Gap analysis of renewable energy generation in the lower mekong basin


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

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Gap analysis of renewable energy generation in the lower mekong basin

  1. 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 (
  2. 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. 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. 4. Renewable Energy Gap in the LMB Lower Mekong Basin Power Development Plan Target
  5. 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. 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. 7. Renewable Energy Gap in the LMB
  8. 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. 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. 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. 11. LMB in the Global Renewable Energy Context Revenue and Cost Source: Ernst and Young
  12. 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. 13. Energy Planning Issues
  14. 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. 15. Energy Planning Issues Externalities not integrated
  16. 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. 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. 18. Portfolio-Based Planning
  19. 19. Portfolio-Based Planning Fossil Fuel Price Volatility $/mmbtu 25 20 15 10 5 0 WTI Crude Australian Coal Japan LNG USA Gas
  20. 20. Investor Concerns • Pricing and Costs of Renewable Energy • Policy and Regulatory Climate • Market and Investment Climate
  21. 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. 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. 23. Regulatory Risk
  24. 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. 25. Policy Interventions for Case Studies
  26. 26. Thank you