3rd Mekong Forum on Water, Food & Energy 2013. Presentation from Session 12: Alternative electricity sources and planning for the Mekong.

1. Bridging the Gap – challenges and
opportunities to increasing the role
of renewables in Mekong power
supply (MK14)
Gap Analysis of Renewable Energy
Generation in the Lower Mekong Basin
2nd Partner Meeting
Hanoi, 20 November 2013
Alexander Kenny (alex.kenny@icem.com.au)

2. Gap Analysis
Lower Mekong Basin Renewable Energy Targets
• The SEA created scenarios with increased
renewable energy. However, strategies to
achieve these higher targets were not
explored in depth.
- How can we get there, and beyond?
 Global Trends
 Energy Planning Paradigm and System
Considerations
 Investor concerns

3. Renewable Energy Gap in the LMB
Percentage of Renewables
• Non-large hydro renewables provide only
approximately 3% of global energy
production. In the LMB, this figure is 5%.

4. Renewable Energy Gap in the LMB
Lower Mekong Basin Power Development Plan Target

5. Renewable Energy Gap in the LMB
Renewable Energy Output by Scenario: Lower Mekong Basin 20122025
140000
120000
PDP Scenario and
Energy Efficiency
Scenarios
Renewable Energy
Scenarios
100000
GWh
80000
60000
40000
20000
0
2012
2015
2020
2025

6. Renewable Energy Gap in the LMB
Renewable Energy Capacity in the LMB (MW)
120,000
100,000
80,000
Technical Potential
60,000
Existing 2010
40,000
Planned 2025
20,000
0
Additional RE Scenario 2025

7. Renewable Energy Gap in the LMB

8. Hydropower Capacity by Scenario
40000
35000
30000
MW
25000
PDP and 2 Global
Scenarios
20000
RE-Regional
15000
EE-Regional
10000
5000
0
2012
2015
2020
2025

9. LMB in the Global Renewable Energy Context
Globally, “there is clearly going to be a slower pathway to
growth than that originally envisaged in 2009” (Ernst and
Young)
 A diminishing role of subsidies and financial incentives, and less
investment, and a concurrent credit crunch.
 In 2012, investment in the biomass and waste to energy sector fell by
27% to US $9.7b
 Solar and wind investment fell less, down 9% (to US $142.5b)and
down 13% (to US$78.3b) respectively.
 Due to shale gas, a reduction of 5% of investment in renewable for the
world as a whole is expected in 2013.
“A three-tier world energy market is emerging, with
the greatest opportunities for renewables in Asia”

10. LMB in the Global Renewable Energy Context
• Decreasing costs of renewable technologies
– The cost of O&M of wind farms has fallen 38% in four years
– The cost of solar panels and equipment continues to
tumble
• Supply currently outstrips demand two to one, and the price of
modules could fall from US $0.70 per watt to as low as US $0.48 per
watt in 2017 (Lux Research).
• In the United States, installation cost is increasing in importance.
• Improvements in battery technology
• Decreasing subsidies for fossil fuels - future cost of
electricity in the Lower Mekong Basin

11. LMB in the Global Renewable Energy Context
Revenue and Cost
Source: Ernst and Young

12. Relevance of Global Trends to LMB
• How insulated/exposed are Lower Mekong
Basin countries to these global trends?
• How do they compare to other “emerging
markets”?

13. Energy Planning Issues

14. Energy Planning Issues
• Current emphasis on centralized generation
• Priorities of Energy Planners
– Least-cost energy generation optimization
-> But renewable energy is more expensive
-> Planning does not adequately include social and
environmental externalities
-> Budget for subsidies – EVN already operating at a loss.

15. Energy Planning Issues
Externalities not integrated

16. Energy Planning Issues
 Reliable system
-> Issues of intermittency as more renewables are
deployed. Storage solutions viability of the renewable
energy sector
• The SEA resulted in increased hydropower pumped storage, and
additional capacity, and increased trading.
 Political Economy factors (Possibly overstated demand
projections; emphasis on certain technologies)

17. Energy Planning Paradigm
 Fuel-price risk and cost variation are not
explicitly integrated into planning decisions
-> Portfolio Based Planning is a potential tool
 Capital, fuel and operating and maintenance (O&M) costs
per unit of output for each technology; the risk of each
cost component; and the correlation factors between and
within cost components.

18. Portfolio-Based Planning

19. Portfolio-Based Planning
Fossil Fuel Price Volatility
$/mmbtu
25
20
15
10
5
0
WTI Crude
Australian Coal
Japan LNG
USA Gas

20. Investor Concerns
• Pricing and Costs of Renewable Energy
• Policy and Regulatory Climate
• Market and Investment Climate

21. Investor Concerns:
Costs/Pricing of Renewable Energy
• Up-front capital costs and pay back period
• Often small scale and modular investments
(not always)
• Stimulus or lack of for private sector
participation

22. Investor Concerns:
Policy and Regulatory Climate
• Policy coherence and simplicity
– Simplicity, clarity and consistency around the policy and
support regime is very helpful.
• Government approval processes – delays, hidden
costs, uncertainty
• Transparent government plans
–
–
–
–
Future electricity pricing
Grid extension plans
Subsidies
World Bank-REF rental scheme, potential market
distortion.

23. Regulatory Risk

24. Investor Concerns:
Market/Investment Climate
• In-country capacity
– Eg. Cambodia biogas operation, absence of a good
network for installation, repair
• Lack of information of costs, benefits, and
applications of RE; lack of technical
information; lack of market information
– Lao PDR small hydro
• Access to financing

25. Policy Interventions for Case
Studies

26. Thank you