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By Narsingh Chaudhary and Harry Harji
Southeast Asia economies are racing to diversify their energy portfolios to balance energy security and sustainability obligations while meeting the power demands of their growing economies and populations. One factor driving the increase in renewable energy is corporate power purchase agreements (PPAs). Under the agreements, businesses purchase electricity directly from power producers.
According to the Black & Veatch Strategic Directions: Electric Industry Asia 2021 report, respondents anticipate that data centers (50 percent), banking (43 percent), and large IT companies (40 percent) will be the most vocal in demanding renewable sources of electricity. Respondents believe government policy, regulation, and socio-economic factors will drive investments more than the technology itself. This suggests the possibility that large commercial and industrial users — driven by sustainability commitments — will demand more renewable generation and, where possible, build their solutions.
Distributed energy resources (DER) such as microgrids will offer large users, like technology company Amazon, the reliability and resilience of supply they require alongside direct control in meeting environmental targets. Amazon is investing in a 62-megawatt (MW) utility-scale solar energy project in Singapore. When completed, the Amazon project will be among the largest aggregated movable solar energy systems designed and installed in Singapore and will contribute net-new renewable energy to the national electricity grid.
The 80,000 megawatt-hours (MWh) of clean energy generated annually will power Amazon’s offices, data centers, and fulfillment facilities in Singapore. Amazon is targeting to power its operations with 100 percent renewable energy by 2030. In addition to corporate sustainability commitments, the rise in consumer awareness about environmental impacts is another factor driving the increase in renewable energy. More regional consumers are expecting their power providers to progressively and proactively tackle climate change, further deepening the need for reliable, resilient energy supplies.
Key survey findings include:
#1: Much more investment in microgrids and other DER
The most significant investment growth in new capacity over the next three to five years is expected in renewable energy. Solar (land), energy storage, solar (floating), wind (offshore), and microgrids represent the top five categories. (Figure 1)
Of all generation technology categories, survey findings suggest a significant investment jump in microgrids and other DERs over the next three to five years. Respondents ranked microgrids third in terms of receiving “much more investment,” reflecting the category’s potential for use both by large users as well as remote and island communities throughout Asia that lack connection to the reliable, resilient and sustainable supply. “Much more investment” in microgrids and DERs ranks just behind solar and energy storage — which are likely components of many microgrid solutions, particularly in Southeast Asia’s
sunny and archipelagic locations.
Opportunity: Introducing greater levels of renewable energy and DERs — such as microgrids — will increase the complexity of grid management and operation throughout Asia. Higher penetration of variable generation will require increased grid flexibility to respond to sudden increases and decreases of supply due to changes in season, weather, and time of day.
#2: Mindset change post-pandemic
Variable load and supply have highlighted the challenges facing future grid management. Lockdowns due to the COVID-19 pandemic — where load curves shifted from industry and offices to people’s homes — have changed the way Asia’s power industry views operations, asset management, and its workforce.
Respondents see the biggest threats to reliable grid operations and performance as network capacity investment not keeping pace with demand (41 percent); underinvestment in more reliable transmission networks (38 percent); and introduction of too much intermittent renewable energy (32 percent). Also prominent and tied for fourth are not enough energy storage capacity and natural disasters (29 percent). (Figure 2)
Opportunity: Better grid flexibility could be achieved by deploying BESS, increasing the capacities of existing transmission systems, and integrating and upgrading flexible generation such as gas-fired facilities. Hydrogen could be another energy storage option that complements BESS, as it provides longduration storage that cannot be addressed by other energy storage technologies.
Renewable energy generation assets could be built or repurposed to power electrolysis to create hydrogen. Informed and rigorous investment prioritization will be required to deliver integrated grid solutions that target system gaps with the right opportunities.
#3: Existing assets, digital systems to receive investment boost
Our industry’s changing mindset to asset management and operations will see short-term investment reprioritized to existing assets and channeled to the replacement of existing units, conversion of analog systems to digital systems, and increased remote monitoring and diagnostics. (Figure 3)
In the face of specific COVID-19 restrictions, both remote asset management performance monitoring, and remote command and control also feature as two of the top five solutions respondents would find most useful in managing through the pandemic; others were related to health and workflow management.
Opportunities: While the power sector had started assessing digital solutions before the global health crisis, survey findings suggest that the pandemic is likely to accelerate the digital transformation of Asia’s power sector. Digitization enhances grid resilience Adopting digital transformation strategies that address core challenges of grid stabilization, peak load management, system flexibility, and reliability in a holistic manner will be critical to balance changing consumer expectations, unpredictable load patterns, and increasing use of DERs.
Digital applications can optimize the impact of individual technologies to enhance grid performance. For example, data collected by smart sensors are particularly useful for renewable energy applications. With wind and sunlight affecting power generation production, sensors and smart grids ensure that renewable energy plants are operating to their optimal potential. Operationally, the adoption of predictive asset maintenance monitors equipment performance in real-time, forecasting and optimizing maintenance schedules. Such advances will help mitigate costly outages and other equipment failures across entire systems and extend the equipment lifecycles. Further still, prescriptive analytics will enable autonomous management, where machines act on the information the artificial intelligence (AI) has extracted, offering even further operational savings long term.
These roll up to asset performance management (APM) solutions in which the health, performance, and optimization of multiple critical generations, transmission, or distribution assets can be managed. The APM approach will minimize failures and improve synergies in the operation of power facilities, ultimately reducing the cost of energy production over time. Digitization will enable the holistic management of DER assets across different capacities and installations. For example, insights can help identify the weakest link in the distributed energy portfolio.
From a transmission network perspective, Flexible Alternating Current Transmission Systems (FACTS) can help to re-route power flow from congested parts of the grid to less congested portions. Transmission technologies with greater situational awareness of local weather conditions, such as Dynamic Line Ratings, can offer near real-time updates on the available capacity of critical bulk power pathways.
Digitizing improves project bankability
With financing at the core of Asia’s energy transition success, improving the bankability of infrastructure projects is critical to achieving grid resilience and modernization. Digitizing power assets will make it easier for investors to assess the planning, returns, and risk allocation of projects. Data analytics across complex grids will provide insights that will help investors visualize risks, such as grid stabilization, peak load management, resiliency, and reliability, across many inter-dependent factors that determine financial success. Digitizing power systems will support investments in decarbonized grids and enable a more efficient and flexible grid Figure 3 operation. This will, in turn, reduce the cost to investors, operators, and ultimately consumers.
Next steps
Factors that will accelerate digital transformation include wide-scale development, integration, and adoption of the Internet of Things; and next generation 5G connectivity. The progress of Southeast Asia’s energy transition will be influenced by the speed and scale of digitalization. Digitizing the grid will require an integrated strategy and execution across generation, transmission, and distribution, as well as prioritized planning that factors both capital and operational expenditures. Southeast Asia’s power industry will need to collaborate with partners who are familiar with every aspect of the lifecycle of generation, transmission, and distribution assets. Such partners will need to be experts in integrating these assets to create a stable, efficiently functioning whole. Additionally, partners who offer holistic infrastructure consulting capabilities will be able to understand how a change in one piece of the business can impact assets, costs, technologies, the workforce, and
customers.
Narsingh Chaudhary is Black & Veatch’s Executive Vice President & Managing Director, Asia Power Business. Harry Harji is
Associate Vice President for Black & Veatch’s management consulting business in Asia.