production was value. The market is overseen by two organisations: the 49.1 million tonnes. Of the latter, 41.0 million tonnes Energy Regulatory Office, which controls tariffs and was used for electricity and heat production. Coal regulates market rules, and the Ministry of Industry and consumption fell by 26 per cent between 1993 and Trade, which oversees the whole sector. There is also a 2003, but has started to rise again, slowly. State Energy Inspection Board. Oil reserves in 2006 were 15 million barrels. In Power generation in the Czech Republic is 2005, the Czech Republic produced 18 030 barrels per dominated by CEZ. The group is a former state- day (bpd) and consumed 203 700 bpd, making the controlled utility and, although it is now a private country a net importer. The country has traditionally sector company, the government holds most of its imported most of its oil from Russia, but new pipeline shares. In 2007, CEZ controlled 73 per cent of the projects have allowed it to diversity its sources. generating capacity in the country. Its facilities include Natural gas reserves were estimated to be the country’s two nuclear power plants, as well as coal, 3.80 billion m3 in 2006, the lowest in the region. hydropower, wind and solar plants. The remaining Production was 165 million m3, but consumption was 27 per cent is provided by a large number of small 9.08 billion m3 in 2005. Most of this natural gas, like companies, none of which has more than a 3 per cent the oil, is imported from Russia, but small amounts also share of generating capacity. Many of these are district come from Norway and Germany. The use of natural heating plants which, together, contribute as much as gas has increased since the country joined the EU. 20 per cent to the national electricity output.

54 PennWell Global Power Review 2009

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The transmissions system is controlled by CEPS, also be installed for peaking Electricity production and consumption (GWh) Source: Czech Statistical Office another independent yet state-owned company. The and grid balancing purposes. Czech transmission system is part of the CENTREL Alongside this, 3380 MW of 100000 system, which links the Czech Republic, Poland, base load lignite-fired units Production (GWh) Consumption (GWh) Hungary and Slovakia. The country linked up to the will be taken out of service 80000 Western European system in 1995. There are eight between 2013 and 2020. regional distribution companies, but their ownership There is little scope 60000 is dominated by three companies: CEZ, EoN and PRE, for additional hydropower which accounted for more than 95 per cent of the capacity, but considerable GWh 40000 electricity supply market in 2007, according to the EU. hope is being placed on the Based on figures from the Czech Statistical Office, development of wind power: 20000 the total installed capacity in the Czech Republic in 2006 capacity should reach 1400 was 17 508 MW. This was dominated by coal-fired MW by 2020. There are also 0 steam and combined heat and power plants, which plans to co-fire biomass in accounted for 11 478 MW (66 per cent). (OTE figures fossil fuel plants, with the 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 suggest that roughly 4000 MW of these coal-fired first co-fired unit due to be Predicted consumption Source: Czech Energy Market Operator (OTE) plants have heat production capacity.) Nuclear power built at Opatovice. plants contributed a further 3760 MW (22 per cent) Beyond 2018, OTE has and hydropower plants, including two pumped-storage considered three options. 80000 hydro stations, generated 2175 MW (12 per cent). There Under a conventional 70000 was a small wind power capacity of around 1.2 MW in option, two 600 MW 2006 and a 10 kW solar station. However, by the end of supercritical hard coal fired 60000 2007 wind capacity had expanded to 133 MW. units burning imported 50000

Electricity production in 2006 was 84 362 GWh. Of fuel will be installed, one GWh* 40000 this, 54 992 GWh (65 per cent) was produced by coal- in 2019 and one it 2026. 30000 fired steam and combined cycle plants. The country’s The second, nuclear option 20000 nuclear plants provided the bulk of the remainder, envisages commissioning 10000 26 046 GWh (31 per cent). The remaining 4 per cent a 1200 MW advanced 0 was primarily from hydropower. Domestic consumption pressurized water reactor in 2006 was 60 368 GWh. A further 12 631 GWh were by the middle of 2019. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 exported, primarily to Germany, Austria and Slovakia. However, this timetable is Exports have fallen during the decade, but remain an considered ambitious, so a * These figures are based on the OTE reference scenario important source of revenue. third scenario will see the nuclear unit enter service in 2026, while a 400 MW Infrastructure Investment combined cycle plant is installed in 2019. According to the most recent reference scenario An additional consideration is a proposal by CEZ to for electricity consumption in the Czech Republic expand the Temelin nuclear power plant from two to developed by OTE, electricity demand will rise from the four units, as was originally planned when the plant current level of 60 GWh to 63 GWh in 2009, 72 GWh was approved in 1979. In July 2008, the company in 2020 and 78 GWh by 2030. A high consumption applied to the Ministry of the Environment for an scenario would push consumption by 2030 to above environmental impact assessment of the proposal to 86 GWh, while in a low consumption scenario, it is be carried out. assumed to level off at close to 69 GWh around 2030. Based on the reference scenario, the country will Future Trends become a net importer of electricity in 2015 if no new Electricity sector growth predictions made before the capacity is constructed. 2008 global recession began suggest a steady rise In order to meet growing demand and maintain in demand for power in the Czech Republic. This is export capacity, the country’s nuclear power plants based on an assumption of continual GDP growth will all have their lives extended to 60 years and between 2006 and 2030, which is now unlikely. Even the capacities of the four units at Dukovany will be so, whatever path future growth follows, changes in increased by around 20 MW to 481 MW. In addition, the generating capacity mix will be necessary to cope three 660 MW supercritical lignite-fired generating with the retirement of old lignite plants and to meet units will be built between 2009 and 2018, along with tougher EU environmental controls to combat global a 285 MW natural gas-fired combined cycle unit (for warming. The country will also want to remain a net completion in 2017). Three open-cycle gas turbines will exporter of power for economic reasons.

56 PennWell Global Power Review 2009

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS France EUROPE Attempts to unbundle France’s energy behemoths and create greater competition in the market have met with predictable resistance. However, regional energy market development and market openness are now a priority.

France is a founder member of the European Under the new directive, France, like other EU Union (EU) and remains a leader of the bloc’s member states, has to play its part in meeting the 27 countries. Its 62 million population is growing target of generating 20 per cent of its energy needs at around 0.5 per cent annually. The country’s gross from renewable sources by 2020. France’s renewable domestic product (GDP) per capita was $32 000 in energy target is 23 per cent. In 2005, the reference 2007 – growing at around two per cent a year – year for the EU legislation, renewables provided only which includes a significant contribution from the 10.3 per cent of France’s energy. Most of that was from 67 TWh of electricity it exported in 2007. its hydropower installations, which supplied almost Unemployment was running at 7 per cent in 10 per cent of the country’s energy. A shift towards 2007, but the global economic downturn in 2008 wind power is the most likely addition to the country’s has damaged the French manufacturing sector, which nuclear-heavy power portfolio. has been hit by layoffs. Electricity production in France Source: French Ministry of the Economy, Industry and Employment By January 2009, the Electricity Market French government had State-backed EDF is the dominant player in France’s 9.9 TWh announced economic electricity market by far. Even the recently combined 20.9 TWh 6.9 TWh stimulus packages GDF-Suez, which plans on increasing its share of the 21.6 TWh amounting to more retail market, only expects to gain around 20 per cent. than €400 billion ($512 (GDF-Suez is also backed by the government, which will 60.9 TWh billion), including around hold a 35 per cent share in the combined business.) €46 billion ($59 billion) Although the market has been partly open to of investment that competition, in accordance with EU laws, EDF’s market- would include spending leading position has been supported by a tariff structure Nuclear power on new infrastructure. that allows it to offer much cheaper tariffs to domestic Hydropower France has always customers who do not switch supplier. Customers Coal been more willing than switching cannot switch back to the cheaper tariff, so Gas Oil most other free-market there is little incentive to change. 428.7 TWh Wind and waste European countries, such In 2007, for example, although the government energy as the UK, to retain a agreed an increase in regulated prices, the regulated government stake in key tariff was still only about half the price of electricity on industries such as electricity and gas, so these could be the wholesale spot market, although the prices were a target for government investment this year. increased by 8 per cent for large businesses and by 6 per cent for small businesses. Domestic regulated Energy Overview tariffs were increased by only 2 per cent. The merger between two of France’s largest energy The European Federation of Energy Traders said and electricity companies, Gaz de France and Suez, that renewing the tariff at all was “another step has fundamentally altered the balance of the country’s backwards” in the process of opening France’s electricity supply industry. Despite the planned spin-off energy market. It said the low prices for industry and of a water and waste company – Suez Environnement commercial consumers set by the French government – the merged group will be among Europe’s top three was “counterproductive”. energy companies, similar in size to France’s mighty The slow pace of market reform in France has EDF and E.ON of Germany. attracted the attention of the European Commission France energy overview The merger had been a pet project of French (EC), which opened an investigation into EDF’s practices President Nicholas Sarkozy, who pushed it through in the industrial and commercial market in July 2008. Oil reserves 144.3 million barrels more than two years of preparation and debate. In December, the commission pressed ahead with anti- Sarkozy was also, perhaps surprisingly, an important trust action, claiming in a statement of objections – the Coal consumption 20.89 million short tons/year driving force behind EU agreements on measures to first phase of legal action – that long-term industrial Natural gas reserves 12.86 trillion cubic feet tackle climate change. While he was not a wholehearted contracts infringed EU rules on the abuse of dominant supporter of the proposals, he wanted to ensure a market position. It said the contracts prevent customers Nuclear electricity generation 415.5 terawatt-hours/year compromise was reached before France relinquished its from switching, reduce liquidity in the markets and Source: Nationmaster six-month EU presidency at the end of 2008. stop new suppliers from entering the market.

PennWell Global Power Review 2009 57

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE France

EDF has fought hard to retain its market dominance, are signs that the credit crunch Gross electricity generation from renewables, 2006 which is bolstered by the fact that it is vertically is freeing up some capacity. So Source: European Commission Directorate-General for Energy and Transport integrated, with energy generation, transmission, far the largest French wind farm distribution and retail supply businesses. It has been is rated at 87 MW. New nuclear 12 GWh a leading opponent of the EC’s drive, embodied in projects, in addition to the 5281 GWh 4929 GWh its so-called “third energy package” of legislation. station now under construction 2189 GWh The commission aims to force energy companies to at Flamanville, also remain on unbundle their transmission businesses from generation the agenda. EDF also plans major and supply, arguing that vertical integration allows investment in photovoltaic (PV) companies to limit competition in their markets. EDF, solar power, with a target to and the French government, have argued in favour install 500 MWp by 2012. Its Solar PV of a “third way”, in which energy companies can biggest investment so far is a 7 Biomass continue to own network companies, but the networks MW PV plant in an industrial area Wind are operated or overseen by an independent system in the Aude region, opened in Hydro operator. EDF argues that its transmission company, RTE, December last year. Pumped storage already operates as an independent entity. Meanwhile, both companies’ 56659 GWh It remains to be seen whether France’s preferred gas supply investment plans have structure will be accepted, but the European Parliament, been given impetus by disputes between Russia and one of the institutions that has to approve new Ukraine over Russian gas supplies. The dispute this legislation, has reiterated more than once its support for winter caused less disruption to west European gas full unbundling and independence for network activities. supplies than it did the year before, but concerns The position of France’s heavyweight ally, Germany, over the lack of supply diversity have meant GDF-Suez which also opposes unbundling, has been weakened by and EDF – in common with other European energy recent national agreements in which energy companies companies – have invested heavily in facilities to import, agreed to sell their network companies to avert cartel regasify and transport liquefied natural gas (LNG). investigations by the German regulator. Alongside new import facilities, France has joined a pan- European drive to develop additional gas storage sites. Infrastructure Investment The presence of two behemoths in the French market Future Trends and the EC’s determination to break the stranglehold on Trends for the next year, and up to 2020, are beginning to the energy market of these two state-backed utilities, emerge as battle lines over the third energy package are mean that much of the companies’ investments will be drawn. Whatever the final compromise over unbundling, outside their French home market. it is clear that network companies will be further separated But the strategies of both EDF and GDF-Suez depend from their vertically integrated parents and more closely on the final form of the EU’s legislation on unbundling, co-ordinated with their network counterparts across the and whether the two companies decide to divest their continent. The need for closer co-ordination has also been energy networks. That seems unlikely, especially in light driven by technical requirements: the shift to renewable of the EU’s commitment to increased interconnection energy and the development of regional electricity between electricity markets. A long-awaited new link markets have both driven increasingly large transfers between France and Spain, long-since named among of power across national and regional boundaries. the bloc’s priority interconnection projects, received new Increased interconnection and greater market openness impetus last year, and increased capacity across France’s will add to that process. EDF’s RTE subsidiary joined its link with the UK and a new link with Ireland have also Belgian counterpart, Elia, in setting up a co-ordination been proposed. centre for cross-border electricity transmission (Coreso), EDF’s £9 billion acquisition of the UK’s nuclear and that group is likely to be joined by other utilities. energy generating company, British Energy, and a Meanwhile, the likely impact of Europe’s energy still-planned acquisition of Constellation Energy in the and climate package – which includes energy efficiency USA, may be large mouthfuls to swallow in a year and carbon dioxide emission commitments, as well as when the cost of debt is rising. renewable energy targets – has begun to be assessed. Within France, both companies will be hard pressed In the coming year the global economic crisis and to invest fast enough to get on track to meet the reduced industrial activity are likely to be the biggest country’s commitments on renewable energy. Huge contributors to both targets, but it remains to be seen investment in offshore and onshore wind are likely to whether France can stay on track over the next few be hampered by the worldwide dash for turbines and years as the economic cycle returns to an upward the resulting supply chain bottlenecks, although there trend.

58 PennWell Global Power Review 2009

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Germany Germany’s policy of weaning itself off nuclear power is predicted to lead to a major energy shortfall, which the current recession will do no more than defer slightly.

The Federal Republic of Germany is Europe’s requirement to meet Electricity supply from renewable sources, 2007 (TWh) largest economy with a population of 82.4 million. tougher environmental Source: BMU publication Renewable energy sources in figures It is a key member of the continent’s economic, standards is the 4.3 political and defence organizations and part main constraint to 3.85 of the euro-zone. Since the unification of East greater use of coal in 20.7 and West Germany in 1990, it has expended power production in considerable funds to bring eastern productivity Germany. 7.5 and wages up to western standards. The federal government is led by Chancellor Angela Electricity Market Hydropower Merkal’s Christian Democrats, who remain popular The electricity gen- Wind despite overseeing an economy in severe recession eration market in 3.5 Photovoltaics and facing the likelihood of high unemployment. GDP Germany is domi- Biomass and biogas in 2008 was 1.3 per cent, but is forecast to fall to -2.4 nated by four large Landfill and sewage gas per cent in 2009, despite the introduction of a €500 players, who between 39.6 Waste billion ($625 billion) financial market stabilization them account for 80 package in October 2008. per cent of national power generation: RWE, which A decade of wage restraint and labour market reform operates primarily in western Germany; E.ON Energy, created a strong German manufacturing base, and which produces in central Germany; Vattenfall Europe, although Germany is now experiencing a manufacturing which was formed in January 2003 and operates slump, it remains an industrial powerhouse with high- in the New Laender and Berlin; and Energie Baden- tech and biotechnology industries that lead the world. Wuerttemberg Aktiengesellschaft (EnBW), which operates in south-west Germany. These companies Energy Overview supply regional and local distributors as well as their Germany’s major fossil fuel reserves are in the form own industrial, commercial and domestic consumers. of coal, mainly lignite. Its reserves of oil total just 367 There are around 60 regional companies and over 800 million barrels and lie in the north of the country. As a local or municipal electricity/heat suppliers, known as result, Germany imports nearly three million barrels per Statwerkes. The liberalized market has encouraged day to meet its needs. Its largest source of crude imports customer switching, which has made it harder for is Russia, followed by Norway, the UK and Libya. Statwerkes to compete. Natural gas reserves total 257 m3 and Germany Germany, along with France, has opposed the pace produces around 20 m3 annually. Imports are around 81 of liberalization across European energy markets and billion m3 per year, and as with oil, the biggest supplier was initially slow to respond fully to the EU’s 2003 is Russia, which meets 37 per cent of Germany’s gas competition reforms. The European authorities require imports, either via Ukraine or Belarus. Most of the rest open access to electricity transmission networks for comes from Norway and the Netherlands. third parties, and this will form part of its third energy Germany’s heavy dependence on Russia for energy package due to be passed this year. An energy regulator is a concern, and the dispute over gas payments was appointed in 2005, since when the switching rate between Russia and Ukraine in early 2009, which saw among German consumers has increased, although it gas pressures fall sharply in the west, has only served to remains low compared with other comparable markets. add to German anxiety over its fuel supply security. Germany has the largest electricity market in Europe, Coal is by far the largest of Germany’s natural generating 592 TWh in 2007, two-thirds of which came resources. With an output of more than 175 million from fossil fuels (mostly coal). Nuclear power made up tonnes (2008), lignite contributes around 40 per cent of the remainder, alongside a growing renewables sector. Germany‘s primary energy generation and is the most Germany is a small net importer of electricity. From 1990 important domestic energy carrier. There is an estimated to 2007 electricity demand in Germany increased by 40.6 billion tonnes of economically viable lignite mining 0.7 per cent on average each year. In recent years the reserves in Germany. Despite the introduction of flue-gas increase in electricity demand has slowed significantly. desulphurization, dust removal and nitrogen oxide (NOx) Germany has an aging fleet of power plants, with reduction technologies in domestic power plants, the much of the coal-fired fleet in need of replacement or

60 PennWell Global Power Review 2009

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PennWell Global Power Review 2009

Forecast gross electricity generation by source (%) refurbishment. It is estimated that the country on environmental and health grounds. Plant in various will need to add around 12 per cent (16 GW) stages of planning or construction include a new of new built thermal capacity by 2012 and over 823 MW hard coal plant planned by KMW at Main- 35 30 GW by 2020. It is planned that around 60 Wiesbaden, a 1600 MW project on the Baltic Sea in 30 per cent of this new capacity will be coal fired, which Denmark’s Dong plan to invest €2 billion ($2.5 with the remainder fuelled by natural gas and billion), an Electrabel/BKW FMB 800 MW coal plant at 25 renewables. Wilhelshaven due for commissioning in 2012, a 910 MW 20 With its 17 operating nuclear power plants, hard coal unit proposed by utility MVV in Mannheim % 15 Germany is one of the world’s largest generators and E.ON’s Staudinger 6 1100 MW unit to be built near of this type of energy. Current legislation requires Frankfurt. Vattenfall Europe is also planning a 1645 MW 10 the phase-out of all nuclear power by 2022. coal plant in Hamburg incorporating carbon capture 5 Support for a softening or reversal of this and storage. EnBW’s 900 MW hard coal-fired unit at 0 policy is growing, as concerns increase over Karlsruhe is due to come into operation in 2011. 2003 2010 2020 2030 dependency on imported gas and the need to The four German transmission system operators meet carbon dioxide (CO ) and other emissions (TSOs) are E.ON Netz GmbH, RWE Transportnetz Hydro Nuclear Hard coal 2 Lignite Gas Wind Other targets. The Christian Democrat government has Strom GmbH, Vattenfall Europe Transmission AG so far declined to back away from Germany’s and EnBW Transportnetze AG. The German TSOs nuclear pledge, but it may be forced to if the promise currently prevent the development of congestion in of alternative clean power generation sources do not their networks by employing network and market- materialize soon enough. Reports suggest that the related measures. However, the predicted development nuclear phase-out will result in a generation shortfall of the German power generating market over the next by 2015, but some believe it will arrive far sooner. few years, which is likely to see the construction of Meanwhile, German engineering giant Siemens has new conventional power plants as well as onshore and re-entered the nuclear power market through a offshore wind farms, will require an expansion of the collaboration with Russian nuclear holding company transmission system and related planning. Rosatom to work on international projects. Germany is also facing a reduction in coal-fired Future Trends capacity, which currently accounts for close to 40 The main drivers for Germany’s electricity market over per cent of generation. Some older plants will shut the next few years will remain European and national under the European Large Combustion Plant Directive. environmental policy. Its target of producing 27 per German utilities are encountering increasing opposition cent of its energy from renewable sources by 2020 to new and replacement power generation projects. remains ambitious, not to mention the further goal Germany is in the forefront of developing and of increasing this to 45 per cent by 2030. Germany’s deploying renewable energy technology. Supportive feed-in tariff policies have boosted development of government policies have seen renewable energy grow biomass and photovoltaic capacity, as well as onshore to account for 14 per cent of energy production. and offshore wind power. Larger and more efficient Germany has the second largest installed base of wind turbines are replacing some of those deployed in wind farms in the world and the biggest solar thermal early wind projects.

market. The country also has a strong commitment to The pressure to cut emissions and CO2 levels will also protecting its environment. It has actively promoted influence the debate over nuclear power production in

the use of renewable energy, and energy tax revenue Germany. The country may need CO2-free nuclear is used to fund renewable projects. The city of Bonn is production to bridge the gap until sufficient renewable bidding to host the headquarters of the newly formed generation is available and viable CCS enables coal to International Renewable Energy Agency (IRENA). remain part of the energy mix. Principal indicators, 2007 Coal-fired generation will remain the bedrock of Infrastructure Investment Area 357021 Germany’s electricity production, but European rules Most new capacity additions in Germany in the last will force the closure of older, dirtier plants. Permits and Population 82.4 million year have been wind projects, which are offered grid public support for new facilities are likely to become GDP growth 2.5% access and favourable terms. In 2008, Germany added harder to obtain, which could see a switch to more gas- 883 new wind turbines with a capacity of 1665 MW, fired generation using CCGT technology. The slowdown Installed capacity (2005) 120 400 MW taking the total number of turbines to 20 301 with an in economic activity will reduce demand for electricity Electricity production (2007) 592 TWh overall capacity of 23 902 MW. Further growth in 2009 in the short term and may defer a predicted energy is anticipated, despite the financial crisis. shortfall as early as 2010. However, with the shutdown Electricity consumption (2006) 549 TWh Environmental campaigners have been stepping up of both nuclear and older coal plants, lost capacity will Source: EIA and Nationmaster.com their opposition to planned coal-fired power projects need to be replaced faster than it is currently.

PennWell Global Power Review 2009 61

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Italy Faced with a dearth of natural resources and a post-Chernobyl withdrawal of nuclear capacity, Italy faces some of the highest energy costs in Europe and remains vulnerable to energy supply disruptions.

With a total area of 301 230 km2, Italy’s estimated In 2007, Eni’s oil and natural Gross electricity generation from renewables, 2006 58 million people support a diversified industrial gas production for the full year Source: European Commission Directorate-General for Energy and Transport economy with roughly the same total and per averaged 1.736 million barrels of capita output as France and the UK. The country oil equivalent per day, down by 35 GWh Total: 52092 became a nation-state in 1861 when the regional 1.9 per cent compared with 2006. 6431 GWh 6565 GWh states of the peninsula, along with Sardinia Production performance was and Sicily, were united. A democratic republic hindered by mature field declines, 2971 GWh replaced the monarchy in 1946 and economic price impacts and unplanned revival followed. events. Over the past decade, Italy has pursued a tight fiscal However, in the past year, policy, and has benefited from lower interest and inflation Eni and fellow Italian energy Solar PV rates. The current government has enacted numerous player Edison have jointly made Biomass short-term reforms aimed at improving competitiveness a number of gas field discoveries Wind and long-term growth, but it has moved slowly on in the Sicilian Strait. Preliminary Hydro implementing needed structural reforms. tests on these fields have shown Pumped Storage The economy continues to grow by less than the a production potential of around 36994 GWh euro-zone average, and growth is expected to fall from 170 000 m3 of gas per day, while 1.9 per cent in 2006 and 2007 to under 1.5 per cent in the potential of the area is estimated at approximately 2008 as the euro-zone and world economies slow. 18 billion m3 of recoverable reserves. Italy’s energy mix Italy’s problems include high levels of illegal is shifting from oil towards gas, but the country is still immigration, organized crime, corruption, high dependent on external sources for these fuels, adding unemployment and sluggish growth. to concerns over supply security and price volatility. Energy Overview Electricity Market With few natural resources of its own to exploit, more Italy’s electricity market is characterized by a slow but than 75 per cent of Italy’s primary energy requirements steady move towards a competitive sector, although are imported. Oil production is estimated at 166 600 with incumbents in such a strong position it has been barrels per day (bpd), against consumption of more difficult for new entrants to make a significant impact. than ten times that, estimated at 1.7 million bpd. Overall electricity production is estimated at around Similarly, natural gas production is estimated at 9.7 293 TWh, against a consumption of over 316 TWh, billion m3, while consumption is almost ten times as leaving imports at around 48 TWh. much, at an estimated 84 billion m3. Recent figures The national utility champion Enel, Italy’s largest suggest around 74 billion m3 of natural gas is imported power company and Europe’s second largest listed annually, close to the country’s total proven reserves of utility in terms of installed capacity, dominates the around 94 billion m3. market. The group has 85 500 employees and operates Coal is also a significant force in Italy’s primary a range of hydroelect ric, thermoelectric, nuclear, energy market. Although domestic production is geothermal, wind-power and photovoltaic power estimated at just 13 000 tonnes of oil equivalent, stations across its international portfolio. The Italian imports came in at some 1.7 million tonnes. economy ministry holds 21.1 per cent of Enel stock The domestic oil and gas sector in Italy is led by directly and another 10.1 per cent indirectly through Oil and gas production and consumption Eni, an integrated energy company with activities in the state-run bank CDP. Total oil production 168.61 billion bbl exploration and production, transport, transformation Italy has made substantial progress in implementing and the marketing of oil and natural gas, as well as electricity and gas market reforms, with both markets Crude oil production 107.94 billion bbl power generation. Although Eni is a private company, fully open to competition and a transmission system Oil consumption 1 701.74 billion bbl the government retains a significant equity stake in it. operator in place. For example, the government Enel is the second-largest Italian operator in the introduced measures to cap Enel’s market share to Proven natural gas reserves 8000 trillion BTU natural gas market, with approximately 2.6 million less than 50 per cent, forcing the company to divest Natural gas production 388 trillion BTU customers and a 10 per cent market share in terms of part of its generation and allowing new participants volumes. to enter the market. Meanwhile, action on enhancing Natural gas consumption 2984 trillion BTU

62 PennWell Global Power Review 2009

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Electricity generation from 2006 competition has continued. In Infrastructure investment Source: European Commission Directorate-General for Energy and Transport August 2008, energy market Investment in energy production, transportation and regulator AEEG established interconnection are crucial for Italy’s supply security, 7.64 TWh 44.21 TWh the code for monitoring the given its high dependence on imported oil, coal 52.09 TWh wholesale electricity market and gas. But such projects often meet strong local and the dispatching service opposition from local authorities. market. In November, to A significant proportion of infrastructure-related 45.88 TWh further boost market liquidity, announcements concern new renewable energy Italy launched an exchange for developments, particularly solar installations, which trading physical forward energy have followed the passage of the feed-in-tariff law. Coal Oil supply contracts. Even so, other types of renewable development, Gas A new regulatory framework as well as more coal and gas installations, have been Renewables for the Italian electricity sector mooted. In the past year, for example, plans to install Other was also established in 2008 115 wind turbines in the Gulf of Gela, 5 km from the Total: 31412 TWh 164.31 TWh with resolutions covering Sicilian coast, have been unveiled by Enel in co-operation service quality, the rate system with the construction group Moncada Costruzioni. The for regulated activities from 2008-2011 and levels of development will produce up to 575 MW, with an remuneration. investment up to €500 million ($643 million). A number of larger European utilities have made E.ON’s new gas power plant, Livorno Ferraris in inroads into the country’s energy market. For example, Northern Italy has begun operating. The €400 million in the past year E.ON completed the acquisition of a ($514 million) plant has an installed capacity of 800 substantial package of power stations and shareholdings MW and will produce approximately 5 TWh annually. in Italy as part of its takeover of Spain’s Endesa. E.ON is Meanwhile, Eni and Enel have signed an agreement taking over Endesa Italia, with over 7.2 GW of installed to develop technologies to capture, transport and

capacity, making the company the country’s fourth- geologically sequester carbon dioxide (CO2) and to largest generator after Enel, Edison and Eni. jointly construct Italy’s first project in this area. Prior to completing the transaction, an agreement Enel is currently completing Italy’s first industrial

was reached with the Italian supplier A2A on terminating CO2 capture plant, capable of removing 2.5 tonnes its 20 per cent shareholding in Endesa Italia in exchange of gas per hour, at the Brindisi thermal power station. for generation from Endesa Italia’s portfolio. In addition, The pilot plant should be ready in the autumn of 2009. E.ON is gaining access to a liquefied natural gas (LNG) Eni has also started to implement a project to inject

terminal project on the coast of Tuscany. 8000 tonnes of CO2 per year at the Stogit exhausted Similarly, Suez has recently concluded an agreement field at Cortemaggiore (Piacenza). with Eni to acquire 1100 MW of virtual power production (VPP) capacity in Italy for 20 years, based on a combined Future trends cycle gas turbine (CCGT) model. The deal raises the Suez In its 2009 credit outlook report on the Italian utility Group’s total production capacity in Italy to 4600 MW, sector, credit ratings agency Fitch says that the expected an increase of approximately 30 per cent. recession, the trend of oil price volatility and the effects Despite improving competition, energy diversification of the global financial crisis on the domestic banking is restricted, due to the country’s dependence on and capital market will put pressure on Italian utilities. natural gas, particularly since it ruled out nuclear The combined effect of declining oil prices, reduced developments in the wake of the Chernobyl disaster demand and restored generation reserve margins are in 1987. However, renewable energy sources have likely to drive down electricity prices over the next 12 been attracting policy developments, particularly solar to 18 months. power. A decree passed in April 2008 lays down the Consolidation is expected to continue in 2009 criteria to stimulate electricity production from grid- as electricity and gas utilities seek to expand their connected solar thermal plants, including a feed-in customer base in response to competitive pressure. tariff. This follows legislation in February 2007 that On top of these financial pressures come a number introduced a new version of a feed-in tariff scheme for of policy drivers from the European Union, not least grid-connected photovoltaic plants. of which is the passage of the “20/20/20” climate Nonetheless, the contribution of renewable power package late last year that establishes a legally binding sources remains small when compared with gas, renewables target by 2020. which supplies around 158 TWh, coal with about 51 Meanwhile, as gas market volatility enhances the TWh and oil with some 46 TWh of the total electrical requirement for secure domestic supplies of energy, a generation. renewed push towards nuclear generation may arise.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Poland Poland is attempting to diversify away from its reliance on neighbouring Russia’s gas by developing its indigenous reserves and building renewable energy capacity.

Poland lies at the heart of north-central Europe on The country’s coal reserves, its most extensive Annual electricity generation (Source: OECD) a direct route between supply-hungry Germany domestic fossil fuel resource, are the largest in Europe. It and resource-rich Russia. The country’s population has around 24 billion tonnes of hard coal and 14 billion of 38.5 million people live in a 312 685 km2 tonnes of lignite and soft coal. Predictably, Poland has 200 territory that borders Germany, Belarus, the Czech always heavily relied on coal for generating electricity. Republic, Slovakia, Lithuania, Russia and Ukraine. Coal fuels around 92.5 per cent of Poland’s supply. After the Second World War, a Soviet-backed However, inefficiencies have resulted in large 150 communist government ruled Poland until free annual losses, spurring reform of the sector. In 1998, elections in 1989 produced Eastern Europe’s first post- the government introduced a five-year hard coal sector 100 communist government. reform programme that closed the most inefficient Poland joined the European Union (EU) in 2004, mines and reduced the number of people employed in

and its economy has been one of the fastest growing the industry. The government began consolidating the Generation (TWh) 50 in Europe. Rising residential demand poses a significant industry for privatisation in 2003. challenge for the electricity industry. Economic development, increases in wage rates Electricity Market 0 and improvements in the standard of living have all Poland began liberalizing its electricity sector in 2003 2004 2005 2006 contributed to changes in Poland’s energy consumption. 1998, and it is now completely open to competition. Business Monitor International (BMI) is forecasting real Government policy is to improve fuel consumption gross domestic product (GDP) growth averaging 4.95 efficiency, rationalise heat and electricity consumption, per cent per annum between 2007 and 2012. GDP promote renewable energy sources, improve per capita and electricity consumption per capita are environmental protection and increase supply security forecast to increase significantly. Power consumption is through diversification of fuel supply. The plan is to expected to increase from 141.7 TWh in 2007 to 176.4 increase the competitiveness of the Polish electricity TWh by the end of 2012. sector by introducing privatization and deregulation. The Energy Law of 1997 opened the way to Energy Overview an important restructuring of Poland’s electric power According to the Oil & Gas Journal, Poland has sector into three subsystems: generation, transmission proven oil reserves of 96 million barrels. However, its and distribution. The electricity sector remains largely oil production is only 37 200 barrels per day (bpd), controlled by the government, even if important reforms compared with consumption of 447 000 bpd. This have been undertaken. forces Poland to import around 98 per cent of its Poland’s high-voltage power transmission network, requirements. It also imports 60 per cent of its natural defined as all lines operating at 220 kV or 440 kV, is now gas requirements, mostly from Russia. operated by the Polish Electricity Grid (PSE) company. With such a heavy reliance on imports, Poland is The 28 local distribution companies operate lines attempting to exploit its domestic reserves and improve rated at 110 kV and below. These companies have its energy security It is looking to increase upstream gas been organized into seven geographical groupings, activity in Norway and North Africa. The country is also and two group consolidations have already taken place, speeding up construction of its proposed Swinoujscie creating the G-8 Group (eight distributors in central liquefied natural gas (LNG) plant on its Baltic coast. and northern Poland) and ENEA SA, comprising five Contribution of renewable electricity The process of restructuring the oil and gas industries merged companies. There are plans to create three to total annual energy supply began in 1994. In August 2002, the Polish government more consolidated power distributors. adopted a plan to restructure and privatize the Polish The distribution companies are also becoming Year % Oil and Gas Co (POGC), the wholly state-owned oil electricity trading entities. In addition to the large power 2003 5.1 and natural gas company. According to the plan, POGC stations that have been turned into companies, the would remain responsible for natural gas transmission, government has also begun to privatize more than 200 2004 5.2 storage and wholesale trade, while six separate regional small-scale power and combined heat and power (CHP) 2005 5.3 companies would be responsible for distribution. In plants that are connected at the distribution level. 2006 5.2 May 2004, the Polish government agreed to open the The Polish electricity sector continues to consolidate country’s natural gas market to competition. in line with the government’s plan to restructure the Source: OECDr

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Electricity production in GWh, by month Source OECD Poland’s per capita consumption of electricity is below the EU average, but domestic electricity consumption is expected to reach this level by 2030. 15000 District heating systems require modernisation, creating 2006 2007 2008 great opportunities for equipment suppliers. 12000 Polish power generation needs urgent restructuring, for environmental reasons, and to improve its efficiency 9000 and make it competitive, offering another good opportunity for suppliers of modern equipment and 6000 associated maintenance. Poland’s commitment to meet the EU directive on 3000 environmental protection and its target of a 14 per cent share of electricity generated from renewable sources make it a good place to investment in new 0 renewable energy projects, mostly wind power plants. Jan Oct Feb Apr Dec July Nov Aug Mar May June Sept RWE Innogy will add 730 MW of total capacity to this sector. The first two wind farms will be erected in industry. In the power generation sector, this has Suwalki and Tychowo in 2009. focused on creating four large regional companies, By 2010, energy utilities in Poland are required to Polska Grupa Energetyczna (PGE), Południowy Koncern provide 10.4 per cent of their energy consumption Energetyczny (PKE), ENERGA and ENEA. PGE is the from renewable energy. By 2020, this figure will largest with an installed capacity of 11 800 MW and increase to 15 per cent. According to calculations produces 52.6 TWh of electricity per year. by PSE, 4000 MW of wind electricity must come on Although Poland’s electricity generation is stream by 2010 to achieve this target. Only 400 MW of dominated by coal, there are 20 hydropower stations wind energy is currently connected to the grid. located in the mountainous south-west of the country. Upgrades are being made to existing coal-fired Most of these are small, but there are also four plants, such as the installation of air pollution control pumped storage plants with a joint capacity of around systems, while Alstom is building a 833 MW clean 1500 MW, adding significant flexibility to Poland’s total coal power plant in Belchatow. Poland’s largest energy generating capacity of 34.6 GW. company, PGE, is building a 1600 MW coal fired power Generation capacity construction in Poland has station in eastern Poland. Foster Wheeler is building been inconsistent over the past 30 years, resulting the world’s first supercritical circulating fluidized bed in an ageing system that is becoming an increasingly (CFB) boiler island for a new 460 MW power plant at serious problem. More than half of the current capacity Lagisza in southern Poland, which is due to go into was built in the 1970s, 60 per cent of the system is operation this year. more than 15 years old and 40 per cent is more than 20 years old. More than 1.5 GW has been in operation Future Trends for more than 30 years. Insufficient expenditure The Polish power generation sector is the largest in on maintenance and modernization projects has Central and Eastern Europe, and the country currently exacerbated the problem. PSE estimates that over has power to export. The Polish government expects 20 GW of capacity needs rehabilitation, while almost electricity demand to grow by over 50 per cent by 3 GW will need to be retired. 2020. This, combined with the ageing power station fleet, presents a major challenge in terms of maintaining Infrastructure Investment supply security and reducing environmental impact. In addition to framework legislation and good-faith Therefore, efficiency has been a major part of efforts, Poland will need money to match Western Poland’s energy policy, along with the promotion of European countries in terms of environmental protection. cogeneration and combined heat and power, and The Polish government estimates that it will need €40 investment in renewable energy sources. Implementing billion ($52 billion) – equal to the Polish annual public these policies, encouraging energy savings and closing budget – to meet EU environmental criteria. down inefficient industrial plants has reduced the Poland is a leader among central European countries country’s energy intensity level significantly. in terms of volume of foreign investment inflows. The BMI forecasts that Poland will account for 7.73 per strong growth prospects of the Polish economy, the cent of Central and Eastern European regional power growing domestic market and its accession to the EU generation by 2012 and remain a net exporter of make Poland highly attractive to foreign investors. electricity to neighbouring states.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Russia Russia’s nascent private generating companies, created as part of the country’s reform process, are struggling to manage their infrastructure investment commitments in the face of the economic recession.

Russia is located in northeastern Europe and Gazprom’s four largest fields Installed generating capacity by source, 2007 (GW) Source: northern Asia and is the largest country in the are in decline, and new world, with a total area of 17 075 200 km2. fields in Siberia will be more Its 142.3 million population live in a diverse expensive to bring on-stream. 44 collection of territories located across 11 different Russians consume around time zones. 400 billion m3 each year, and Despite going through a period of considerable the government is looking 88 economic reform, the post-soviet, democratic Russia to reduce consumption by a still retains elements of a centrally planned economy, quarter in order to increase 22 with considerable power residing in the Kremlin. export sales. Thermal gas Former president Vladimir Putin was responsible for Coal reserves stand at 157 Thermal coal replacing directly elected regional governors with billion tones, second only to Nuclear appointees, while as prime minister, Putin remains, the USA. Production in 2006 Hydropower in most Russians’ eyes, the most powerful force in was 303 million tonnes, and 56 the country, despite the election of Dmitry Medvedev output is expected to reach as president. 400-450 million tonnes by 2020. Russia’s economy has enjoyed very strong growth on the back of high oil and gas prices, with GDP Electricity Market running at an average of 7.3 per cent in the years Russia is the fourth largest generator and consumer of 2003-2007. However, the world economic downturn electricity in the world. Thermal power plants account and the collapsing oil price has hit Russia harder than for around two-thirds of production, followed by most countries, resulting in a sharp slowdown in hydropower (20 per cent) and nuclear (15 per cent). economic activity and a fall in the value of the ruble of Despite considerable geothermal, wind and wave around 35 per cent against the US dollar. resources, renewable energy production accounts for less than 1 per cent. Energy Overview In July 2008, the state power monopoly RAO Russia’s economy is heavily reliant on energy exports, UESR was liquidated, having separated its assets with oil, gas and fuel making up 65 per cent of into multiple wholesale electricity companies (known total exports in 2007. This has manifested itself in as OGKs), which participate in a new competitive contrasting ways in the last year, with Russia able wholesale market. Fourteen territorial generating to exert political pressure on neighbouring countries companies (TGKs) were also created, and these reliant on energy exports. generated over $24 billion in investment from private Its dispute with Ukraine in early 2009 created investors in 2007. Principal energy indicators unease in a number of other European countries, Germany’s E.ON and RWE, Italy’s Enel and Finnish whose Russian gas supplies are transported through Fortum are some of the most prominent foreign Electricity production 964 TWh Ukraine. However, Russia’s economy has suffered entities that have paid premiums for strategic or heavily from the drop in oil prices from a peak of controlling stakes in the generating companies. Electricity consumption 985 TWh $147 a barrel to the current $41 a barrel, and the All 25 GW of Russia’s hydropower assets are held government is now predicting that the economy will by RusHydro, which remains state-controlled, as do all Electricity imports 10 TWh shrink by 2.2 per cent in 2009. nuclear power assets, controlled by Rosenergoatom. Russia has 60 billion barrels of proven oil reserves. The Federal Grid Company also remains state owned Electricity exports 22 TWh Production of crude reached 9.4 million bbl/day in and is responsible for system operation. Responsibility 2007, challenging Saudi Arabia for the title of world’s for oversight of the electricity sector has been given to Coal production 309 million tonnes biggest oil producer, with an estimated 7 million bbl/ the Ministry of Energy. day being exported. There are seven separate regional power systems Oil production 9.9 million b/d At 47 570 billion m3, Russia has the largest natural in the Russian electricity sector: Northwest, Center, 3 gas reserves in the world. Reported production in Middle Volga, North Caucasus, Urals, Siberia and Far Natural gas production 565 billion m 2007 was 656 billion m3, but production at monopoly East. The Far East region is the only one not connected

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Russia

to an integrated power system. The grid comprises During 2008, Russia’s nuclear energy sector Forecast electricity consumption (TWh) almost 2 million miles of power lines, 93 000 miles completed structural reforms and increased its assets. Source: ______Nationmaster.com of which are high-voltage cables over 220 kV. There It also mapped out a range of new sites for the are currently two efforts underway to integrate the construction of nuclear power plants. A new nuclear 2000 Russian and Western European electricity grids. power plant was announced in the Baltic exclave of Russia is participating in the Baltrel programme, Kalingrad, in which private foreign owners would 1500 designed to create an energy-ring of power be allowed to take an ownership interest. With companies in the Baltic states. Also, the Union for the appointment of Sergei Shmatko (ex-head of the Coordination of Transmission of Electricity (UCTE), Atomstroexport) as Russia’s energy minister, it is 1000 TWh of which 20 European countries are members, has expected that nuclear power generation will have a entered into discussions with Russian colleagues higher profile, both in terms of domestic electricity 500 over the technological and operational aspects of production and as a vendor for international projects. interconnecting their systems. Equipment in Russia’s hydropower plant is over 0 Russia’s demand for electricity has been rising 40 per cent obsolete, due to chronic under-funding. steadily since 1999 and was predicted to reach 1426 RusHydro recently announced a scaled-back programme 2010 2015 2020 TWh by 2010. However this growth trend has gone for 2009 that will see the sum of 79 578 million rubles into reverse, with reported demand for electricity in ($2.2 billion) invested and the commissioning of 145 January falling 7 per cent year-on-year. As a result, free- MW of generating capacity. market electricity prices have fallen 40 per cent since Russia’s first power plant to be built on the basis August 2008. Currently, only 30 per cent of electricity of a turnkey EPC contract by a non-Russian company is freely traded, and this is expected to rise to 50 per is nearing completion in Moscow. The €300 million cent later this year. Plans are also being drawn up for ($378 million) advanced combined cycle cogeneration the establishment of a long-term capacity market to let facility, officially titled Mosenergo Moscow TPP-26 Unit generation companies recoup building costs. 8, is being built by Alstom and will also be the most Despite considerable geothermal, wind and wave efficient in the country. resources, renewable energy production accounts for less than 1 per cent. Russia had 16.5 MW of installed Future Trends wind generation at the end of 2007, although a Russia faces the problem of completing its reform federal programme has called for 228 MW of wind process and developing a fully traded market in power by 2010. the face of major economic pressures. Some of the transition steps are likely to be delayed. Long-term Infrastructure Investment growth in demand will need to be met, and the current Years of under-investment in Russia’s power generation, owners of the wholesale generators are finding that transmission and distribution infrastructure has left the the calculations they made at the time they bought system operating at full capacity. The years of economic their stakes, no longer stand up. Some government growth have put an increasing strain on the sector and intervention or consolidation in the sector seems likely. have been one of the main driving forces leading to the A few of the original investors in OGKs are currently liberalization of the sector as a way to attract investment looking to sell their stakes. in new plants and delivery infrastructure. The contrast between the increasing state The new OGK and TGK owners took over obligations involvement in the oil and gas sectors and the trend for construction programmes and the delivery specific towards liberalization and private ownership in the capacities to the market in time. The current economic power industry has been much remarked upon. The slowdown has meant that the majority of the new difficulty in attracting investors to a nascent industry owners have found it hard to meet these obligations, with highly subsidized prices is evident. Although partly due to non-payment issues. The new owners tariffs rose 19 per cent in 2008, further reform is have lobbied the government to cancel projects and needed to bring consumer rates more in line with change the ownership terms. production costs. Although the government has insisted that the However, the current economic climate makes this planned infrastructure expansion programme must more difficult. If power producers were to recapture go ahead, announcements are anticipated concerning their costs and earn fair returns, prices would likely corrections to the 2020 master plan and investment jump as much as 200 per cent. programmes. Much of the equipment employed in Russia is not about to pull the plug on all state refurbishing and expanding Russia’s electricity industry controls, but it will move cautiously and try to walk a is imported, and this is becoming more expensive as the fine line between opening markets and avoiding the ruble weakens. large price hikes that could lead to social unrest.

68 PennWell Global Power Review 2008

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   S A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Spain Faced with a challenging economic outlook and rising unemployment, Spain continues to invest in the power sector, focusing on gas turbine combined cycle generation, wind power and solar energy in particular.

Spain occupies approximately 500,000 km2 of land medium term, because Market shares (by number of consumers) of suppliers and by energy share in 2007 Source: CNE and has a population of more than 46 million. significant new power It joined the European Union in 1985 and, until generating capacity will be recently, enjoyed a period of prosperity. However, coming on stream, including Endesa 2008 could be a pivotal year. a gas turbine combined- Investment in Spanish residential housing has cycle plant, on-shore wind Iberdrola accounted for 9 per cent of gross domestic product turbines and photovoltaic Gas Natural (GDP) – a higher proportion than in many other parts installations. of Europe – so the recent housing market downturn Union Fenosa has had a significant impact on the country’s economy. Electricity Market In GDP terms, Spain’s economy grew by approximately The past two years have Cantábrico Energia 3.7 per cent in 2007 and 1.4 per cent in 2008. Current seen significant moves to * Consumer share + Energy share predictions suggest 2009 will see a fall of approximately deregulate Spain’s domestic Others + 1 per cent. Unemployment, already the highest in the electricity and gas markets. 0 102030405060 EU, is predicted to rise to almost 15 per cent this year. On the back of Law 17/2007, % The relatively rapid reversal of Spain’s economic steps are being taken to fortunes presents a serious challenge to the Socialist boost the growth of the liberalized market. For example, government, which was re-elected for a four-year term the tariffs for high-voltage supplies (greater than 1 kV) in March 2008. Steps being taken to meet this challenge were abolished in 2008, leaving all non-household include establishing a fund of up to €50 billion ($64 or small to medium enterprise (SME) customers to billion) to buy assets from financial institutions that need negotiate their electricity supplies in the free market. liquidity and spending €11 billion on infrastructure, the This step was prompted by a decline in the number of motor industry and other targets. consumers buying electricity in the free market, due to high prices. Other recent regulatory changes include Energy Overview Royal Decrees 222/2008 and 325/2008, which regulate Spain has limited fossil fuel reserves and is dependent distribution and transmission activities respectively. on imports to meet its energy requirements. While The companies Endesa and Iberdrola account for its most plentiful indigenous resource is coal, natural approximately three-quarters of the electricity supply gas has become the country’s main source of fuel market in Spain. (The other main operators in the for electricity production. Enagás reports that 25 per Spanish electricity sector are the EDP/Hidrocantabrico cent of total electricity produced in Spain in 2007 was Group, the Union Fenosa Group and Gas Natural.) generated using natural gas. That year, Spain imported Endesa is the leading utility in the Spanish electricity 34 474 million m3 of natural gas, making it the eighth system. With an installed capacity of 24 490 MW, largest importer of natural gas worldwide. Endesa sold 40 629 GWh on the deregulated market Oil is the dominant fuel for energy generation, and 72 746 GWh on the regulated market in 2007, accounting for 52 per cent of primary energy reaching more than 11 million customers. demand, but high prices have prompted the Spanish Nuclear and hydroelectric output accounted for government to diversify its sources of energy and 41 per cent of Endesa’s mainland generation mix (at implement an energy savings and efficiency plan for 22 906 GWh and 7149 GWh respectively), coal provided Fuel consumption in Spain in 2007 2008-2011. Key objectives of this plan include raising 34 802 GWh and combined cycle plants 8080 GWh. Fuel Consumption (million tonnes of oil equivalent) environmental awareness and reducing the negative Iberdrola is the second largest operator in the impact that Spain’s heavy dependency on fossil fuels Spanish electricity sector and it is expanding its presence Oil 78.7 has on its economy. In total, Spain produced 90 TWh on a global platform. For example, it completed an Natural gas 31.6 of electricity from burning fossil fuels in 2006. acquisition of US-based Energy East Corporation in Coal 20.1 According to Spain’s national energy commission September 2008. Its renewable energy arm, Iberdrola (CNE), the country’s demand for energy is increasing at Renewables, is an important player in the global wind Nuclear energy 12.5 an above average rate compared with other European energy sector and has an installed wind power capacity Hydroelectricity 7.4 countries. However, the CNE does not predict any in Spain of 4450 MW, complimented by a further 3696 particular stress in meeting demand during the short to MW of wind capacity abroad. Source: (BP Statistical Review of World Energy)

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Recent trends in Spanish electricity production Source: Monthly electricity statistics, OECD/IEA 2008 liquefied natural gas (LNG)-fired gas turbine combined cycle (GTCC) power generation systems from Endesa. GE Energy’s F-class gas turbine technology has been Sept 2008 (GWh) Sept 2007 (% change) Combustable selected to extend the life of an existing combined cycle fuels power plant at Granadilla on Tenerife. Nuclear In October 2008 the Irish power utility ESB Hydro International (ESBI) announced plans to build a €500 Geoth./Wind/ million ($639 million) gas fired power station in Solar/Other northern Spain. Indigenous production Data released by the European Wind Energy Imports Association shows that wind capacity grew more in Exports Europe in 2007 than any other power-generating technology and that this increase was driven primarily by Spain. The country set a record in 2007 for installing the highest wind generation capacity, 3522 MW, of

0 0 any European country in any year. Approximately 10 10 -50 -40 -30 -20 -10

5000 per cent of Spain’s electricity now comes from wind. 10000 15000 20000 25000 Spain is also being seen as the main market for Total electricity supplied 22319 Total electricity supplied -5.6 developing concentrating solar power worldwide, having led the way by inaugurating the first commercial- Red Eléctrica de España (REE) is the sole owner of scale plant some two years ago. The 11 MW PS10 solar transmission assets in Spain. REE reported that demand thermal power plant at Sanlúcar la Mayor in southern for electricity in 2008 reached 263 961 GWh, which Spain, developed by Solucar, is designed to generate represents growth of 1 per cent compared with 2007. 23 GWh of electricity per year. Looking at the electricity supply mix, REE noted a The AndaSol solar power plant in Andalusia progressive increase in combined cycle generation and converts solar energy into electricity using a parabolic wind energy production, which satisfied 32 per cent and trough collector and a molten-salt thermal storage 11 per cent of demand respectively. Most significant system. Andasol 1 started its test run in the autumn decreases have been seen in coal and hydroelectric of 2008. It is expected to yield 179 GWh of electricity power generation, which met 16 per cent and 7 per per year. cent of demand respectively (compared with 24 per cent REE expects to spend an average of €800 million and 10 per cent in 2007), which in part may be due to per year on Spain’s transmission network until drought conditions in Spain over the past few years. 2012. Transmission links are also developing with The need to reduce the country’s dependency on Spain’s neighbours. In 2008, the French and Spanish imported fossil fuels has prompted further scrutiny governments signed a formal agreement to almost of the government’s anti-nuclear policy. Operating double the capacity of the link through the Pyrenees. permits for seven of Spain’s eight nuclear plants are up REE and French operator RTE will jointly develop the for renewal by 2011. project. The reinforcement of Iberian electricity market Speaking at the 50th anniversary meeting of the (MIBEL) internal links follows foreseen deadlines: nuclear energy agency in October 2008, Spanish capacity will be close to 2000 MW in two years and is minister Miguel Sebastián commented: “Whatever expected to reach 3000 MW by 2014. the future of nuclear power in Spain, the Spanish government is determined to ensure that the use of Future Trends nuclear energy will be possible only under the highest In the summer of 2008, the Spanish minister of industry safety standards, and the most reassuring levels of explained the government’s plan for the electricity and protection to the population and the environment.” gas sectors from 2008 to 2016. Nearly €19 billion ($24 In January 2009, Iberdrola announced an initiative billion) of investment will be used to improve the gas and to build nuclear plants in the UK, working in electricity network grids, connect new generation plants conjunction with Scottish and Southern Energy. to the grid and develop international connections. The growth of the renewable energy sector also Infrastructure Investment looks set to continue, exemplified by a programme As already outlined, natural gas has become an to install 500 MW of solar power in Spain by 2010, increasingly important source of power generation in announced in September 2008, with 233 MW allocated Spain. Plant investment in this sector is widespread. to ground installations and 267 MW for rooftop For example, MHI has received an order for two sets of installations.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Sweden Development in Sweden’s power infrastructure, which has the lowest carbon footprint in the European Union, is focused on combined heat and power, biomass and nuclear power.

The Kingdom of Sweden is a Nordic country on per cent in 2006. This is Electricity production by source, 2007 (GWh) Source: Swedish Energy Agency the Scandinavian Peninsula in Northern Europe. composed of renewable Sweden has land borders with Norway to the west electricity generation (18 per 505 25 and Finland to the north-east, and is connected to cent), the industrial sector 7471 1430 Total: 145130 Denmark by the Öresund Bridge. The Baltic Sea (14 per cent), the district 5763 65658 wraps around its eastern and south-eastern land heating sector (6 per cent), the borders, while the Gulf of Bothnia lies to its east. residential and services sector Hydro power 2 At 449 964 km , Sweden is the third largest (5 per cent) and the transport Nuclear power country in the European Union. Its population of sector (1 per cent). CHP in industry more than 9.1 million is growing at a rate of 0.7 per The renewable proportion CHP in public steam cent. The capital, Stockholm, is the largest city in of the energy use of dwellings, and hot water works the country, the second and third largest cities are excluding electricity and district Condensing Gothenburg and Malmö. heating, has increased from 32 steam power Gas turbines & others Sweden is a constitutional monarchy with a per cent in 1990 to 75 per cent 64279 Wind power parliamentary system of government and a highly in 2006. The industrial sector, developed economy. The country became a member especially the pulp and paper of the EU in 1995, but rejected adopting the single industry, is the largest biofuel user. The proportion of currency in a referendum in September 2003. Sweden renewable energy in district heating has increased from has a GDP per capita of $49 441. 24 per cent in 1990 to 55 per cent in 2006. Following the general election in September 2006, Sweden has ten operational nuclear reactors. The a centre-right coalition government comprising the nation’s largest power station, Ringhals Nuclear Power Moderate, Centre, Liberal and Christian Democratic Plant, has four reactors and generates about 24 TWh parties took office in October 2006. This victory for a year, the equivalent of 47.6 per cent of Sweden’s the Alliance for Sweden ended 12 years of Social electricity consumption. Sweden used to have a Democratic Party (SAP) rule. The next general election nuclear phase-out policy, aiming to end nuclear power is scheduled for 2010. generation in Sweden by 2010. However, in February 2009 the Swedish government decided to scrap a Energy Overview three-decade ban on building new nuclear reactors, In 2007, Sweden produced 145 130 GWh of electricity, saying it needs to avoid producing more greenhouse importing 16 052 GWh. Sweden has a very small gases. The centre-right coalition government’s capacity to produce oil at 2350 barrels per day (bpd), proposal, which needed approval from parliament which is dwarfed by its consumption of 353 700 bpd. at the time GPR went to press, called for new The country has no proven natural gas reserves and reactors to be built at existing plants to replace the imports all 1 billion m3 of its annual consumption. ten operational reactors when they are taken out of The lack of indigenous fossil fuels led Sweden service. Prime Minister Fredrik Reinfeldt said he did not to become a world leader in the implementation of feel bound by the referendum because it did renewable energy. Renewable power accounts for not specify how to replace nuclear energy. Swedish energy overview 55 per cent of all electricity generation in Sweden, of which 45 per cent is large-scale hydropower. Electricity Market Coal production 4000 tons Electricity from hydropower accounts for 45 Sweden is a forerunner in electricity market Geothermal power use 1147 GWh/year per cent overall, while nuclear power delivers 47 liberalization and its energy sector is largely 3 per cent of Sweden’s power. Wind power produces privatized. The Nordic energy market, Nord Natural gas consumption 1.006bn m 1 per cent. Biomass (wood) is also used extensively in Pool, is a common marketplace for energy in Nuclear reactors operable 11 combined heat and power (CHP) plants to produce Sweden, Norway, Denmark and Finland. The heat for district heating, central heating and industry group comprises Nord Pool ASA and Nord Oil consumption 353 700 bbl/day processes. Pool Spot AS. The latter comprises the wholly Total energy usage per person 5.7 tons of oil equivalent per person Sweden now leads the EU in the proportion of owned subsidiaries, Nord Pool Clearing ASA its total capacity generated by renewable energy, and Nord Pool Consulting AS. The national grid Wind energy installation 442 MW which increased from 33.9 per cent in 1990 to 43.3 companies of Sweden and Norway, Svenska Source: Nationmaster

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Electricity usage in Sweden, 2007 (GWh) Source: Swedish Energy Agency Kraftnät and Statnett, each Infrastructure Investment hold 50 per cent in Nord Sweden has the lowest carbon power generation Pool ASA. capacity of any EU member, and it is currently meeting 14736 Total: 161182 Nord Pool allows these its targets to reduce its greenhouse gases under the 10845 countries to assist each other Kyoto Protocol. With more than 90 per cent of its 57983 when additional electricity power capacity coming from established nuclear and supplies are required. If one hydropower plants and the energy policy emphasis Manufacturing country is unable to satisfy on efficiency, Sweden has little new capacity in the industries, domestic demand from its pipeline. Most infrastructure investment is being 33434 mines & quarries own output, it can import spent on upgrading existing nuclear plants and in Services the necessary power from transmission and distribution. Agriculture a neighbour. In January 2009, ABB received an order from Households 2964 The system operators of utility Vattenfall to support a 160 MW upgrade of the Losses each country are responsible Forsmark 3 reactor. Under the deal, ABB will provide 40039 Exports for keeping their areas the electrical package needed to increase gross output electrically stable, which in of the Swedish unit from 1200 MW to 1360 MW. The Sweden is Svenska Kraftnät. In practice, this means project, which will also extend the operating life of the the transmission system operator (TSO) keeps the reactor, is scheduled to be completed by 2014. frequency at 50 Hz and maintains supply security in In March 2008, Nexans won a deal worth €150 their area. For each local area, there is a local grid million ($237 million) from the Finnish and Swedish operator, effectively a non-commercial participant, national grid operators for a subsea cable between the which handles the local low- voltage system. two countries. The link will boost transmission capacity Since Svenska Kraftnät is responsible for keeping between Finland and Sweden by 800 MW, or about 40 the power system in Sweden balanced, it effectively per cent, and is set to go live in late 2011. The new controls the power system throughout the country. connection is 270 km long, while the subsea cable Therefore, commercial participants in the Swedish element will extend for about 200 km. energy market are not, and cannot be, responsible for Finnish energy group Fortum is developing carbon the security of supply. capture technology suitable for pressurized fluidized Nord Pool says that if a retailer in the south of bed coal combustion technology at a test site in Sweden, for example, has bought power from a Stockholm. The demonstration started in 2007 and Swedish producer in the north, then the producer uses a complex system of pressurized filters, absorbers has no way to guarantee there will be power at the and condensers that have been found to capture 95 plug with the retailer’s customers. Ultimately, the per cent of carbon dioxide. commercial participants are only able to decide what price to charge each other and the end users. Since the Future Trends commercial participants deliver financial services only, While the planned phase-out by 2020 of nuclear their role depends on how liberalized the market is. power was suspended in 2006, the outlook for The Nordic system price is set in Nord Pool’s physical nuclear power remains uncertain. It is hard to see market for the following day on an hourly basis. This how phasing out nuclear power could serve Sweden’s is based on registered offers/bids from generators and broader energy and climate policy goals, according to distributors respectively. the International Energy Agency (IEA), which also says The price is determined by Nord Pool’s trading system, that the current situation has created uncertainty for all which matches offers and bids with Nordic transmission forms of electricity generation in the Nordic area. capacity. The electricity price is basically the same across In an effort to reduce dependency on nuclear the whole region, but with certain regional differences, power and oil use in transport, Sweden has launched a which reflect transmission bottlenecks. Prices paid by multi-billion dollar programme to promote renewable consumers can vary from country to country, however, energy and energy efficiency. primarily because of different tax levels and competition Sweden’s 3500 clean technology companies jointly in the Nordic consumer market. earn an estimated $14 billion in revenue. Exports, which Variations in the wholesale (spot price) for each make up about a quarter of their overall sales, have country also play a minor role. In the financial grown 75 per cent over the past four years. To further market, the same buyers and sellers conclude forward boost this sector, Sweden has earmarked around contracts for power. This allows them to hedge against $590 million for environmental projects over the next price changes, which also provides a measure of two years, including $180 million to commercialize predictability for consumers. green technologies.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE Turkey Turkey’s power sector is being privatized as the country seeks to join the European Union and link up to the European energy grid. Meanwhile, demand for natural gas, its preferred fuel, is far outpacing production.

Turkey is located at the eastern end of the of hard coal and 9.3 billion tonnes of Generating capacity Mediterranean Sea, straddling the sea passage lignite, of which over two-thirds is of Source: Turkish Statistical Institute - Statistical Yearbook 2007, TEIAS, EUAS, Ministry of Energy and Mineral Resources that links the Mediterranean and Aegean Seas low calorific value. Production was 60.2 to the Black Sea. The country shares borders million tonnes of lignite and 2.2 million 50000 with Bulgaria and Greece in the west and tonnes of hard coal in 2006, while Georgia, Armenia, Iran, Iraq and Syria to the consumption was 60.9 million tonnes 40000 east. The smaller western part of the country is and 19.5 million tonnes respectively. In geographically considered part of Europe, while the same year, 83 per cent of lignite and 30000 the larger eastern part is in Asia. The country 27 per cent of hard coal was used for

2 covers a total area of 780 580 km and a land area power generation. 20000 of 770 760 km2. Its population was 71.9 million Gross theoretical hydropower in 2008. potential in Turkey is 433 TWh/year, 10000 Modern Turkey was formed in 1923 from the according to the World Energy Council, Installed capacity (GW) remains of the Ottoman Empire. It was a one-party of which 130 TWh/year is considered 0 state until 1946. Today it is a presidential democracy, economically exploitable. Potential under which the members of the Grand National generating capacity is 35 000 MW, 2000 2001 2002 2003 2004 2005 2006 2007 Assembly are elected by popular vote. They, in turn, of which less than 40 per cent has elect the president for a single seven-year term. There been utilized. There is estimated to be 35 000 MW have been several military interventions in the country’s of exploitable geothermal capacity and 50 TWh/year recent political history, most recently in 1997, while of economically exploitable onshore wind potential. fundamentalist Islam and a Kurdish independence Economically viable solar potential is around 300 TWh/ movement threaten stability. year, and there is significant biomass potential. The economy suffered a severe contraction in 2001, but has since recovered. GDP in 2007 was $663.4 Electricity Market billion and growth was 4.5 per cent. However, inflation Turkey’s electricity market is undergoing a slow has been rising, reaching 12 per cent in mid 2008. The restructuring as the country brings its institutions in country is in negotiation to become a member of the line with the requirements for EU accession. In 1993, European Union (EU), but faces opposition from some the state-owned Turkish Electricity Authority was existing member states, notably Greece. split into two in parts: a generation and transmission company (TEAS) and a distribution company (TEDAS). Energy Overview In 2001, an Energy Market Regulatory Authority Turkey has limited fossil fuel reserves and is a net (EMRA) was created and TEAS was split into a importer of oil and gas. Oil reserves were estimated transmission company (TEIAS), which also operates the to be 260 million barrels in 2006. Production was electricity market, a generation company (EUAS) and then around 42 000 barrels per day (bpd) and the a wholesale market trading company, TETAS, that also output level was similar in the first six months of 2007. controls the import and export of power. In 2004, the Principal indicators However, consumption was 666 000 bpd. The national government published its plan for full privatisation and Country area 780 580 km2 oil company is investing in overseas oil fields in order to liberalisation of the market, in conformation with EU Population (2008) 71.9 million secure national supplies. regulations, over a period of eight years. Natural gas reserves in Turkey are around 8500 First to be fully privatized is TEDAS, which currently GDP (2007) $663.4 billion million m3. It produced 680 million m3 of gas in 2006 controls 20 of the country’s 21 distribution companies. GDP growth (2007) 4.5 per cent and consumed 30 500 million m3, rising to 35 100 Bidding for these finally began in 2008. Meanwhile, million m3 in 2007. With demand roughly 45 times the sale of some of EUAS’s power plants to the private production, most natural gas is imported, currently sector has also been announced, but this will exclude Installed generating capacity (2007) 40 834 MW from Russia and Iran, but supplies have been regularly a number of large power plants with a combined interrupted for political and economic reasons. The capacity of around 7500 MW. Whether the power Electricity production (2007) 191.6 TWh country is planning to import gas from Azerbaijan plant sale will actually take place soon, given the Peak demand (2006) 28 000 MW through a new pipeline. present economic outlook, seems doubtful. Eight small Coal reserves are estimated to be 1.3 billion tonnes plants belonging to EUAS, with a combined capacity Electricity consumption (2006) 143.0 TWh

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of 150 MW, were transferred to the Ankara Dogal for interconnection with the Union for Coordination Electricity Generation Company in 2007. and Transmission of Energy (UCTE) grid by 2009. Generation in Turkey is provided by a combination of public and private sector plants. Total installed capacity Infrastructure Investment was 40 834 MW in 2007, according to EUAS, which has According to the transmission company TEIAS, the changed little since 2006, when capacity was 40 565 installed capacity in Turkey needs to increase by between Predicted demand growth MW. Of this, 23 874 MW (58.5 per cent) was 20 GW and 30 GW by 2016 to meet an expected Source: Ministry of Energy and Natural Resources controlled by EUAS and 16 960 MW by other, demand peak of up to 70 GW, based on a high-growth mainly private sector, organisations as well scenario in which demand continues to grow by 8 per 500 as the state lignite company TKI. The private cent each year. Meanwhile, the state planning authority Low growth scenario sector in Turkey is a mixture of BOO and BOT predicts that demand could more than double between High growth scenario 400 and BOT-structured projects, auto producers 2007 and 2016, and TEIAS figures suggest it could and licensed generators. EUAS capacity reach 500 000 GWh by 2020, by which time as much as comprised 12 525 MW from thermal power 50 GW of new capacity will be required compared with 300 plants and 11 349 MW from hydropower the installed capacity in 2007.

TWh plants in 2007. Private sector capacity Potential sources for new capacity include the 200 includes 14 747 MW based on thermal country’s lignite deposits and extensive hydropower power plants, 2045 from hydropower, 23 potential. Hydropower could supply around 20 000 100 MW of geothermal capacity and 146 MW MW of additional capacity, with a further 11 000 MW of wind capacity. supplied by coal and lignite. There are also proposals 0 Total production in Turkey in 2007 was to import hard coal for power generation. Wind offers 191.6 GWh. Of this, EUAS provided 92 a further option and proposals have been put forward 2005 2010 2015 2020 327 GWh (48.2 per cent) while the private for wind farms with a total capacity of 8000 MW, but sector contributed 99 231 GWh (51.8 per cent). The project approval is slow. The country has been planning bulk of this power, 155 196 GWh, was provided by a nuclear plant for many years and a power plant law thermal power plants, primarily burning natural gas currently permits construction of 4000 MW of nuclear (81 TWh) followed by lignite (32 TWh) and coal capacity, but there is no firm nuclear timetable. Any (14 TWh). Hydr opower provided 35 851 GWh, further shortfalls will be met with imports of natural geothermal 156 GWh and wind 355 GWh. Hydropower gas and oil. output was notably lower in 2007 than in 2006, when it reached 44 200 GWh. EUAS is currently engaged Future Trends in a power plant rehabilitation programme that will Capacity margins in Turkey are narrowing, making improve the availability of its power plants. This the need for investment in new generating capacity programme is due to be completed by 2013. vital. Full privatisation is due to be completed in 2012, Consumption in Turkey in 2006, the last year for but the completion of that schedule will depend on which figures appear to be available, was 143.0 GWh. continued government goodwill. A sale of distribution The industrial sector consumes most electricity, 54.7 per companies was postponed in 2007 for fear of a cent of the total in 2006, followed by the residential backlash during an election year. By the end of 2008, sector with 24.1 per cent and the commercial sector the programme appeared to be on track again. with 14.2 per cent. Although it seems likely that at least some Tariffs in Turkey are regulated by EMRA, and there generating capacity will remain with EUAS after are elements of both subsidy and cross-subsidy in privatisation, most will be owned by the private sector. those applicable in 2008, although these are due to A large part of future capacity must therefore be built be phased out by 2010, when tariffs should be set by, with private sector investment. While the investment supposedly, private sector distribution companies. climate in Turkey has improved during this decade, it is The transmission system in Turkey comprises a still vulnerable to both global economic conditions and backbone of 400 kV lines and 154 kV transmission the political situation. lines together with a small number of 66 kV lines, On the positive side, tenders have been sought which are due to be upgraded to 154 kV. The for two new private sector financed lignite plants distribution system is extensive and operates at 34.5 with capacity of 1200 MW each. Bids for these kV and below. Losses at the end of 2007 were below projects were accepted in June 2008. Meanwhile, a 3 per cent. EUAS power plant rehabilitation programme, which There are numerous interconnections between is due to be completed for thermal plants by 2011 Turkey and its neighbours, including two 400 kV and hydropower plants by 2013, will provide and interconnections with Bulgaria that will form the basis additional 13 900 GWh annually.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS EUROPE United Kingdom The UK’s response to the challenges of energy security and climate change centre on investment in combined cycle gas turbines in the short term and on nuclear power and wind energy over the long term.

The UK covers an area of almost 250 000 km2 Electricity Market Wholesale UK electricity market share, 2007) (GWh) and includes England, Scotland and Wales (which In 2007, the UK generated Source: National Grid (as reported in the 11th report of the Business and Enterprise Committee, July 2008) together comprise Great Britain) and Northern 408 TWh of electricity and Ireland. The UK has a parliamentary democracy. had a total generating 15% 18% Its population is approximately 61 million, and this capacity of nearly 83 GW. British Energy population is projected to increase by 4.4 million by Furthermore, Great Britain 5% E.ON 2016. Its unemployment rate was 6.1 per cent for had the capacity to import SSE the three months to November 2008, up 0.4 over and export a total of 2500 5% RWE 13% EDF the previous quarter and up 0.9 over the year. MW from and to France Drax Power The economy was a major issue for the UK in 2008. and Ireland. 6% Scottish Power In the autumn, the government announced a £50 billion Great Britain’s electricity International package to support the country’s banking sector, as the network operator, the 7% 12% Power flow of capital dried up. The country’s gross domestic National Grid, has predicted Centrica 9% product (GDP) contracted by 1.5 per cent during the a total increase in aggregate 10% Others fourth quarter of 2008. power station capacity of 37.8 per cent (or 30.2 GW) from the 2008/09 winter Energy Overview peak to the 2014/15 winter peak. Peak unrestricted In 2007, the UK was 91 per cent dependent on fossil demand in Great Britain was approximately 61.4 GW fuels for its primary energy supply. While it has a for 2007/08. This is estimated to rise to 67.3 GW by relatively rich and diverse resource base, over recent 2014/15, a growth rate of about 1.3 per cent per year. years it has grown increasingly reliant on imported Northern Ireland has current total installed gas and oil. generation capacity of 2793 MW (including renewables). Natural gas became the UK’s dominant fuel in the A single electricity market for the whole of Ireland was mid-1990s and currently meets nearly 40 per cent of established in November 2007. Eirgrid, the transmission primary energy demand. In 2007, the UK produced systems operator in the Republic of Ireland, carried out 76.04 billion m3 of natural gas, representing 2.5 per a series of adequacy studies in support of generation on cent of the world’s total. Gas production peaked in the grid for 2013. These studies found a capacity deficit 2000 and has since been declining. The UK imported of around 1000 MW across the island. 30.84 billion m3 of natural gas in 2007. Petroleum A new UK Planning Act is designed to support the meets about one-third of the UK’s primary energy introduction of new capacity by making the planning demand (the UK has recently become a net importer of regime clearer and more streamlined. Ministers will oil), and coal contributes about 18 per cent, its share provide National Policy Statements and a newly having fallen from nearly 50 per cent in 1970. established Infrastructure Planning Commission will Following publication of the government’s Energy agree final consents. Currently, consent has been White Paper in 2007, important developments affecting granted to build approximately 10 GW of conventional the energy sector in 2008 have included support for electricity generating capacity in the UK, of which 7.5 nuclear energy and formal approval of the Energy Act GW is under construction. 2008, plus bills on climate change and planning. The Focusing on the more immediate future, the government hopes to see construction of a new phase National Grid predicts a sharp increase of 8.3 GW in of nuclear power stations begin in 2013/14. capacity during 2009/10, 18 per cent of which will The Energy Act covers a range of areas. For include new wind capacity in Scotland and 12.5 per example, it seeks to enable a fit-for-purpose regime cent new wind capacity in England and Wales. for certain types of offshore gas infrastructure such The UK market is supported by the renewable as offshore gas storage; it introduces a renewable energy obligation, which requires electricity suppliers to heat incentive and a feed-in tariff for small-scale source at least part of their electricity from renewable renewable electricity generation; and it updates the generators. In Great Britain, this level started at 3 per legislative framework to reflect the availability of new cent of electricity supplied in 2002/03. The level for technologies, such as carbon capture and emerging 2007/08 was 7.9 per cent and for 2008/09 it is 9.1 renewable technologies. per cent. The total obligation for electricity supplied

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Electricity generating capacity in the UK by technology Source: Digest of UK Energy Statistics 2008 to customers across the UK infrastructure. In November 2008, Centrica outlined in 2007/08 was 25 551 357 the important role that Qatar will play in supplying MWh. liquefied natural gas (LNG) to the UK, beginning with 2%2% 1% 3% A substantial proportion of the shipment of the UK’s largest LNG delivery to date 5% 32% the UK’s electricity generating for use in the commissioning of the second phase CCGT capacity is due to close soon: expansion of the Isle of Grain LNG terminal in England. Coal 12 GW of coal and oil-fired Furthermore, construction of two new terminals to 13% Other conventional generating plants have opted import LNG is under way, near Milford Haven in steam* out of the European large Wales. In October 2008, E.ON began the next phase Nuclear Oil combustion plants directive, of preparing eight caverns at its Holford gas storage Hydro pumped which came into effect in facility in Cheshire, England, which should be able to 3 14% storage January 2008, and as a result store up to 165 million m of gas. In August 2008, Hydro natural flow will have to close by the end former energy minister Malcolm Wicks gave the go Other renewables of 2015 or after 20 000 hours ahead to Thor Cogeneration Ltd to construct a 1020 28% Wind of operation from 1 January MW gas-fired combined heat and power station at 2008 (whichever is the sooner). Seal sands, Teesside in England. * Other conventional steam includes mixed or dual fired In addition, according to current timetables, 7.3 GW of The wind sector dominates renewable energy thermal capacity and gas fired stations that are open cycle nuclear generation capacity will have closed by 2020 in the UK, as highlighted by Prime Minster Gordon gas turbines or have some CCGT capacity but mainly oper- ate as conventional thermal stations. and all but one of the UK’s nuclear power stations will Brown when he announced in October 2008 that the have closed by 2025. Therefore, significant investment UK is now generating 3 GW of its electricity supply UK electricity generated in 2007 Source: Digest of UK Energy Statistics 2008 is likely to be made in the UK from the wind. Exemplifying projects under construc- electricity sector in the coming tion, the first turbine was installed at the 180 MW years. Robin Rigg 60 turbine offshore wind farm in the 1%1% 1% 1% 1% 1% Making this investment Solway Firth in November 2008. 3% are companies such as the A range of other projects are at varying stages of Gas so-called “big six” – E.ON, development, as demonstrated by energy secretary 41% Coal 16% Nuclear RWE npower, EDF Energy, John Hutton’s approval of the UK’s fourth largest Other renewables Scottish Power, Scottish offshore wind farm, which will generate 315 MW at Oil and Southern Energy, and Sheringham Shoal, off the coast of Norfolk, England. Hydro pumped Centrica – plus operators such The renewable industry is also showing increased storage as British Energy, Drax Power interest in biomass and tidal power as future sources Hydro and International Power. of power. Drax is in the middle of building a 400 MW Wind The emerging nuclear biomass co-firing facility in North Yorkshire, England. Other market is leading to greater Turning to electricity transmission, a second elec- 34% Net imports collaboration in power supply. tricity interconnection to mainland Europe is being In September 2008, EDF bid built with a capacity of 1.3 GW. In December 2008, Total generated power in 2007: 407 671 GWh £12.5 billion ($18.7 billion) for formal acquisition energy regulator Ofgem published a consultation on of British Energy. And in January 2009 collaborative encouraging investment in electricity transmission. A ventures were announced between Iberdrola and month later, the regulator appointed financial advi- Scottish and Southern Energy, and between RWE and sors to assist it in running the competitive tendering E.ON, to develop new nuclear power stations in the of transmission licenses for more than £10 billion UK. ($15 million) worth of new offshore power networks needed to carry electricity to the mainland. Investment Infrastructure The significant UK plant capacity is aging and requires Future Trends investment. Exemplifying such investment, in 2008 The National Grid predicts that the largest change RWE npower began a £60 million ($89 million) in the coming years for Great Britain’s electricity upgrade to the gas-fired Didcot B Power Station in generation capacity will result from a 13.9 GW increase England, Scottish Power announced a £20 million in combined cycle gas turbine (CCGT) plant capacity. ($30 million) programme to upgrade its three hydro- The second largest increase is due to the growth in electric plants and RWE npower recently completed a wind generation, which is set to rise in capacity from £235 million ($351 million) upgrade to its coal-fired 3.8 GW in 2008/09 to 15.9 GW by 2014/15. Aberthaw power station in Wales. This year, the government looks set to publish Beyond such upgrade work, important areas of documents on carbon budgets and carbon capture, current investment include gas and renewable energy plus its new strategy on renewable energy.

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middle east-africa MIDDLE EAST-AFRICA

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 Office No. LOB 16-504, Jebel Ali Free Zone, P.O. Box 17204, Dubai, U.A.E Tel: (+9714) 887 1891, Fax: (+9714) 887 1869, Email: [email protected], Website: www.pdi.ae

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS MIDDLE EAST-AFRICA Angola After years of civil war, Angola’s infrastructure is only just beginning to be rebuilt. With less than 20 per cent of the population having access to power, the transmission and distribution system needs massive investment.

Angola is located on the western coast of southern Gross theoretical hydropower ENE annual electricity production and consumption ENE, CIA World Factbook Africa. To the north lies the Democratic Republic capability in Angola is 150 TWh/ of Congo, to the south Namibia and to the year, of which 65 TWh/year is technically 3000 east is Zambia. The Atlantic Ocean forms its exploitable, according to the World Energy Production (GWh) western boundary. The total area of the country is Council. The Cuanza, Queve, Cunene and 2500 Consumption (GWh) 1 246 700 km2. Apart from a coastal plain, much Catumbela rivers all have great potential.

2 of the land is rugged and arid. In 2008, the With solar irradiation levels of 5 kWh/m / 2000 population was 12.5 million. day in the capital, Luanda, the country The country was a Portuguese colony until 1975, has significant potential for solar energy 1500 GWh when it was granted independence, but a bitter civil as well as wind power, but neither is war ensued that only ended in 2002 and devastated exploited to a significant extent today. 1000 much of the country. Legislative elections were held Biomass is used by around 80 per 500 in September 2008, with the ruling MPLA (Popular cent of the population as their main Front for the Liberation of Angola) winning decisively. source of energy, but much of this use is 0 Presidential elections are predicted for 2009, moving unsustainable and there are large areas of

the country further towards full democracy. deforestation around the major cities. The 2001 2002 2003 2004 2005 The country has had a high growth rate in recent country has no known coal reserves, but years, as a result of an expanding oil sector. GDP was it does have natural uranium deposits Capacity on Angolan grids Source: OECD/IEA $61.4 billion and growth 16.7 per cent in 2007, but it could exploit, suggesting that a the fall in the value of oil is likely to reduce growth nuclear industry may be established in the coming year. Even with this income, around in the future. No recent figures for gross 1000 70 per cent of the population live on less than $1 energy consumption are available, but the Installed capacity (MW) per day. The Angolan government is bureaucratic and US Energy Information Administration put Available capacity (MW) 800 lacks transparency, making business dealings difficult, the 2005 consumption at 160 billion MJ. according to the World Bank. Allegations of corruption 600 are widespread. Electricity Market

The electricity sector in Angola is government MW Energy Overview controlled through ENE (the state-owned 400 Angola is the third largest oil producer in Africa after electricity utility). This is overseen by MINEA Nigeria and Libya. Output has risen dramatically during (the ministry of energy and water). There 200 the past decade, growing from 710,000 barrels per is also the electricity sector regulator, IRSE, day (bpd) in 1997 to 1.7 million bpd in 2007 and an which was created by a 2002 decree. 0 expected average of 2 million bpd in 2008. Oil reserves ENE is responsible for the grid systems in

were estimated to be 9 billion barrels in 2008, most of Angola and a number of isolated systems. It Total which are located offshore. Local consumption is low is active in 15 of the country’s 18 provinces.

at 56 000 bpd, and most crude oil is exported to the Meanwhile, the largest distribution company Central grid Northern grid Chinese and US markets. China, in particular, has been in Angola, EDEL, distributes power to the Southern grid Isolated sytems investing heavily in Angola in recent years with loans capital Luanda. EDEL is another state-owned backed by oil. The 2008 fall in the price of oil is likely to company, and 80 per cent of its customers are domestic. have a significant effect on these loan repayments. In addition to these two major electricity sector Natural gas reserves were estimated to be 270 companies, there are a number of municipally owned and billion m3 at the beginning of 2008, a massive increase controlled utilities that generate and distribute electricity over the 2007 estimate of 56 billion m3. Estimated to isolated communities. The main independent power production in 2006 was 790 million m3, all of which producer is Hidrochicapa, which was created in 2002. was consumed locally. In the past, much of this local Hidrochicapa’s ownership is split between Alrosa, a consumption was a result of gas flaring, but the Russian diamond monopoly, which controls a 55 per government is to phase the practice out, and there are cent stake in the company, and ENE, which controls the plans to convert it into liquefied natural gas for both remaining shares. Hidrochicapa is building a 16 MW export and domestic electricity production. hydropower plant to supply power to a diamond mine

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Installed capacity by source Source: OECD/IEA at Catoca and to the population Oil revenues should help support reconstruction, of Luanda Sul in the north-east of but international financial support will be needed. One the country. of the electricity sector’s main targets is to increase The transmission and the availability of power by extending the transmission distribution of electricity in Angola and distribution systems. One important project is to 37% is currently provided by three grid link the northern grid, where most power is currently systems: Sistema Norte, Sistema available, to the central and southern grids. Central and Sistema Sul. In 2006, Angola is part of the Southern African Power Grid the generating capacity of the (SAPP), which was formed in 1995. The country is not 63% northern system was 643 MW, the currently an active part of SAPP, but a proposed project central system could generate 106 to build a transmission line to export power from the Hydropower MW and the southern system 64 Democratic Republic of Congo (DRC) via Angola and Thermal power MW, according to a report jointly Namibia to South Africa does offer the means of linking published by the Organisation the three Angolan grids. This would also provide access for Economic Co-operation and to additional power from the DRC and, ultimately, Development (OECD) and the International Energy South Africa. Agency (IAE). However, much of the capacity was The government has acknowledged the need for unavailable. While in the northern system, 508 MW rural electrification to provide power to people who were available (79 per cent), only 27 MW (25 per cent) currently rely exclusively on biomass for energy. However, and 24 MW (38 per cent) were operational in the central it is likely to take many years to achieve full coverage. and southern systems respectively. The development of Angola’s oil and gas reserves The latest figures suggest that the total installed has opened up the possibility of generating power capacity in Angola was 1128 MW in 2008, of which from natural gas, which is currently flared. There is 943 MW were available. This appears to be more already 146 MW of gas-turbine-based capacity, but than sufficient to meet demand, since the peak only 40 MW is available. Meanwhile, hydropower consumption in 2007 was only 476 MW. Demand is offers a major future source of new generating weak because most of Angola’s citizens do not have capacity. A 2002 study suggested that there was access to electricity. The best current estimate suggests around 18 GW of potential generating capacity, of that 20 per cent of the population have a supply, but which only 3 per cent has been developed. One new this may be optimistic. Peak demand is predicted to rise project, Cambambe II, with a capacity of 260 MW, is to 1010 MW by 2012. due to enter service in 2011. Hydropower is the main source of electricity in Angola, accounting for close to 63 per cent of total Future Trends installed capacity, based on the OECD/IEA report. Angola’s electricity sector is at the beginning of a Capanda, the largest hydropower plant, is capable of lengthy process of reconstruction and modernisation, supplying 260 MW to the northern grid. It entered following decades of civil war. The growth of the service in 2007. A second hydro plant, Cambambe, has oil industry and exports of crude oil should provide an installed capacity of 180 MW, also supplying the revenues for reconstruction, but with loans from China northern grid. backed by oil, the value of which is falling, these funds Annual production by ENE in 2005, the latest may be significantly reduced. date for which figures are available, was 2585 GWh. Rehabilitation of existing capacity and better reliability Consumption was 2201 GWh. By 2012, production is will lead to significant improvements. Natural gas could predicted to rise to 3935 GWh. provide an important future source of electricity and the country’s hydropower potential is also likely to be Infrastructure Investment exploited to increase domestic capacity. Twenty-seven years of civil war have left Angola’s The overriding need, however, is for a single infrastructure devastated, and it is likely to take connected system transmission and distribution system many more years to rebuild. In 2008, with financial that will permit the large generating capacity in the support from the US Trade and Development Agency, north to be transmitted to areas with less capacity. Grid MINEA requested tenders from US companies to connections to towns currently without them and the carry out a study entitled ‘Technical Assistance for the extension of rural distribution networks are also vital. On Electricity Distribution Rehabilitation and Hydropower top of this, the tariff system needs overhauling so that Development Project in Angola’, suggesting planning prices reflect production costs. The future prosperity for the electricity system’s reconstruction is only of the country is likely to depend on how quickly and just beginning. effectively these measures are implemented.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS MIDDLE EAST-AFRICA Egypt Egypt is seeking to meet growing demand for energy by building thermal and nuclear plants, investing in interconnection infrastructure, expanding its energy alliances and liberalizing its electricity market.

Egypt is a desert land, with hot, dry summers and to exploit renewable energy resources, particularly solar Peak load development, 2003-2007 Source: EEHC mild winters, occupying the northeast corner of and wind. the African continent. It is neatly split in two by Energy distribution infrastructure for oil, gas and the fertile Nile Valley. Egypt has long coastlines electricity is adequate, covering most populated areas, 20000 on the Mediterranean Sea and the Red Sea, and and permits gases and liquids to be exported. shares land borders with Libya, Israel and Sudan. Egypt is enhancing its energy ties with Europe 15000 It has a total area of 1 001 450 km2. Following and the rest of the Middle East. It recently signed the completion of the Suez Canal in 1869, Egypt a memorandum of understanding in Brussels, for 10000 MWh became an important transportation hub. example, that will pave the way for the gradual President Mohamed Hosni Mubarak has led the convergence of European and Egyptian energy 5000 country’s rapidly growing population of 82 million markets. Last year, it also began developing a strategic since October 1981, although the first presidential gas alliance with the Italian power company Enel. 0 election in the country was only in 2005. The next election is scheduled for 2011. Electricity Market

In 2005, a series of government reforms reduced Peak demand for electricity in Egypt is estimated at 18 2003-2004 2004-2005 2005-2006 2006-2007 personal and corporate tax rates, reduced energy GW, while total electricity production capacity is 115 subsidies and privatized several enterprises. Gross TWh and consumption close to 96 TWh. Electricity domestic product (GDP) growth accelerated as a result, generation is dominated by gas, with around 84 TWh, reaching more than 7 per cent in 2007. However, while followed by oil at around 18 TWh and hydropower at foreign direct investment has increased significantly some 13 TWh. since then, further reforms are required to sustain this Electricity demand is increasing at an average rate of growth. annual rate of more than 6 per cent, mainly coming from fossil fuels. Peak load is expected to reach 25 110 Energy Overview MW by 2011/2012, and a plan has been developed With extensive indigenous hydrocarbon reserves, as to add a total of 6800 MW of new capacity between well as a favourable geographical location position, 2007/2008 and 2011/2012, which would bring the Egypt is ideally placed to be a major hub of energy country’s total installed capacity to around 30 GW. exports, particularly natural gas. Its proven oil reserves The government has exclusively managed the stand at around 4.2 billion barrels, from which it electricity sector since it was nationalized in 1965. produces around 700 000 barrels per day (bpd) and However, reforms began transforming the landscape exports up to 205 000 bpd. Domestic oil consumption in 2000, when the Egyptian Electricity Authority is estimated at 653 000 bpd. Proven natural gas became the Egyptian Electricity Holding Company reserves were estimated at 1.66 trillion m3 in 2008, (EEHC). A succession of restructuring steps led to production at around 47.5 billion m3 and consumption the formation of 15 affiliated electricity companies, at some 32 billion m3. Gas exports are around including: five generating companies (Cairo Electricity 16 billion m3 annually. In fact, crude oil and natural gas Production Co, East Delta Electricity Production Co, Principal indicators reserves are larger than currently reported, following West Delta Electricity Production Co, Upper Egypt Area 1 million km2 substantial oil and gas discoveries in 2008. Electricity Production Co and Hydro-Power Plants The energy sector in Egypt is managed through Electricity Production Co); one transmission company; Population (2008) 81.7 million the Ministry of Electricity and Energy (MOEE) and the and nine distribution companies. GDP (2008) $158.3 billion Ministry of Petroleum (MOP). Primary energy demand All electricity companies remain state owned under GDP growth (2008) 7 % has grown at an average annual rate of more than the EEHC, which is responsible for financing its 4 per cent over the past two decades, and much of own investment plans. The EEHC and its affiliated Installed generating capacity (2006) 22 500 MW this growth has been supported by the increasing role companies build and operate large power plants, Electricity production 115 TWh of gas. Fossil fuels satisfy about 94 per cent of primary substations and the transmission grid, as well as energy demand, with around 50 per cent generated additional electrical interconnection projects with Arab, Peak demand (2006-2007) 18 500 MWh from oil and 44 per cent from natural gas. The rest African and European countries. In addition, there are Electricity consumption 96 TWh comes mainly from hydropower, at close to 4 per cent, a number of smaller independent power providers and coal. However, Egypt also has a very high potential (IPPs) that sell output to the EEHC.

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Wind power growth forecast, 2008-2012 Source: BTM Consult ApS In August 2007, the government announced plants, a renewed focus on nuclear technology is a that it would gradually phase out subsidies to major plank of Egyptian energy policy. The country energy-intensive industries, such as iron, cement plans to build several nuclear power plants as part of 400 and aluminium production, with the intention of its strategy to meet rising energy demand and improve 350 reaching market rates by 2010. However, in the energy security. Egypt launched a tender in February 300 wake of the global economic crisis, the government 2008 seeking international help in building the plant, 250 has announced that prices for electricity and at a cost of up to $1.8 billion. This was followed in late 200 natural gas will be frozen until the end of 2009. 2008 by the Egyptian Ministry of Electricity and Energy 150 This measure is part of an industrial support awarding a contract to engineering player Bechtel to 100 package that includes financing for technology help design and consult on the country’s first nuclear

Capacity additions (MW) 50 transfer and industrial modernization. power plant. Bechtel will be responsible for choosing 0 Despite what may appear to be a retrograde the location of the plant, which could be built at Dabaa step, there are some signs of energy market on the Mediterranean coast, west of Alexandria and 2008 2009 2010 2011 2012 reform, with plans to privatize the nine distribution 220 km north of Cairo. companies and moves to allow foreign players However, while nuclear and renewable capacities to enter the market being considered. For example, are important features of Egypt’s energy strategy, it is Italian energy major Eni signed a memorandum of expected to continue with its programme of expanding understanding in April 2008 with EEHC and the thermal capacity. To that end, the African Development Egyptian Natural Gas Holding Company (EGAS) for a Bank recently approved a loan of $413 million to feasibility study to apply combined cycle generation finance a thermal power project in Egypt. This involves technologies to some Egyptian power plants. The constructing a 1300 MW supercritical steam turbine application envisaged by the memorandum will lead power plant adjacent to the Ain Sokhna sea port on to energy savings of more than 20 per cent and bring the Gulf of Suez, 112 km east of Cairo. significant environmental benefits, according to Eni, Another significant development in infrastructure which is already a major foreign oil and gas player will come from improved transmission links with in Egypt. Its equity production of oil and natural neighbouring countries in the Middle East, and further gas reached approximately 240 000 barrels of oil afield in Europe and the wider African continent. A equivalent per day in 2007. long-term plan for the interconnection network involves There are also policy drivers for the growth of the extending links to countries lying east of the Red renewable energy sector. The New and Renewable Sea, such as Kuwait, Qatar and the UAE, through an Energy Authority (NREA), which owns and operates interconnection between Egypt and Saudi Arabia, which all existing renewable energy facilities, was established in turn is implementing interconnection projects with in 1986 as part of a plan to boost renewable energy the Gulf Cooperation Council. A feasibility study for the capacity. This was followed in 2006 by the creation of the interconnection between Egypt and Saudi Arabia has Supreme Council of Energy as well as the development already been signed as part of this programme. of a National Sustainable Development Strategy through the Ministry of State for Environmental Affairs. Future Trends In the western region of the Gulf of Suez, there In light of rapid growth in demand, Egypt is expected is 20 GW of estimated renewable energy potential. to see significant capacity growth in the coming years. The Egyptian Electricity Transmission Company (EETC) Along with gas-fired combined cycle gas turbines bears the cost of wind farms’ connections to the 220 (CCGT) and new nuclear development in the longer kV transmission grid, in addition to paying a tariff term, renewable energy sources are expected to per kWh about 10 per cent higher than that paid to form a growing proportion of installed capacity. An conventional generation companies. overall target is to achieve 20 per cent of electricity Although wind capacity is currently only around from sources such as wind and hydro power by 2020. 300 MW, there are plans to increase this to 850 MW Egypt is already the regional leader for hydroelectricity, by 2010, which would account for about 3 per cent which provides up to 12 per cent of its electricity. of the country’s electricity demands. This is expected Perhaps more significant, as a country that receives a to reach 3000 MW by 2021/2022, about 7 per cent lot of sunshine, Egypt’s solar potential is huge. With of demand, solely from capacity installed in the Gulf improved transmission infrastructure the country could of Suez region. export solar energy to demand centres in Europe. Along with a shift in installed capacity towards Infrastructure Investment lower carbon options, a phased liberalization of the As well developing new renewable capacity and electricity market is also anticipated, with all consumers boosting the efficiency of its existing thermal power being free to choose supplier by 2020.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS MIDDLE EAST-AFRICA Kuwait Kuwait needs to rapidly increase its generating capacity by attracting investors, ending subsidies and moving towards renewable sources of power if it is to avoid power shortages and summer power cuts.

The middle-eastern country of Kuwait is situated reserves, Kuwait has been seeking to Installed generating capacity in the north-western corner of the Persian Gulf, import natural gas in recent years Source: Kuwait Institute for Scientific Research, US Energy Information Administration which forms its eastern border. The country with approaches to both Qatar and borders Iraq on the north and east, while in the Iran. Imports from Iraq, interrupted by 12000 south it shares a border with Saudi Arabia. The the 1990/1991 war, may eventually country, which occupies an area of 17 820 km2, is be resumed. Imported gas is likely to 10000 mostly desert, except for the coastal region where be used for power generation and 8000 the capital, Kuwait city, is located. Most of the desalination. population lives here and only 5 per cent of the The abundance of fossil fuel has 6000 country is inhabited. In 2008, the population was meant that Kuwait has devoted little 2.60 million, including 1.29 million non-nationals. attention to renewable resources. 4000 The Al Sabah family rules Kuwait, and most Kuwaiti Some wind surveying has been

nationals are employed by the government. There is a carried out, indicating that the wind Installed capacity (MW) 2000 democratically elected legislative assembly, but it has resource is most abundant during 0 limited power. Political parties are illegal in practice, the summer, when energy demand although most members of the assembly have some is also at its peak. The country has 2002 2003 2004 2005 2006 2007 2008 affiliation. GDP was $111.3 billion and GDP growth considerable solar potential for both 4.7 per cent in 2007. solar photovoltaic (pV) and solar thermal power plants, * According to some sources, capacity grew The primary source of income in Kuwait is oil. but this has not been quantified. to 9800 MW in 2007. During the recent period of high oil prices, petroleum accounted for close to half of GDP, 95 per cent of Electricity Market Annual electricity consumption Source: CIA export revenues and 80 per cent of government The electricity sector in Kuwait falls revenue. The government invests around 10 per cent under the auspices of the Ministry of oil revenue in an investment fund against the day of Energy (Electricity and Water). The 40000 its oil reserves are exhausted. The Kuwaiti currency was ministry was established in 2003 by 35000 pegged against the US dollar until May 2007, when it the merger of the Ministry of Oil and 30000 changed to a basket of currencies to reduce volatility. the Ministry of Electricity and Water. 25000 The two sections were segregated Energy Overview again in 2007, so the Ministry of 20000 Kuwait’s oil reserves were estimated to be 101.5 Energy (Electricity and Water) is now, 15000 billion barrels at the end of 2007, around 8 per cent of apparently, an independent unit, 10000 global oil reserves. It also has another 5 billion barrels though both sections are headed 5000

in the neutral zone, a region on its border with Saudi by the same minister. The ministry Electricity consumption (GWh) Arabia that is shared between the two countries. Oil is responsible for establishing, 0 production in 2007 was 2.63 million barrels per day managing and operating the country’s

(bpd), according to the BP ‘Statistical Review of World power and desalination plant and for 1999 2000 2001 2002 2003 2004 2005 Energy’, and consumption in 2007 was 276 000 bpd. distributing power. Most Kuwaiti oil is located in the Greater Burgan area, Kuwait’s electric power system is a vertically which has been producing oil since 1938. However, integrated, state-owned organisation. The system has the old oil fields are becoming exhausted, and in five major power stations: Doha East, Doha West, 2005 the Kuwaiti Oil Company revised downwards Al-Subiya, Shuaiba South and Al-Zour South. The its production plateau estimates for the Great Burgan capacity at these sites includes a large number of gas field from 2 million bpd to 1.7 bpd over the next turbines, many of which operate in open cycle mode, 20-30 years. leading to inefficient generation. Total installed capacity Natural gas reserves at the end of 2007 were reached 10 300 MW in 2008, following an emergency estimated to be 1780 billion m3. Production in 2007 construction programme during the year that added was 12.6 million m3 and consumption was the same, 1000 MW to the earlier capacity of 9300 MW. Until then, indicating that all the natural gas produced was capacity had remained relatively unchanged since 2005. consumed domestically. With relatively limited domestic This expansion became essential as demand threatened

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Fuel consumption for electricity production, 2005 Source: Ministry of Energy to outstrip supply, highlighted Infrastructure Investment by power outages during the The electric power system has suffered from significant summers of 2006 and 2007. under-investment in recent years, often as a result of 782700 bbl 2567m3 The newly constructed facilities bureaucratic tendering regulations. There were plans in included 800 MW of additional 2005 to increase generating capacity by around 3500 19323394 bbl gas turbine generation at MW through three new projects: a 2500 MW plant 46349461bbl Al-Zour South, completed in at Al-Zour North, an additional 500 MW at Al-Zour June 2008. South created by converting the plant to combined All Kuwait’s power stations cycle operation and a 1500 MW project at Subiya. A are fuelled with fossil fuel, lack of interest from contractors coupled with a rigid Heavy oil primarily oil, although natural tendering process led to all three projects foundering, Crude oil gas does account for a small forcing an emergency programme to be implemented Gas oil proportion. In 2005, the last in 2007. Natural gas year for which detailed figures While this has enabled demand to be met, are available, consumption of significant new investment is required if supply heavy oil, crude oil and gas oil for power generation reliability is to be maintained. In June 2008, the was 64.9 million barrels. Natural gas consumption was Ministry of Energy unveiled a five-year plan to build 2567 million m3. an additional 6700 MW of capacity. This is expected Electricity in Kuwait is heavily subsided and this, to include one 1500 MW scheme and one 2000 MW combined with the extensive use of air conditioning scheme entering service in 2010, a 1500 MW project during the summer, has resulted in one of the highest starting up in 2011 and a further 1700 MW from as per capita electricity consumptions in the world. In 2005, yet unspecified projects. per capita consumption was 14 000 kWh. Electricity The Ministry of Energy announced in November demand has been growing at between 6 per cent and 2008 that it had received bids from GE Energy, Siemens 8 per cent annually for the past decade and is expected and Iberdrola for construction of the proposed 2000 to continue to grow by 5 per cent to 6 per cent over the MW power plant. The cost of this project is expected next decade, although this predicted rate of growth may to be $2.59 billion. be moderated by the recession of 2008. Kuwait’s transmission and distribution network is Future Trends concentrated in a relatively small area of the country Kuwait’s immediate need is to rapidly increase centred on Kuwait city and along the Persian Gulf generating capacity in order to avoid power shortages coast. All five power plants are on the coast, and the and regular summer power cuts. Over the longer distance between the furthest is 160 km. The system term, however, two other factors are likely to become backbone, to which they are all connected, operates prominent: the restructuring of the power sector and at 275 kV. This includes 18 substations and 854 km of the introduction of renewable capacity to replace fossil transmission line. There is a further 4000 km of 132 fuel for generating electricity. kV lines and 246 substations linking to the distribution Restructuring, if it takes place, is likely to be a system at 33 kV and 11 kV. painful process. It will become a necessity as the While the system is considered to be reliable, the demand for power grows because the government concentration of a large number of interconnections will at some stage need to attract private investment in over a small area means that the overall system the power sector. Foreign companies currently cannot impedance is low, leading to high fault currents when be established in Kuwait unless Kuwaiti ownership is problems occur. There is also some transmission system more than 50 per cent, so legal changes are likely to substation congestion during periods of high demand, be needed to create an attractive economic climate. which can result in a reduction in transmission capacity Subsidies are another barrier and will need to be of 600 MW. phased out, although this is likely to be extremely Kuwait is about to become part of the Gulf unpopular. Cooperation Council grid, a scheme that will link the Meanwhile, Kuwait has begun to examine states on the Persian Gulf. A final agreement covering renewable options with a $150 million research the grid was signed in late 2008. Meanwhile, the and development grant, and it is also encouraging first phase of this project, which will link Kuwait, renewable initiatives. One result was the signing, in Saudi Arabia, Bahrain and Qatar, is due to become December 2008, of a memorandum of understanding operational in early 2009. This part of the grid will between the Ministry of Energy and the Japanese have a capacity of 1200 MW and an estimated cost government for a feasibility study into the construction of $1.6 billion. of an integrated solar-thermal combined cycle plant.

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A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS MIDDLE EAST-AFRICA Saudi Arabia As the world’s largest petroleum exporter with enormous hydrocarbon reserves and a voracious appetite for electricity, Saudi Arabia is a major investor in the energy sector.

Saudi Arabia is the fastest-growing consumer of cent of power is supplied to the industrial sector (not energy in the Middle East, with transport fuels including water supply), which is largely in the oil and growing even faster than electricity use. It is also a petroleum supply business that represents 90 per cent major energy supplier: it has a fifth of the world’s of Saudi Arabia’s industry. known oil reserves and, as a major player in the Typically, electricity demand is greatest during the Organisation of Petroleum Exporting Countries summer months, when heavy loads for air-conditioning (OPEC), it has considerable influence over the have to be supported. In recent years, demand growth price of oil. The country is home to 28 million has outstripped the speed of construction, leading to people, including 5 million permanent or semi- power cuts and rationing. permanent overseas nationals. It is controlled by All power generated in Saudi Arabia is from thermal the royal family, the house of Saud, whose head is sources, making use of its huge indigenous reserves of both the prime minister and head of state. Since oil and gas. Although a switch to gas-fired power 2005, this has been Abdallah bin Abd al-Aziz Al stations was expected in the past, and nearly 900 MW Saud. The heir apparent is his half-brother, crown of gas fired stations were planned for the 2007 fiscal prince Sultan bin Abd al-Aziz Al Saud. There are year, a royal decree in 2006 demanded that coastal no elections, although the proposal has been generation must be fuelled using crude oil. Saudi raised. Instead, the king appoints a council of Aramco is building combined heat and power plants at ministers at four-year intervals. several of its oil refineries and other installations, each project providing up to 300 MW of electricity. Energy Overview Some 90 per cent of the population has access Saudi Arabia is the world’s largest producer of petroleum to electricity through a transmission and distribution and has the largest proven crude oil reserves, at 266.8 network of around 241 400 km. It is estimated that billion barrels. In addition, it has extensive natural gas bringing power to the remaining 10 per cent of the reserves of 7.2 trillion m3, which is still the country’s population could require a further 32 000 km of most important resource: it provide 40 per cent of the transmission and distribution lines. Saudi Arabia electricity production by source country’s gross domestic product (GDP) and comprises Saudi Arabia has sought to attract private Electricity production 179 100 TWh 90 per cent of its exports. investment into its power projects since 2002, and in This dominance is likely to persist as the country 2004 it announced plans to develop ten independent Electricity consumption 156 800 TWh continues to invest in developing its existing oil fields water and power projects by 2016, costing $16 Electricity production – nuclear 0% and turns to ready export markets in developing billion at the time of the announcement. Around 60 Electricity production – hydro 0% economies as the West tries to reduce its dependence per cent of each project would be funded by private on oil. That investment outweighs investment in low- equity, with the remainder split between SEC and a Electricity production – other 0% carbon technologies, although Saudi Arabia has signed public investment fund. So far, the first six have been Electricity production – fossil fuel 100% and ratified both the UN Convention on Climate approved, the first four of which are expected to come Change and the Kyoto Protocol. into operation between 2009 and 2010 and generate Source: CIA Factbook Saudi Arabia’s per capita carbon dioxide emissions a total of around 7 GW. These are Shuaibah 3 (900 in 2005 were 15.6 tonnes, approaching those of the MW), Shuqaiq 2 (850 MW), Ras Az Zour (originally USA, which were 20.1 tonnes per capita. An electricity planned at 2000 MW, now likely to be 1000 MW), industry based almost entirely on thermal generation, Jubail 3 (2750 MW), Yanbu 2 (1700 MW) and Rabigh much of it oil fired, and the large energy requirements (2400 MW). The majority of these facilities will be in Saudi Arabia energy overview of the country’s desalination processes were important the western parts of the country, drawing water from contributors to the total. the Red Sea. Natural gas reserves 6 339 000 000 000 cubic feet Saudi Arabia’s interest in non-conventional and Crude oil exports 8 900 000 bbl/day Electricity Market renewable energy has been limited up to now. Electricity use in Saudi Arabia is still growing by up to However, a feasibility study was carried out for a Crude oil production 10 250 000 bbl/day 7 per cent annually. The installed capacity, estimated waste-to-energy facility in the south-western city of Crude oil proven reserves 266 800 000 000 bbl at 30.5 GW in 2005, must more than double to match Jizan. Following the study, a plant was proposed that Oil exports 6 710 000 barrels per day demand of 65 GW by 2023, according to predictions would produce 6 MW of electricity and up to 250 000 by the Water and Electricity Ministry. Some 60 per gallons of distilled water per day. Source: Nationmaster

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Total energy consumption in Saudi Arabia by type SEC has also expressed interest SEC is also working with SWCC on a new Source: Energy Information Administration in solar power, suggesting that desalination plant, Shoaiba 3. SEC’s share in this build, this huge resource could one day own, operate (BOO) project amounts to 8 per cent, allow the country to generate and while the private sector contributes 60 per cent and export thousands of megawatts of the Public Investment Fund the remaining 32 per cent power. Up to now, however, there of the value of the project. 40% has been little investment in solar SEC will install new transmission lines to export energy, and this looks unlikely to electricity to the western region, while SWCC will change as investment conditions construct pipelines and pumping stations to transport 60% tighten. SEC reported profits fell in the 734 million litres of water produced daily. The the third quarter of 2008, the first project will serve and meet the water needs of the cities Oil decline in summer profits for four of Makkah Al-Mukarama, Jeddah, Taif and Baha. It will Natural gas years. The company was also hit by also support the electricity grid of the Western Region. a commitment to raise the wages With a total project cost of $2.5 billion, this is of its 28 000 staff and by higher one of the largest public-private projects in the world commodity prices for its investment programme. and will be the largest oil-fired project in the Middle Higher up the Saudi agenda than renewables is a East. A $1.9 billion contract was recently signed with long-mooted project to link the Saudi grid with those Alstom, which led a consortium that built the first and of its neighbours. The aim is to link the grids of the six second phases at the site, competed in 2003 and 2007 Gulf Cooperation Council (GCC) countries, beginning respectively. When Shoaiba 3 is complete, the site’s with interconnections between Saudi Arabia and total power output will be 5600 MW. Kuwait, and Bahrain and Qatar. The $1.2 billion first phase will include an overhead linkup to Kuwait and Future Trends marine transmission infrastructure to Bahrain. Although Saudi Arabia greatly relies on its oil and gas reserves to fuel its thermal power stations, it relies on Infrastructure Investment them far more as exports. That is behind Saudi Arabia’s The Water and Energy Ministry estimates that the interest – along with other oil-rich Middle Eastern direct investment in the electricity generation industry countries – in nuclear power. It is already a member of required over the next 15 years will be $120 billion. the Arab Atomic Energy Agency (AAEA). According to the Saline Water Conversion Company In the near and mid term, however, grid links with (SWCC), new desalination projects will add a further neighbouring countries are higher up the Saudi Arabian $50 billion to that total. agenda. Differences in peak times should allow countries SEC has recently begun the tendering process for to import energy to meet peak loads in advance on new a series of three dedicated power projects – part of plant construction. The Arabian Union of Producers, the group of ten it announced in 2002. The first is a Transporters and Distributors of Electricity has also been second plant at Rabigh, a 1200 MW project 140 km pushing for such links and working on the grid codes north of Jeddah and due to start up in June 2012. required for regular power export and import. SEC extended the bidding period on this project to Along with links to other gulf states, the Saudi December 2008, and is evaluating bids from two Arabian electricity minister, Hassan Younis, has called for consortia: Kepco with ACWA Power Projects; and a link with Egypt, which he said would have immediate International Power, with Suez International and Saudi economic benefits. Oger. In January, SEC said it planned to sign a power SEC expects its total generation capacity to reach purchase agreement with a preferred bidder by 14 46 563 MW by 2013 and anticipates that an additional March 2009 and close the deal by 1 June 2009. 243 TWh will be required. At the same time, SEC The second independent power producer (IPP) is is predicting that 99.8 per cent of Saudi Arabia’s a 2000 MW project in Riyadh. In August, SEC invited residential consumer areas, serving some 6.7 million expressions of interest for a developer or consortium customers, will be electrified. partner to build, own and operate this combined cycle Transmission lines are forecast to total some plant, which is to be fuelled by natural gas and is 53 363 kilometres, linked to 720 grid stations and due to go into operation in April 2012, but could be 368 000 transformers. The state company said that it delayed until 2014. would continue to seek independent power producers SEC’s third IPP is also a gas-fired 2000 MW plant, to supply some of its future generation requirements, sited at Qurayyah, in the country’s Eastern Province. with 30-40 per cent of its future generation needs That plant is due to enter operation in 2014, but could set to be supplied by such producers in the next be delayed to 2016. ten years.

PennWell Global Power Review 2009 87

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS MIDDLE EAST-AFRICA South Africa South Africa continues the battle to ensure its electricity supply meets demand, with Eskom more than doubling its infrastructure investment programme up to 2026.

The Republic of South Africa occupies the southern Electricity Market Net reserve margin during winter peak Source: Eskom tip of Africa, its long coastline stretching more than South Africa’s electricity sector is dominated 2500 km from the desert border with Namibia on by state-owned Eskom, which is one of the the Atlantic coast, southwards around the tip of world’s largest electricity utilities (based on 30 Africa, then north to the border with Mozambique generation capacity) and generates 95 per 25 on the Indian Ocean. It has a total land area of cent of the country’s electricity and 45 per cent around 1.2 million km2, and a population in excess of the electricity for the African continent. 20 of 48 million. Eskom’s net maximum generating capacity

% 15 South Africa remains the biggest economy on is 38 700 MW, which is primarily coal fired. In the African continent, and it has enjoyed robust GDP addition, the utility operates a nuclear power 10 growth for many years. However, its economy began to station at Koeberg (1800 MW), four open 5 slow in the second half of last year because of the global cycle gas turbine generators (1400 MW), two economic slowdown. The Economist Intelligence Unit conventional hydroelectric plants (600 MW) 0 has revised its growth forecast downwards, and expects and two hydroelectric pumped-storage stations

South Africa’s real GDP growth to contract by 0.8 per (1400 MW). It also owns over 360 000 km 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 cent this year, before recovering in 2010 as the global of power lines, around 27 000 km of which economy recovers and the FIFA World Cup kicks off. constitutes the national transmission grid. South Africa is a constitutional democracy, with South Africa has been a significant exporter of the African National Congress the ruling party in electricity to its neighbours, including Botswana, parliament. Its president is Kgalema Motlanthe. Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe. When the Apartheid era ended, Energy Overview however, the government made a policy decision South Africa has only small deposits if oil and natural that electrification should proceed rapidly, bringing gas, so it relies on coal production to meet most of its electricity to everyone in the country. This programme energy needs. was successful, increasing the percentage of the According to the Oil and Gas Journal, as of January population with access to electricity from 30 per cent 2008 the country has proven oil reserves of 15 million under Apartheid to over 80 per cent. However, this barrels, all located offshore. In 2007, South Africa increase brought significantly increased demand. produced 199 000 barrels per day (bpd) of oil, of which This increase in demand coupled with a failure 160 000 bpd were synthetic liquids processed from to keep pace with this increase with investment in coal and natural gas. generation and transmission capabilities has meant Approximately 66 per cent of its oil consumption that Eskom’s reserve margins have been eroded. is imported. According to the South African Petroleum According to the state utility, net reserve margins Industries Association, most of the oil imports come have decreased to 8 per cent and are likely to continue from the Middle East. to fall until new permanent power stations come into According to Cedigaz, as of January 2008, South operation. Eskom wants to eventually return to an Africa had 9 billion m3 of natural gas reserves. To internationally accepted reserves margin of 15 per cent. compensate for the lack of large reserves, South Africa Towards the end of 2007 and in the first months Electricity supply parameters, 2008 has developed natural gas supply agreements with its of 2008, forced rolling blackouts or load shedding, Electricity sold – local (GWh) 210 458 neighbours, Mozambique and Namibia. caused by a higher than expected demand in electricity The country’s economy is heavily dependent on and low reserve margins, wreaked havoc on South Electricity sold – international (GWh) 13 908 coal. It provides approximately 88 per cent of total Africa’s economy. Total electricity sold (GWh) 224 366 primary energy and supports around 90 per cent of In a bid to handle the electricity crisis, the electricity generation. South Africa has the world’s six government launched the National Electricity Peak demand on integrated system (MW) 36 513 largest recoverable coal reserves at 50 billion tonnes. Management Plan and called on citizens, businesses Peak demand on integrated system The National Energy Regulator of South Africa and other organizations to come together and work including load reductions (MW) 37 158 (NERSA), created in 2005, regulates policy over the towards finding solutions to the current power crisis. entire South African energy industry and is responsible Large electricity consumers agreed to decrease their Demand-side management savings (MW) 650.4 for implementing the country’s energy plan. consumption by 10 per cent leading to some industries, Source: Eskom

88 PennWell Global Power Review 2009

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PennWell Global Power Review 2009

Capacity expansion, 2006-2008 Source: Eskom the mining sector in particular, being put the extra units come online Ankerlig’s installed capacity under tremendous strain. There were also will rise to 1350 MW a series of unplanned blackouts. Eskom is upgrading its Arnot coal-fired power 1500 500 In January 2008, the Department of station, increasing its total installed capacity from 1200 400 Mines and Energy and Eskom jointly released 2100 MW to 2400 MW. The utility is also investing a policy document ‘National response to in new high-efficiency coal-fired power generation for South Africa’s electricity shortage’. The the first time in more than 20 years. Currently, under

900 300 km plan includes the restructuring of the construction is the Medupi power plant, located in MW 600 200 country’s electricity distribution industry the Limpopo Province. Once completed in 2015, it will and fast tracking of electricity projects by provide 4700 MW of power. Eskom plans to have the 300 100 independent power producers. The plan first unit working by 2011. also focuses on the importance of reducing In August 2008, construction began on the Kusile 0 0 demand by pricing electricity correctly, as coal-fired power station in Mpumalanga Province. The 2006 2007 2008 well as promoting energy efficiency. Eskom power station, which is described as South Africa’s Generation capacity installed and commissioned (MW) aims to reduce demand by 300 MW by cleanest coal-fired power station, will consist of six units 2012 and a further 5000 MW by 2025. and will generate approximately 4800 MW of electricity. Transmission lines installed (km) The cost of electricity in South Africa is The first generating unit is scheduled for completion in among the lowest in the world. Last year the country’s 2013, with the entire power station complete by 2017. energy regulator, NERSA, gave permission for Eskom to Work is progressing well on Ingula, a pumped- raise average electricity tariffs by 14.2 per cent. Then in storage scheme in the KwaZulu-Natal Province, with June, NRSA agreed to a further increase of 13.3 per cent an output capacity of 1332 MW. The station should for the year ending March 2009. This represents a 27.5 be fully operational by the middle of 2013. Eskom is per cent average increase year-on-year. NERSA, howev- also planning to invest R19 billion in a second pumped- er, also ruled that the price increase to ‘poor’ residential storage scheme, called Tubatse, in Limpopo Province. customers was to be limited to 14.2 per cent. In January the South African government took over the Nuclear 1 project, and said South Africa’s next Infrastructure Investment nuclear power plant would come on stream by 2019. Eskom has revised its expansion programme, which Eskom’s major transmission projects include a new it launched in 2005, to upgrade and expand the 400 kV transmission line and three new substations country’s electricity infrastructure. The project will see to strengthen the supply to the Platinum Basin, which it double its capacity to 80 000 MW by 2026. Over will be completed this year. Another is the new 765 the next five years to March 2013, Eskom will spend kV transmission power line and substations from Zeus R343 billion ($34 billion) on capacity expansion, which substation in Mpumalanga down to Omega substation, is significantly higher than the R150 billion reported near the Koeberg power station – approximately 1450 previously for the five years to 2012. Generation km – which will be completed by 2011. This will projects will take up 73 per cent of the budget, with strengthen supply to the Western Cape. transmission investment accounting for another 13 per cent. The rest of the budget will fund improvements Future Trends to its distribution network. Its expansion budget is South Africa is a signatory to the United Nations expected to grow to more than R1 trillion by 2026. Framework Convention on Climate Change (UNFCCC) Since the programme began, an additional 2582 and its implementing mechanism, the Kyoto Protocol. MW have been commissioned, and in terms of the As a developing country, it has no binding obligations revised plan, Eskom will now deliver a further16 304 to reduce greenhouse gas emissions, but South Africa MW in generating capacity by 2017. Of this, 4644MW is the 12th largest carbon polluter in the world. will come on stream within the next five years. This In recognition of this, the government is targeting the includes the return to service of the three mothballed generation of 10 000 GWh of electricity from renewable coal fired stations. energy by 2013. According to Eskom, although its In October 2007, the formal opening of Ankerlig carbon emissions will increase in the short to medium and Gourikwa open cycle gas turbine stations took term, its ultimate aim is to reduce its carbon footprint place. Both of these stations are now being expanded. by investing in low-carbon emitting technologies as they At Gourikwa, two 150 MW units are being added, become commercially viable. Its plans include increasing increasing its capacity 750 MW. The expansion is due the renewables components of its generation portfolio to be completed this year. Five additional 150 MW to a minimum of 1600 MW by 2025. units are also being constructed at Ankerlig, and again Last year, Eskom announced it plans to build a 100 this project is due to be completed later this year. Once MW wind farm on the country’s west coast.

PennWell Global Power Review 2009 89

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS MIDDLE EAST-AFRICA UAE Energy demand in the resource-rich UAE is growing rapidly, while the country is becoming increasingly dependent on gas. New policies on nuclear and renewable energy are part of an ongoing push to strengthen non-oil sectors.

The UAE is situated in the south-east of the Arabian national policy on nuclear energy, which includes plans to Peninsula, bordering Oman, Saudi Arabia, the establish a nuclear energy implementation organization. Persian Gulf and the Gulf of Oman. It was formed On the eve of the World Future Energy Summit in in December 1971, initially comprising six emirates: January 2009, the government of Abu Dhabi announced Abu Dhabi, Dubai, Sharjah, Umm al-Qaiwain, that it wants 7 per cent of its power to come from Fujairah and Ajman. The seventh emirate, Ras renewable energy sources by 2020. Much of this will al-Khaimah, formally joined the UAE in 1972. be created by its flagship Masdar initiative. The initiative The Emirates are governed individually and also announced in May 2008 that it would be investing have assigned specific areas of authority to a Federal $2 billion in thin-film photovoltaic solar technology. Supreme Council. A UAE government strategy was formally launched in 2007, outlining plans for the Electricity Market coming years. Development in the UAE continues The total capacity for electricity production in the apace, with real GDP growth of 9.4 per cent in 2006 UAE was approximately 16 670 MW in January 2008, and 7.4 per cent in 2007. Similar levels of growth have compared with 9600 MW in 2001. Capacity is expected been reported in the first half of 2008, supported in to rise by 60 per cent to almost 26 000 MW by 2010. particular by expansion in construction and real estate. The Abu Dhabi Water and Electricity Authority (ADWEA) More recently the pace of construction has slowed, accounts for the bulk of this capacity, followed by the primarily due to the global financial downturn. Dubai Electricity and Water Authority (DEWA), the Sharjah Electricity and Water Authority (SEWA) and the Energy Overview Federal Electricity and Water Authority (FEWA). The UAE has a rich natural resource base. It produced Historically, each service provider has operated as a 131 million tonnes of crude oil in 2007 (3.3 per cent separate entity, but the levels of regional interconnection of the world’s total) and was the world’s sixth largest are increasing. The Emirates National Grid has been oil exporter in 2006. The country’s proven crude oil operating contractually between Abu Dhabi and Dubai reserves stand at 97.8 billion barrels, or slightly less since 2006. The electricity network in Sharjah was than 8 per cent of the world’s total reserves. added to the grid in May 2007. Expanding beyond In January 2008, the country reported approximately the UAE, the Gulf Cooperation Council is expected to 6 trillion m3 of natural gas reserves, 3.5 per cent commission the first phase of its power grid initiative by of the world’s total. Natural gas has been gaining the first quarter of 2009. importance as a local energy source. Households There is growing interest in projects based on and industry, including power generation and water importing electricity. In 2008, Belgium’s Tractebel desalination plants, are increasingly turning DEWA’s installed capacity for 2007 (power only) to gas. Market analyst Business Monitor Source: ADWEA International (BMI) reports that gas was the dominant fuel in 2007, accounting for 63.8 per cent of primary energy demand, Jebel Ali power and desalination station D followed by oil at 36.2 per cent. Jebel Ali power and desalination station E Rapid development of tourism and real estate projects, increased industrialization, Jebel Ali power and desalination station G expanding agriculture and a growing Aweer power station H - phase I population are placing severe pressures on electricity and water supplies in the Aweer power station H - phase II UAE. In August 2008, it was predicted that Jebel Ali power and desalination station K the country will need $10 billion to satisfy energy demand in the next ten years. Jebel Ali power and desalination station L - phase I The past 12 months have seen major Jebel Ali power and desalinationstation L - phase II developments in the UAE’s stance on nuclear energy and renewable energy. The 0 200 400 600 800 1000 1200 MW government has published a comprehensive

90 PennWell Global Power Review 2009

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CONNECTING GLOBAL ENERGY INDUSTRIES

New Delhi, India Moscow, Russia Cologne, Germany Cologne, Germany 2-4 April 2009 28-30 April 2009 26-28 May 2009 26-28 May 2009 www.power-genindia.com www.russia-power.org www.powergeneurope.com www.renewableenergyworld-europe.com

Cologne, Germany Charlotte NC, USA Katowice, Poland 26-28 May 2009 19-21 August 2009 1-4 Sept 2009 www.powergrideurope.com www.coal-gen.com www.coal-gen-europe.com

Bangkok, Thailand Bangkok, Thailand Las Vegas, NV, USA Las Vegas, NV, USA 7-9 October 2009 7-9 October 2009 8-10 December 2009 8-10 December 2009 www.powergenasia.com www.renewableenergyworld-asia.com www.nuclearpowerinternational.com www.power-gen.com

Las Vegas, NV, USA Tampa, FL, USA Doha, Qatar 10-12 March 2010 23-25 March 2010 1-4 November 2010 www.power-gengreen.com www.distributech.com www.power-gen-middleeast.com

A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS A GPrevious Page|||| Contents Zoom in Zoom out Refer a Friend | Search Issue | Next Page BEF MaGS MIDDLE EAST-AFRICA UAE

Engineering and Italy’s Centro Elettrotecnico Sperimentale ADWEC forecast of electricity capacities Source: ADWEA Italiano submitted their technical conclusions on a proposed underwater interconnection between Dubai and Iran for importing electricity into the UAE. 20000 Available capacity In Abu Dhabi, demand for power is expected to Demand grow by 900 MW per annum from 2010 to 2013. 15000 Required capacity Current available capacity is 8400 MW. In May 2008, Surplus/Deficit ADWEA announced its five-year strategic plan, focusing on security of supply, international investment, sewerage 10000 services, and research and development for alternative and renewable energy. 5000 DEWA currently holds a monopoly to produce and Electricity MW (gross) sell electricity in Dubai. However, the emirate may 0 open its power generation industry to private foreign investment in an effort to meet surging demand, which is increasing by at least 12 to 14 per cent annually. -5000 2006 2007 2006 2009 2010 2011 2012 2013 2014 2015 2016 2018 2019 2020 Investment of $37 billion will be required to double 2017 generating capacity to 11 100 MW by 2011 and quadruple projected capacity to 25 000 MW by 2017. During 2007, FEWA supplemented its installed carried out by South Korea’s Doosan Heavy Industries capacity of 1251 MW with 3365 GWh of electricity and Construction and Fisia Italimpianti. imported from Abu Dhabi. A contract was signed in In August 2007, International Power plc announced early 2008 between ADWEA and FEWA, under which the signing of a 20-year agreement with the Abu the former will supply the latter with 2500 MW of Dhabi Water and Electricity Company (ADWEC) for the electricity until 2015, a 64 per cent increase on the entire power and water output from the Fujairah F2 current arrangement. integrated water and power plant. The $2800 million project is expected to yield 2000 MW of power on Infrastructure Investment completion by the end of 2010. Significant levels of infrastructure investment have Other recent developments include the completion been occurring across the UAE, at the forefront of of the third phase of Aweer power plant (station H) which is the Dolphin project, a $4.8 billion initiative to in 2008 and the ongoing expansion of Abu Dhabi’s produce and process natural gas from Qatar’s North Taweelah A1 plant. Field, and then transport it via subsea pipeline to the UAE and Oman. The project began in 2007, and the Future Trends gas processing plant in Qatar was formally inaugurated Energy demand in the UAE is increasing rapidly. In Abu in May 2008. Dolphin is now supplying natural gas to Dhabi, from a current peak demand of 4790 MW, all of the UAE and to Oman. ADWEA is forecasting that the total In June 2008, Abu Dhabi National Oil Company system peak demand will rise to 8735 Generation capacity by technology (gross MW), 2003-2007. Source: ADWEA (ADNOC) and Dolphin Energy signed a 25-year MW by 2010, 10 600 MW in 2012 and agreement for Dolphin to lease and operate ADNOC’s 14 340 MW by 2020. The power sector Eastern Gas Distribution System. Dolphin Energy is is moving quickly to meet surging 5000 developing a new Taweelah to Fujairah gas pipeline demand and is responding to a policy (TFP) across the UAE. shift to strengthen non-oil sectors. 4000 In May 2008, ADWEA announced plans for a Foreign investment is likely to 1500 MW power plant and a 100 million gallon water play an increasingly significant role in 3000 manufacturing plant at Al Shuweihat (S2). A contract ongoing construction. In a speech in was awarded to GDF Suez for the S2 plant in July 2008. October 2008, the UAE minister for Completion of the plant is expected by 2011. S3 looks the economy, Al Mansouri, highlighted 2000 set to follow close on the heels of this development. that foreign investment has increased Work on the Jebel Ali power and desalination plants by 11 per cent from 2005 to 2006 and 1000 in Dubai continues. The second phase of station L is now praised the efforts of the government partially commissioned, following work undertaken by a in issuing a federal law to support and 0 consortium of Hyundai Engineering and Construction regulate foreign investment activities, 2004 2005 2006 2007 Co Ltd, Korea and Fisia Italimpianti, Italy. The first phase and to enhance the investment Gas turbine Steam turbine of station M is well under way, with the work being opportunities in the UAE.

92 PennWell Global Power Review 2009

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FOR EXHIBIT INFORMATION, PLEASE CONTACT: Bill Langenheim Kristin Stavinoha Linda Fransson Svetlana Strukova POWER - NORTH AMERICA PETROLEUM - NORTH AMERICA POWER / PETROLEUM - INTERNATIONAL POWER / PETROLEUM - RUSSIA P: + 1 918.832.9256 P: +1 713.963.6283 P: +44 (0) 1992.656.665 P: +7 495.580.3201 E: [email protected] E: [email protected] E: [email protected] E: [email protected]

 
   
   
  


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